UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported):
July 15, 2009
INVO
BIOSCIENCE, INC.
(Exact
name of registrant as specified in its charter)
Nevada
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333-147330
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20-4036208
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(State
or other jurisdiction of
incorporation)
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(Commission
File
Number)
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(I.R.S.
Employer
Identification
No.)
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100
Cummings Center, Suite 421E, Beverly, MA
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01915
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(Address
of principal executive offices)
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(Zip
Code)
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(978) 878-9505
(Registrant’s
telephone number, including area code)
Not
Applicable
(Former
Name or Former Address, if Changed Since Last Report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
FR 240.13e-4(c))
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Item
1.01.
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Entry
into a Material Definitive
Agreement.
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The
information set forth under Item 2.03 of this Current Report on Form 8-K is
hereby incorporated by reference into this Item 1.01.
Item
2.03.
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Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance
Sheet Arrangement of a Registrant.
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On June
5, 2009, INVO Bioscience, Inc. (“we,” the “Company” or “IVOB”) commenced a
private placement offering of convertible promissory notes (the “Notes”) for an
aggregate principal amount of up to $500,000 (the “Bridge
Offering”). On July 15, 2009, IVOB consummated the initial closing of
the Bridge Offering in the total principal amount of $100,000 to one accredited
investor (the “Initial Investor”). IVOB expects to consummate additional
closings for the Bridge Offering over the next 60 to 90 days, although no
assurances can be made that the remaining amount of the Bridge Offering will be
consummated.
Each Note
bears interest, payable in shares of common stock, at a rate equal to 9-12% per
annum from the date of issuance of the Note until paid in full on the Maturity
Date (defined below). The Initial Investor’s Note has a 12% interest rate. All
outstanding principal and accrued interest under each Note is payable on the
first to occur of (i) one year following the original issue date (as defined
below), or (ii) the follow-on financing of at least $2,500,000 (the “Maturity
Date”). IVOB can pre-pay the Note at any time without penalty or premium. The
Notes are secured and carry detachable Common Stock purchase
warrants. The Notes rank junior to the Company’s SBA $50,000 Century
Bank Line of Credit Loan and shall rank senior in all respects to all other
existing and future indebtedness of the Company.
The Notes
are convertible into IVOB Common Stock (“Common Stock”) at a conversion price of
$0.10 per common stock share. The Investor has the option to convert all or any
portion of the principal amount of the Note outstanding at any time, together
with any accrued and unpaid interest hereunder into shares of Common Stock at
the conversion price. Additionally under the Purchase Agreement (the “Purchase
Agreement”), effective as of July 15, 2009, by and among IVOB and the Initial
Investor, as additional consideration for the investment in the Notes, IVOB
issued a warrant to purchase the number of shares of Common Stock
equal to 100% of the quotient of the principal amount of the Note issued to such
Investor divided by the Conversion Price, as set forth in such Note, which the
Conversion (of the note) Price initially shall equal $0.10 per share and the
exercise price of the Warrants shall equal $0.20 per share. The
Purchase Agreement also includes certain negative covenants of the Company,
including, without limitation, limitations on: incurring additional
indebtedness and liens, transactions with affiliates and payment of
dividends.
The
Company engaged Hallmark Investments, Inc. (“Hallmark”) to act as its placement
agent on an exclusive basis in connection with this private
placement. Hallmark, if successful in assisting IVOB in securing the
Bridge Offering will be compensated the following placement fee; a cash payment
equal to ten percent (10%) of the gross proceeds raised and five (5) year Common
Stock Purchase Warrants equal to ten percent (10%) of the number of shares of
common stock underlying any debt placed by Hallmark, as more fully described in
the Offering Document. The Company also agreed to pay the expenses of Hallmark.
The Common Stock Purchase Warrants will have features identical to the Warrants
issued to the investors.
The
description above summarizes the material terms of the Note, Purchase Agreement,
Warrant Purchase Agreement and Hallmark Investments Agreement. The description
above is qualified in its entirety by the text of the forms of the Agreements
filed as exhibits to this Current Report on Form 8-K as Exhibits 10.1, 10.2,
10.3 and 10.4, respectively, and are incorporated into this Current Report on
Form 8-K by reference.
The
securities sold in this transaction have not been registered under the
Securities Act of 1933, as amended (the “Act”) and may not be offered or sold in
the United States in the absence of an effective registration statement or
exemption from the registration requirements under the Act. IVOB believes that
the issuance of the foregoing securities was exempt from registration under
Section 4(2) of the Act as transactions not involving a public
offering. The facts relied upon to claim the exemption include: (i)
the purchaser represented that he purchased shares from the Company for
investment and not with a view to distribution to the public; (ii) the
certificate issued for unregistered securities contains a legend stating that
the securities have not been registered under the Securities Act and setting
forth the restrictions on the transferability and the sale of the securities;
(iii) the purchaser represented that he is an accredited investor and
sophisticated and is familiar with our business activities; and (iv) the
purchaser was given full and complete access to any corporate information
requested by them.
Item
3.02.
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Unregistered
Sales of Equity Securities.
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The
information set forth under Item 2.03 of this Current Report on Form 8-K is
hereby incorporated by reference into this Item 3.02.
Item
9.01.
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Financial
Statements and Exhibits
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(d)
Exhibits
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
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INVO
Bioscience, Inc.
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Date:
July 17, 2009
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By:
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/s/ Robert
Bowdring
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Robert
Bowdring
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Chief
Financial Officer
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Exhibit
Index
Exhibit
10.1
NEITHER
THIS NOTE NOR THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE 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.
No. HM
-1
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Principal
Amount $
100,000
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Original
Issue Date: July __,
2009
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INVO
BIOSCIENCE, INC.
12%
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
FOR VALUE
RECEIVED, the Company promises to pay to the order of ______or its registered
assigns (the
“Investor”
), in United States
Dollars, the principal sum of $100,000, on the first to occur of (i)
one (1) year following the Original Issue Date (as defined below), or (ii) the
follow on financing of at least $2,500,000 (as defined below), (in each case,
the
“Maturity Date”
),
and to pay interest to the Investor on the principal amount of this Note
outstanding in accordance with the provisions hereof. All holders of
Notes are referred to collectively, as the
“Investors.”
The
Company shall have the right to prepay this Note, in part or in whole, at any
time and from time to time, without any prepayment penalty or other
fee. In the event that the Maturity Date occurs on a date that is not
a Business Day (as defined below), then all payments due on such date shall be
payable on the next succeeding Business Day.
So long
as this Note remains outstanding, it is subject to the following additional
provisions:
1.
Definitions
. In
addition to the terms defined elsewhere in this Note: (a) capitalized terms that
are used but not otherwise defined herein have the meanings given to such terms
in the Purchase Agreement, dated as of July __, 2009, among the Company and the
Investors identified therein (the
“Purchase Agreement”
), and (b)
the following terms have the meanings indicated below:
“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.
“Common Stock”
means the
common stock of the Company, $0.0001 par value per share, and any securities
into which such common stock may hereafter be reclassified.
“Conversion Date”
means the
date a Conversion Notice together with the Conversion Schedule is actually
received by the Company in proper and completed form in accordance with
Section 6(a)
of the
Note.
“Conversion Notice”
means a
written notice in the form attached hereto as
Exhibit
A
.
“Conversion Price”
means $.10
per share.
“Default”
means any event or
condition which constitutes an Event of Default or that upon notice, lapse of
time or both would, unless cured or waived, become an Event of
Default.
“Event of
Default”
means any one of the following events (whatever the reason and
whether it shall be voluntary or involuntary or effected by operation of law or
pursuant to any judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental body):
(i)
any
default in the payment, when the same becomes due and payable, of principal
under or interest in respect of this Note;
(ii)
the
Company experiences, an event of default (which has not been cured in accordance
with the terms thereof and is continuing) and acceleration of payment
obligations under, any currently existing or hereafter arising material
agreement, debenture (other than a Note) or any mortgage, credit agreement or
other facility, indenture agreement, factoring agreement or other instrument
under which there may be issued, or by which there may be secured or evidenced,
any Indebtedness or under any long term leasing or factoring arrangement, if the
aggregate amount of the obligations and liabilities of the Company under the
Indebtedness in such default exceeds $100,000 (each of the foregoing,
a
“Material Debt
Agreement”
);
(iii) the
occurrence of a Bankruptcy Event; or
(iv) any
breach of any material covenant, agreement or representation and/or warranty in
any of the Transaction Documents (as described in the Purchase
Agreement)
“Follow-On-Financing”
shall
mean the offer and sale of securities of the Company.
“Fundamental Transaction”
means the occurrence of any of the following in one or a series of related
transactions: (i) the Company effects any merger or consolidation of the Company
with or into another Person (other than a reincorporation and/or similar
transaction), (ii) the Company effects any sale of all or substantially all its
assets, (it being understood that a sale (but not a license (unless the license
results in the Company business and/or revenues resulting substantially from
licensing revenues)) of any patents related to the Company’s technology shall
constitute a Fundamental Transaction) .or (iii) any Person acquires at least
50.01% of the issued and outstanding voting stock of the Company.
