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 28,
2017
YOUNGEVITY INTERNATIONAL, INC.
(Exact
name of registrant as specified in its charter)
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Delaware
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000-54900
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90-0890517
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(State
or other jurisdiction of incorporation)
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(Commission
File No.)
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(IRS
Employer Identification No.)
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2400 Boswell Road, Chula Vista, CA 91914
(Address
of principal executive offices) (Zip Code)
Registrant’s
telephone number, including area code: (619) 934-3980
N/A
(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:
☐
Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Indicate
by check mark whether the registrant is an emerging growth company
as defined in in Rule 405 of the Securities Act of 1933
(§230.405 of this chapter) or Rule 12b-2 of the Securities
Exchange Act of 1934 (§240.12b-2 of this
chapter).
Emerging
growth company ☑
If an
emerging growth company, indicate by checkmark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange
Act. ☐
Item
1.01
Entry
into a Material Definitive Agreement.
On July 28, 2017,
Youngevity International, Inc. (the “
Company
”), closed
the first tranche of its private placement offering (the
“
Offering
”) pursuant to
which the Company offered for sale a minimum of $100,000 of
units up to a maximum of $10,000,000 of units, with each unit (a
“
Unit
”)
consisting of: (i) a three (3) year convertible note in the
principal amount of $25,000 (the “
Note
or
Notes
”) initially
convertible into shares of the Company’s common stock, par
value $0.001 per share (the “
Common Stock
”), at $4.60
per share (subject to adjustment); and (ii) Series D Warrant (the
“
Class D
Warrant
” or “
Warrant(s)
”), exercisable
to purchase 50% of the number of shares issuable upon conversion of
the Note at an exercise price equal to $5.56. On July 28, 2017, the
Company entered into a Note Purchase Agreement with eight (8)
accredited investors pursuant to which the Company raised gross
cash proceeds of $2,100,000 in the Offering and sold Notes in the
aggregate principal amount of $2,100,000, convertible into 456,522
shares of the Company’s Common Stock, at a conversion price
of $4.60 per share, subject to adjustment as provided therein; and
Warrants to purchase 228,261 shares of Common Stock at an exercise
price of $5.56. In addition, as part of the Offering, three (3)
investors in the Company’s 2015 private placement (the
“
Prior
Investors
”), converted their 8% Series C Convertible
Notes in the aggregate principal amount of $4,200,349 together with
accrued interest thereon into new convertible notes for an equal
principal amount, convertible into 913,119 shares of Common Stock
and class D warrants to purchase an aggregate of 456,560 shares of
Common Stock. The new note will carry the same interest rate as the
prior note. The Prior Investors also agreed to exchange their
Series A Warrants dated October 26, 2015 to purchase an aggregate
of 279,166 shares of Common Stock for a new warrant to purchase an
aggregate of 182,065 shares of Common Stock. The Offering was
extended an additional thirty (30) days from the initial closing
date of July 31, 2017. The Company intends to use the proceeds for
working capital purposes. For twelve (12) months following
the Closing, the investors have the right to participate in any
future equity financings by the Company up to their pro rata share
of the maximum offering amount in the
aggregate.
The
Notes bear interest at a rate of eight percent (8%) per annum. The
Company has the right to prepay the Notes at any time after the one
year anniversary date of the issuance of the Notes at a rate equal
to 110% of the then outstanding principal balance and accrued
interest. The Notes automatically convert to Common Stock if prior
to the maturity date the Company sells Common Stock, preferred
stock or other equity-linked securities with aggregate gross
proceeds of no less than $3,000,000 for the purpose of raising
capital. The Notes provide for full ratchet price protection for a
period of nine months after their issuance and thereafter weighted
average price adjustment.
The
Warrants contain cashless exercise provisions in the event a
registration statement registering the Common Stock underlying the
Warrants has not been declared effective by the Securities and
Exchange Commission (the “
SEC
”) by specified dates
and customary anti-dilution protection and registration rights. The
Warrants expire thirty-six (36) months from the date of the closing
and have an initial exercise price of $5.56 per share.
In
connection with the Offering, the Company also entered into a
registration rights agreement with the investors in the Offering
(the “
Registration
Rights Agreement
”). The Registration Rights Agreement
requires that the Company file a registration statement (the
“
Initial
Registration Statement
”) with the SEC within ninety
(90) days of the final closing date of the Offering (the
“
Filing
Date
”) for the resale by the investors of all of the
Common Shares underlying the Notes and the Warrants and all shares
of Common Stock issuable upon any stock split, dividend or other
distribution, recapitalization or similar event with respect
thereto (the “
Registrable
Securities
”). The Initial Registration
Statement must be declared effective by the SEC on the later of 180
days of the final closing date of the Offering or, if the
registration statement receives a full review by the SEC, 210 days
of the final closing date (the “
Effectiveness Date
”)
subject to certain adjustments. Upon the occurrence of certain
events (each an “
Event
”), including, but
not limited to, that the Initial Registration Statement is not
filed prior to the Filing Date or declared effective by the
Effectiveness Date, the Company will be required to pay to the
investors liquidated damages of 1.0% of their respective aggregate
purchase price upon the date of the Event and then monthly
thereafter until the Event is cured. In no event may the aggregate
amount of liquidated damages payable to each of the Purchasers
exceed in the aggregate 10% of the aggregate purchase price paid by
such Purchaser for the Registrable Securities.
The
Company paid a placement fee of $262,008.73, excluding legal
expenses and has agreed to issue to the Placement Agent three-year
warrants to purchase 159,817 shares of Common Stock at an exercise
price of $5.56 per share and the Company has agreed to issue the
Placement Agent 22,680 shares of the Company’s common stock,
par value $0.001 per share.
The
foregoing descriptions of the Note Purchase Agreement, the Notes,
the Warrants, and the Registration Rights Agreement are qualified
in their entirety by reference to the full text of the Note
Purchase Agreement, Notes, the Warrants, and the Registration
Rights Agreement (herein, the “
Transaction Documents
”),
copies of each of which are attached as Exhibit Items 4.1, 4.2,
4.3, and 4.4, respectively, below.
Important Notice regarding the Transaction Documents
The Transaction Documents have been included as exhibits to this
Current Report on Form 8-K to provide investors and security
holders with information regarding their terms. They are not
intended to provide any other financial information about the
Company or its subsidiaries. The representations, warranties and
covenants contained in the Transaction Documents were made only for
purposes of those agreements and as of specific dates; were solely
for the benefit of the parties to the Transaction Documents; may be
subject to limitations agreed upon by the parties, including being
qualified by disclosures made for the purposes of allocating
contractual risk between the parties to the Transaction Documents
instead of establishing these matters as facts; and may be subject
to standards of materiality applicable to the contracting parties
that differ from those applicable to investors. Investors should
not rely on the representations, warranties and covenants or any
description thereof as characterizations of the actual state of
facts or condition of the Company. Moreover, information concerning
the subject matter of the representations, warranties and covenants
may change after the date of the Transaction Documents, which
subsequent information may or may not be fully reflected in public
disclosures by the Company.
Item
2.03
Creation
of a Direct Financial Obligation of an Obligation Under an Off
Balance Sheet Arrangement of a Registrant
The
information contained in Item 1.01 above is hereby incorporated by
reference in this Item 2.03.
Item
3.02
Unregistered
Sales of Equity Securities.
The
Notes and Warrants, including the Warrants issued to the Placement
Agent in the Offering, as well as the shares of Common Stock
issuable upon conversion of the Notes and acquirable upon exercise
of the Warrants, were not registered under the Securities Act of
1933, as amended (the “
Securities Act
”), or the
securities laws of any state, and were offered and sold in reliance
on the exemption from registration afforded by Section 4(a)(2) and
Regulation D (Rule 506) under the Securities Act and corresponding
provisions of state securities laws, which exempt transactions by
an issuer not involving any public offering. The investors are
“accredited investors” as such term is defined in
Regulation D promulgated under the Securities Act. This
Current Report on Form 8-K shall not constitute an offer to sell or
the solicitation of an offer to buy securities, nor shall such
securities be offered or sold in the United States absent
registration or an applicable exemption from the registration
requirements and certificates evidencing such securities contain a
legend stating the same.
Item
9.01
Financial
Statements and Exhibits.
(d)
Exhibits
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Exhibit No.
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Name of Exhibit
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4.1
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Form of
Note Purchase Agreement
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4.2
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Form of
Convertible Note
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4.3
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Form of
Series D Warrant
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4.4
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Form of
Registration Rights Agreement
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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 hereunto duly authorized.
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YOUNGEVITY
INTERNATIONAL, INC.
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Date:
August 3, 2017
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By: /s/
David
Briskie
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Name:
David Briskie
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Title:
Chief Financial Officer
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Exhibit
4.1
NOTE PURCHASE AGREEMENT
among
YOUNGEVITY INTERNATIONAL, INC.
and
THE PURCHASERS LISTED ON EXHIBIT A
Dated as of July , 2017
Table
of Contents
ARTICLE
1
PURCHASE AND SALE
OF THE UNITS
Section
1.1
Purchase and Sale
of Units
Section
1.3
Note and Warrant
Shares
Section
1.4
Purchase Price and
Closing
ARTICLE
2
REPRESENTATIONS AND
WARRANTIES
Section
2.1
Representations and
Warranties of the Company and Subsidiary
Section
2.2
Representations and
Warranties of the Purchasers
Section
3.1
Use of
Proceeds
Section
3.2
Securities
Compliance
Section
3.4
Keeping of Records
and Books of Account
Section
3.6
Other
Agreements
Section
3.7
Senior
Status
Section
3.8
Reservation of
Shares
Section
3.9
Disposition of
Assets
Section
3.8
Reporting
Status
Section
3.9
Disclosure of
Transaction
Section
3.10
Sarbanes-Oxley
Act
Section
3.11
Conversion and
Exercise Procedures
Section
3.12
No Integrated
Offerings
Section
3.13
Subsequent
Financing
Section
3.14
No Commissions in
Connection with Conversion of Notes
Section
3.15
Registration
Rights
Section
3.16 No Manipulation of Price
Section
3.17
Independent Nature
of Purchasers' Obligations and Rights
Section
3.18
Additional
Collateral; Further Assurances
Section
3.19
Best
Efforts
Section
4.1
Conditions
Precedent to the Obligation of the Company to Sell the
Units
Section
4.2
Conditions
Precedent to the Obligation of the Purchasers to Purchase the
Units
ARTICLE
5
STOCK CERTIFICATE
LEGEND
ARTICLE
6
INDEMNIFICATION
Section
6.1
General
Indemnity
Section
6.2
Indemnification
Procedure
Section
7.1
Fees and
Expenses
Section
7.2
Specific
Enforcement, Consent to Jurisdiction
Section
7.3
Entire Agreement;
Amendment
Section
7.7
Successors and
Assigns
Section
7.8
Rescission and
Withdrawal Right
Section
7.9
Replacement of
Securities
Section
7.10
Limitation of
Liability
Section
7.11
No Third Party
Beneficiaries
Section
7.12
Governing
Law
Section
7.14
Counterparts
Section
7.15
Severability
Section
7.16
Further
Assurances
EXHIBIT LIST
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Exhibit
A
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List of
Purchasers
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Exhibit
B
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Definition
of Accredited Investor
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Exhibit
B-1
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Accredited
Investor Representations and Acknowledgements
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Exhibit
B-2
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Subscription
Agreement
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Exhibit
C
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Form of
Convertible Note
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Exhibit
D
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Form of
Series D Warrant
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Exhibit
E
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Form of
Escrow Deposit Agreement
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Exhibit
F
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Form of
Registration Rights Agreement
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NOTE PURCHASE AGREEMENT
This
NOTE PURCHASE AGREEMENT (this “
Agreement
”) is dated as
of July , 2017 by and among Youngevity International, Inc., a
Delaware corporation (the “
Company
”), and each of
the Purchasers whose names are set forth on
Exhibit A
hereto (individually,
a “
Purchaser
” and
collectively, the “
Purchasers
”).
RECITALS
WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant
to Section 4(a)(2) of the Securities Act of 1933, as amended (the
“
Securities
Act
”) and/or Rule 506 promulgated thereunder, the
Company desires to issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, desires to purchase from the
Company, securities of the Company as more fully described in this
Agreement;
WHEREAS, the
Company is offering a minimum of $100,000 of Units (the
"
Minimum Offering
Amount
") and a maximum of $9,000,000 of Units (the
“
Maximum Offering
Amount
”), with a right
to
offer up to an additional $1,000,000 of Units (the
“
Over-allotment
Option
”) for a total
possible offering amount of $10,000,000;
the final offering
amount being hereinafter referred to as the “
Financing Transaction
”,
with each Unit (each a “
Unit
”)consisting of: (i)
a three (3) year convertible note (the “
Note(s)
”) in the
principal amount of $25,000 initially convertible into shares of
the Company’s common stock, par value $0.001 per share (the
“
Common
Stock
”) at the lessor of (x)
the volume weighted average price
(“
VWAP
”) of the
Company’s Common Stock for the five Business Days prior to
the Initial Closing Date, or (y)
$4.60 per share (subject to
adjustment); and (ii) one (1) Series D Warrant (the
“
Series D
Warrant
” or “
Warrant(s)
”), each
exercisable to purchase 50% of the number of shares of Common Stock
issuable upon conversion of the Note at an exercise price equal to
equal to one hundred twenty percent (120%) of the closing price of
the Company’s common stock on the Initial Closing Date;
and
AGREEMENT
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 Purchasers hereby agree as follows:
ARTICLE
1
PURCHASE AND SALE OF THE UNITS
Section
1.1
Purchase and Sale of Units
.
Upon the following terms and conditions, the Company is offering to
each Purchaser the number of Units set forth opposite such
Purchaser’s name as
Exhibit A
hereto, up to
$9,000,000, consisting of: (i) convertible Notes, in substantially
the form attached hereto as
Exhibit C
, initially
convertible into up to ________ shares of Common Stock (subject to
adjustment); and (ii) up to ________ Series D Warrants. The terms
and provisions of the Notes are set forth therein.
Section
1.2
Warrants
. Each of the
Purchasers shall be issued, as part of the Units and per each Unit,
one (1) Series D Warrant, each of which is exercisable to purchase
50% of the number of shares of Common Stock issuable upon
conversion of the Note, at a price equal to one hundred twenty
percent (120%) of the closing price of the Company’s Common
Stock on its Trading Market (as herein defined) on the Initial
Closing Date. The Series D Warrant, in substantially the form
attached hereto as
Exhibit
D,
shall expire thirty six (36) months following the Closing
Date.
Section
1.3
Note and Warrant Shares
. The
Company has authorized and has reserved and covenants to continue
to reserve, free of preemptive rights and other similar contractual
rights of stockholders, a number of shares of Common Stock equal to
one hundred ten percent (110%) of the number of shares of Common
Stock as shall from time to time be sufficient to effect conversion
of all of the Notes and exercise of the Warrants then outstanding.
Any shares of Common Stock issuable upon conversion of the Notes
and exercise of the Warrants (and such shares when issued) are
herein referred to as the “
Note Shares
” and the
“
Warrant
Shares
”, respectively. The Note Shares and the Warrant
Shares are sometimes collectively referred to as the
“
Shares
” and together with
the Notes and Warrants, the “
Securities
”.
Section
1.4
Purchase Price and Closing
.
Subject to the terms and conditions hereof, the Company agrees to
issue and sell to the Purchasers and, in consideration of and in
express reliance upon the representations, warranties, covenants,
terms and conditions of this Agreement, the Purchasers, severally
but not jointly, agree to purchase the Units for $25,000.00 per
Unit (the “
Unit
Price
”) for an aggregate purchase price up to
$10,000,000, including the over allotment options, (the amount paid
by each Purchaser is referred herein as the “
Purchase Price
”). Subject
to all conditions to closing being satisfied or waived, the closing
of the purchase and sale of the Units shall take place at the
offices of Hunter Taubman Fischer & Li LLC (the
“
Closing
”) by the earlier
to occur of (a) completion of the
Minimum Offering Amount
and
receipt by the Escrow Agent (as defined in the Escrow Deposit
Agreement) of the Minimum Offering Amount, or (b) by 5:00 pm
(Eastern Time) on _______ [ ], 2017 (the “
Initial Closing Date
”);
or by the earlier of (a) completion of the sale of all Units
included in the Maximum Offering (subject to increase to cover
over-allotments, if any), or (b) by 5:00 p.m. (Eastern Time) on
_______ [ ], 2017 (the “
Final Closing Date
”)
which can be further extended up to 30 days by the mutual agreement
of the Company and the Placement Agent if the sale of all Units in
the Maximum Offering has not been completed by _______ [ ], 2017
(the Final Closing Date, collectively with the Initial Closing Date
are sometimes referred herein as the “
Closing Date
”). Subject
to the terms and conditions of this Agreement, at the Closing the
Company shall deliver or cause to be delivered to each Purchaser
(x) Notes in the amount set forth opposite the name of such
Purchaser on
Exhibit
A
hereto, (y) the Warrants to purchase such number of shares
of Common Stock as is set forth opposite the name of such Purchaser
on
Exhibit A
attached hereto, and (z) any other documents required to be
delivered pursuant to
Article 4 hereof.
At the time of
the Closing, each Purchaser shall have delivered its Purchase Price
by wire transfer to the escrow account pursuant to the Subscription
Agreement and Escrow Deposit Agreement (as such terms are hereafter
defined). Subject to Section 7.18, the Company and Tripoint may
also, by mutual agreement, terminate the offering and the Company
and TriPoint Global Equities, LLC (the “
Placement Agent
”) would
then notify the Escrow Agent to return the funds deposited in
escrow, in accordance with the Escrow Deposit
Agreement.
ARTICLE
2
Representations and
Warranties
Section
2.1
Representations and Warranties of the
Company and Subsidiary
. The Company hereby represents and
warrants to the Purchasers on behalf of itself, its Subsidiaries,
as set forth on
Schedule
2.1(e)
, as of the date hereof (except as set forth on the
Schedule of Exceptions attached hereto with each numbered Schedule
corresponding to the section number herein), as
follows:
(a)
Organization, Good Standing and
Power
. Each of the Company and its Subsidiaries is a
corporation or other entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation or organization (as applicable)
and has the requisite corporate power to own, lease and operate its
properties and assets and to conduct its business as it is now
being conducted. Except as set forth on
Schedule 2.1(a)
, each of the
Company and its Subsidiary is duly qualified to do business and is
in good standing in every jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification
necessary except for any jurisdiction(s) (alone or in the
aggregate) in which the failure to be so qualified will not have a
Material Adverse Effect (as defined in Section 2.1(g) hereof) on
the Company’s consolidated financial condition.
(b)
Corporate Power; Authority and
Enforcement
. The Company has the requisite corporate power
and authority to enter into and perform this Agreement, the Escrow
Deposit Agreement by and among the Company, the Placement Agent and
the escrow agent named therein, substantially in the form of
Exhibit E
attached
hereto (the “
Escrow
Deposit Agreement
”), the Registration Rights
Agreement, substantially in the form of
Exhibit F
attached hereto (the
“
Registration Rights
Agreement
”), the Notes, and the Warrants
(collectively, the “
Transaction Documents
”),
and to issue and sell the Units in accordance with the terms
hereof. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action, and no
further consent or authorization of the Company or its Board of
Directors or stockholders is required. Each of the Transaction
Documents constitutes, or shall constitute when executed and
delivered, a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor’s rights and
remedies or by other equitable principles of general
application.
(c)
Capitalization
. The authorized
capital stock of the Company and the shares thereof currently
issued and outstanding as of the date hereof is set forth on
Schedule 2.1(c)
hereto. All of the issued and outstanding shares of the Common
Stock have been duly and validly authorized. Except as contemplated
by the Transaction Documents or as set forth on
Schedule 2.1(c)
hereto:
(i)
no shares of Common
Stock are entitled to preemptive, conversion or other rights and
there are no outstanding options, warrants, scrip, rights to
subscribe to, call or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares
of capital stock of the Company;
(ii)
there
are no contracts, commitments, understandings, or arrangements by
which the Company is or may become bound to issue additional shares
of capital stock of the Company or options, securities or rights
convertible into shares of capital stock of the
Company;
(iii)
the
Company is not a party to any agreement granting registration or
anti-dilution rights to any person with respect to any of its
equity or debt securities; and
(iv)
the
Company is not a party to, and it has no knowledge of, any
agreement restricting the voting or transfer of any shares of the
capital stock of the Company.
The
offer and sale of all capital stock, convertible securities,
rights, warrants, or options of the Company issued prior to the
Closing complied with all applicable Federal and state securities
laws. The Company has furnished or made available to the Purchasers
true and correct copies of the Company’s Certificate of
Incorporation, as amended and in effect on the date hereof (the
“
Certificate of
Incorporation
”), and the Company’s Bylaws, as
amended and in effect on the date hereof (the “
Bylaws
”). Except as
restricted under applicable federal, state, local or foreign laws
and regulations, the Certificate of Incorporation, or the
Transaction Documents, or as set forth on
Schedule 2.1 (c)
, no written or
oral contract, instrument, agreement, commitment, obligation, plan
or arrangement of the Company shall limit the payment of dividends
on the Company’s Common Stock.
(d)
Issuance of Shares
. The Units,
the Notes, and the Warrants to be issued at the Closing have been
duly authorized by all necessary corporate action and immediately
after the Closing, the Purchasers will be the record and beneficial
owners of all of such securities and have good and valid title to
all of such securities, free and clear of all encumbrances. When
the Note Shares and the Warrant Shares are issued in accordance
with the terms of the Notes and the Warrants, respectively, such
Shares will be duly authorized by all necessary corporate action
and validly issued and outstanding, fully paid and nonassessable,
and the holders will be entitled to all rights accorded to a holder
of Common Stock and will be the record and beneficial owners of all
of such securities and have good and valid title to all of such
securities, free and clear of all encumbrances.
(e)
Subsidiaries
.
