kitlarson@gtfinancial.com


    Exhibit
      10.9

     

     

    STANDBY
      EQUITY DISTRIBUTION AGREEMENT

     

    THIS
      AGREEMENT
      dated as
      of the 14th day of June 2006 (the “Agreement”) between CORNELL
      CAPITAL PARTNERS, LP,
      a
      Delaware limited partnership (the “Investor”), and SEREFEX
      CORPORATION,
      a
      corporation organized and existing under the laws of the State of Delaware
      (the
“Company”).

     

    WHEREAS,
      the
      parties desire that, upon the terms and subject to the conditions contained
      herein, the Company shall issue and sell to the Investor, from time to time
      as
      provided herein, and the Investor shall purchase from the Company up to Five
      Million Dollars ($5,000,000) of the Company’s common stock, par value
      $0.0001 per share (the “Common Stock”); and

     

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

     

    WHEREAS,
      the
      Company has engaged Newbridge Securities Corporation (the “Placement
      Agent”), to act as the Company’s exclusive placement agent in connection with
      the sale of the Company’s Common Stock to the Investor hereunder pursuant to the
      Placement Agent Agreement dated the date hereof by and among the Company, the
      Placement Agent and the Investor (the “Placement Agent Agreement”).

     

    NOW,
      THEREFORE,
      the
      parties hereto agree as follows:

     

    ARTICLE
      I.

     

     

    Certain
      Definitions

     

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

     

    Section
      1.2. “Advance
      Date” shall mean the first (1st)
      Trading
      Day after expiration of the applicable Pricing Period for each
      Advance.

     

    Section
      1.3. “Advance
      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
      amount that the Company requests from the Investor.

     

    Section
      1.4. “Advance
      Notice Date” shall mean each date the Company delivers (in accordance with
      Section 2.2(b) of this Agreement) to the Investor an Advance Notice requiring
      the Investor to advance funds to the Company, subject to the terms of this
      Agreement. No Advance Notice Date shall be less than five (5) Trading Days
      after
      the prior Advance Notice Date.

     

    Section
      1.5. “Bid
      Price” shall mean, on any date, the closing bid price (as reported by Bloomberg
      L.P.) of the Common Stock on the Principal Market or if the Common Stock is
      not
      traded on a Principal Market, the highest reported bid price for the Common
      Stock, as furnished by the National Association of Securities Dealers,
      Inc.

     

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

     

    Section
      1.7. “Commitment
      Amount” shall mean the aggregate amount of up to Five Million
      Dollars ($5,000,000) 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.

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    Section
      1.8. “Commitment
      Period” shall mean the period commencing on the earlier to occur of (i) the
      Effective Date, or (ii) such earlier date as the Company and the Investor may
      mutually agree in writing, and expiring on the earliest to occur of (x) the
      date
      on which the Investor shall have made payment of Advances pursuant to this
      Agreement in the aggregate amount of the Commitment Amount, (y) the date this
      Agreement is terminated pursuant to Section 10.2 or (z) the date occurring
      twenty-four (24) months after the Effective Date.

     

    Section
      1.9. “Common
      Stock” shall mean the Company’s common stock, par value $0.0001 per
      share.

     

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

     

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

     

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

     

    Section
      1.13. Intentionally
      Omitted.

     

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

     

    Section
      1.15. “Material
      Adverse Effect” shall mean any condition, circumstance, or situation that would
      prohibit or otherwise materially interfere with the ability of the Company
      to
      enter into and perform any of its obligations under this Agreement or the
      Registration Rights Agreement in any material respect.

     

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

     

    Section
      1.17. “Maximum
      Advance Amount” shall be Three Hundred Thousand Dollars ($300,000) per
      Advance Notice. 

     

    Section
      1.18. “NASD”
      shall mean the National Association of Securities Dealers, Inc.

     

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

     

    Section
      1.20. “Placement
      Agent” shall mean Newbridge Securities Corporation, a registered
      broker-dealer.

     

    Section
      1.21. “Pricing
      Period” shall mean the five (5) consecutive Trading Days after the Advance
      Notice Date.

     

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

     

    Section
      1.23. “Purchase
      Price” shall be set at ninety five percent (95%) of the Market Price during the
      Pricing Period.

