THE CERTO GROUP, INC. PLACEMENT AGENT AGREEMENT

 

                                    

 

 

                              THE CERTO GROUP, INC.

 

                            PLACEMENT AGENT AGREEMENT

 

                                                     Dated as of: April 28, 2005

 

Monitor Capital Inc.

9171 Towne Centre Drive, Suite 465

San Diego, CA 92122

 

 

Ladies and Gentlemen:

 

     The   undersigned,   The Certo   Group,   Inc.,   a   Delaware   corporation   (the

"Company"),   hereby agrees with Monitor Capital Inc. (the "Placement Agent") and

Cornell Capital Partners,   LP, a Delaware Limited   Partnership (the "Investor"),

as follows:

     

 

     1. Offering.   The Company hereby engages the Placement   Agent to act as its

exclusive   placement   agent in connection   with the Standby Equity   Distribution

Agreement of even date herewith (the "Standby Equity   Distribution   Agreement"),

pursuant to which the Company shall issue and sell to the Investor, from time to

time, and the Investor   shall   purchase from the Company (the   "Offering") up to

Twenty   Million   Dollars   ($20,000,000)   of   the   Company's   common   stock   (the

"Commitment   Amount"), no par value per share (the "Common Stock"), at price per

share equal to the Purchase Price, as that term is defined in the Standby Equity

Distribution Agreement.   The Placement Agent services shall consist of reviewing

the terms of the Standby Equity Distribution   Agreement and advising the Company

with respect to those terms.

 

     All   capitalized   terms used herein and not otherwise   defined herein shall

have the same   meaning   ascribed to them as in the Standby   Equity   Distribution

Agreement. The Investor will be granted certain registration rights with respect

to the Common Stock as more fully set forth in the Registration Rights Agreement

of even date herewith   between the Company and the Investor   (the   "Registration

Rights   Agreement").   The   documents to be executed and   delivered in connection

with the Offering,   including,   but not limited to, this Agreement,   the Standby

Equity Distribution Agreement, the Registration Rights Agreement, and the Escrow

Agreement   of even date   herewith   (the   "Escrow   Agreement"),   are   referred to

sometimes   hereinafter   collectively as the "Offering   Materials." The Company's

Common   Stock   purchased by the   Investor   hereunder   is   sometimes   referred to

hereinafter as the   "Securities."   The Placement Agent shall not be obligated to

sell any Securities.

 

     2. Compensation.

        -------------

 

     A. For its services hereunder, the Company shall pay to the Placement Agent

a fee of Ten Thousand   Dollars   ($10,000),   payable by the issuance of shares of

the Company's   Common Stock (the   "Placement   Agent's   Shares"),   which shall be

determined   by dividing   $10,000 by the VWAP of the Common   Stock,   as quoted by

Bloomberg, LP, on the second (2nd) trading day Common Stock. The Placement Agent

shall be   entitled   to   "piggy-back"   registration   rights   with   respect to the

Placement   Agent's   Shares which shall be   triggered   upon   registration   of any

shares of Common   Stock by the   Investor   pursuant   to the   Registration   Rights

Agreement.

 

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     3. Representations, Warranties and Covenants of the Placement Agent.

        -----------------------------------------------------------------

 

          A. The Placement Agent represents, warrants and covenants as follows:

 

               (i) The   Placement   Agent has the   necessary   power to enter into

this Agreement and to consummate the transactions contemplated hereby.

 

               (ii) The execution   and delivery by the   Placement   Agent of this

Agreement and the consummation of the transactions   contemplated herein will not

result in any   violation   of, or be in conflict   with,   or   constitute a default

under, any agreement or instrument to which the Placement Agent is a party or by

which the Placement Agent or its properties are bound, or any judgment,   decree,

order or, to the Placement Agent's   knowledge,   any statute,   rule or regulation

applicable to the Placement Agent. This Agreement when executed and delivered by

the Placement Agent, will constitute the legal, valid and binding obligations of

the Placement   Agent,   enforceable in accordance   with their   respective   terms,

except   to the   extent   that (a) the   enforceability   hereof or   thereof   may be

limited by bankruptcy,   insolvency,   reorganization,   moratorium or similar laws

from time to time in effect and affecting the rights of creditors generally, (b)

the enforceability hereof or thereof is subject to general principles of equity,

or (c) the   indemnification   provisions   hereof or thereof   may be held to be in

violation of public policy.

 

               (iii) Upon receipt and execution of this Agreement, the Placement

Agent will   promptly   forward   copies of this   Agreement   to the   Company or its

counsel and the Investor or its counsel.

