PURCHASE AGREEMENT
EXECUTION
COPY
PURCHASE
AGREEMENT
PURCHASE AGREEMENT (the
“Agreement”), dated as of November 8, 2010, by and between NUTRA PHARMA CORP., a
California corporation, (the “Company”), and LINCOLN PARK CAPITAL FUND,
LLC, an Illinois limited liability company (the “Investor”).
WHEREAS:
Subject
to the terms and conditions set forth in this Agreement, the Company wishes to
sell to the Investor, and the Investor wishes to buy from the Company, up to Ten
Million Dollars ($10,000,000) of the Company's common stock, $0.001 par
value per share (the "Common Stock"). The shares of Common Stock to
be purchased hereunder are referred to herein as the "Purchase
Shares."
NOW
THEREFORE, the Company and the Investor hereby agree as follows:
1.
CERTAIN DEFINITIONS.
For
purposes of this Agreement, the following terms shall have the following
meanings:
(a)
“Accelerated Purchase Notice” shall mean an irrevocable written
notice from the Company to the Investor directing the Investor to buy such
Accelerated Purchase Amount in Purchase Shares as specified by the Company
therein on the Purchase Date.
(b)
“Available Amount” means initially Ten Million Dollars
($10,000,000) in the aggregate which amount shall be reduced by the Purchase
Amount each time the Investor purchases shares of Common Stock pursuant to
Section 2 hereof.
(c)
“Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or
state law for the relief of debtors.
(d)
“Business Day” means any day on which the
Principal Market is open for trading including any day on which the Principal
Market is open for trading for a period of time less than the customary
time.
(e)
“Closing Sale Price” means, for any security as of any
date, the last closing trade price for such security on the Principal Market as
reported by the Principal Market, or, if the Principal Market is not the
principal securities exchange or trading market for such security, the last
closing trade price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by the
Principal Market.
(f)
“Confidential Information” means any information
disclosed by either party to the other party, either directly or indirectly, in
writing, orally or by inspection of tangible objects (including, without
limitation, documents, prototypes, samples, plant and equipment), which is
designated as "Confidential," "Proprietary" or some similar designation.
Information communicated orally shall be considered Confidential Information if
such information is confirmed in writing as being Confidential Information
within ten (10) Business Days after the initial disclosure. Confidential
Information may also include information disclosed to a disclosing party by
third parties. Confidential Information shall not, however, include any
information which (i) was publicly known and made generally available in the
public domain prior to the time of disclosure by the disclosing party; (ii)
becomes publicly known and made generally available after disclosure by the
disclosing party to the receiving party through no action or inaction of the
receiving party; (iii) is already in the possession of the receiving party at
the time of disclosure by the disclosing party as shown by the receiving party’s
files and records immediately prior to the time of disclosure; (iv) is obtained
by the receiving party from a third party without a breach of such third party’s
obligations of confidentiality; (v) is independently developed by the receiving
party without use of or reference to the disclosing party’s Confidential
Information, as shown by documents and other competent evidence in the receiving
party’s possession; or (vi) is required by law to be disclosed by the receiving
party, provided that the receiving party gives the disclosing party prompt
written notice of such requirement prior to such disclosure and assistance in
obtaining an order protecting the information from public
disclosure.
(g) “Custodian”
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
(h) “Exchange
Act” means the Securities Exchange Act of 1934, as amended.
(i)
“Maturity Date” means the date that is 600 Business Days (30 Monthly
Periods) from the Commencement Date.
(j)
“Monthly Period” means each successive 20 Business Day period
commencing with the Commencement Date.
(k) “Person”
means an individual or entity including but not limited to any limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
(l)
“Principal Market” means the OTC Bulletin Board;
provided however, that in the event the Company’s Common Stock is ever listed or
traded on the Nasdaq Global Market, the Nasdaq Global Select Market, the Nasdaq
Capital Market, the New York Stock Exchange, or the NYSE Amex, than the
“Principal Market” shall mean such other market or exchange on which the
Company’s Common Stock is then listed or traded.
(m) “Purchase
Amount” means, with respect to any particular purchase made hereunder, the
portion of the Available Amount to be purchased by the Investor pursuant to
Section 2 hereof.
(n) “Purchase
Date” means with respect to any particular purchase made hereunder, the Business
Day on which the Investor receives by 10:00 a.m. eastern time of such Business
Day a valid Regular Purchase Notice or a valid Accelerated Purchase Notice that
the Investor is to buy Purchase Shares pursuant to Section 2
hereof.
(o)
“Purchase Price” means the lower of the (A) the lowest Sale Price of the Common
Stock on the Purchase Date and (B) the arithmetic average of the three (3)
lowest Closing Sale Prices for the Common Stock during the twelve (12)
consecutive Business Days ending on the Business Day immediately preceding such
Purchase Date (to be appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split or other similar
transaction).
(p) “Regular
Purchase Notice” shall mean an irrevocable written notice from the Company to
the Investor directing the Investor to buy such Regular Purchase Amount in
Purchase Shares as specified by the Company therein on the Purchase
Date.
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(q) “Sale
Price” means any trade price for the shares of Common Stock on the Principal
Market as reported by the Principal Market.
(r)
“SEC” means the United States Securities and
Exchange Commission.
(s)
“Securities Act” means the Securities
Act of 1933, as amended.
(t)
“Transfer Agent” means the transfer agent of the Company as set forth in
Section 11(f) hereof or such other person who is then serving as the transfer
agent for the Company in respect of the Common Stock.
2.
PURCHASE OF COMMON STOCK.
Subject
to the terms and conditions set forth in this Agreement, the Company has the
right to sell to the Investor, and the Investor has the obligation to purchase
from the Company, Purchase Shares as follows:
(a)
Initial Purchase and
Commencement of Regular Sales of Common Stock. Upon execution
of this Agreement, the Company shall sell to the Investor and the Investor shall
purchase 1,666,667 Purchase Shares (such initial Purchase Shares, the “Initial
Purchase Shares”) together with warrants (the “Warrants”) to purchase 1,666,667
shares (“Warrant Shares”) of Common Stock, for aggregate consideration of
$200,000. The Warrants shall have a term of five (5) years from the
date they are exercisable, an exercise price of $.15 per share and shall be in
the form of Exhibit F hereto. Upon the satisfaction of the conditions
set forth in Sections 7 and 8 hereof (the “Commencement” and the date of
satisfaction of such conditions the “Commencement Date”) and thereafter, the
Company shall have the right but not the obligation to direct the Investor by
its delivery to the Investor of a Regular Purchase Notice from time to time to
buy Purchase Shares (each such purchase a “Regular Purchase”) in any amount up
to Forty Thousand Dollars ($40,000.00) per Regular Purchase Notice (the “Regular
Purchase Amount”) at the Purchase Price on the Purchase Date. The
Company may deliver multiple Regular Purchase Notices to the Investor so long as
at least two (2) Business Days have passed since the most recent Regular
Purchase was completed.
(b) Accelerated
Purchases. At any time
on or after the Commencement Date, the Company shall also have the right to
direct the Investor to buy Purchase Shares (each such purchase an “Accelerated
Purchase”) in the amounts specified in this Section 2(b) per Accelerated
Purchase Notice at the Accelerated Purchase Price on the Purchase Date by
delivering to the Investor Accelerated Purchase Notices as
follows: the Accelerated Purchase Amount may be up to Eighty Thousand
Dollars ($80,000.00) per Accelerated Purchase Notice provided that the Closing
Sale Price of the Common Stock must not be below $.15 (subject to equitable
adjustment for any reorganization, recapitalization, non-cash dividend, stock
split or other similar transaction) on the Purchase Date. The
Accelerated Purchase Amount may be increased to up to One Hundred Sixty Thousand
Dollars ($160,000.00) per Accelerated Purchase Notice if the Closing Sale Price
of the Common Stock is not below $.30 (subject to equitable adjustment for any
reorganization, recapitalization, non-cash dividend, stock split or other
similar transaction) on the Purchase Date. The Accelerated Purchase
Amount may be increased to up to Three Hundred Twenty Thousand Dollars
($320,000.00) per Accelerated Purchase Notice if the Closing Sale Price of the
Common Stock is not below $.45 (subject to equitable adjustment for any
reorganization, recapitalization, non-cash dividend, stock split or other
similar transaction) on the Purchase Date. The Accelerated Purchase
Amount may be increased to up to Five Hundred Thousand Dollars ($500,000.00) per
Accelerated Purchase Notice if the Closing Sale Price of the Common Stock is not
below $.60 (subject to equitable adjustment for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction)
on the Purchase Date. With respect to each such Accelerated Purchase, the
Company must deliver the Purchase Shares before 1:00 p.m. eastern time on the
Business Day following the Purchase Date. As used herein, the term
“Accelerated Purchase Price” shall mean the lesser of (i) the lowest Sale Price
of the Common Stock on the Purchase Date or (ii) the lowest Purchase Price
during the previous ten (10) Business Days prior to the date that the valid
Accelerated Purchase Notice was received by the Investor. However, if
on any Purchase Date the Closing Sale Price of the Common Stock is below the
applicable Accelerated Purchase threshold price, such Accelerated Purchase shall
be void and the Investor’s obligations to buy Purchase Shares in respect of that
Accelerated Purchase Notice shall be terminated. Thereafter,
the Company shall again have the right to submit an Accelerated Purchase Notice
as set forth herein by delivery of a new Accelerated Purchase Notice only if the
Closing Sale Price of the Common Stock is at or above the applicable Accelerated
Purchase Amount threshold price on the date of the delivery of the Accelerated
Purchase Notice. The Company may deliver multiple Accelerated
Purchase Notices to the Investor so long as at least two (2) Business Days have
passed since the most recent Accelerated Purchase was completed.