“Indebtedness”
of any Person
shall mean, without duplication, (a) all obligations of such Person for borrowed
money or with respect to deposits or advances of any kind, (b) all
obligations of such Person evidenced by bonds, Notes, notes or similar
instruments, (c) all obligations of such Person upon which interest charges are
customarily paid, (d) all obligations of such Person under conditional sale or
other title retention agreements relating to property or assets purchased by
such Person, (e) all obligations of such Person issued or assumed as the
deferred purchase price of property or services (other than unsecured accounts
payable incurred in the ordinary course of business and no more than ninety (90)
days past the date of the invoice therefor), (f) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the obligations secured thereby have
been assumed, (g) all obligations of such Person in respect of interest rate
protection agreements, foreign currency exchange agreements or other interest or
exchange rate hedging arrangements that exceed amounts necessary to hedge the
Company’s cross-currency exposure, (h) all obligations of such Person as an
account party in respect of letters of credit and bankers’ acceptances, and (i)
the Indebtedness of any partnership in which such Person is a general
partner.
“Original Issue Date”
has the
meaning set forth on the face of this Note.
“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.
“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.
“Underlying Shares”
means the
Common Stock issuable upon conversion of the Notes.
“Warrants”
means the Common
Stock purchase warrants issued pursuant to the Purchase Agreement.
“Warrant Shares”
means the
shares of Common Stock issuable upon exercise of the Warrants.
2.
Interest
.
(a) The
Company shall pay interest in cash in United States dollars to the Investor on
the aggregate unconverted and then outstanding principal amount of this Note at
the rate of twelve percent (12%) per annum. All interest shall accrue
and be payable on the maturity date, the interest will be payable in common
stock shares. Interest shall be compounding and shall be calculated
on the basis of a 360-day year for the actual number of days elapsed and shall
accrue daily commencing on the Original Issue Date.
(b)
Maximum Rate
. In the
event that it is determined that, under the laws relating to usury applicable to
the Company or the indebtedness evidenced by this Note (the
“Applicable Usury Laws”
), the
interest charges and fees payable by the Company in connection herewith or in
connection with any other document or instrument executed and delivered in
connection herewith cause the effective interest rate applicable to the
indebtedness evidenced by this Note to exceed the maximum rate allowed by law
(the
“Maximum Rate”
),
then such interest shall be recalculated for the period in question and any
excess over the Maximum Rate paid with respect to such period shall be credited,
without further agreement or notice, to the principal amount outstanding
hereunder to reduce said balance by such amount with the same force and effect
as though the Company had specifically designated such extra sums to be so
applied to principal and the Investor had agreed to accept such extra payment(s)
as a premium-free prepayment. All such deemed prepayments shall be applied to
the principal balance payable at maturity. In no event shall any agreed-to or
actual exaction as consideration for this Note exceed the limits imposed or
provided by Applicable Usury Laws in the jurisdiction in which the Company is
resident applicable to the use or detention of money or to forbearance in
seeking its collection in the jurisdiction in which the Company is resident and
any funds received in excess of such limits shall be so applied as provided
herein or held in trust.
3.
Registration of
Notes
. The Company shall register the Note upon records
maintained by the Company for that purpose (the
“Note Register”
) in the name
of each record Investor thereof from time to time. The Company may deem and
treat the registered Investor of this Note as the absolute owner hereof for the
purpose of any conversion hereof or any payment of interest hereon, and for all
other purposes, absent actual notice to the contrary from such record
Investor.
4.
Registration of Transfers
and Exchanges
. The Company shall register the transfer of any
portion of this Note in the Note Register upon surrender of this Note to the
Company at its address for notice set forth herein. Upon any such registration
or transfer, a new Note, in substantially the form of this Note (any such new
note, a
“New Note”
),
evidencing the portion of this Note so transferred shall be issued to the
transferee and a New Note evidencing the remaining portion of this Note not so
transferred, if any, shall be issued to the transferring Investor. The
acceptance of the New Note by the transferee thereof shall be deemed the
acceptance by such transferee of all of the rights and obligations of a holder
of a Note. The Company agrees that its prior consent is not required
for the transfer of any portion of this Note;
provided
,
however
, that the
Company shall be entitled to reasonable written assurance, including an opinion
of counsel reasonably acceptable to the Company that such transfer complies with
applicable federal and state securities laws. This Note is
exchangeable for an equal aggregate principal amount of Note of different
authorized denominations, as requested by the Investor surrendering the same. No
service charge or other fee will be imposed in connection with any such
registration of exchange.
5.
Conversion
. All
or any portion of the principal amount of this Note outstanding at any time,
together with any accrued and unpaid interest hereunder, shall be convertible
into shares of Common Stock at the Conversion Price, at the option of the
Investor. The Investor may effect conversions under this
Section 5
by
delivering to the Company a Conversion Notice together with a schedule in the
form of
Schedule
1
attached hereto (the
“Conversion
Schedule”
). If the Investor is converting less than all of the
principal amount represented by this Note, the Company shall honor such
conversion and shall no later than three (3) Business Days thereafter, deliver
to the Investor a Conversion Schedule indicating the principal amount which has
not been converted and a new Note in the principal amount not so
converted.
6.
Mechanics of
Conversion
.
(a)
The
number of Underlying Shares issuable upon any conversion hereunder shall equal
(i) the outstanding principal amount of this Note to be converted, together with
any accrued but unpaid interest upon such principal amount being converted,
divided by
(ii)
the Conversion Price in effect on the Conversion Date.
(b)
Conversion
Price adjustment, if the Company issues new stock within twenty-four months (24)
of executing this note at a price point below the conversion price as outlined
in this document, then the conversion price will be automatically modified to
reflect the new lower price per share.
(c)
The
Company shall no later than ten (10) Business Days following the Conversion Date
promptly issue or cause to be issued and cause to be delivered to or upon the
written order of the Investor and in such name or names as the Investor may
designate in the Conversion Notice, a certificate for the Underlying Shares
issuable upon such conversion. The Investor, or any Person so
designated by the Investor in the Conversion Notice to receive Underlying
Shares, shall be deemed to have become holder of record of such Underlying
Shares as of such Conversion Date.
(d)
The
Investor must deliver the original Note (or a lost note certificate) in order to
effect a conversion hereunder.
7.
Events of
Default
.
(a)
At any
time or times following the occurrence and during the continuance of an Event of
Default, the Required Investors may elect to declare, by written notice to the
Company (an
“Event
Notice”
), all or any portion of the outstanding principal amount of this
Note, due and payable.
(b)
Subject
to
Section 7(a)
above, in connection with any Event of Default, the Investor need not provide
and the Company hereby waives any presentment, demand, protest or other notice
of any kind (other than the Event Notice), and the Investor may immediately
enforce any and all of its rights and remedies hereunder and all other remedies
available to it under applicable law. Any such declaration may be rescinded and
annulled by the Investor at any time prior to payment hereunder. No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereto.
8.
Ranking
. This
Note ranks
junior
to
the SBA $50,000 Century Bank Line of Credit Loan. This Note, together with all
other Notes now or hereafter issued pursuant to the Transaction Documents, shall
rank senior in all respects to all existing and hereafter created Indebtedness
of the Company.
9.
Reservation of Underlying
Shares
. Until the Maturity Date, commencing as of the date of
the Offering, the Company covenants that it will at all times reserve and keep
available out of the aggregate of its authorized but unissued and otherwise
unreserved Common Stock, solely for the purpose of enabling it to issue
Underlying Shares as required hereunder, the number of Underlying Shares which
are then issuable and deliverable upon the conversion of (and otherwise in
respect of) this entire Note, free from preemptive rights or any other
contingent purchase rights of persons other than the
Investor. Assuming due and proper conversion of this Note, the
Company covenants that all Underlying Shares so issuable and deliverable shall,
upon issuance in accordance with the terms hereof, be duly and validly
authorized, issued and fully paid and nonassessable.
10.
Certain
Adjustments
. The Conversion Price is subject to adjustment
from time to time as set forth in this
Section
10
.
(a)
Stock Dividends and
Splits
. If the Company, at any time following the Offering and
while this Note is outstanding: (i) pays a stock dividend on its Common Stock or
otherwise makes a distribution on any class of capital stock that is payable in
shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into
a larger number of shares, or (iii) combines outstanding shares of Common Stock
into a smaller number of shares, then in each such case the Conversion Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding immediately before such event and of which
the denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause
(i) of this paragraph shall become effective immediately after the record date
for the determination of shareholders entitled to receive such dividend or
distribution, and any adjustment pursuant to clause (ii) or (iii) of this
paragraph shall become effective immediately after the effective date of such
subdivision or combination.
(b)
Pro Rata
Distributions
. If the Company, at any time following the
Offering and while this Note is outstanding, distributes to all holders of
Common Stock any security, asset(s) or other property of the Company (in each
case,
“Distributed
Property”
), then upon any conversion of this Note, the Investor shall be
entitled to receive, in addition to the Underlying Shares otherwise issuable
upon such conversion, the Distributed Property that the Investor would have been
entitled to receive in respect of such number of Underlying Shares had the
Investor been the record holder of such Underlying Shares immediately prior to
the record date for any distribution of Distributed
Property. Notwithstanding the foregoing, this
Section 10(b)
shall
not apply to any distribution of rights or securities in respect of adoption by
the Company of a shareholder rights plan, which events shall be covered by
Section
10(a)
.
