BLUE SPHERE CORP. INVESTMENT AGREEMENT

 

 























 



















 

  

 

   

  

3.3     Exempt Offering Under Regulation D.

3.3.1      No General Solicitation.  The Investment Agreement was not offered to Investor through, and Investor is not aware of, any form of general solicitation or general advertising, including, without limitation, (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, and (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.

3.3.2      Restricted Securities.  Investor understands that the Investment Agreement is, the Common Stock issued at each Put Closing will be characterized as "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in a transaction exempt from the registration requirements of the federal securities laws and that under such laws and applicable regulations such securities may not be transferred or resold without registration under the Act or pursuant to an exemption therefrom.  In this connection, Investor represents that Investor is familiar with Rule 144 under the Act, as presently in effect, and understands the resale limitations imposed thereby and by the Act.

3.3.3      Disposition.  Investor further agrees not to sell, transfer, assign, or pledge the Securities (except for any bona fide pledge arrangement to the extent that such pledge does not require registration under the Act or unless an exemption from such registration is available and provided further that if such pledge is realized upon, any transfer to the pledgee shall comply with the requirements set forth herein), or to otherwise dispose of all or any portion of the Securities unless and until:

(a)   There is then in effect a registration statement under the Act and any applicable state securities laws covering such proposed disposition and such disposition is made in accordance with such registration statement and in compliance with applicable prospectus delivery requirements; or

(b)     (i) Investor shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the circumstances surrounding the proposed disposition to the extent relevant for determination of the availability of an exemption from registration, and (ii) if reasonably requested by the Company, Investor shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of the Securities under the Act or state securities laws.  It is agreed that the Company will not require the Investor to provide opinions of counsel for transactions made pursuant to Rule 144 provided that Investor and Investor’s broker, if necessary, provide the Company with the necessary representations and documents for counsel to the Company to issue an opinion with respect to such transaction.

  

   

3.4     Due Authorization.

3.4.1 Authority.  The person executing this Investment Agreement, if executing this Agreement in a representative or fiduciary capacity, has full power and authority to execute and deliver this Agreement and each other document included herein for which a signature is required in such capacity and on behalf of the subscribing individual, partnership, trust, estate, corporation or other entity for whom or which Investor is executing this Agreement.  Investor has reached the age of majority (if an individual) according to the laws of the state in which he or she resides.

3.4.2  Due Organization; Due Authorization.  Investor is duly and validly organized, validly existing and in good standing as a limited liability company under the laws of Georgia with full power and authority to purchase the Securities to be purchased by Investor and to execute and deliver this Agreement.  

3.5     No Registration As A Dealer. The Investor is not and will not be required to be registered as a "dealer" under the 1934 Act, either as a result of its execution and performance of its obligations under this Agreement or otherwise.

 

 4.           Acknowledgments.  

4.1     Risks of Investment.  The Investor recognizes that an investment in the Company involves substantial risks, including the potential loss of Investor's entire investment herein.  Investor recognizes that the Disclosure Documents, this Agreement and the exhibits hereto do not purport to contain all the information, which would be contained in a registration statement under the Act;

4.2     No Government Approval.  The Investor and the Company each acknowledge that no federal or state agency has passed upon the Securities, recommended or endorsed the Offering, or made any finding or determination as to the fairness of this transaction;

4.3          No Registration, Restrictions on Transfer.  The Investor acknowledges that, as of the date of this Agreement, the Securities and any component thereof have not been registered under the Act or any applicable state securities laws by reason of exemptions from the registration requirements of the Act and such laws, and may not be sold, pledged (except for any limited pledge in connection with a margin account of Investor to the extent that such pledge does not require registration under the Act or unless an exemption from such registration is available and provided further that if such pledge is realized upon, any transfer to the pledgee shall comply with the requirements set forth herein), assigned or otherwise disposed of in the absence of an effective registration of the Securities and any component thereof under the Act or unless an exemption from such registration is available;

4.4    Restrictions on Transfer.  The Investor acknowledges that it may not attempt to sell, transfer, assign, pledge or otherwise dispose of all or any portion of the Securities or any component thereof in the absence of either an effective registration statement or an exemption from the registration requirements of the Act and applicable state securities laws;

4.5     No Assurances of Registration.  There can be no assurance that any registration statement will become effective at the scheduled time, or ever, or remain effective when required, and Investor acknowledges that it may be required to bear the economic risk of Investor's investment for an indefinite period of time;

4.6     Exempt Transaction.  Investor understands that the Securities are being offered and sold in reliance on specific exemptions from the registration requirements of federal and state law and that the representations, warranties, agreements, acknowledgments and understandings set forth herein are being relied upon by the Company in determining the applicability of such exemptions and the suitability of Investor to acquire such Securities.

4.7     Legends.  The Company agrees and acknowledges that the certificates representing the Put Shares shall not bear a legend restricting the sale or transfer thereof.

4.8     Investor’s Resources.  The Company agrees and acknowledges that the Investor has not represented, and does not represent, that it now has or at any time in the future will have assets at any given time equal to the Maximum Offering Amount available for investment pursuant to this Agreement, but only covenants to make payment of the applicable Put Share Price for each Put when due under the terms of this Agreement.

5.      Representations, Warranties and Covenants of the Company.  The Company hereby makes the following representations and warranties to Investor (which shall be true at the signing of this Agreement, and as of any such later date as specified hereunder) and agrees with Investor that, except as set forth in the “Schedule of Exceptions” attached hereto as Exhibit G:

5.1  Organization, Good Standing, and Qualification.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, USA and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted.  The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would, in the Company’s opinion, have a material adverse effect on the business or properties of the Company and its subsidiaries taken as a whole.  The Company is not the subject of any pending, threatened or, to its Knowledge, contemplated investigation or administrative or legal proceeding (a “Proceeding”) by the Internal Revenue Service, the taxing authorities of any state or local jurisdiction, or the Securities and Exchange Commission, the FINRA, the Nasdaq Stock Market, Inc. or any state securities commission, or any other governmental entity, which have not been disclosed in the Disclosure Documents.  None of the disclosed Proceedings, if any, will, in the Company’s opinion, have a material adverse effect upon the Company. Each of the Company’s subsidiaries, if any, the jurisdiction of incorporation or organization of each, and the percentage of the Company’s ownership of each is as set forth in Schedule 5.1 annexed hereto.

