PURCHASE AGREEMENT
EXHIBIT
10.2
This
Purchase Agreement (this “Agreement”) is dated as of
July __, 2009, by and among INVO Bioscience, Inc., a Nevada corporation (the
“Company”), and the
investors identified on the signature pages hereto (each an “Investor” and, collectively,
the “Investors”).
WHEREAS, subject to the terms
and conditions set forth in this Agreement, the Company desires to borrow
certain sums from each of the Investors and, in consideration thereof issue
certain convertible notes and warrants to each of the Investors, and each
Investor, severally and not jointly, desires to make a loan to the Company and
accept such notes and warrants from the Company, all pursuant to the terms set
forth herein.
NOW, THEREFORE, IN
CONSIDERATION of the mutual covenants contained in this Agreement, and
for other good and valuable consideration the receipt and adequacy of which are
hereby acknowledged, the Company and the Investors agree as
follows:
ARTICLE
I.
DEFINITIONS
Definitions. In
addition to the terms defined elsewhere in this Agreement, for all purposes of
this Agreement, the following terms shall have the meanings indicated in this
Section 1.1:
“Affiliate” means any Person
that, directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a Person, as such terms are used
in and construed under Rule 144.
“Bankruptcy Event” means any
of the following events: (a) the Company commences a
proceeding under any bankruptcy, reorganization, arrangement, adjustment of
debt, relief of debtors, dissolution, insolvency or liquidation or similar law
of any jurisdiction relating to the Company; (b) there is commenced against the
Company any such case or proceeding described in the foregoing clause (a) that
is not dismissed within sixty (60) days after commencement; (c) by an order of a
court of competent jurisdiction, the Company is adjudicated insolvent or
bankrupt; (d) a custodian or receiver has been appointed for all or any
substantial part of its to the Company’s property, and such custodian or
receiver is not discharged or stayed within sixty (60) days from the
appointment date thereof; (e) under applicable law, the Company makes a general
assignment for the benefit of creditors; (f) the Company calls in writing a
meeting of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (g) the Company, by any act or failure to act,
expressly in writing indicates its consent to or approval of any of the
foregoing or takes any corporate or other action for the purpose of effecting
any of the foregoing.
“Business Day” means any
day except Saturday, Sunday and any day that is a federal legal holiday or a day
on which banking institutions in the State of New York are authorized or
required by law or other governmental action to close.
“Closing” means each closing
of the purchase and sale of Notes and Warrants contemplated by Section
2.1.
“Closing Date” means the
Business Day immediately following the date on which all of the conditions set
forth in Section
2.1(d) and Section 2.1(e) have
been satisfied for a Closing, or such other date as the parties may
agree.
“Code” means the Internal
Revenue Code of 1986, as amended.
“Commission” means the
Securities and Exchange Commission.
“Common Stock” means the
common stock of the Company, $0.001 par value per share, and any securities into
which such common stock may hereafter be reclassified.
“Common Stock
Equivalents” means any securities of the Company which entitle the holder
thereof to acquire Common Stock at any time, including without limitation, any
debt, preferred stock, rights, options, warrants or other instrument that is at
any time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock or other securities that entitle the holder to
receive, directly or indirectly, Common Stock.
“Contemplated Transactions”
means the transactions contemplated by this Agreement and the other
Transaction Documents.
“Contingent Liability” means,
as to any Person, any obligation, contingent or otherwise, of such Person
guaranteeing or having the economic effect of guaranteeing or agreeing to pay or
become responsible for any Debt or obligation of any other Person in any manner,
whether directly or indirectly, including without limitation any obligation of
such Person, direct or indirect, (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt or to purchase (or to advance or
supply funds for the purchase of) any security for the payment of such Debt, (b)
to purchase property or services for the purpose of assuring the owner of such
Debt of its payment, or (c) to maintain the solvency, working capital, equity,
cash flow, fixed charge or other coverage ratio, or any other financial
condition of the primary obligor so as to enable the primary obligor to pay any
Debt or to comply with any agreement relating to any Debt or
obligation.
“Debt” of any Person means at
any date, without duplication, (i) all obligations of such Person for borrowed
money, (ii) all obligations of such Person evidenced by bonds, debentures,
notes, or other similar instruments issued by such Person, (iii) all obligations
of such Person as lessee which (y) are capitalized in accordance with GAAP or
(z) arise pursuant to sale-leaseback transactions, (iv) all reimbursement
obligations of such Person in respect of letters of credit or other similar
instruments, (v) all Debt of others secured by a Lien on any asset of such
Person, whether or not such Debt is otherwise an obligation of such Person and
(vi) all Debt of others guaranteed by such Person.
“Exchange Act” means the
Securities Exchange Act of 1934, as amended.