Schedule 2.1(e)
hereto sets
forth each Subsidiary of the Company, showing the jurisdiction of
its incorporation or organization and showing the percentage of
ownership of each Subsidiary. There are no outstanding preemptive,
conversion or other rights, options, warrants or agreements granted
or issued by or binding upon any Subsidiary for the purchase or
acquisition of any shares of capital stock of any Subsidiary or any
other securities convertible into, exchangeable for or evidencing
the rights to subscribe for any shares of such capital stock.
Neither the Company, nor any Subsidiary is subject to any
obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of the capital stock of any Subsidiary
or any convertible securities, rights, warrants or options of the
type described in the preceding sentence. Except as filed as
exhibits to the Commission Documents (as defined below), neither
the Company nor any Subsidiary is party to, nor has any knowledge
of, any agreement restricting the voting or transfer of any shares
of the capital stock of any Subsidiary. All of the outstanding
shares of capital stock of each Subsidiary has been duly authorized
and validly issued, and are fully paid and non-assessable. For the
purposes of this Agreement, “
Subsidiary
” shall mean
any corporation or other entity of which at least a majority of the
securities or other ownership interests having ordinary voting
power (absolutely or contingently) for the election of directors or
other persons performing similar functions are at the time owned
directly or indirectly by the Company and/or any
Subsidiary.
(f)
Shell Company Status
. The
Company is not a shell company (as defined in Rule 405 under the
Securities Act) and has never been an issuer subject to Rule 144(i)
under the Securities Act.
(g)
Commission Documents, Financial
Statements
. The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by it
with the Securities and Exchange Commission (the
“
Commission”
)
pursuant to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the “
Exchange Act
”), including
material filed pursuant to Section 13(a) or 15(d) of the Exchange
Act (all of the foregoing including filings incorporated by
reference therein being referred to herein as the
“
Commission
Documents
”). The Company has not provided to the
Purchasers any material non-public information or other information
which, according to applicable law, rule or regulation, was
required to have been disclosed publicly by the Company but which
has not been so disclosed, other than (i) with respect to the
transactions contemplated by this Agreement, or (ii) pursuant to a
non-disclosure or confidentiality agreement signed by the
Purchasers. At the time of the respective filings, the Annual
Report on Form 10-K for the year ended December 31, 2016 (the
“
Form
10-K
”) and the Quarterly Report on Form 10-Q for the
quarter ended on March 31, 2017 (the “
Form 10-Q
”) complied in
all material respects with the requirements of the Exchange Act and
the rules and regulations of the Commission promulgated thereunder
and other federal, state and local laws, rules and regulations
applicable to such documents. As of their respective filing dates,
neither the Form 10-K nor the Form 10-Q contained any untrue
statement of a material fact; and neither omitted to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of
the Company included in the Commission Documents (the
“
Financial
Statements
”) comply as to form in all material
respects with applicable accounting requirements and the published
rules and regulations of the Commission or other applicable rules
and regulations with respect thereto. The Financial Statements have
been prepared in accordance with United States generally accepted
accounting principles (“
GAAP
”) applied on a
consistent basis during the periods involved (except: (i) as may be
otherwise indicated in the Financial Statements or the notes
thereto; or (ii) in the case of unaudited interim statements, to
the extent they may not include footnotes or may be condensed or
summary statements), and fairly present in all material respects
the consolidated financial position of the Company as of the dates
thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
(h)
No Material Adverse Effect
.
Since March 31, 2017, neither the Company, nor any Subsidiary has
experienced or suffered any Material Adverse Effect. For the
purposes of this Agreement, “
Material Adverse Effect
”
means any of: (i) a material and adverse effect on the legality,
validity or enforceability of this Agreement or the other
Transaction Documents; (ii) a material adverse effect on the
business, operations, properties, or financial condition of the
Company, its Subsidiaries, individually, or in the aggregate and/or
any condition, circumstance, or situation that would prohibit or
otherwise materially interfere with the ability of the Company to
perform any of its obligations under this Agreement or the other
Transaction Documents in any material respect; or (iii) an adverse
impairment to the Company’s ability to perform on a timely
basis its obligations under this Agreement or the other Transaction
Document.
(i)
No Undisclosed Liabilities
.
Other than as disclosed on
Schedule 2.1(i
) or set forth in
the Commission Documents, to the knowledge of the Company, neither
the Company, nor any Subsidiary has any liabilities, obligations,
claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) other than
those incurred in the ordinary course of the Company’s and
any Subsidiary’s respective businesses since March 31, 2017
and those which, individually or in the aggregate, do not have a
Material Adverse Effect on the Company and any
Subsidiary.
(j)
No Undisclosed Events or
Circumstances
. To the Company’s knowledge, no event or
circumstance has occurred or exists with respect to the Company or
any Subsidiary or their respective businesses, properties,
operations or financial condition, which, under applicable law,
rule or regulation, requires public disclosure or announcement by
the Company but which has not been so publicly announced or
disclosed.
(k)
Indebtedness
. Other than as set
forth on
Schedule
2.1(k)
, the Financial Statements set forth all outstanding
secured and unsecured Indebtedness of the Company, or for which the
Company, or any Subsidiary have commitments as of the date of the
Financial Statements or any subsequent period that would require
disclosure. For the purposes of this Agreement, “
Indebtedness
” shall mean
(i) any liabilities for borrowed money or amounts owed (other than
trade accounts payable incurred in the ordinary course of
business); (ii) all guaranties, endorsements and other contingent
obligations in respect of Indebtedness of others, whether or not
the same should be reflected in the Company’s consolidated
balance sheet (or the Units thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (iii)
the present value of any lease payments due under leases required
to be capitalized in accordance with GAAP. Neither the Company, nor
any Subsidiary is in default with respect to any Indebtedness
which, individually or in the aggregate, would have a Material
Adverse Effect.
(l)
Title to Assets
. Except as set
forth on
Schedule
2.1(l)
, the Company has good and marketable title in fee
simple to all real property owned by it and good and marketable
title in all personal property owned by it that is material to the
business of the Company, in each case free and clear of all Liens,
except for: (i) Liens as do not materially affect the value of such
property and do not materially interfere with the use made and
proposed to be made of such property by the Company; and (ii) Liens
for the payment of federal, state or other taxes, for which
appropriate reserves have been made therefore in accordance with
GAAP and, the payment of which is neither delinquent nor subject to
penalties (liens referenced in subsection (i) and (ii) above are
collectively referred to as “
Permitted Liens
”). Any
real property and facilities held under lease by the Company are
held by it under valid, subsisting and enforceable leases with
which the Company is in compliance.
(m)
Actions Pending
. Except as
disclosed in the Commission Documents or on
Schedule 2.1(m)
, there is no
action, suit, claim, investigation, arbitration, alternate dispute
resolution proceeding or any other proceeding pending or, to the
knowledge of the Company, threatened against or involving the
Company, any Subsidiary: (i) which questions the validity of this
Agreement or any of the other Transaction Documents or the
transactions contemplated hereby or thereby or any action taken or
to be taken pursuant hereto or thereto; or (ii) involving any of
their respective properties or assets. To the knowledge of the
Company, there are no outstanding orders, judgments, injunctions,
awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company or any Subsidiary or any of
their respective executive officers or directors in their
capacities as such.
(n)
Compliance with Law
. The
Company and its Subsidiaries have all material franchises, permits,
licenses, consents and other governmental or regulatory
authorizations and approvals necessary for the conduct of their
respective business as now being conducted by it unless the failure
to possess such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals,
individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect.
(o)
Compliance
. Except as set forth
in the in
Schedule
2.1(o)
, the Company: (i) is not in default under or in
violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a
default by the Company), nor has the Company received notice of a
claim that it is in default under or that it is in violation of,
any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has
been waived), (ii) is in violation of any judgment, decree or order
of any court, arbitrator or other governmental authority or (iii)
is or has been in violation of any statute, rule, ordinance or
regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to
taxes, environmental protection, occupational health and safety,
product quality and safety and employment and labor matters, except
in each case as could not have or reasonably be expected to result
in a Material Adverse Effect.
(p)
No Violation.
The business of
the Company and any Subsidiary is not being conducted in violation
of any federal, state, local or foreign governmental laws, or
rules, regulations and ordinances of any governmental entity,
except for possible violations which singularly or in the aggregate
could not reasonably be expected to have a Material Adverse Effect.
The Company is not required under federal, state, local or foreign
law, rule or regulation to obtain any consent, authorization or
order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform
any of its obligations under the Transaction Documents, or issue
and sell the Units, the Notes, the Warrants, the Notes Shares or
the Warrant Shares in accordance with the terms hereof or thereof
(other than (x) any consent, authorization or order that has been
obtained as of the date hereof, (y) any filing or registration that
has been made as of the date hereof or (z) any filings which may be
required to be made by the Company with the Commission or state
securities administrators subsequent to the Closing).
(q)
No Conflicts
. The execution,
delivery and performance of this Agreement and the Transaction
Documents by the Company and the consummation by the Company of the
transactions contemplated herein and therein do not and will not:
(i) violate any provision of the Certificate of Incorporation or
Bylaws; (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument
or obligation to which the Company or any Subsidiary is a party or
by which it or its properties or assets are bound; (iii) create or
impose a lien, mortgage, security interest, pledge, charge or
encumbrance (collectively, “
Lien
”) of any nature on
any property of the Company or any Subsidiary under any agreement
or any commitment to which the Company or any Subsidiary is a party
or by which the Company, or any Subsidiary is bound or by which any
of its respective properties or assets are bound; or (iv) result in
a violation of any federal, state, local or foreign statute, rule,
regulation, order, judgment or decree (including federal and state
securities laws and regulations) applicable to the Company or any
Subsidiary or by which any property or asset of the Company, or any
Subsidiary are bound or affected,
provided
,
however
, that, excluded from
the foregoing in all cases are such conflicts, defaults,
terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a
Material Adverse Effect.
(r)
Taxes
. Other than as set forth
on
Schedule 2.1(r)
,
each of the Company and any Subsidiary, to the extent its
applicable, has accurately prepared and filed all federal, state
and other tax returns required by law to be filed by it, has paid
or made provisions for the payment of all taxes shown to be due
other than payment being contested and all additional assessments,
and adequate provisions have been and are reflected in the
consolidated financial statements of the Company for all current
taxes and other charges to which the Company, or any Subsidiary, if
any, is subject and which are not currently due and payable. None
of the federal income tax returns of the Company have been audited
by the Internal Revenue Service. The Company has no knowledge of
any additional assessments, adjustments or contingent tax liability
(whether federal, state or foreign) of any nature whatsoever,
whether pending or threatened against the Company or any Subsidiary
for any period, nor of any basis for any such assessment,
adjustment or contingency.
(s)
Certain Fees
. The Company has
agreed to pay Tripoint Global Equities, LLC
(“Tripoint”) or its assigns, a cash placement agent fee
equal to eight percent (8%) of the amount of the gross cash
proceeds received by the Company in connection with the Financing
Transaction and warrants to purchase securities of the Company
equal to eight percent (8%) of the amount of securities underlying
the Notes, exercisable at the Conversion Price of the Notes, and
eight percent (8%) of the amount of securities underlying the
Warrants, exercisable at the Exercise Price of the Warrants,
whether or not converted or exercised, respectively.
Notwithstanding the foregoing, the Company shall pay Tripoint or
its assigns, a cash placement agent fee equal to six percent (6%)
of the amount of the gross cash proceeds received by the Company
from any investor identified directly by its officers, directors or
shareholders, including current shareholder Raymond Bennett, in
connection with the Financing Transaction and warrants to purchase
securities of the Company equal to six percent (6%) of the amount
of securities underlying the Notes, exercisable at the Conversion
Price of the Notes, and six percent (6%) of the amount of
securities underlying the Warrants, exercisable at the Exercise
Price of the Warrants, whether or not converted or exercised,
respectively. Furthermore, The Company has agreed to pay Tripoint
or its assigns, a cash placement agent fee equal to two and one
half percent (2.5%) of the gross amount of any debt conversion from
current Company debt holders (Carl Grover, Tom Myers and Paul
Sallwasser) into the Financing Transaction (“
Debt Conversion
”), a
common stock fee of two and one half percent (2.5%) of the Debt
Conversion and warrants to purchase securities of the Company equal
to seven percent (7%) of the amount of securities underlying the
Notes, exercisable at the Conversion Price of the Notes, and seven
percent (7%) of the amount of securities underlying the Warrants,
exercisable at the Exercise Price of the Warrants, whether or not
converted or exercised, respectively. The warrants to be issued to
Tripoint will provide that cashless exercise of such warrants will
be available at any time before the three year anniversary of the
Closing Date. The Company shall also be prepared to pay reasonable
legal fees, not to exceed $15,000 in the aggregate. Except as set
forth herein, no brokers fees, finders fees or financial advisory
fees or commissions will be payable by the Company with respect to
the transactions contemplated by this Agreement and the other
Transaction Documents.
(t)
Intellectual Property
. Each of
the Company and any Subsidiary, owns or has the lawful right to use
all patents, trademarks, domain names (whether or not registered)
and any patentable improvements or copyrightable derivative works
thereof, websites and intellectual property rights relating
thereto, service marks, trade names, copyrights, licenses and
authorizations, if any, and all rights with respect to the
foregoing, if any, which are necessary for the conduct of their
respective business as now conducted without any conflict with the
rights of others, except where the failure to so own or possess
would not have a Material Adverse Effect.
(u)
Books and Records Internal Accounting
Controls
. Except as may have otherwise been disclosed in the
Commission Documents, the books and records of the Company, and any
Subsidiary accurately reflect in all material respects the
information relating to the business of the Company and any
Subsidiary, the location and collection of their assets, and the
nature of all transactions giving rise to the obligations or
accounts receivable of the Company, or any Subsidiary. Except as
disclosed on
Schedule
2.1(u),
the Company and any Subsidiary maintain a system of
internal accounting controls sufficient, in the judgment of the
Company, to provide reasonable assurance that: (i) transactions are
executed in accordance with management’s general or specific
authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP
and to maintain asset accountability; (iii) access to assets is
permitted only in accordance with management’s general or
specific authorization; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals
and appropriate actions are taken with respect to any
differences.
(v)
Material Agreements
. Any and
all written or oral contracts, instruments, agreements,
commitments, obligations, plans or arrangements, the Company and
any Subsidiary is a party to, that a copy of which would be
required to be filed with the Commission as an exhibit to a
registration statement (collectively, the “
Material Agreements
”) if
the Company or any Subsidiary were registering securities under the
Securities Act has previously been publicly filed with the
Commission in the Commission Documents. Each of the Company and any
Subsidiary has in all material respects performed all the
obligations required to be performed by them to date under the
foregoing agreements, have received no notice of default and are
not in default under any Material Agreement now in effect the
result of which would cause a Material Adverse Effect.
(w)
Transactions with Affiliates
.
Except as set forth in the Financial Statements or in the
Commission Documents or on
Schedule 2.1(w)
, there are no
loans, leases, agreements, contracts, royalty agreements,
management contracts or arrangements or other continuing
transactions between: (i) the Company, or any Subsidiary on the one
hand; and (ii) on the other hand, any officer, employee, consultant
or director of the Company or any Subsidiary, or any person owning
more than ten percent (10%) capital stock of the Company, or any
Subsidiary, or any member of the immediate family of such officer,
employee, consultant, director or stockholder or any corporation or
other entity controlled by such officer, employee, consultant,
director or stockholder, or a member of the immediate family of
such officer, employee, consultant, director or
stockholder.
(x)
Private Placement and
Solicitation
. Assuming the accuracy of the Purchasers’
representations and warranties set forth in
Section 2.2
, no registration
under the Securities Act is required for the offer and sale of the
Securities by the Company to the Purchasers as contemplated hereby.
Based in part on the accuracy of the representations of the
Purchasers in
Section
2.2
, and subject to timely applicable Form D filings
pursuant to Regulation D of the Securities Act with the Commission
and pursuant to applicable state securities laws, the offer, sale
and issuance of the Securities to be issued pursuant to and in
conformity with the terms of this Agreement, will be issued in
compliance with all applicable federal and state securities laws.
Neither the Company nor any of its affiliates, nor any person
acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer
or sale of any of the Units, Notes or Warrants.
(y)
Governmental Approvals
. Except
for the filing of any notice prior or subsequent to the Closing
Date that may be required under applicable state and/or federal
securities laws (which if required, shall be filed on a timely
basis), including the filing of a Form D, no authorization,
consent, approval, license, exemption of, filing or registration
with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, is or will
be necessary for, or in connection with, the execution or delivery
of the Units, the Notes and the Warrants, or for the performance by
the Company of its obligations under this Agreement and the
Transaction Documents.
(z)
Employees
. Except as disclosed
on
Schedule 2.1(z
),
neither the Company nor any Subsidiary has any collective
bargaining arrangements covering any of its employees.
Schedule 2.1(z)
sets forth a
list of the employment contracts, agreements regarding proprietary
information, non-competition agreements, non-solicitation
agreements, confidentiality agreement, or any other similar
contract or restrictive covenant, relating to the right of any
officer, employee or consultant to be employed or engaged by the
Company. Since March 31, 2017, no officer, consultant or key
employee of the Company or any Subsidiary whose termination, either
individually or in the aggregate, would have a Material Adverse
Effect, has terminated or, to the knowledge of the Company, has any
present intention of terminating his or her employment or
engagement with the Company or any Subsidiary.
(aa)
Absence
of Certain Developments
. Except as disclosed on
Schedule 2.1(aa)
, since March
31, 2017, other than in the ordinary course of business, neither
the Company, nor any Subsidiary have:
(i)
issued any stock,
bonds or other corporate securities or any rights, options or
warrants with respect thereto;
(ii)
borrowed
any amount or incurred or become subject to any liabilities
(absolute or contingent) except current liabilities incurred in the
ordinary course of business which are comparable in nature and
amount to the current liabilities incurred in the ordinary course
of business during the comparable portion of its prior fiscal year,
as adjusted to reflect the current nature and volume of the
business of the Company and any Subsidiary;
(iii)
discharged
or satisfied any lien or encumbrance or paid any obligation or
liability (absolute or contingent), other than current liabilities
paid in the ordinary course of business;
(iv)
declared
or made any payment or distribution of cash or other property to
stockholders with respect to its stock, or purchased or redeemed,
or made any agreements so to purchase or redeem, any shares of its
capital stock;
(v)
sold, assigned or
transferred any other tangible assets, or canceled any debts or
claims, except in the ordinary course of business;
(vi)
sold,
assigned or transferred any patent rights, trademarks, trade names,
copyrights, trade secrets or other intangible assets or
intellectual property rights, or disclosed any proprietary
confidential information to any person except to customers in the
ordinary course of business or to the Purchasers or their
representatives;
(vii)
suffered
any material losses or waived any rights of material value, whether
or not in the ordinary course of business, or suffered the loss of
any material amount of prospective business;
(viii)
made
any changes in employee compensation except in the ordinary course
of business and consistent with past practices;
(ix)
made
capital expenditures or commitments therefor that aggregate in
excess of $50,000;
(x)
entered into any
other transaction other than in the ordinary course of business, or
entered into any other material transaction, whether or not in the
ordinary course of business;
(xi)
made
charitable contributions or pledges in excess of
$10,000;
(xii)
suffered
any material damage, destruction or casualty loss, whether or not
covered by insurance;
(xiii)
experienced
any material problems with labor or management in connection with
the terms and conditions of their employment;
(xiv)
effected
any two or more events of the foregoing kind which in the aggregate
would be material to the Company or any Subsidiary; or
(bb)
entered
into an agreement, written or otherwise, to take any of the
foregoing actions.
(cc)
Public
Utility Holding Company Act; Investment Company Act and U.S. Real
Property Holding Corporation Status
. The Company is not a
“holding company” or a “public utility
company” as such terms are defined in the Public Utility
Holding Company Act of 1935, as amended. The Company is not, and as
a result of and immediately upon the Closing will not be, an
“investment company” or a company
“controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940, as
amended. The Company is not and has never been a U.S. real property
holding corporation within the meaning of Section 897 of the
Internal Revenue Code of 1986, as amended.
(dd)
ERISA
.
No liability to the Pension Benefit Guaranty Corporation has been
incurred with respect to any Plan (as defined below) by the Company
or any of its subsidiaries which is or would be materially adverse
to the Company and its subsidiaries. The execution and delivery of
this Agreement and the other Transaction Documents and the issuance
and sale of the Units, the Note Shares and the Warrants will not
involve any transaction which is subject to the prohibitions of
Section 406 of ERISA or in connection with which a tax could be
imposed pursuant to Section 4975 of the Internal Revenue Code of
1986, as amended, provided, that, if any of the Purchasers, or any
person or entity that owns a beneficial interest in any of the
Purchasers, is an “employee pension benefit plan”
(within the meaning of Section 3(2) of ERISA) with respect to which
the Company is a “party in interest” (within the
meaning of Section 3(14) of ERISA), the requirements of Sections
407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in
this Section 2.1(aa), the term “
Plan
” shall mean an
“employee pension benefit plan” (as defined in Section
3 of ERISA) which is or has been established or maintained, or to
which contributions are or have been made, by the Company or any
Subsidiary by any trade or business, whether or not incorporated,
which, together with the Company and any Subsidiary is under common
control, as described in Section 414(b) or (c) of the
Code.
(ee)
Disclosure.
All disclosure provided to the Purchasers regarding the Company and
any Subsidiary or their respective businesses and the transactions
contemplated hereby, furnished by or on behalf of the Company
(including the Company’s representations and warranties set
forth in this Agreement and the disclosure set forth in any
diligence report or business plan provided by the Company or any
person acting on the Company’s behalf) are true and correct
in all material aspects and do not contain any untrue statement of
a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the
circumstances under which they were made, not
misleading.
(ff)
No
Additional Agreements
. Neither the Company nor any Affiliate
has any agreement or understanding with any Purchaser with respect
to the transactions contemplated by this Agreement and the
Transaction Documents other than as specified in this Agreement and
the Transaction Documents.