(c)
Reclassifications; Share
Exchanges
. At any time following the Offering and while this
Note is outstanding, in case of any reclassification of the Common Stock, or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property (other than compulsory share exchanges which
constitute Change of Control transactions), the Investors of the Notes then
outstanding shall have the right thereafter to convert such shares only into the
shares of stock and other securities, cash and property receivable upon or
deemed to be held by holders of Common Stock following such reclassification or
share exchange, and the Investors shall be entitled upon such event to receive
such amount of securities, cash or property as a holder of the number of shares
of Common Stock of the Company into which such shares of Notes could have been
converted immediately prior to such reclassification or share exchange would
have been entitled. This provision shall similarly apply to successive
reclassifications or share exchanges.
(d)
Calculations
. All
calculations under this
Section 10
shall be
made to the nearest cent or the nearest 1/100th of a share, as applicable. The
number of shares of Common Stock outstanding at any given time shall not include
shares owned or held by or for the account of the Company, and the disposition
of any such shares shall be considered an issue or sale of Common
Stock.
(e)
Notice of
Adjustments
. Upon the occurrence of each adjustment pursuant
to this
Section
10,
the Company at its expense will promptly compute such adjustment in
accordance with the terms hereof and prepare a certificate describing in
reasonable detail such adjustment and the transactions giving rise thereto,
including all facts upon which such adjustment is based. Upon written request,
the Company will promptly deliver a copy of each such certificate to the
Investor.
(f)
Notice of Corporate
Events
. If, at any time while this Note is outstanding, the
Company (i) declares a dividend or any other distribution of cash, securities or
other property in respect of its Common Stock, (ii) authorizes and publicly
approves, or enters into any agreement contemplating or solicits shareholder
approval for any Fundamental Transaction, or, (iii) issues Additional Stock
(hereafter defined) (iii) publicly authorizes in writing the voluntary
dissolution, liquidation or winding up of the affairs of the Company, then the
Company shall deliver to the Investor a notice describing the material terms and
conditions of such transaction, at least 20 calendar days prior to the
applicable record or effective date on which a Person would need to hold Common
Stock in order to participate in or vote with respect to such transaction;
provided, however, that the failure to deliver such notice or any defect therein
shall not affect the validity of the corporate action required to be described
in such notice.
11.
Fractional
Shares
. The Company shall not be required to issue or cause to
be issued fractional Underlying Shares on conversion of this Note. If any
fraction of an Underlying Share would, except for the provisions of this
Section, be issuable upon conversion of this Note or payment of interest hereon,
the number of Underlying Shares to be issued will be rounded to the nearest
whole share.
12.
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 addresses for such communications shall be: (i) if to the Company, to100
Cummings Center, Suite 421E, Beverly, MA 01915,
facsimile: 978-878-9505, attention: Chief Financial Officer, (ii) if
to the Placement Agent, to Hallmark Investments, Inc. 420 Lexington Avenue,
8
th
Floor, New York, NY 10170, facsimile: (212) 661-2055 and (iii) if to
the Investor, to the address or facsimile number appearing on the Company's
shareholder records or such other address or facsimile number as the Investor
may provide to the Company in accordance with this Section.
13.
Miscellaneous
.
(a)
This Note
shall be binding on and inure to the benefit of the parties hereto and their
respective successors and assigns that are permitted pursuant to this
Note.
(b)
Subject
to
Section
13(a)
, above, nothing in this Note shall be construed to give to any
person or corporation other than the Company and the Investor any legal or
equitable right, remedy or cause under this Note. This Note shall inure to the
sole and exclusive benefit of the Company and the Investor.
(c)
All
questions concerning the construction, validity, enforcement and interpretation
of this Note shall be governed by, construed and enforced solely and exclusively
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 shall be commenced exclusively in the state and federal courts
sitting in the County, City and State of New York, (the
“New York
Courts”
). Each party hereto hereby irrevocably agrees and
submits to the exclusive jurisdiction of the New York Courts for any Proceeding,
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 New York
Court or that a New York Court is an inconvenient forum for such
Proceeding. 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 Note 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 legal Proceeding. The prevailing party in a 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.
(d)
The
headings herein are for convenience only, do not constitute a part of this Note
and shall not be deemed to limit or affect any of the provisions
hereof.
(e)
In case
any one or more of the provisions of this Note shall be invalid or unenforceable
in any respect, the validity and enforceability of the remaining terms and
provisions of this Note shall not in any way be affected or impaired
thereby.
(f)
No
provision of this Note may be waived or amended except (i) in accordance with
the requirements set forth in the Purchase Agreement, and (ii) in a written
instrument signed, in the case of an amendment, by the Company and the Investor
or, in the case of a waiver, by the party against whom enforcement of any such
waiver is sought. No waiver of any default with respect to any provision,
condition or requirement of this Note 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.
(g)
To the
extent it may lawfully do so, the Company hereby agrees not to insist upon or
plead or in any manner whatsoever claim, and will resist any and all efforts to
be compelled to take the benefit or advantage of, usury laws wherever enacted,
now or at any time hereafter in force, in connection with any claim, action or
Proceeding that may be brought by any Investor in order to enforce any right or
remedy under the Notes. Notwithstanding any provision to the contrary contained
in the Notes, it is expressly agreed and provided that the total liability of
the Company under the Notes for payments in the nature of interest shall not
exceed the Maximum Rate, and, without limiting the foregoing, in no event shall
any rate of interest or default interest, or both of them, when aggregated with
any other sums in the nature of interest that the Company may be obligated to
pay under the Notes exceed such Maximum Rate. It is agreed that if the maximum
contract rate of interest allowed by law and applicable to the Notes is
increased or decreased by statute or any official governmental action subsequent
to the date hereof, the new maximum contract rate of interest allowed by law
will be the Maximum Rate of interest applicable to the Notes from the effective
date forward, unless such application is precluded by applicable law. If under
any circumstances whatsoever, interest in excess of the Maximum Rate is paid by
the Company to any Investor with respect to indebtedness evidenced by the Notes,
such excess shall be applied by such Investor to the unpaid principal balance of
any such indebtedness or be refunded to the Company, the manner of handling such
excess to be at such Investor’s election.
(h) All
rights and benefits, including, but not limited to, the right to receive notice
of certain events set forth in the Purchase Agreement, are expressly
incorporated by reference into this Note as if made directly in this
Note.
IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly
authorized officer as of the date first above indicated.
INVO BIOSCIENCE, INC
By:
Name:
Kathleen T. Karloff
Title:
Chief Executive Officer
Name of
Investor:
Principal
Amount of This Note: $100,000
EXHIBIT
A
CONVERSION
NOTICE
(To
be Executed by the Registered Investor
in order
to convert Notes)
The
undersigned hereby elects to convert the principal amount of Note indicated
below, into shares of Common Stock of INVO Bioscience, Inc., as of the date
written below. If shares are to be issued in the name of a Person other than
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
Investor for any conversion, except for such transfer taxes, if any. All terms
used in this notice shall have the meanings set forth in the Note.
|
Date
to Effect Conversion
|
|
Principal
amount of Note owned prior to
conversion
|
|
Principal
amount of Note to be Converted
|
|
Aggregate
amount of Interest to be Converted
|
|
Principal
amount of Note remaining after
Conversion
|
|
Number
of shares of Common Stock to be
Issued
|
|
$0.10 per Common Stock
share
|
|
Applicable
Conversion Price
|
Schedule
1
INVO
Bioscience, Inc.
10%
Senior Secured Convertible Promissory Notes
CONVERSION
SCHEDULE
This
Conversion Schedule reflects conversions made under the above referenced
Notes.
Dated:
Date
of Conversion
|
Amount
of Conversion (Including Interest)
|
Aggregate
Principal Amount Remaining Subsequent to Conversion
|
Applicable
Conversion Price
|
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$0.10
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EXHIBIT
10.2
PURCHASE
AGREEMENT
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. 420 Lexington Avenue, 8
th
Floor,
New York, NY 10170 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, Joseph Barboza, 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 mark, 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:
I
f
to the Company:
|
INVO
Bioscience, Inc.
|
|
100
Cummings Center, Suite 421E
|
|
Beverly,
MA 01915
|
|
Attention: Chief
Financial Officer
|
With a
copy to (which shall not constitute notice):
|
Scott
Museles, Esq.
|
|
Shulman
Rogers Gandal Pordy & Ecker PA
|
|
11921
Rockville Pike, 3
rd
Floor
|
|
Rockville,
MD 20852
|
|
Fax: 301-230-2891
|
If
to the Placement Agent:
|
Hallmark
Investments, Inc.
|
|
420
Lexington Avenue, 8
th
Floor
|
|
New
York, New York 10170
|
|
Attention: Edward
Taylor
|
Fax:
|
212-661-2055
|
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.
INVO
BIOSCIENCE, INC.
By:_______________________________________
Name:
Kathleen T. Karloff
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
Claude
Ranoux
Note $96,000
Kathleen
Karloff
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
Exhibit
10.3
WARRANT
NO. HM:1
NEITHER
THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN
REGISTEREDWITH 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.
WARRANT
TO PURCHASE SHARES OF COMMON STOCK OF
INVO
BIOSCIENCE, INC.
