DRAWDOWN EQUITY FINANCING AGREEMENT

 

THIS AGREEMENT, dated as of January 31, 2012 (this “Agreement”), between Auctus
Private Equity Fund, LLC a Massachusetts corporation (the “Investor”), and
Exergetic Energy, Inc. a corporation organized and existing under the laws of
the State of Michigan (the “Company”).

 

WHEREAS, the parties desire that, upon the terms and subject to the conditions
and limitations contained herein, the Company shall issue and sell to the
Investor, from time to time as provided herein, and the Investor shall purchase
from the Company up to Ten Million Dollars ($10,000,000) of the Company’s common
stock, par value $0.0001 per share (the “Common Stock”);

 

WHEREAS, such investments will be made in reliance upon the provisions of
Regulation D (“Regulation D”) of the Securities Act of 1933, as amended, and the
regulations promulgated thereunder (the “Securities Act”), and or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder;
and

 

WHEREAS, contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
substantially in the form attached hereto (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 thereunder,
and applicable state securities laws.

 

NOW, THEREFORE, the parties hereto agree as follows:

 

ARTICLE I.
Certain Definitions

 

Section 1.1            “Advance Request” shall mean the portion of the
Commitment Amount requested by the Company in the Drawdown Notice.

 

Section 1.2           "Advance Shares" shall mean all shares of Common Stock
that may be issued or are issuable pursuant to an Advance Request that has been
exercised or may be exercised in accordance with the terms and conditions of
this Agreement.

 

Section 1.3           “Advance Shares True-Up Date” shall mean the first (1st)
Trading Day after expiration of the applicable Pricing Period for an Advance
Request.

 

Section 1.4           “Bid Price” shall mean, on any date, the closing best bid
price (as reported by a direct feed service) of the Common Stock on the
Principal Market or, if the Common Stock is not traded on a Principal Market,
the highest reported bid price for the Common Stock, as furnished by FINRA.

 

Section 1.5           “Clearing Date” shall be the date on which the Estimated
Advance Shares (as defined in Section 2.2(b)) have been deposited into the
Investor’s brokerage account and the Investor’s broker has confirmed with the
Investor that the Investor may execute trades of such Estimated Advance Shares.

 

Exergetic Energy, Inc. XNGR.OB DEFA 1 2/10/2012

 

 

 

 

 

 

Section 1.6           “Closing” shall mean each of the closings of a purchase
and sale of Common Stock pursuant to Section 2.3.

 

Section 1.7           “Closing Date” shall have the meaning specified in Section
2.3.

 

Section 1.8           “Commitment Amount” shall mean the aggregate amount of up
to Ten Million Dollars ($10,000,000) which the Investor has agreed to provide to
the Company in order to purchase the Company’s Common Stock pursuant to the
terms and conditions of this Agreement.

 

Section 1.9           “Commitment Period” shall mean the period commencing on
the earlier to occur of (i) the Effective Date, or (ii) such earlier date as the
Company and the Investor may mutually agree in writing, and expiring on the
earliest to occur of (x) the date on which the Investor shall have made payment
of Advance Requests pursuant to this Agreement in the aggregate amount of the
Commitment Amount, (y) the date this Agreement is terminated pursuant to Section
10.2, or (z) the date occurring thirty-six (36) months after the Effective Date

 

Section  1.10          “Common Stock” shall mean the Company’s Common Stock, par
value $0.0001 per share. No Drawdown Notice shall be made if the Company’s
Common Stock is trading at or below its par value.

 

Section 1.11         “Condition Satisfaction Date” shall have the meaning set
forth in Section 7.2.

 

Section 1.12         “Damages” shall mean any loss, claim, damage, liability,
reasonable costs and expenses (including, without limitation, reasonable
attorney’s fees and disbursements and reasonable costs and expenses of expert
witnesses and investigation).

 

Section 1.13          “Discounted Floor Price” shall be set at Ninety-Three
(93%) percent of the Floor Price of the Common Stock during the Pricing Period,
in accordance with the terms and conditions of this Agreement.

 

Section 1.14         “Drawdown Notice” shall mean a written notice, in the form
of Exhibit A attached hereto, to the Investor executed by an officer of the
Company and setting forth the Advance Request amount that the Company requests
from the Investor.

 

Section 1.15         “Drawdown Notice Date” shall mean any Trading Day during
the Commitment Period that the Company provides (in accordance with and deemed
delivered pursuant to Section 2.2(d) of this Agreement) to the Investor a
Drawdown Notice requiring the Investor to advance funds to the Company subject
to the terms of this Agreement. 

 

Section 1.16         “DTC” shall have the meaning specified in Section 2.3.

 

Section 1.17         “DWAC” shall have the meaning specified in Section 2.3.

 

Exergetic Energy, Inc. XNGR.OB DEFA 2 2/10/2012

  

 

 

 

 

Section 1.18         “Effective Date” shall mean the date on which the SEC first
declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in Section 7.2(a).

 

Section 1.19         “Estimated Advance Shares” shall have the meaning specified
in Section 2.2(b).

 

Section 1.20         “Exchange Act” shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.

 

Section 1.21         “Exchange Cap” shall have the meaning specified in Section
2.2(e).

 

Section 1.22         “FINRA” shall mean the Financial Industry Regulatory
Authority.

 

Section 1.23         “Floor Day” shall have the meaning specified in Section
2.2(c).

 

Section 1.24         “Floor Price” shall mean, with respect to any Trading Day
in a Pricing Period, the lowest price per share of Common Stock provided by the
Company in the applicable Drawdown Notice at which the Investor may sell shares
of Common Stock in connection with an Advance Request provided however that the
Floor Price is equal to or less than the Bid Price of the Common Stock one
Trading Day immediately preceding the Drawdown Notice Date. If the Company does
not specify a Floor Price in the applicable Drawdown Notice, then the “Floor
Price” shall be deemed to equal Seventy-Five (75%) of the average Bid Price over
the ten (10) trading days immediately preceding the Drawdown Notice Date. In all
circumstances the specified Floor Price must be above par value.

 

Section 1.25         “Material Adverse Effect” shall mean (i) any condition,
occurrence, state of facts or event having, or insofar as reasonably can be
foreseen would likely have, any material adverse effect on the legality,
validity or enforceability of the Transaction Documents or the transactions
contemplated thereby, (ii) any condition, occurrence, state of facts or event
having, or insofar as reasonably can be foreseen would likely have, any effect
on the business, operations, properties, financial condition or prospects of the
Company that is material and adverse to the Company and its Subsidiaries, taken
as a whole, and/or (iii) any condition, occurrence, state of facts or event that
would, or insofar as reasonably can be foreseen would likely, prohibit or
otherwise materially interfere with or delay the ability of the Company to
perform any of its obligations under any of the Transaction Documents to which
it is a party.

 

Section 1.26         “Market Price” shall mean the lowest Bid Price of the
Common Stock during the Pricing Period.

 

Section 1.27         “Maximum Advance Amount” shall not exceed the lesser of (a)
Two Hundred Thousand Dollars ($200,000) or (b) two hundred (200%) percent of the
average daily volume of the Common Stock for the three (3) Trading Days
immediately preceding the applicable Drawdown Notice Date, multiplied by the
average of the Bid Prices for the three (3) Trading Days immediately preceding
the applicable Drawdown Notice Date. 

 

Exergetic Energy, Inc. XNGR.OB DEFA 3 2/10/2012

 

 

 

 

 

 

Section 1.28         “Ownership Limitation” shall have the meaning specified in
Section 2.2(f).

  

Section 1.29         “Par Value Payment” shall have the meaning specified in
Section 2.2(b).

 

Section 1.30 “Person” shall mean an individual, a corporation, a partnership, an
association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.

 

Section 1.31         “Pricing Period” shall mean the five (5) consecutive
Trading Days immediately following the Clearing Date associated with the
applicable Drawdown Notice and during which the Purchase Price of the Common
Stock is valued.

 

Section 1.32         “Principal Market” shall mean the Nasdaq Global Select
Market, the Nasdaq Global Market, the Nasdaq Capital Market, the American Stock
Exchange, the OTC Bulletin Board, OTC Pink Sheets or the New York Stock
Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock.

 

Section 1.33         “Purchase Price” shall be set at Ninety-Three (93%) percent
of the Market Price of the Common Stock during the Pricing Period, in accordance
with the terms and conditions of this Agreement.

 

Section 1.34         “Registrable Securities” shall mean the shares of Common
Stock, to be issued hereunder (i) in respect of which the Registration Statement
has not been declared effective by the SEC, (ii) which have not been sold under
circumstances meeting all of the applicable conditions of Rule 144 (or any
similar provision then in force) under the Securities Act (“Rule 144”) or (iii)
which have not been otherwise transferred to a holder who may trade such shares
without restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend.