 

5.2     Corporate Condition.  The Company's condition is, in all material respects, as described in the Disclosure Documents (as further set forth in any subsequently filed Disclosure Documents, if applicable), except for changes in the ordinary course of business and normal year-end adjustments that are not, in the aggregate, materially adverse to the Company.  There have been no Material Adverse Changes to the Company’s business, financial condition, or prospects from the dates of such Disclosure Documents through the date of the Investment Commitment Closing.  The financial statements as contained in the 10-K and 10-Q have been prepared in accordance with generally accepted accounting principles, consistently applied (except as otherwise permitted by Regulation S-X of the Exchange Act, or Generally Accepted Accounting Principles, as applicable), subject, in the case of unaudited interim financial statements, to customary year end adjustments and the absence of certain footnotes, and fairly present the financial condition of the Company as of the dates of the balance sheets included therein and the consolidated results of its operations and cash flows for the periods then ended.  Without limiting the foregoing, there are no material liabilities, contingent or actual, that are not disclosed in the Disclosure Documents (other than liabilities incurred by the Company in the ordinary course of its business, consistent with its past practice, after the period covered by the Disclosure Documents).  The Company has paid all material taxes that are due, except for taxes that it reasonably disputes.  There is no material claim, litigation, or administrative proceeding pending or, to the best of the Company’s Knowledge, threatened against the Company, except as disclosed in the Disclosure Documents.  This Agreement and the Disclosure Documents do not contain any untrue statement of a material fact and do not omit to state any material fact required to be stated therein or herein necessary to make the statements contained therein or herein not misleading in the light of the circumstances under which they were made.  No event or circumstance exists relating to the Company which, under applicable law, requires public disclosure but which has not been so publicly announced or disclosed.

 

5.3           Commission Documents, Financial Statements. 

(a)           The Company has timely filed (giving effect to permissible extensions in accordance with Rule 12b-25 under the Exchange Act) all Commission Documents. The Company has delivered or made available to the Investor via EDGAR or otherwise true and complete copies of the Commission Documents filed with or furnished to the SEC prior to the Commitment Closing Date (including, without limitation, the 2010 Form 10-K). No Subsidiary of the Company is required to file or furnish any report, schedule, registration, form, statement, information or other document with the SEC. As of its filing date, each Commission Document filed with or furnished to the SEC prior to the Commitment Closing Date (including, without limitation, the 2010 Form 10-K) complied in all material respects with the requirements of the Securities Act or the Exchange Act, as applicable, and other federal, state and local laws, rules and regulations applicable to it, and, as of its filing date (or, if amended or superseded by a filing prior to the Commitment Closing Date, on the date of such amended or superseded filing), such Commission Document did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Registration Statement, on the date it is filed with the SEC, on the date it is declared effective by the SEC, on each Put Date and on each Put Closing Date, shall comply in all material respects with the requirements of the Securities Act (including, without limitation, Rule 415 under the Securities Act) and shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, except that this representation and warranty shall not apply to statements in or omissions from the Registration Statement made in reliance upon and in conformity with information relating to the Investor furnished to the Company in writing by or on behalf of the Investor expressly for use therein (which to the Company’s Knowledge are not false or misleading). The Prospectus and each Prospectus Supplement required to be filed pursuant to this Agreement or the Registration Rights Agreement, when taken together, on its date, on each Put Date and on each Put Closing Date, shall comply in all material respects with the requirements of the Securities Act (including, without limitation, Rule 424(b) under the Securities Act) and shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that this representation and warranty shall not apply to statements in or omissions from the Prospectus or any Prospectus Supplement made in reliance upon and in conformity with information relating to the Investor furnished to the Company in writing by or on behalf of the Investor expressly for use therein (which to the Company’s Knowledge are not false or misleading). Each Commission Document (other than the Registration Statement, the Prospectus or any Prospectus Supplement) to be filed with or furnished to the SEC after the Commitment Closing Date and incorporated by reference in the Registration Statement, the Prospectus or any Prospectus Supplement required to be filed pursuant to this Agreement or the Registration Rights Agreement (including, without limitation, the Current Report), when such document is filed with or furnished to the SEC and, if applicable, when such document becomes effective, as the case may be, shall comply in all material respects with the requirements of the Securities Act or the Exchange Act, as applicable, and other federal, state and local laws, rules and regulations applicable to it, and shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company has delivered or made available to the Investor via EDGAR or otherwise true and complete copies of all comment letters and substantive correspondence received by the Company from the SEC relating to the Commission Documents filed with or furnished to the SEC as of the Commitment Closing Date, together with all written responses of the Company thereto. There are no outstanding or unresolved comments or undertakings in such comment letters received by the Company from the SEC. The SEC has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company under the Securities Act or the Exchange Act.

 

(b)          The financial statements, together with the related notes and schedules, of the Company included in the Commission Documents comply as to form in all material respects with all applicable accounting requirements and the published rules and regulations of the SEC and all other applicable rules and regulations with respect thereto as may be subject to any applicable out of period adjustments disclosed in the Commission Documents. Such financial statements, together with the related notes and schedules, have been prepared in accordance with GAAP applied on a consistent basis 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 not include footnotes or may be condensed or summary statements and are subject to customary year-end audit adjustments), and fairly present in all material respects the financial condition of the Company and its consolidated Subsidiaries as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

 

(c)           The Company has timely filed with the SEC and made available to the Investor via EDGAR or otherwise all certifications and statements required by (x) Rule 13a-14 or Rule 15d-14 under the Exchange Act or (y) 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002 (“ SOXA ”)) with respect to all relevant Commission Documents.  The Company is in compliance in all material respects with the provisions of SOXA applicable to it as of the date hereof.  The Company maintains disclosure controls and procedures required by Rule 13a-15 or Rule 15d-15 under the Exchange Act; such controls and procedures are effective to ensure that all material information concerning the Company and its Subsidiaries is made known on a timely basis to the individuals responsible for the timely and accurate preparation of the Company’s Commission filings and other public disclosure documents.  As used in this Section 5.3(c), the term “file” shall be broadly construed to include any manner in which a document or information is furnished, supplied or otherwise made available to the SEC.