New York, New
York
|
July__,
2009
|
This is to Certify that, for value
received, __________(the “
Holder
”),
is entitled to purchase, subject to the provisions of this Warrant, from INVO
Bioscience, Inc., a Nevada corporation (the “
Company
”),
at any time on or after date hereof (the “
Original
Issuance Date
”), and not later than 5:00 p.m. Eastern Standard Time,
_______________, 2014 (the “
Expiration
Date
”), _________shares of common stock, $.0001 par value per share, of
the Company (the “
Common
Stock
”) at an initial purchase price per share (the “
Exercise
Price
”) equal to
$.20
(Twenty Cents), subject
to adjustment as provided elsewhere herein. The shares of the
Company's Common Stock issuable upon the exercise of this Warrant are called
herein the “
Warrant
Shares
.” The Holder hereof may exercise this Warrant as to all or any
portion of the Warrant Shares which such Holder shall have the right to acquire
hereunder.
This
Warrant is one of a series (collectively the “
Warrants
”)
issued in connection with the Company’s private placement offering (the “
Offering
”)
of its units (the “
Units
”),
each Unit consisting of a (i) 12% Senior Secured Convertible Promissory Note
(the “
Notes
”)
and (ii) a Warrant. The terms and conditions of the Offering are
described in greater detail in the Purchase Agreement, dated July __,
2009, as amended or supplemented from time to time (the “
Purchase
Agreement
”). All capitalized terms used without definition in
this Warrant, except where expressly otherwise indicate, shall have the meanings
ascribed to such terms in the Purchase Agreement.
(a)
Exercise of Warrant
.
This Warrant may be exercised by presentation and surrender hereof to the
Company with the Form of Payment Exercise attached hereto as
Annex
A
. The Warrant shall be deemed to have been exercised when (i)
the Company has received this Warrant, together with a completed Exercise
Notice, and (ii) the Company has received payment in the amount of the
applicable Exercise Price in accordance with this Section (a), notwithstanding
that certificates representing such Warrant Shares shall not then be actually
delivered to the Holder. If the stock transfer books of the Company shall be
closed on the date of receipt of this Warrant, the Exercise Notice and the
Exercise Price as aforesaid, the Holder shall be deemed to be the holder of such
shares of Common Stock on the next succeeding day on which the stock transfer
books of the Company shall be opened. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the right of the
Holder to purchase the balance of the Warrant Shares purchasable hereunder. In
the event this Warrant shall not be exercised on or before five (5) years after
the date of issue, this Warrant shall become void and all rights hereunder shall
cease. Each date of exercise of this Warrant shall be referred to as
an “
Exercise
Date
.” Notwithstanding anything to the contrary provided
herein or elsewhere upon exercise of this Warrant, the Company shall issue
certificates representing the Warrant Shares no later than ten (10) Business
Days (as defined in the Purchase Agreement) following exercise (three (3)
business days if the Company is either subject to the reporting requirements of
the Federal Securities Laws or the Common Stock is quoted or traded on any
trading medium).
(1)
Method of
Payment.
The Holder at its option may use any combination of
the payment methods set forth in the following paragraphs (A) and
(B):
(A)
Payment
Exercise
. Payment of the Exercise Price for the number of
Warrant Shares purchased shall be made in cash, by money order, certified or
bank cashier's check or wire transfer (in each case in lawful currency of the
United States of America).
(B)
Conversion
Exercise
. As an alternative to payment in the manner provided
in paragraph (1)(A) above, the Holder may, in lieu of payment of such Exercise
Price, elect not to receive all of such Warrant Shares but only to receive that
number of such Warrant Shares as shall be determined in accordance with the
following formula:
X =
Y*(A-B)
A
Where:
X
= the
number of Warrant Shares to be issued to the Holder pursuant to this paragraph
(B);
Y
= the
number of Warrant Shares for which this Warrant is being exercised as of the
applicable Exercise Date;
A
= the
Fair Market Value as of the applicable Exercise Date of a share of the Stock
constituting such Warrant Shares; and
B
= the
Exercise Price in effect as of the applicable Exercise Date of a share of the
Stock constituting such Warrant Shares.
The
Holder may elect to exercise this Warrant as to the number of Warrant Shares
computed in the manner set forth in this paragraph (B) by surrendering this
Warrant to the Company at its principal office, together with (i) a properly
completed and duly executed notice of exercise using the Form of Conversion
Exercise attached hereto as
Annex B
, which notice
shall specify the number of Warrant Shares for which this Warrant is then being
exercised, the number of such Warrant Shares that the Holder is electing not to
receive and the aggregate Fair Market Value of such number of Warrant Shares
that the Holder is electing not to receive, (ii) if requested by the Company, a
duly executed instrument or certificate, in form and substance satisfactory to
the Company, pursuant to which the Holder makes such representations and
warranties to the Company and provides or confirms such information concerning
the Holder, as the Company may reasonably request (including, without
limitation, such representations and warranties and such information as may be
required in order to confirm compliance with applicable securities laws), and
(iii) if applicable, the payment of any transfer taxes required to be paid by
the Holder. Payment of such transfer taxes shall be made in cash, by money
order, certified or bank cashier's check or wire transfer (in each case in
lawful currency of the United States of America).
“
Fair
Market Value
” shall mean (i) the last reported sale price per share of
Common Stock on the Nasdaq National Market System or any national securities
exchange in which such Common Stock is quoted or listed, as the case may be, on
the date immediately preceding the Exercise Date or, if no such sale price is
reported on such date, such price on the next preceding business day in which
such price was reported, (ii) if the Common Stock is not quoted or listed on the
Nasdaq National Market, Nasdaq Small Cap Market or any national securities
exchange, then the closing bid price or last sale price, as the case may be, on
the NASD Bulletin Board, the Pink Sheets or any other trading or quotation
medium, (iii) if the Common Stock is not traded and/or quoted as provided in
subsection (ii) of this paragraph, the fair market value of a share of Common
Stock, as determined in good faith by mutual agreement of the Board of Directors
of the Company (the “
Board
”)
and Holders of the then issued and outstanding Warrants representing no less
than 75% of the Warrant Shares held (the “
Required
Holders
.
(2)
Expenses of
Issuance
. The Company shall issue the Warrant Shares upon
exercise of this Warrant without charge to Holder for any issuance tax or other
cost incurred by the Company in connection with such exercise and the related
issuance of the Warrant Shares. Each of the Warrant Shares shall,
upon payment of the Exercise Price therefor, be fully paid and nonassessable and
free from all liens, and charges and/or pre-emptive or similar rights with
respect to the issuance thereof.
(3)
Withholding
Taxes
. Holder shall satisfy any federal, state, local or
foreign withholding tax obligations arising from the exercise of the Warrant or
the subsequent disposition of the Shares.
(b)
Reservation of Warrant
Shares
. The Company agrees that at all times there shall be authorized
and reserved for issuance upon exercise of this Warrant such number of Warrant
Shares as shall be required for issuance or delivery upon exercise of this
Warrant.
(c)
Fractional Shares
.
This Warrant shall be exercisable in such manner as not to require the issuance
of fractional shares or scrip representing fractional shares. If, as a result of
adjustment in the Exercise Price or the number of Warrant Shares to be received
upon exercise of this Warrant fractional shares would be issuable, no such
fractional shares shall be issued. In lieu thereof the Company shall pay the
Holder an amount in cash equal to the Fair Market Value of one share of Common
Stock.
(d)
Exchange or Assignment of
Warrant
. Holder may sell, assign, transfer, pledge, hypothecate, encumber
or otherwise dispose of, voluntarily or involuntarily, directly or indirectly
(each, a “
Transfer
”)
this Warrant (or a portion thereof), to any person (each, a “
Permitted
Transferee
”); provided, however, that (x) any such Permitted Transferee
shall have agreed in writing to be bound by the terms of this Agreement with
respect to the Warrant Shares and (y) any transfer to a Permitted Transferee
shall not be in violation of applicable federal or state securities
laws. Any permitted assigned of the Warrant shall be completed with a
Form of Assignment attached hereto as
Annex C
.
(e)
Rights of the Holder;
Limitation on Liability
. The Holder shall not, prior to exercise of this
Warrant, by virtue hereof, be entitled to any rights of a shareholder in the
Company, either at law or equity, and the rights of the Holder are limited to
those expressed in the Warrant. No provision hereof, in absence of an
affirmative action by the Holder to purchase the Warrant Shares, and no
enumeration herein of rights or privileges by the Holder, shall give rise to any
liability of the Holder for the Exercise Price of the Warrant
Shares.
(f)
Adjustment of Exercise
Rights
. The Exercise Price or the number of Warrant Shares to be received
upon the exercise of this Warrant, or both shall be subject to adjustment from
time to time as follows:
(l)
Dividends
. In
case any additional shares of Common Stock or any obligation or stock
convertible into or exchangeable for shares of Common Stock (such convertible or
exchangeable obligations or stock being hereinafter called “
Convertible
Securities
”) shall be issued as a dividend on the outstanding shares of
any class of stock of the Company, the Exercise Price then in effect shall be
decreased proportionately and the number of Warrant Shares then exercisable
hereunder shall be increased proportionately. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment in the
Exercise Price in the case of the issuance at any time or from time to time of
any Warrant Shares pursuant to any exercise of this Warrant.