“GAAP” means U.S. generally
accepted accounting principles.
“Investment Amount” means,
with respect to each Investor, the investment amount indicated below such
Investor’s signature page to this Agreement, which investment amount shall be at
least $50,000 (unless reduced in the sole discretion of the Company) and shall
be in increments of $50,000 (unless reduced in the sole discretion of the
Company).
“Lien” means any lien, charge,
encumbrance, security interest, right of first refusal or other restrictions of
any kind.
“Material Adverse
Effect” means any of (i) a material and adverse effect on the legality,
validity or enforceability of any Transaction Document, (ii) a material and
adverse effect on the results of operations, assets, prospects, business or
condition (financial or otherwise) of the Company or (iii) a material and
adverse impairment to the Company's ability to timely perform its obligations
under any Transaction Document; provided, however,
that any effect to the extent resulting from changes in general economic,
regulatory, legal or political conditions or changes generally affecting the
securities or financial markets, or those generally effecting the software,
payment services or stored value card industries in which the Company operates,
shall not constitute, in and of itself or themselves and shall not be taken into
account in determining whether there has been or will be, a Material Adverse
Effect.
“New York Courts” means the
state and federal courts sitting in the City, County and State of New
York.
“Notes” means the 12% senior
secured convertible notes issuable by the Company to the Investors at Closing in
the Form of Exhibit
A.
“Offering” means the offering
contemplated by the Transaction Documents.
“Permitted Liens”
means: (a) Liens for taxes, assessments or governmental charges not
delinquent or being contested in good faith and by appropriate proceedings and
for which adequate reserves in accordance with GAAP are maintained on the books
of the Company; (b) Liens arising out of deposits in connection with workers’
compensation, unemployment insurance, old age pensions or other social security
or retirement benefits legislation; (c) deposits or pledges to secure bids,
tenders, contracts (other than contracts for the payment of money), leases,
statutory obligations, surety and appeal bonds, and other obligations of like
nature arising in the ordinary course of business of the Company; (d) Liens
imposed by law, such as mechanics’, workers’, material mens’, carriers’ or other
like liens arising in the ordinary course of business of the Company which
secure the payment of obligations which are not past due or which are being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP are maintained on the books of the
Company or the applicable Subsidiary; (e) Liens existing on the Closing Date,
and specified on Schedule 3.1(z); (f)
purchase money security interests or Liens for the purchase of fixed assets to
be used in the business of the Company, securing solely the fixed assets so
purchased and the proceeds thereof; (g) capitalized leases which do not violate
any provision of this Agreement; (h) Liens of commercial depository
institutions, arising in the ordinary course of business, constituting a
statutory or common law right of setoff against amounts on deposit with such
institution; and (i) rights of way, zoning restrictions, easements and similar
encumbrances affecting the Company’s real property which do not materially
interfere with the use of such property.
“Person” means an individual
or corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
“Placement Agent” means
Hallmark Securities, Inc.
“Proceeding” means an action,
claim, suit, investigation or proceeding (including, without limitation, an
investigation or partial proceeding, such as a deposition), whether commenced or
threatened.
“Required Investors” means one
or more Investors representing, collectively, greater than seventy five (75%) of
the aggregate principal amount of all Notes, including any issued hereunder then
outstanding.
“Restricted Payment” means,
with respect to any Person, (a) any direct or indirect distribution, dividend or
other payment on account of any equity interest in, or shares of capital stock
or other securities of, such Person and (b) any management, consulting or other
similar fees, or any interest thereon, payable by such Person to any Affiliate
of such Person (other than the Company), or to any other Person, other than an
employee, third party consultant, finder or placement agent or other third
party; provided, however,
that Restricted Payments shall not include any arms length consulting agreements
with consultants of the Company.
“Rule 144” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.
“Securities” means the Notes,
the Warrants and the Shares.
“Securities Act” means the
Securities Act of 1933, as amended.
“Shares” means the shares of
Common Stock issuable upon conversion of the Notes (the Underlying Shares) and
exercise of the Warrants.
“Transaction Documents” means
this Agreement, the Notes and the Warrants.
“Underlying Shares” means the
Common Stock issuable upon conversion of the Notes.
“Warrants” means the Common
Stock purchase warrants, in the form of Exhibit B, issuable
to each Investor at the Closing.
ARTICLE
II.
PURCHASE
AND SALE
2.1 Closings.
(a) Subject
to the terms and conditions set forth in this Agreement, at each Closing the
Company shall issue and sell to each Investor, and each Investor shall,
severally and not jointly, purchase from the Company, the Notes and the Warrants
(collectively, the “Units”) representing such
Investor’s Investment Amount. All Closings shall take place at the
offices of, Hallmark Investments, Inc. 000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx,
Xxx Xxxx, XX 00000 or at such location or time as the parties may
agree.