     

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

     

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

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    Section
      1.26. “Registration
      Statement” shall mean a registration statement on Form S-1 or SB-2 (if use of
      such form is then available to the Company pursuant to the rules of the SEC
      and,
      if not, on such other form promulgated by the SEC for which the Company then
      qualifies and which counsel for the Company shall deem appropriate, and which
      form shall be available for the resale of the Registrable Securities to be
      registered thereunder in accordance with the provisions of this Agreement and
      the Registration Rights Agreement, and in accordance with the intended method
      of
      distribution of such securities), for the registration of the resale by the
      Investor of the Registrable Securities under the Securities Act.

     

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

     

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

     

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

     

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

     

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

     

    Section
      1.32. “VWAP”
      shall mean the volume weighted average price of the Company’s Common Stock as
      quoted by Bloomberg, LP.

     

     

    ARTICLE
      II.

     

     

    Advances

     

    Section
      2.1. Advances.

     

    Subject
      to the terms and conditions of this Agreement (including, without limitation,
      the provisions of Article VII hereof), the Company, at its sole and exclusive
      option, may issue and sell to the Investor, and the Investor shall purchase
      from
      the Company, shares of the Company’s Common Stock by the delivery, in the
      Company’s sole discretion, of Advance Notices. The number of shares of Common
      Stock that the Investor shall purchase pursuant to each Advance shall be
      determined by dividing the amount of the Advance by the Purchase Price. No
      fractional shares shall be issued. Fractional shares shall be rounded to the
      next higher whole number of shares. The aggregate maximum amount of all Advances
      that the Investor shall be obligated to make under this Agreement shall not
      exceed the Commitment Amount.

     

    Section
      2.2. Mechanics.

     

    (a) Advance
      Notice. At any time during the Commitment Period, the Company may require the
      Investor to purchase shares of Common Stock by delivering an Advance Notice
      to
      the Investor, subject to the conditions set forth in Section 7.2; provided,
      however, the amount for each Advance as designated by the Company in the
      applicable Advance Notice shall not be more than the Maximum Advance Amount
      and
      the aggregate amount of the Advances pursuant to this Agreement shall not exceed
      the Commitment Amount. The Company acknowledges that the Investor may sell
      shares of the Company’s Common Stock corresponding with a particular Advance
      Notice after the Advance Notice is received by the Investor. There shall be
      a
      minimum of five (5) Trading Days between each Advance Notice Date.

     

    (b) Date
      of
      Delivery of Advance Notice. An Advance Notice shall be deemed delivered on
      (i)
      the Trading Day it is received by facsimile or otherwise by the Investor if
      such
      notice is received prior to 5:00 pm Eastern Time, or (ii) the immediately
      succeeding Trading Day if it 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 Advance Notice may be deemed delivered on a day that is not a Trading
      Day. 

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    Section
      2.3. Closings.
      On each Advance Date (i) the Company shall deliver to the Investor such number
      of shares of the Common Stock registered in the name of the Investor as shall
      equal (x) the amount of the Advance specified in such Advance Notice pursuant
      to
      Section 2.1 herein, divided by (y) the Purchase Price and (ii) upon receipt
      of
      such shares, the Investor shall deliver to the Company the amount of the Advance
      specified in the Advance Notice by wire transfer of immediately available funds.
      In addition, on or prior to the Advance 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 of the Investor
      in
      accordance with Section 12.4, the amount of such fees, expenses, and
      disbursements may be deducted by the Investor (and shall be paid to the relevant
      party) directly out of the proceeds of the Advance with no reduction in the
      amount of shares of the Company’s Common Stock to be delivered on such Advance
      Date. 

     

    	(a)  	
            Company’s
              Obligations Upon Closing.

          


     

    (i) The
      Company shall deliver to the Investor the shares of Common Stock applicable
      to
      the Advance in accordance with Section 2.3. The certificates evidencing such
      shares shall be free of restrictive legends.

     

    (ii) the
      Company’s Registration Statement with respect to the resale of the shares of
      Common Stock delivered in connection with the Advance shall have been declared
      effective by the SEC;

     

    (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 have filed 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; and

     

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

     

    (b) Investor’s
      Obligations Upon Closing. 
      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 specified in the Advance Notice
      by wire transfer of immediately available funds. 