(2)
Effect of “Split-ups” and
“Split-down” and Certain Dividends
. In case at any time or from time to
time the Company shall subdivide as a whole, by reclassification, by the
issuance of a stock dividend on the Common Stock payable in Common Stock, or
otherwise, the number of shares of Common Stock then outstanding into a greater
number of shares of Common Stock, with or without par value, the Exercise Price
then in effect shall be reduced proportionately, and the number of Warrant
Shares then exercisable hereunder shall be increased proportionately. In case at
any time or from time to time the Company shall consolidate as a whole, by
reclassification or otherwise, the number of shares of Common Stock then
outstanding into a lesser number of shares of Common Stock, with or without par
value, the Exercise Price then in effect shall be increased proportionately and
the number of Warrant Shares then exercisable hereunder shall be decreased
proportionately.
(3)
Effect of Merger or
Consolidation
. In case the Company shall enter into any consolidation
with or merger into any other corporation wherein the Company is not the
surviving corporation, or sell or convey its property as an entirety or
substantially as an entirety and in connection with such consolidation, merger,
sale or conveyance shares of stock or other securities shall be issuable or
deliverable in exchange for the Common Stock of the Company, the Holder of any
Warrant shall thereafter be entitled to purchase pursuant to such Warrant (in
lieu of the number of Warrant Shares which such Holder would have been entitled
to purchase immediately prior to such consolidation, merger, sale or conveyance)
the shares of stock or other securities to which such number of Warrant Shares
would have been entitled at the time of such consolidation, merger sale or
conveyance, at an aggregate Exercise Price equal to that which would have been
payable if such number of Warrant Shares had been purchased immediately prior
thereto. In case of any such consolidation, merger, sale or conveyance,
appropriate provision (as determined by resolution of the Board of Directors of
the Company with the approval of the Holder) shall be made with respect to the
rights and interests thereafter of the Holder of this Warrant, to the end that
all the provisions of this Warrant (including adjustment provisions) shall
thereafter be applicable, as nearly as reasonably practicable, in relation to
such stock or other securities.
(4)
Reorganization and
Reclassification
. In case of any capital reorganization or any
reclassification of the capital stock of the Company (except as provided in
Subsection (2) of this Section (f)); the Holder of this Warrant shall thereafter
be entitled to purchase pursuant to such Warrant (in lieu of the number of
Warrant Shares which such Holder would have been entitled to purchase
immediately prior to such reorganization or reclassification) the shares of
stock of any class or classes or other securities or property to which the
holder of such number of Warrant Shares would have been entitled at the time of
such reorganization or reclassification, at an aggregate Exercise Price equal to
that which would have been payable if such number of Warrant Shares had been
purchased immediately prior to such reorganization or reclassification,
appropriate provision (as determined by resolution of the Board of Directors of
the Company with the approval of the Holder) shall be made with respect to the
rights and interest thereafter of this Warrant (including adjustment provisions)
shall thereafter be applicable, as nearly as reasonably practicable, in relation
to such stock or other securities or property.
(5)
Distributions
. In
case the Company shall make any distribution of its assets to holders of its
Common Stock as a liquidation or partial liquidation dividend or by way of
return of capital, or other than as a dividend payable out of earnings or any
surplus legally available for dividends under the laws of the State of New York,
then the Holder of this Warrant who thereafter exercises the same as herein
provided after the date of record for the determination of those holders of
Common Stock entitled to such distribution of assets, shall be entitled to
receive, in exchange for the Exercise Price paid hereunder, in addition to the
Warrant Shares so purchased, the amount of such assets (or at the option of the
Company, a sum equal to the value thereof at the time of such distribution to
holders of Common Stock, as such value is determined by the Board of Directors
of the Company in good faith), which would have been payable to such Holder had
he been the holder of record of such Warrant Shares on the record date for the
determination of those entitled to such distribution.
(6)
Dissolution or
Liquidation
. In case the Company shall liquidate or wind up its affairs,
the Holder of this Warrant shall be entitled, upon the exercise thereof, to
receive, in lieu of the Warrant Shares which it would have been entitled to
receive, the same kind and amount of assets as would have been issued,
distributed or paid to it upon any such dissolution, liquidation or winding up
with respect to such Warrant Shares had it been the holder of record of such
Warrant Shares on the record date for the determination of those entitled to
receive any such liquidating distribution; provided, however, that all rights
under this Warrant shall terminate on a date fixed by the Company, such date to
be not earlier than the date of commencement of proceedings for dissolution,
liquidation or winding up and not later than thirty (30) days after such
commencement date, unless the Holder shall have, prior to such termination date,
exercised this Warrant. Notice of such termination of rights under this Warrant
shall be given to the last registered Holder hereof, as the same shall appear on
the books of the Company, by mail at least thirty (30) days prior to such
termination date. In the event of such notice, the Holder may exercise this
Warrant prior to the fifth anniversary hereof.
(g)
Limitations on Transfer of
Warrant Shares
. The Warrant Shares issuable pursuant hereto
have not been registered under the Act. Accordingly, by acceptance hereof the
Holder agrees that:
(l)
It will
acquire the Warrant Shares issuable pursuant hereto to be held as an investment
and that it will not attempt to sell, distribute or dispose of the same except
pursuant to this agreement and:
(A)
pursuant to a registration statement filed and rendered effective under the Act;
or
(B)
pursuant to a specific exemption from registration under the Act.
(2)
There
shall appear on the certificate or certificates evidencing any Warrant Shares
issued pursuant hereto a legend as follows:
“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.”
(h)
Notices
. All notices,
payments, requests and demands and other communications required or permitted
under this Warrant shall be deemed to have been duly given, delivered and made
if in writing and if served either by personal delivery to the party for whom it
is intended or by being deposited, postage prepaid, certified or registered mail
return receipt requested to the address shown below or such other address as may
be designated in writing hereafter by such party:
|
INVO
Bioscience, Inc.
|
|
100
Cummings Center, Suite 421E
|
|
Beverly,
MA 01915
|
|
Attention:
Chief Financial Officer
|
|
With a copy to (which
shall not constitute
notice):
|
|
Scott
Museles, Esq.
|
|
Shulman
Rogers Gandal Pordy & Ecker PA
|
|
11921
Rockville Pike, 3
rd
Floor
|
|
Rockville,
MD 20852
|
|
Fax: 301-230-2891
|
If to the Holder
, to
the address for such Holder as set forth on the corporate records of the
Company.
(i)
Governing Law; Jurisdiction;
WAIVER OF JURY TRIAL
.
(1) All
questions concerning the construction, validity, enforcement and interpretation
of this Note shall be governed by, construed and enforced solely and exclusively
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 (as defined in the Notes) shall be commenced exclusively in the
state and federal courts sitting in the County, City and State of New York, (the
“New York
Courts”
). Each party hereto hereby irrevocably agrees and
submits to the exclusive jurisdiction of the New York Courts for any Proceeding,
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 New York
Court or that a New York Court is an inconvenient forum for such
Proceeding. 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 Note 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. The prevailing party in a 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.
(2)
EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS WARRANT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
(j)
Further Assurances
.
The parties agree to execute, acknowledge and deliver any and all such other
documents and to take any and all such of the action as may, in the reasonable
opinion of either of the parties hereto be necessary or convenient to
efficiently carry out any or all of the purposes of this Warrant.
(k)
Severability
. Each
and all provisions of this Warrant deemed to be prohibited by law or otherwise
held invalid shall be ineffective only to the extent of such prohibition or
invalidity and shall not invalidate or otherwise render ineffective any or all
of the remaining provisions of this Warrant.
(l)
Parties in Interest.
Assignment
. The Company may assign any and all of its rights under this
Agreement to its successors, and this Agreement shall inure to the benefit of,
and be binding on, the successors of the Company. Subject to the
restrictions on transfer herein set forth, this Agreement shall be binding upon
the Holder and his heirs, executors, administrators, successors and
assigns.
(n)
Entire
Agreement
. This Agreement constitutes the entire agreement of
the parties with respect to the subject matter hereof and supercedes in its
entirety all prior undertakings and agreements of the Company and the Holder
with respect to the subject matter hereof, and may not be modified adversely to
the Holder interest except by means of a writing signed by the Company and the
Holder.
(o)
Piggy-Back Registration
Rights
.
(1) At
anytime and from time to time, if the Company proposes to file a registration
statement with the Securities and Exchange Commission (“
SEC
”)
with respect to any firmly underwritten offering of any securities of any class
of its equity securities for its own account or for the account of a holder(s)
of securities of the Company (a “
Requesting
Stockholder
”), the Company shall, each time it intends to file a
registration statement, give prompt written notice to the Holder of this Warrant
at least 20 days prior to the initial filing of the registration statement
relating to such offering (the “
Registration
Statement
”), and shall include for resale all of the Warrant Shares
issued or issuable upon exercise of this Warrant in such Registration
Statement. If, however, the underwriter for such offering (in either
case, the “
managing
underwriter
”) delivers a notice (a “
Cutback
Notice
”) in accordance with paragraph (2) below, then the Company shall
follow the procedures set forth in paragraph (2) below for reducing such Warrant
Shares in such Registration Statement. The managing underwriter may deliver one
or more Cutback Notices at any time prior to the execution of the underwriting
agreement for such underwritten offering.