(gg)
Foreign
Corrupt Practices Act
. Neither the Company or any
Subsidiary, nor to the knowledge of the Company or any Subsidiary,
any agent or other person acting on behalf of the Company or any
Subsidiary, has, directly or indirectly: (i) used any funds, or
will use any proceeds from the sale of the Units, for unlawful
contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity; (ii) made any
unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or
campaigns from corporate funds; (iii) failed to disclose fully any
contribution made by the Company or any Subsidiary (or made by any
Person acting on their behalf of which the Company or any
Subsidiary is aware) or any members of their respective management
which is in violation of any applicable law; or (iv) has violated
in any material respect any provision of the Foreign Corrupt
Practices Act of 1977, as amended, and the rules and regulations
thereunder which was or is applicable to the Company, any
Subsidiary.
(hh)
PFIC
.
None of the Company or any Subsidiary is or intends to become a
“passive foreign investment company” within the meaning
of Section 1297 of the U.S. Internal Revenue Code of 1986, as
amended.
(ii)
OFAC
.
None of the Company or any Subsidiary nor, to the knowledge of the
Company, any director, officer, agent, employee, affiliate or
person acting on behalf of any of the Company or any of its
Subsidiaries, is currently subject to any U.S. sanctions
administered by the Office of Foreign Assets Control of the U.S.
Treasury Department (“
OFAC
”); and the Company
will not directly or indirectly use the proceeds of the sale of the
Units, or lend, contribute or otherwise make available such
proceeds to any of its Subsidiaries, joint venture partner or other
Person or entity, towards any sales or operations in Cuba, Iran,
Syria, Sudan, Myanmar or any other country sanctioned by OFAC or
for the purpose of financing the activities of any Person currently
subject to any U.S. sanctions administered by OFAC.
(jj)
Money
Laundering Laws
. The operations of each of the Company and
any Subsidiary have been conducted at all times in compliance with
the money laundering requirements of all applicable governmental
authorities and any related or similar rules, regulations or
guidelines, issued, administered or enforced by any governmental
authority (collectively, the “
Money Laundering Laws
”)
and no action, suit or proceeding by or before any court or
governmental authority or any arbitrator involving any of the
Company or any Subsidiary with respect to the Money Laundering Laws
is pending or, to the best knowledge of the Company,
threatened.
(kk)
Regulatory
Permits
. The Company possesses all 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 could not reasonably be expected to result in a
Material Adverse Effect (“
Material Permits
”), and
the Company has not received any notice of proceedings relating to
the revocation or modification of any Material Permit.
(ll)
Registration
Rights
. Except as contemplated herein or in the Registration
Rights Agreement, and except as set forth on Schedule 2.1(ll), no
Person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the
Company or any Subsidiaries.
(mm)
Acknowledgment
Regarding Purchasers’ Purchase of Securities
. The
Company acknowledges and agrees that each of the Purchasers is
acting solely in the capacity of an arm’s length purchaser
with respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and
any advice given by any Purchaser or any of their respective
representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely
incidental to the Purchasers’ purchase of the Securities. The
Company further represents to each Purchaser that the
Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company
and its representatives.
(nn)
Subsequent
Closings/No Integration
.
The Company has not
made any prior offering nor sold any securities in any prior
offering that would be integrated pursuant to Rule 502(a) with the
sale of the Securities and the transactions contemplated by this
Agreement in which the Company has not taken reasonable steps to
verify that the purchasers of such securities were accredited
investors. Further, the Company covenants and agrees it shall take
reasonable steps to verify that all investors are accredited
investors in connection with: (i) the offer, sale and issuance of
the Securities pursuant to this Agreement in all Closings; and (ii)
pursuant to any other future securities offering that would be
integrated with the transactions contemplated by this
Agreement.
(oo)
Sarbanes-Oxley
Act.
Except as specified in the Commission Documents, the
Company is in compliance with the applicable provisions of the
Sarbanes-Oxley Act of 2002 (the “
Sarbanes-Oxley Act
”), and
the rules and regulations promulgated thereunder, that are
effective and for which compliance by the Company is required as of
the date hereof.
(pp)
Solvency.
Based on the financial condition of the Company as of the Closing
Date (and assuming that the Closing shall have occurred): (i) the
Company’s fair saleable value of its assets exceeds the
amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including
known contingent liabilities) as they mature; (ii) the
Company’s assets do not constitute unreasonably small capital
to carry on its business for the current fiscal year as now
conducted and as proposed to be conducted including its capital
needs taking into account the particular capital requirements of
the business conducted by the Company, and projected capital
requirements and capital availability thereof; and (iii) the
current cash flow of the Company, together with the proceeds the
Company would receive, were it to liquidate all of its assets,
after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its debt when
such amount are required to be paid. The Company does not intend to
incur debts beyond its ability to pay such debts as they mature
(taking into account the timing and amounts of cash to be payable
on or in respect of its debt).
(qq)
Listing
and Maintenance Requirements.
Except as specified in the
Commission Documents, the Company has not, in the two years
preceding the date hereof, received notice from any Trading Market
to the effect that the Company is not in compliance with the
listing maintenance requirement thereof. The Company is, and has no
reason to believe that it will not in the foreseeable future
continue to be, in compliance with the listing and maintenance
requirements for continued listing of the Common Stock on the
Trading Market on which the Common Stock is currently listed or
quoted. The issuance and sale of the Notes under this Agreement and
the Transaction Documents do not contravene the rules and
regulations of the Trading Market which the Common Stock is
currently listed or quoted, and, except as otherwise set forth in
the Transaction Documents, no approval of the stockholders of the
Company thereunder is required for the Company to issue and deliver
to the Purchasers the Notes contemplated by this Agreement and the
Transaction Documents. “Trading Market” means whichever
of the New York Stock Exchange, NYSE MKT, the NASDAQ Global Select
Market, the NASDAQ Global Market, the NASDAQ Capital Market, OTC
Markets or OTC Bulletin Board on which the Common Stock is listed
or quoted for trading on the date in question.
Section
2.2
Representations and Warranties of the
Purchasers
. Each Purchaser hereby makes the following
representations and warranties to the Company as of the date
hereof, with respect solely to itself and not with respect to any
other Purchaser:
(a)
Organization and Good Standing of the
Purchasers
. If the Purchaser is an entity, such Purchaser is
a corporation, partnership or limited liability company duly
incorporated or organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or
organization.
(b)
Authorization and Power
. Each
Purchaser has the requisite power and authority to enter into and
perform this Agreement and each of the other Transaction Documents
to which such Purchaser is a party and to purchase the Units,
consisting of the Notes and Warrants, being sold to it hereunder.
The execution, delivery and performance of this Agreement and each
of the other Transaction Documents to which such Purchaser is a
party by such Purchaser and the consummation by it of the
transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate, partnership or limited
liability company action, and no further consent or authorization
of such Purchaser or its Board of Directors, stockholders,
partners, members, or managers, as the case may be, is required.
This Agreement and each of the other Transaction Documents to which
such Purchaser is a party has been duly authorized, executed and
delivered by such Purchaser and constitutes, or shall constitute
when executed and delivered, a valid and binding obligation of such
Purchaser enforceable against such Purchaser in accordance with the
terms hereof.
(c)
No Conflicts
. The execution,
delivery and performance of this Agreement and each of the other
Transaction Documents to which such Purchaser is a party and the
consummation by such Purchaser of the transactions contemplated
hereby and thereby or relating hereto do not and will not: (i)
result in a violation of such Purchaser’s charter documents,
bylaws, operating agreement, partnership agreement or other
organizational documents; or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of any
agreement, indenture or instrument or obligation to which such
Purchaser is a party or by which its properties or assets are
bound, or result in a violation of any law, rule, or regulation, or
any order, judgment or decree of any court or governmental agency
applicable to such Purchaser or its properties (except for such
conflicts, defaults and violations as would not, individually or in
the aggregate, have a material adverse effect on such Purchaser).
Such Purchaser is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform
any of its obligations under this Agreement or any other
Transaction Document to which such Purchaser is a party or to
purchase the Units in accordance with the terms hereof, provided,
that for purposes of the representation made in this sentence, such
Purchaser is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.
(d)
Status of Purchasers
. Each
Purchaser is an “accredited investor”
(“
Accredited
Investor
”) as defined in Regulation D. Such Purchaser
is not required to be registered as a broker-dealer under Section
15 of the Exchange Act and such Purchaser is not a broker-dealer,
nor an affiliate of a broker-dealer.
(e)
Acquisition for Investment
.
Each Purchaser is acquiring the Units, and the Notes, the
underlying Note Shares, the Warrants and the shares underlying the
Warrants solely for its own account for the purpose of investment
and not with a view to or for sale in connection with a
distribution. The Purchaser does not have a present intention to
sell the Units, the Notes, the Note Shares, the Warrants or the
shares underlying the Warrants, nor a present arrangement (whether
or not legally binding) or intention to effect any distribution of
the Units, Notes, Note Shares, the Warrants or the shares
underlying the Warrants to or through any person or entity;
provided
,
however
, that by
making the representations herein and subject to Section 2.2(h)
below, such Purchaser does not agree to hold the Units, the Notes,
the Note Shares, the Warrants or the shares underlying the Warrants
for any minimum or other specific term and reserves the right to
dispose of the Units, the Notes, the Note Shares, the Warrants or
the shares underlying the Warrants at any time in accordance with
federal and state securities laws applicable to such
disposition.
(f)
Knowledge
. Each Purchaser
acknowledges that it is able to bear the financial risks associated
with an investment in the Units, the Notes, the Note Shares, the
Warrants and the shares underlying the Warrants and has sufficient
knowledge and experience in investing in companies similar to the
Company in terms of the Company’s stage of development so as
to be able to evaluate the risks and merits of its investment in
the Company. Each Purchaser further acknowledges that the purchase
of the Units, Notes, Warrants and the shares underlying the
Warrants involves substantial risks.
(g)
Review of Commission Documents
.
Each Purchaser represents that such Purchaser has reviewed the
Commission Documents and has been given full and complete access to
the Company for the purpose of obtaining such information as such
Purchaser or its qualified representative has reasonably requested
in connection with the decision to purchase the Securities. Each
Purchaser represents that such Purchaser has been afforded the
opportunity to ask questions of the officers of the Company
regarding its business prospects and the Securities as Purchaser or
Purchaser’s qualified representative have found necessary to
make an informed investment decision to purchase the Securities
hereunder. Each Purchaser acknowledges that it has access to the
Company’s publicly available reports and registration
statements filed with the Commission prior to the Closing via the
internet at
www.sec.gov
.
The Purchaser is satisfied that it has received adequate
information with respect to all matters which it or its advisors,
if any, consider material to its decision to make this
investment.
(h)
Additional Representations and
Warranties of Accredited Investors
. Each Purchaser
indicating that such Purchaser is an Accredited Investor, severally
and not jointly, further makes the representations and warranties
to the Company set forth on
Exhibit B-1
.
(i)
Opportunities for Additional
Information
. Each Purchaser acknowledges that such Purchaser
has had the opportunity to ask questions of and receive answers
from, or obtain additional information from, the executive officers
of the Company concerning the financial and other affairs of the
Company.
(j)
No General Solicitation
. Each
Purchaser acknowledges that the Units were not offered to such
Purchaser by means of any form of general or public solicitation or
general advertising, or publicly disseminated advertisements or
sales literature, including: (i) any advertisement, article, notice
or other communication published in any newspaper, magazine, or
similar media, or broadcast over television or radio; or (ii) any
seminar or meeting to which such Purchaser was invited by any of
the foregoing means of communications.
(k)
Rule 144
. Such Purchaser
understands that each of the Note Shares, the Warrants and the
shares underlying the Warrants must be held indefinitely unless
such Note Shares, the Warrants or the shares underlying the
Warrants are registered under the Securities Act or an exemption
from registration is available. Such Purchaser acknowledges that
such Purchaser is familiar with Rule 144, of the rules and
regulations of the Commission, as amended, promulgated pursuant to
the Securities Act (“
Rule 144
”), and that such
person has been advised that Rule 144 permits resales only under
certain circumstances. Such Purchaser understands that to the
extent that Rule 144 is not available, such Purchaser will be
unable to sell any of the Note Shares, the Warrants or the shares
underlying the Warrants without either registration under the
Securities Act or the existence of another exemption from such
registration requirement.
(l)
General
. Such Purchaser
understands that the Units, the Notes and Warrants are being
offered and sold in reliance on a transactional exemption from the
registration requirements of federal and state securities laws and
the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and
understandings of such Purchaser set forth herein in order to
determine the applicability of such exemptions and the suitability
of such Purchaser to acquire the Units, the Notes and
Warrants.
(m)
Independent Investment
. Except
as may be disclosed in any filings with the Commission by the
Purchasers under Section 13 and/or Section 16 of the Exchange Act,
no Purchaser has agreed to act with any other Purchaser for the
purpose of acquiring, holding, voting or disposing of the Units,
the Notes, the Note Shares, the Warrants and the shares underlying
the Warrants purchased hereunder for purposes of Section 13(d)
under the Exchange Act, and each Purchaser is acting independently
with respect to its investment in the Units.
(n)
Brokers
. Other than the
Placement Agent and selected dealers of the Placement Agent, no
Purchaser has any knowledge of any brokerage or finder’s fees
or commissions that are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other person or entity with respect to
the transactions contemplated by this Agreement and the Transaction
Documents.
(o)
Confidential Information
. Each
Purchaser agrees that such Purchaser and its employees, agents and
representatives will keep confidential and will not disclose,
divulge or use (other than for purposes of monitoring its
investment in the Company) any confidential information which such
Purchaser may obtain from the Company pursuant to financial
statements, reports and other materials submitted by the Company to
such Purchaser pursuant to this Agreement, unless such information
is: (i) known to the public through no fault of such Purchaser or
his or its employees or representatives; (ii) becomes part of the
public domain other than by a breach of this Agreement; (iii)
becomes known by the action of a third party not in breach of a
duty of confidence; or (iv) is required to be disclosed to a third
party pursuant to any applicable law, government resolution, or
decision of any court or tribunal of competent jurisdiction;
provided
,
however
, that a
Purchaser may disclose such information: (i) to its attorneys,
accountants and other professionals in connection with their
representation of such Purchaser in connection with such
Purchaser’s investment in the Company; (ii) to any
prospective permitted transferee of the Securities; or (iii) to any
general partner or affiliate of such Purchaser, so long as the
prospective transferee agrees to be bound by the provisions of this
Section 2.2(o).
ARTICLE 3
Covenants
The
Company covenants with each of the Purchasers as follows, which
covenants are for the benefit of the Purchasers and their permitted
assignees (as defined herein).
Section
3.1
Use of Proceeds
. The Company
shall use the proceeds from this Financing Transaction for working
capital purposes.
Section
3.2
Securities Compliance
. The
Company shall notify the Commission in accordance with its rules
and regulations, of the transactions contemplated by this Agreement
and the Transaction Documents, including filing a Form D with
respect to the Units, as required under Regulation D and applicable
“blue sky” laws if such Units are offered pursuant to
Rule 506 of Regulation D (“
Regulation D
”) and shall
take all other necessary action and proceedings as may be required
and permitted by applicable law, rule and regulation, for the legal
and valid issuance of the Units to the Purchasers or subsequent
holders.
Section
3.3
Liquidation
. Subject to the
terms of the Transaction Documents, the Company covenants that it
will take such further action as the Purchasers may reasonably
request, all to the extent required from time to time to enable the
Purchasers to sell the Units without registration under the
Securities Act within the limitation of the exemptions provided by
Rule 144 promulgated under the Securities Act, as
amended.
Section
3.4
Keeping of Records and Books of
Account
. The Company shall keep and cause each Subsidiary to
keep adequate records and books of account, in which complete
entries will be made in accordance with GAAP consistently applied,
reflecting all financial transactions of the Company and its
Subsidiaries, and in which, for each fiscal year, all proper
reserves for depreciation, depletion, obsolescence, amortization,
taxes, bad debts and other purposes in connection with its business
shall be made.
Section
3.5
Intentionally
Omitted
.
Section
3.6
Other Agreements
. The Company
shall not and shall cause its Subsidiaries, enter into any
agreement the terms of which would restrict or impair the ability
of the Company to perform its obligations under this Agreement and
the Transaction Document.
Section
3.7
Intentionally Left
Blank
.
Section
3.8
Reservation of Shares
. So long
as any of the Notes or Warrants remain outstanding, the Company
shall take all actions necessary to at all times have authorized,
and reserved for the purpose of issuance, no less than one hundred
ten percent (110%) of the aggregate number of shares of Common
Stock needed to provide for the complete issuance of the Note
Shares and the Warrant Shares underlying such outstanding Notes and
Warrants.
Section
3.9
Disposition of Assets
. So long
as any Notes remain outstanding, neither the Company, nor any of
its Subsidiaries shall sell, transfer or otherwise dispose of any
of its material properties, assets and rights including, without
limitation, its software and intellectual property, to any person
except for: (i) sales to customers in the ordinary course of
business; (ii) sales or transfers between the Company and its
Subsidiaries; (iii) disposition of obsolete or worn out equipment;
or (iv) otherwise with the prior written consent of the Majority
Holders (as defined in Section 7.3 of this
Agreement”).
Section
3.10
Reporting Status
. So long as a
Purchaser beneficially owns any of the Securities, the Company
shall timely file all reports required to be filed with the
Commission pursuant to the Exchange Act, and the Company shall not
terminate its status as an issuer required to file reports under
the Exchange Act even if the Exchange Act or the rules and
regulations thereunder would permit such termination.
Section
3.11
Disclosure of Transaction
. The
Company shall file with the Commission, a Current Report on Form
8-K describing the material terms of the transactions contemplated
hereby and all material non-public information disclosed to the
Purchasers prior to the filing as soon as practicable after the
Closing but in no event later than 5:30 p.m. (Eastern Time) on the
fourth Business Day following the Closing. In the event that the
Company is unable to disclose specific non-public information in
the Form 8-K, the Company shall include such information in its
Form 10-Q for the interim period during which the Closing
contemplated hereby occurs. “
Business Day
” means any
day during which the
NASDAQ
(or other principal
exchange) shall be open for trading.
Section
3.12
Sarbanes-Oxley Act
. The Company
shall be in compliance with the applicable provisions of the
Sarbanes-Oxley Act of 2002, and the rules and regulations
promulgated thereunder, as required under such Act.
Section
3.13
Conversion and Exercise
Procedures
. Each of the form of Notice of Exercise included
in the Warrants and the form of Notice of Conversion included in
the Note set forth the totality of the procedures required of the
Purchasers in order to exercise the Warrants or convert the Note.
The Company shall honor exercises of the Warrants and conversions
of the Note and shall deliver Warrant Shares and Note Shares in
accordance with the terms, conditions and time periods set forth in
the Transaction Documents
Section
3.14
No Integrated Offerings
. The
Company shall not make any offers or sales of any security (other
than the securities being offered or sold hereunder) under
circumstances that would require registration of the securities
being offered or sold hereunder under the Securities
Act.
Section
3.15
Intentionally
Omitted
.
Section
3.16
Intentionally
Omitted
.
Section
3.17
Registration Rights
. The Purchasers are eligible for the registration
rights set forth in the Registration Rights
Agreement.
Section
3.18
No Manipulation of Price
. The
Company will not take, directly or indirectly, any action designed
to cause or result in, or that has constituted or might reasonably
be expected to constitute, the stabilization or manipulation of the
price of any securities of the Company.
Section
3.19
Independent Nature of Purchasers'
Obligations and Rights
. The obligations of each Purchaser
under any Transaction Document are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of
any other Purchaser under any Transaction Document. The decision of
each Purchaser to purchase Securities pursuant to the Transaction
Documents has been made by such Purchaser independently of any
other Purchaser and independently of any information, materials,
statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company which may have
been made or given by any other Purchaser or by any agent or
employee of any other Purchaser, and no Purchaser and none of its
agents or employees shall have any liability to any other Purchaser
(or any other Person) relating to or arising from any such
information, materials, statements or opinions. Nothing contained
herein or in any other Transaction Document, and no action taken by
any Purchaser pursuant hereto or thereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that
the Purchasers are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser acknowledges that no other
Purchaser has acted as agent for such Purchaser in connection with
making its investment hereunder and that no Purchaser will be
acting as agent of such Purchaser in connection with monitoring its
investment in the Securities or enforcing its rights under the
Transaction Documents. Each Purchaser 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 Purchaser to be joined as an additional party in any
Proceeding for such purpose. It is expressly understood and agreed
that each provision contained in this Agreement is between the
Company and a Purchaser, solely, and not between the Company and
the Purchasers collectively and not between and among the
Purchasers.
Section
3.20
Best Efforts
. The Company shall
exert its best efforts to satisfy the closing conditions set forth
in Section 4.1 hereof or cause such closing conditions to be
satisfied at or before the Closing.
ARTICLE
4
CONDITIONS
Section
4.1
Conditions Precedent to the Obligation
of the Company to Sell the Units
. The obligation hereunder
of the Company to issue and sell the Units, and the underlying Note
and the Warrants to the Purchasers is subject to the satisfaction
or waiver, at or before the Closing, of each of the conditions set
forth below. These conditions are for the Company’s sole
benefit and may be waived by the Company at any time in its sole
discretion.
(a)
Accuracy of Each Purchaser’s
Representations and Warranties
. The representations and
warranties of each Purchaser in this Agreement and each of the
other Transaction Documents to which such Purchaser is a party
shall be true and correct in all material respects as of the date
when made and as of the Closing Date as though made at that time,
except for representations and warranties that are expressly made
as of a particular date, which shall be true and correct in all
material respects as of such date.
(b)
Performance by the Purchasers
.
Each Purchaser shall have performed, satisfied and complied in all
respects with all covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by such
Purchaser at or prior to the Closing.
(c)
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 which
prohibits the consummation of any of the transactions contemplated
by this Agreement.
(d)
Purchaser Deliverables
. On or
prior to the applicable Closing Date, each Purchaser shall deliver
or cause to be delivered to the Company the following:
i.
this Agreement duly
executed by such Purchaser, which includes completed Exhibit B-1
and the completed Subscription Agreement, which is attached as
Exhibit B-2; by executing this Agreement, such Purchaser will be
deemed to have executed each of the Transaction Documents and will
be bound by each of their terms even if the Purchaser does not
physically sign such other Transaction Documents; and
ii.
such
Purchaser’s Purchase Price by wire transfer to the account as
specified in writing by the Company or by check as per the payment
terms set forth in the Subscription Agreement.