     

    Section
      2.4. Lock
      Up
      Period. On the date hereof, the Company shall obtain from each officer and
      director a lock-up agreement, as defined below, in the form annexed hereto
      as
      Schedule 2.4.

     

    Section
      2.5. Hardship.
      In the event the Investor sells shares of the Company’s Common Stock after
      receipt of an Advance Notice and the Company fails to perform its obligations
      as
      mandated in Section 2.3, and specifically the Company fails to deliver to the
      Investor on the Advance Date the shares of Common Stock corresponding to the
      applicable Advance pursuant to Section 2.3(a)(i), the Company acknowledges
      that
      the Investor shall suffer financial hardship and therefore shall be liable
      for
      any and all losses, commissions, fees, or financial hardship caused to the
      Investor.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    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
      Date:

     

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

     

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

     

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

     

    Section
      3.4. Investment
      Purpose. The securities are being purchased by the Investor for its own account,
      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
      3.5. Accredited
      Investor. The Investor is an “Accredited Investor” as that term is defined in
      Rule 501(a)(3) of Regulation D of the Securities Act.

     

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

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    Section
      3.7. Receipt
      of Documents. The Investor and its counsel have received and read in their
      entirety: (i) this Agreement and the Exhibits annexed hereto; (ii) all due
      diligence and other information necessary to verify the accuracy and
      completeness of such representations, warranties and covenants; (iii) the
      Company’s Form 10-KSB for the year ended December 31, 2005 and Form 10-QSB for
      the period ended March 31, 2006; and (iv) answers to all questions the
      Investor submitted to the Company regarding an investment in the Company; and
      the Investor has relied on the information contained therein and has not been
      furnished any other documents, literature, memorandum or prospectus.


     

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

     

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

     

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

     

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

     

     

    ARTICLE
      IV.

     

     

    Representations
      and Warranties of the Company

     

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

     

    Section
      4.1. Organization
      and Qualification. The Company is duly incorporated or organized and validly
      existing in the jurisdiction of its incorporation or organization and has all
      requisite 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.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

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

     

    Section
      4.3. Capitalization.
      The authorized capital stock of the Company consists of 300,000,000 shares
      of
      Common Stock and zero shares of Preferred Stock, of which 151,013,985 shares
      of
      Common Stock are issued and outstanding. All of such outstanding shares have
      been validly issued and are fully paid and nonassessable. Except as disclosed
      in
      the SEC Documents, no shares of Common Stock are subject to preemptive rights
      or
      any other similar rights or any liens or encumbrances suffered or permitted
      by
      the Company. Except as disclosed in the SEC Documents, as of the date hereof,
      (i) there are no outstanding options, warrants, scrip, rights to subscribe
      to, calls or commitments of any character whatsoever relating to, or securities
      or rights convertible into, any shares of capital stock of the Company or any
      of
      its subsidiaries, or contracts, commitments, understandings or arrangements
      by
      which the Company or any of its subsidiaries is or may become bound to issue
      additional shares of capital stock of the Company or any of its subsidiaries
      or
      options, warrants, scrip, rights to subscribe to, calls or commitments of any
      character whatsoever relating to, or securities or rights convertible into,
      any
      shares of capital stock of the Company or any of its subsidiaries, (ii) there
      are no outstanding debt securities (iii) there are no outstanding
      registration statements other than on Form S-8 and (iv) there are no agreements
      or arrangements under which the Company or any of its subsidiaries is obligated
      to register the sale of any of their securities under the Securities Act (except
      pursuant to the Registration Rights Agreement). There are no securities or
      instruments containing anti-dilution or similar provisions that will be
      triggered by this Agreement or any related agreement or the consummation of
      the
      transactions described herein or therein. The Company has furnished to the
      Investor true and correct copies of the Company’s Certificate of Incorporation,
      as amended and as in effect on the date hereof (the “Certificate of
      Incorporation”), and the Company’s By-laws, as in effect on the date hereof (the
“By-laws”), and the terms of all securities convertible into or exercisable for
      Common Stock and the material rights of the holders thereof in respect
      thereto.