(2)
If the proposed underwritten offering is an underwritten offering by the Company
on a primary basis (a “
Primary
Registration
”), the Warrant Shares may be excluded in the event and to
the extent recommended by the managing underwriter, pursuant to a Cutback Notice
stating that, in its opinion, the number of securities to be offered for the
account of the Company (“
Company
Shares
”), plus the Warrant Shares that the Holders have requested to be
sold therein, plus the securities (the “
Other
Share
s
”)
that selling stockholders (other than the Holders) exercising similar piggy-back
registration rights with respect to such offering (“
Other
Selling Stockholders
”) propose to sell therein, exceeds the maximum
number of shares specified by the managing underwriter in such Cutback Notice
that may be distributed without having a material adverse effect on the price,
timing or distribution of the Company Shares. Such maximum number of shares that
may be so sold, excluding the Company Shares, are referred to as the “
Includible
Shares
.” If the managing underwriter delivers such Cutback Notice, the
Company shall be entitled to include all of the Company Shares in the
Underwritten Offering in priority to the inclusion of any “
Other
Shares
” or Warrant Shares and the Holders shall be entitled to include
the Warrant Shares in priority to any Other Shares. Each requesting Holder shall
then be entitled to include in such offering up to its pro rata portion of the
Includible Shares, based on the number of securities requested to be sold by the
Holders.
(3) Notwithstanding anything
to the contrary provided herein or elsewhere (i) if any Warrant Shares are not
included in a Registration Statement as provided in paragraph (1) above, then
the Company shall file and cause to be declared effective a new Registration
Statement covering the resale of such excluded Warrant Shares no later than six
(6) months following the effective date of the Registration Statement that the
Warrant Shares were excluded from, (ii) the Company shall pay all costs and
expenses of the preparation of all Registration Statements and (iii) the Company
shall provide the Holder with all materials and take all actions necessary
and/or required to allow such Holder to sell its Warrant Shares pursuant to a
Registration Statement (including, but not limited to causing each such
Registration Statement to remain effective until all Warrant Shares are
sold).
IN
WITNESS WHEREOF, the Company has caused this instrument to be signed as of the
July __, 2009.
INVO
BIOSCIENCE, INC.
By:
________________________
Kathleen
T. Karloff
Its:
Chief Financial Officer
ANNEX A
FORM OF
PAYMENT EXERCISE
(To be
executed upon cash payment exercise of Warrant)
To: INVO
BIOSCIENCE, INC.
The undersigned hereby irrevocably
elects to exercise the right of purchase represented by the attached Warrant
for, and to exercise thereunder, _______ shares of Common Stock, $.0001 par
value per share (“
Common
Stock
”), of INVO Bioscience, Inc., a Nevada corporation, and tenders
herewith payment of $__________, representing the aggregate purchase price for
such shares based on the price per share provided for in such
Warrant. Such payment is being made in accordance with Section (a) of
the attached Warrant.
Please issue a certificate or
certificates for such shares of Common Stock in the following name or names and
denominations and deliver such certificate or certificates to the person or
persons listed below at their respective addresses set forth below:
Dated:
(Name)
(Address)
If said number of shares of Common
Stock shall not be all the shares of Common Stock issuable upon exercise of the
attached Warrant, a new Warrant is to be issued in the name of the undersigned
for the balance remaining of such shares of Common Stock less any fraction of a
share of Common Stock paid in cash.
Dated:
NOTE: The
above signature should correspond exactly with the name on the face of the
attached Warrant or with the name of the assignee appearing in the assignment
form below.
ANNEX B
FORM OF
CONVERSION EXERCISE
(To be
executed upon conversion or net issue exercise of Warrant)
To: INVO
BIOSCIENCE, INC.
The undersigned hereby irrevocably
elects to exercise the right of purchase represented by the attached Warrant
for, and to exercise thereunder, _______ shares of Common Stock, par value
$0.0001 per share (the “
Exercise
Shares
”) of INVO Bioscience, Inc., a Nevada corporation (the “
Company
”). The
aggregate Exercise Price (as defined in the attached Warrant) to purchase all
such Exercise Shares is $__________. Pursuant to Section (a),
paragraph (B) of the attached Warrant, the undersigned hereby elects, in lieu of
paying in cash such aggregate Exercise Price, to surrender the right to receive
_______ of the Exercise Shares (the “
Surrendered
Warrant Shares
”). The aggregate Fair Market Value of the
Surrendered Warrant Shares is $____________. The net number of
Exercise Shares issuable by the Company (after giving effect to the surrender by
the undersigned of the Surrendered Warrant Shares) in connection with such
exercise shall be __________ shares (the “
Net Issue
Exercise Shares
”).
Please issue a certificate or
certificates for the Net Issue Exercise Shares in the following name or names
and denominations and deliver such certificate or certificates to the person or
persons listed below at their respective addresses set forth below:
If the sum of the Net Issue Exercise
Shares and the Surrendered Warrant Shares shall not be all the Warrant Shares
issuable upon exercise of the attached Warrant, a new Warrant is to be issued in
the name of the undersigned for the balance remaining of such Warrant Shares
(less any fraction of a Warrant Share paid in cash).
NOTE: The
above signature should correspond exactly with the name on the face of the
attached Warrant or with the name of the assignee appearing in the assignment
form below.
ANNEX C
FORM OF
ASSIGNMENT
(To be
executed upon assignment of Warrant)
For value received,
_____________________________________ hereby sells, assigns and transfers unto
_________________ the attached Warrant [__% of the attached Warrant], together
with all right, title and interest therein, and does hereby irrevocably
constitute and appoint ___________________________ attorney to transfer said
Warrant [said percentage of said Warrant] on the books of INVO Bioscience, Inc.,
a Nevada corporation, with full power of substitution in the
premises.
If not all of the attached Warrant is
to be so transferred, a new Warrant is to be issued in the name of the
undersigned for the balance of said Warrant.
Dated: ____________,
____
NOTE: The
above signature should correspond exactly with the name on the face of the
attached Warrant.
Exhibit
10.4
______________Hallmark
Investments, Inc._______________
420
Lexington Avenue, 8
th
Floor,
New York, NY 10170
Tel:
(212) 661-2277 (866) 542-5562 Fax: 212
661-2055
June 5,
2009
Ms.
Kathleen T. Karloff, CEO
INVO
Bioscience, Inc.
100
Cummings Center, suite 421E
Beverly
MA 01915
Dear Ms.
Karloff:
This
letter agreement (this “Agreement”) confirms our understanding that INVO
Bioscience, Inc., a Nevada corporation, and its affiliates, (the “Company”),
have engaged Hallmark Investments, Inc., (the “Placement Agent”) to act as a
Placement Agent on an exclusive basis in connection with a private placement by
the Company or its affiliates of debt and/or equity securities (the
“Securities”) on a “best efforts” basis of up to an aggregate offering of
approximately Five Hundred Thousand Dollars ($500,000.00) (the “Private
Placement”). This Agreement shall be effective for a period commencing June 1,
2009 and ending on August 31, 2009.
Section
1.
Appointment
and Acceptance.
The
Company hereby appoints the Placement Agent Placement Agent on an exclusive
basis in connection with the Private Placement of the Securities. The
Placement Agent accepts such appointment, subject to the terms and conditions of
this letter agreement.
The
Placement Agent agrees that in its capacity hereunder it will use commercially
reasonable efforts to arrange the Private Placement. In no event shall the
Placement Agent be obligated to purchase the Securities for its own account or
for the accounts of its customers
.
Section
2.
The
Transaction
The
parties contemplate that an initial offering of a maximum of approximately
$500,000.00 of debt and /or equity securities will be offered in the
Private Placement. Upon commencement, the Private Placement shall continue
through August 31, 2009.
The
Placement Agent envisions the following terms:
A 10%
Senior Secured Convertible Note, (“the Note” or “the Notes”), with detachable
Common Stock Purchase Warrants. Interest on the Notes will be paid in
Shares of Common Stock. Each Note entitles the Note holder to convert
the Notes into Common Stock of the Company at of $.10 per Share The
Notes mature upon the earlier of one (1) year or the completion of a
follow-on-financing by the Company of a minimum of $2,500,000
dollars. The warrants are exercisable at a 100% premium to the
conversion pricing of the Notes at 100% coverage.
The
Placement Agent will assist in negotiating the terms and conditions for a
successful completion of the Private Placement; provided, however, that the
Company, in its sole discretion, must approve any such terms and conditions. To
facilitate the Private Placement, the Company shall prepare and deliver to the
Placement Agent any offering documents or other information to be used in the
Private Placement.
Section
3.
Fees and
Expenses.
As
compensation to the Placement Agent for its services hereunder, the Company
agrees
that the
Company and the Placement Agent shall determine whether more than one closing
shall be necessary. If there is more than one closing, at each closing the Gross
proceeds shall be paid into an escrow account (the Escrow Account). The Company
agrees that immediately upon the closing of a sale of the Securities the Escrow
Agent shall make disbursements from the Escrow Account as follows:
(i)
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to the Placement Agent a placement fee consisting of the following: a cash
payment equal to ten percent (10%) of the gross proceeds raised (as
defined below), in a sale of equity securities, and
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(ii)
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As part of the Placement Agent’s compensation hereunder, the Company shall
issue to the Placement Agent, at each closing hereunder, five (5) year
Common Stock Purchase Warrants equal to ten percent (10%) of the number of
shares of common stock underlying any debt and/or equity securities sold
by the Placement Agent, as more fully described in the Offering Document.