(b) At each
Closing, the Company shall deliver or cause to be delivered to each Investor the
following (the “Company
Deliverables”):
(i) Notes in
the aggregate principal amount of the Investment Amount indicated below such
Investor’s name on its signature page of this Agreement, registered in the name
of such Investor;
(ii) Warrants,
registered in the name of such Investor, pursuant to which such Investor shall
have the right to acquire the number of Warrant Shares of Common Stock equal to
100% of the quotient of the principal amount of the Note issued to such Investor
in accordance with Section 2.1(b) (i) (without
regard to any exercise restrictions contained there under) divided by the
Conversion Price, as set forth in such Note, which the Conversion (of the note)
Price initially shall equal $.10 per share. For the avoidance of
doubt, assuming the current Exercise Price of $.10, the Warrant Price is $.20
per share, an Investment Amount of $50,000 would result in a Warrant being
issued for the purchase of up 500,000 Warrant Shares ($50,000/$0.10 Conversion
price) at a warrant purchase price of $.20 per share (such price subject to
adjustment as provided in the Warrant). The exercise of the associated warrants
and purchase of 500,000 shares of common stock would cost $100,000;
(iii) resolutions
of the Company authorizing the execution and delivery of the Transaction
Documents by the Company and the consummation by the Company of the Contemplated
Transactions, including, without limitation, the issuance of the Notes and the
Warrants and the reservation for issuance and issuance of Shares, duly executed
by the Board of Directors of the Company; and
(iv) a
certificate executed by a duly authorized officer of the Company certifying that
(i) all representations and warranties made by the Company and information
furnished by the Company in any schedules to this Agreement, are true and
correct in all material respects as of the Closing Date, (ii) all covenants,
agreements and obligations required by this Agreement to be performed or
complied with by the Company, prior to or at the Closing, have been performed or
complied with and (iii) the items referenced in Sections 2.1(d)(i) (iii) and
(iv) are true and correct as of the Closing Date.
(c) At each
Closing, each Investor shall deliver or cause to be delivered to the Company the
Investment Amount indicated below such Investor’s name on its signature page of
this Agreement, in United States dollars and in immediately available funds, by
wire transfer (or check) to an account designated in writing by the Company for
such purpose (the “Investor
Deliverables”).
(d) Conditions Precedent to the
Obligations of an Investor to Purchase Notes and Warrants. The
obligation of each Investor to acquire Notes and Warrants and make loans at each
Closing is subject to the satisfaction or waiver by such Investor, at or before
each Closing, of each of the following conditions:
(i) Representations and
Warranties. The representations and warranties of the Company
contained in the Transaction Documents shall be true and correct as of the date
when made and as of such Closing Date as though made on and as of such
date;
(ii) Performance. The
Company shall have performed, satisfied and complied with all covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by it at or prior to the Closing;
(iii) Officer’s
Certificate. The officer’s certificate described in Section 2.1(b) (IV)
hereof shall have been delivered;
(iv) No
Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the Contemplated Transactions;
and
(v) Company
Deliverables. The Company shall have delivered the Company
Deliverables in accordance with Section
2.1(b).
(e) Conditions Precedent to the
Obligations of the Company to sell Notes and Warrants. The
obligation of the Company to sell Notes and Warrants at each Closing is subject
to the satisfaction or waiver by the Company, at or before each Closing, of each
of the following conditions:
(i) Representations and
Warranties. The representations and warranties of each
Investor contained herein shall be true and correct as of the date when made and
as of the Closing Date as though made on and as of such date;
(ii) Performance. Each
Investor shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Investor at or
prior to the Closing;
(iii) No
Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits the consummation of any of the Contemplated Transactions;
and
(iv) Investors
Deliverables. Each Investor shall have delivered its Investor
Deliverables in accordance with Section
2.1(c).
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES
3.1 Representations and
Warranties of the Company. The Company hereby makes the
following representations and warranties to each Investor:
(a) The
Company is a corporation, duly organized, validly existing and in good standing
under the laws of the State of New York with the requisite corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. The Company is not in violation of any of the provisions
of its certificate of incorporation, by-laws or other organizational or charter
documents, each as amended through each closing date (the “Internal
Documents”). The Company is duly qualified to conduct
business and is in good standing as a foreign corporation 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, would not result in a Material Adverse Effect. The
term “knowledge” as used herein with respect to the Company” shall mean the
knowledge of the Company’s chief executive officer, Xxxxxx Xxxxxxx, including,
but not limited to, items which a reasonable person in the same situation would
be aware of. The Company does not have any subsidiaries.