     

    Section
      4.4. No
      Conflict. The execution, delivery and performance of this Agreement by the
      Company and the consummation by the Company of the transactions contemplated
      hereby will not (i) result in a violation of the Certificate of Incorporation,
      any certificate of designations of any outstanding series of preferred stock
      of
      the Company or By-laws or (ii) conflict with or constitute a default (or an
      event which with notice or lapse of time or both would become a default) under,
      or give to others any rights of termination, amendment, acceleration or
      cancellation of, any agreement, indenture or instrument to which the Company
      or
      any of its subsidiaries is a party, or result in a violation of any law, rule,
      regulation, order, judgment or decree (including federal and state securities
      laws and regulations and the rules and regulations of the Principal Market
      on
      which the Common Stock is quoted) applicable to the Company or any of its
      subsidiaries or by which any material property or asset of the Company or any
      of
      its subsidiaries is bound or affected and which would cause a Material Adverse
      Effect. Except as disclosed in the SEC Documents, neither the Company nor its
      subsidiaries is in violation of any term of or in default under its Articles
      of
      Incorporation or By-laws or their organizational charter or by-laws,
      respectively, or any material contract, agreement, mortgage, indebtedness,
      indenture, instrument, judgment, decree or order or any statute, rule or
      regulation applicable to the Company or its subsidiaries. The business of the
      Company and its subsidiaries is not being conducted in violation of any material
      law, ordinance, regulation of any governmental entity. Except as specifically
      contemplated by this Agreement and as required under the Securities Act and
      any
      applicable state securities laws, the Company is not required to obtain any
      consent, authorization or order of, or make any filing or registration with,
      any
      court or governmental agency in order for it to execute, deliver or perform
      any
      of its obligations under or contemplated by this Agreement or the Registration
      Rights Agreement in accordance with the terms hereof or thereof. All consents,
      authorizations, orders, filings and registrations which the Company is required
      to obtain pursuant to the preceding sentence have been obtained or effected
      on
      or prior to the date hereof. The Company and its subsidiaries are unaware of
      any
      fact or circumstance which might give rise to any of the foregoing.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    Section
      4.5. SEC
      Documents; Financial Statements. The Company has filed all reports, schedules,
      forms, statements and other documents required to be filed by it with the SEC
      under the Exchange Act since January 1, 2004. The Company has delivered to
      the
      Investor or its representatives, or made available through the SEC’s website at
      http://www.sec.gov, true and complete copies of the SEC Documents. As of their
      respective dates, the financial statements of the Company disclosed in the
      SEC
      Documents (the “Financial Statements”) complied as to form in all material
      respects with applicable accounting requirements and the published rules and
      regulations of the SEC with respect thereto. Such financial statements have
      been
      prepared in accordance with generally accepted accounting principles,
      consistently applied, during the periods involved (except (i) as may be
      otherwise indicated in such financial statements or the notes thereto, or (ii)
      in the case of unaudited interim statements, to the extent they may exclude
      footnotes or may be condensed or summary statements) and, fairly present in
      all
      material respects the financial position of the Company as of the dates thereof
      and the results of its operations and cash flows for the periods then ended
      (subject, in the case of unaudited statements, to normal year-end audit
      adjustments). No other information provided by or on behalf of the Company
      to
      the Investor which is not included in the SEC Documents contains any untrue
      statement of a material fact or omits to state any material fact necessary
      in
      order to make the statements therein, in the light of the circumstances under
      which they were made, not misleading.

     

    Section
      4.6. 10b-5.
      The SEC Documents do not include any untrue statements of material fact, nor
      do
      they omit to state any material fact required to be stated therein necessary
      to
      make the statements made, in light of the circumstances under which they were
      made, not misleading.

     

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

     

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

     

    Section
      4.9. Intellectual
      Property Rights. The Company and its subsidiaries own or possess adequate rights
      or licenses to use all material trademarks, trade names, service marks, service
      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
      4.10. Employee
      Relations. Neither the Company nor any of its subsidiaries is involved in any
      labor dispute nor, to the knowledge of the Company or any of its subsidiaries,
      is any such dispute threatened. None of the Company’s or its subsidiaries’
employees is a member of a union and the Company and its subsidiaries believe
      that their relations with their employees are good.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

    Section
      4.15. Internal
      Accounting Controls. The Company and each of its subsidiaries maintain a system
      of internal accounting controls sufficient to provide reasonable assurance
      that
      (i) transactions are executed in accordance with management’s general or
      specific authorizations, (ii) transactions are recorded as necessary to permit
      preparation of financial statements in conformity with generally accepted
      accounting principles and to maintain asset accountability, (iii) access to
      assets is permitted only in accordance with management’s general or specific
      authorization and (iv) the recorded accountability for assets is compared with
      the existing assets at reasonable intervals and appropriate action is taken
      with
      respect to any differences.