Section 1.35          “Registration Limitation” shall have the meaning specified
in Section 2.2(a).

 

Section 1.36          “Registration Rights Agreement” shall mean the
Registration Rights Agreement, dated the date hereof, regarding the filing of
the Registration Statement for the resale of the Registrable Securities, entered
into between the Company and the Investor.

 

Exergetic Energy, Inc. XNGR.OB DEFA 4 2/10/2012

   

 

 

Section 1.37         “Registration Statement” shall mean a registration
statement on Form S-1 or Form S-3 (if use of such form is then available to the
Company pursuant to the rules of the SEC and, if not, on such other form
promulgated by the SEC for which the Company then qualifies and which counsel
for the Company shall deem appropriate, and which form shall be available for
the resale of the Registrable Securities to be registered thereunder in
accordance with the provisions of this Agreement and the Registration Rights
Agreement, and in accordance with the intended method of distribution of such
securities), for the registration of the resale by the Investor of the
Registrable Securities under the Securities Act.

 

Section 1.38         “Registration Statement Eligibility Cap” shall have the
meaning specified in Section 2.2(e).

 

Section 1.39         “Regulation D” shall have the meaning set forth in the
recitals of this Agreement.

 

Section 1.40          “SEC” shall mean the United States Securities and Exchange
Commission.

 

Section 1.41         “Securities Act” shall have the meaning set forth in the
recitals of this Agreement.

 

Section 1.42         “SEC Documents” shall mean Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K and Proxy
Statements of the Company as supplemented to the date hereof, filed by the
Company for a period of at least twelve (12) months immediately preceding the
date hereof, until such time as the Company no longer has an obligation to
maintain the effectiveness of a Registration Statement as set forth in the
Registration Rights Agreement.

 

Section 1.43         “Trading Day” shall mean any day during which the New York
Stock Exchange shall be open for business.

 

Section 1.44          “Transaction Documents” shall mean, collectively, the
Registration Rights Agreement and the Drawdown Equity Financing Agreement
entered into by the parties on the Effective Date.

 

ARTICLE II
Advance Requests

 

Section 2.1           Advance Requests. Subject to the terms, conditions and
limitations of this Agreement (including, without limitation, the provisions of
Article VII hereof), the Company may, at its sole and exclusive option, issue
and sell to the Investor from time to time during the Commitment Period, and,
except for conditions outside of the Investor’s control, the Investor shall
purchase from the Company, shares of the Company’s Common Stock by the delivery,
in the Company’s sole discretion, of Drawdown Notices in accordance with Section
2.2. Subject to the terms, conditions and limitations of this Agreement
(including, without limitation, the provisions of Article VII hereof), the
number of Advance Shares that the Investor shall purchase pursuant to a Drawdown
Notice shall be determined by dividing the applicable Advance Request, as such
Advance Request may be reduced pursuant to Section 2.2(c), by the Purchase Price
with respect to such Drawdown Notice, together with such additional shares of
Common Stock that may be purchased pursuant to Section 2.2(c).

 

Exergetic Energy, Inc. XNGR.OB DEFA 5 2/10/2012

   

 

 

 

Section 2.2           Mechanics.

 

(a)          Drawdown Notice. Subject to the terms, conditions and limitations
of this Agreement (including, without limitation, the provisions of Article VII
hereof), the Company may, at its sole and exclusive option from time to time
during the Commitment Period, deliver a Drawdown Notice to the Investor setting
forth the Advance Request that the Company requests from the Investor on the
applicable Closing Date. Notwithstanding anything herein to the contrary, in no
event shall (i) any Advance Request designated by the Company in any Drawdown
Notice exceed the Maximum Advance Amount, (ii) the aggregate amount of all
Advance Requests pursuant to this Agreement exceed the Commitment Amount, (iii)
the number of shares of Common Stock issuable to the Investor pursuant to a
Drawdown Notice cause the aggregate number of shares of Common Stock
beneficially owned (as calculated pursuant to Section 13(d) of the Exchange Act
and Rule 13d-3 promulgated thereunder) by the Investor and its affiliates to
exceed the Ownership Limitation, (iv) if the Common Stock is listed or quoted on
The Nasdaq Stock Market or any other U.S. national securities exchange during
the Commitment Period, the number of shares of Common Stock issuable to the
Investor pursuant to a Drawdown Notice cause the aggregate number of shares of
Common Stock that would be issued pursuant to this Agreement, together with all
shares of Common Stock issued pursuant to any transactions that may be
aggregated with the transactions contemplated by this Agreement under applicable
rules of The Nasdaq Stock Market or any other Principal Market on which the
Common Stock may be listed or quoted, to exceed the Exchange Cap, and (v) the
number of shares of Common Stock issuable to the Investor pursuant to a Drawdown
Notice exceed the number of shares of Common Stock then available for resale by
the Investor under the Registration Statement (the “Registration Limitation”).
In connection with each Drawdown Notice delivered by the Company, if any portion
of the applicable Advance Request would result in any of the limitations set
forth in this Section 2.2(a) to be exceeded, such portion of such Advance
Request shall be void ab initio. Unless the parties agree in writing otherwise,
there shall be a minimum of five (5) Trading Days between an Advance Shares
True-Up Date and a subsequent Drawdown Notice Delivery Date.

 

(b)          Delivery of Estimated Advance Shares. On a Drawdown Notice Date,
the Company shall deliver to the Investor’s brokerage account an estimated
number of shares of Common Stock equal to the Advance Request indicated in the
applicable Drawdown Notice divided by the Bid Price on the Trading Day
immediately preceding the Drawdown Notice Date, multiplied by one hundred fifty
percent (150%) (the “Estimated Advance Shares”). On the Trading Day immediately
following the applicable Clearing Date, the Investor shall deliver payment to
the Company, by check or wire transfer of immediately available funds to an
account designated in writing by the Company on or prior to the Clearing Date,
an amount equal to the par value of the Estimated Advance Shares (“Par Value
Payment”). The Company acknowledges and agrees that the Investor may sell shares
of the Company’s Common Stock relating to a particular Drawdown Notice,
including, without limitation, all of the Estimated Advance Shares delivered on
the Clearing Date with respect to such Drawdown Notice, at any time after the
Drawdown Notice is received by the Investor.

 

Exergetic Energy, Inc. XNGR.OB DEFA 6 2/10/2012

   

 

 

   

(c)          Maximum Advance Amount, Floor Price.  In relation to each Drawdown
Notice, the Company may, in its sole discretion, designate a Floor Price. Any
Floor Price designated by the Company in a Drawdown Notice may not be changed by
the Company once the Drawdown Notice is submitted to the Investor. The amount of
the Advance Request set forth in a Drawdown Notice shall automatically be
reduced by one-fifth (20%) for each Trading Day during the Pricing Period that
any one or more of the following occur: (i) the price of the Common Stock falls
below the Floor Price at any time during the Trading Day (each such day, a
“Floor Day”), (ii) trading in the Common Stock is suspended for any reason
during trading hours on the Principal Market on the Trading Day,(iii) the price
of the Common Stock falls below its par value at any time during the Trading
Day, or (iv) there is a public holiday or no trading volume in the Common Stock
on the Principal Market on the Trading Day. The Investor shall immediately cease
selling any shares of Common Stock with respect to the Drawdown Notice if the
price of the Common Stock falls below the Floor Price; provided, however, that
the Investor may reinitiate selling shares of Common Stock on any Floor Day if
the price of the Common Stock exceeds the Floor Price. The number of Advance
Shares to be issued and delivered to the Investor at the Closing (in accordance
with Section 2.3 of this Agreement) with respect to a Drawdown Notice that
includes one or more Floor Days shall be determined based on the applicable
Advance Request, as it may be reduced pursuant to this Section 2.2(c), provided
however, that the Company shall be obligated to sell, and the Investor shall be
obligated to purchase, at a price equal to the Floor Price multiplied by 93%
(“The Discounted Floor Price”), any shares of Common Stock corresponding to such
Drawdown Notice that have been sold by the Investor on any Floor Day (all of
which shares shall be deemed Advance Shares).  The Investor shall provide the
Company with notice of the number of shares of Common Stock sold by the Investor
on any Floor Day prior to the applicable Closing.

 

(d)          Date of Delivery of Drawdown Notice.  A Drawdown Notice shall be
deemed delivered on: (i) the Trading Day it is received by email or fax if such
notice is received prior to 5:00 pm Eastern Time; or (ii) the immediately
succeeding Trading Day if the Drawdown Notice is received by facsimile or
otherwise after 5:00 pm Eastern Time on a Trading Day or at any time on a day
which is not a Trading Day.  No Drawdown Notice may be deemed delivered on a day
that is not a Trading Day or if positive receipt is not acknowledged by Auctus.