(d)           Deloitte (the “Accounting Firm”), who shall express their opinion on the audited financial statements and related schedules to be included or incorporated by reference in the Registration Statement and the Prospectus are, with respect to the Company, independent public accountants as required by the Securities Act and is an independent registered public accounting firm within the meaning of SOXA as required by the rules of the Public Company Accounting Oversight Board.

5.4     Authorization.  All corporate action on the part of the Company by its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement and all of the Transaction Documents, the performance of all obligations of the Company hereunder and the authorization, issuance and delivery of the Common Stock being sold hereunder have been taken, and this Agreement and the Registration Rights Agreement constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, except insofar as the enforceability may be limited by applicable bankruptcy, insolvency, reorganization, or other similar laws affecting creditors’ rights generally or by principles governing the availability of equitable remedies.  The Company has obtained all consents and approvals required for it to execute, deliver and perform each agreement referenced in the previous sentence.  The Board of Directors of the Company shall have adopted resolutions granting the above authorizations (the "Resolutions") and, as a condition to each Put, such Resolutions shall not have been amended or rescinded prior to such Put Date.

5.5     Valid Issuance of Common Stock.  The Commitment Shares, the Fee Shares and Put Shares, when issued, sold and delivered in accordance with the terms hereof, for the consideration expressed herein, will be validly issued, fully paid and nonassessable, will be issued free of any preemptive rights and, based in part upon the representations of Investor in this Agreement, will be issued in compliance with all applicable U.S. federal and state securities laws.  

 

5.6.         Securities Act. The Company has complied and shall comply with all applicable federal and state securities laws in connection with the offer, issuance and sale of the Securities hereunder, including, without limitation, the applicable requirements of the Securities Act. Without limiting the generality of the foregoing, the Company satisfies, and the Registration Statement upon filing with the SEC and at the time it is declared effective by the SEC shall satisfy, all of the requirements of the Securities Act to register the resale of the Registrable Securities by the Investor in accordance with the Registration Rights Agreement on a delayed or continuous basis under Rule 415 under the Securities Act at then-prevailing market prices, and not fixed prices. The Company is not, and has never been, an issuer identified in, or subject to, Rule 144(i).

     

5.7     Compliance with Other Instruments.  The Company is not in violation or default of any provisions of its Certificate of Incorporation or Bylaws, each as amended and in effect on and as of the date of the Agreement, or of any material provision of any material instrument or material contract to which it is a party or by which it is bound or of any provision of any federal or state judgment, writ, decree, order, statute, rule or governmental regulation applicable to the Company, which would, in the Company’s opinion, have a material adverse effect on the Company's business or prospects, or on the performance of its obligations under this Agreement or the Registration Rights Agreement.  The execution, delivery and performance of this Agreement and the other agreements entered into in conjunction with the Offering and the consummation of the transactions contemplated hereby and thereby will not (a) result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument or contract or an event which results in the creation of any lien, charge or encumbrance upon any assets of the Company, which would, in the Company’s opinion, have a material adverse effect on the Company’s business or prospects, or on the performance of its obligations under this Agreement, the Registration Rights Agreement, or (b) violate the Company’s Certificate of Incorporation or By-Laws or (c) violate any statute, rule or governmental regulation applicable to the Company which violation would, in the Company’s opinion, have a material adverse effect on the Company's business or prospects.

5.8     Reporting Company.  The Company is subject to the reporting requirements of the Exchange Act, has a class of securities registered under Section 12 of the Exchange Act, and has filed all reports required by the Exchange Act since the date the Company first became subject to such reporting obligations. The Company undertakes to furnish Investor with copies of such reports as may be reasonably requested by Investor prior to consummation of this Offering and thereafter, to make such reports available, for the full term of this Agreement, including any extensions thereof, and for as long as Investor holds the Securities.  The Common Stock is duly listed or approved for quotation on the OTC BB.  The Company is not in violation of the listing requirements of the OTC BB, and does not reasonably anticipate that the Common Stock will be delisted by the OTC BB for the foreseeable future.  

  

   

5.10        Indebtedness; Solvency.  The Company’s Quarterly Report on Form 10-Q for its fiscal quarter ended September 30, 2010 sets forth, as of September 30, 2010, all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments through such date.  For the purposes of this Agreement, “Indebtedness ” shall mean (a) any liabilities for borrowed money (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements, indemnities and other contingent obligations in respect of Indebtedness of others, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present value of any lease payments due under leases required to be capitalized in accordance with GAAP.  There is no existing or continuing default or event of default in respect of any Indebtedness of the Company or any of its Subsidiaries. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to Title 11 of the United States Code or any similar federal or state bankruptcy law or law for the relief of debtors, nor does the Company have any Knowledge that its creditors intend to initiate involuntary bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for relief under Title 11 of the United States Code or any other federal or state bankruptcy law or any law for the relief of debtors. The Company is financially solvent and is generally able to pay its debts as they become due.