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(c)
Payment for Purchase
Shares. The Investor shall pay to the Company an amount
equal to the Purchase Amount with respect to such Purchase Shares as full
payment for such Purchase Shares via wire transfer of immediately available
funds on the same Business Day that the Investor receives such Purchase Shares
if they are received by the Investor before 1:00 p.m. eastern time or if
received by the Investor after 1:00 p.m. eastern time, the next Business Day.
The Company shall not issue any fraction of a share of Common Stock upon any
purchase. If the issuance would result in the issuance of a fraction of a share
of Common Stock, the Company shall round such fraction of a share of Common
Stock up or down to the nearest whole share. All payments made under this
Agreement shall be made in lawful money of the United States of America or wire
transfer of immediately available funds to such account as the Company may from
time to time designate by written notice in accordance with the provisions of
this Agreement. Whenever any amount expressed to be due by the terms of this
Agreement is due on any day that is not a Business Day, the same shall instead
be due on the next succeeding day that is a Business Day.
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3.
INVESTOR'S REPRESENTATIONS AND
WARRANTIES.
The
Investor represents and warrants to the Company that as of the date hereof and
as of the Commencement Date:
(a) Investment
Purpose. The Investor is acquiring the Purchase Shares,
Warrant Shares and Commitment Shares (“Securities”) as principal for its own
account and not with a view to or for distributing or reselling such Securities
or any part thereof in violation of the Securities Act or any applicable state
securities law, has no present intention of distributing any of such Securities
in violation of the Securities Act or any applicable state securities law and
has no direct or indirect arrangement or understandings with any other persons
to distribute or regarding the distribution of such Securities in violation of
the Securities Act or any applicable state securities law (this representation
and warranty not limiting the Investor’s right to sell the Securities at any
time pursuant to the registration statement described herein or otherwise in
compliance with applicable federal and state securities laws and with respect to
the Additional Commitment Shares, subject to Section 5(e)
hereof). The Investor is acquiring the Securities hereunder in the
ordinary course of its business.
(b) Accredited Investor
Status. The Investor is an "accredited investor" as that term
is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance on
Exemptions. The Investor understands that the Securities may
be offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and the
Investor's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Investor set forth herein in order to
determine the availability of such exemptions and the eligibility of the
Investor to acquire the Securities.
(d) Information. The
Investor understands that its investment in the Securities involves a high
degree of risk. The Investor (i) is able to bear the economic risk of
an investment in the Securities including a total loss, (ii) has such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of the proposed investment in the Securities and
(iii) has had an opportunity to ask questions of and receive answers from the
officers of the Company concerning the financial condition and business of the
Company and others matters related to an investment in the
Securities. Neither such inquiries nor any other due diligence
investigations conducted by the Investor or its representatives shall modify,
amend or affect the Investor's right to rely on the Company's representations
and warranties contained in Section 4 below. The Investor has sought
such accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the
Securities.
(e) No Governmental
Review. The Investor understands that no United States federal
or state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities or the fairness or
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.
(f) Transfer or
Sale. The Investor understands that(i) the Securities may not
be offered for sale, sold, assigned or transferred unless (A) registered
pursuant to the Securities Act or (B) an exemption exists permitting such
Securities to be sold, assigned or transferred without such registration; (ii)
any sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which
the seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the SEC thereunder.
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(g) Validity;
Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Investor and is a valid and
binding agreement of the Investor enforceable against the Investor in accordance
with its terms, subject as to enforceability to general principles of equity and
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
(h) Residency. The
Investor is a resident of the State of Illinois.
(i)
No Short
Selling. The Investor represents and warrants to the Company
that at no time prior to the date of this Agreement has any of the Investor, its
agents, representatives or affiliates engaged in or effected, in any manner
whatsoever, directly or indirectly, any (i) "short sale" (as such term is
defined in Section 242.200 of Regulation SHO of the Exchange Act) of the Common
Stock or (ii) hedging transaction, which establishes a net short position with
respect to the Common Stock.
4.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants to the Investor that as of the date hereof and
as of the Commencement Date:
(a) Organization and
Qualification. The Company and each of the Subsidiaries (which for
purposes of this Agreement means any entity in which the Company, directly or
indirectly, owns 50% or more of the voting stock or capital stock or other
similar equity interests) is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, with the requisite power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation nor
default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter
documents. Each of the Company and the Subsidiaries is duly qualified
to conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not
have or reasonably be expected to result in: (i) a material adverse effect on
the legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse
Effect”) and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification. The Company has no Subsidiaries
except as set forth on Schedule
4(a).
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(b) Authorization; Enforcement;
Validity. (i) The Company has the requisite corporate power
and authority to enter into and perform its obligations under this Agreement,
the Registration Rights Agreement and each of the other agreements
entered into by the parties on the Commencement Date and attached hereto as
exhibits to this Agreement (collectively, the "Transaction Documents"), and to
issue the Securities in accordance with the terms hereof and thereof, (ii) the
execution and delivery of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including without limitation, the issuance of the Commitment Shares and the
reservation for issuance and the issuance of the Purchase Shares, Warrants and
Warrant Shares issuable under this Agreement, 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 shareholders, (iii) this Agreement
has been, and each other Transaction Document shall be on the Commencement Date,
duly executed and delivered by the Company and (iv) this Agreement constitutes,
and each other Transaction Document upon its execution on behalf of the Company,
shall 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. The Board of Directors of the Company has approved the
resolutions (the “Signing Resolutions”) substantially in the form as set forth
as Exhibit C
attached hereto to authorize this Agreement and the transactions contemplated
hereby. The Signing Resolutions are valid, in full force and effect
and have not been modified or supplemented in any respect. The
Company has delivered to the Investor a true and correct copy of a unanimous
written consent adopting the Signing Resolutions executed by all of the members
of the Board of Directors of the Company. No other approvals or
consents of the Company’s Board of Directors and/or shareholders is necessary
under applicable laws and the Company’s Certificate of Incorporation and/or
Bylaws to authorize the execution and delivery of this Agreement or any of the
transactions contemplated hereby, including, but not limited to, the issuance of
the Commitment Shares and the issuance of the Purchase Shares.
(c) Capitalization. As
of the date hereof, the authorized capital stock of the Company is set forth on
Schedule
4(c). Except as disclosed in Schedule 4(c), (i) no
shares of the Company's capital stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by the
Company, (ii) there are no outstanding debt securities, (iii) 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, (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 the Registration Rights Agreement), (v) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement and (vii) the Company does not
have any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement. 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 amended and as in effect on the
date hereof (the "By-laws"), and summaries of the terms of all securities
convertible into or exercisable for Common Stock, if any, and copies of any
documents containing the material rights of the holders thereof in respect
thereto.
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(d) Issuance of
Securities. Upon issuance and payment therefor in accordance
with the terms and conditions of this Agreement, the Purchase Shares, shall be
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof, with the holders being entitled to
all rights accorded to a holder of Common Stock. The Initial Purchase Shares
have been duly authorized and, upon issuance in accordance with the terms
hereof, the Initial Purchase Shares shall be (i) validly issued, fully paid and
non-assessable and (ii) free from all taxes, liens and charges with respect to
the issue thereof. The Commitment Shares have been duly authorized and, upon
issuance in accordance with the terms hereof, the Commitment Shares shall be (i)
validly issued, fully paid and non-assessable and (ii) free from all taxes,
liens and charges with respect to the issue thereof. The Warrant
Shares have been duly authorized and reserved for issuance upon exercise in
accordance with the Warrants. When issued in accordance with the
Warrants, the Warrant Shares shall be validly issued, fully paid and
non-assessable, to our knowledge, free of all taxes, liens, charges,
restrictions, rights of first refusal and preemptive rights. 70,000,000
shares of Common Stock have been duly authorized and reserved for issuance upon
purchase under this Agreement as Purchase Shares. 2,600,000 shares of
Common Stock (subject to equitable adjustment for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction)
have been duly authorized and reserved for issuance as Additional Commitment
Shares in accordance with this Agreement.