  

Exergetic Energy, Inc. XNGR.OB DEFA 7 2/10/2012

   

 

 

    

(e)          Exchange Cap. The Company shall not issue or sell any shares of
Common Stock pursuant to this Agreement, and the Investor shall not purchase or
acquire any shares of Common Stock pursuant to this Agreement, to the extent
that after giving effect thereto, the aggregate number of all shares of Common
Stock that would be issued pursuant to this Agreement, together with all shares
of Common Stock issued pursuant to any transactions that may be aggregated with
the transactions contemplated by this Agreement under applicable rules of The
Nasdaq Stock Market or any other Principal Market on which the Common Stock may
be listed or quoted, would exceed the maximum number of shares of Common Stock
that the Company may issue pursuant to this Agreement and the transactions
contemplated hereby without (1) breaching the Company’s obligations under the
applicable rules of The Nasdaq Stock Market or any other Principal Market on
which the Common Stock may be listed or quoted or (2) obtaining stockholder
approval under the applicable rules of The Nasdaq Stock Market or any other
Principal Market on which the Common Stock may be listed or quoted (the
“Exchange Cap”), unless and until the Company elects to solicit stockholder
approval of the transactions contemplated by this Agreement and the stockholders
of the Company have in fact approved the transactions contemplated by this
Agreement in accordance with the applicable rules and regulations of The Nasdaq
Stock Market, any other Principal Market on which the Common Stock may be listed
or quoted, and the Certificate of Incorporation and Bylaws of the Company

 

(f)          Ownership Limitation. The Company shall not issue or sell, and the
Investor shall not purchase or acquire, any shares of Common Stock under this
Agreement which, when aggregated with all other shares of Common Stock then
beneficially owned by the Investor and its affiliates (as calculated pursuant to
Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder), would
result in the beneficial ownership by the Investor and its affiliates of more
than 4.99% of the then issued and outstanding shares of Common Stock (the
“Ownership Limitation”). Upon the written or oral request of the Investor, the
Company shall confirm orally or in writing to the Investor within two (2)
Business Days of such request the number of shares of Common Stock then
outstanding. The Investor and the Company shall each cooperate in good faith in
the determinations required hereby and the application hereof.

   

Exergetic Energy, Inc. XNGR.OB DEFA 8 2/10/2012

 

 

 

 

 

Section 2.3           Closings.  Subject to the terms,conditions, and
limitations of this Agreement, the Investor promptly shall notify the Company in
writing of the occurrence of the Clearing Date associated with a Drawdown
Notice. The Pricing Period with respect to such Drawdown Notice shall begin on
the first (1st) Trading Day immediately following the applicable Clearing Date.
 At the end of the Pricing Period, the Purchase Price and the amount of the
Advance Request (taking into account adjustments and/or reductions) shall be
established and the number of Advance Shares shall be determined for a
particular Advance Request (which shall include any shares of Common Stock sold
by the Investor on any Floor Day). If the number of Estimated Advance Shares
initially delivered to the Investor pursuant to Section 2.2(b) is greater than
the aggregate number of Advance Shares to be purchased by the Investor pursuant
to such Advance Request, then, on the Advance Shares True-Up Date, the Investor
shall deliver to Company any excess Estimated Advance Shares associated with
such Advance Request unless the parties mutually agree for the Investor to
retain such excess Common Shares to apply to the next Advance Request.  If the
number of Estimated Advance Shares initially delivered to the Investor pursuant
to Section 2.2(b) is less than the aggregate number of Advance Shares to be
purchased by the Investor pursuant to such Advance Request, then, on the Advance
Shares True-Up Date, the Company shall deliver to the Investor the difference
between the Estimated Advance Shares and the Advance Shares issuable pursuant to
such Advance Request.  The Closing of an Advance Request shall occur upon the
date (the “Closing Date”) on which the settlement of trades of the Advance
Shares that occurred during the applicable Pricing Period and after the
applicable Advance Shares True-Up Date associated with such Drawdown Notice in
the Investor’s brokerage account has been completed, whereby the Investor shall
deliver to the Company, by wire transfer of immediately available funds to an
account designated in writing by the Company, (i) the Advance Request specified
in the Drawdown Notice, as reduced pursuant to Section 2.2(c) (as applicable),
plus (ii) an amount equal to the number of shares of Common Stock corresponding
to such Drawdown Notice that have been sold by the Investor on any Floor Day
during the applicable Pricing Period multiplied by the Discounted Floor Price,
less (iii) the Par Value Payment. In the event that the Investor is no longer
able, due to time constraints beyond its control, to perform a wire on any
particular Trading Day, then the wire will be promptly executed on the next
following Trading Day. In lieu of delivering physical certificates representing
the Common Stock issuable in accordance with this Section 2.3, and provided that
the Company’s transfer agent is then participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer (FAST) program, upon request
of the Investor, the Company shall cause the Company’s transfer agent to
electronically transmit the applicable Advance Shares by crediting the account
of the Investor's prime broker with DTC through its Deposit Withdrawal Agent
Commission ("DWAC") system, and provide proof satisfactory to the Investor of
such delivery. In addition, on or prior to the Closing Date, each of the Company
and the Investor shall deliver to the other all documents, instruments and
writings required to be delivered by either of them pursuant to this Agreement
in order to implement and effect the transactions contemplated herein.  To the
extent the Company has not paid the fees, expenses, and disbursements to the
Investor in accordance with Sections 2.4 and 12.4, then the amount of such fees,
expenses, and disbursements may be withheld by the Investor (and shall be paid
to the relevant party) from the wire transfer pursuant to that particular
Drawdown Notice. If in the event that at Closing the Advance Request has been
reduced to a dollar amount that does not exceed the initial Par Value Payment
made by the Investor, then that difference, up to the full Par Value Payment,
not including any associated fees, will be required to be returned to the
Investor by the Company on the next following Trading Day via wire transfer.

   

Exergetic Energy, Inc. XNGR.OB DEFA 9 2/10/2012

  

 

 

  

(a)          Company’s Obligations Upon Closing. 

 

(i)          The Company shall use all reasonable efforts to become DTC eligible
within a reasonable time of the date of this Agreement.  Upon approval of DTC
eligibility, and provided that the Company’s transfer agent then is
participating in the DTC Fast Automated Securities Transfer (FAST) program, upon
request of the Investor, the Company shall cause the Company’s transfer agent to
electronically transmit all shares of Common Stock issuable in accordance with
this Section 2.3 by crediting the account of the Investor's prime broker with
DTC through its DWAC system, and provide proof satisfactory to the Investor of
such delivery, all of which shares of Common Stock shall be freely tradable and
transferable and without restriction on resale pursuant to the Registration
Statement (and no stop-transfer order shall be placed against transfer thereof),
and the Company shall not take any action or give any instructions to any
transfer agent of the Company otherwise. All physical certificates representing
the Common Stock issuable in accordance with this Section 2.3 shall be free of
restrictive legends, and all of such shares of Common Stock shall be freely
tradable and transferable and without restriction on resale pursuant to the
Registration Statement (and no stop-transfer order shall be placed against
transfer thereof), and the Company shall not take any action or give any
instructions to any transfer agent of the Company otherwise.

 

(ii)         The Registration Statement covering the resale by the Investor of
the Registrable Securities shall have been declared effective under the
Securities Act by the SEC and shall remain effective, and the Investor shall be
permitted to utilize the prospectus therein to resell (a) all of the Advance
Shares issued pursuant to all prior Drawdown Notices and (b) all of the Advance
Shares issuable pursuant to the applicable Drawdown Notice.

 

(iii)        The Company shall have obtained all material permits and
qualifications required by any applicable state for the offer and sale of the
Registrable Securities, or shall have the availability of exemptions therefrom. 
The sale and issuance of the Registrable Securities shall be legally permitted
by all laws and regulations to which the Company is subject.

 

(iv)         The Company shall file with the SEC in a timely manner all reports,
notices and other documents required of a “reporting company” under the Exchange
Act and applicable Commission regulations.

 

(v)          The fees as set forth in Section 12.4 below shall have been paid or
can be withheld as provided in Section 2.3.

 

(vi)         The Company’s transfer agent shall be DWAC eligible.

 

(b)          Investor’s Obligations Upon Closing. Subject to the terms and
conditions of this Agreement, upon receipt of the shares referenced in Section
2.3(a)(i) above and provided the Company is in compliance with its obligations
in Section 2.3, the Investor shall deliver to the Company the amount of the
Advance Request specified in the Drawdown Notice by wire transfer of immediately
available funds.