 

5.11        No Antidilution Triggered.  There are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities.  

5.12   Intellectual Property.  The Company has valid, unrestricted and exclusive ownership of or rights to use the patents, trademarks, trademark registrations, trade names, copyrights, know-how, technology and other intellectual property necessary to the conduct of its business.  The Commission Documents list all patents, trademarks, trademark registrations, trade names and copyrights of the Company.  The Company has granted such licenses or has assigned or otherwise transferred a portion of (or all of) such valid, unrestricted and exclusive patents, trademarks, trademark registrations, trade names, copyrights, know-how, technology and other intellectual property necessary to the conduct of its business.  The Company has been granted licenses, know-how, technology and/or other intellectual property necessary to the conduct of its business.  To the best of the Company’s Knowledge after due inquiry, the Company is not infringing on the intellectual property rights of any third party, nor is any third party infringing on the Company’s intellectual property rights.  There are no restrictions in any agreements, licenses, franchises, or other instruments that preclude the Company from engaging in its business as presently conducted.

 

                       5.13    Former Shell Company.  The Company is not a “Shell Company” within the meaning of Rule 144(i) of Rule 405 of the Act, and has not been a Shell Company since the Company filed a Form 8-K on March 9, 2010. As of March 9, 2010, the Company had filed current “Form 10 information” with the Commission reflecting its status as an entity that is no longer an issuer described in Rule 144(i)(1). Investor acknowledges and agrees that the Company was, at one time, a “shell company” as defined in Rule 12b-2 under the Exchange Act.  Pursuant to Rule 144(i) under the Securities Act, securities issued by a current or former shell company (such as the Securities) that otherwise meet the holding period and other requirements of Rule 144 nevertheless cannot be sold in reliance on Rule 144 until one year after the date on which such company filed current “Form 10 information” (as defined in Rule 144(i)) with the SEC reflecting that it ceased being a shell company (and that, in the Company’s case, such Form 10 Information was filed on May 14, 2010), and provided that at the time of a proposed sale pursuant to Rule 144, the issuer is subject to the reporting requirements of section 13 or 15(d) of the Exchange Act and has filed all reports and other materials required to be filed by section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months (or for such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports.  As a result, shares issued without legend may need to be returned to have such legend affixed to them in the event that the Registration Statement is not effective and the Company ceases to be subject to the reporting requirements of section 13 or 15(d) of the Exchange Act or fails to file a required report, subject to legend removal once a Legend Removal Condition has again been met.

5.14   No Rights of Participation.  No person or entity, including, but not limited to, current or former stockholders of the Company, underwriters, brokers, agents or other third parties, has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the financing contemplated by this Agreement which has not been waived.

5.15   No Advance Regulatory Approval.  The Company acknowledges that this Investment Agreement, the transaction contemplated hereby and the Registration Statement contemplated hereby have not been approved by the SEC, or any other regulatory body and there is no guarantee that this Investment Agreement, the transaction contemplated hereby and the Registration Statement contemplated hereby will ever be approved by the SEC or any other regulatory body.  The Company is relying on its own analysis and is not relying on any representation by Investor that either this Investment Agreement, the transaction contemplated hereby or the Registration Statement contemplated hereby has been or will be approved by the SEC or other appropriate regulatory body.

5.16   Underwriter’s Fees.  The Company is not obligated to pay any compensation or other fees, costs or related expenditures in cash or securities to any underwriter, broker, agent or other representative in connection with this Offering.

 

5.19   Foreign Corrupt Practices.  Neither the Company, nor any of its subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any subsidiary has, in the course of its actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S.  Foreign Corrupt Practices Act of 1977, as amended; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

5.20   Absence of Certain Company Control Person Actions Or Events.  For purposes hereof, “Company Control Person” means each director, executive officer, promoter, and such other Persons as may be deemed in control of the Company pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act.  To the Company’s Knowledge, during the past ten (10) years:

(i) No petition under the federal bankruptcy laws or any state insolvency law was filed by or against, and no receiver, fiscal agent or similar officer was appointed by a court for the business or property of such Company Control Person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

(ii) No Company Control Person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses), or has not been convicted of, found guilty of, or have pled guilty nolo contendere of a crime or felony, entered into a pre trial diversion for or otherwise been charged for any action, misdemeanor or felony, involving fraud, dishonesty, breach of trust, contract or money laundering, or which may be considered to be a crime concerning moral turpitude, including but not limited to any disciplinary action by any branch of the United State military, regulatory bodies, including but not limited to any professional licensing authority [or has been the Defendant in a civil action for fraud or material breach of a financing agreement];

     

 

(B) engaging in any type of business practice; or

(C) engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws;

(iv) No Company Control Person has been the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such Company Control Person to engage in any activity described in paragraph (iii) of this item, or to be associated with Persons engaged in any such activity; or

(v) No Company Control Person was found by a court of competent jurisdiction in a civil action or by the CFTC or SEC to have violated any federal or state securities law, and the judgment in such civil action or finding by the CFTC or SEC has not been subsequently reversed, suspended, or vacated.

5.21         Representations Correct.  The foregoing representations, warranties and agreements are true, correct and complete in all material respects, and shall survive any Put Closing and the issuance of the shares of Common Stock thereby.

   

5.22    Tax Status.  The Company 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 (unless and only to the extent that the Company has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and 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.

  

    

   

5.24   Transactions With Affiliates.  Except as set forth in the Disclosure 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.

            5.25        Application of Takeover Protections.  The Company has not adopted and will not adopt any “poison pill” provision that will be applicable to Investor as a result of transactions contemplated by this Agreement.

5.26         Investment Company Act Status.  The Company is not, and as a result of the consummation of the transactions contemplated by the Transaction Documents and the application of the proceeds from the sale of the Shares as set forth in the Prospectus and any Prospectus Supplement shall not be, an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.

 

5.27         Taxes.  The Company and each of its Subsidiaries (i) has filed all necessary federal, state and foreign income and franchise tax returns or has duly requested extensions thereof, except for those the failure of which to file would not have a Material Adverse Effect, (ii) has paid all federal, state, local and foreign taxes due and payable for which it is liable, except to the extent that any such taxes are being contested in good faith and by appropriate proceedings, except for such taxes the failure of which to pay would not have a Material Adverse Effect, and (iii) does not have any tax deficiency or claims outstanding or assessed or, to the Company’s Knowledge, proposed against it which would have a Material Adverse Effect. 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 and its Subsidiaries know of no basis for any such claim. The Company is not operated in such a manner as to qualify as a passive foreign investment company, as defined in Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.