(e)
No
Conflicts. Except as disclosed in Schedule 4(e), the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the reservation for issuance and
issuance of the Purchase Shares) will not (i) result in a violation of the
Certificate of Incorporation, any Certificate of Designations, Preferences and
Rights of any outstanding series of preferred stock of the Company or the
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 applicable to
the Company or any of its Subsidiaries) or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected, except in the case of
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations under clause (ii), which could not reasonably be expected to result
in a Material Adverse Effect. Except as disclosed in Schedule 4(e),
neither the Company nor its Subsidiaries is in violation of any term of or in
default under its Certificate of Incorporation, any Certificate of Designation,
Preferences and Rights of any outstanding series of preferred stock of the
Company or By-laws or their organizational charter or by-laws,
respectively. Except as disclosed in Schedule 4(e),
neither the Company nor any of its Subsidiaries is in violation of any term of
or is in default under 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, except for possible
conflicts, defaults, terminations or amendments which could not reasonably be
expected to have a Material Adverse Effect. The business of the
Company and its Subsidiaries is not being conducted, and shall not be conducted,
in violation of any law, ordinance, regulation of any governmental entity,
except for possible violations, the sanctions for which either individually or
in the aggregate could not reasonably be expected to have a Material Adverse
Effect. Except as specifically contemplated by this Agreement and as
required under the Securities Act or 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 or any
regulatory or self-regulatory agency in order for it to execute, deliver or
perform any of its obligations under or contemplated by the Transaction
Documents in accordance with the terms hereof or thereof. Except as
disclosed in Schedule
4(e), all consents, authorizations, orders, filings and registrations
which the Company is required to obtain pursuant to the preceding sentence shall
be obtained or effected on or prior to the Commencement Date. Except
as listed in Schedule
4(e), since one year prior to the date hereof, the Company has
not received nor delivered any notices or correspondence from or to the
Principal Market. The Principal Market has not commenced any
delisting proceedings against the Company.
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(f)
SEC Documents; Financial
Statements. Except as disclosed in Schedule 4(f) the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by the Company under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law or regulation to file such material) (the foregoing materials, including the
exhibits thereto and documents incorporated by reference therein, being
collectively referred to herein as the “SEC Documents”) on a timely basis or has
received a valid extension of such time of filing and has filed any such SEC
Documents prior to the expiration of any such extension. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act and the Exchange Act, as applicable, and none
of the SEC Documents, when filed, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance
with United States generally accepted accounting principles applied on a
consistent basis during the periods involved (“GAAP”), except as may be
otherwise specified in such financial statements or the notes thereto and except
that unaudited financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the financial position of the
Company and its consolidated Subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end audit
adjustments. Except as listed in Schedule 4(f), the
Company has received no notices or correspondence from the SEC for the one year
preceding the date hereof. The SEC has not
commenced any enforcement proceedings against the Company or any of its
subsidiaries.
(g) Absence of Certain
Changes. Except as disclosed in Schedule 4(g), since
May 31, 2010, there has been no material adverse change in the business,
properties, operations, financial condition or results of operations of the
Company or its Subsidiaries. The Company has not taken any steps, and
does not currently expect to take any steps, to seek protection pursuant to any
Bankruptcy Law nor does the Company or any of its Subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy or
insolvency proceedings. The Company is financially solvent and is
generally able to pay its debts as they become due.
(h) Absence of
Litigation. There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company
or any of its Subsidiaries, threatened against or affecting the Company, the
Common Stock or any of the Company's Subsidiaries or any of the Company's or the
Company's Subsidiaries' officers or directors in their capacities as such, which
could reasonably be expected to have a Material Adverse
Effect. A description of each action, suit, proceeding, inquiry
or investigation before or by any court, public board, government agency,
self-regulatory organization or body which, as of the date of this Agreement, is
pending or threatened in writing against or affecting the Company, the Common
Stock or any of the Company's Subsidiaries or any of the Company's or the
Company's Subsidiaries' officers or directors in their capacities as such, is
set forth in Schedule
4(h).
(i)
Acknowledgment Regarding
Investor's Status. The Company acknowledges and agrees that
the Investor is acting solely in the capacity of arm's length purchaser with
respect to the Transaction Documents and the transactions contemplated hereby
and thereby. The Company further acknowledges that the Investor is
not acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby and any advice given by the Investor or any of
its representatives or agents in connection with the Transaction Documents and
the transactions contemplated hereby and thereby is merely incidental to the
Investor's purchase of the Securities. The Company further represents
to the Investor that the Company's decision to enter into the Transaction
Documents has been based solely on the independent evaluation by the Company and
its representatives and advisors.
(j)
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
Securities.
-9-
(k) 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 xxxx 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. Except as set forth on Schedule 4(k), none
of the Company's material trademarks, trade names, service marks, service xxxx
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, government authorizations, trade secrets or other
intellectual property rights have expired or terminated, or, by the terms and
conditions thereof, could expire or terminate within two years from the date of
this Agreement. The Company and its Subsidiaries do not have any
knowledge of any infringement by the Company or its Subsidiaries of any material
trademark, trade name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service xxxx registrations, trade secret
or other similar rights of others, or of any such development of similar or
identical trade secrets or technical information by others and, except as set
forth on Schedule
4(k), 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 xxxx
registrations, trade secret or other infringement, which could reasonably be
expected to have a Material Adverse Effect.
(l)
Environmental
Laws. The Company and its Subsidiaries (i) are in compliance
with any and all applicable 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, except where, in each of the
three foregoing clauses, the failure to so comply could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect.
(m) Title. The
Company and the Subsidiaries have good and marketable title in fee simple to all
real property owned by them and good and marketable title in all personal
property owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all liens, encumbrances and defects
(“Liens”) and , except for Liens as do not materially affect the value of such
property and do not materially interfere with the use made and proposed to be
made of such property by the Company and the Subsidiaries and Liens for the
payment of federal, state or other taxes, the payment of which is neither
delinquent nor subject to penalties. Any real property and facilities
held under lease by the Company and the Subsidiaries are held by them under
valid, subsisting and enforceable leases with which the Company and the
Subsidiaries are in compliance 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. Any
real property and facilities held under lease by the Company and any of 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.
(n) 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.
-10-
(o) 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.
(p) Tax
Status. The Company and each of its Subsidiaries has made or
filed all federal and state income and all other material tax returns, reports
and declarations required by any jurisdiction to which it is subject (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) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company know of no basis for any such claim.
(q) Transactions With
Affiliates. Except
as set forth in the SEC Documents, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (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 entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $100,000
other than for (i) payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company and (iii)
other employee benefits, including stock option agreements under any stock
option plan of the Company.
(r)
Application of Takeover
Protections. The Company and its board of directors have taken
or will take prior to the Commencement Date all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Certificate of Incorporation
or the laws of the state of its incorporation which is or could become
applicable to the Investor as a result of the transactions contemplated by this
Agreement, including, without limitation, the Company's issuance of the
Securities and the Investor's ownership of the Securities.
(s) Disclosure. Except
with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms that neither it
nor any other Person acting on its behalf has provided the Investor or its
agents or counsel with any information that it believes constitutes or might
constitute material, non-public information which is not otherwise disclosed in
the Registration Statement or prospectus supplements
thereto. The Company understands and confirms that the Investor
will rely on the foregoing representation in effecting purchases and sales of
securities of the Company. All of the disclosure furnished by or on
behalf of the Company to the Investor regarding the Company, its business and
the transactions contemplated hereby, including the disclosure schedules to this
Agreement, is true and correct and does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The press releases disseminated by the Company during the
twelve months preceding the date of this Agreement taken as a whole do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made and when made,
not misleading. The Company acknowledges and agrees that the Investor
neither makes nor has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
Section 3 hereof.
-11-
(t)
Foreign Corrupt
Practices. Neither
the Company, nor to the knowledge of the Company, any agent or other person
acting on behalf of the Company, has (i) directly or indirectly, used any funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate funds, (iii)
failed to disclose fully any contribution made by the Company (or made by any
person acting on its behalf of which the Company is aware) which is in violation
of law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
(u) DTC
Eligible. The Company through its transfer agent currently
participates in the Depository Trust Company Fast Automated Securities Transfer
Program (“DTC FAST System”) and the Company’s Common Stock can be transferred
electronically to third parties via the DTC FAST System.
5.
COVENANTS.
(a)
Filing of Form 8-K and
Registration Statement. The Company agrees that it shall,
within the time required under the Exchange Act file a Report on Form 8-K
disclosing this Agreement and the transaction contemplated hereby. The Company shall also
file within thirty (30)days from the date hereof a new registration statement
covering only the sale of the Purchase Shares, Warrant Shares and the Commitment
Shares in accordance with the terms of the Registration Rights Agreement between
the Company and the Investor, dated as of the date hereof (“Registration Rights
Agreement”). Any securities issuable under this Agreement that have
not been registered under the Securities Act shall bear the following
restrictive legend (the “Restrictive Legend”):
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (2) AN OPINION OF HOLDER’S COUNSEL,
IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS.
(b) Blue Sky. The Company
shall take such action, if any, as is reasonably necessary in order to obtain an
exemption for or to qualify (i) the initial sale of the Commitment Shares and
any Purchase Shares to the Investor under this Agreement and (ii) any subsequent
resale of the Commitment Shares and any Purchase Shares by the Investor, in each
case, under applicable securities or "Blue Sky" laws of the states of the United
States in such states as is reasonably requested by the Investor from time to
time, and shall provide evidence of any such action so taken to the
Investor.