 

 

Exergetic Energy, Inc. XNGR.OB DEFA 10 2/10/2012

 

 

 

Section 2.4            Hardship.  In the event the Investor sells shares of the
Company’s Common Stock after receipt of a Drawdown Notice and the Company fails
to perform its obligations as mandated in Section 2.3, and specifically the
Company fails to deliver to the Investor the shares of Common Stock
corresponding to the applicable Drawdown Notice pursuant to Section 2.3 and no
later than on the Advance Share True-Up Date, the Company acknowledges that the
Investor shall suffer financial hardship and therefore shall be liable for any
and all losses, commissions, fees, interest, legal fees or any other financial
hardship caused to the Investor.

 

The Company understands that a delay in the delivery of the securities in the
form required pursuant to this registration statement beyond the Closing could
result in economic loss to the Investor.  After the Effective Date, as
compensation to the Investor for late issuance of such shares (delivery of
securities after the applicable closing), the Company agrees to make payments to
the Investor in accordance with the schedule below where the number of days
overdue is defined as the number of business days beyond the close with amount
due being cumulative. 

 

The Company shall pay any payments incurred under this Section in immediately
available funds upon demand.  Nothing herein shall limit the right of the
Investor to pursue damages for the Company’s failure to comply with the issuance
and delivery of securities to the Investor.

  

Payments for Each Number of Days Overdue For each $10,000 Worth of Common Stock
    1 $100 2 $200 3 $300 4 $400 5 $500 6 $600 7 $700 8 $800 9 $900 10 $1000 Over
10

$1000 + $200 for each Business Day beyond the tenth day 

 

ARTICLE III
Representations and Warranties of Investor

 

Investor hereby represents and warrants to, and agrees with, the Company that
the following are true and correct as of the date hereof and as of each Advance
Request Date:

 

Exergetic Energy, Inc. XNGR.OB DEFA 11 2/10/2012

 

 

 

 

Section 3.1           Organization and Authorization.  The Investor is duly
incorporated or organized and validly existing in the jurisdiction of its
incorporation or organization and has all requisite power and authority to
purchase and hold the securities issuable hereunder.  The decision to invest and
the execution and delivery of this Agreement by such Investor, the performance
by such Investor of its obligations hereunder and the consummation by such
Investor of the transactions contemplated hereby have been duly authorized and
requires no other proceedings on the part of the Investor.  The undersigned has
the right, power and authority to execute and deliver this Agreement and all
other instruments (including, without limitations, the Registration Rights
Agreement), on behalf of the Investor.  This Agreement has been duly executed
and delivered by the Investor and, assuming the execution and delivery hereof
and acceptance thereof by the Company, will constitute the legal, valid and
binding obligations of the Investor, enforceable against the Investor in
accordance with its terms.

 

Section 3.1.1           Evaluation of Risks.  The Investor has such knowledge
and experience in financial, tax and business matters as to be capable of
evaluating the merits and risks of, and bearing the economic risks entailed by,
an investment in the Company and of protecting its interests in connection with
this transaction.  It recognizes that its investment in the Company involves a
high degree of risk.

 

Section 3.2           No Legal Advice From the Company.  The Investor
acknowledges that it had the opportunity to review this Agreement and the
transactions contemplated by this Agreement with his or its own legal counsel
and investment and tax advisors.  The Investor is relying solely on such counsel
and advisors and not on any statements or representations of the Company or any
of its representatives or agents for legal, tax or investment advice with
respect to this investment, the transactions contemplated by this Agreement or
the securities laws of any jurisdiction.

 

Section 3.3           Investment Purpose. The securities are being purchased by
the Investor for its own account, and for investment purposes.  The Investor
agrees not to assign or in any way transfer the Investor’s rights to the
securities or any interest therein and acknowledges that the Company will not
recognize any purported assignment or transfer except in accordance with
applicable Federal and state securities laws.  No other person has or will have
a direct or indirect beneficial interest in the securities.  The Investor agrees
not to sell, hypothecate or otherwise transfer the Investor’s securities unless
the securities are registered under Federal and applicable state securities laws
or unless, in the opinion of counsel satisfactory to the Company, an exemption
from such laws is available.

 

Section 3.4           Accredited Investor.  The Investor is an “Accredited
Investor” as that term is defined in Rule 501(a)(3) of Regulation D of the
Securities Act.

 

Exergetic Energy, Inc. XNGR.OB DEFA 12 2/10/2012

 

 

 

 

Section 3.5           Information.  The Investor and its advisors (and its
counsel), if any, have been furnished with all materials relating to the
business, finances and operations of the Company and information it deemed
material to making an informed investment decision.  The Investor and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company and its management.  Neither such inquiries nor any other due diligence
investigations conducted by such Investor or its advisors, if any, or its
representatives shall modify, amend or affect the Investor’s right to rely on
the Company’s representations and warranties contained in this Agreement.  The
Investor understands that its investment involves a high degree of risk.  The
Investor is in a position regarding the Company, which, based upon employment,
family relationship or economic bargaining power, enabled and enables such
Investor to obtain information from the Company in order to evaluate the merits
and risks of this investment.  The Investor has sought such accounting, legal
and tax advice, as it has considered necessary to make an informed investment
decision with respect to this transaction.

 

Section 3.6           Receipt of Documents. The Investor and its counsel have
received and read in their entirety:  (i) this Agreement and the Exhibits
annexed hereto; (ii) all due diligence and other information necessary to verify
the accuracy and completeness of such representations, warranties and covenants;
and (iii) answers to all questions the Investor submitted to the Company
regarding an investment in the Company; and the Investor has relied on the
information contained therein and has not been furnished any other documents,
literature, memorandum or prospectus. 

 

Section 3.7           Registration Rights Agreement.  The parties have entered
into the Registration Rights Agreement dated the date hereof.

 

Section 3.8           No General Solicitation.  Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the shares of Common Stock offered hereby.

 

Section 3.9           Not an Affiliate.  The Investor is not an officer,
director or a person that directly, or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common control with
the Company or any “Affiliate” of the Company (as that term is defined in Rule
405 of the Securities Act).

 

Section 3.10         Trading Activities.  The Investor’s trading activities with
respect to the Company’s Common Stock shall be in compliance with all applicable
federal and state securities laws, rules and regulations and the rules and
regulations of the Principal Market on which the Company’s Common Stock is
listed or traded and Investor will comply with any requests that the SEC makes
in connection with the filing of the Registration Agreement to ensure such
compliance. Neither the Investor nor its affiliates has an open short position
in the Common Stock of the Company, the Investor agrees that it shall not, and
that it will cause its affiliates not to, engage in any short sales of or
hedging transactions with respect to the Common Stock, provided that the Company
acknowledges and agrees that upon receipt of a Drawdown Notice the Investor has
the right to sell the shares to be issued to the Investor pursuant to the
Drawdown Notice, during the applicable Pricing Period.

 

Section 3.11         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.

 

Exergetic Energy, Inc. XNGR.OB DEFA 13 2/10/2012

 

 

 

 

   

Section 3.12         Good Standing. The Investor is a limited liability company,
duly organized, validly existing and in good standing under the laws of its
state of formation and any jurisdiction in which it is conducting business.

 

ARTICLE IV.
Representations and Warranties of the Company

 

Except as stated below, on the disclosure schedules attached hereto or in the
SEC Documents (as defined herein), the Company hereby represents and warrants
to, and covenants with, the Investor that the following are true and correct as
of the date hereof:

 

Section 4.1           Organization and Qualification.  The Company is duly
incorporated or organized and validly existing in the jurisdiction of its
incorporation or organization and has all requisite corporate power to own its
properties and to carry on its business as now being conducted.  Each of the
Company and its subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect on the Company and its subsidiaries taken as a whole.

 

Section 4.2           Authorization, Enforcement, Compliance with Other
Instruments.  (i) The Company has the requisite corporate power and authority to
enter into and perform this Agreement, the Registration Rights Agreement and any
related agreements, in accordance with the terms hereof and thereof, (ii) the
execution and delivery of this Agreement, the Registration Rights Agreement and
any related agreements by the Company and the consummation by it of the
transactions contemplated hereby and thereby, have been duly authorized by the
Company’s Board of Directors and no further consent or authorization is required
by the Company, its Board of Directors or its stockholders, (iii) this
Agreement, the Registration Rights Agreement and any related agreements have
been duly executed and delivered by the Company, (iv) this Agreement, the
Registration Rights Agreement and any related agreements constitute the valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors’ rights and remedies.