 

5.28         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 be unable to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.

5.29         U.S. Real Property Holding Corporation. Neither the Company nor any of its Subsidiaries is, or has ever been, and so long as any of the Securities are held by the Investor, shall become a U.S. real property holding corporation within the meaning of Section 897 of the Code.

5.30         Acknowledgment Regarding Investor's Purchase of Shares. The Company acknowledges and agrees that the Investor is acting solely in the capacity of an arm's length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that the Investor is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby and any advice given by the Investor or any of its respective representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Investor's purchase of the Securities, and is not being relied on by the Company. The Company further represents to the Investor that the Company's decision to enter into the Transaction Documents has been based solely on the independent evaluation by the Company and its representatives.

5.31         Lock-Up. The Company shall cause its officers and directors , to refrain from selling Common Stock during each Pricing Period, and the Company shall use its best efforts to cause other insiders, Affiliates or any related parties under the control of the Company to refrain from selling any Stock during each Pricing Period.

5.32   Other Agreements.  The Company has not, directly or indirectly, made any agreements with the Investor under a subscription in the form of this Agreement for the purchase of Common Stock, relating to the terms or conditions of the transactions contemplated hereby or thereby except as expressly set forth herein, respectively, or in exhibits hereto or thereto.

  

   

                        5.36        Dilution.  The number of shares of Common Stock issuable as Put Shares may increase substantially in certain circumstances, including, but not necessarily limited to, the circumstance wherein the trading price of the Common Stock declines during the period between the Effective Date and the end of the Commitment Period.  The Company’s executive officers and directors fully understand the nature of the transactions contemplated by this Agreement and recognize that they have a potential dilutive effect.  The board of directors of the Company has concluded, in its good faith business judgment, that such issuance is in the best interests of the Company.  The Company specifically acknowledges that, whenever the Company elects to initiate a Put, its obligation to issue the Put Shares is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of other shareholders of the Company.  The Company acknowledges that the Investor may sell shares of Common Stock anytime including but not limited to during any Pricing Period, and, subject to the limitations in Section 2.3.12, may enter into a short exempt sale or any short sale or other hedging or similar arrangement anytime including but not limited to during any Pricing Period, and that such sales, short sales or hedging arrangements may serve to lower the Purchase Price thereby having a potential dilutive effect on the Company’s Common Stock. 

 

5.37         No Brokers.  No brokers, finders or financial advisory fees or commissions shall be payable by the Company or any Subsidiary (or any of their respective Affiliates) with respect to the transactions contemplated by the Transaction Documents.

5.38         Material Representations True and Correct.  All material representations in the Company’s public filings from the date that is one (1) year prior to the date of this Investment Agreement up through the date of the Investment Agreement and up through the date of each Put Notice, if such representation is made in conjunction with a Put were true and correct when made.

5.39   No Material Non-Public Information.  The Company has not furnished to the Investor any information concerning the Company that will constitute material nonpublic information on or after the Liquidity Date.

6.        Additional Covenants of the Company.

6.1     Independent Auditors.  The Company shall, until at least the Termination Date, maintain as its independent auditors an accounting firm authorized to practice before the SEC.

 

6.2     Corporate Existence and Taxes; Change in Corporate Entity.  The Company shall, until at least the Termination Date, maintain its corporate existence in good standing and, once it becomes a “Reporting Issuer” (defined as a Company which files periodic reports under the Exchange Act), remain a Reporting Issuer and shall pay all its taxes when due except for taxes which the Company disputes.  Notwithstanding the terms of Section 9.2 below, the Company may, at any time after the date hereof, enter into any merger, consolidation or corporate reorganization of the Company with or into, or transfer all or substantially all of the assets of the Company to, another entity only if the resulting successor or acquiring entity in such transaction, if not the Company (the “Surviving Entity”), (i) has Common Stock listed for trading on a Nasdaq Market or on another national stock exchange and is a Reporting Issuer, (ii) assumes by written instrument the Company's obligations with respect to this Investment Agreement, the Registration Rights Agreement, the Transfer Agent Instructions and the other agreements referred to herein, including but not limited to the obligations to deliver to the Investor shares of Common Stock and/or securities that Investor is entitled to receive pursuant to this Investment Agreement.  

  

6.3           Registration Rights.  The Company will enter into a registration rights agreement covering the resale of the Common Shares substantially in the form of the Registration Rights Agreement attached as Exhibit F.  During the period from the Effective Date through the Termination Date, the Company shall use its best efforts to maintain the continuous effectiveness of the Registration Statement under the Securities Act.

  

6.4.          Blue Sky.  The Company shall take such action, if any, as is necessary in order to obtain an exemption for or to qualify the Securities for sale to the Investor pursuant to the Transaction Documents and for the subsequent resale of Securities by the Investor into the Principal Market and such other jurisdictions within the United States as Investor reasonably requests in writing, in each case, under applicable state securities or “blue sky” laws and shall provide evidence of any such action so taken to the Investor from time to time following the Commitment Closing Date.

 

6.5           Asset Transfers.  The Company shall not (i) transfer, sell, convey or otherwise dispose of any of its material assets to any subsidiary except for a cash or cash equivalent consideration and for a proper business purpose or (ii) transfer, sell, convey or otherwise dispose of any of its material assets to any Affiliate, as defined below, during the Term of this Agreement.  For purposes hereof, “Affiliate” shall mean any officer of the Company, director of the Company or owner of twenty percent (20%) or more of the Common Stock or other securities of the Company.