(b) The
Company has the requisite corporate power and authority to enter into the
Transaction Documents and to consummate the Contemplated Transactions and
otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of each of the Transaction Documents by the Company and the
consummation by it of the Contemplated Transactions have been duly authorized by
all necessary action on the part of the Company and no further corporate or
shareholder action is required in connection therewith. Each Transaction
Document has been (or upon delivery will have been) duly executed by the Company
and, when delivered in accordance with the terms hereof, will constitute the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally.
(c) The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the Contemplated Transactions, do not and
will not (i) conflict with or violate any provision of the Company’s Internal
Documents, (ii) conflict with, or constitute a default (or an event that 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 (with or
without notice, lapse of time or both) under any material agreement, and/or
under any shareholder agreement, security agreement, credit agreement or
facility or other instrument evidencing a Company debt or other securities of
the Company, to which the Company is a party or of which it is an issuer
(collectively, the “Material
Securities Agreements”) or (iii) result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company is subject.
(d) The
Company is not required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or any Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents and the Contemplated Transactions, other than the filing
with the Commission of a Form D and applicable Blue Sky filings.
(e) The
Company possesses all licenses, certificates, authorizations and permits issued
by the appropriate federal, state, local or foreign regulatory authorities
necessary to conduct their respective businesses, except where the failure to
possess such permits would not have or reasonably be expected to result in a
Material Adverse Effect (“Material
Permits”). The Company has not received any notice of any
Proceeding relating to the revocation or modification of any Material
Permit.
(f) The
Company owns its property and assets free and clear of all mortgages, liens,
loans, pledges, security interests, claims, equitable interests, charges, and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company’s ownership or use
of such property or assets. With respect to the property and assets it leases,
the Company is in compliance in all material respects with such leases and, to
its knowledge, holds a valid leasehold interest free of any liens, claims, or
encumbrances.
(g) The
Company owns, or possesses adequate rights or licenses to use all trademarks,
trade names, service marks, service xxxx, service names, patents, patent rights,
copyrights, inventions, trade secrets and other intellectual property
(collectively, the “IP
Rights”)
necessary to conduct its business as now conducted, other than any IP Rights the
lack of which would not reasonably be expected to have a Material Adverse
Effect. The Company does not have any knowledge of any infringement
by the Company of any IP Rights of others, and no claim, action or proceeding
has been made or brought against, or to the Company's knowledge, has been
threatened against, the Company regarding any IP Rights, except where such
infringement, claim, action or proceeding would not reasonably be expected to
have either individually or in the aggregate a Material Adverse Effect. The
Company is not aware that any of its employees, officers, or consultants are
obligated under any contract (including licenses, covenants, or commitments of
any nature) or other agreement, or subject to any judgment, decree, or order of
any court or administrative agency, that would interfere with the use of such
employee’s, officer’s, or consultant’s commercially reasonable efforts to
promote the interests of the Company or that would conflict with the Company’s
business as conducted. Neither the execution nor delivery of the
Transaction Documents, the performance of the Contemplated Transactions, nor the
carrying on of the Company’s business by the employees of the Company, as is
presently conducted, nor the conduct of the Company’s business, will, to the
Company’s knowledge, conflict with or result in a breach of the terms,
conditions, or provisions of, or constitute a default under, any contract,
covenant, or instrument under which any of such employees, officers or
consultants are now obligated.
(h) All
of the Securities have been duly and validly authorized and, when issued,
delivered and sold in accordance with this Agreement and the applicable
Transaction Documents against full payment therefor, will be duly and validly
issued, fully paid, and nonassessable, free and clear of all liens, pledges and
other encumbrances, and not subject to any preemptive or other similar
rights.
(i) There is no
Proceeding pending or, to the knowledge of the Company, currently threatened
against or affecting the Company, or any of its respective properties which is
reasonably likely to affect or challenge the legality, validity or
enforceability of any of the Transaction Documents, the Contemplated
Transactions and/or the Securities offered thereunder.
(j) Since
April 1, 2009, there (i) has been no event, occurrence or development that has
had a Material Adverse Effect, (ii) the Company has not incurred any material
liabilities other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company's financial statements pursuant to
GAAP, (iii) the Company has not altered its method of accounting or the identity
of its auditors, (iv) the Company has not declared or made payment or
distribution of any dividend or distribution of cash or other property to its
holders of Common Stock (or other securities) or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock (or other
securities), and (v) the Company has not issued any equity securities to any
officer, director or Affiliate, except pursuant to the Company’s stock option
plan.
(k) Insurance. The
Company is insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as are prudent and customary in the
businesses in which the Company is engaged. The Company has no 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 on terms consistent with
market for the Company’s and such respective lines of business.
(l) Transactions with Affiliates
and Employees. 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 (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.