The Common Stock Purchase Warrants shall be exercisable at the same price
as the shares of common stock underlying the debt and/or equity securities
sold by the Placement Agent. And, The Common Stock Purchase Warrants will
have features identical to the shares of common stock underlying the debt
and/or equity securities sold by the Placement Agent. The Placement Agent
may designate that the Placement Agent’s Common Stock or Preferred Stock
be issued in varying amounts to its officers, agents, consultants and
affiliates and not to the Placement
Agent.
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The
amounts payable or securities deliverable pursuant to subparts (i), and (ii)
above shall be referred to as the “Placement Fee.”
The
Company hereby agrees to complete the following and pay the expenses associated
therewith, in addition to a non-refundable retainer of fifteen thousand dollars
($15,000.00), which, at this time, the Company does not have and where there is
little or no prospect that the Company will have the retainer amount available
until such time as the Placement Agent raises this amount, and more, from its
investor clients. It is therefore expressly agreed that the retainer amount of
$15,000.00 will be paid to the Placement Agent by the Company from the first
monies raised by the Placement Agent but that such payment will in no way
diminish or be credited to the Company against the 10% commission fee for which
the Company is obligated to the Placement Agent. The
$15,000.00 retainer fee will be paid by the Company as soon as that
amount is raised by the Placement Agent.
(i)
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the preparation and printing of the Offering Documents, and any
supplements or amendments thereto, including the cost of all copies
thereof;
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(ii)
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the issuance, sale, transfer and delivery of the Securities, including any
transfer or other taxes payable thereon and the fees of any transfer agent
or registrar;
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(iii)
|
the registration or qualification of the Securities or the securing of an
exemption therefrom under state or foreign "blue sky" or securities laws,
including without limitation, filing fees payable in the jurisdictions in
which such registration or qualification or exemption therefrom is sought
and disbursements in connection
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Such
Placement Fee will be payable in the respect of each sale of Securities only if
such sale has been arranged by the Placement Agent or its Co-Placement Agents or
Selected Dealers. Gross proceeds raised shall include only cash consideration
received by the Company for the purchase of the Securities and shall not include
the cash received by the Company upon the exercise of warrants or other
convertible securities, if any. In no event shall the Company be
obligated to issue and sell any Securities unless the Company shall have
executed and delivered an investor subscription agreement pertaining to such
sale setting forth the terms of such sale of Securities and (ii) the aggregate
gross proceeds raised in connection with the Private Placement exceeds any
minimum set forth in the Offering. Additionally, the Company shall
have complete and absolute discretion in determining the terms of the Private
Placement and whether or not to sell Securities to any potential purchaser
presented by the Placement Agent.
Gross
proceeds shall include only cash consideration received by the Company for the
purchase of the Securities and shall not include the cash received by the
Company upon the exercise of warrants or other convertible securities, if
any.
The
Company and the Placement Agent acknowledge and agree that, in the course of
performing services hereunder, the Placement Agent may introduce the Company to
third parties who may, directly or indirectly through other third parties, be
interested in providing debt or equity financing to the Company (a “
Financing”
) in addition to the
Private Placement.
The
Company agrees that if during the terms of this agreement or within eighteen
(18) months year from the effective date of the termination of this Agreement,
the Company or any party to whom the Company was introduced by the Placement
Agent in connection with its services for the Company hereunder
proposes a Financing involving the Company and the Placement Agent is not
engaged as the Company’s financial advisor, agent, and/or investment banker in
connection with such Financing, then, if any such Financing is consummated, the
Company shall pay to the Placement Agent the following fees:
(i)
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a cash fee of eight percent (8%) of the amount of capital raised, invested
or committed;
and
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(ii)
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issue to the Placement Agent, at each closing hereunder, five year Common
Stock Purchase Warrants equal to eight percent (8%) of the number of
shares of common stock underlying any debt and/or equity securities issued
the amount of capital raised, invested or committed The Placement Agent
may designate that the Placement Agent’s Common Stock or Preferred Stock
be issued in varying amounts to its officers and agents and not to the
Placement Agent.
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Such fees
shall be payable to the Placement Agent in cash immediately at the closing or
closings of the Financing to which it relates. Any Financing to be
provided to the Company by the Placement Agent or underwriter shall be provided
pursuant to a separate agency or underwriting agreement between the Company and
the Placement Agent which agreement shall contain the terms set forth in Section
3 hereof and such other customary
terms,
conditions, agreements, covenants, representations and warrants as the parties
may agree upon.
All cash
fees and expenses paid by the Company to the Placement Agent in Section 3 above
shall be in United States currency.
Section
4.
Information
In
connection with the Placement Agent’s engagement, the Company will furnish the
Placement Agent with all information concerning the Company as the Company and
the Placement Agent may reasonably agree and will provide the Placement Agent
with reasonable access to the company’s officers, directors, employees,
accountants, counsel and other representatives. The Company
acknowledges and confirms that the Placement Agent (I) will rely solely on such
information in the performance of the services contemplated by this engagement
without assuming any responsibility for independent investigation or
verification thereof, (ii) assumes no responsibility for the accuracy or
completeness of such information or any other information regarding the Company
and (iii) will not make any appraisal of any assets of the Company.
The
Company will be solely responsible for the contents of the offering documents
(subject to review by counsel to the Placement Agent) or other offering document
used in connection with the Private Placement (as such private placement
memorandum or other
document
may be amended or supplemented and including any information incorporated herein
by reference, the “Private Placement Memorandum”) and any and all other written
communications provided by the Company to any actual or prospective purchaser of
the Securities.
The
Placement Agent shall not make any changes to the offering documents, and except
in connection with performing the services contemplated by and with the consent
of the Company, the Placement Agent shall keep the offering documents
confidential and shall not distribute it or any other materials related to
Private Placement.
The
Company represents and warrants that the Offering Memorandum and such other
communications will not, as of the date of any delivery by the Placement Agent
to a perspective purchaser and as of the time of sale of any Securities pursuant
to the Private Placement 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 in which they were
made, not misleading. If at any time prior to the completion of the
offer and sale of the Securities or the closing date of any such sale an event
occurs as a result of which the Offering Memorandum (as then supplemented or
amended) would include any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, the Company, will
promptly notify the Placement Agent of such event and the Placement Agent will
promptly suspend solicitations of prospective purchasers of the Securities and
distribution of the Offering Memorandum until such time as the Company shall
prepare (and the Company agrees that, if it shall have notified the Placement
Agent to suspend solicitations after the Company has accepted orders from
prospective purchasers, it will promptly prepare) a supplement or amendment to
the Offering Memorandum which corrects such statement(s) or
omission(s). Each party hereto shall be responsible for violations of
their respective agents and advisors of the obligations set forth in this
agreement.
Section
5.
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Exemption from
Registration; Restrictions on Offer and Sale of Same or Similar
Securities
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It is
understood that the offer and sale of the Securities will be exempt from the
registration requirements of The Securities Act of 1933, as amended (the
“Act”). The Company will not, directly or indirectly, makes any offer
or sale of Securities or of securities of the same or of similar class as the
Securities if as a result the offer and sale of Securities contemplated hereby
would fail to be entitled to the exemption from the registration requirements of
the Act.
The
Placement Agent will not, directly or indirectly, make any offer of Securities,
if as a result the offer of Securities contemplated hereby would fail to be
entitled to the exemption from the registration requirements of the
Act. In addition, the Placement Agent will solicit offers only for
the Securities and will not, directly or indirectly make any offer of securities
of the same or similar class of the securities.
A.
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Additional
Restrictions on the Company and the Placement
Agent
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In
connection with all offers and sales of the securities:
(a)
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The Company will not offer or sell the Securities by means of any form of
general solicitation or general advertising. The Placement
Agent will not offer the Securities by means of any form of general
solicitations or general
advertising.
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(b)
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The Company will not offer or sell the Securities to any person who is not
an “accredited investor” as the term is defined in Section 501(a) or
Regulation D of the Securities Act of 1933, as amended (“Regulation
D”). The Placement Agent will not offer the Securities to any
person who is not a “qualified client” as defined in Regulation
D.
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(c)
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The Company will exercise reasonable care to ensure that purchasers of the
Securities are not underwriters within the meaning of Section 2(11) of the
Act and, without limiting the foregoing, that such purchases will comply
with Rule 502(d) under the Act.
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B.
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Compliance With
Securities Laws, Broker/Dealer Regulations And Relevant Self-Regulation
Organizations.
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The
company will make such notice filings and pay such fees under the securities
laws of such jurisdictions in the United States as the Company may reasonably
determine, in each case to the extent required under Section 18( c ) (2) of the
Act, and in such other jurisdictions as required by applicable law
The
Placement Agent hereby represents and warrants that it is (1) registered as a
broker or dealer as required under Section 15(a)(1) of the Securities and
Exchange Act of 1934, (the “Exchange Act”), (2) it is a (a) associated with a
broker/dealer, which is a person other than a natural person, and (b) registered
with the National Association of Securities Dealers as a registered
representative or (3) exempt from the regulation requirement of Section 15(a)(1)
of the Exchange Act and applicable state laws.
Section
6.
Term
and
Termination
.
This
Agreement shall be effective for the period commencing June 1, 2009 and ending
August 31, 2009.