-12-
(c)
Listing/DTC. The
Company shall promptly secure the listing of all of the Purchase Shares, Warrant
Shares and Commitment Shares upon each national securities exchange and
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all such
securities from time to time issuable under the terms of the Transaction
Documents. The Company shall maintain the Common Stock's
authorization for quotation on the Principal Market. Neither the
Company nor any of its Subsidiaries shall take any action that would be
reasonably expected to result in the delisting or suspension of the Common Stock
on the Principal Market. The Company shall promptly, and in no event
later than the following Business Day, provide to the Investor copies of any
notices it receives from the Principal Market regarding the continued
eligibility of the Common Stock for listing on such automated quotation system
or securities exchange. The Company shall pay all fees and expenses
in connection with satisfying its obligations under this Section. The
Company shall take all action necessary to ensure that its Common Stock can be
transferred electronically via the DTC FAST System.
(d) Limitation on Short Sales
and Hedging Transactions. The Investor agrees that beginning
on the date of this Agreement and ending on the date of termination of this
Agreement as provided in Section 11, the Investor and its agents,
representatives and affiliates shall not in any manner whatsoever enter into or
effect, directly or indirectly, any (i) "short sale" (as such term is defined in
Section 242.200 of Regulation SHO of the Exchange Act) of the Common Stock or
(ii) hedging transaction, which establishes a net short position with respect to
the Common Stock.
(e)
Issuance of Commitment
Shares. Immediately upon the execution of this Agreement, the
Company shall issue to the Investor as consideration for the Investor entering
into this Agreement 400,000 shares of Common Stock (the "Initial Commitment
Shares") and shall deliver to the Transfer Agent a letter in the form as set
forth as Exhibit
E attached hereto with respect to the issuance of the Initial Commitment
Shares. In connection with each purchase of Purchase Shares
hereunder, the Company agrees to issue to the Investor a number of shares of
Common Stock (the “Additional Commitment Shares” and together with the Initial
Commitment Shares, the “Commitment Shares”) equal to the product of (x)
2,600,000 and (y) the Purchase Amount Fraction. The “Purchase Amount
Fraction” shall mean a fraction, the numerator of which is the Purchase Amount
purchased by the Investor with respect to such purchase of Purchase Shares and
the denominator of which is Nine Million Eight Hundred Thousand
Dollars ($9,800,000). The Additional Commitment Shares shall be
equitably adjusted for any reorganization, recapitalization, non-cash dividend,
stock split or other similar transaction. The Initial Commitment
Shares shall be issued in certificated form and shall bear the Restrictive
Legend.
(f)
Due
Diligence. The Investor shall have the right, from time to
time as the Investor may reasonably deem appropriate, to perform reasonable due
diligence on the Company during normal business hours. The Company
and its officers and employees shall provide information and reasonably
cooperate with the Investor in connection with any reasonable request by the
Investor related to the Investor's due diligence of the Company. Each
party hereto agrees not to disclose any Confidential Information of the other
party to any third party and shall not use the Confidential Information for any
purpose other than in connection with, or in furtherance of, the transactions
contemplated hereby. Each party hereto acknowledges that the
Confidential Information shall remain the property of the disclosing party and
agrees that it shall take all reasonable measures to protect the secrecy of any
Confidential Information disclosed by the other party. The Company
confirms that neither it nor any other Person acting on its behalf shall provide
the Investor or its agents or counsel with any information that it believes
constitutes or might constitute material, non-public information which is not
otherwise disclosed in the Registration Statement or prospectus supplements
thereto.
-13-
(g) Purchase Records. The
Investor and the Company shall each maintain records showing the remaining
Available Amount at any given time and the dates and Purchase Amounts for each
purchase or shall use such other method, reasonably satisfactory to the Investor
and the Company.
(h) Taxes. The Company
shall pay any and all transfer, stamp or similar taxes that may be payable with
respect to the issuance and delivery of any shares of Common Stock to the
Investor made under this Agreement.
(i) No Variable Rate
Transactions. From the date hereof until the Maturity Date,
the Company shall be prohibited from effecting or entering into an agreement to
effect any issuance by the Company or any of its Subsidiaries of Common Stock or
Common Stock Equivalents for cash consideration (or a combination of units
thereof) involving a Variable Rate Transaction other than in connection with an
Exempt Issuance. “Variable Rate Transaction” means a transaction in
which the Company (i) issues or sells any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the right to
receive additional shares of Common Stock either (A) at a conversion price,
exercise price or exchange rate or other price that is based upon and/or varies
with the trading prices of or quotations for the shares of Common Stock at any
time after the initial issuance of such debt or equity securities, or (B) with a
conversion, exercise or exchange price that is subject to being reset at some
future date after the initial issuance of such debt or equity security or upon
the occurrence of specified or contingent events directly or indirectly related
to the business of the Company or the market for the Common Stock or (ii) enters
into any agreement, including, but not limited to, an equity line of credit,
whereby the Company may sell securities at a future determined price. “Exempt Issuance”
means the issuance of (a) shares of Common Stock or options to employees,
officers, directors or vendors of the Company pursuant to any stock or option
plan duly adopted for such purpose, by a majority of the non-employee members of
the Board of Directors or a majority of the members of a committee of
non-employee directors established for such purpose, (b) securities upon the
exercise or exchange of or conversion of any Securities issued hereunder and/or
other securities exercisable or exchangeable for or convertible into shares of
Common Stock issued and outstanding on the date of this Agreement, provided that
such securities have not been amended since the date of this Agreement to
increase the number of such securities or to decrease the exercise price,
exchange price or conversion price of such securities, and (c) securities issued
pursuant to acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, which acquisitions or strategic
transactions can have a Variable Rate Transaction component, provided
that any such issuance shall only be to a Person (or to the equity holders of a
Person) which is, itself or through its subsidiaries, an operating company or an
asset in a business synergistic with the business of the Company and shall
provide to the Company additional benefits in addition to the investment of
funds, but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity whose
primary business is investing in securities.
6.
TRANSFER AGENT INSTRUCTIONS.
On the
Commencement Date, the Company shall cause any restrictive legend on the Initial
Commitment Shares to be removed and all of the Purchase Shares, Warrant Shares
and Additional Commitment Shares, to be issued under this Agreement shall be
issued without any restrictive legend unless the Investor expressly consents
otherwise. The Company shall issue irrevocable instructions to the
Transfer Agent, and any subsequent transfer agent, to issue Purchase Shares in
the name of the Investor for the Purchase Shares (the "Irrevocable Transfer
Agent Instructions"). The Company warrants to the Investor that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 6, will be given by the Company to the Transfer Agent with
respect to the Purchase Shares and that the Commitment Shares, Warrant Shares
and the Purchase Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this
Agreement.
-14-
7.
CONDITIONS
TO THE COMPANY'S RIGHT TO COMMENCE SALES
OF SHARES OF COMMON STOCK.
The right
of the Company hereunder to commence sales of the Purchase Shares is subject to
the satisfaction of each of the following conditions:
(a) The
Investor shall have executed each of the Transaction Documents and delivered the
same to the Company; and
(b) A
registration statement covering the sale of all of the Commitment Shares,
Warrant Shares and
Purchase Shares shall have been declared effective under the Securities Act by
the SEC and no stop order with respect to the registration statement shall be
pending or threatened by the SEC.
8. CONDITIONS
TO THE INVESTOR'S OBLIGATION TO PURCHASE SHARES OF COMMON STOCK.