 

Exergetic Energy, Inc. XNGR.OB DEFA 14 2/10/2012

 

 

 

 

Section 4.3           Capitalization.  The authorized capital stock of the
Company consists of 100,000,000 shares of Common Stock $0.0001 par value per
share of which approximately 15,549,115 shares of Common Stock are issued and
outstanding, respectively. All of such outstanding shares have been validly
issued and are fully paid and nonassessable.  Except as disclosed in the SEC
Documents, no shares of Common Stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by the
Company.  Except as disclosed in the SEC Documents, as of the date hereof,
(i) there are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into, any shares of capital stock of the Company or any of
its subsidiaries, or contracts, commitments, understandings or arrangements by
which the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries, (ii) there
are no outstanding debt securities (iii) there are no outstanding registration
statements, other than on Form S-1and (iv) there are no agreements or
arrangements under which the Company or any of its subsidiaries is obligated to
register the sale of any of their securities under the Securities Act (except
pursuant to the Registration Rights Agreement).  There are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by this Agreement or any related agreement or the consummation of the
transactions described herein or therein.  This section shall not prevent the
Company, after the date hereof, from obtaining other funding or other means of
financing.

 

The Company has furnished to the Investor via the SEC's live EDGAR filing
service true and correct copies of the Company’s Certificate of Incorporation,
as amended and as in effect on the date hereof (the “Certificate of
Incorporation”), and the Company’s By-laws, as in effect on the date hereof (the
“By-laws”), and via conference call the terms of all securities convertible into
or exercisable for Common Stock and the material rights of the holders thereof
in respect thereto.

 

Section 4.4           No Conflict.  The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby will not (i) result in a violation of the
Certificate of Incorporation, any certificate of designations of any outstanding
series of preferred stock of the Company or By-laws or (ii) conflict with or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, or result
in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of the Principal Market on which the Common Stock is quoted)
applicable to the Company or any of its subsidiaries or by which any material
property or asset of the Company or any of its subsidiaries is bound or affected
and which would cause a Material Adverse Effect.  Except as disclosed in the SEC
Documents, neither the Company nor its subsidiaries is in violation of any term
of or in default under its Articles of Incorporation or By-laws or their
organizational charter or by-laws, respectively, or any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the Company or its
subsidiaries.  The business of the Company and its subsidiaries is not being
conducted in violation of any material law, ordinance, 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 fact or
circumstance which might give rise to any of the foregoing.

 

Exergetic Energy, Inc. XNGR.OB DEFA 15 2/10/2012

 

 

 

 

 

 

Section 4.5           SEC Documents; Financial Statements.  As of the date
hereof, the Company has filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the 1934 Act.   As of their respective dates, to the
Company’s knowledge, the financial statements of the Company disclosed in the
SEC Documents (the “Financial Statements”) complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto.  Such financial statements have
been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and, fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).  No other information provided by or on behalf of the Company to
the Investor, which is not included in the SEC Documents, contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.

 

Section 4.6           No Default.  Except as disclosed in Exhibit 4.6, the
Company is not in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust or other material instrument or agreement to which it is
a party or by which it is or its property is bound and neither the execution,
nor the delivery by the Company, nor the performance by the Company of its
obligations under this Agreement or any of the exhibits or attachments hereto
will conflict with or result in the breach or violation of any of the terms or
provisions of, or constitute a default or result in the creation or imposition
of any lien or charge on any assets or properties of the Company under its
Certificate of Incorporation, By-Laws, any material indenture, mortgage, deed of
trust or other material agreement applicable to the Company or instrument to
which the Company is a party or by which it is bound, or any statute, or any
decree, judgment, order, rules or regulation of any court or governmental agency
or body having jurisdiction over the Company or its properties, in each case
which default, lien or charge is likely to cause a Material Adverse Effect on
the Company’s business or financial condition.

 

Exergetic Energy, Inc. XNGR.OB DEFA 16 2/10/2012

   

 

 

 

 

Section 4.7           Absence of Events of Default.  Except for matters
described in Exhibit 4.7 and/or this Agreement, no Event of Default, as defined
in the respective agreements to which the Company is a party, and no event
which, with the giving of notice or the passage of time or both, would become an
Event of Default (as so defined), has occurred and is continuing, which would
have a Material Adverse Effect on the Company’s business, properties, prospects,
financial condition or results of operations.

 

Section 4.8           Intellectual Property Rights.  The Company and its
subsidiaries own or possess adequate rights or licenses to use all material
trademarks, trade names, service marks, service mark 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 mark 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 mark registrations, trade secret
or other infringement; and the Company and its subsidiaries are unaware of any
facts or circumstances which might give rise to any of the foregoing. 

 

Section 4.9           Employee Relations.  Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened.  None of the
Company’s or its subsidiaries’ employees is a member of a union and the Company
and its subsidiaries believe that their relations with their employees are good.

 

Section 4.10         Environmental Laws.  The Company and its subsidiaries are
(i) in compliance with any and all applicable material foreign, federal, state
and local laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants (“Environmental Laws”), (ii) have received all permits, licenses
or other approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (iii) are in compliance with all terms
and conditions of any such permit, license or approval.

 

Section 4.11         Title.  Except as set forth in Exhibit 4.11, the Company
has good and marketable title to its properties and material assets owned by it,
free and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest other than such as are not material to the business of the
Company.  Any real property and facilities held under lease by the Company and
its subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.

 

Exergetic Energy, Inc. XNGR.OB DEFA 17 2/10/2012

 

 

 

Section 4.12         Insurance. Except as set forth in Exhibit 4.12, the Company
and each of its subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as management
of the Company believes to be prudent and customary in the businesses in which
the Company and its subsidiaries are engaged.  Neither the Company nor any such
subsidiary has been refused any insurance coverage sought or applied for and
neither the Company nor any such subsidiary has any reason to believe that it
will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its subsidiaries, taken as a whole.

 

Section 4.13         Regulatory Permits.  The Company and its subsidiaries
possess all material certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct their respective businesses, and neither the Company nor any such
subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.

 

Section 4.14         Internal Accounting Controls.  Except as disclosed in the
SEC documents, the Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. Representation by the Company relating to internal
controls will be made at such time the registration filing has been approved.

 

Section 4.15         No Material Adverse Breaches, etc.  Except as set forth in
Exhibit 4.15, neither the Company nor any of its subsidiaries is subject to any
charter, corporate or other legal restriction, or any judgment, decree, order,
rule or regulation which, in the judgment of the Company’s officers, has or is
expected in the future to have a Material Adverse Effect on the business,
properties, operations, financial condition, results of operations or prospects
of the Company or its subsidiaries.  Except as set forth in the SEC Documents,
neither the Company nor any of its subsidiaries is in breach of any contract or
agreement which breach, in the judgment of the Company’s officers, has or is
expected to have a Material Adverse Effect on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries.

 

Exergetic Energy, Inc. XNGR.OB DEFA 18 2/10/2012

 

 

 

Section 4.16         Absence of Litigation.  Except as set forth in Exhibit
4.16, there is no action, suit, proceeding, inquiry or investigation before or
by any court, public board, government agency, self-regulatory organization or
body pending against or affecting the Company, the Common Stock or any of the
Company’s subsidiaries, wherein an unfavorable decision, ruling or finding would
(i) have a Material Adverse Effect on the transactions contemplated hereby (ii)
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, this Agreement or any of the
documents contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents, have a Material Adverse Effect on the business, operations,
properties, financial condition or results of operation of the Company and its
subsidiaries taken as a whole.

 

Section 4.17         Subsidiaries.  Except as disclosed in Exhibit 4.17, the
Company does not presently own or control, directly or indirectly, any interest
in any other corporation, partnership, association or other business entity.

 

Section 4.18         Tax Status.  Except as disclosed in Exhibit 4.18, the
Company and each of its subsidiaries has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject and (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) has paid
all taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply. 
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.

 

Section 4.19         Certain Transactions.  Except as set forth in Exhibit 4.19
none of the officers, directors, or employees of the Company is presently a
party to any transaction with the Company (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.

 

Section 4.20         Fees and Rights of First Refusal.  The Company is not
obligated to offer the securities offered hereunder on a right of first refusal
basis or otherwise to any third parties including, but not limited to, current
or former shareholders of the Company, underwriters, brokers, agents or other
third parties.

 

Exergetic Energy, Inc. XNGR.OB DEFA 19 2/10/2012

 

 

 

Section 4.21         Use of Proceeds.  The Company shall use the net proceeds
from this offering for general corporate purposes, including, without
limitation, the payment of loans incurred by the Company.  However, in no event
shall the Company use the net proceeds from this offering for the payment (or
loan to any such person for the payment) of any judgment, or other liability,
incurred by any executive officer, officer, director or employee of the Company,
except for any liability owed to such person for services rendered, or if any
judgment or other liability is incurred by such person originating from services
rendered to the Company, or the Company has indemnified such person from
liability.

 

Section 4.22         Further Representation and Warranties of the Company.  For
so long as any securities issuable hereunder held by the Investor remain
outstanding, the Company acknowledges, represents, warrants and agrees that it
will maintain the listing of its Common Stock on the Principal Market.

 

Section 4.23         Opinion of Counsel.  Investor shall receive an opinion
letter from counsel to the Company on the date hereof. The Company will obtain
for the Investor, at the Company’s expense, any and all opinions of counsel
which may be reasonably required in order to sell the securities issuable
hereunder without restriction.