Section
4.2
Conditions Precedent to the Obligation
of the Purchasers to Purchase the Units
. The obligation
hereunder of each Purchaser to acquire and pay for the Units is
subject to the satisfaction or waiver, at or before the Closing, of
each of the conditions set forth below. These conditions are for
each Purchaser’s sole benefit and may be waived by such
Purchaser at any time in its sole discretion.
(a)
Accuracy of the Company’s
Representations and Warranties
. Each of the representations
and warranties of the Company in this Agreement and the other
Transaction Documents that are qualified by materiality or by
reference to any Material Adverse Effect shall be true and correct
in all respects, and all other representations and warranties shall
be true and correct in all material respects, as of the date when
made and as of the Closing Date as though made at that time, except
for representations and warranties that are expressly made as of a
particular date, which shall be true and correct in all respects as
of such date.
(b)
Performance by the Company
. The
Company shall have performed, satisfied and complied in all
respects with all covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing.
(c)
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 which
prohibits the consummation of any of the transactions contemplated
by this Agreement and the Transaction Documents.
(d)
No Proceedings or Litigation
.
No action, suit or proceeding before any arbitrator or any
governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been
threatened, against the Company or any Subsidiary, or any of the
officers, directors or affiliates of the Company or any Subsidiary
seeking to restrain, prevent or change the transactions
contemplated by this Agreement and the Transaction Documents, or
seeking damages in connection with such transactions.
(e)
Securities
. The Company shall
have executed and delivered to the Purchasers the Notes and
Warrants underlying the Units being acquired by such Purchaser at
the Closing to such address set forth next to each Purchasers name
on
Exhibit A
with
respect to the Closing.
(f)
Resolutions
. The Board of
Directors of the Company shall have adopted resolutions consistent
with Section 2.1(b) hereof in a form reasonably acceptable to such
Purchaser (the “
Resolutions
”).
(g)
Reservation of Shares
. As of
the Closing Date, the Company shall have reserved out of its
authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Notes and the exercise of the
Warrants, a number of shares of Common Stock equal to one hundred
ten percent (110%) of the aggregate number of Note Shares issuable
upon conversion of the Notes issued or to be issued pursuant to
this Agreement and the number of Warrant Shares issuable upon
exercise of the number of Warrants issued or to be issued pursuant
to this Agreement.
(h)
Secretary’s Certificate
.
The Company shall have delivered to such Purchaser a
secretary’s certificate, dated as of the Closing Date,
certifying attached copies of: (i) the Organizational Documents of
the Company; (ii) the resolutions of the Company's Board approving
this Agreement and the transactions contemplated hereby; and (iii)
the incumbency of each authorized officer of the Company signing
this Agreement and the Transaction Documents and any other
documents required to be executed or delivered in connection
herewith and therewith.
(i)
Officer’s Certificate
.
The Company shall have delivered to the Purchasers a certificate of
an executive officer of the Company, dated as of the Closing Date,
confirming the accuracy of the Company’s representations,
warranties and covenants as of the Closing Date and confirming the
compliance by the Company with the conditions precedent set forth
in this Section 4.2 as of the Closing Date.
(j)
Transaction Documents
. On the
Closing Date, the Company shall have executed and delivered the
Transaction Documents, including all required exhibits and
schedules to each Purchaser.
(k)
Material Adverse Effect
. No
Material Adverse Effect shall have occurred at or before the
Closing Date.
(l)
Intentionally
Omitted
(m)
Stop Orders
. No stop order or
suspension of trading shall have been imposed by the Commission or
any other governmental or regulatory body having jurisdiction over
the Company or the Trading Market(s) where the Common Stock is
listed or quoted, with respect to public trading in the Common
Stock.
ARTICLE
5
Stock Certificate
Legend
Section
5.1
Legend
. Each certificate
representing the Notes Shares, the Warrants and Warrant Shares and
if appropriate, securities issued upon conversion or exercise
thereof, shall be stamped or otherwise imprinted with a legend
substantially in the following form (in addition to any legend
required by applicable state securities or “blue sky”
laws):
“THESE
SECURITIES REPRESENTED BY THIS CERTIFICATE (THE
“SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE
SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE
COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT REGISTRATION
OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED.”
(a)
The restrictions on
transfer contained in this
Section 5.1
shall be in
addition to, and not by way of limitation of, any other
restrictions on transfer contained in any other section of this
Agreement. Whenever a certificate representing the Note Shares or
the Warrant Shares is required to be issued to a Purchaser without
a legend, in lieu of delivering physical certificates representing
the Note Shares or the Warrant Shares (provided that a registration
statement under the Securities Act providing for the resale of the
Warrant Shares and Note Shares is then in effect), the Company may
cause its transfer agent to electronically transmit the Note Shares
or Warrant Shares to a Purchaser by crediting the account of such
Purchaser or such Purchaser’s prime broker with the DTC
through its DWAC system (to the extent not inconsistent with any
provisions of this Agreement).
(b)
Certificates
evidencing the Note Shares and the Warrant Shares shall not contain
any legend (including the legend set forth in
Section 5.1
hereof): (i) while
a registration statement covering the resale of such security is
effective under the Securities Act (the date such registration
statement is declared effective, being referred to as the
“
Effective
Date”
); (ii) following any sale of such Note Shares or
Warrant Shares pursuant to Rule 144; (iii) if such Note Shares or
Warrant Shares are eligible for sale under Rule 144, without the
requirement for the Company to be in compliance with the current
public information required under Rule 144 as to such Note Shares
or Warrant Shares and without volume or manner-of-sale
restrictions; or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission). The Company shall cause its counsel to issue a legal
opinion to its transfer agent promptly after the Effective Date if
required by the transfer agent to effect the removal of the legend
hereunder. If all or any Note is converted or Warrant is exercised
at a time when there is an effective registration statement to
cover the resale of the Note Shares or Warrant Shares, or if such
Note Shares or Warrant Shares may be sold under Rule 144 and the
Company is then in compliance with the current public information
required under Rule 144, or if such Note Shares or Warrant Shares
may be sold under Rule 144 without the requirement for the Company
to be in compliance with the current public information required
under Rule 144 as to such Note Shares or Warrant Shares and without
volume or manner-of-sale restrictions or if such legend is not
otherwise required under applicable requirements of the Securities
Act (including judicial interpretations and pronouncements issued
by the staff of the Commission) then such Note Shares or Warrant
Shares shall be issued free of all legends. The Company agrees that
following the Effective Date or at such time as such legend is no
longer required under this
Section 5.1
, it will, no later
than three Business Days following the delivery by a Purchaser to
the Company or the transfer agent of a certificate representing
Note Shares or Warrant Shares, as applicable, issued with a
restrictive legend (such third Business Day, the
“
Legend Removal
Date
”), deliver or cause to be delivered to such
Purchaser a certificate representing such shares that is free from
all restrictive and other legends. The Company may not make any
notation on its records or give instructions to the transfer agent
that enlarge the restrictions on transfer set forth in this Article
5.
(c)
Each
Purchaser, severally and not jointly with the other Purchasers,
agrees with the Company that such Purchaser will sell any
Securities pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if Securities are
sold pursuant to a registration statement, they will be sold in
compliance with the plan of distribution set forth therein, and
acknowledges that the removal of the restrictive legend from
certificates representing Securities as set forth in this Article 5
is predicated upon the Company’s reliance upon this
understanding.
ARTICLE 6
Indemnification
Section
6.1
General Indemnity
. The Company
agrees to indemnify and hold harmless the Purchasers (and their
respective directors, officers, managers, partners, members,
shareholders, affiliates, agents, successors and assigns) from and
against any and all losses, liabilities, deficiencies, costs,
damages and expenses (including, without limitation, reasonable
attorneys’ fees, charges and disbursements) incurred by the
Purchasers as a result of any material breach of the material
representations, warranties or covenants made by the Company
herein. Each Purchaser severally but not jointly agrees to
indemnify and hold harmless the Company and its directors,
officers, affiliates, agents, successors and assigns from and
against any and all losses, liabilities, deficiencies, costs,
damages and expenses (including, without limitation, reasonable
attorneys’ fees, charges and disbursements) incurred by the
Company as a result of any breach of the representations,
warranties or covenants made by such Purchaser herein. The maximum
aggregate liability of each Purchaser pursuant to its
indemnification obligations under this Article 6 shall not exceed
the portion of the Purchase Price paid by such Purchaser hereunder.
In no event shall any “Indemnified Party” (as defined
below) be entitled to recover consequential or punitive damages
resulting from a breach or violation of this
Agreement.
Section
6.2
Indemnification Procedure
. Any
party entitled to indemnification under this Article 6 (an
“
Indemnified
Party
”) will give written notice to the indemnifying
party of any matters giving rise to a claim for indemnification;
provided
, that the
failure of any party entitled to indemnification hereunder to give
notice as provided herein shall not relieve the indemnifying party
of its obligations under this Article 6 except to the extent that
the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought
against an Indemnified Party in respect of which indemnification is
sought hereunder, the indemnifying party shall be entitled to
participate in and, unless in the reasonable judgment of the
Indemnified Party a conflict of interest between it and the
indemnifying party may exist with respect of such action,
proceeding or claim, to assume the defense thereof with counsel
reasonably satisfactory to the Indemnified Party. In the event that
the indemnifying party advises an Indemnified Party that it will
contest such a claim for indemnification hereunder, or fails,
within thirty (30) days of receipt of any indemnification notice to
notify, in writing, such person of its election to defend, settle
or compromise, at its sole cost and expense, any action, proceeding
or claim (or discontinues its defense at any time after it
commences such defense), then the Indemnified Party may, at its
option, defend, settle or otherwise compromise or pay such action
or claim. In any event, unless and until the indemnifying party
elects in writing to assume and does so assume the defense of any
such claim, proceeding or action, the Indemnified Party’s
costs and expenses arising out of the defense, settlement or
compromise of any such action, claim or proceeding shall be losses
subject to indemnification hereunder. The Indemnified Party shall
cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party which
relates to such action or claim. The indemnifying party shall keep
the Indemnified Party fully apprised at all times as to the status
of the defense or any settlement negotiations with respect thereto.
If the indemnifying party elects to defend any such action or
claim, then the Indemnified Party shall be entitled to participate
in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any
settlement of any action, claim or proceeding effected without its
prior written consent,
provided
,
however
, that the indemnifying
party shall be liable for any settlement if the indemnifying party
is advised of the settlement but fails to respond to the settlement
within thirty (30) days of receipt of such notification.
Notwithstanding anything in this Article 6 to the contrary, the
indemnifying party shall not, without the Indemnified Party’s
prior written consent, settle or compromise any claim or consent to
entry of any judgment in respect thereof which imposes any future
obligation on the Indemnified Party or which does not include, as
an unconditional term thereof, the giving by the claimant or the
plaintiff to the Indemnified Party of a release from all liability
in respect of such claim. The indemnity agreements contained herein
shall be in addition to (a) any cause of action or similar rights
of the Indemnified Party against the indemnifying party or others,
and (b) any liabilities the indemnifying party may be subject to
pursuant to the law.
ARTICLE 7
Miscellaneous
Section
7.1
Fees and Expenses
. The Company
has engaged Tripoint Global Equities, LLC, as exclusive placement
agent for the Company (the “
Placement Agent
). The Company
has agreed to pay the Placement Agent, in connection with sales of
the Units made to Persons introduced to the Company by either
themselves or the Placement Agent, the fees set forth in
Schedule 7.1
hereto
and legal fees related hereto up to $15,000. The Company shall
deliver to each Purchaser, prior to the Closing, a completed and
executed copy of the Closing Statement, attached hereto as
Annex A
. Except as
expressly set forth in the Transaction Documents to the contrary,
each party shall pay the 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 this Agreement.
The Company shall pay all Transfer Agent fees, stamp taxes and
other taxes and duties levied in connection with the delivery of
any Securities to the Purchasers.
Section
7.2
Specific Enforcement, Consent to
Jurisdiction
.
(a)
The Company and the
Purchasers acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement or
the other Transaction Documents were not performed in accordance
with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement or the other Transaction Documents and
to enforce specifically the terms and provisions hereof or thereof,
this being in addition to any other remedy to which any of them may
be entitled by law or equity.
(b)
Each of the Company
and the Purchasers: (i) hereby irrevocably submits to the
jurisdiction of the United States District Court sitting in the
Southern District of New York and the courts of the State of New
York located in New York county for the purposes of any suit,
action or proceeding arising out of or relating to this Agreement
or any of the other Transaction Documents or the transactions
contemplated hereby or thereby; and (ii) hereby waives, and agrees
not to assert in any such suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of such
court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or
proceeding is improper. Each of the Company and the Purchasers
consents to process being served in any such suit, action or
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 in this
Section 7.2
shall
affect or limit any right to serve process in any other manner
permitted by law. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party
at the address for such notices to it under this Agreement and
agrees that such service shall constitute good and sufficient
service of process and notice thereof. The Company hereby appoints
Gracin & Marlow, LLP as its agent for service of process in New
York. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by
law.
Section
7.3
Entire Agreement; Amendment
.
This Agreement and the other Transaction Documents contain the
entire understanding and agreement of the parties with respect to
the matters covered hereby and, except as specifically set forth
herein or in the Transaction Documents, neither the Company nor any
of the Purchasers makes any representations, warranty, covenant or
undertaking with respect to such matters and they supersede all
prior understandings and agreements with respect to said subject
matter, all of which are merged herein. No provision of this
Agreement nor any of the Transaction Documents may be waived or
amended other than by a written instrument signed by the Company
and the holders of at least fifty percent (50%) of the Note Shares
then outstanding (the “
Majority Holders
”), and
no provision hereof may be waived other than by a written
instrument signed by the consenting parties. No such amendment
shall be effective to the extent that it applies to less than all
of the holders of the Note Shares then outstanding. No
consideration shall be offered or paid to any person to amend or
consent to a waiver or modification of any provision of any of the
Transaction Documents unless the same consideration is also offered
to all of the parties to the Transaction Documents or holders of
Note Shares, as the case may be.
Section
7.4
Notices
. All notices, demands,
consents, requests, instructions and other communications to be
given or delivered or permitted under or by reason of the
provisions of this Agreement and the Transaction Documents or in
connection with the transactions contemplated hereby and thereby
shall be in writing and shall be deemed to be delivered and
received by the intended recipient as follows: (i) if personally
delivered, on the business day of such delivery (as evidenced by
the receipt of the personal delivery service); (ii) if delivered by
overnight courier (with all charges having been prepaid), on the
business day of such delivery (as evidenced by the receipt of the
overnight courier service of recognized standing); or (iii) if
delivered by facsimile or electronic transmission, on the business
day of such delivery if sent by 6:00 p.m. in the time zone of the
recipient, or if sent after that time, on the next succeeding
business day (as evidenced by the printed confirmation of delivery
generated by the sending party’s telecopier machine). If any
notice, demand, consent, request, instruction or other
communication cannot be delivered because of a changed address of
which no notice was given (in accordance with this
Section 7.4
), or the refusal to
accept same, the notice, demand, consent, request, instruction or
other communication shall be deemed received on the second business
day the notice is sent (as evidenced by a sworn affidavit of the
sender). Notwithstanding the foregoing, routine communications may
be sent by ordinary first-class mail and contemporaneous e-mail.
All such notices, demands, consents, requests, instructions and
other communications will be sent to the following addresses or
facsimile numbers as applicable:
If to
the Company:
Youngevity
International, Inc.
2400
Boswell Rd
Chula
Vista, CA 91914
Attn:
Steven Wallach
Phone:
(619) 934-3980
with
copies (which shall not constitute notice) to:
Leslie
Marlow, Esq.
Gracin
& Marlow, LLP
200
Broadhollow Road
Suite
207
Melville, New York
11747
If to
any Purchaser: At the address of such Purchaser set
forth on
Exhibit A
to this Agreement, as the case may be, with copies to
Purchaser’s counsel as set forth on
Exhibit A
or as specified in
writing by such Purchaser.
Any
party hereto may from time to time change its address for notices
by giving at least ten (10) days written notice of such changed
address to the other party hereto.
Section
7.5
Waivers
. No waiver by any party
of any default with respect to any provision, condition or
requirement of this Agreement and the other Transaction Documents
shall be deemed to be a continuing waiver in the future or a waiver
of any other provisions, condition or requirement hereof and
thereof, nor shall any delay or omission of any party to exercise
any right hereunder and thereunder in any manner impair the
exercise of any such right accruing to it thereafter.
Section
7.6
Headings
. The section headings
contained in this Agreement (including, without limitation, section
headings and headings in the exhibits and schedules) are inserted
for reference purposes only and shall not affect in any way the
meaning, construction or interpretation of this Agreement and the
other Transaction Documents. Any reference to the masculine,
feminine, or neuter gender shall be a reference to such other
gender as is appropriate. References to the singular shall include
the plural and vice versa.
Section
7.7
Successors and Assigns
. This
Agreement may not be assigned by a party hereto without the prior
written consent of the Company or the Purchasers, as applicable,
provided
,
however
, that,
subject to federal and state securities laws and as otherwise
provided in the Transaction Documents, a Purchaser may assign its
rights and delegate its duties hereunder in whole or in part: (i)
to a third party acquiring all or substantially all of its Shares
or Warrants in a private transaction; or (ii) to an affiliate, in
each case, without the prior written consent of the Company or the
other Purchasers, after notice duly given by such Purchaser to the
Company
provided
,
that no such assignment or obligation shall affect the obligations
of such Purchaser hereunder and that such assignee agrees in
writing to be bound, with respect to the transferred securities, by
the provisions hereof that apply to the Purchasers. The provisions
of this Agreement shall inure to the benefit of and be binding upon
the respective permitted successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement. If any Purchaser transfers
the Note Shares purchased hereunder, any such penalty shares or
liquidated damages, as the case may be, pursuant to this Agreement
shall similarly transfer to such transferee with no further action
required by the purchaser or the Company.
Section
7.8
Rescission and Withdrawal
Right
. Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) this Agreement and
the Transaction Documents, whenever any Purchaser exercises a
right, election, demand or option under this Agreement or a
Transaction Document and the Company does not timely perform its
related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time
to time upon written notice to the Company, any relevant notice,
demand or election in whole or in part without prejudice to its
future actions and rights.
Section
7.9
Replacement of Securities
. If
any certificate or instrument evidencing any Unit 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, 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 Unit. If a replacement certificate or
instrument evidencing any Unit 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.
Section
7.10
Limitation of Liability
.
Notwithstanding anything herein to the contrary, the Company
acknowledges and agrees that the liability of any Purchaser arising
directly or indirectly, under this Agreement and the other
Transaction Documents of any and every nature whatsoever shall be
satisfied solely out of the assets of such Purchaser, and that no
trustee, officer, other investment vehicle or any other Affiliate
of such Purchaser or any Purchaser, shareholder or holder of shares
of beneficial interest of such a Purchaser shall be personally
liable for any liabilities of such Purchaser.
Section
7.11
No Third Party Beneficiaries
.
This Agreement is intended for the benefit of the parties hereto
and their respective permitted successors and assigns and is not
for the benefit of, nor may any provision hereof be enforced by,
any other person.
Section
7.12
Governing Law
. This Agreement
and the other Transaction Documents shall be governed by and
construed in accordance with the laws of the State of New York,
without giving effect to any of the conflicts of law principles
which would result in the application of the substantive law of
another jurisdiction. This Agreement and the other Transaction
Documents shall not be interpreted or construed with any
presumption against the party causing this Agreement and the other
Transaction Documents to be drafted.
Section
7.13
Survival
. The representations
and warranties of the Company hereunder and under the other
Transaction Documents shall survive the execution and delivery
hereof and the Closing hereunder for a period of three (3) years
following the Closing Date.
Section
7.14
Counterparts
. This Agreement
may be executed in any number of counterparts, each of which when
so executed shall be deemed to be an original and, all of which
taken together shall constitute one and the same Agreement and
shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being
understood that all parties need not sign the same counterpart. In
the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as
if such facsimile signature were the original thereof.
Section
7.15
Severability
. The provisions of
this Agreement and the Transaction Documents are severable and, in
the event that any court of competent jurisdiction shall determine
that any one or more of the provisions or part of the provisions
contained in this Agreement or the Transaction Documents shall, for
any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not
affect any other provision or part of a provision of this Agreement
or the Transaction Documents and such provision shall be reformed
and construed as if such invalid or illegal or unenforceable
provision, or part of such provision, had never been contained
herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
Section
7.16
Further Assurances
. From and
after the date of this Agreement, upon the request of any Purchaser
or the Company, each of the Company and the Purchasers shall
execute and deliver such instrument, documents and other writings
as may be reasonably necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this
Agreement and the other Transaction Documents.
Section
7.17
Currency
. Unless otherwise
indicated, all dollar amounts referred to in this Agreement are in
United States Dollars (“
US Dollars
”). All amounts
owed under this Agreement or any Transaction Document shall be paid
in US Dollars.
Section
7.18
Termination
. This Agreement may
be terminated prior to the Closing:
(a)
by mutual written
agreement of the Purchasers and the Company, a copy of which shall
be provided to the escrow agent appointed under the Escrow Deposit
Agreement; and
(b)
by the Company or a
Purchaser (as to itself but no other Purchaser) upon written notice
to the other, with a copy to the Escrow Agent, if the Closing shall
not have taken place by 5:00 p.m. Eastern time on [ ], 2017, unless
extended to a later date by the mutual consent of the Company and
the Placement Agent; provided, that the right to terminate this
Agreement under this Section 7.18(b) shall not be available to any
person whose failure to comply with its obligations under this
Agreement has been the cause of or resulted in the failure of the
Closing to occur on or before such time.
(c)
In the event of a
termination pursuant to Section 7.18(a) or 7.18(b), each Purchaser
shall have the right to a return of up to its entire Purchase Price
deposited with the Escrow Agent pursuant to this Agreement and the
Escrow Agreement, without interest or deduction. The Company
covenants and agrees to cooperate with such Purchaser in obtaining
the return of its Purchase Price, and shall not communicate any
instructions to the contrary to the Escrow Agent.