     

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

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

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

     

    Section
      4.22. Use
      of
      Proceeds. The Company shall use the net proceeds from this offering for general
      corporate purposes, including, without limitation, the payment of 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
      4.23. Further
      Representation and Warranties of the Company. For so long as any securities
      issuable hereunder held by the Investor remain outstanding, the Company
      acknowledges, represents, warrants and agrees that it will maintain the listing
      of its Common Stock on the Principal Market.

     

    Section
      4.24. Opinion
      of Counsel. Investor shall receive an opinion letter from counsel to the Company
      on the date hereof.

     

    Section
      4.25. Opinion
      of Counsel. The Company will obtain for the Investor, at the Company’s expense,
      any and all opinions of counsel which may be reasonably required in order to
      sell the securities issuable hereunder without restriction.

     

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


     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    ARTICLE
      V.

     

     

    Indemnification

     

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

     

    Section
      5.1. Indemnification.

     

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

     

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

     

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

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    ARTICLE
      VI.

     

     

    Covenants
      of the Company

     

    Section
      6.1. Registration
      Rights. The Company shall cause the Registration Rights Agreement to remain
      in
      full force and effect and the Company shall comply in all material respects
      with
      the terms thereof.

     

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

     

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

     

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

     

    Section
      6.7. Restriction
      on Sale of Capital Stock. During the Commitment Period, the Company shall not,
      without the prior written consent of 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. Notwithstanding the forgoing, the Company shall be entitled to issue
      up to 5,000,000 shares to its Chief Financial Officer for services rendered.
      

     

    
      
         

      

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

     

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

     

    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 and 10-QSB, 10-K
      and
      10K-SB, 8-K, etc) and other public disclosures made by the Company, including,
      without limitation, all press releases, investor relations materials, and
      scripts of analysts meetings and calls, shall be reviewed and approved for
      release by the Company’s attorneys and, if containing financial information, the
      Company’s independent certified public accountants. 

     

    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 shall be true and correct in all material
      respects.

     

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

     

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

     

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

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

    (f) No
      Suspension of Trading in or Delisting of Common Stock. The trading of the Common
      Stock is not suspended by the SEC or the Principal Market (if the Common Stock
      is traded on a Principal Market). The issuance of shares of Common Stock with
      respect to the applicable Closing, if any, shall not violate the shareholder
      approval requirements of the Principal Market (if the Common Stock is traded
      on
      a Principal Market). The Company shall not have received any notice threatening
      the continued listing of the Common Stock on the Principal Market (if the Common
      Stock is traded on a Principal Market).

     

    (g) Maximum
      Advance Amount. The amount of an Advance requested by the Company shall not
      exceed the Maximum Advance Amount. In addition, in no event shall the number
      of
      shares issuable to the Investor pursuant to an Advance cause the aggregate
      number of shares of Common Stock beneficially owned by the Investor and its
      affiliates to exceed nine and 9/10 percent (9.9%) of the then outstanding Common
      Stock of the Company. For the purposes of this section beneficial ownership
      shall be calculated in accordance with Section 13(d) of the Exchange
      Act.

     

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

     

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

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    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, immediately notify the
      advisors and representatives of the Investor and, if any, underwriters, of
      any
      event or the existence of any circumstance (without any obligation to disclose
      the specific event or circumstance) of which it becomes aware, constituting
      non-public information (whether or not requested of the Company specifically
      or
      generally during the course of due diligence by such persons or entities),
      which, if not disclosed in the prospectus included in the Registration Statement
      would cause such prospectus to include a material misstatement or to omit a
      material fact required to be stated therein in order to make the statements,
      therein, in light of the circumstances in which they were made, not misleading.
      Nothing contained in this Section 8.2 shall be construed to mean that such
      persons or entities other than the Investor (without the written consent of
      the
      Investor prior to disclosure of such information) may not obtain non-public
      information in the course of conducting due diligence in accordance with the
      terms of this Agreement and nothing herein shall prevent any such persons or
      entities from notifying the Company of their opinion that based on such due
      diligence by such persons or entities, that the Registration Statement contains
      an untrue statement of material fact or omits a material fact required to be
      stated in the Registration Statement or necessary to make the statements
      contained therein, in light of the circumstances in which they were made, not
      misleading.