(m) The
Company is not required to pay any brokerage or finder’s fees or commissions to
any person including, but not limited to, any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other person
with respect to the Offering, other than the Placement Agent.
(n) Assuming
the accuracy of the Investor’s representations and warranties set forth in this
Agreement, no registration under the Securities Act is required for the offer
and sale of the Securities by the Company to the Investor as contemplated
hereby.
(o) The
Company is not, and is not an Affiliate of, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(p) As
of the Closing Date, other than as set forth in Schedule 3.1(p), the
Company has no Debt. Schedule 3.1(p) sets
forth all Debt, the holders thereof, the terms and whether such Debt is secured
by a Lien or otherwise.
(q) As
of the date of this Agreement, except as set forth on Schedule 3.1(q), no
indebtedness of the Company is senior to and or pari passu to the Notes in right
of payment or otherwise, including without limitation, with respect to interest
or upon liquidation or dissolution.
(r) Neither
the Company, nor, to the knowledge of the Company, any of its Affiliates nor any
Person acting on the Company’s 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 any of the
Units.
(s) Neither
the Company, nor, to the knowledge of the Company, any of their Affiliates nor
any Person acting on the Company’s behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would require registration of any of the Securities
under the Securities Act or cause the Offering to be integrated with prior
offerings by the Company for purposes of the Securities Act or any applicable
stockholder approval provisions, including without limitation, under the rules
and regulations of any exchange or automated quotation system on which any of
the securities of the Company are listed or designated.
(t) The
Company has made or filed all federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject, except when the failure to do so would not have a Material Adverse
Effect, 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 otherwise due and payable, except those being contested
in good faith and has set aside on its books reserves in accordance with GAAP
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. The Company has not executed a waiver with respect to the
statute of limitations relating to the assessment or collection of any foreign,
federal, state or local tax. To the Company’s knowledge, none of the
Company’s tax returns are presently being audited by any taxing
authority.
(u) Neither
the sale of any of any Securities by the Company hereunder nor its use of the
proceeds thereof will violate the Trading with the Enemy Act, as amended, or any
of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto. Without limiting the foregoing,
the Company is not (a) a person whose property or interests in property are
blocked pursuant to Section 1 of Executive Order 13224 of September 23, 2001
Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten
to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) or (b) to the
Company’s knowledge, engaged in any dealings or transactions, or is otherwise
associated, with any such Person. The Company is in compliance with the
anti-money laundering requirements of the USA Patriot Act of 2001 (signed into
law October 26, 2001).
Each
Investor acknowledges and agrees that the Company has not made or makes any
representations or warranties with respect to the Contemplated Transactions
other than those specifically set forth in this Section
3.1.
3.2 Representations and
Warranties of the Investors. Each Investor hereby, for itself
and for no other Investor, represents and warrants to the Company as
follows:
(a) Organization;
Authority. Such Investor (if other than an individual) is an
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the Contemplated
Transactions and otherwise to carry out its obligations thereunder. The
execution, delivery and performance by such Investor of the Contemplated
Transactions have been duly authorized by all necessary corporate or, if such
Investor is not a corporation, such partnership, limited liability company or
other applicable like action, on the part of such Investor. This
Agreement has been duly executed by such Investor, and when delivered by such
Investor in accordance with terms hereof, will constitute the valid and legally
binding obligation of such Investor, enforceable against it in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors’ rights and
remedies or by other equitable principles of general application.
(b) Investment
Intent. Such Investor is acquiring the Securities as principal
for its own account for investment purposes only and not with a view to or for
distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Investor's right at all times to sell or otherwise
dispose of all or any part of such Securities in compliance with applicable
federal and state securities laws.
(c) Investor
Status. The Investor is an “accredited investor” as defined in
Rule 501(a) under the Securities Act.
(d) General
Solicitation. Such Investor is not purchasing the Securities
as a result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar media
or broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.
(e) Access to
Information. Such Investor acknowledges that it has been
afforded (i) the opportunity to ask such questions as it has deemed necessary
of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Securities offered hereby and the
merits and risks of investing in the Securities; (ii) access to information
about the Company and its financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that
is necessary to make an informed investment decision with respect to the
investment.
(f) Independent Investment
Decision. Such Investor has independently evaluated the merits
of its decision to purchase Securities pursuant to this Agreement, and such
Investor confirms that it has not relied on the advice of any other Investor’s
business and/or legal counsel in making such decision.
The
Company acknowledges and agrees that no Investor has made or makes any
representations or warranties with respect to the Contemplated Transactions
other than those specifically set forth in this Section
3.2.
ARTICLE
IV.