The
obligation of the Investor to buy Purchase Shares (other than the Initial
Purchase Shares) under this Agreement is subject to the satisfaction of each of
the following conditions and once such conditions have been initially satisfied,
there shall not be any ongoing obligation to satisfy such conditions after the
Commencement has occurred:
(a) The
Company shall have executed each of the Transaction Documents and delivered the
same to the Investor;
(b) The
Company shall have issued to the Investor the Initial Commitment Shares without
restrictive legend;
(c) The
Common Stock shall be authorized for quotation on the Principal Market, trading
in the Common Stock shall not have been within the last 365 days suspended by
the SEC or the Principal Market and the Purchase Shares, Warrant Shares and Commitment Shares
shall be approved for listing upon the Principal Market;
(d) The
Investor shall have received the opinions of the Company's legal counsel dated
as of the Commencement Date substantially in the form of Exhibit
A attached hereto;
(e) The
representations and warranties of the Company shall be true and correct in all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 4 above, in which
case, such representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the Commencement Date
as though made at that time (except for representations and warranties that
speak as of a specific date) and the Company shall have performed, satisfied and
complied with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
at or prior to the Commencement Date. The Investor shall have
received a certificate, executed by the CEO, President or CFO of the Company,
dated as of the Commencement Date, to the foregoing effect in the form attached
hereto as Exhibit
B;
-15-
(f) The
Board of Directors of the Company shall have adopted resolutions in the form
attached hereto as Exhibit
C which shall be in full force and effect without any amendment or
supplement thereto as of the Commencement Date;
(g) As
of the Commencement Date, the Company shall have reserved out of its authorized
and unissued Common Stock, (A) solely for the purpose
of effecting purchases of Purchase Shares hereunder, 70,000,000 shares of Common
Stock, (B) as Additional Commitment Shares in accordance with Section 5(e)
hereof, 2,600,000 shares of Common Stock and (C) 1,666,667 Warrant
Shares;
(h) The
Irrevocable Transfer Agent Instructions shall have been delivered to and
acknowledged in writing by the Company and the Company's Transfer
Agent;
(i) The
Company shall have delivered to the Investor a certificate evidencing the
incorporation and good standing of the Company in the State of California issued
by the Secretary of State of the State of California as of a date within ten
(10) Business Days of the Commencement Date;
(j) The
Company shall have delivered to the Investor a certified copy of the Certificate
of Incorporation as certified by the Secretary of State of the State of
California within ten (10) Business Days of the Commencement Date;
(k) The
Company shall have delivered to the Investor a secretary's certificate executed
by the Secretary of the Company, dated as of the Commencement Date, in the form
attached hereto as Exhibit
D;
(l) A
registration statement covering the sale of all of the Purchase Shares, Warrant
Shares and Commitment Shares shall have been declared effective under the
Securities Act by the SEC and no stop order with respect to the registration
statement shall be pending or threatened by the SEC. The Company
shall have prepared and delivered to the Investor a final and complete form of
prospectus, dated and current as of the Commencement Date, to be used by the
Investor in connection with any sales of any Commitment Shares, Warrant Shares
or any Purchase Shares, and to be filed by the Company one Business Day after
the Commencement Date. The Company shall have made all filings under all
applicable federal and state securities laws necessary to consummate the
issuance of the Commitment Shares and Purchase Shares pursuant to this Agreement
in compliance with such laws;
(m) No
Event of Default has occurred, or any event which, after notice and/or lapse of
time, would become an Event of Default has occurred;
(n) On
or prior to the Commencement Date, the Company shall take all necessary action,
if any, and such actions as reasonably requested by the Investor, in order to
render inapplicable any control share acquisition, business combination,
shareholder rights plan or poison pill (including any distribution under a
rights agreement) or other similar anti-takeover provision under the Certificate
of Incorporation or the laws of the state of its incorporation which is or could
become applicable to the Investor as a result of the transactions contemplated
by this Agreement, including, without limitation, the Company's issuance of the
Securities and the Commitment Shares and the Investor's ownership of the
Securities and the Commitment Shares; and
-16-
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9.
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INDEMNIFICATION.
|
In
consideration of the Investor's execution and delivery of the Transaction
Documents and acquiring the Securities hereunder and in addition to all of the
Company's other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless the Investor and all of its
affiliates, shareholders, officers, directors, employees and direct or indirect
investors and any of the foregoing person's agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Indemnitees")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by
any Indemnitee 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 the Transaction Documents 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 the Transaction Documents 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 Indemnitee
and arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument
or document contemplated hereby or thereby, other than with respect
to Indemnified Liabilities which directly and primarily result from the gross
negligence or willful misconduct of the Indemnitee. 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. Payment under this indemnification shall be made
within thirty (30) days from the date Investor makes written request for it. A
certificate containing reasonable detail as to the amount of such
indemnification submitted to the Company by Investor shall be conclusive
evidence, absent manifest error, of the amount due from the Company to
Investor.
10. EVENTS
OF DEFAULT.
An "Event
of Default" shall be deemed to have occurred at any time as any of the following
events occurs:
(a) the
effectiveness of a registration statement registering the Purchase Shares,
Warrant Shares or Commitment Shares lapses for any reason (including, without
limitation, the issuance of a stop order) or is unavailable to the Investor for
sale of any or all of the Purchase Shares, Warrant Shares or Commitment Shares
(“Registrable Securities”), and such lapse or unavailability continues for a
period of ten (10) consecutive Business Days or for more than an aggregate of
thirty (30) Business Days in any 365-day period;
(b) the
suspension from trading or failure of the Common Stock to be listed on the
Principal Market for a period of three (3) consecutive Business
Days;
(c) the
delisting of the Company’s Common Stock from the Principal Market, provided,
however, that the Common Stock is not immediately thereafter trading on the New
York Stock Exchange, the Nasdaq Global Market, the Nasdaq Global Select Market,
the Nasdaq Capital Market, or NYSE Amex;
-17-
(d) the
failure for any reason by the Transfer Agent to issue Purchase Shares to the
Investor within five (5) Business Days after the applicable Purchase Date which
the Investor is entitled to receive;
(e) the
Company breaches any representation, warranty, covenant or other term or
condition under any Transaction Document if such breach could have a Material
Adverse Effect and except, in the case of a breach of a covenant which is
reasonably curable, only if such breach continues for a period of at least five
(5) Business Days;
(f)
if any Person commences a proceeding against the Company
pursuant to or within the meaning of any Bankruptcy Law ;
(g) if
the Company pursuant to or within the meaning of any Bankruptcy Law; (A)
commences a voluntary case, (B) consents to the entry of an order for relief
against it in an involuntary case, (C) consents to the appointment of a
Custodian of it or for all or substantially all of its property, (D) makes a
general assignment for the benefit of its creditors or is generally unable to
pay its debts as the same become due;
(h) a
court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that (A) is for relief against the Company in an involuntary case, (B)
appoints a Custodian of the Company or for all or substantially all of its
property, or (C) orders the liquidation of the Company or any
Subsidiary;
(i)
if at any time the Company is not eligible to transfer its Common
Stock electronically via the DTC FAST System.; or
(j)
a material adverse change occurs in the Company, its business,
financial condition, operations or prospects.
In
addition to any other rights and remedies under applicable law and this
Agreement, including the Investor termination rights under Section 11 hereof, so
long as an Event of Default has occurred and is continuing, or if any event
which, after notice and/or lapse of time, would become an Event of Default, has
occurred and is continuing, or so long as the Purchase Price is below the Floor
Price, the Investor shall not be permitted or obligated to purchase any shares
of Common Stock under this Agreement. If pursuant to or within the
meaning of any Bankruptcy Law, the Company commences a voluntary case or any
Person commences a proceeding against the Company, a Custodian is appointed for
the Company or for all or substantially all of its property, or the Company
makes a general assignment for the benefit of its creditors, (any of which would
be an Event of Default as described in Sections 10(f), 10(g) and 10(h) hereof) this Agreement
shall automatically terminate without any liability or payment to the Company
without further action or notice by any Person. No such termination
of this Agreement under Section 11(a) or 11(d) shall affect the Company's or the
Investor's obligations under this Agreement with respect to pending purchases
and the Company and the Investor shall complete their respective obligations
with respect to any pending purchases under this Agreement.
11. TERMINATION
This
Agreement may be terminated only as follows:
(a) If
pursuant to or within the meaning of any Bankruptcy Law, the Company commences a
voluntary case or any Person commences a proceeding against the Company, a
Custodian is appointed for the Company or for all or substantially all of its
property, or the Company makes a general assignment for the benefit of its
creditors, (any of which would be an Event of Default as described in Sections
10(f), 10(g) and 10(h) hereof) this Agreement shall automatically terminate
without any liability or payment to the Company without further action or notice
by any Person. No such termination of this Agreement under this
Section 11(a) shall affect the Company's or the Investor's obligations under
this Agreement with respect to pending purchases and the Company and the
Investor shall complete their respective obligations with respect to any pending
purchases under this Agreement.
-18-
(b) In
the event that the Commencement shall not have occurred, the Company shall have
the option to terminate this Agreement for any reason or for no reason without
any liability whatsoever of any party to any other party under this
Agreement.
(c) In
the event that the Commencement shall not have occurred on or before December
15, 2010, due to the failure to satisfy the conditions set forth in Sections 7
and 8 above with respect to the Commencement, the non-breaching party shall have
the option to terminate this Agreement at the close of business on such date or
thereafter without liability of any party to any other party.
(d)
At any time after the Commencement Date, the Company shall have the option to
terminate this Agreement for any reason or for no reason by delivering notice (a
“Company Termination Notice”) to the Investor electing to terminate this
Agreement without any liability whatsoever of any party to any other party under
this Agreement. The Company Termination Notice shall not be effective
until one (1) Business Day after it has been received by the Investor. No such
termination of this Agreement under this Section 11(d) shall affect the
Company's or the Investor's obligations under this Agreement with respect to
pending purchases and the Company and the Investor shall complete their
respective obligations with respect to any pending purchases under this
Agreement.
(e) This
Agreement shall automatically terminate on the date that the Company sells and
the Investor purchases the full Available Amount as provided herein, without any
action or notice on the part of any party and without any liability whatsoever
of any party to any other party under this Agreement.
(f)
If by the Maturity Date for any reason or for no reason the full
Available Amount under this Agreement has not been purchased as provided for in
Section 2 of this Agreement, this Agreement shall automatically terminate on the
Maturity Date, without any action or notice on the part of any party and without
any liability whatsoever of any party to any other party under this
Agreement.
Except as
set forth in Sections 11(a) (in respect of an Event of Default under Sections
10(f), 10(g) and 10(h)) and 11(f), any termination of this Agreement pursuant to
this Section 11 shall be effected by written notice from the Company to the
Investor, or the Investor to the Company, as the case may be, setting forth the
basis for the termination hereof. The representations and warranties
and covenants of the Company and the Investor contained in Sections 3, 4, 5, and
6 hereof, the indemnification provisions set forth in Section 9 hereof and the
agreements and covenants set forth in Sections 10, 11 and 12, shall
survive the Commencement and any termination of this Agreement. No
termination of this Agreement shall affect the Company's or the Investor's
rights or obligations (i) under the Registration Rights Agreement which shall
survive any such termination or (ii) under this Agreement with respect to
pending purchases and the Company and the Investor shall complete their
respective obligations with respect to any pending purchases under this
Agreement.