6.6      Variable Equity Securities. Notwithstanding anything to the contrary herein, if the Company issues any Variable Equity Securities (as defined below) anytime after the date hereof, the Company shall not be entitled to deliver a Put Notice to the Investor and the Investor shall not be required to purchase any Put Shares so long as any portion of such Variable Equity Securities (as defined below) remain outstanding.  For purposes hereof, the following shall be collectively referred to herein as, the “Equity Securities”: (i) Common Stock or any other equity securities, (ii) any debt or equity securities which are convertible into, exercisable or exchangeable for, or carry the right to receive additional shares of Common Stock or other equity securities, or (iii) any securities of the Company pursuant to an equity line structure or format similar in nature to this Offering.  For purposes hereof, the following shall be collectively referred to herein as, the “Variable Equity Securities”: any debt or Equity Securities which are convertible into, exercisable or exchangeable for, or carry the right to receive additional shares of Common Stock either (i) at any conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for Common Stock at any time after the initial issuance of such debt or equity security, or (ii) with a fixed conversion, exercise or exchange price that is subject to being reset at some future date at any time after the initial issuance of such debt or equity security or upon the occurrence of specified contingent events directly or indirectly related to the business of the Company or the market for the Common Stock.  

 

 

6.7         Opinion of Counsel.  Investor shall, concurrent with the Investment Commitment Closing, receive an opinion letter from the Company’s legal counsel, in the form of the Investment Commitment Opinion of Counsel attached as Exhibit B, or in such form as agreed upon by the parties, and shall, concurrent with each Put Date, receive an opinion letter from the Company’s legal counsel, in the form of the Put Opinion of Counsel attached as Exhibit D or in such form as agreed upon by the parties.

6.8           Listing.  Subject to the remainder of this Section 6.8, the Company shall ensure that its shares of Common Stock (including all Commitment Shares, the Fee Shares and Put Shares) are listed or quoted and available for trading on the OTC QB.  Thereafter, the Company shall (i) use its best efforts to continue the listing and trading of its Common Stock on an Approved Primary Market; and (ii) comply in all material respects with the Company’s reporting, filing and other obligations under the By-Laws or rules of FINRA and such exchanges, as applicable.

6.9           The Company’s Instructions to Transfer Agent.  The Company will instruct the Transfer Agent of the Common Stock (the “Transfer Agent”), by delivering irrevocable instructions to issue certificates, registered in the name of each Investor or its nominee, for the Commitment Shares, the Fee Shares and for the Put Shares in such amounts as specified from time to time by the Company upon any exercise by the Company of a Put.  Such certificates shall not bear a Legend unless issuance with a Legend is permitted by the terms of this Agreement and Legend removal is not permitted by Section 9.10(ii) hereof and the Company shall cause the Transfer Agent to issue such certificates without a Legend, and the Irrevocable Instructions to Transfer Agent shall so indicate.  Nothing in this Section shall affect in any way Investor’s obligations and agreement set forth in Sections 3.3.2 or 3.3.3 hereof to resell the Securities pursuant to an effective registration statement and to deliver a prospectus in connection with such sale or in compliance with an exemption from the registration requirements of applicable securities laws.  If (a) an Investor provides the Company with an opinion of counsel, which opinion of counsel shall be in form, substance and scope reasonably acceptable to counsel for the Company, to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from registration or (b) an Investor transfers Securities, pursuant to Rule 144, to a transferee which is an accredited investor, the Company shall permit the transfer.  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to an Investor 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 6.9 will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 6.9, that an Investor 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.

  

  

    

At or before 8:30 a.m., New York City time, on the second Trading Day following the Commitment Closing Date, the Company shall file a Current Report on Form 8-K describing all the material terms of the transactions contemplated by the Transaction Documents in the form required by the Exchange Act and attaching copies of each of this Agreement, the Registration Rights Agreement and the Press Release as exhibits thereto (including all exhibits thereto, the “Current Report”). The Company shall provide the Investor a reasonable opportunity to comment on a draft of such Current Report and has given due consideration to such comments. From and after the Liquidity Date, the Company shall have disclosed all material, nonpublic information delivered to the Investor (or the Investor’s representatives or agents) by the Company or any of its Subsidiaries, or any of their respective officers, directors, employees, agents or representatives (if any) in connection with the transactions contemplated by the Transaction Documents. The Investor covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company as described in this Section 6.10, the Investor will maintain the confidentiality of all disclosures made to it in connection with the transactions contemplated by the Transaction Documents (including the existence and terms of the transactions), except that the Investor may disclose the terms of such transactions to its financial, accounting, legal and other advisors. Not later than 15 business days following the Commitment Closing Date, the Company shall file a Form D with respect to the Securities in accordance with Regulation D and shall provide a copy thereof to the Investor promptly after such filing. The Company shall prepare and file with the SEC the Registration Statement (including the prospectus therein) covering only the resale by the Investor of the Registrable Securities in accordance with the Securities Act and the Registration Rights Agreement.

6.11   Change in Law or Policy.  In the event of a change in law, or policy of the SEC, as evidenced by a No-Action letter or other written statements of the SEC or FINRA which causes the Investor or the Company to be unable to perform its obligations hereunder, this Agreement shall be automatically terminated, provided that notwithstanding any termination under this Section 6.11, the Investor shall retain full ownership of the Commitment Shares and the Fee Shares as partial consideration for its commitment hereunder.

  

 

7.       Subscription and Wiring Instructions; Irrevocability.

8.       Indemnification.

In consideration of the Investor’s execution and delivery of the Investment Agreement, the Registration Rights Agreement and acquiring the Securities thereunder and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless Investor and all of its stockholders, officers, directors, employees and direct or indirect investors and any of the foregoing person’s agents, members, partners or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “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 Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorney’s fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any material misrepresentation or omission, or breach of any representation or warranty made by the Company in the Prospectus, Transaction Documents or any other certificate, instrument or documents contemplated hereby or thereby, (b) any material breach of any covenant, agreement or obligation of the Company contained in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (c) any cause of action, suit or claim, derivative or otherwise, by any stockholder of the Company based on a breach or alleged breach by the Company or any of its officers or directors of their fiduciary or other obligations to the stockholders of the Company or (d) any action, suit, claim or proceeding (including for these purposes a derivative action brought on behalf of the Company) instituted against any Indemnitee arising out of or resulting from the execution, delivery, performance or enforcement of the Transaction Documents, excluding liability resulting from a breach of the Investor’s representations and warranties or the Investor’s fraud or willful misconduct.