     

     

    ARTICLE
      IX.

     

     

    Choice
      of Law/Jurisdiction

     

    Section
      9.1. Governing
      Law. This Agreement shall be governed by and interpreted in accordance with
      the
      laws of the State of New Jersey without regard to the principles of conflict
      of
      laws. The parties further agree that any action between them shall be heard
      in
      Hudson County, New Jersey, and expressly consent to the jurisdiction and venue
      of the Superior Court of New Jersey, sitting in Hudson County, New Jersey and
      the United States District Court of New Jersey, sitting in Newark, New Jersey,
      for the adjudication of any civil action asserted pursuant to this
      paragraph.

     

     

    ARTICLE
      X.

     

     

    Assignment;
      Termination

     

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

     

    Section
      10.2. Termination.
      

     

    (a) The
      obligations of the Investor to make Advances under Article II hereof shall
      terminate twenty-four (24) 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
      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.

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    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:

            	
              Serefex
                Corporation

            
	 	
              4328
                Corporate Square Boulevard, Suite C

            
	 	
              Naples,
                Florida 34104

            
	 	
              Attention: Brian
                S. Dunn

            
	 	
              Telephone: (239)
                262-1610

            
	 	
              Facsimile: (239)
                262-1642

            
	 	 
	
              With
                a copy to:

            	
              Williams,
                Schifino, Mangioni and Steady P.A.

            
	 	
              One
                Tampa City Center, Suite 250

            
	 	
              Tampa,
                Florida 33602

            
	 	
              Attention:
                William Schifino

            
	 	
              Telephone: (813)
                221-2626

            
	 	
              Facsimile: (813)
                221-7335

            
	 	 
	
              If
                to the Investor(s):

            	
              Cornell
                Capital Partners, LP

            
	 	
              101
                Hudson Street -Suite 3700

            
	 	
              Jersey
                City, NJ 07302

            
	 	
              Attention: Mark
                Angelo

            
	 	
              Portfolio
                Manager

            
	 	
              Telephone: (201)
                985-8300 

            
	 	
              Facsimile: (201)
                985-8266 

            
	 	 
	
              With
                a Copy to:

            	
              David
                Gonzalez, Esq.

            
	 	
              101
                Hudson Street - Suite 3700

            
	 	
              Jersey
                City, NJ 07302

            
	 	
              Telephone: (201)
                985-8300

            
	 	
              Facsimile: (201)
                985-8266

            


    

    


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

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    ARTICLE
      XII.

     

     

    Miscellaneous

     

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

     

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

     

    Section
      12.3. Reporting
      Entity for the Common Stock. The reporting entity relied upon for the
      determination of the trading price or trading volume of the Common Stock on
      any
      given Trading Day for the purposes of this Agreement shall be Bloomberg, L.P.
      or
      any successor thereto. The written mutual consent of the Investor and the
      Company shall be required to employ any other reporting entity.

     

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

     

    (a) Structuring
      Fees. Each of the parties shall pay its own fees and expenses (including
      the fees of any attorneys, accountants, appraisers or others engaged by such
      party) in connection with this Agreement and the transactions contemplated
      hereby, except that (i) the Company has paid the Investor or its designee a
      structuring fee of Fifteen Thousand Dollars ($15,000), and (ii) On each
      Advance Date, the Company shall pay Yorkville Advisors, LLC a structuring fee
      of
      Five Hundred Dollars ($500) directly out the gross proceeds of each
      Advance.

     

    (b) Due
      Diligence Fee. Company has paid the Investor a non-refundable due diligence
      fee
      of Five Thousand Dollars ($5,000) upon submission of the due diligence documents
      to the Investor.

     

    (c) Commitment
      Fees.

     

    (i) On
      each
      Advance Date the Company shall pay to the Investor, directly out of the gross
      proceeds of each Advance, an amount equal to five percent (5%) of the amount
      of
      each Advance. The Company hereby agrees that if such payment, as is described
      above, is not made by the Company on the Advance Date, such payment shall be
      made as outlined and mandated by Section 2.3 of this Agreement. 