 

Section 4.24         Dilution.  The Company is aware and acknowledges that
issuance of shares of the Company’s Common Stock could cause dilution to
existing shareholders and could significantly increase the outstanding number of
shares of Common Stock.

 

Section 4.25         Acknowledgement of Terms. The Company acknowledges,
represents, and warrants to the Investor that (i) it has had independent legal
counsel of its own choosing review, advise, and represent on this Agreement,
(ii) it has had sufficient time to review, and has carefully reviewed and fully
understands, all the provisions of this Agreement, (iii) the terms of this
Agreement are reasonable and fair to the Company, (iv) it is entering knowingly
and voluntarily into this Agreement of its own freewill, and (v) it is entering
into this Agreement not out of economic duress. Each party and counsel for each
party (where such exist) has reviewed this Agreement, and thus agree that the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of this Agreement.

 

Exergetic Energy, Inc. XNGR.OB DEFA 20 2/10/2012

 

 

 

ARTICLE V.
Indemnification

 

The Investor and the Company represent to the other the following with respect
to itself:

 

Section 5.1           Indemnification.

 

(a)          In consideration of the Investor’s execution and delivery of this
Agreement, and in addition to all of the Company’s other obligations under this
Agreement, the Company shall defend, protect, indemnify and hold harmless the
Investor, and all of its officers, directors, partners, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the “Investor
Indemnitees”) from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Investor Indemnitee is a
party to the action for which indemnification hereunder is sought), and
including reasonable attorneys’ fees and disbursements (the “Indemnified
Liabilities”), incurred by the Investor Indemnitees or any of them as a result
of, or arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement or the
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement or the Registration Rights
Agreement or any other certificate, instrument or document contemplated hereby
or thereby, or (c) any cause of action, suit or claim brought or made against
such Investor Indemnitee not arising out of any action or inaction of an
Investor Indemnitee, and arising out of or resulting from the execution,
delivery, performance or enforcement of this Agreement or any other instrument,
document or agreement executed pursuant hereto by any of the Investor
Indemnitees.  To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.

 

(b)          In consideration of the Company’s execution and delivery of this
Agreement, and in addition to all of the Investor’s other obligations under this
Agreement, the Investor shall defend, protect, indemnify and hold harmless the
Company and all of its officers, directors, shareholders, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the “Company
Indemnitees”) from and against any and all Indemnified Liabilities incurred by
the Company Indemnitees or any of them as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any representation or
warranty made by the Investor in this Agreement, the Registration Rights
Agreement, or any instrument or document contemplated hereby or thereby executed
by the Investor, (b) any breach of any covenant, agreement or obligation of the
Investor(s) contained in this Agreement,  the Registration Rights Agreement or
any other certificate, instrument or document contemplated hereby or thereby
executed by the Investor, or (c) any cause of action, suit or claim brought or
made against such Company Indemnitee based on misrepresentations or due to a 
breach by the Investor and arising out of or resulting from the execution,
delivery, performance or enforcement of this Agreement or any other instrument,
document or agreement executed pursuant hereto by any of the Company
Indemnitees.  To the extent that the foregoing undertaking by the Investor may
be unenforceable for any reason, the Investor shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.

 

Exergetic Energy, Inc. XNGR.OB DEFA 21 2/10/2012

 

 

 

(c)          The obligations of the parties to indemnify or make contribution
under this Section 5.1 shall survive termination.

 

ARTICLE VI.
Covenants of the Company

 

Section 6.1           Registration Rights.  The Company shall cause the
Registration Rights Agreement to remain in full force and effect and the Company
shall comply in all material respects with the terms thereof. During the
Commitment Period, the Company shall notify the Investor promptly if (i) the
Registration Statement shall cease to be effective under the Securities Act,
(ii) the Common Stock shall cease to be authorized for listing on the Principal
Market, (iii) the Common Stock ceases to be registered under Section 12(g) of
the Exchange Act or (iv) the Company fails to file in a timely manner all
reports and other documents required of it as a reporting company under the
Exchange Act.

 

Section 6.2           Listing of Common Stock.  The Company shall maintain the
Common Stock’s authorization for quotation on the Principal Market. 

 

Section 6.3           Exchange Act Registration.  The Company will cause its
Common Stock to continue to be registered under Section 12(g) of the Exchange
Act, will file in a timely manner all reports and other documents required of it
as a reporting company under the Exchange Act and will not take any action or
file any document (whether or not permitted by Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said Exchange Act.

 

Section 6.4           Transfer Agent Instructions.  Upon effectiveness of the
Registration Statement the Company shall deliver instructions to its transfer
agent to issue shares of Common Stock to the Investor free of restrictive
legends on or before each Advance Request Date.

 

Section 6.5           Corporate Existence.  The Company will take all steps
necessary to preserve and continue the corporate existence of the Company.

 

Section 6.6           Notice of Certain Events Affecting Registration;
Suspension of Right to Make an Advance Request.  The Company will immediately
notify the Investor as soon as practible, upon its becoming aware of the
occurrence of any of the following events in respect of the Registration
Statement or related prospectus relating to an offering of Registrable
Securities: (i) receipt of any request for additional information by the SEC or
any other Federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to the
registration statement or related prospectus; (ii) the issuance by the SEC or
any other Federal or state governmental authority of  any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose; (iii) receipt of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in the Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company’s
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Investor any such supplement or amendment to the related prospectus.  The
Company shall not deliver to the Investor any Drawdown Notice during the
continuation of any of the foregoing events.

 

Exergetic Energy, Inc. XNGR.OB DEFA 22 2/10/2012

 

 

 

 

Section 6.7           Restriction on Sale of Capital Stock.  During the
Commitment Period, the Company shall not, without 10 days written notice to the
Investor (i) issue or sell any Common Stock or Preferred Stock without
consideration or for a consideration per share less than the Bid Price of the
Common Stock determined immediately prior to its issuance, (ii) issue or sell
any Preferred Stock warrant, option, right, contract, call, or other security or
instrument granting the holder thereof the right to acquire Common Stock without
consideration or for a consideration per share less than the Bid Price of the
Common Stock determined immediately prior to its issuance, or (iii) file any
registration statement on Form S-8.

 

Section 6.8           Consolidation; Merger.  The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all the assets of the Company to
another entity (a “Consolidation Event”) unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the Investor such shares of stock and/or securities as
the Investor is entitled to receive pursuant to this Agreement prior to the
closing date of any merger.

 

Section 6.9           Issuance of the Company’s Common Stock.  The sale of the
shares of Common Stock shall be made in accordance with the provisions and
requirements of Regulation D and any applicable state securities law.

 

Section 6.10         Review of Public Disclosures.  All SEC filings (including,
without limitation, all filings required under the Exchange Act, which include
Forms 10-Q, 10-K, 8-K, etc) and other public disclosures made by the Company,
including, without limitation, all press releases, investor relations materials,
and scripts of analysts meetings and calls, shall be reviewed and approved for
release by the Company’s attorneys and, if containing financial information, the
Company’s independent certified public accountants. All press releases
referencing the Investor shall first be approved by Investor prior to release.

 

Exergetic Energy, Inc. XNGR.OB DEFA 23 2/10/2012

 

 

 

Section 6.11         Market Activities. The Company will not, directly or
indirectly, (i) take any action designed to cause or result in, or that
constitutes or might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Common Stock or (ii) sell, bid for or purchase the Common
Stock, or pay anyone any compensation for soliciting purchases of the Common
Stock.

 

ARTICLE VII.
Conditions for Advance and Conditions to Closing

 

Section 7.1           Conditions Precedent to the Obligations of the Company. 
The obligation hereunder of the Company to issue and sell the shares of Common
Stock to the Investor incident to each Closing is subject to the satisfaction,
or waiver by the Company, at or before each such Closing, of each of the
conditions set forth below.

 

(a)          Accuracy of the Investor’s Representations and Warranties.  The
representations and warranties of the Investor contained in this Agreement shall
be true and correct in all material respects.

 

(b)          Performance by the Investor.  The Investor shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement and the Registration Rights Agreement to
be performed, satisfied or complied with by the Investor at or prior to such
Closing.