(d)
In the event of a
termination pursuant to this
Section 7.18
, the Company shall
promptly notify all non-terminating Purchasers. Upon a termination
in accordance with this
Section 7.18
, the Company and
the terminating Purchaser(s) shall not have any further obligation
or liability (including as arising from such termination) to the
other and no Purchaser will have any liability to any other
Purchaser under the Transaction Documents as a result
therefrom.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officer as of the
date first above written.
YOUNGEVITY
INTERNATIONAL, INC.
Name:
Steven Wallach
Title:
Chief Executive Officer
YOUNGEVITY
INTERNATIONAL, INC.
PURCHASER
SIGNATURE PAGE TO
NOTE
PURCHASE AGREEMENT
Purchaser
hereby elects to purchase a total of ____ Units in an amount of
$___________.
Date
(NOTE: To be completed by the Purchaser): _____ , 2017
If the
Purchaser is an INDIVIDUAL, and if purchased as JOINT TENANTS,
as
TENANTS
IN COMMON, or as COMMUNITY PROPERTY:
Print
Name(s)
Social
Security Number(s)
Signature(s)
of Purchaser(s)
Signature
If the
Purchaser is a PARTNERSHIP, CORPORATION, LIMITED LIABILITY COMPANY
or TRUST:
Name
of Partnership,
Federal
Taxpayer Corporation, LimitedIdentification Number Liability
Company or Trust
Name:
State
of Organization
Title:
EXHIBIT A TO THE
NOTE PURCHASE AGREEMENT
|
Investor
|
Investment Amount
|
Convertible Note
|
Series D Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Purchasers
EXHIBIT B TO THE
NOTE PURCHASE AGREEMENT
DEFINITION OF “ACCREDITED INVESTOR”
The term “accredited investor” means:
1)
A bank as defined
in Section 3(a)(2) of the Securities Act, or a savings and loan
association or other institution as defined in Section 3(a)(5)(A)
of the Securities Act, whether acting in its individual or
fiduciary capacity; a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934; an insurance
company as defined in Section 2(13) of the Securities Act; an
investment company registered under the Investment Company Act of
1940 (the “Investment Company Act”) or a business
development company as defined in Section 2(a)(48) of the
Investment Company Act; a Small Business Investment Company
licensed by the U.S. Small Business Administration under Section
301(c) or (d) of the Small Business Investment Act of 1958; a plan
established and maintained by a state, its political subdivisions
or any agency or instrumentality of a state or its political
subdivisions for the benefit of its employees, if such plan has
total assets in excess of US $5,000,000; an employee benefit plan
within the meaning of the Employee Retirement Income Security Act
of 1974 (“ERISA”), if the investment decision is made
by a plan fiduciary, as defined in Section 3(21) of ERISA, which is
either a bank, savings and loan association, insurance company, or
registered investment advisor, or if the employee benefit plan has
total assets in excess of US $5,000,000 or, if a self-directed
plan, with investment decisions made solely by persons that are
accredited investors.
2)
A private business
development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940.
3)
An organization
described in Section 501(c)(3) of the Internal Revenue Code,
corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of US
$5,000,000.
4)
A director or
executive officer of the Company.
5)
A natural person
whose individual net worth, or joint net worth with that
person’s spouse, at the time of his or her purchase exceeds
US $1,000,000.
6)
A natural person
who had an individual income in excess of US $200,000 in each of
the two most recent years or joint income with that person’s
spouse in excess of US $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the
current year.
7)
A trust, with total
assets in excess of US $5,000,000, not formed for the specific
purpose of acquiring the securities offered, whose purchase is
directed by a sophisticated person as described in Rule
506(b)(2)(ii) (i.e., a person who has such knowledge and experience
in financial and business matters that he is capable of evaluating
the merits and risks of the prospective investment).
8)
An entity in which
all of the equity owners are accredited investors. (The Purchaser,
as an entity, must identify each equity owner and provide
statements signed by each demonstrating how each is qualified as an
accredited investor.)
EXHIBIT B-1 TO THE
NOTE PURCHASE AGREEMENT
EXHIBIT B-1
ACCREDITED INVESTOR
REPRESENTATIONS AND ACKNOWLEDGEMENT
ACCREDITED
INVESTOR CERTIFICATION
For
Individual Investors Only
(All
individual investors must
INITIAL
where appropriate. Where there
are joint investors both parties must
INITIAL
):
Initial
_________
I certify that I
have a “net worth” of at least $1 million either
individually or through aggregating my individual holdings and
those in which I have a joint, community property or other similar
shared ownership interest with my spouse. For purposes hereof,
“net worth” shall be deemed to include all of your
assets, liquid or illiquid (excluding the value of your principal
residence), minus all of your liabilities (excluding the amount of
indebtedness secured by your principal residence up to its fair
market value).
Initial
________
I certify that I
have had an annual gross income for the past twoyears of at least
$200,000 (or $300,000 jointly with my spouse) andexpect my income
(or joint income, as appropriate) to reach the same level in the
current year.
For
Non-Individual Investors
(all
Non-Individual Investors must
INITIAL
where
appropriate):
Initial
_________
The undersigned
certifies that it is a partnership, corporation, limited liability
company or business trust that is 100% owned by persons who meet
either of the criteria for Individual Investors,
above.
Initial
_________
The undersigned
certifies that it is a partnership, corporation, limited liability
company or business trust that has total assets of at least
$5,000,000 and was not formed for the purpose of investing in
Company.
Initial
_________
The undersigned
certifies that it is an employee benefit plan whose investment
decision is made by a plan fiduciary (as defined in ERISA
§3(21)) that is a bank, savings and loan association,
insurance company or registered investment adviser.
The undersigned
certifies that it is an employee benefit plan whose total assets
exceed $5,000,000 as of the date of the Purchase
Agreement.
Initial
_________
Th
e
undersigned certifies that it is a self-directed employee benefit
plan whose investment decisions are made solely by persons who meet
either of the criteria for Individual Investors,
above.
The undersigned
certifies that it is a U.S. bank, U.S. savings and loan association
or other similar U.S. institution acting in its individual or
fiduciary capacity.
The undersigned
certifies that it is a broker-dealer registered pursuant to
§15 of the Securities Exchange Act of 1934.
Initial
_________
The undersigned
certifies that it is an organization described in §501(c)(3)
of the Internal Revenue Code with total assets exceeding $5,000,000
and not formed for the specific purpose of investing in
Company.
Initial
_________
The undersigned
certifies that it is a trust with total assets of at least
$5,000,000, not formed for the specific purpose of investing in
Company, and whose purchase is directed by a person with such
knowledge and experience in financial and business matters that he
is capable of evaluating the merits and risks of the prospective
investment.
Initial
_________
The undersigned
certifies that it is a plan established and maintained by a state
or its political subdivisions, or any agency or instrumentality
thereof, for the benefit of its employees, and which has total
assets in excess of $5,000,000.
Initial
_________
The undersigned
certifies that it is an insurance company as defined in
§2(a)(13) of the Securities Act of 1933, as amended, or a
registered investment company.
EXHIBIT C TO THE
NOTE PURCHASE AGREEMENT
FORM OF CONVERTIBLE NOTE
EXHIBIT D TO THE
NOTE PURCHASE AGREEMENT
FORM OF SERIES D WARRANT
EXHIBIT E TO THE
NOTE PURCHASE AGREEMENT
FORM OF ESCROW DEPOSIT AGREEMENT
EXHIBIT F TO THE
NOTE PURCHASE AGREEMENT
FORM OF REGISTRATION RIGHTS AGREEMENT
Exhibit 4.2
NEITHER THE OFFER NOR SALE OF THE SECURITIES REPRESENTED BY THIS
NOTE
HAS BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, (THE “
1933
ACT”). THE SECURITIES MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
1933
ACT, OR AN OPINION OF COUNSEL, IN
FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN
COMPARABLE TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER
THE
1933
ACT OR UNLESS SOLD
PURSUANT TO RULE 144 UNDER THE
1933
ACT.
YOUNGEVITY INTERNATIONAL, INC.
8% CONVERTIBLE PROMISSORY NOTE
DUE: JULY
,
2020
No.
2017-00_
July
, 2017 (the “
Issuance Date”
)
$____,000
New York, New
York
FOR
VALUE RECEIVED, the undersigned,
YOUNGEVITY INTERNATIONAL, INC.
(herein
called the “
Company
”), a Delaware corporation,
promises to pay to the order of
_________
, or his, her or its registered
assigns (the “
Holder
”
or
“Holders
”), the principal
sum of ____________ Dollars (US$___,000), as such amount is reduced
pursuant to the terms hereof pursuant to redemption, conversion or
otherwise (the “
Principal
”), on July , 2020 (the
“
Maturity
Date
”), together with interest (computed on the basis
of a 365-day year) on the outstanding principal amount at the rate
of eight percent (8%) per annum (the “
Interest Rate
”) from the date
hereof, payable commencing on September 30, 2017, and, thereafter,
quarterly
in arrears
, until the
principal hereof shall have become due and payable.
1.
Note Purchase
Agreement
.
This Note
has been issued pursuant to the terms and conditions set forth in
the Note Purchase Agreement dated as of July , 2017 by and among
the Company and the Holder, (as from time to time amended, the
“
Note Purchase
Agreement
”). All of the terms and conditions of such
Note Purchase Agreement are incorporated herein by this reference,
and all capitalized terms not separately defined in this Note,
shall have the same meanings as defined in the Note Purchase
Agreement.
2.
Notes
.
Payments of principal of, and interest on, this Note are to be made
in lawful money of the United States of America at such place as
provided in the Note Purchase Agreement. This Note is one of a
series of up to $9,000
,000
aggregate amount (including the over-allotment option) (the
“
Offering
Amount
”) of eight percent (8%) Convertible Promissory
Notes (herein called the “
Notes
”) issued pursuant to the
Note Purchase Agreement, and is subject to other terms as set forth
in the Note Purchase Agreement.
a.
Prepayment
.
Following the twelve (12) month anniversary of the Closing Date,
and prior to the Maturity Date, the Company shall have the right to
prepay this Note in full or any portion thereof at the rate of 110%
of the then outstanding principal balance, including all accrued
interest,
provided
that the Company give written notice to the Purchasers at least ten
(
10) business days before the
prepayment and;
provided
further that Purchasers may elect to
convert the Notes in accordance with their terms set forth herein
within five business days after receipt of such written notice,
although such conversion shall not be effective until sixty-one
(61) days following the date of Purchasers’ notice of
election.
3.
Interest
.
Interest
on this Note shall commence accruing on the Issuance Date, shall
accrue daily at the Interest Rate on the outstanding Principal
amount from time to time, shall be computed on the basis of a
365-day year comprised of twelve (12) months and shall be payable
in arrears upon the earlier of: (i) the last day of each September,
December, March and June, commencing on the Issuance Date, until
the principal hereof shall have become due and payable; and (ii)
the date of conversion into Common Stock in accordance with Section
6 herein below. From and after the occurrence and during the
continuance of any Event of Default, the Interest Rate shall
automatically be increased to fifteen percent (15%) (the
“
Default Rate
”).
In the event that such Event of Default is subsequently cured, the
increase referred to in the preceding sentence shall cease to be
effective as of the date of such cure,
provided
that the Interest as
calculated and unpaid at such increased rate during the continuance
of such Event of Default shall continue to apply to the extent
relating to the days after the occurrence of such Event of Default
through and including the date of such cure of such Event of
Default.
4.
Intentionally
Left Blank
.
5.
Conversion
into Common Stock
.
a.
General
.
(i)
Conversion
into Common Stock
.
Subject to the provisions of Section
5(a)(iv), on any one or more occasions on or after the date hereof,
the Holder shall be entitled to convert any portion of the
outstanding and unpaid Conversion Amount (as defined below) into
fully paid and non-assessable shares of
common stock of the Company, par value $0.001 per
share (the “
Common Stock
”), or any shares of capital stock or other
securities of the Company into which such Common Stock shall
hereafter be changed, exchanged or reclassified
in
accordance with Section 5 at the Conversion Rate (as defined below)
then in effect. The Company shall not issue any fraction of a share
of Common Stock upon any conversion. If the issuance would result
in the issuance of a fraction of a share of Common Stock, the
Company shall round such fraction of a share of Common Stock up to
the nearest whole share. The Company shall pay any and all
transfer, stamp and similar taxes that may be payable with respect
to the issuance and delivery of Common Stock upon conversion of any
Conversion Amount
. Any such conversion
set forth in a conversion notice
dated prior thereto, shall be deemed to be
effective as of the date of such conversion notice (the
“
Conversion
Date
”)
.
(ii)
Automatic
Conversion into Common Stock
.
In the event the Company consummates, prior to the
Maturity Date, an equity financing pursuant to which it sells its
common stock, preferred stock or other equity or equity-linked
securities with an aggregate gross proceeds of no less than $3
million with the principal purpose of raising capital (a
“
Qualified
Financing
”), the shares
shall automatically convert as described below.
(iii)
Conversion
Rate
.
The number of
shares of Common Stock issuable upon conversion of any Conversion
Amount pursuant to Section 5 shall be determined by dividing (x)
such Conversion Amount by (y) the Conversion Price (the
“
Conversion
Rate
”).
The Conversion
Amount shall be subject from time to time to adjustment as
described below.
1.
“
Conversion Amount
” means the sum
of (A) the portion of the Principal to be converted, amortized,
redeemed or otherwise with respect to which this determination is
being made, and (B) any accrued and unpaid Interest with respect to
such Principal.
2.
“
Conversion Price
” means shall be
$____ per share, subject to adjustment as provided
herein.
(iv)
Conversion
Limit
.
Notwithstanding anything to the contrary set forth
in this Note, at no time may a Holder of this Note (other than the
Holder for purposes of this Section
5a(
iv))
convert this Note into Common Stock if the number
of shares of Common Stock to be issued pursuant to such conversion
would cause the number of shares of Common Stock beneficially owned
by such Holder at such time to exceed, when aggregated with all
other shares of Common Stock beneficially owned by such Holder and
its affiliates at such time, the number of shares of Common Stock
that would result in such Holder, its affiliates, any investment
manager having discretionary investment authority over the accounts
or assets of such Holder, or any other persons whose beneficial
ownership of Common Stock would be aggregated with such
Holder’s for purposes of Section 13(d) and Section 16 of
the
1934
Act, beneficially owning (as determined in
accordance with Section 13(d) of the
1934
Act and
the rules thereunder) in excess of 9.99% of the then issued and
outstanding shares of Common Stock
.
In addition, the Company shall not issue any
shares of Common Stock upon conversion of this Note or otherwise
pursuant to the terms of this Note if the issuance of such shares
of Common Stock (after taking into account the issuance of Common
Stock upon exercise of the Warrants issued pursuant to the terms of
the Note Purchase Agreement) would exceed the aggregate number of
shares of Common Stock that the Company may issue upon conversion
of the Notes and exercise of the Warrants or otherwise pursuant to
terms of the Notes or Warrants without breaching the
Company’s obligations under the rules and regulations of the
Trading Market
(the number of shares which may be issued
without violating such rules and regulations, the
“
Exchange Cap
”),
except that such limitation shall not apply in the event that the
Company (A) obtains the approval of its stockholders as required by
the applicable rules of the Trading Market for issuances of shares
of Common Stock in excess of such amount or
(B) obtains a written opinion from outside counsel
to the Company that such approval is not required, which opinion
shall be reasonably satisfactory to the Holder. Until such approval
or such written opinion is obtained, the aggregate maximum number
of shares of Common Stock that all Holders may be issued in the
aggregate, upon conversion of any Notes (after taking into account
the issuance of Common Stock upon exercise of the Warrants issued
pursuant to the terms of the Note Purchase Agreement) or any other
issuance pursuant to the terms of the Notes, the Note Purchase
Agreement or Warrants shall not exceed the Exchange Cap and the
Holder shall not be issued any shares of Common Stock pursuant to
the terms of the Notes or Warrants in an amount greater than the
product of (i) the Exchange Cap as of the Initial Closing Date
multiplied by (ii) the quotient of (1) the aggregate maximum number
of shares of Common Stock issuable to the Holder at the time of the
conversion under the Notes and Warrants issued to the Holder
pursuant to the Note Purchase Agreement divided by (2) the maximum
aggregate number of shares of Common Stock issuable to all of the
Purchasers at the time of the conversion under the Notes and
Warrants (with respect to each Purchase, the
“
Exchange Cap
Allocation
”). In the
event that any Purchaser shall sell or otherwise transfer any of
such Purchaser’s Notes, the transferee shall be allocated a
pro rata portion of such Purchaser’s Exchange Cap Allocation
with respect to such portion of such Notes so transferred, and the
restrictions of the prior sentence shall apply to such transferee
with respect to the portion of the Exchange Cap Allocation so
allocated to such transferee. Upon repayment or conversion in full
of a Holder’s Notes, the difference (if any) between such
holder’s Exchange Cap Allocation and the number of shares of
Common Stock actually issued to such Holder upon such
Holder’s conversion in full of such Notes shall be allocated
to the respective Exchange Cap Allocations of the remaining Holders
of Notes on a
pro
rata
basis in proportion to the
shares of Common Stock underlying the Notes then held by each such
Holder. In the event that the Company is prohibited from issuing
shares of Common Stock pursuant to this Section 5(a)(iv) (the
“
Exchange Cap
Shares
”), the Company
shall pay cash in lieu of issuing such Exchange Cap Shares at a
price equal to the sum of: (i) the product of (x) such number of
Exchange Cap Shares and (y) the average closing price of the Common
Stock for the five Trading Days preceding the date the Holder
delivers the applicable Conversion Notice with respect to such
Exchange Cap Shares to the Company; and (ii) to the extent the
Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the
Holder of Exchange Cap Shares, any brokerage commissions and other
out-of-pocket expenses, if any, of the Holder incurred in
connection therewith.
(v)
Effect
of Conversion
.
Upon conversion of this Note in full in the manner
provided by Section 5(c) below, this Note shall be deemed fully
satisfied and cancelled.
a.
Authorized
Shares
.
The Company covenants that during the period the
conversion right exists, the Company will reserve from its
authorized and unissued Common Stock, free from preemptive rights,
to provide for the issuance of 110% of the number of shares of
Common Stock upon the full conversion of the Holder’s Note
and the other Notes issued pursuant to the Note Purchase Agreement
(the “
Reserved
Amount
”). If the Company
shall issue any securities or make any change to its capital
structure which would change the number of shares of Common Stock
into which the Notes shall be convertible at the then current
Conversion Price, the Company shall at the same time make proper
provision so that thereafter there shall be a sufficient number of
shares of Common Stock authorized and reserved, free from
preemptive rights, for conversion of the outstanding Notes. The
Company: (i) acknowledges that it has irrevocably authorized by its
Board of Directors to issue certificates for the Common Stock
issuable upon conversion of the Holder’s Note; and (ii)
agrees that its issuance of the Holder’s Note shall
constitute full authority to its officers and agents who are
charged with the duty of executing stock certificates to execute
and issue the necessary certificates for shares of Common Stock in
accordance with the terms and conditions of the Holder’s
Note.
b.
Method
of Conversion
.
(i)
Mechanics
of Conversion
.
Subject to Section 5(a), the Holder’s Note
may be converted by the Holder in whole or in part, by: (i)
submitting to the Company a conversion notice (by facsimile or
other reasonable means of communication dispatched on the
Conversion Date prior to 6:00 p.m., New York, New York time); and
(ii) subject to Section 5(d)(ii), surrendering the Holder’s
Note at the principal office of the Company.
(ii)
Surrender
of Note Upon Conversion
.
Notwithstanding anything to the contrary set forth
herein, upon conversion of the Holder’s Note in accordance
with the terms hereof, the Holder shall not be required to
physically surrender the Holder’s Note to the Company unless
the entire unpaid principal amount of the Holder’s Note is so
converted. The Holder and the Company shall maintain records
showing the principal amount so converted and the dates of such
conversions or shall use such other method, reasonably satisfactory
to the Holder and the Company, so as not to require physical
surrender of the Holder’s Note upon each such conversion. In
the event of any dispute or discrepancy, such records of the
Company shall be controlling and determinative in the absence of
manifest error. Notwithstanding the foregoing, if any portion of
the Holder’s Note is converted as aforesaid, the Holder may
not transfer the Holder’s Note unless the Holder first
physically surrenders the Holder’s Note to the Company,
whereupon the Company will forthwith issue and deliver upon the
order of the Holder a new Note of like tenor, registered as the
Holder (upon payment by the Holder of any applicable transfer
taxes) may request, representing in the aggregate the remaining
unpaid principal amount of the Holder’s Note. The Holder and
any assignee, by acceptance of the Holder’s Note, acknowledge
and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of the Holder’s Note, the
unpaid and unconverted principal amount of the Holder’s Note
represented by the Holder’s Note may be less than the amount
stated on the face hereof.
(iii)
Delivery
of Common Stock Upon Conversion
.
Upon receipt by the Company from the Holder of a
facsimile or electronic transmission (or other reasonable means of
communication) of a conversion notice meeting the requirements for
conversion
as provided in this
Section 5(d), the Company shall issue and deliver or cause to be
issued and delivered to or upon the order of the Holder
certificates for the Common Stock issuable upon such conversion
within three (3) Business Days (such third Business Day being
hereinafter referred to as the “
Deadline
”) in accordance with the terms hereof and
the Note Purchase Agreement.
(iv)
Obligation
of Company to Deliver Common Stock
.