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The
Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of the Securities
other than pursuant to an effective registration statement, to the Company, to
an Affiliate of an Investor or in connection with a pledge as contemplated in
Section 4.1(b),
the Company may require the transferor thereof to provide to the Company an
opinion of counsel selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the
Securities Act.
(b) Certificates
evidencing the Securities will contain the following legend, until such time as
they are not required:
[NEITHER
THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION OR EXERCISE OF
THESE SECURITIES HAVE BEEN REGISTERED] [THESE SECURITIES HAVE NOT BEEN
REGISTERED] WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
The
Company acknowledges and agrees that an Investor may from time to time pledge,
and/or grant a security interest in some or all of the Securities pursuant to a
bona fide margin agreement in connection with a bona fide margin account and, if
required under the terms of such agreement or account, such Investor may
transfer pledged or secured Securities to the pledgees or secured
parties. Such a pledge or transfer would not be subject to approval
or consent of the Company and no legal opinion of legal counsel to the pledgee,
secured party or pledgor shall be required in connection with the pledge, but
such legal opinion may be required in connection with a subsequent transfer
following default by the Investor transferee of the pledge. No notice
shall be required of such pledge.
4.2 Integration. The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities in a
manner that would require the registration under the Securities Act of the sale
of the Securities to the Investors, or that would be integrated with the offer
or sale of the Securities.
4.3 Reservation of
Shares. The Company shall maintain a reserve from its duly
authorized shares of Common Stock to comply with its conversion and exercise
obligations under the Notes and Warrants, respectively. If on any
date the Company would be, if notice of conversion were to be delivered on such
date, precluded from issuing the number of Shares, issuable upon conversion and
exercise in full of the Notes and Warrants, respectively, due to the
unavailability of a sufficient number of authorized but unissued or reserved
shares of Common Stock, then the Board of Directors of the Company (the “Board”) shall
promptly prepare and mail to the stockholders of the Company proxy materials or
other applicable materials requesting authorization to amend the Company’s
certificate of incorporation or other organizational document to increase the
number of shares of Common Stock which the Company is authorized to issue so as
to provide enough shares of Common Stock for the full issuance of all of the
Shares. In connection therewith, the Board shall (a) adopt proper
resolutions authorizing such increase, (b) recommend to promptly and
duly obtain stockholder approval to carry out such resolutions (and hold a
special meeting of the stockholders as soon as practicable, but in any event not
later than the 60th day after delivery of the proxy or other applicable
materials relating to such meeting) and (c) within five Business Days of
obtaining such stockholder authorization, file an appropriate amendment to the
Company’s certificate of incorporation or other organizational document to
evidence such increase.
4.4 Use of
Proceeds. The Company will use the net proceeds from the sale
of the Securities hereunder for working capital purposes and not to redeem any
Common Stock.
ARTICLE
V.
NEGATIVE
COVENANTS
The
Company hereby agrees that, from and after the date hereof until the date that
the Notes have either been repaid in their entirety and/or converted entirely
into Underlying Shares, the Company shall be bound according to the restrictions
set forth in each of the following negative covenants, unless any such
restriction shall have been expressly waived in writing by the Required
Investors.
5.1 Restrictions on Certain
Amendments. The Company will not amend the rights and
privileges granted under the Notes, to adversely affect the rights or privileges
granted under the Notes.
5.2 Restricted
Payment. Other than with respect to payments set forth on
Schedule 5.2,
the Company shall not make any Restricted Payment.
5.3 Debt. The
Company shall not, without obtaining the prior written consent of the Required
Investors, which shall not be unreasonably withheld, create, incur, assume,
become or be liable in any manner in respect of, or suffer to exist, any Debt,
except (a) Debt in existence on the date hereof (which may not be increased, or
if repaid, in whole or in part, loaned again), as shown on Schedule 3.1(p), (b)
trade payables incurred and paid in the ordinary course of business, (c)
Contingent Liabilities in existence on the date hereof, as shown on Schedule 5.3(c), (d)
Contingent Liabilities resulting from the endorsement of negotiable instruments
for collection in the ordinary course of business or (e) securities sold in the
Follow-On-Offering (collectively (a) through (e) shall be referred to as “Permitted
Indebtedness”).
5.4 Liens. The
Company shall not create or suffer to exist any Lien upon any of its properties,
except Permitted Liens.
5.5 Amendment of Organizational
Documents. The Company shall not permit any amendment to its
certificate of incorporation so as to directly or indirectly adversely affect
the rights or privileges granted under the Notes and/or Warrants.
5.6 Business. The
Company shall not change the nature of its business as now
conducted.