 

           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 it would be required to make if such foregoing undertaking was enforceable which is permissible under applicable law.

Promptly after receipt by an Indemnified Party of notice of the commencement of any action pursuant to which indemnification may be sought, such Indemnified Party will, if a claim in respect thereof is to be made against the other party (hereinafter “Indemnitor”) under this Section 8, deliver to the Indemnitor a written notice of the commencement thereof and the Indemnitor shall have the right to participate in and to assume the defense thereof with counsel reasonably selected by the Indemnitor.  The failure to deliver written notice to the Indemnitor within a reasonable time of the commencement of any such action, to the extent that such failure is materially prejudicial to the Indemnitor’s ability to defend such action, shall relieve the Indemnitor of liability to the Indemnified Party under this Section 8, but the omission to so deliver written notice to the Indemnitor will not relieve it of any liability that it may have to any Indemnified Party other than under this Section 8 to the extent it is prejudicial.

9.            Miscellaneous.

9.1     Representations and Warranties Survive the Closing; Severability.  Investor’s and the Company’s representations and warranties shall survive the Investment Date and any Put Closing contemplated by this Agreement notwithstanding any due diligence investigation made by or on behalf of the party seeking to rely thereon.  In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, or is altered by a term required by the Securities Exchange Commission to be included in the Registration Statement, this Agreement shall continue in full force and effect without said provision; provided that if the removal of such provision materially changes the economic benefit of this Agreement to the Investor, this Agreement shall terminate.

9.2     Successors and Assigns.  The Transaction Documents, including this Investment Agreement, shall not be assignable by the Investor.  The Transaction Documents, including this Investment Agreement, shall not be assignable by the Company except in conjunction with a transaction permitted under the terms of Section 6.2 above.

                      9.5          Written Notices, Etc. Any notice, demand or request required or permitted to be given by the Company or Investor pursuant to the terms of this Agreement shall be in writing and shall be deemed given when delivered personally, or by facsimile or upon receipt if by overnight or two (2) day courier, addressed to the parties at the addresses and/or facsimile telephone number of the parties set forth at the end of this Agreement or such other address as a party may request by notifying the other in writing; provided, however, that in order for any notice to be effective as to the Investor such notice shall be delivered and sent, as specified herein, to all the addresses and facsimile telephone numbers of the Investor set forth at the end of this Agreement or such other address and/or facsimile telephone number as Investor may request in writing.

9.6      Expenses. Except as set forth in the Registration Rights Agreement, each of the Company and Investor shall pay all costs and expenses that it respectively incurs, with respect to the negotiation, execution, delivery and performance of this Agreement.

9.7           Entire Agreement; Written Amendments Required.  This Agreement, including the Exhibits attached hereto, the Common Stock certificates, the Registration Rights Agreement, and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof, and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants, whether oral, written, or otherwise except as specifically set forth herein or therein.  Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought. The Disclosure Documents and all exhibits to this Agreement are hereby incorporated by reference in, and made a part of, this Agreement as if set forth in full herein.

9.8           Headings.  The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the words “without limitation.”  The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just the provision in which they are found.  

9.10        Fees and Expenses.

(i)  Commitment Shares and Fee Shares. Not later than three (3) Business Days after the date of the execution and delivery of this Agreement, in consideration for the Investor’s execution and delivery of this Agreement, the Company shall issue to the Investor a number of shares of restricted Common Stock (the “Commitment Shares”) having a value equal to $300,000 (the “Commitment Fee”)(which represents 1.5% of the Maximum Offering Amount) and a number of shares of restricted Common Stock (the “Fee Shares”) having a value equal to $20,000.00 (the “Legal/Due Diligence Fee”), in each case based upon a deemed valuation per share equal to the lesser of (i) 98% of the VWAP of the Company’s Common Stock for the 5 trading days immediately preceding June 20, 2011, the date of the initial term sheet between the parties related to this transaction, or (ii) 98% of the VWAP of the Company’s Common Stock for the 5 trading days immediately preceding the date of this Agreement.  The certificate(s) representing the Commitment Shares and Fee Shares shall be delivered to the Investor by overnight courier at its address set forth in Section 9.12 hereof. For the avoidance of doubt, all of the Commitment Shares and Fee Shares shall be fully earned as of the Commitment Closing Date regardless of whether or not any Registration Statement is filed or declared effective and regardless of whether any Puts are issued by the Company or settled hereunder. Upon issuance, the Commitment Shares and the Fee Shares shall constitute “restricted securities” as such term is defined in Rule 144(a)(3) under the Securities Act and, subject to the provisions of subsection (iv) of this Section 9.10, the certificate(s) representing the Commitment Shares and Fee Shares shall bear the restrictive legend set forth below in subsection (iii) of this Section 9.10. The Commitment Shares and Fee Shares shall constitute Registrable Securities and shall be included in the Registration Statement in accordance with the terms of the Registration Rights Agreement.  If at any time after the date that is six (6) months from the date of this Agreement, any outstanding Commitment Shares and Fee Shares cannot be sold under Rule 144 without volume restrictions or pursuant to a current and effective Registration Statement for an aggregate of 5 Trading Days during any 20 Trading Day period (the date of such occurrence, the “Redemption Trigger Date”), the Company shall be required to redeem the Commitment Shares and Fee Shares, in cash, for an amount equal to the greater of (i) the pro rata portion of the Commitment Fee and Legal/Due Diligence Fee represented by such shares or (ii) the number of Commitment Shares and Fee Shares being redeemed, multiplied by the average of the VWAPS for the five (5) Trading Days immediately prior to the Redemption Trigger Date, payable within three (3) Trading Days of the Redemption Trigger Date.