-19-
12. MISCELLANEOUS.
(a) Governing Law; Jurisdiction;
Jury Trial. The corporate laws of the State of California
shall govern all issues concerning the relative rights of the Company and its
shareholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement and the other Transaction
Documents shall be governed by the internal laws of the State of Illinois,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Illinois or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of
Illinois. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of Chicago, for
the adjudication of any dispute hereunder or under the other Transaction
Documents or in connection herewith or therewith, or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(b) Counterparts. This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature or signature delivered by e-mail in a “.pdf”
format data file shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were an
original, not a facsimile signature or a signature in a “.pdf” format data
file.
(c) Headings. The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
(d) Severability. If
any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e) Entire
Agreement. With the exception of the Mutual Nondisclosure
Agreement between the parties dated as of October 28, 2010, 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, the other Transaction Documents
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. The Company acknowledges and agrees that is has not relied
on, in any manner whatsoever, any representations or statements, written or
oral, other than as expressly set forth in this Agreement.
(f)
Notices. Any
notices, consents 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 confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii) one
Business 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:
-20-
If to the
Company:
0000
Xxxxxxxxxx Xxxxx
Xxxxx
Xxxxxxx, XX 00000
|
Telephone:
|
000-000-0000
|
|
Facsimile:
|
877-895-5647
|
|
Attention:
|
Chairman
and Chief Executive Officer
|
If to the
Investor:
Lincoln
Park Capital Fund, LLC
000 Xxxxx
Xxxxx, Xxxxx 000
Xxxxxxx,
XX 00000
|
Telephone:
|
000-000-0000
|
|
Facsimile:
|
000-000-0000
|
|
Attention:
|
Xxxx
Xxxxxxxxxx/Xxxxxxxx Xxxx
|
If to the
Transfer Agent:
Standard
Registrar & Transfer Co Inc.
00000
Xxxxx 0000 Xxxx
Xxxxxx,
XX 00000
|
Telephone:
|
000-000-0000
|
|
Facsimile:
|
000-000-0000
|
|
Attention:
|
Xxx
Xxxxxxx
|
or at
such other address and/or facsimile number and/or to the attention of such other
person as the recipient party has specified by written notice given to each
other party three (3) Business Days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of
such notice, consent or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, and
recipient facsimile number or (C) provided by a nationally recognized overnight
delivery service, shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
(g) Successors and
Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and
assigns. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Investor,
including by merger or consolidation. The Investor may not assign its
rights or obligations under this Agreement.
(h) No Third Party
Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
person.
(i)
Publicity. The
Investor shall have the right to approve before issuance any press release, SEC
filing or any other public disclosure made by or on behalf of the Company
whatsoever with respect to, in any manner, the Investor, its purchases hereunder
or any aspect of this Agreement or the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of the Investor, to make any press release or other public disclosure
(including any filings with the SEC) with respect to such transactions as is
required by applicable law and regulations so long as the Company and its
counsel consult with the Investor in connection with any such press release or
other public disclosure at least two (2) Business Days prior to its
release. The Investor must be provided with a copy thereof at least
two (2) Business Days prior to any release or use by the Company
thereof. The Company agrees and acknowledges that its failure to
fully comply with this provision constitutes a material adverse effect on its
ability to perform its obligations under this Agreement.
-21-
(j)
Further
Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(k)
No Financial Advisor,
Placement Agent, Broker or Finder. The Company
represents and warrants to the Investor that it has not engaged any financial
advisor, placement agent, broker or finder in connection with the transactions
contemplated hereby. The Investor represents and warrants to the
Company that it has not engaged any financial advisor, placement agent, broker
or finder in connection with the transactions contemplated
hereby. The Company shall be responsible for the payment of any fees
or commissions, if any, of any financial advisor, placement agent, broker or
finder relating to or arising out of the transactions contemplated
hereby. The Company shall pay, and hold the Investor harmless
against, any liability, loss or expense (including, without limitation,
attorneys' fees and out of pocket expenses) arising in connection with any such
claim.
(l)
No Strict
Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any
party.
(m) Remedies, Other Obligations,
Breaches and Injunctive Relief. The Investor’s remedies
provided in this Agreement shall be cumulative and in addition to all other
remedies available to the Investor under this Agreement, at law or in equity
(including a decree of specific performance and/or other injunctive relief), no
remedy of the Investor contained herein shall be deemed a waiver of compliance
with the provisions giving rise to such remedy and nothing herein shall limit
the Investor's right to pursue actual damages for any failure by the Company to
comply with the terms of this Agreement. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
the Investor and that the remedy at law for any such breach may be
inadequate. The Company therefore agrees that, in the event of any
such breach or threatened breach, the Investor shall be entitled, in addition to
all other available remedies, to an injunction restraining any breach, without
the necessity of showing economic loss and without any bond or other security
being required.
(n) Enforcement
Costs. If: (i) this Agreement is placed by the Investor in the
hands of an attorney for enforcement or is enforced by the Investor through any
legal proceeding; or (ii) an attorney is retained to represent the Investor in
any bankruptcy, reorganization, receivership or other proceedings affecting
creditors' rights and involving a claim under this Agreement; or (iii) an
attorney is retained to represent the Investor in any other proceedings
whatsoever in connection with this Agreement, then the Company shall pay to the
Investor, as incurred by the Investor, all reasonable costs and expenses
including attorneys' fees incurred in connection therewith, in addition to all
other amounts due hereunder.
-22-
(o) Failure or Indulgence Not
Waiver. No failure or delay in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or
privilege.
* * * * *
-23-
IN WITNESS WHEREOF, the
Investor and the Company have caused this Purchase Agreement to be duly executed
as of the date first written above.
|
THE
COMPANY:
|
|||
|
By:
|
/s/
Xxx X Xxxxxxx
|
||
|
Name:
Xxx X Xxxxxxx
|
|||
|
Title:
Chairman and Chief Executive Officer
|
|||
|
INVESTOR:
|
|||
|
LINCOLN
PARK CAPITAL FUND, LLC
|
|||
|
BY:
LINCOLN PARK CAPITAL, LLC
|
|||
|
BY:
ROCKLEDGE CAPITAL CORPORATION
|
|||
|
By:
|
/s/
Xxxx Xxxxxxxxxx
|
||
|
Name:
Xxxx Xxxxxxxxxx
|
|||
|
Title:
President
|
|||
-24-
SCHEDULES
|
Schedule
4(a)
|
Subsidiaries
|
|
Schedule
4(c)
|
Capitalization
|
|
Schedule
4(e)
|
Conflicts
|
|
Schedule
4(f)
|
Exchange
Act Filings
|
|
Schedule
4(g)
|
Material
Changes
|
|
Schedule
4(h)
|
Litigation
|
|
Schedule
4(k)
|
Intellectual
Property
|
EXHIBITS
|
Exhibit
A
|
Form
of Company Counsel Opinion
|
|
Exhibit
B
|
Form
of Officer’s Certificate
|
|
Exhibit
C
|
Form
of Resolutions of Board of Directors of the Company
|
|
Exhibit
D
|
Form
of Secretary’s Certificate
|
|
Exhibit
E
|
Form
of Letter to Transfer Agent
|
|
Exhibit
F
|
Form
of Warrant
|
DISCLOSURE
SCHEDULES
Schedule
4(a) – Subsidiaries
Schedule
4(c) - Capitalization
Schedule
4(e) - No Conflicts
Schedule
4(f) - Exchange Act Filings
Schedule
4(g) - Absence of Certain Changes
Schedule
4(h) - Litigation
Schedule
4(k) - Intellectual Property Rights
EXHIBIT
A
FORM
OF COMPANY COUNSEL OPINION
Capitalized terms used herein but not
defined herein, have the meaning set forth in the Purchase
Agreement. Based on the foregoing, and subject to the assumptions and
qualifications set forth herein, we are of the opinion that:
1. The
Company is a corporation existing and in good standing under the laws of the
State of California. The Company is qualified to do business as a
foreign corporation and is in good standing in the States of California and
Florida.
2. The
Company has the corporate power to execute and deliver, and perform its
obligations under, each Transaction Document to which it is a
party. The Company has the corporate power to conduct its business
as, to the best of our knowledge, it is now conducted, and to own and use the
properties owned and used by it.
3. The
execution, delivery and performance by the Company of the Transaction Documents
to which it is a party have been duly authorized by all necessary corporate
action on the part of the Company. The execution and delivery of the
Transaction Documents by the Company, the performance of the obligations of the
Company thereunder and the consummation by it of the transactions contemplated
therein have been duly authorized and approved by the Company's Board of
Directors and no further consent, approval or authorization of the Company, its
Board of Directors or its stockholders is required. The Transaction
Documents to which the Company is a party have been duly executed and delivered
by the Company and are 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 creditor’s rights and remedies.