5.7 Transactions with
Affiliates. The Company shall not, directly or indirectly, pay
any funds to or for the account of, make any investment (whether by acquisition
of stock or indebtedness, by loan, advance, transfer of property, guarantee or
other agreement to pay, purchase or service, directly or indirectly, any Debt,
or otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect any transaction in
connection with any joint enterprise or other joint arrangement with, any
Affiliate, except, on terms no less favorable than terms that could be obtained
by the Company from a Person that is not an Affiliate of the Company upon
negotiation at arms' length, as determined in good faith by the Board; provided, that no
determination of the Board shall be required with respect to any such
transactions entered into in the ordinary course of business.
5.8 Limitation on
Restrictions. The Company shall not enter into, or suffer to
exist, any agreement with any Person which prohibits or limits its ability to
pay Debt owed to the Investors.
5.9 Payment of Cash
Dividend. The Company agrees, so long as any of the Notes are
outstanding, not to declare, pay or make any provision for any cash dividend or
distribution with respect to the Common Stock (or other capital stock), without
first obtaining the approval of the Required Investors.
ARTICLE
VI.
MISCELLANEOUS
6.1 Fees and
Expenses. The Company shall pay its and the Placement Agent’s
fees and expenses of its advisers, counsel, accountants and other experts, if
any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of the Transaction
Documents. The Company shall pay all stamp and other taxes and duties
levied in connection with the sale of the Notes.
6.2 Entire
Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements,
understandings, discussions and representations, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.
6.3 Notices. Any
and all notices or other communications or deliveries hereunder (including
without limitation any Conversion Notice) shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 5:30 p.m. (New York City time) on a Business
Day, (ii) the next Business Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Business Day or later than 5:30 p.m. (New
York City time) on any Business Day, (iii) the Business Day following the date
of mailing, if sent by nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required to be
given. The address for such notices and communications shall be as
follows:
|
If
to the Company:
|
INVO Bioscience, Inc. |
| 000 Xxxxxxxx Xxxxxx, Xxxxx 000X | |
| Xxxxxxx, XX 00000 | |
| Attention: Chief Financial Officer |
With a
copy to (which shall not constitute notice):
| Xxxxx Xxxxxxx, Esq. | |
| Xxxxxxx Xxxxxx Xxxxxx Xxxxx & Xxxxx PA | |
| 00000 Xxxxxxxxx Xxxx, 0xx Xxxxx | |
| Xxxxxxxxx, XX 00000 | |
| Fax: 000-000-0000 |
|
If
to the Placement Agent:
|
Hallmark Investments, Inc. |
| 000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx | |
| Xxx Xxxx, Xxx Xxxx 00000 | |
| Attention: Xxxxxx Xxxxxx | |
|
Fax:
|
000-000-0000 |
|
If
to an Investor:
|
To
the address set forth under such Investor's
name
|
|
|
on
the signature pages hereof;
|
or such
other address as may be designated in writing hereafter, in the same manner, by
such Person.
6.4
Amendments; Waivers; No
Additional Consideration. No provision of this Agreement may
be waived or amended except in a written instrument signed by the Company and
the Required Investors except as set forth below and except that the conditions
precedent set forth in Section 2.1(b) and
Section 2.2(b)
may only be waived by each Investor to be bound by such waiver. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such
right. No consideration shall be offered or paid to any Investor to
amend or consent to a waiver or modification of any provision of any Transaction
Document unless the same consideration is also offered to all Investors who then
hold Notes.
6.5 Construction. The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. 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. This Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.
6.6 Successors and
Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns if expressly
permitted pursuant to and in accordance with this Agreement. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investors. Any Investor may assign any
or all of its rights under this Agreement to any Person to whom such Investor
assigns or transfers any Notes, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the “Investors,” and completes all necessary documentation required by
the Company to ensure compliance with all federal and state securities
laws.
6.7 No Third-Party
Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person.
6.8 Governing
Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced, exclusively and solely, in accordance with the internal
laws of the State of New York, without regard to the principles of conflicts of
law thereof. Each party agrees that all Proceedings concerning the
interpretations, enforcement and defense of the Transaction Documents, and/or
the Contemplated Transactions (whether brought against a party hereto or its
respective Affiliates, employees or agents) shall be commenced exclusively in
the New York Courts. Each party hereto hereby irrevocably submits to
the exclusive and sole jurisdiction of the New York Courts for the adjudication
of any dispute hereunder or in connection herewith or with any Contemplated
Transactions (including with respect to the enforcement of the any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto
hereby irrevocably waives personal service of process and consents to process
being served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for 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
hereto hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any Proceeding arising out of or
relating to this Agreement or the Contemplated Transactions. If
either party shall commence a Proceeding in connection with a Transaction
Document, then the prevailing party in such Proceeding shall be reimbursed by
the other party for its reasonable attorneys’ fees and other costs and expenses
incurred with the investigation, preparation and prosecution of such
Proceeding.