Upon delivery by the Holder to the Company of a
conversion notice, the Holder shall be deemed to be the Holder of
record of the Common Stock issuable upon such conversion, the
outstanding principal amount and the amount of accrued and unpaid
interest on that portion of the Holder’s Note being converted
shall be reduced to reflect such conversion, and, unless the
Company defaults on its obligations under this Section 5, all
rights with respect to the portion of the Holder’s Note being
so converted shall forthwith terminate except the right to receive
the Common Stock or other securities, cash or other assets, as
herein provided, on such conversion. If the Holder shall have given
a conversion notice as provided herein, the Company’s
obligation to issue and deliver the certificates for Common Stock
shall be absolute and unconditional, irrespective of the absence of
any action by the Holder to enforce the same, any waiver or consent
with respect to any provision thereof, the recovery of any judgment
against any Person or any action to enforce the same, any failure
or delay in the enforcement of any other obligation of the Company
to the Holder of record, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the
Holder of any obligation to the Company, and irrespective of any
other circumstance which might otherwise limit such obligation of
the Company to the Holder in connection with such conversion. The
Conversion Date specified in the conversion notice shall be the
Conversion Date so long as the conversion notice is received by the
Company before 6:00 p.m., New York, New York time, on such
date.
(v)
Company’s
Failure to Timely Convert
.
If the Company shall fail, for any
reason or for no reason, to issue to the Holder by the Deadline, a
certificate for the number of shares of Common Stock to which the
Holder is entitled and register such shares of Common Stock on the
Company’s share register or to credit the Holder’s or
its designee’s balance account with DTC for such number of
shares of Common Stock to which the Holder is entitled upon the
Holder’s conversion of any Conversion Amount (as the case may
be) (a “
Conversion
Failure
”), then, in addition to all other remedies
available to the Holder, (1) the Company shall pay in cash to the
Holder on each Trading Day after such third (3
rd
) Trading Day that
the issuance of such shares of Common Stock is not timely effected
an amount equal to one percent (1%) of the product of (A) the sum
of the number of shares of Common Stock not issued to the Holder on
a timely basis and to which the Holder is entitled multiplied by
(B) the Closing Sale Price of the Common Stock on the Trading Day
immediately preceding the last possible date which the Company
could have issued such shares of Common Stock to the Holder without
violating Section 5 and (2) the Holder, upon written notice to the
Company, may void its Conversion Notice with respect to, and retain
or have returned (as the case may be) any portion of this Note that
has not been converted pursuant to such Conversion Notice,
provided
that the
voiding of a Conversion Notice shall not affect the Company’s
obligations to make any payments which have accrued prior to the
date of such notice pursuant to this Section (c)(v) or otherwise.
For purposes of this Note, “
Closing Sale Price
” means, for any
security as of any date, the last closing bid price and last trade
price, respectively, for such security on the Trading Market, or if
the foregoing do not apply, the last closing bid price or last
trade price, respectively, of such security in the over-the-counter
market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no closing bid price or last trade
price, respectively, is reported for such security by Bloomberg,
the average of the bid prices, or the ask prices, respectively, of
any market makers for such security as reported in the “pink
sheets” by OTC Markets Group, Inc. (formerly Pink Sheets
LLC). If the Closing Sale Price cannot be calculated for a security
on a particular date on any of the foregoing bases, the Closing
Sale Price, as the case may be, of such security on such date shall
be the fair market value as mutually determined by the Company and
the Holder. If the Company and the Holder are unable to agree upon
the fair market value of such security, then such dispute shall be
resolved pursuant to Section 19. All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock
combination or other similar transaction during the applicable
calculation period.
(vi)
Pro
Rata Conversion; Disputes
. In the event that the Company
receives a Conversion Notice from more than one holder of Notes for
the same Conversion Date and the Company can convert some, but not
all, of such portions of the Notes submitted for conversion, the
Company, subject to Section 5(a)(iv), shall convert from each
holder of Notes electing to have Notes converted on such date a pro
rata amount of such holder’s portion of its Notes submitted
for conversion based on the principal amount of Notes submitted for
conversion on such date by such holder relative to the aggregate
principal amount of all Notes submitted for conversion on such
date. In the event of a dispute as to the number of shares of
Common Stock issuable to the Holder in connection with a conversion
of this Note, the Company shall issue to the Holder the number of
shares of Common Stock not in dispute and resolve such dispute in
accordance with Section 19.
c.
Adjustments
on Conversion Amount
.
The number of shares of Common Stock to be issued
upon each conversion of the Holder’s Note shall be subject to
adjustments as follows:
(i)
Subdivision
or Combination of Common Stock
.
If the Company at any time subdivides (by any
stock split, stock dividend, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after
the date of record for effecting such subdivision, the Conversion
Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time combines (by
any reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a smaller number of shares, then, after
the date of record for effecting such combination, the Conversion
Price in effect immediately prior to such combination will be
proportionately increased.
(ii)
Reclassification,
Exchange, and Substitution
.
If at any time or from time to time
after the date upon which this Note was issued by the Company (the
“
Original Issue
Date
”), the shares of
Common Stock issuable upon the conversion of this Note shall be
changed into the same or a different number of shares of any class
or classes of stock, whether by recapitalization, reclassification,
reorganization, merger, exchange, consolidation, sale of assets or
otherwise, then, in any such event, each holder of the Notes shall
have the right thereafter to convert such stock into the kind and
amount of stock and other securities and property receivable upon
such recapitalization, reclassification, reorganization, merger,
exchange, consolidation, sale of assets, distribution of assets or
other change by a holder of the number of shares of Common Stock
into which such shares of this Note could have been converted
immediately prior to such recapitalization, reclassification,
reorganization, merger, exchange, consolidation, sale of assets,
distribution of assets or other change, or with respect to such
other securities or property by the terms
thereof.
(iii)
Adjustment
Upon Issuance of Shares of Common Stock.
If and
whenever during the nine (9) month period commencing on the Issue
Date, the Company issues or sells, or in accordance with this
Section 5 is deemed to have issued or sold, any shares of Common
Stock (including the issuance or sale of shares of Common Stock
owned or held by or for the account of the Company, but excluding
any Excluded Securities issued or sold or deemed to have been
issued or sold) for a consideration per share (the
“
Dilutive Issuance
Price
”) that is
less
than a price
equal to the Conversion Price in effect immediately prior to such
issue or sale or deemed issuance or sale (the “
Applicable Conversion Price
”) (the
foregoing, a “
Dilutive Issuance
”), then
immediately following such Dilutive Issuance, the Applicable
Conversion Price then in effect shall be reduced to the Dilutive
Issuance Price. Following the date which is nine (9) months after
the Issuance Date, if the Company is deemed to have issued or sold
any securities that result in a Dilutive Issuance, then immediately
following such Dilutive Issuance, the Applicable Conversion Price
then in effect shall be reduced to the Adjusted Conversion Price
(as hereinafter defined). For purposes of this Note, the term
“
Adjusted Conversion
Price
” means the price determined by multiplying the
Applicable Conversion Price in effect immediately prior to the
Dilutive Issuance by a fraction, (A) the numerator of which is an
amount equal to the sum of (x) the number of shares of Common Stock
actually outstanding immediately prior to the Dilutive Issuance,
plus (y) the quotient of the aggregate consideration, calculated as
set forth in Section 5(d)(iii)(4) hereof, received by the Company
upon such Dilutive Issuance divided by the Applicable Conversion
Price in effect immediately prior to the Dilutive Issuance, and (B)
the denominator of which is the Common Stock Deemed Outstanding (as
defined below) immediately after the Dilutive Issuance; provided
that only one adjustment will be made for each Dilutive Issuance.
The term “
Common Stock Deemed
Outstanding
” shall mean the number of shares of Common
Stock actually outstanding (not including shares of Common Stock
held in the treasury of the Company), plus (i) pursuant to Section
5(d)(iii)(4) hereof, the maximum total number of shares of Common
Stock issuable upon the exercise of Options, as of the date of such
issuance or grant of such Options, if any, and (ii) pursuant to
Section 5(d)(iii)(4) hereof, the maximum total number of shares of
Common Stock issuable upon conversion or exchange of Common Stock
Equivalents, as of the date of issuance of such Common Stock
Equivalents, if any. No adjustment to the Applicable Conversion
Price shall have the effect of increasing the Applicable Conversion
Price above the Applicable Conversion Price in effect immediately
prior to such adjustment.
1.
Issuance of Options
. If the
Company in any manner grants any Options and the lowest price per
share for which one share of Common Stock is issuable upon the
exercise of any such Option or upon conversion, exercise or
exchange of any Common Stock Equivalents issuable upon exercise of
any such Option is less than the Applicable Exercise Price, then
such share of Common Stock shall be deemed to be outstanding and to
have been issued and sold by the Company at the time of the
granting or sale of such Option for such price per share. For
purposes of this Section 6(b)(i), the “lowest price per share
for which one share of Common Stock is issuable upon exercise of
such Options or upon conversion, exercise or exchange of such
Common Stock Equivalents issuable upon exercise of any such
Option” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with
respect to any one share of Common Stock upon the granting or sale
of the Option, upon exercise of the Option and upon conversion,
exercise or exchange of any convertible security
(“
Convertible
Security
”) issuable upon exercise of such Option less
any consideration paid or payable by the Company with respect to
such one share of Common Stock upon the granting or sale of such
Option, upon exercise of such Option and upon conversion exercise
or exchange of any Convertible Security issuable upon exercise of
such Option. No further adjustment of the Conversion Price or
number of Note Shares shall be made upon the actual issuance of
such shares of Common Stock or of such Common Stock Equivalents
upon the exercise of such Options or upon the actual issuance of
such shares of Common Stock upon conversion, exercise or exchange
of such Common Stock Equivalents.
2.
Issuance of Common Stock
Equivalents
. If the Company in any manner issues or sells
any Common Stock Equivalents and the lowest price per share for
which one share of Common Stock is issuable upon the conversion,
exercise or exchange thereof is less than the Applicable Conversion
Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the
time of the issuance or sale of such Common Stock Equivalents for
such price per share. For the purposes of this Section 5(d)(iii),
the “lowest price per share for which one share of Common
Stock is issuable upon the conversion, exercise or exchange
thereof” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with
respect to one share of Common Stock upon the issuance or sale of
the Convertible Security and upon conversion, exercise or exchange
of such Convertible Security less any consideration paid or payable
by the Company with respect to such one share of Common Stock upon
the issuance or sale of such Convertible Security and upon
conversion, exercise or exchange of such Convertible Security. No
further adjustment of the Conversion Price or number of Note Shares
shall be made upon the actual issuance of such shares of Common
Stock upon conversion, exercise or exchange of such Common Stock
Equivalents, and if any such issue or sale of such Common Stock
Equivalents is made upon exercise of any Options for which
adjustment of this Note has been or is to be made pursuant to other
provisions of this Section 5(d)(iii), no further adjustment of the
Conversion Price or number of Note Shares shall be made by reason
of such issue or sale.
3.
Change in Option Price or Rate of
Conversion.
If the purchase price provided for in any
Options, the additional consideration, if any, payable upon the
issue, conversion, exercise or exchange of any Common Stock
Equivalents, or the rate at which any Common Stock Equivalents are
convertible into or exercisable or exchangeable for shares of
Common Stock increases or decreases at any time, the Conversion
Price and the number of Note Shares in effect at the time of such
increase or decrease shall be adjusted to the Conversion Price and
the number of Note Shares which would have been in effect at such
time had such Options or Common Stock Equivalents provided for such
increased or decreased purchase price, additional consideration or
increased or decreased conversion rate, as the case may be, at the
time initially granted, issued or sold. For purposes of this
Section 5(d)(iii), if the terms of any Option or Convertible
Security that was outstanding as of the date of issuance of this
Note are increased or decreased in the manner described in the
immediately preceding sentence, then such Option or Convertible
Security and the shares of Common Stock deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such increase or decrease. No
adjustment pursuant to this Section 5(d) shall be made if such
adjustment would result in an increase of the Conversion Price then
in effect or a decrease in the number of Note Shares.
4.
Calculation of Consideration
Received
. In case any Option is issued in connection with
the issue or sale of other securities of the Company, together
comprising one integrated transaction, (x) the Options will be
deemed to have been issued for the exercise price of such Options
and (y) the other securities issued or sold in such integrated
transaction shall be deemed to have been issued for the aggregate
consideration received by the Company. If any shares of Common
Stock, Options or Common Stock Equivalents are issued or sold or
deemed to have been issued or sold for cash, the consideration
received therefor will be deemed to be the net amount received by
the Company therefor. If any shares of Common Stock, Options or
Common Stock Equivalents are issued or sold for a consideration
other than cash, the amount of such consideration received by the
Company will be the fair value of such consideration, except where
such consideration consists of securities, in which case the amount
of consideration received by the Company will be the Closing Sale
Price of such security on the date of receipt. If any shares of
Common Stock, Options or Common Stock Equivalents are issued to the
owners of the non-surviving entity in connection with any merger in
which the Company is the surviving entity, the amount of
consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving entity
as is attributable to such shares of Common Stock, Options or
Common Stock Equivalents, as the case may be. The fair value of any
consideration other than cash or securities will be determined
jointly by the Company and the Required Holders. If such parties
are unable to reach agreement within ten (10) days after the
occurrence of an event requiring valuation (the “
Valuation Event
”), the fair value
of such consideration will be determined within five (5) Trading
Days after the tenth (10
th
) day following the
Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the Required Holders. The determination
of such appraiser shall be final and binding upon all parties
absent manifest error and the fees and expenses of such appraiser
shall be borne by the Company.
5.
Record Date
. If the Company
takes a record of the holders of shares of Common Stock for the
purpose of entitling them (A) to receive a dividend or other
distribution payable in shares of Common Stock, Options or in
Common Stock Equivalents or (B) to subscribe for or purchase shares
of Common Stock, Options or Common Stock Equivalents, then such
record date will be deemed to be the date of the issue or sale of
the shares of Common Stock deemed to have been issued or sold upon
the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
6.
Exceptions to Adjustment of Conversion
Price
.
No adjustment to the Conversion
Price will be made (i) upon the issuance of shares of Common Stock
or options or warrants to purchase Common Stock to directors,
officers, consultants or employees of the Company in their capacity
as such pursuant to any stock or option plan duly adopted by the
Board of Directors of the Company (an “
Approved Stock Plan
”), provided
that the exercise price of any such options is not lowered, none of
such options are amended to increase the number of shares issuable
thereunder and none of the terms or conditions of any such options
are otherwise materially changed in any manner that adversely
affects the Warrant Holder or, any of the holders of the
Company’s warrants (the “
Other Holders
”); (ii) upon
issuance of shares of Common Stock upon the conversion or exercise
of Common Stock Equivalents (other than standard options to
purchase Common Stock issued pursuant to an Approved Stock Plan
that are covered by clause (i) above) issued prior to the Issue
Date, provided that the conversion or exercise (as the case may be)
of any such Convertible Security is made solely pursuant to the
conversion or exercise (as the case may be) provisions of such
Convertible Security that were in effect on the date immediately
prior to the Issue Date, the conversion or exercise price of any
such Common Stock Equivalents (other than standard options to
purchase Common Stock issued pursuant to an Approved Stock Plan
that are covered by clause (i) above) is not lowered other than by
the operation of provisions of such Convertible Security that were
in effect on the date immediately prior to the Issue Date, none of
such Common Stock Equivalents are (other than standard options to
purchase Common Stock issued pursuant to an Approved Stock Plan
that are covered by clause (i) above) (nor is any provision of any
such Common Stock Equivalents) amended or waived in any manner
(whether by the Company or the holder thereof) to increase the
number of shares issuable thereunder and none of the terms or
conditions of any such Common Stock Equivalents (other than
standard options to purchase Common Stock issued pursuant to an
Approved Stock Plan that are covered by clause (i) above) are
otherwise materially changed or waived (whether by the Company or
the holder thereof) in any manner that adversely affects the Note
Holder or any of the Other Holders; (iii) upon the issuance of the
Notes; (iv) upon the issuance of the Note Shares; (v) upon the
issuance of Warrant Shares issued pursuant to the Purchase
Agreement; (vi) upon the issuance of any warrants to the Placement
Agent and the underlying shares; (vii) upon the issuance of Common
Stock upon conversion or exercise of any currently outstanding
securities;
(viii) upon the issuance
of securities pursuant to any equipment loan or leasing
arrangement, real property leasing arrangement or debt financing
from a bank or similar financial institution;
(ix) upon the
issuance of securities pursuant to a
stock dividend or stock split;
and (x) upon the issuance of
shares of Common Stock in connection with mergers, acquisitions,
strategic licensing arrangements, strategic business partnerships
or joint ventures, in each case with non-affiliated third parties
and otherwise on an arm’s-length basis, the purpose of which
is not to raise additional capital. Notwithstanding the foregoing,
(I) any Common Stock issued or issuable to raise capital for the
Company or its Subsidiaries, directly or indirectly, in connection
with any transaction contemplated by clause (x) above, including,
without limitation, securities issued in one or more related
transactions or that result in similar economic consequences, shall
not constitute Excluded Securities.
(iv)
Notice
of Adjustments
.
Upon the occurrence of each adjustment or
readjustment of the Conversion Price as a result of the events
described in this Section 5(d), the Company, at its expense, shall
promptly compute such adjustment or readjustment and prepare and
furnish to the Holder of this Note a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based. Failure to give
such notice or any defect therein shall not affect the legality or
validity of the subject adjustment.
d.
Concerning
the Shares
.
(i)
Legend
.
The shares of Common Stock issuable upon conversion of the Note may
not be sold or transferred unless: (A) such shares are sold
pursuant to an effective registration statement under the
Securities Act; or (B) the Company or its transfer agent shall have
been furnished with an opinion of counsel (which opinion shall be
in form, substance and scope customary for opinions of counsel in
comparable transactions and from an attorney that regularly
practices securities law) to the effect that the shares to be sold
or transferred may be sold or transferred pursuant to an exemption
from such registration; or (C) such shares are sold or transferred
pursuant to Rule 144 under the Securities Act (or a successor rule)
(“
Rule 144
”); or
(D) such shares are sold or transferred outside the United States
in accordance with Rule 904 of Regulation S under the Securities
Act; or (E) such shares are transferred to an
“affiliate” (as defined in Rule 144) of the Company who
agrees to sell or otherwise transfer the shares only in accordance
with this Section 5(e). Except as otherwise provided in this
Agreement (and subject to the removal provisions set forth below),
until such time as the shares of Common Stock issuable upon
conversion of the Note have been registered under the Securities
Act as contemplated by the Registration Rights Agreement, otherwise
may be sold pursuant to Rule 144 without any restriction as to the
number of securities as of a particular date that can then be
immediately sold, each certificate for shares of Common Stock
issuable upon conversion of the Note that has not been so included
in an effective registration statement or that has not been sold
pursuant to an effective registration statement or an exemption
that permits removal of the legend, shall bear a legend
substantially in the following form, as appropriate:
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S.
SECURITIES ACT”). THE HOLDER HEREOF, BY PURCHASING SUCH
SECURITIES, AGREES THAT SUCH SECURITIES MAY BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE CORPORATION,
(B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF
REGULATION S UNDER THE U.S. SECURITIES ACT, (C) WITHIN THE UNITED
STATES AFTER REGISTRATION OR IN ACCORDANCE WITH THE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS UNDER THE U.S. SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER, IF APPLICABLE, AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS, OR (D) WITHIN THE UNITED
STATES IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER
THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS AND
THE HOLDER HAS PRIOR TO SUCH SALE FURNISHED TO THE CORPORATION AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION.
(ii)
Removal
of Legend
.
The legend
set forth above shall be removed and the Company shall issue to the
Holder a new certificate therefor free of any transfer legend if:
(A) the Company or its transfer agent shall have received an
opinion of counsel, in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that
a public sale or transfer of such Common Stock may be made without
registration under the Act and the shares are so sold or
transferred; or (B) in the case of the Common Stock issuable upon
conversion of the Holder’s Note, such security is registered
for sale by the Holder under an effective registration statement
filed under the Securities Act or otherwise may be sold pursuant to
Rule 144 without any restriction as to the number of securities as
of a particular date that can then be immediately sold. The Company
shall cause its counsel to issue a legal opinion to the
Company’s transfer agent promptly after the effective date of
any registration statement under the Securities Act registering the
resale of the Common Stock issuable upon conversion of the Note if
required by the Company’s transfer agent to effect the
removal of the legend hereunder. Nothing in the Note shall (x)
limit the Company’s obligation under the Registration Rights
Agreement or (y) affect in any way the Holder’s obligations
to comply with applicable prospectus delivery requirements upon the
resale of the securities referred to herein.
6
.
Status
as Shareholder
.
Upon submission of a conversion notice by the
Holder of this Note: (i) the shares covered thereby (other than the
shares, if any, which cannot be issued because their issuance would
exceed such Holder’s allocated portion of the Reserved
Amount) shall be deemed converted into shares of Common Stock; and
(ii) the Holder’s rights as a Holder of such converted
portion of the Holder’s Note shall cease and terminate,
excepting only the right to receive certificates for such shares of
Common Stock and to any remedies provided herein or otherwise
available at law or in equity to such Holder because of a failure
by the Company to comply with the terms of the Holder’s Note.
Notwithstanding the foregoing, if a Holder has not received
certificates for all shares of Common Stock prior to the third
(3
rd
)
Business Day after the Deadline, Holder may elect at such
Holder’s option to regain the rights of a Holder of the
Holder’s Note with respect to such attempted converted
portions of the Holder’s Note and the Company shall, as soon
as practicable, return such attempted converted Note to the Holder
or, if the Note has not been surrendered, adjust its records to
reflect that such portion of the Holder’s Note has not been
converted. In all cases, the Holder shall retain all of its rights
and remedies for the Company’s failure to convert the
Holder’s Note.
7.
Governing
Law; Consent to Jurisdiction; Waiver of Jury
Trial
.
a.
This
Note
shall be
governed by, and construed in accordance with, the internal laws of
the State of New York without regard to the choice of law
principles thereof. Each of the parties of the Note hereto
irrevocably submits to the exclusive
jurisdiction of the courts of the State of New York located in New
York County and the United States District Court for the Southern
District of New York for the purpose of any suit, action,
proceeding or judgment relating to or arising out of this
Note. Service of process in connection
with any such suit, action or proceeding may be served on each
party hereto
anywhere in the
world by the same methods as are specified for the giving of
notices under this
Note. Each
of the parties
of this
Note
irrevocably consents to
the jurisdiction of any such court in any such suit, action or
proceeding and to the laying of venue in such court. Each party
hereto
irrevocably waives any
objection to the laying of venue of any such suit, action or
proceeding brought in such courts and irrevocably waives any claim
that any such suit, action or proceeding brought in any such court
has been brought in an inconvenient forum.