 

Section 7.2           Conditions Precedent to the Right of the Company to
Deliver a Drawdown Notice.  The right of the Company to deliver a Drawdown
Notice to the Investor is subject to the fulfillment by the Company on each
Drawdown Notice Date, and the right of the Company to receive an Advance Request
from the Investor is subject to the fulfillment by the Company on each Closing
Date (each such date, a “Condition Satisfaction Date”), of each of the following
conditions:

 

(a)          Registration of the Common Stock with the SEC.  The Company shall
have filed with the SEC a Registration Statement with respect to the resale of
the Registrable Securities in accordance with the terms of the Registration
Rights Agreement.  As set forth in the Registration Rights Agreement, the
Registration Statement shall have previously become effective and shall remain
effective on each Condition Satisfaction Date and (i) neither the Company nor
the Investor shall have received notice that the SEC has issued or intends to
issue a stop order with respect to the Registration Statement or that the SEC
otherwise has suspended or withdrawn the effectiveness of the Registration
Statement, either temporarily or permanently, or intends or has threatened to do
so, and (ii) no other suspension of the use or withdrawal of the effectiveness
of the Registration Statement or related prospectus shall exist.  The
Registration Statement must have been declared effective by the SEC prior to the
first Drawdown Notice Date.

 

Exergetic Energy, Inc. XNGR.OB DEFA 24 2/10/2012

 

 

 

(b)          Authority.  The Company shall have obtained all permits and
qualifications required by any applicable state in accordance with the
Registration Rights Agreement for the offer and sale of the shares of Common
Stock, or shall have the availability of exemptions therefrom.  The sale and
issuance of the shares of Common Stock shall be legally permitted by all laws
and regulations to which the Company is subject.

 

(c)          Fundamental Changes. There shall not exist any fundamental changes
to the information set forth in the Registration Statement, which would require
the Company to file a post-effective amendment to the Registration Statement. 

 

(d)          Accuracy of the Company’s Representations and Warranties. The
representations and warranties of the Company contained in this Agreement (a)
that are not qualified by “materiality” or “Material Adverse Effect” shall be
true and correct in all material respects when made and shall be true and
correct in all material respects as of the applicable Condition Satisfaction
Date with the same force and effect as if made on such dates, except to the
extent such representations and warranties are as of another date, in which
case, such representations and warranties shall be true and correct in all
material respects as of such other date and (b) that are qualified by
“materiality” or “Material Adverse Effect” shall have been true and correct when
made and shall be true and correct as of the applicable Condition Satisfaction
Date with the same force and effect as if made on such dates, except to the
extent such representations and warranties are as of another date, in which
case, such representations and warranties shall be true and correct as of such
other date.

 

(e)          Performance by the Company.  The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement and the Registration Rights Agreement
to be performed, satisfied or complied with by the Company at or prior to each
Condition Satisfaction Date.

 

(f)           No Injunction.  No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits or directly and adversely affects any of the transactions contemplated
by this Agreement, and no proceeding shall have been commenced that may have the
effect of prohibiting or adversely affecting any of the transactions
contemplated by this Agreement.

 

(g)          No Suspension of Trading in or Delisting of Common Stock.  The
trading of the Common Stock is not suspended by the SEC or the Principal Market
(if the Common Stock is traded on a Principal Market).  The issuance of shares
of Common Stock with respect to the applicable Closing shall not violate the
shareholder approval requirements, if any, of the Principal Market (if the
Common Stock is traded on a Principal Market).  The Company shall not have
received any notice threatening the continued listing of the Common Stock on the
Principal Market (if the Common Stock is traded on a Principal Market). If the
Company receives any such notice from a Principal Market regarding the continued
eligibility of the continued listing of the Common Stock on such automated
quotation system or exchange, then the Company shall promptly, and in no event
later than the following Business Day, provide to the Investor a copy of any
such notice.

 

Exergetic Energy, Inc. XNGR.OB DEFA 25 2/10/2012

 

 

 

(h)          Maximum Advance Amount.  The amount of an Advance Request made by
the Company shall not exceed the limitations set forth in Section 2.2.

 

(i)           No Knowledge.  The Company has no knowledge of any event which
would be more likely than not to have the effect of causing such Registration
Statement to be suspended or otherwise ineffective.

 

(j)           Executed Drawdown Notice.  The Investor shall have received the
Drawdown Notice executed by an officer of the Company and the representations
contained in such Drawdown Notice shall be true and correct as of each Condition
Satisfaction Date.

 

(k)          Compliance with Laws.  The Company shall have complied with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances in connection with the execution, delivery and performance of this
Agreement and the other Transaction Documents to which it is a party and the
consummation of the transactions contemplated hereby and thereby, including,
without limitation, the Company shall have obtained all permits and
qualifications required by any applicable state securities or “blue sky” laws
for the offer and sale of the Securities by the Company to the Investor and the
subsequent resale of the Registrable Securities by the Investor (or shall have
the availability of exemptions therefrom).

(l)    No Bankruptcy Proceedings.  The Company shall not have filed for and/or
be subject to any bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors instituted by or against the Company or any subsidiary
of the Company, or instituted involuntarily against the Company.

 

(m)     At Least Two Independent Board Members. The Company shall have at least
two (2) independent (as “independent” is defined under the New York Stock
Exchange’s listing standards) members on its board of directors prior to
initiating each Drawdown Notice, and shall represent so to the Investor in
writing.

 

(n)        Consecutive Drawdown Notices. Except with respect to the first
Drawdown Notice, the Company shall have delivered all Shares relating to all
prior Advance Requests.

 

(o)          Advance Shares DTC Eligible.  The Advance Shares delivered to the
Investor are DTC eligible, can be immediately converted into electronic form,
and there is no DTC “chill” or equivalent on the Company’s Common Stock.

 

Exergetic Energy, Inc. XNGR.OB DEFA 26 2/10/2012

 

 

 

ARTICLE VIII.
Due Diligence Review; Non-Disclosure of Non-Public Information

 

Section 8.1           Non-Disclosure of Non-Public Information.

 

(a)          The Company covenants and agrees that it shall refrain from
disclosing, and shall cause its officers, directors, employees and agents to
refrain from disclosing, any material non-public information to the Investor
without also disseminating such information to the public, unless prior to
disclosure of such information the Company identifies such information as being
material non-public information and provides the Investor with the opportunity
to accept or refuse to accept such material non-public information for review.

 

(b)          Nothing herein shall require the Company to disclose non-public
information to the Investor or its advisors or representatives, and the Company
represents that it does not disseminate non-public information to any investors
who purchase stock in the Company in a public offering, to money managers or to
securities analysts, provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided, promptly notify the
advisors and representatives of the Investor and, if any, underwriters, of any
event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration Statement
would cause such prospectus to include a material misstatement or to omit a
material fact required to be stated therein in order to make the statements,
therein, in light of the circumstances in which they were made, not misleading. 
Nothing contained in this Section 8.1 shall be construed to mean that such
persons or entities other than the Investor (without the written consent of the
Investor prior to disclosure of such information) may not obtain non-public
information in the course of conducting due diligence in accordance with the
terms of this Agreement and nothing herein shall prevent any such persons or
entities from notifying the Company of their opinion that based on such due
diligence by such persons or entities, that the Registration Statement contains
an untrue statement of material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.

 

ARTICLE XI.
Choice of Law/Jurisdiction

 

Section 9.1           Governing Law.  This Agreement shall be governed by and
interpreted in accordance with the laws of the Commonwealth of Massachusetts
without regard to the principles of conflict of laws.  The parties further agree
that any action between them shall be heard in Boston, MA. for the adjudication
of any civil action asserted pursuant to this Agreement.

 

EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.

 

Exergetic Energy, Inc. XNGR.OB DEFA 27 2/10/2012

 

 

 

ARTICLE X.
Assignment; Termination

 

Section 10.1         Assignment.  Neither this Agreement nor any rights of the
Company hereunder may be assigned to any other Person. 

 

Section 10.2         Termination. 

 

(a)          Unless terminated earlier as herein provided, the obligations of
the Investor to make Advance Requests under Article II hereof shall terminate
thirty six (36) months after the Effective Date.

 

(b)          The obligation of the Investor to make an Advance to the Company
pursuant to this Agreement shall terminate permanently (including with respect
to an Advance Request Date that has not yet occurred) in the event that (i)
there shall occur any stop order or suspension of the effectiveness of the
Registration Statement for an aggregate of fifty (50) Trading Days, other than
due to the acts of the Investor, during the Commitment Period, or (ii) the
Company shall at any time fail materially to comply with the requirements of
Article VI and such failure is not cured within thirty (30) days after receipt
of written notice from the Investor, provided, however, that this termination
provision shall not apply to any period commencing upon the filing of a
post-effective amendment to such Registration Statement and ending upon the date
on which such post effective amendment is declared effective by the SEC.

 

(c)          The obligations and rights of each of the Company and the Investor
are terminable by the Company at any time upon written notice to the Investor
subject at all times to the terms, conditions and obligations that the Company
may have to the Investor, including and without limit to any fees, charges and
obligations described herein. Prior to issuing any press release, or making any
public statement or announcement, with respect to such termination, the Company
shall consult with the Investor and shall obtain the Investor’s consent to the
form and substance of such press release or other disclosure, which consent
shall not be unreasonably delayed or withheld. Any and all shares, or penalties,
if any, due under this Agreement shall be immediately payable and due upon
termination of this Agreement.