6.9 Survival. The
representations, warranties, agreements and covenants contained herein shall
survive the Closing and the delivery of the Securities for a period of one (1)
year.
6.10 Execution. This
Agreement may be executed in two or more counterparts, all of which when taken
together 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, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
6.11 Severability. If
any provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and the
parties will attempt to agree upon a valid and enforceable provision that is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
6.12 Replacement of
Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity (which shall not include a surety bond), if requested. The
applicants for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs associated with the issuance of such
replacement Securities. If a replacement certificate or instrument
evidencing any Securities is requested due to a mutilation thereof, the Company
may require delivery of such mutilated certificate or instrument as a condition
precedent to any issuance of a replacement.
6.13 Remedies. In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, nothing contained herein shall limit the
right of each of the Investors and the Company to seek specific performance
under the Transaction Documents. The parties agree that monetary
damages may not be adequate compensation for any loss incurred by reason of any
breach of obligations described in the foregoing sentence and hereby agrees to
waive in any action for specific performance of any such obligation the defense
that a remedy at law would be adequate.
6.14 Payment Set
Aside. To the extent that the Company makes a payment or
payments to any Investor pursuant to any Transaction Document or an Investor
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
6.15 Independent Nature of
Investors' Obligations and Rights. The obligations of each
Investor under any Transaction Document are several and not joint with the
obligations of any other Investor, and no Investor shall be responsible in any
way for the performance of the obligations of any other Investor under any
Transaction Document. The decision of each Investor to purchase
Securities pursuant to the Transaction Documents has been made by such Investor
independently of any other Investor. Nothing contained herein or in
any Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the Contemplated Transactions. Each Investor
acknowledges that no other Investor has acted as agent for such Investor in
connection with making its investment hereunder and that no Investor will be
acting as agent of such Investor in connection with monitoring its investment in
the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect
and enforce its rights, including without limitation the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of
the Investors has been provided with the same Transaction Documents for the
purpose of closing a transaction with multiple Investors and not because it was
required or requested to do so by any Investor.
6.16 Limitation of
Liability. Notwithstanding anything herein to the contrary,
the Company acknowledges and agrees that the liability of an Investor arising
directly or indirectly, under any Transaction Document of any and every nature
whatsoever shall be satisfied solely out of the assets of such Investor, and
that no trustee, officer, other investment vehicle or any other Affiliate of
such Investor or any investor, shareholder or holder of shares of beneficial
interest of such a Investor shall be personally liable for any liabilities of
such Investor.
6.17 Notice of Certain
Events. The Company shall provide each holder of Notes with
express written notice of any of the following events/items no later than five
(5) Business Days after the occurrence of any such event/item in the manner set
forth herein:
(i) any
Event of Default pursuant to the Notes;
(ii) any
event of default (or an event that with notice and/or the lapse of time and/or
both, would constitute an event of default) under or pursuant to any Material
Securities Agreement or Material Debt Agreement (as defined in Notes), or any
other material agreement of the Company; and
(iii) a
Bankruptcy Event.
[IN
WITNESS WHEREOF, THE PARTIES HERETO HAVE CAUSED THIS PURCHASE AGREEMENT TO BE
DULY EXECUTED BY THEIR RESPECTIVE AUTHORIZED SIGNATORIES AS OF THE DATE FIRST
INDICATED ABOVE.
By:_______________________________________
Name:
Xxxxxxxx X. Xxxxxxx
Title:
Chief Executive Officer
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE
PAGES FOR INVESTORS FOLLOW]
IN
WITNESS WHEREOF, the parties hereto have caused this Purchase Agreement to be
duly executed by their respective authorized signatories as of the date first
indicated above.
NAME OF INVESTOR
____________
By:
Name:
Title:
Investment Amount: $
___,000
Tax ID
No.:
ADDRESS FOR NOTICE
c/o:
Street:
City/State/Zip:
Attention:
Tel:
Fax:
DELIVERY INSTRUCTIONS
(if different from above)
c/o:
Street:
City/State/Zip:
Attention:
Tel:
SCHEDULE
3.1 (p)
OUTSTANDING
INDEDEBTEDNESS
Creditor/Debt
Holder Principal
Amount
SBA
Century Bank Line of
Credit
$50,000
Xxxxxx
Xxxxxx
Note $96,000
Xxxxxxxx
Xxxxxxx
Notes
$88,000
\
SCHEDULE
3.1 (q)
OUTSTANDING
SENIOR INDEDEBTEDNESS
Creditor/Debt
Holder Principal
Amount
SBA
Century Bank Line of
Credit
$50,000
SCHEDULE
5.3
CONTINGENT
LIABILITIES
NONE