EACH OF THE PARTIES HERETO
WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH
RESPECT TO THIS
NOTE
AND REPRESENTS THAT COUNSEL HAS
BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
b.
Each party shall bear its own expenses in any
litigation conducted under this section.
c.
The
Company consents to accept service of process by the certified
mail, return receipt requested in the event of litigation. The
Company further consents to accept service of process via
recognized international courier in the case that the Company is
not able to accept service by the certified mail provided a receipt
of delivery is available.
8.
Facsimile
Signatures
.
This Note may be executed by facsimile signature
which shall, for all purposes be deemed to be as legally valid and
binding upon the Company as
an
original
signature.
9.
Event
of Default
.
An “Event of Default” shall exist if
any of the following conditions or events shall occur and be
continuing:
a.
Following
the Holder’s written demand for payment, the Company shall
fail to pay in full the entire outstanding principal amount of this
Note and all interest accrued hereon within thirty (30) Days after
such written demand for payment is given to Holder; or
b.
Subject
to Section 5(a)(iv), the Company’s: (A) failure to cure a
Conversion Failure by delivery of the required number of shares of
Common Stock within ten (10) Business Days after the applicable
Conversion Date; or (B) notice, written or oral, to any holder of
the Notes, including by way of public announcement or through any
of its agents, at any time, of its intention not to comply with a
request for conversion of any Notes into shares of Common Stock
that is tendered in accordance with the provisions of the Notes;
or
c.
At
any time following the tenth (10
th
) consecutive
Business Day that the Reserved Amount is less than the number of
shares of Common Stock that the Holder would be entitled to receive
upon a conversion of the full Conversion Amount of this Note
(without regard to any limitations on conversion set forth in
Section 5(a)(iv) or otherwise); or
d.
The
Company defaults in the performance of or compliance with its
obligations under any of this Note, the Note Purchase Agreement or
any of the Transaction Documents and such default has not been
cured for thirty (30) days after written notice of default is given
to the Company; or
e.
Any
representation or warranty made by or on behalf of the Company or
the Holder in this Note, the Note Purchase Agreement or any of the
Transaction Documents proves to have been false or incorrect in any
material respect on the date as of which made, and such condition
has not been cured for sixty (60) Business Days after written
notice of default is given to the other party; or
f.
The
Company (i) admits in writing its inability to pay, its debts as
they become due; (ii) files, or consents by answer or otherwise to
the filing against it of a petition for relief or reorganization or
arrangement or any other petition in bankruptcy, for liquidation or
to take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction; (iii) makes an
assignment for the benefit of its creditors; (iv) consents to the
appointment of a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any
substantial part of its property; (v) is adjudicated as insolvent
or to be liquidated; or (vi) takes corporate action for the purpose
of any of the foregoing; or
g.
A
court or governmental authority of competent jurisdiction enters an
order appointing, without consent by the Company, a custodian,
receiver, trustee or other officer with similar powers with respect
to it or with respect to any substantial part of its property, or
constituting an order for relief or approving a petition for relief
or reorganization or any other petition in bankruptcy or for
liquidation or to take advantage of any bankruptcy or insolvency
law of any jurisdiction, or ordering the dissolution, winding-up or
liquidation of the Company, or any such petition shall be filed
against such party and such petition shall not be dismissed within
six (6) months; or
h.
A
final judgment or judgments for the payment of money in excess of
(U.S.) $600,000 are rendered against the Company, which judgments
are not, within six (6) months after entry thereof, bonded,
discharged or stayed pending appeal, or are not discharged within
six (6) months after the expiration of such stay.
10.
Remedies
Following An Event Of Default
.
Upon occurrence of an Event of Default defined in
subsection (a) to (h) of Section 9, this Note
and all
accrued Interest to the date of such default shall, at the option
of the Holder, immediately become due and payable without
presentment, protest or notice of any kind, all of which are waived
by the Company.
11.
Vote To Issue, Or
Change The Terms Of, Notes
.
The written consent of a majority of
the Holders shall be required for any change or amendment to any of
the Notes, unless the change shall only effect the Holder and the
Company shall have offered such change to all other Holders of
Notes, in which case only the consent of the Holder is
required.
12.
Transfer
.
This Note and any shares of Common Stock issued upon conversion of
this Note may not be offered, sold, assigned or transferred by the
Holder without the consent of the Company.
13.
Noncircumvention
.
The Company hereby covenants and agrees that the Company will not,
by amendment of its certificate of incorporation, bylaws or through
any reorganization, transfer of assets, consolidation, merger,
scheme of arrangement, dissolution, issue or sale of securities, or
any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Note, and will at all
times in good faith carry out all of the provisions of this Note
and take all action as may be required to protect the rights of the
Holder of this Note.
14.
Intentionally
Left Blank
.
15.
Reissuance Of This
Note
.
a.
Lost,
Stolen or Mutilated Note
.
Upon receipt by the Company
of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of this Note, and, in the case of
loss, theft or destruction, of any indemnification undertaking by
the Holder to the Company in customary form and, in the case of
mutilation, upon surrender and cancellation of this Note, the
Company shall execute and deliver to the Holder a new Note (in
accordance with Section 15(c) representing the outstanding
Principal.
b.
Note
Exchangeable for Different Denominations
.
This Note is exchangeable, upon the
surrender hereof by the Holder at the principal office of the
Company, for a new Note or Notes (in accordance with Section 15(c)
and in principal amounts of at least $10,000) representing in the
aggregate the outstanding Principal of this Note, and each such new
Note will represent such portion of such outstanding Principal as
is designated by the Holder at the time of such
surrender.
c.
Issuance of New
Notes
.
Whenever the Company is
required to issue a new Note pursuant to the terms of this Note,
such new Note: (i) shall be of like tenor with this Note; (ii)
shall represent, as indicated on the face of such new Note, the
Principal remaining outstanding (or in the case of a new Note being
issued pursuant to Section 15(b), the Principal designated by the
Holder which, when added to the principal represented by the other
new Notes issued in connection with such issuance, does not exceed
the Principal remaining outstanding under this Note immediately
prior to such issuance of new Notes); (iii) shall have an issuance
date, as indicated on the face of such new Note, which is the same
as the Issuance Date of this Note; (iv) shall have the same rights
and conditions as this Note; and (v) shall represent accrued and
unpaid Interest, if any, on the Principal of this Note, from the
Issuance Date.
16.
Payment Of
Collection, Enforcement And Other Costs
.
If (a) this Note is placed in the
hands of an attorney for collection or enforcement or is collected
or enforced through any legal proceeding or the Holder otherwise
takes action to collect amounts due under this Note or to enforce
the provisions of this Note; or (b) there occurs any bankruptcy,
reorganization, receivership of the Company or other proceedings
affecting Company creditors’ rights and involving a claim
under this Note, then the Company shall pay the costs incurred by
the Holder for such collection, enforcement or action or in
connection with such bankruptcy, reorganization, receivership or
other proceeding, including, but not limited to, attorneys’
fees and disbursements.
17.
Construction;
Headings
.
This Note shall be deemed
to be jointly drafted by the Company and the Holder and shall not
be construed against any Person as the drafter
hereof. The headings of this Note are for convenience of
reference and shall not form part of, or affect the interpretation
of, this Note.
18.
Failure Or
Indulgence Not Waiver
.
No failure or delay on the
part of the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or
privilege. No waiver shall be effective unless it is in writing and
signed by an authorized representative of the waiving
party.
19.
Dispute
Resolution
.
In the case of a dispute as
to the arithmetic calculation of the Conversion Price or Conversion
Amount, the Company shall submit the disputed determinations or
arithmetic calculations via facsimile within one (1) Business Day
of receipt, or deemed receipt, of the Conversion Notice or other
event giving rise to such dispute, as the case may be, to the
Holder. If the Holder and the Company are unable to
agree upon such determination or calculation within one (1)
Business Day of such disputed determination or arithmetic
calculation being submitted to the Holder, then the Company shall,
within one Business Day submit via facsimile the disputed
arithmetic calculation of the Conversion Price or Conversion Amount
to the Company’s independent, outside
accountant. The Company shall cause the accountant to
perform the determinations or calculations and notify the Company
and the Holder of the results no later than five (5) Business Days
from the time it receives the disputed determinations or
calculations. Such accountant’s determination or calculation
shall be binding upon all parties absent demonstrable
error. The party whose calculation is furthest from the
accountant’s determination or calculation, shall be obligated
to pay the fees and expenses of such accountant.
a.
Notices
.
Whenever
notice is required to be given under this Note, unless otherwise
provided herein, such notice shall be given in accordance with
Section 7.4 of the Note Purchase Agreement.
b.
Payments
.
Except
as otherwise provided in this Note, whenever any payment of cash is
to be made by the Company to any Person pursuant to this Note, such
payment shall be made in lawful money of the United States of
America by a check drawn on the account of the Company and sent via
overnight courier service to such Person at such address as
previously provided to the Company in writing;
provided
that the Holder may
elect to receive a payment of cash via wire transfer of immediately
available funds by providing the Company with prior written notice
setting out such request and the Holder’s wire transfer
instructions. Whenever any amount expressed to be due by
the terms of this Note is due on any day which is not a Business
Day, the same shall instead be due on the next succeeding day which
is a Business Day.
21.
Cancellation
.
After
all Principal and other amounts at any time owed on this Note have
been paid in full, this Note shall automatically be deemed
canceled, shall be surrendered to the Company for cancellation and
shall not be reissued.
22.
Waiver Of
Notice
.
To
the extent permitted by law, the Company hereby waives demand,
notice, protest and all other demands and notices in connection
with the delivery, acceptance, performance, default or enforcement
of this Note and the Note Purchase Agreement.
23.
Currency
.
All principal, interest and other amounts owing under this Note or
any Transaction Document that, in accordance with their terms, are
paid in cash shall be paid in U.S. dollars. All amounts denominated
in other currencies shall be converted in the U.S. dollar
equivalent amount in accordance with the Exchange Rate on the date
of calculation. “
Exchange
Rate
” means, in relation to any amount of currency to
be converted into U.S. dollars pursuant to this Note, the U.S.
dollar exchange rate as published in the Wall Street Journal on the
relevant date of calculation (it being understood and agreed that
where an amount is calculated with reference to, or over, a period
of time, the date of calculation shall be the final date of such
period of time).
24.
Severability
.
The provisions of this Note are severable and, in the event that
any court of competent jurisdiction shall determine that any one or
more of the provisions or part of the provisions contained in this
Note shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a
provision of this Note and such provision shall be reformed and
construed as if such invalid or illegal or unenforceable provision,
or part of such provision, had never been contained herein, so that
such provisions would be valid, legal and enforceable to the
maximum extent possible.
25.
Amendments
.
No provision of this Note may be waived or amended other than by a
written instrument signed by the Company and the holders of at
least fifty percent (50%) of the principal amount of the Notes then
outstanding (the “
Majority
Holders
”), and no provision hereof may be waived other
than by a written instrument signed by the consenting parties. No
such amendment shall be effective to the extent that it applies to
less than all of the holders of the Notes then
outstanding.
[Signature
Page Follows]
IN WITNESS WHEREOF,
the Company has executed and delivered this Note
the date and year first above written.
YOUNGEVITY INTERNATIONAL, INC.
By:
_______________________________
Exhibit 4.3
THE SECURITIES REPRESENTED HEREBY, INCLUDING THE SHARES ISSUABLE
UPON EXERCISE HEREOF, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE
SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN
MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT
AND SUCH LAWS WHICH, IN THE OPINION OF COUNSEL FOR THE ISSUER, IS
AVAILABLE.
SERIES D WARRANT AGREEMENT
No. 2017-[ ]
YOUNGEVITY INTERNATIONAL, INC.
This
Warrant Agreement (this “
Agreement
”) is dated as
of July , 2017 (the “
Issue Date
”) and entered
into by and between Youngevity International, Inc., a company
organized under the laws of State of Delaware and _____________
(together with his, her or its successors and assigns, the
“
Warrant
Holder
”).
WHEREAS, the
Company and the Warrant Holder entered into that certain Note
Purchase Agreement of even date herewith (the “
Purchase Agreement
”),
pursuant to which, the Warrant Holder, together with the other
Purchasers agreed to purchase certain Securities of the Company,
including the Warrants evidenced by this Agreement;
WHEREAS, all of the
terms and conditions of such Purchase Agreement are incorporated
herein by this reference, and all capitalized terms not separately
defined in this Warrant, shall have the same meanings as defined in
the Purchase Agreement;
NOW,
THEREFORE, in consideration of the mutual covenants set forth in
this Agreement and for other good and valuable consideration, the
parties agree as follows:
1.
Grant
of Warrant
. The Company hereby, upon the terms and subject
to the conditions of this Agreement, issues to the Warrant Holder a
warrant (the “
Warrant
”) evidenced by
this Agreement to purchase up to _________ shares of Common Stock
(the shares of Common Stock issuable to the Warrant Holder
hereunder (as such amount may be adjusted pursuant to the terms
hereof), the “
Warrant Shares
”) at an
exercise price equal to $[ ] per share (as such amount may be
adjusted pursuant to the terms hereof, the “
Exercise Price
”). The
Exercise Price and the number of Warrant Shares for which the
Warrant are exercisable shall be subject to adjustment as described
in
Section
6.
2.
Term
and Termination of Warrant
. The Warrant shall terminate on
the third (3rd) anniversary of the Issue Date (the
“
Expiration
Date
”).
3.
Exercise
of the Warrant
.
(a)
Exercise and Payment
. The
purchase rights represented by the Warrant may be exercised by the
Warrant Holder, in whole or in part at any time following the Issue
Date during the period prior to the Expiration Date, by the
surrender of the Warrant (together with a duly executed notice of
exercise in the form attached hereto as
Exhibit A
(the
“
Exercise
Notice
”) at the principal office of the Company, and
by the payment to the Company, at the option of the Warrant Holder
by:
(i)
wire transfer of
immediately available funds, of an amount equal to (A) the number
of shares of Common Stock being purchased upon exercise of the
Warrant multiplied by (B) the then current Exercise Price (the
“
Warrant
Price
”);
(ii)
This
Warrant may also be exercised, in whole or in part, at such time by
means of a “cashless exercise, which shall mean an exercise
of a Warrant in accordance with the immediately following three
sentences. To effect a Cashless Exercise, the holder of a Warrant
may exercise a Warrant or Warrants without payment of the Exercise
Price in cash by surrendering such Warrant or Warrants and, in
exchange therefor, receiving such number of shares of Common Stock
equal to the product of (1) that number of shares of Common Stock
for which such Warrants are exercisable and which would be issuable
in the event of an exercise with payment in cash of the Exercise
Price and (2) the Cashless Exercise Ratio (as defined below). The
“Cashless Exercise Ratio” shall equal a fraction, the
numerator of which is the excess of the Current Market Price per
share of the Common Stock, as applicable, on the date of exercise
over the Exercise Price per share of Common Stock as of the date of
exercise and the denominator of which is the Current Market Price
per share of the Common Stock, as applicable, on the date of
exercise.; or
(iii)
any
combination thereof.
For
purposes of this Agreement, “
Fair Market Value
” of a
share as of a particular date shall mean: (A) if the Common Stock
is traded on an exchange or the over-the-counter market or
otherwise quoted or reported on a national exchange, the average
reported closing price for the five (5) trading days prior to the
date of determination of fair market value, (B) if conversion or
exercise is simultaneous with an underwritten public offering of
Common Stock registered under the Act, then the initial public
offering price (before deducting commissions, discounts or
expenses) per share sold in such offer, and (C) otherwise that
price determined in good faith and in such reasonable manner as
prescribed by a majority of the Board.
(b)
Intentionally Left
Blank.
(c)
Warrant Shares
. On or before
the first (1
st
) Trading Day
following the date on which the Company has received an Exercise
Notice, the Company shall transmit by facsimile an acknowledgment
of confirmation of receipt of such Exercise Notice to the Holder
and the Company’s transfer agent (the “
Transfer Agent
”). On or
before the third (3
rd
) Trading Day
following the date on which the Company has received such Exercise
Notice, so long as the Holder delivers the Aggregate Exercise Price
(or elects a Cashless Exercise) on or prior to the second
(2
nd
)
Trading Day following the date on which the Company has received
such Exercise Notice, the Company shall (X) provided that the
Transfer Agent is participating in The Depository Trust Company
(“
DTC
”)
Fast Automated Securities Transfer Program, upon the request of the
Holder, credit such aggregate number of shares of Common Stock to
which the Holder is entitled pursuant to such exercise to the
Holder’s or its designee’s balance account with DTC
through its Deposit/ Withdrawal at Custodian system, or (Y) if the
Transfer Agent is not participating in the DTC Fast Automated
Securities Transfer Program, issue and deliver to the Holder or, at
the Holder’s instruction pursuant to the Exercise Notice, the
Holder’s agent or designee, in each case, sent by reputable
overnight courier to the address as specified in the applicable
Exercise Notice, a certificate, registered in the Company’s
share register in the name of the Holder or its designee (as
indicated in the applicable Exercise Notice), for the number of
shares of Common Stock to which the Holder is entitled pursuant to
such exercise. The Company shall be responsible for all fees and
expenses of the Transfer Agent and all fees and expenses with
respect to the issuance of shares of Common Stock via DTC, if any.
Upon delivery of an Exercise Notice, the Holder shall be deemed for
all corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been
exercised, irrespective of the date such Warrant Shares are
credited to the Holder’s DTC account or the date of delivery
of the certificates evidencing such Warrant Shares (as the case may
be). If this Warrant is submitted in connection with any exercise
pursuant to this Section 3(c) and the number of Warrant Shares
represented by this Warrant submitted for exercise is greater than
the number of Warrant Shares being acquired upon an exercise, then,
at the request of the Holder, the Company shall as soon as
practicable and in no event later than three (3) Business Days
after any exercise and at its own expense, issue and deliver to the
Holder (or its designee) a new Warrant (in accordance with Section
12(d)) representing the right to purchase the number of Warrant
Shares purchasable immediately prior to such exercise under this
Warrant, less the number of Warrant Shares with respect to which
this Warrant is exercised. No fractional shares of Common Stock are
to be issued upon the exercise of this Warrant, but rather the
number of shares of Common Stock to be issued shall be rounded up
to the nearest whole number. The Company shall pay any and all
taxes and fees which may be payable with respect to the issuance
and delivery of Warrant Shares upon exercise of this Warrant.
Following the exercise in full of this Warrant, the Holder shall
deliver this original Warrant certificate to the Company.
(d)
Company’s Failure to Timely
Deliver Securities
. If the Company shall fail for any reason
or for no reason to issue to the Warrant Holder within five (5)
Trading Days of receipt of the Exercise Notice so long as the
Warrant Holder delivers the Aggregate Exercise Price (or notice of
a Cashless Exercise) on or prior to the second (2
nd
) Trading Day
following the date on which the Company has received the Exercise
Notice, a certificate for the number of shares of Common Stock to
which the Warrant Holder is entitled and register such shares of
Common Stock on the Company’s share register or to credit the
Warrant Holder’s balance account with DTC for such number of
shares of Common Stock to which the Warrant Holder is entitled upon
the Warrant Holder’s exercise of this Warrant, then, in
addition to all other remedies available to the Warrant Holder, the
Company shall pay in cash to the Warrant Holder on each day after
such fifth (5
th
) Trading Day that
the issuance of such shares of Common Stock is not timely effected
an amount equal to 0.5% of the product of (A) the sum of the number
of shares of Common Stock not issued to the Warrant Holder on a
timely basis and to which the Warrant Holder is entitled and (B)
the Closing Sale Price of the Common Stock on the Trading Day
immediately preceding the last possible date which the Company
could have issued such shares of Common Stock to the Warrant Holder
without violating Section 3(a). In addition to the foregoing, if
within five (5) Trading Days after the Company’s receipt of
an Exercise Notice (whether via facsimile or otherwise) the Company
shall fail to issue and deliver a certificate to the Warrant Holder
and register such shares of Common Stock on the Company’s
share register or credit the Warrant Holder’s balance account
with DTC for the number of shares of Common Stock to which the
Warrant Holder is entitled upon the Warrant Holder’s exercise
hereunder or pursuant to the Company’s obligation pursuant to
clause (ii) below, and if on or after such Trading Day the Warrant
Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the
Warrant Holder of shares of Common Stock issuable upon such
exercise that the Warrant Holder anticipated receiving from the
Company, then the Company shall, within five (5) Trading Days after
the Warrant Holder’s request and in the Warrant
Holder’s discretion, either (i) pay cash to the Warrant
Holder in an amount equal to the Warrant Holder’s total
purchase price (including brokerage commissions and other
reasonable out-of-pocket expenses, if any) for the shares of Common
Stock so purchased (the “
Buy-In Price
”), at which
point the Company’s obligation to deliver such certificate
(and to issue such shares of Common Stock) or credit such Warrant
Holder’s balance account with DTC shall terminate, or (ii)
promptly honor its obligation to deliver to the Warrant Holder a
certificate or certificates representing such shares of Common
Stock or credit such Warrant Holder’s balance account with
DTC and pay cash to the Warrant Holder in an amount equal to the
excess (if any) of the Buy-In Price over the product of (A) such
number of shares of Common Stock, times (B) the Closing Bid Price
on the date of exercise. Nothing shall limit the Warrant
Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity, including, without limitation, a
decree of specific performance and/or injunctive relief with
respect to the Company’s failure to timely deliver
certificates representing shares of Common Stock (or to
electronically deliver such shares of Common Stock) upon the
exercise of this Warrant as required pursuant to the terms
hereof.
(e)
Fractional Warrant Shares
. No
fractional Warrant Shares will be issued in connection with any
exercise hereunder. In lieu of such fractional shares, the number
of shares of Common Stock to be issued shall be rounded up to the
nearest whole number.
(f)
Ownership Limitation
.