 

(d)          The obligation of the Investor to make an Advance to the Company
pursuant to this Agreement shall terminate permanently if pursuant to or within
the meaning of any Bankruptcy Law, the Company commences a voluntary case or any
Person commences a proceeding against the Company, a Custodian is appointed for
the Company or for all or substantially all of its property, or the Company
makes a general assignment for the benefit of its creditors, this Agreement
shall automatically terminate without any liability or payment to the Company
without further action or notice by any Person.  No such termination of this
Agreement under this Section 10.2(d) shall affect the Company's or the
Investor's obligations under this Agreement with respect to pending purchases
and the Company and the Investor shall complete their respective obligations
with respect to any pending purchases under this Agreement.

 

Exergetic Energy, Inc. XNGR.OB DEFA 28 2/10/2012

 

 

 

ARTICLE XI.
Notices

 

Section 11.1         Notices.  Any notices, consents, waivers, or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile,
provided a copy is mailed by U.S. certified mail, return receipt requested;
(iii) three (3) days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same.  The addresses and facsimile numbers for such communications
shall be:

 

If to the Company, to:        

Exergetic Energy, Inc.

440 Burroughs, Suite 386

Detroit, MI 48202

Telephone:    313-309-4169

Facsimile:      313-216-1777

    If to the Investor, to:

Auctus Private Equity Fund, LLC

101 Arch Street, Suite 2010

Boston, MA 02110

ATTN: Lou Posner

Telephone: 617-532-6408

Facsimile: 617-532-6420

 

Each party shall provide five (5) days’ prior written notice to the other party
of any change in address or facsimile number.

 

ARTICLE XII.
Miscellaneous

 

Section 12.1         Counterparts.  This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party.  In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof, though failure to deliver such copies shall not affect the
validity of this Agreement.

 

Exergetic Energy, Inc. XNGR.OB DEFA 29 2/10/2012

 

 

 

Section 12.2         Entire Agreement; Amendments.  This Agreement supersedes
all other prior oral or written agreements between the Investor, the Company,
their affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters.  No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.

 

Section 12.3         Reporting Entity for the Common Stock.  The reporting
entity relied upon for the determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this Agreement
shall be reported by a direct feed service.  The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.

 

Section 12.4         Fees and Expenses.  The Company hereby agrees to pay the
following fees:

 

(a)          Fees.  Each of the parties shall pay its own fees and
expenses (including the fees of any attorneys, accountants, appraisers or others
engaged by such party) in connection with this Agreement and the transactions
contemplated hereby. However, the Company shall pay an amount not to exceed four
percent (4%) of the amount specified in each Drawdown Notice on its applicable
Closing Date to cover costs associated with, but not limited to: DWAC charges,
commissions, legal review fees, and wire fees.

 

(b)          Origination Fee. The Company is obligated to pay the Investor a
non-refundable origination fee equal to Fifteen Thousand Dollars ($15,000) in
cash which will be paid as follows: a) Five Thousand Dollars ($5,000) in cash
immediately upon execution of the term sheet and b) Ten Thousand Dollars
($10,000) in cash to be taken out of the proceeds from the first and any
subsequent Advance Requests until that amount is paid in full.

 

Section 12.5         Confidentiality.  If for any reason the transactions
contemplated by this Agreement are not consummated, each of the parties hereto
shall keep confidential any information obtained from any other party (except
information publicly available or in such party’s domain prior to the date
hereof, and except as required by court order) and shall promptly return to the
other parties all schedules, documents, instruments, work papers or other
written information without retaining copies thereof, previously furnished by it
as a result of this Agreement or in connection herein.

 

Section 12.6          Remedies, Other Obligations, Breaches and Injunctive
Relief.  The Investor’s remedies provided in this Agreement shall be cumulative
and in addition to all other remedies available to the Investor under this
Agreement, at law or in equity (including a decree of specific performance
and/or other injunctive relief), no remedy of the Investor contained herein
shall be deemed a waiver of compliance with the provisions giving rise to such
remedy and nothing herein shall limit the Investor's right to pursue actual
damages for any failure by the Company to comply with the terms of this
Agreement.  The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Investor and that the remedy at law
for any such breach may be inadequate.  The Company therefore agrees that, in
the event of any such breach or threatened breach, the Investor shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.

 

Exergetic Energy, Inc. XNGR.OB DEFA 30 2/10/2012

 

 

 

Section 12.7          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; provided that a facsimile signature or
signature delivered by e-mail in a “.pdf” format data file shall be considered
due execution and shall be binding upon the signatory thereto with the same
force and effect as if the signature were an original, not a facsimile signature
or a signature in a “.pdf” format data file.

 

Section 12.8          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.

 

Section 12.9          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.

 

Section 12.10        Publicity. The Investor shall have the right to pre-approve
any press release, SEC filing (including, without limitation, all filings
required under the Exchange Act, which include Forms 10-Q, 10-K, 8-K, etc), or
any other public disclosure made by or on behalf of the Company whatsoever
relating to the Investor, its purchases hereunder or any aspect of this
Agreement or the transaction contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of the Investor, to make
any press release or other public disclosure (including any SEC filings) with
respect thereto as is required by applicable law and regulations so long as
prior to releasing any such press release or any other public disclosure, the
Company and its counsel shall have provided the Investor and its counsel with a
reasonable opportunity to review and comment upon, and shall have consulted with
the Investor and its counsel on the form and substance of such press release or
other disclosure. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of the Investor without prior consent from the Investor,
except to the extent required by law. The Company agrees and acknowledges that
its failure to fully comply with this provision constitutes a material adverse
affect on its ability to perform its obligations under this Agreement.

 

Exergetic Energy, Inc. XNGR.OB DEFA 31 2/10/2012

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Drawdown Equity
Financing Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.

 

  COMPANY:   Exergetic Energy, Inc.       By: /s/ C.B. McCollum   Name: C.B.
McCollum   Title: CEO       INVESTOR:   Auctus Private Equity Fund, LLC      
By: /s/ Lou Posner   Name: Lou Posner   Title: Managing Director

 

Exergetic Energy, Inc. XNGR.OB DEFA 32 2/10/2012

 

 

 

EXHIBIT A

 

DRAWDOWN NOTICE

 

Exergetic Energy, Inc.

 

The undersigned, _______________________ hereby certifies, with respect to the
sale of shares of Common Stock of Exergetic Energy, Inc. (the “Company”)
issuable in connection with this Drawdown Notice, delivered pursuant to the
Drawdown Equity Financing Agreement (the “Agreement”), as follows:

 

1.          The undersigned is the duly elected ______________ of the Company.

 

2.          There are no fundamental changes to the information set forth in the
Registration Statement which would require the Company to file a post effective
amendment to the Registration Statement.

 

3.          The Company has performed in all material respects all covenants and
agreements to be performed by the Company and has complied in all material
respects with all obligations and conditions contained in the Agreement on or
prior to the Drawdown Notice Date, and shall continue to perform in all material
respects all covenants and agreements to be performed by the Company through the
applicable Advance Request Date.  All conditions to the delivery of this
Drawdown Notice are satisfied as of the date hereof and all of the Company’s
conditions to Closing set forth in Section 7.2 of the Agreement have been
satisfied as of the Condition Satisfaction Date.

 

4.          The Company hereby represents, warrants and covenants that it has
made all filings (“SEC Filings”) required to be made by it pursuant to
applicable securities laws (including, without limitation, all filings required
under the Securities Exchange Act of 1934, which include Forms 10-Q, 10-K, 8-K,
etc.).  All SEC Filings and other public disclosures made by the Company,
including, without limitation, all press releases, analysts meetings and calls,
etc. (collectively, the “Public Disclosures”), have been reviewed and approved
for release by the Company’s attorneys and, if containing financial information,
the Company’s independent certified public accountants.  None of the Company’s
Public Disclosures contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.5.          The Advance Request will be in the amount of
$_____________________ in Advance Shares.

 

The current number of shares issued and outstanding is                  
          and 4.99% of that amount would be_____________.

 

The number of shares currently available for resale pursuant to the Registration
Statement on Form S-1 for the Drawdown Equity Financing Facility
is                             .

 

6.          The “Floor Price” for this Drawdown Notice shall be: (Please check
one):

 

____               $______ per share

 

____               Seventy-Five (75%) of the average Bid Price over the
preceding ten (10) trading days prior to the Drawdown Notice Date.

 

The undersigned has executed this Certificate this ____ day of
_________________.

 

  Exergetic Energy, Inc.       By:          Name: C.B. McCollum       Title: CEO

 

Exergetic Energy, Inc. XNGR.OB DEFA 33 2/10/2012