SECURITIES PURCHASE
AGREEMENT
This SECURITIES
PURCHASE AGREEMENT, dated as of September 29, 2009 (this
"Agreement") is
entered into by and among Ecology
Coatings, Inc., a Nevada corporation (the
"Company"), Stromback Acquisition Corporation, an Illinois
corporation (the "Purchaser") and Richard Stromback. The
parties, intending to be legally bound, hereby agree as
follows:
WHEREAS, the Company desires to sell to Purchaser, and
the Purchaser desires to purchase from the Company up to three
thousand (3,000) five (5.0%) percent Cumulative Convertible
Preferred Shares of the Company at a price per share of One
Thousand and 00/100 dollars ($1,000/00) (the “Convertible
Preferred Stock”) containing the terms set forth in the
Certificate of Designation attached as Exhibit “A”
hereto (the “Certificate of Designation”). The
amounts in excess of $240,000.00 invested by Stromback Acquisition
Corporation to Company under this agreement is not guaranteed and
will be subject to Stromback Acquisition Corporation’s sole
and absolute discretion.
NOW,
THEREFORE , in
consideration of the mutual promises herein made, and in
consideration of the representations, warranties and covenants
herein contained, the Company and Purchaser agree as
follows:
1.
Sale of Convertible Preferred
Stock . Subject to the terms and conditions
of this Agreement, Company hereby agrees to sell to Purchaser and
Purchaser hereby agrees to purchase from Company up to three
thousand (3,000) shares of the Convertible Preferred Stock at a
price of One Thousand and 00/100 dollars ($1,000/00) per share.
Upon the execution of this Agreement (the "First
Closing"):
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The Company
shall deliver or cause to be delivered to Purchaser
the following: (i) this Agreement duly
executed by the Company; (ii) a certificate evidencing that number
of shares of Convertible Preferred Stock being purchased
by Purchaser, registered in the name of Purchaser; (iii)
the Registration Rights Agreement [attached]
duly executed by the Company and (iv) and Warrant (the "Warrant")
[attached], registered in the name of Purchaser and giving
Purchaser the right to acquire the number of shares of the
Company’s common stock (the “Common Stock”) upon
the exercise of the Warrant;
and
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Purchaser shall
deliver or cause to be delivered to the Company the following: (i)
this Agreement duly executed by Purchaser; (ii)
the purchase price for the
Shares being purchased by
Purchaser, by check, wire
transfer, or
any combination thereof, payable
to Company, and (iii)
the Registration Rights Agreement duly executed
by Purchaser.
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2.
Additional Closings
. After investment of the initial
$240,000.00 Purchaser, in Purchaser’s sole and
absolute discretion, may purchase up to 2760 additional Convertible
Preferred Shares on or before six
(6) months after the First Closing
(the "Additional Closing(s)"), subject to
the same procedures as
provided in Section 1.
3.
Conversion.
The Convertible Preferred Stock can
be converted at Purchaser’s option at any time into shares of
the Company’s Common Stock at a conversion price equal to
seventy-seven (77%) percent of the average closing price of the
Company’s common stock as quoted on the Over the Counter
Bulletin Board, or, where applicable, other national exchange, for
the five (5) business days preceding the First Closing or, as
applicable, any Additional Closing (the “Conversion
Price”).
4.
Warrants. Upon the First Closing, and each Additional
Closing(s) thereafter, the Company shall issue Purchaser a warrant
to purchase that number of shares of the Company’s Common
Stock which is equal to six (6%) percent of the total dollar amount
invested by Purchaser at the respective Closing (the
“Warrant”). Thus, for the avoidance of doubt, should
Purchaser invest One Million and 00/100 dollars ($1,000,000/00)
(e.g., purchases 1,000 shares of the Convertible Preferred Stock),
the Company shall issue Purchase a warrant to purchase sixty
thousand (60,000/00) shares of the Company’s Common Stock.