4. The
execution, delivery and performance by the Company of the Transaction Documents,
the consummation by the Company of the transactions contemplated thereby
including the offering, sale and issuance of the Commitment Shares, Warrant
Shares and the Purchase Shares in accordance with the terms and conditions of
the Purchase Agreement, and fulfillment and compliance with terms of the
Transaction Documents, does not and shall not: (i) conflict with,
constitute a breach of or default (or an event which, with the giving of notice
or lapse of time or both, constitutes or could constitute a breach or a
default), under (a) the Certificate of Incorporation or the Bylaws of the
Company, (b) any material agreement, note, lease, mortgage, deed or other
material instrument to which to our knowledge the Company is a party or by which
the Company or any of its assets are bound, (ii) result in any violation of
any statute, law, rule or regulation applicable to the Company, or (iii) to our
knowledge, violate any order, writ, injunction or decree applicable to the
Company or any of its subsidiaries.
5. The
issuance of the Purchase Shares, Warrant Shares and Commitment Shares pursuant
to the terms and conditions of the Transaction Documents has been duly
authorized and the Initial Commitment Shares and Initial Purchase Shares are
validly issued, fully paid and non-assessable, to our knowledge, free of all
taxes, liens, charges, restrictions, rights of first refusal and preemptive
rights. _______ shares of Common Stock have been properly reserved for issuance
under the Purchase Agreement. When issued and paid for in accordance
with the Purchase Agreement, the Purchase Shares shall be validly issued, fully
paid and non-assessable, to our knowledge, free of all taxes, liens, charges,
restrictions, rights of first refusal and preemptive rights. The Warrant Shares
have been duly authorized and reserved for issuance upon exercise in accordance
with the Warrants. 2,600,000 shares of Common Stock have been
properly reserved for issuance as Additional Commitment Shares under the
Purchase Agreement. When issued in accordance with the Purchase
Agreement, the Additional Commitment Shares shall be validly issued, fully paid
and non-assessable, to our knowledge, free of all taxes, liens, charges,
restrictions, rights of first refusal and preemptive rights. To our knowledge,
the execution and delivery of the Registration Rights Agreement do not, and the
performance by the Company of its obligations thereunder shall not, give rise to
any rights of any other person for the registration under
the Securities Act of any shares of Common Stock or other securities
of the Company which have not been waived.
6. As
of the date hereof, the authorized capital stock of the Company consists of
_______ shares of common stock, par value $0.001 per share, of which to our
knowledge __________ shares are issued and outstanding. Except as set
forth on Schedule 4(c) of the Purchase Agreement, to our knowledge, there are no
outstanding shares of capital stock or other securities convertible into or
exchangeable or exercisable for shares of the capital stock of the
Company.
7. Assuming
the accuracy of the representations and your compliance with the covenants made
by you in the Transaction Documents, the offering, sale and issuance of the
Initial Purchase Shares and Initial Commitment Shares to you pursuant to the
Transaction Documents is exempt from registration under the Securities Act and
the securities laws and regulations of the State of _________.
8. Other
than that which has been obtained and completed prior to the date hereof, no
authorization, approval, consent, filing or other order of any federal or state
governmental body, regulatory agency, or stock exchange or market, or any court,
or, to our knowledge, any third party is required to be obtained by the Company
to enter into and perform its obligations under the Transaction Documents or for
the Company to issue and sell the Purchase Shares as contemplated by the
Transaction Documents.
9. The Common Stock is
registered pursuant to Section 12(g) of the
Exchange Act. To our knowledge, since one year preceding
the date of the Purchase Agreement, the Company has been in compliance with the
reporting requirements of the Exchange Act applicable to it. To our
knowledge, since one year preceding the date of the Purchase Agreement, the
Company has not received any written notice from the Principal Market stating
that the Company has not been in compliance with any of the rules and
regulations (including the requirements for continued listing) of the Principal
Market.
We
further advise you that to our knowledge, except as disclosed on Schedule 4(h)
in the Purchase Agreement, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body, any governmental
agency, any stock exchange or market, or self-regulatory organization, which has
been threatened in writing or which is currently pending against the Company,
any of its subsidiaries, any officers or directors of the Company or any of its
subsidiaries or any of the properties of the Company or any of its
subsidiaries.
In addition, we have participated in
the preparation of the Registration Statement (SEC File #________) covering the
sale of the Purchase Shares, the Warrant Shares, and the Commitment Shares
including the prospectus dated ____________, contained therein and in
conferences with officers and other representatives of the Company (including
the Company’s independent auditors) during which the contents of the
Registration Statement and related matters were discussed and reviewed and,
although we are not passing upon and do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement, on the basis of the information that was developed in
the course of the performance of the services referred to above, considered in
the light of our understanding of the applicable law, nothing came to our
attention that caused us to believe that the Registration Statement (other than
the financial statements and schedules and the other financial and statistical
data included therein, as to which we express no belief), as of their dates,
contained any untrue statement of a material fact or omitted 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.
EXHIBIT
B
FORM
OF OFFICER’S CERTIFICATE
This
Officer’s Certificate (“Certificate”) is being
delivered pursuant to Section 8(e) of that certain Purchase Agreement dated as
of _________, (“Purchase
Agreement”), by and between NUTRA PHARMA CORP., a
California corporation (the “Company”), and LINCOLN PARK CAPITAL FUND, LLC
(the “Investor”). Terms
used herein and not otherwise defined shall have the meanings ascribed to them
in the Purchase Agreement.
The
undersigned, ___________, ______________ of the Company, hereby certifies as
follows:
1. I
am the _____________ of the Company and make the statements contained in this
Certificate;
2. The
representations and warranties of the Company are true and correct in all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 4 of the Purchase
Agreement, in which case, such representations and warranties are true and
correct without further qualification) as of the date when made and as of the
Commencement Date as though made at that time (except for representations and
warranties that speak as of a specific date);
3. The
Company has performed, satisfied and complied in all material respects with
covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the
Commencement Date.
4.
The
Company has not taken any steps, and does not currently expect to take any
steps, to seek protection pursuant to any Bankruptcy Law nor does the Company or
any of its Subsidiaries have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy or insolvency proceedings.
The Company is financially solvent and is generally able to pay its debts as
they become due.
IN
WITNESS WHEREOF, I have hereunder signed my name on this ___ day of
___________.
|
|
||
|
Name:
|
||
|
Title:
|
The
undersigned as Secretary of NUTRA PHARMA CORP., a
California corporation, hereby certifies that ___________ is the duly elected,
appointed, qualified and acting ________ of _________ and that the signature
appearing above is his genuine signature.
|
|
||
|
Secretary
|
EXHIBIT
C
FORM
OF COMPANY RESOLUTIONS
FOR
SIGNING PURCHASE AGREEMENT
UNANIMOUS
WRITTEN CONSENT OF
In
accordance with the corporate laws of the state of California, the undersigned,
being all of the directors of NUTRA PHARMA CORP., a
California corporation (the “Corporation”) do hereby consent to and adopt the
following resolutions as the action of the Board of Directors for and on behalf
of the Corporation and hereby direct that this Consent be filed with the minutes
of the proceedings of the Board of Directors:
WHEREAS, there has been presented to
the Board of Directors of the Corporation a draft of the Purchase Agreement (the
“Purchase Agreement”) by and between the Corporation and Lincoln Park Capital
Fund, LLC (“Lincoln Park”), providing for the purchase by Lincoln Park of up to
Ten Million Dollars ($10,000,000) of the Corporation’s common stock, $0.001 par
value per share (the “Common Stock”); and
WHEREAS, after careful consideration of
the Purchase Agreement, the documents incident thereto and other factors deemed
relevant by the Board of Directors, the Board of Directors has determined that
it is advisable and in the best interests of the Corporation to engage in the
transactions contemplated by the Purchase Agreement, including, but not limited
to, the issuance of 400,000 shares of Common Stock to Lincoln Park as a an
initial commitment fee (the “Initial Commitment Shares”) and
the sale of shares of Common Stock to Lincoln Park up to the available amount
under the Purchase Agreement (the "Purchase Shares").