 

               (iv) The Placement Agent will not   intentionally   take any action

that it reasonably   believes   would cause the Offering to violate the provisions

of the Securities Act of 1933, as amended (the "Securities Act"), the Securities

Exchange Act of 1934 (the "Exchange   Act"), the respective rules and regulations

promulgated   thereunder (the "Rules and   Regulations")   or applicable "Blue Sky"

laws of any state or jurisdiction.

 

                (v) The Placement   Agent is a member of the National   Association

of Securities Dealers, Inc., and is a broker-dealer registered as such under the

Exchange Act and under the securities laws of the states in which the Securities

will be offered or sold by the   Placement   Agent   unless an   exemption   for such

state   registration is available to the Placement   Agent. The Placement Agent is

in   material   compliance   with   the   rules   and   regulations   applicable   to the

Placement Agent generally and applicable to the Placement Agent's   participation

in the Offering.

 

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    4. Representations and Warranties of the Company.

       ----------------------------------------------

 

         A. The Company represents and warrants as follows:

 

               (i)   The   execution,   delivery   and   performance   of each of this

Agreement,   the Standby Equity Distribution Agreement, the Escrow Agreement, and

the   Registration   Rights   Agreement   has   been   or will   be   duly   and   validly

authorized by the Company and is, or with respect to this Agreement, the Standby

Equity Distribution Agreement, the Escrow Agreement, and the Registration Rights

Agreement will be, a valid and binding agreement of the Company,   enforceable in

accordance   with   its   respective   terms,   except   to the   extent   that   (a) the

enforceability   hereof or   thereof   may be limited   by   bankruptcy,   insolvency,

reorganization,   moratorium   or   similar   laws from   time to time in effect   and

affecting the rights of creditors   generally,   (b) the enforceability   hereof or

thereof is subject to general   principles   of equity or (c) the   indemnification

provisions   hereof or thereof may be held to be in violation   of public   policy.

The Securities to be issued   pursuant to the   transactions   contemplated by this

Agreement   and   the   Standby   Equity   Distribution    Agreement   have   been   duly

authorized and, when issued and paid for in accordance with this Agreement,   the

Standby    Equity    Distribution    Agreement   and   the    certificates/instruments

representing   such   Securities,   will be valid and   binding   obligations   of the

Company,   enforceable in accordance with their respective   terms,   except to the

extent   that   (1) the   enforceability   thereof   may be   limited   by   bankruptcy,

insolvency,   reorganization,   moratorium   or   similar   laws from time to time in

effect   and    affecting   the   rights   of   creditors    generally,    and   (2)   the

enforceability thereof is subject to general principles of equity. All corporate

action   required   to be taken for the   authorization,   issuance   and sale of the

Securities has been duly and validly taken by the Company.

 

               (ii) The Company has a duly   authorized,   issued and   outstanding

capitalization   as set   forth   herein   and in the   Standby   Equity   Distribution

Agreement.   The Company is not a party to or bound by any instrument,   agreement

or other   arrangement   providing   for it to issue   any   capital   stock,   rights,

warrants, options or other securities, except for this Agreement, the agreements

described herein and as described in the Standby Equity   Distribution   Agreement

and the agreements described therein.   All issued and outstanding   securities of

the Company have been duly   authorized and validly issued and are fully paid and

non-assessable;   the holders   thereof have no rights of rescission or preemptive

rights with respect thereto and are not subject to personal   liability solely by

reason of being security   holders;   and none of such   securities   were issued in

violation   of the   preemptive   rights   of any   holders   of any   security   of the

Company.

 

               (iii)   The   Common   Stock to be issued   in   accordance   with this

Agreement   and   the   Standby   Equity   Distribution    Agreement   have   been   duly

authorized and, when issued and paid for in accordance with this Agreement,   the

Standby    Equity    Distribution    Agreement   and   the    certificates/instruments

representing    such   Common   Stock   will   be   validly   issued,    fully-paid   and

non-assessable;   the holders   thereof will not be subject to personal   liability

solely by reason of being such holders;   such Securities are not and will not be

subject to the preemptive rights of any holder of any security of the Company.

 

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               (iv) The Company has good and   marketable   title to, or valid and

enforceable   leasehold   estates   in,   all   items of real and   personal   property

necessary to conduct its business   (including,   without limitation,   any real or

personal property stated in the Offering   Materials to be owned or leased by the

Company), free and clear of all liens, encumbrances,   claims, security interests

and defects of any material nature whatsoever, other than those set forth in the

Offering Materials and liens for taxes not yet due and payable.