The exercise price of a Warrant shall be equal to the Conversion
Price.
5.
Budgetary Authority. Purchaser shall have approval
authority over fifty (50%) percent of the proceeds of the First
Closing, or, as applicable, any Additional Closing up to a maximum
of Five hundred thousand dollars ($500,000.00) in total (the
"Discretionary Investment"). Purchaser will advise and
make recommendations to the Company as to the use of such
Discretionary Investment, which shall include recommendations as to
the Company’s investor relations and shareholder
communications programs as well as other company debts and payables
per its existing agreements. The Company shall not
employ nor withhold the Discretionary Investment without the prior
approval of the Purchaser. Upon approval or
recommendation of the Discretionary
Investment from the Purchaser, the Company shall make the
approved payments within three (3) business days of the request of
the Purchaser. The Company's failure to
abide by the terms and conditions of this paragraph five (5) or
paragraph nine (9) shall constitute a material breach of this
Securities Purchase Agreement and result in liquidated damages for
Purchaser equal to four times the amount of Discretionary
Investment funds. In the event the Company fails
to abide by the terms and conditions of this paragraph five (5) or
paragraph nine (9) it is understood and agreed that Purchaser
has the unequivocal right to obtain timely injunctive relief to
protect the rights of Purchaser. Notwithstanding the
foregoing, Purchaser shall not have authority pursuant to this
paragraph five (5) to bind or obligate the Company with respect to
any material agreement.
6.
Representations and Warranties of
Company . Company hereby
represents and warrants to
Purchaser in
the First Closing that the statements
contained in the following paragraphs of this Section 6 are all
true and correct as of the date of this Agreement and
the Closing Date, and to Purchaser in an Additional Closing that
the statements contained in the following paragraphs of
this Section 6 are all true
and correct as of the date of
the Additional Closing:
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Organization
and Standing: Articles and Bylaws. Company is a corporation duly
organized, validly existing and in good
standing under the laws of
the State of Nevada and has
all requisite corporate power and
authority to carry on its business as now conducted.
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Corporate Power.
Company has
all requisite legal and corporate power to
enter into, execute, deliver and perform this
Agreement and the Registration Rights Agreement (the
"Registration Rights Agreement") of even date herewith
between Company and Purchaser. This Agreement and the Registration
Rights Agreement
(the "Transaction Documents") have been duly
executed by the Company and constitute the
legal, valid and
binding obligations of Company, enforceable
in accordance with their terms, except as the same may be limited
by (i)
bankruptcy, insolvency, moratorium, and
other laws of general application affecting
the enforcement of creditors' rights
and (ii) limitations on the
enforceability of
the indemnification provisions of
the Registration Rights Agreement as limited
by applicable securities laws.
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Corporate
Action . All
corporate and legal action on the part of Company, its officers,
directors and shareholders necessary for the execution and delivery
of this Agreement, the Registration Rights Agreement, the sale and
issuance of the Convertible Preferred Stock and Common
Stock, and the performance of Company's obligations
hereunder have been taken.
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Valid
Issuance . The
Convertible Preferred Stock and Common Stock, when issued in
compliance with the provisions of this Agreement and the Warrant,
will be duly and validly issued, fully paid and nonassessable, free
and clear of all liens and encumbrances; provided, however, that
the Convertible Preferred Stock, the Common Stock and Warrants may
be subject to restrictions on transfer under state and/or
federal securities laws as set forth
herein, and as may be required by future changes in such
laws.
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Government
Consent, Etc . No
consent, approval, order or authorization of,
or designation, registration, declaration or filing
with, any federal, state, local or other governmental
authority on the part of Company is required in
connection with the valid execution and delivery of this
Agreement, the Registration Rights Agreement or the offer, sale or
issuance of the Convertible Preferred Stock, the Common
Stock and the
Warrant other than, if required, filings
or qualifications under the Nevada Securities Act, as amended (the
"Nevada Law"), or
other applicable blue sky
laws,&nb
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