(ii)  Legends. The certificate representing the Commitment Shares and the certificate representing the Fees Shares, except as set forth below, shall each bear a restrictive legend (“Legend”) in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificate):

 

 

  

Notwithstanding the foregoing and for the avoidance of doubt, all Shares to be issued in respect of any Put Notice delivered to the Investor pursuant to this Agreement shall be issued to the Investor in accordance with Section 2.3 by crediting the Investor’s or its designees’ account at DTC through its Deposit/Withdrawal at Custodian (DWAC) system, and all such Shares shall be freely tradable and transferable and without any restrictive legends or restrictions on resale (and no stop-transfer order shall be placed against transfer thereof), and the Company shall not take any action or give instructions to any transfer agent of the Company otherwise.

 

(iii)  Removal of Legend.  If either (a) the Registration Statement is Effective, or (b) such holder provides the Company with an opinion of counsel, in form, substance and scope reasonably acceptable to counsel for the Company (the reasonable cost of which shall be borne by the Investor), to the effect that a public sale or transfer of such Security may be made without registration under the Act, or (c) such holder provides the Company with reasonable assurances (which assurances shall be adequate to the Company or the Company’s counsel) that such Security can be sold pursuant to Rule 144 (each, a “Legend Removal Condition”), then the Company shall, no later than two Trading Days following the delivery by the Investor to the Company or the Company’s transfer agent (with notice to the Company) of a legended certificate representing the Commitment Shares and a legended certificate representing the Fee Shares (each endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer, if applicable), as directed by the Investor, either: (A) issue and deliver (or cause to be issued and delivered) to the Investor a certificate(s) representing such Commitment Shares and Fee Shares that is free from all restrictive and other legends or (B) cause the Company’s transfer agent to credit the investor’s or its designee’s account at DTC through its Deposit/Withdrawal at Custodian (DWAC) system with a number of shares of Common Stock equal to the number of Commitment Shares and Fee Shares represented by the certificate(s) so delivered by the Investor (the date by which such certificate is required to be delivered to the investor or such credit is so required to be made to the account of the Investor or its designee at DTC pursuant to the foregoing is referred to herein as the “Required Delivery Date ”).

  

                 (ii) Governing Law and Jurisdiction.  All questions concerning the construction, validity, enforcement and interpretation of this Agreement and the other Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of Georgia without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of Atlanta, Georgia.  Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of Atlanta, Georgia for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding.  If either party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.  THE PARTIES HEREBY WAIVE ALL RIGHTS TO, AND AGREES NOT TO REQUEST, A TRIAL BY JURY FOR ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR BY ANY OF THE TRANSACTION DOCUMENTS.  

 

9.12         Notices.  Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery or facsimile (with facsimile machine confirmation of delivery received) at the address or number designated below (if delivered on a Business Day during normal business hours where such notice is to be received), or the first Business Day following such delivery (if delivered other than on a Business Day during normal business hours where such notice is to be received) or (b) on the second Business Day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The address for such communications shall be:

   

    

If to the Investor:  

  

Attn: Eric S. Swartz

1120 Sanctuary Parkway, Suite 325

Alpharetta, GA 30009

Telephone Number: (770) 640-8130

Fax:  (770) 777-5844

With a copy (which shall not constitute notice) to:

 

Attn: P. Bradford Hathorn, Esq.

1120 Sanctuary Parkway, Suite 325

Alpharetta, GA  30009

Telephone Number: (770) 640-8130

Fax:  (770) 777-5844

Either party hereto may from time to time change its address for notices by giving at least 10 days advance written notice of such changed address to the other party hereto.

  

     

IN WITNESS WHEREOF, the undersigned Investor does represent and certify under penalty of perjury that the foregoing statements are true and correct and that Investor by the following signature(s) executed this Agreement.

Dated this 17th day of August, 2011.

CENTURION PRIVATE EQUITY, LLC

By:
	Eric S. Swartz, Manager

 

Centurion Private Equity, LLC

c/o Eric S. Swartz

1120 Sanctuary Parkway, Suite 325

Alpharetta, GA 30009

Telephone: (770) 640-8130

Fax: 770 ###-###-####

THIS AGREEMENT IS ACCEPTED BY THE COMPANY IN THE AMOUNT OF THE MAXIMUM OFFERING AMOUNT ON THE 17TH DAY OF AUGUST, 2011.

	BLUE SPHEARE CORP.
	By:
		Shlomi Palas, CEO

 

    

BLUE SPHERE CORP. (the "Company") hereby intends, subject to the Individual Put Limit (as defined in the Investment Agreement), to elect to exercise a Put to sell the number of shares of Common Stock of the Company specified below, to Centurion Private Equity, LLC, as of the Intended Put Date written below, all pursuant to that certain Investment Agreement (the “Investment Agreement”) by and between the Company and Centurion Private Equity, LLC dated on or about August 17th, 2011.

 

	BLUE SPHERE CORP.
	By:
		Shlomi Palas, CEO

Address:
	Blue Sphere Corp.
	Attn:  Shlomi Palas, CEO
	35 Asuta Street
	Even Yehuda, Israel 40500
	Phone:  972-9 ###-###-####
	Fax:  972-9 ###-###-####
	Email:   ***@***

  

BLUE SPHERE CORP., (the "Company") hereby elects to exercise a Put to sell shares of common stock ("Common Stock") of the Company to Centurion Private Equity, LLC (the “Investor”), as of the Put Date, at the Put Share Price and for the number of Put Shares written below, all pursuant to that certain Investment Agreement (the “Investment Agreement”) by and between the Company and Centurion Private Equity, LLC dated on or about August 17th, 2011.

Note:  Capitalized terms shall have the meanings ascribed to them in this Investment Agreement.

	BLUE SPHERE CORP.
	By:
		Shlomi Palas, CEO

	Address:
		Blue Sphere Corp.
		Attn:  Shlomi Palas
		35 Asuta Street
		Even Yehuda, Israel 40500
		Phone:  972-9-891743
		Fax:  972-9 ###-###-####
		Email:   ***@***