No
termination of the Placement Agent’s engagement hereunder shall affect (I) the
Company’s obligation to reimburse the Placement Agent for expenses as provided
herein or (ii) the provisions of Sections 3 and 9 of this letter
agreement.
Section
7.
General
.
In
connection with this engagement, the Placement Agent is acting as an independent
contractor and not in any other capacity, with duties owing solely to the
Company. All aspects of the relationship created by this agreement
shall be governed by and construed in accordance with the laws of the state of
New York, applicable to contracts made and to be performed
therein. Each of the Placement Agent and the Company waives all right
to trial by jury in any action, suit proceeding or counter claim (whether based
upon contract tort or otherwise) relating to or arising out of the engagement of
the Placement Agent pursuant to, or the performance by the Placement Agent of
the services contemplated by, this agreement. All actions and
proceedings arising out of or relating to this letter agreement shall be heard
and determined exclusively in any New York State court or federal court sitting
in the state of New York to whose jurisdiction the company and the Placement
Agent hereby irrevocably submit. The Company and the Placement Agent
irrevocably waive any defense or objection to the New York forum designated
above.
This
letter agreement contains the entire agreement of the parties with respect to
the subject matter hereof and supersedes and takes precedence over all prior
agreements or understandings, whether oral or written, between the Placement
Agent and the Company. The invalidity or enforceability of any
provision of the letter agreement shall not affect the validity or
enforceability of any other provisions of this agreement, which shall remain in
full force and effect.
We are
delighted that you have accepted this engagement and look forward to working
with you on this assignment. Please confirm that the foregoing is in accordance
with your understanding by signing and returning to us the enclosed duplicate of
this agreement.
Section
8.
Governing
Law; Jurisdiction; Waiver of Jury Trail.
This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York applicable to agreements made and to be fully performed
therein, with disregard to conflicts of law principles. The Company
irrevocably submits to the exclusive jurisdiction of any court of the State of
New York or the United States District Court for the Southern District of the
State of New York for the purpose of any suit, action or other proceeding
arising out of this Agreement, or any of the agreements or transactions
contemplated hereby, which is brought by or against the Company. All
notices provided hereunder shall be given in writing and either delivered
personally or by
overnight
courier service or sent by certified mail, return receipt requested, or by
facsimile transmission, if to Hallmark Investments, Inc., 420 Lexington Avenue,
New York, NY 10170, Attn: Edward Taylor, Managing Partner, Fax No.: (212)
661-2055, and if to the Company, to the address, set forth on the first page of
this Agreement: Ms. Kathleen T. Karloff, CEO, INVO Bioscience, Inc., 100
Cummings Center, suite E421, Beverly, MA 01915: Fax No.: (978) 878-9505. The
parties hereby expressly waive all right to trail by jury in any suit, action or
proceeding arising under this Agreement.
Section
9.
Indemnification
Provisions
The Company agrees to indemnify and
hold harmless the Placement Agent and any indemnified parties identified herein
from and against any and all losses, claims, damages, obligations, penalties,
judgments, awards, liabilities, costs, expenses and disbursements, and any and
all actions, suits, proceedings and investigations in respect thereof and any
and all legal and other costs, expenses and disbursements in giving testimony or
furnishing documents in response to a subpoena or otherwise (including, without
limitation, the costs, expenses and disbursements, as and when incurred, of
investigating, preparing, pursing or defending any such action, suit, proceeding
or investigation (whether or not in connection with litigation in which any
Indemnified Party is a party))(collectively, “
Losses”
), directly or
indirectly, caused by, relating to, based upon, arising out of, or in connection
with, the Placement Agent acting for the Company, including, without limitation,
any act or omission by the Placement Agent in connection with its acceptance of
or the performance or non-performance of its obligations under the Agreement
between the Company and the Placement Agent to which these indemnification
provisions are attached and form a part (the “
Agreement”
), any breach by the
Company of any representation, warranty, covenant or agreement contained in the
Agreement (or in any instrument, document or agreement relating thereto,
including any Agency Agreement), or the enforcement by Placement Agent of its
rights under the Agreement or these indemnification provisions, except to the
extent that and such Losses are found in a final judgment by a court of
competent jurisdiction (not subject to further appeal) to have resulted
primarily and directly from the gross negligence or willful misconduct of the
Indemnified Party seeking indemnification hereunder. The Company also
agrees that no Indemnified Party shall have any liability (whether direct or
indirect, in contract or tort or otherwise) to the Company for its connection
with the engagement of the Placement Agent by the Company or for any
other
reason,
except to the extent that any such liability is found in a final judgment by a
court of competent jurisdiction (not subject to further appeal) to have resulted
primarily and directly from such Indemnified Party’s gross negligence or willful
misconduct.
These Indemnification Provisions shall
extend to the following persons (collectively, the
“Indemnified
Parties”
): the Placement Agent, its present and former
affiliated entities, managers, members, officers, employees, consultants,
advisors, legal counsel, agents and controlling persons (within the meaning of
the federal securities laws), and the officers, directors, partners
stockholders, members, managers, employees, legal counsel, agents and
controlling persons of any of them. These indemnification provisions
shall be in addition to any liability, which the Company may otherwise have to
any Indemnified Party. If any action, suit, proceeding or
investigation is commenced, as to which an Indemnified Party proposes to demand
indemnification, it shall notify the Company with reasonable promptness;
provided, however,
that any failure by an Indemnified party to notify the Company shall not relieve
the Company from its obligations hereunder. An Indemnified Party
shall have the right to retain counsel of its own choice to represent it, and
the fees, expenses and disbursements of such counsel shall be borne by the
Company. Any such counsel shall, to the extent consistent with its
professional responsibilities, cooperate with the Company and any counsel
designated by the Company. The Company shall be liable for any
settlement of any claim against any Indemnified Party made with the Company’s
written consent. The Company shall not, without the prior written
consent of the Placement Agent settle or compromise any claim, or permit a
default or consent to the entry of any judgment in respect thereof, unless such
settlement, compromise or consent (I) includes, as an unconditional term
thereof, the giving by the claimant to all of the Indemnified Parties of an
unconditional release from all liability in respect of such claim, and (ii) does
not contain any factual or legal admission by or with respect to an Indemnified
Party or an adverse statement with respect to the character, professionalism,
expertise of any of the Indemnified Party or any action or inaction of any
Indemnified Party.
In order
to provide for just and equitable contribution, if a claim or indemnification
pursuant to these indemnification provisions Is made but is found in a final
judgment by a court competent jurisdiction (not subject to further appeal) that
such indemnification may not be enforced in such case, even though the express
provisions hereof provide for indemnification in such case, then the Company
shall contribute to the Losses to which any Indemnified Party may be subject to
in accordance with the relative benefits received by the Company and its
stockholders, subsidiaries and affiliates, on the one hand, and the Indemnified
Party, on the other hand and (ii) if (and only if) the allocation provided in
clause (I) of this sentence is not permitted by applicable law, in such
proportion as to reflect not only the relative benefits, but also the relative
fault of the Company, on the one hand, and the Indemnified Party, on the other
hand, in connection with statements, acts or omissions which results in such
Losses as well as any relevant equitable considerations. No person
found liable for a fraudulent misrepresentation shall
be
entitled to contribution from any person who is not also found liable for
fraudulent misrepresentation. The relative benefits received (or
anticipated to be received) by the Company and its stockholders, subsidiaries
and affiliates shall be deemed to be equal to the aggregate consideration
payable or receivable by such parties in connection with the transaction or
transactions to which the Agreement relates relative to the amount of fees
actually received by the Placement Agent in connection with such transaction or
transactions. Notwithstanding the foregoing, in no event shall the
amount contributed by all Indemnified Parties exceed the amount of fees
previously received by Placement Agent pursuant to the Agreement.
Neither
termination nor completion of the Agreement shall affect these Indemnified
Provisions which shall remain operative and in full force and effect. The
Indemnified Provisions shall be binding upon the Company and its successors and
assigns and shall inure to the benefit of the Indemnified Parties and their
respective successors, assigns, heirs and personal representatives.
Section
10.
Notices
All
notices provided hereunder shall be given in writing and either delivered
personally or by overnight courier service or sent by certified , return receipt
requested, or by facsimile transmission, if to Hallmark Investments, Inc., 420
Lexington Avenue, New York, NY 10170, Attn: Edward Taylor, Managing Partner, Fax
No.: (212) 661-2055, and if to the Company, to the address, set forth on the
first page of this Agreement: Ms. Kathleen T. Karloff, CEO, INVO Bioscience,
Inc., 100 Cummings Center, suite E421, Beverly, MA 01915: Fax No.: (978)
878-9505.
-443-1989
Section
11.
Invalidation of Prior
Agreement
It is
herby agreed by the parties hereto that the Agreement executed by the Company
and the Placement Agent dated June 1, 2009 is deemed as null and
void.
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Very
truly yours,
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Hallmark
Investments, Inc.
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By:
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/s/ Edward
Taylor
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Edward
Taylor
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Managing
Partner
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ACCEPTED
AND AGREED TO
AS OF THE
DATE FIRST ABOVE WRITTEN
INVO
Bioscience, Inc
.
/s/
Kathleen Karloff
By:
Kathleen T. Karloff
Title:
CEO