 

               (v) There is no litigation or governmental proceeding pending or,

to the best of the Company's   knowledge,   threatened   against,   or involving the

properties   or   business   of the   Company,   except as set forth in the   Offering

Materials.

 

               (vi) The Company has been duly organized and is validly   existing

as a   corporation   in good   standing   under the laws of the   State of   Delaware.

Except as set   forth in the   Offering   Materials,   the   Company   does not own or

control,    directly   or   indirectly,   an   interest   in   any   other   corporation,

partnership,   trust, joint venture or other business entity. The Company is duly

qualified   or licensed   and in good   standing as a foreign   corporation   in each

jurisdiction    in   which   the    character   of   its    operations    requires   such

qualification or licensing and where failure to so qualify would have a material

adverse effect on the Company. The Company has all requisite corporate power and

authority,   and all material and necessary   authorizations,   approvals,   orders,

licenses,   certificates   and   permits   of and from all   governmental   regulatory

officials   and bodies   (domestic   and   foreign) to conduct its   businesses   (and

proposed   business) as described in the Offering   Materials.   Any disclosures in

the Offering   Materials   concerning the effects of foreign,   federal,   state and

local   regulation   on the   Company's   businesses   as currently   conducted and as

contemplated   are correct in all   material   respects   and do not omit to state a

material fact.   The Company has all corporate   power and authority to enter into

this Agreement,   the Standby Equity   Distribution   Agreement,   the   Registration

Rights   Agreement,   and the Escrow   Agreement,   to carry out the   provisions and

conditions hereof and thereof, and all consents,   authorizations,   approvals and

orders   required in connection   herewith and therewith   have been   obtained.   No

consent,   authorization   or order of, and no filing with, any court,   government

agency   or   other   body is   required   by the   Company   for the   issuance   of the

Securities   or   execution   and   delivery of the   Offering   Materials   except for

applicable federal and state securities laws. The Company,   since its inception,

has not incurred any liability   arising under or as a result of the   application

of any of the   provisions of the   Securities   Act, the Exchange Act or the Rules

and Regulations.

 

                (vii) There has been no material   adverse change in the condition

or prospects of the Company, financial or otherwise, from the latest dates as of

which such condition or prospects,   respectively,   are set forth in the Offering

Materials,   and the   outstanding   debt,   the   property   and the   business of the

Company conform in all material   respects to the descriptions   thereof contained

in the Offering Materials.

 

               (viii) Except as set forth in the Offering Materials, the Company

is not in breach of, or in default under,   any term or provision of any material

indenture,   mortgage,   deed   of   trust,   lease,   note,   loan or   Standby   Equity

Distribution   Agreement or any other material agreement or instrument evidencing

an obligation for borrowed money, or any other material   agreement or instrument

to which it is a party or by which it or any of its   properties   may be bound or

affected.   The Company is not in   violation   of any   provision of its charter or

by-laws or in violation of any franchise,   license, permit, judgment,   decree or

order, or in violation of any material statute, rule or regulation.   Neither the

execution   and delivery of the Offering   Materials   nor the issuance and sale or

delivery of the   Securities,   nor the   consummation   of any of the   transactions

contemplated   in the Offering   Materials nor the   compliance by the Company with

the terms and provisions hereof or thereof, has conflicted with or will conflict

with,   or has   resulted   in or will   result in a breach of, any of the terms and

provisions   of, or has   constituted or will   constitute a default under,   or has

 

 

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resulted in or will result in the creation or imposition of any lien,   charge or

encumbrance   upon any property or assets of the Company or pursuant to the terms

of any indenture,   mortgage, deed of trust, note, loan or any other agreement or

instrument   evidencing an obligation for borrowed   money, or any other agreement

or   instrument to which the Company may be bound or to which any of the property

or assets of the Company is subject except (a) where such default,   lien, charge

or encumbrance   would not have a material   adverse effect on the Company and (b)

as   described   in the   Offering   Materials;   nor will such action   result in any

violation   of the   provisions   of the   charter or the by-laws of the Company or,

assuming   the   due   performance   by   the   Placement   Agent   of   its   obligations

hereunder,   any   material   statute or any   material   order,   rule or   regulation

applicable   to the   Company of any court or of any   foreign,   federal,   state or

other regulatory authority or other government body having jurisdiction over the

Company.