Transaction
Documents
NOW,
THEREFORE, BE IT RESOLVED, that the transactions described in the Purchase
Agreement are hereby approved and Xxx X. Xxxxxxx (the “Authorized Officer”) is
authorized to execute and deliver the Purchase Agreement, and any other
agreements or documents contemplated thereby including, without limitation, a
registration rights agreement (the “Registration Rights Agreement”) providing
for the registration of the shares of the Company’s Common Stock issuable in
respect of the Purchase Agreement on behalf of the Corporation, with such
amendments, changes, additions and deletions as the Authorized Officers may deem
to be appropriate and approve on behalf of, the Corporation, such approval to be
conclusively evidenced by the signature of an Authorized Officer thereon;
and
FURTHER
RESOLVED, that the terms and provisions of the Registration Rights Agreement by
and among the Corporation and Lincoln Park are hereby approved and the
Authorized Officers are authorized to execute and deliver the Registration
Rights Agreement (pursuant to the terms of the Purchase Agreement), with such
amendments, changes, additions and deletions as the Authorized Officer may deem
appropriate and approve on behalf of, the Corporation, such approval to be
conclusively evidenced by the signature of an Authorized Officer thereon;
and
FURTHER
RESOLVED, that the terms and provisions of the Form of Transfer Agent
Instructions (the “Instructions”) are hereby approved and the Authorized
Officers are authorized to execute and deliver the Instructions (pursuant to the
terms of the Purchase Agreement), with such amendments, changes, additions and
deletions as the Authorized Officers may deem appropriate and approve on behalf
of, the Corporation, such approval to be conclusively evidenced by the signature
of an Authorized Officer thereon; and
Execution of Purchase
Agreement
FURTHER
RESOLVED, that the Corporation be and it hereby is authorized to execute the
Purchase Agreement providing for the purchase of up to Ten Million Dollars
($10,000,000) of the Corporation’s common stock; and
Issuance of Common
Stock
FURTHER
RESOLVED, that the Corporation is hereby authorized to issue to Lincoln Park
Capital Fund, LLC 1,666,667 shares of Common Stock as Initial Purchase Shares
and 400,000 shares of Common Stock as Initial Commitment Shares and
that upon issuance of the Initial Purchase Shares and the Initial Commitment
Shares pursuant to the Purchase Agreement, the Initial Purchase Shares and
Initial Commitment Shares shall be duly authorized, validly issued, fully paid
and nonassessable with no personal liability attaching to the ownership thereof;
and
FURTHER
RESOLVED, that the Corporation is hereby authorized to issue shares of Common
Stock upon the purchase of Purchase Shares up to the Available Amount under the
Purchase Agreement in accordance with the terms of the Purchase Agreement and
that, upon issuance of the Purchase Shares pursuant to the Purchase Agreement,
the Purchase Shares will be duly authorized, validly issued, fully paid and
nonassessable with no personal liability attaching to the ownership thereof;
and
FURTHER
RESOLVED, that the Corporation shall initially reserve 70,000,000 shares of
Common Stock for issuance as Purchase Shares under the Purchase
Agreement.
FURTHER
RESOLVED, that the Corporation is hereby authorized to issue 2,600,000 shares of
Common Stock (subject to equitable adjustment for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction)
in connection with the purchase of Purchase Shares (the “Additional Commitment
Shares”) in accordance with the terms of the Purchase Agreement and that, upon
issuance of the Additional Commitment Shares pursuant to the Purchase Agreement,
the Additional Commitment Shares will be duly authorized, validly issued, fully
paid and nonassessable with no personal liability attaching to the ownership
thereof; and
FURTHER
RESOLVED, that the Corporation shall initially reserve
2,600,000 shares of Common Stock (subject to equitable adjustment for
any reorganization, recapitalization, non-cash dividend, stock split or other
similar transaction) for issuance as Additional Commitment Shares under the
Purchase Agreement.
FURTHER
RESOLVED, that the Corporation is hereby authorized to issue Warrants (as
defined in the Purchase Agreement) and to issue 1,666,667 shares of Common Stock
(subject to equitable adjustment for any reorganization, recapitalization,
non-cash dividend, stock split or other similar transaction) in connection with
the exercise of the Warrants (the “Warrant Shares”) in accordance with the terms
of the Warrants and that, upon issuance of the Warrant Shares pursuant to the
Warrants, the Warrant Shares will be duly authorized, validly issued, fully paid
and nonassessable with no personal liability attaching to the ownership thereof;
and
FURTHER
RESOLVED, that the Corporation shall initially reserve 1,666,667 shares of
Common Stock (subject to equitable adjustment for any reorganization,
recapitalization, non-cash dividend, stock split or other similar
transaction) for
issuance as Warrant Shares.
Approval of
Actions
FURTHER
RESOLVED, that, without limiting the foregoing, the Authorized Officers are, and
each of them hereby is, authorized and directed to proceed on behalf of the
Corporation and to take all such steps as deemed necessary or appropriate, with
the advice and assistance of counsel, to cause the Corporation to consummate the
agreements referred to herein and to perform its obligations under such
agreements; and
FURTHER RESOLVED, that the Authorized
Officers be, and each of them hereby is, authorized, empowered and directed on
behalf of and in the name of the Corporation, to take or cause to be taken all
such further actions and to execute and deliver or cause to be executed and
delivered all such further agreements, amendments, documents, certificates,
reports, schedules, applications, notices, letters and undertakings and to incur
and pay all such fees and expenses as in their judgment shall be necessary,
proper or desirable to carry into effect the purpose and intent of any and all
of the foregoing resolutions, and that all actions heretofore taken by any
officer or director of the Corporation in connection with the transactions
contemplated by the agreements described herein are hereby approved, ratified
and confirmed in all respects.
IN WITNESS WHEREOF, the Board of
Directors has executed and delivered this Consent effective as of 5,
2010.
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/s/
Xxx X Xxxxxxx
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| Xxx X Xxxxxxx, Chairman of the Board | |
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/s/
Xxxxx X. Xxxxxxxx
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| Xxxxx X. Xxxxxxxx, Director | |
| /s/ Xxxxxxx Lunky | |
| Xxxxxxx Lunky, Director | |
| /s/ Xxxxxx Xxxxx | |
| Xxxxxx Xxxxx, Director | |
being all
of the directors of NUTRA
PHARMA CORP.
EXHIBIT
D
FORM
OF SECRETARY’S CERTIFICATE
This Secretary’s Certificate
(“Certificate”) is being delivered pursuant to Section 7(k) of that certain
Purchase Agreement dated as of __________, (“Purchase Agreement”), by and
between NUTRA PHARMA
CORP., a California corporation (the “Company”) and LINCOLN PARK CAPITAL FUND, LLC
(the “Investor”), pursuant to which the Company may sell to the Investor up to
Ten Million Dollars ($10,000,000) of the Company's Common Stock, $0.001 par
value per share (the "Common Stock"). Terms used herein and not
otherwise defined shall have the meanings ascribed to them in the Purchase
Agreement.
The undersigned, ____________,
Secretary of the Company, hereby certifies as follows:
1. I
am the Secretary of the Company and make the statements contained in this
Secretary’s Certificate.
2. Attached
hereto as Exhibit
A and Exhibit
B are true, correct and complete copies of the Company’s bylaws
(“Bylaws”) and Certificate of Incorporation (“Articles”), in each case, as
amended through the date hereof, and no action has been taken by the Company,
its directors, officers or shareholders, in contemplation of the filing of any
further amendment relating to or affecting the Bylaws or Articles.
3. Attached
hereto as Exhibit
C are true, correct and complete copies of the resolutions duly adopted
by the Board of Directors of the Company on _____________, at which a quorum was
present and acting throughout. Such resolutions have not been
amended, modified or rescinded and remain in full force and effect and such
resolutions are the only resolutions adopted by the Company’s Board of
Directors, or any committee thereof, or the shareholders of the Company relating
to or affecting (i) the entering into and performance of the Purchase Agreement,
or the issuance, offering and sale of the Purchase Shares and the Commitment
Shares and (ii) and the performance of the Company of its obligation under the
Transaction Documents as contemplated therein.
4. As
of the date hereof, the authorized, issued and reserved capital stock of the
Company is as set forth on Exhibit D
hereto.
IN WITNESS WHEREOF, I have
hereunder signed my name on this ___ day of ____________.
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Secretary
|
The
undersigned as ___________ of NUTRA PHARMA CORP., a California corporation,
hereby certifies that ____________ is the duly elected, appointed, qualified and
acting Secretary of _________, and that the signature appearing above is his
genuine signature.
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EXHIBIT
E
FORM
OF LETTER TO THE TRANSFER AGENT FOR THE ISSUANCE OF THE INITIAL PURCHASE SHARES
AND INITIAL COMMITMENTS SHARES AT SIGNING OF THE PURCHASE AGREEMENT
[COMPANY
LETTERHEAD]
[DATE]
[TRANSFER
AGENT]
__________________
__________________
__________________
Re:
Issuance of Common Shares to Lincoln Park Capital Fund, LLC
Dear
________,
On behalf
of NUTRA PHARMA CORP.,
(the “Company”), you are hereby instructed to issue as soon
as possible (i) 400,000 shares of
our common and (ii) 1,666,667 shares of our common stock for an aggregate of
2,066,667 shares of common stock in the name of Lincoln
Park Capital Fund, LLC. The share certificate should be dated
[DATE OF THE PURCHASE AGREEMENT]. I have included a true and correct
copy of a unanimous written consent executed by all of the members of the Board
of Directors of the Company adopting resolutions approving the issuance of these
shares. The shares should be issued subject to the following
restrictive legend:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (2) AN OPINION OF HOLDER’S COUNSEL,
IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS.
The share
certificate should be sent as soon
as possible via overnight mail to the following address:
Lincoln
Park Capital Fund, LLC
000 Xxxxx
Xxxxx, Xxxxx 000
Xxxxxxx,
XX 00000
Attention:
Xxxx Xxxxxxxxxx/Xxxxxxxx Xxxx
Thank you
very much for your help. Please call me at ______________ if you have
any questions or need anything further.
NUTRA
PHARMA CORP.
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BY:
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[name]
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[title]
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EXHIBIT
F
FORM
OF WARRANT