     

    (ii) Upon
      the
      execution of this Agreement the Company shall issue to the Investor 2,666,667
      shares
      of
      Common Stock (the “Investor’s Shares”) (an amount equal to Two Hundred Forty
      Thousand Dollars ($240,000) worth of Common Stock).

     

    (iii) Fully
      Earned. The Investor’s Shares shall be deemed fully earned as of the date
      hereof. 

     

    (iv) Registration
      Rights. The Investor’s Shares will have “piggy-back” registration
      rights.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    Section
      12.5. Brokerage.
      Each of the parties hereto represents that it has had no dealings in connection
      with this transaction with any finder or broker who will demand payment of
      any
      fee or commission from the other party. The Company on the one hand, and the
      Investor, on the other hand, agree to indemnify the other against and hold
      the
      other harmless from any and all liabilities to any person claiming brokerage
      commissions or finder’s fees on account of services purported to have been
      rendered on behalf of the indemnifying party in connection with this Agreement
      or the transactions contemplated hereby.

     

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

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

    


    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    


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

     

    
      	 	
              COMPANY:

            
	 	
              Serefex
                Corporation

            
	 	 
	 	
              By:       

            
	 	
              Name: Brian
                Dunn

            
	 	
              Title: Chief
                Executive Officer

            
	 	 
	 	 
	 	
              INVESTOR:

            
	 	
              Cornell
                Capital Partners, LP

            
	 	 
	 	
              By: Yorkville
                Advisors, LLC

            
	 	
              Its: General
                Partner

            
	 	 
	 	
              By:      

            
	 	
              Name: Mark
                Angelo

            
	 	
              Title: Portfolio
                Manager

            
	 	 


    

    


    


    


    
      
         

      

      
        19

        
          

        

      

      
         

      

       

    

    EXHIBIT
      A

     

     

    ADVANCE
      NOTICE

     

     

    SEREFEX
      CORPORATION

     

    The
      undersigned, _______________________ hereby certifies, with respect to the
      sale
      of shares of Common Stock of SEREFEX
      CORPORATION
      (the
“Company”) issuable in connection with this Advance Notice, delivered pursuant
      to the Standby Equity Distribution 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 Advance
      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 Date. All conditions to the delivery of this Advance Notice are
      satisfied as of the date hereof.

     

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

     

    5. The
      Advance requested is _____________________.

     

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

     

    SEREFEX
      CORPORATION

    


    


    By:_____________________     

    Name:___________________ 

    Title:____________________

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

     

    SCHEDULE
      2.4

     

     

    SEREFEX
      CORPORATION

     

    The
      undersigned hereby agrees that for a period commencing on June ___, 2006 and
      expiring on the termination of the Standby Equity Distribution Agreement dated
      June ___, 2005 between the Serefex Corporation (the “Company”) and the Cornell
      Capital Partners, LP (the “Investor”) (the “Lock-up Period”), he, she or it will
      not, directly or indirectly, without the prior written consent of the Investor,
      issue, offer, agree or offer to sell, sell, grant an option for the purchase
      or
      sale of, pledge, assign, hypothecate, distribute or otherwise encumber or
      dispose of any securities of the Company, including common stock or options,
      rights, warrants or other securities underlying, convertible into, exchangeable
      or exercisable for or evidencing any right to purchase or subscribe for any
      common stock (whether or not beneficially owned by the undersigned), or any
      beneficial interest therein (collectively, the “Securities”) except in
      accordance with the volume limitations set forth in Rule 144(e) of the General
      Rules and Regulations under the Securities Act of 1933, as amended.

     

    In
      order
      to enable the aforesaid covenants to be enforced, the undersigned hereby
      consents to the placing of legends and/or stop-transfer orders with the transfer
      agent of the Company’s securities with respect to any of the Securities
      registered in the name of the undersigned or beneficially owned by the
      undersigned, and the undersigned hereby confirms the undersigned’s investment in
      the Company.

     

    Dated:
      _______________, 2006

    


    Signature

    


    


     

    Name:
      ____________________________________

    Address:      

    City,
      State, Zip Code:     

    


    


     

    Print
      Social Security Number 

    or
      Taxpayer I.D. Number

    


    
      
         

      

      
        21