 

               (ix) Subsequent to the dates as of which   information is given in

the Offering Materials, and except as may otherwise be indicated or contemplated

herein or therein and the securities offered pursuant to the Securities Purchase

Agreement   the   Company   has not (a)   issued   any   securities   or   incurred   any

liability   or   obligation,   direct or   contingent,   for borrowed   money,   or (b)

entered into any transaction   other than in the ordinary course of business,   or

(c)   declared   or paid any   dividend   or made any   other   distribution   on or in

respect of its capital stock. Except as described in the Offering Materials, the

Company   has no   outstanding   obligations   to any   officer   or   director   of the

Company.

 

               (x) There are no claims for   services in the nature of a finder's

or   origination   fee with   respect to the sale of the Common   Stock or any other

arrangements, agreements or understandings that may affect the Placement Agent's

compensation,   as determined by the National   Association of Securities Dealers,

Inc.

 

               (xi) The Company owns or   possesses,   free and clear of all liens

or   encumbrances   and rights thereto or therein by third parties,   the requisite

licenses   or other   rights to use all   trademarks,   service   marks,   copyrights,

service names, trade names, patents,   patent applications and licenses necessary

to conduct its business   (including,   without   limitation,   any such licenses or

rights   described in the   Offering   Materials as being owned or possessed by the

Company) and, except as set forth in the Offering   Materials,   there is no claim

or action by any person   pertaining   to, or   proceeding,   pending or threatened,

which   challenges   the   exclusive   rights of the   Company   with   respect   to any

trademarks,   service marks,   copyrights,   service names,   trade names,   patents,

patent applications and licenses used in the conduct of the Company's businesses

(including,   without   limitation,   any such licenses or rights   described in the

Offering   Materials as being owned or possessed by the Company) except any claim

or action   that would not have a material   adverse   effect on the   Company;   the

Company's   current   products,   services or processes do not infringe or will not

infringe on the patents currently held by any third party.

 

               (xii) Except as described in the Offering Materials,   the Company

is not under any   obligation to pay royalties or fees of any kind   whatsoever to

any third   party with   respect to any   trademarks,   service   marks,   copyrights,

service names, trade names, patents, patent applications, licenses or technology

it has developed, uses, employs or intends to use or employ, other than to their

respective licensors.

 

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               (xiii) Subject to the   performance by the Placement   Agent of its

obligations   hereunder,   the offer and sale of the Securities complies, and will

continue to comply,   in all material   respects with the requirements of Rule 506

of Regulation D promulgated   by the SEC pursuant to the   Securities   Act and any

other   applicable   federal   and state laws,   rules,   regulations   and   executive

orders.   Neither the Offering   Materials nor any amendment or supplement thereto

nor any documents   prepared by the Company in connection   with the Offering will

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 light of the   circumstances   under which they were made, not misleading.   All

statements of material   facts in the Offering   Materials are true and correct as

of the date of the Offering Materials.

 

               (xiv)   All   material   taxes   which are due and   payable   from the

Company   have been   paid in full or   adequate   provision   has been made for such

taxes on the books of the Company, except for those taxes disputed in good faith

by the Company.

 

               (xv)   None of the   Company   nor any of its   officers,   directors,

employees or agents, nor any other person acting on behalf of the Company,   has,

directly   or   indirectly,   given or agreed to give any   money,   gift or   similar

benefit (other than legal price   concessions to customers in the ordinary course

of   business)   to any   customer,   supplier,   employee   or agent of a customer or

supplier,   or official or employee of any governmental agency or instrumentality

of any government   (domestic or foreign) or any political party or candidate for

office   (domestic   or foreign) or other person who is or may be in a position to

help or hinder the business of the Company (or assist it in connection   with any

actual or   proposed   transaction)   which (A) might   subject   the   Company to any

damage   or   penalty   in   any   civil,   criminal   or   governmental   litigation   or

proceeding, or (B) if not given in the past, might have had a materially adverse

effect on the assets,   business or operations of the Company as reflected in any

of the financial statements   contained in the Offering Materials,   or (C) if not

continued in the future, might adversely affect the assets, business, operations

or prospects of the Company in the future.

 

    5. Representations, Warranties and Covenants of the Investor.

       ----------------------------------------------------------

 

    The Investor represents, warrants and covenants as follows:

 

          A. The Investor has the necessary   power to enter into this   Agreement

and to consummate the transactions contemplated hereby.

 

          B. The   execution   and delivery by the Investor of this   Agreement and

the consummation of the transactions   contemplated herein will not result in any

violation   of, or be in   conflict   with,   or   constitute   a default   under,   any

agreement   or