Notwithstanding the provisions of this Warrant, in no event shall
this Warrant be exercisable to the extent that the issuance of
Common Stock upon the exercise hereof, after taking into account
the Common Stock then owned by the Warrant Holder and its
affiliates, would result in the beneficial ownership by the Warrant
Holder and its affiliates of more than 9.99% of the outstanding
Common Stock of the Company. For purposes of this paragraph,
beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended. In
addition, the Company shall not issue any shares of Common Stock
upon exercise of this Warrant or otherwise pursuant to the terms of
this Warrant if the issuance of such shares of Common Stock (after
taking into account the issuance of Common Stock upon conversion of
the Notes issued pursuant to the terms of the Note Purchase
Agreement) would exceed the aggregate number of shares of Common
Stock that the Company may issue upon conversion of the Notes and
exercise of the Warrants or otherwise pursuant to terms of the
Notes or Warrants without breaching the Company’s obligations
under the rules and regulations of the Trading Market (the number
of shares which may be issued without violating such rules and
regulations, the “
Exchange Cap
”), except
that such limitation shall not apply in the event that the Company
(A) obtains the approval of its stockholders as required by the
applicable rules of the Trading Market for issuances of shares of
Common Stock in excess of such amount or (B) obtains a written
opinion from outside counsel to the Company that such approval is
not required, which opinion shall be reasonably satisfactory to the
Warrant Holder. Until such approval or such written opinion is
obtained, the aggregate maximum number of shares of Common Stock
that all Warrant Holders may be issued in the aggregate, upon
exercise of any Warrants (after taking into account Common Stock
issuable upon conversion of the Notes issued pursuant to the terms
of the Note Purchase Agreement) or any other issuance pursuant to
the terms of the Warrants shall not exceed the Exchange Cap and the
Warrant Holder shall not be issued any shares of Common Stock
pursuant to the terms of the Warrants or Notes held by it in an
amount greater than the product of (i) the Exchange Cap as of the
Initial Closing Date multiplied by (ii) the quotient of (1) the
aggregate maximum number of shares of Common Stock issuable to the
Warrant Holder at the time of the exercise under the Notes and
Warrants issued to the Warrant Holder pursuant to the Note Purchase
Agreement divided by (2) the maximum aggregate number of shares of
Common Stock issuable to all of the Purchasers at the time of the
conversion under the Notes and Warrants (with respect to each
Purchase, the “
Exchange Cap
Allocation
”). In the event that any Warrant Holder
shall sell or otherwise transfer any of its Warrants, the
transferee shall be allocated a
pro rata
portion of
the Warrant Holder’s Exchange Cap Allocation with respect to
such portion of such Warrants so transferred, and the restrictions
of the prior sentence shall apply to such transferee with respect
to the portion of the Exchange Cap Allocation so allocated to such
transferee. In the event that the Company is prohibited from
issuing shares of Common Stock pursuant to this Section 3(f) (the
“Exchange Cap Shares”), the Company shall refund from
the Warrant Price received cash in lieu of issuing such Exchange
Cap Shares equal to the sum of: (i) the product of (x) such number
of Exchange Cap Shares and (y) the average closing price of the
Common Stock for the five Trading Days preceding the date the
Holder delivers the applicable exercise notice with respect to such
Exchange Cap Shares to the Company; and (ii) to the extent the
Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the
Holder of Exchange Cap Shares, any brokerage commissions and other
out-of-pocket expenses, if any, of the Holder incurred in
connection therewith.
(g)
Legend.
The Warrant Shares
to be acquired by the Holder pursuant
hereto,
may not be sold or transferred unless (A) such
shares are sold pursuant to an effective registration statement
under the Securities Act, or (B) the Company or its transfer agent
shall have been furnished with an opinion of counsel (which opinion
shall be in form, substance and scope customary for opinions of
counsel in comparable transactions and from an attorney who
regularly practices securities law) to the effect that the shares
to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration or (C) such shares are sold or
transferred pursuant to Rule 144 under the Securities Act (or a
successor rule) (“
Rule 144
”) or (D) such
shares are sold or transferred outside the United States in
accordance with Rule 904 of Regulation S under the Securities Act,
or (E) such shares are transferred to an “affiliate”
(as defined in Rule 144) of the Company who agrees to sell or
otherwise transfer the shares only in accordance with this Section
3(g). Except as otherwise provided in this Warrant (and subject to
the removal provisions set forth below), until such time as the
Warrant Shares issuable upon exercise of the Warrant have been
registered under the Act, otherwise may be sold pursuant to Rule
144 without any restriction as to the number of securities as of a
particular date that can then be immediately sold, each certificate
for Warrant Shares that has not been so included in an effective
registration statement or that has not been sold pursuant to an
effective registration statement or an exemption that permits
removal of the legend, shall bear a legend substantially in the
following form, as appropriate:
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED. THE HOLDER
HEREOF, BY PURCHASING SUCH SECURITIES, AGREES THAT SUCH SECURITIES
MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO
THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH
RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT, (C) WITHIN
THE UNITED STATES AFTER REGISTRATION OR IN ACCORDANCE WITH THE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE U.S.
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF APPLICABLE, AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, OR (D) WITHIN
THE UNITED STATES IN A TRANSACTION THAT DOES NOT REQUIRE
REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE
SECURITIES LAWS AND THE HOLDER HAS PRIOR TO SUCH SALE FURNISHED TO
THE CORPORATION AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE CORPORATION.
(h)
Removal of Legend
. The legend
set forth above shall be removed and the Company shall issue to the
Holder a new certificate therefor free of any transfer legend if
(A) the Company shall have received an opinion of counsel, in form,
substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such
Securities may be made without registration under the Act and the
shares are so sold or transferred, or (B) in the case of the Common
Stock issuable upon exercise of the Warrant, such security is
registered for sale by the Holder under an effective registration
statement filed under the Act or otherwise may be sold pursuant to
Rule 144 without any restriction as to the number of securities as
of a particular date that can then be immediately sold. The Company
shall cause its counsel to issue a legal opinion promptly after the
effective date of any registration statement under the Act
registering the resale of the Common Stock issuable upon exercise
of the Warrant if required to effect the removal of the legend
hereunder.
4.
Stock
Fully Paid; Reservation of Warrant Shares
. All of the
Warrant Shares issuable upon the exercise of the Warrant will, upon
issuance and receipt of the Warrant Price for such Warrant Shares,
be duly authorized, validly issued, fully paid and nonassessable,
and will be free and clear of all taxes, liens, encumbrances and
charges with respect to the issue.
5.
Rights
of the Warrant Holder
. The Warrant Holder shall have no
voting rights as a stockholder or rights to dividends or other
distributions with respect to Warrant Shares subject to this
Agreement until payment in full of the Warrant Price for Warrant
Shares being issued.
6.
Adjustment
of Exercise Price and Number of Warrant Shares
. The Exercise
Price and the number of Warrant Shares purchasable upon any
exercise of the Warrant shall be subject to adjustment from time to
time upon the occurrence of certain events described in this
Section
6
if such events occur within
the three year period following the Issue Date.
(a)
Subdivision or Combination of Stock;
Stock Dividend and Stock Conversion
.
(i)
In the event the
Company should at any time or from time to time fix a record date
for the effectuation of a split or subdivision of the outstanding
shares of Common Stock, or a record date for the determination of
the holders of capital stock entitled to receive a dividend or
other distribution payable in Common Stock or other securities or
rights directly or indirectly convertible into or exercisable or
exchangeable, or rights that entitle the holders of Common Stock to
purchase, Common Stock (hereinafter referred to as
“
Common Stock
Equivalents
”), without payment of any consideration by
such holders for the additional Common Stock or the Common Stock
Equivalents (including the additional Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or
the date of such dividend distribution, split or subdivision if no
record date is fixed), (y) the Exercise Price of the Warrant Shares
shall be appropriately decreased (but not below the then par value
per share of Common Stock), and (z) the number of Warrant Shares
shall be increased in proportion to such increase of outstanding
Common Stock and shares of Common Stock issuable with respect to
Common Stock Equivalents.
(ii)
If
the number of shares of Common Stock outstanding at any time after
the Issue Date is decreased by a combination of the outstanding
Common Stock, then, upon the record date of such combination, (A)
the Exercise Price shall be appropriately increased, and (B) the
number of Warrant Shares shall be decreased in proportion to such
decrease in outstanding Common Stock.
(iii)
The
Company will not modify its certificate of incorporation or effect
any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities in
a manner that negates or avoids the rights of the Warrant Holder to
exercise its rights hereunder, but will at all times assist in the
carrying out of all the provisions of this Agreement and in the
taking of all such actions as may be necessary or appropriate in
order to protect the Warrant Holder against
impairment.
(b)
Adjustment Upon Issuance of Shares of
Common Stock
. If and whenever on or after the Issue Date,
the Company issues or sells, or in accordance with this Section 6
is deemed to have issued or sold, any shares of Common Stock
(including the issuance or sale of shares of Common Stock owned or
held by or for the account of the Company, but excluding any
Excluded Securities issued or sold or deemed to have been issued or
sold) for a consideration per share (the “
Dilutive Issuance Price
”)
that is
less
than a price
equal to the Exercise Price in effect immediately prior to such
issue or sale or deemed issuance or sale (the “
Applicable Exercise
Price
”) (the foregoing, a “
Dilutive Issuance
”), then
immediately following such Dilutive Issuance, the Applicable
Exercise Price then in effect shall be reduced to the Adjusted
Price (as hereinafter defined). For purposes of this Warrant, the
term “
Adjusted
Price
” means the price determined by multiplying the
Exercise Price in effect immediately prior to the Dilutive Issuance
by a fraction, (A) the numerator of which is an amount equal to the
sum of (x) the number of shares of Common Stock actually
outstanding immediately prior to the Dilutive Issuance, plus (y)
the quotient of the aggregate consideration, calculated as set
forth in Section 6(b)(iv) hereof, received by the Company upon such
Dilutive Issuance divided by the Exercise Price in effect
immediately prior to the Dilutive Issuance, and (B) the denominator
of which is the Common Stock Deemed Outstanding (as defined below)
immediately after the Dilutive Issuance; provided that only one
adjustment will be made for each Dilutive Issuance. The term
“
Common Stock Deemed
Outstanding
” shall mean the number of shares of Common
Stock actually outstanding (not including shares of Common Stock
held in the treasury of the Company), plus (i) pursuant to Section
6(b)(iv)(1) hereof, the maximum total number of shares of Common
Stock issuable upon the exercise of Options, as of the date of such
issuance or grant of such Options, if any, and (ii) pursuant to
Section 6(b)(iv)(2) hereof, the maximum total number of shares of
Common Stock issuable upon conversion or exchange of Common Stock
Equivalents, as of the date of issuance of such Common Stock
Equivalents, if any. No adjustment to the Conversion Price shall
have the effect of increasing the Conversion Price above the
Conversion Price in effect immediately prior to such adjustment.
For all purposes of the foregoing (including, without limitation,
determining the reduced Exercise Price and consideration per share
under this Section 6(b)), the following shall be
applicable:
(i)
Issuance of Options
. If the
Company in any manner grants any Options and the lowest price per
share for which one share of Common Stock is issuable upon the
exercise of any such Option or upon conversion, exercise or
exchange of any Common Stock Equivalents issuable upon exercise of
any such Option is less than the Applicable Exercise Price, then
such share of Common Stock shall be deemed to be outstanding and to
have been issued and sold by the Company at the time of the
granting or sale of such Option for such price per share. For
purposes of this Section 6(b)(i), the “lowest price per share
for which one share of Common Stock is issuable upon exercise of
such Options or upon conversion, exercise or exchange of such
Common Stock Equivalents issuable upon exercise of any such
Option” shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with
respect to any one share of Common Stock upon the granting or sale
of the Option, upon exercise of the Option and upon conversion,
exercise or exchange of any Convertible Security issuable upon
exercise of such Option less any consideration paid or payable by
the Company with respect to such one share of Common Stock upon the
granting or sale of such Option, upon exercise of such Option and
upon conversion exercise or exchange of any Convertible Security
issuable upon exercise of such Option. No further adjustment of the
Exercise Price or number of Warrant Shares shall be made upon the
actual issuance of such shares of Common Stock or of such Common
Stock Equivalents upon the exercise of such Options or upon the
actual issuance of such shares of Common Stock upon conversion,
exercise or exchange of such Common Stock Equivalents.
(ii)
Issuance
of Common Stock Equivalents
. If the Company in any manner
issues or sells any Common Stock Equivalents and the lowest price
per share for which one share of Common Stock is issuable upon the
conversion, exercise or exchange thereof is less than the
Applicable Exercise Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the
Company at the time of the issuance or sale of such Common Stock
Equivalents for such price per share. For the purposes of this
Section 6(b)(ii), the “lowest price per share for which one
share of Common Stock is issuable upon the conversion, exercise or
exchange thereof” shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by the
Company with respect to one share of Common Stock upon the issuance
or sale of the Convertible Security and upon conversion, exercise
or exchange of such Convertible Security less any consideration
paid or payable by the Company with respect to such one share of
Common Stock upon the issuance or sale of such Convertible Security
and upon conversion, exercise or exchange of such Convertible
Security. No further adjustment of the Exercise Price or number of
Warrant Shares shall be made upon the actual issuance of such
shares of Common Stock upon conversion, exercise or exchange of
such Common Stock Equivalents, and if any such issue or sale of
such Common Stock Equivalents is made upon exercise of any Options
for which adjustment of this Warrant has been or is to be made
pursuant to other provisions of this Section 6(b)(ii), no further
adjustment of the Exercise Price or number of Warrant Shares shall
be made by reason of such issue or sale.
(iii)
Change
in Option Price or Rate of Conversion.
If the purchase price
provided for in any Options, the additional consideration, if any,
payable upon the issue, conversion, exercise or exchange of any
Common Stock Equivalents, or the rate at which any Common Stock
Equivalents are convertible into or exercisable or exchangeable for
shares of Common Stock increases or decreases at any time, the
Exercise Price and the number of Warrant Shares in effect at the
time of such increase or decrease shall be adjusted to the Exercise
Price and the number of Warrant Shares which would have been in
effect at such time had such Options or Common Stock Equivalents
provided for such increased or decreased purchase price, additional
consideration or increased or decreased conversion rate, as the
case may be, at the time initially granted, issued or sold. For
purposes of this Section 6(b)(iii), if the terms of any Option or
Convertible Security that was outstanding as of the date of
issuance of this Warrant are increased or decreased in the manner
described in the immediately preceding sentence, then such Option
or Convertible Security and the shares of Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be
deemed to have been issued as of the date of such increase or
decrease. No adjustment pursuant to this Section 6(b)(iii) shall be
made if such adjustment would result in an increase of the Exercise
Price then in effect or a decrease in the number of Warrant
Shares.
(iv)
Calculation
of Consideration Received
. In case any Option is issued in
connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction, (x) the
Options will be deemed to have been issued for the exercise price
of such Options and (y) the other securities issued or sold in such
integrated transaction shall be deemed to have been issued for the
aggregate consideration received by the Company. If any shares of
Common Stock, Options or Common Stock Equivalents are issued or
sold or deemed to have been issued or sold for cash, the
consideration received therefor will be deemed to be the net amount
received by the Company therefor. If any shares of Common Stock,
Options or Common Stock Equivalents are issued or sold for a
consideration other than cash, the amount of such consideration
received by the Company will be the fair value of such
consideration, except where such consideration consists of
securities, in which case the amount of consideration received by
the Company will be the Closing Sale Price of such security on the
date of receipt. If any shares of Common Stock, Options or Common
Stock Equivalents are issued to the owners of the non-surviving
entity in connection with any merger in which the Company is the
surviving entity, the amount of consideration therefor will be
deemed to be the fair value of such portion of the net assets and
business of the non-surviving entity as is attributable to such
shares of Common Stock, Options or Common Stock Equivalents, as the
case may be. The fair value of any consideration other than cash or
securities will be determined jointly by the Company and the
Required Holders. If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event requiring
valuation (the “
Valuation Event
”), the
fair value of such consideration will be determined within five (5)
Trading Days after the tenth (10
th
) day following the
Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the Required Holders. The determination
of such appraiser shall be final and binding upon all parties
absent manifest error and the fees and expenses of such appraiser
shall be borne by the Company.
(v)
Record Date
. If the Company
takes a record of the holders of shares of Common Stock for the
purpose of entitling them (A) to receive a dividend or other
distribution payable in shares of Common Stock, Options or in
Common Stock Equivalents or (B) to subscribe for or purchase shares
of Common Stock, Options or Common Stock Equivalents, then such
record date will be deemed to be the date of the issue or sale of
the shares of Common Stock deemed to have been issued or sold upon
the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(vi)
Exceptions
to Adjustment of Conversion Price
.
No adjustment to the Exercise Price will be made
(A) upon the issuance of shares of Common Stock or options or
warrants to purchase Common Stock to
directors, officers,
consultants or employees of the Company in their capacity as such
pursuant to
any stock or option plan
duly adopted by the Board of Directors of the Company (an
“
Approved Stock
Plan
”)
, provided
that the exercise price of any such options is not lowered, none of
such options are amended to increase the number of shares issuable
thereunder and none of the terms or conditions of any such options
are otherwise materially changed in any manner that adversely
affects the Warrant Holder, any of the holders of the
Company’s warrants (the “
Other Holders
”); (ii)
shares of Common Stock issued upon the conversion or exercise of
Common Stock Equivalents (other than standard options to purchase
Common Stock issued pursuant to an Approved Stock Plan that are
covered by clause (i) above) issued prior to the Issue Date,
provided that the conversion or exercise (as the case may be) of
any such Convertible Security is made solely pursuant to the
conversion or exercise (as the case may be) provisions of such
Convertible Security that were in effect on the date immediately
prior to the Issue Date, the conversion or exercise price of any
such Common Stock Equivalents (other than standard options to
purchase Common Stock issued pursuant to an Approved Stock Plan
that are covered by clause (i) above) is not lowered other than by
the operation of provisions of such Convertible Security that were
in effect on the date immediately prior to the Issue Date,, none of
such Common Stock Equivalents are (other than standard options to
purchase Common Stock issued pursuant to an Approved Stock Plan
that are covered by clause (i) above) (nor is any provision of any
such Common Stock Equivalents) amended or waived in any manner
(whether by the Company or the holder thereof) to increase the
number of shares issuable thereunder and none of the terms or
conditions of any such Common Stock Equivalents (other than
standard options to purchase Common Stock issued pursuant to an
Approved Stock Plan that are covered by clause (i) above) are
otherwise materially changed or waived (whether by the Company or
the holder thereof) in any manner that adversely affects the
Warrant Holder or any of the Other Holders; (iii) upon the issuance
of the Notes; (iv) upon the issuance of the Note Shares; (v) upon
the issuance of Warrant Shares issued pursuant to the Purchase
Agreement; (vi) upon the issuance of any warrants to the Placement
Agent and the underlying shares; (vii) upon the issuance of Common
Stock upon conversion or exercise of any currently outstanding
securities;
(viii) upon the issuance
of securities pursuant to any equipment loan or leasing
arrangement, real property leasing arrangement or debt financing
from a bank or similar financial institution;
(ix) upon the
issuance of securities pursuant to a
stock dividend or stock split
; and (x) upon the issuance of
shares of Common Stock in connection with mergers, acquisitions,
strategic licensing arrangements, strategic business partnerships
or joint ventures, in each case with non-affiliated third parties
and otherwise on an arm’s-length basis, the purpose of which
is not to raise additional capital. Notwithstanding the foregoing,
any Common Stock issued or issuable to raise capital for the
Company or its Subsidiaries, directly or indirectly, in connection
with any transaction contemplated by clause (xi) above, including,
without limitation, securities issued in one or more related
transactions or that result in similar economic consequences, shall
not constitute Excluded Securities.
(c)
Notice of Adjustment
. Promptly
after adjustment of the Exercise Price or any increase or decrease
in the number of shares purchasable upon the exercise of the
Warrant, the Company shall give written notice in accordance with
Section 11
. The
notice shall be signed by an authorized officer of the Company and
shall state the effective date of the adjustment and the Exercise
Price resulting from such adjustment and the increase or decrease,
if any, in the number of shares purchasable at such price upon any
exercise of the Warrant, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is
based.
(d)
Other Notices
. In the event
that the Company shall propose at any time: (i) to declare any
dividend or distribution upon any class or series of capital stock,
whether in cash, property, stock or other securities (including,
without limitation, pursuant to a split or subdivision of the
outstanding shares of capital stock); (ii) to effect any
reclassification or recapitalization of its capital stock
outstanding involving a change in the capital stock; or (iii) to
merge or consolidate with or into any other corporation, or to
sell, lease or convey all or substantially all of its property or
business, or to liquidate, dissolve or wind up; then, in connection
with each such event, the Company shall mail to the Warrant Holder
notice of such transaction:
(A)
at least five (5)
business days’ prior written notice in accordance with
Section 11
of the
date on which a record shall be taken for such dividend or
distribution (and specifying the date on which the holder of the
affected class or series of capital stock shall be entitled
thereto) or for determining the rights to vote, if any, in respect
of the matters referred to in (c)(ii) and (c)(iii) above;
and
(B)
in the case of the
matters referred to in (c)(ii) and (c)(iii) above, written notice
of such impending transaction not later than ten (10) business
days’ prior to any shareholders’ meeting called to
approve such transaction, or ten (10) business days’ prior to
the closing of such transaction, whichever is earlier, and shall
also notify the Warrant Holder in writing in accordance with
Section 11
of the
final approval of such transaction by the stockholders of the
Company (if such approval is required). The first of such notices
shall describe the terms and conditions of the impending
transaction that are material to a holder of Common Stock (as
determined by the Board of Directors of the Company (the
“
Board
”) in good faith)
and specify the date on which a holder of Common Stock shall be
entitled to exchange his, her or its Common Stock for securities or
other property deliverable upon the occurrence of such event) and
the Company shall thereafter give such holder prompt notice of any
changes in such terms or conditions that are material to a holder
of Common Stock (as determined by the Board in good faith). The
Company acknowledges that any record date must be set at a date
that would permit the Warrant Holder effectively to exercise its
rights hereunder.
(e)
Changes in Stock
. In case at
any time prior to the Expiration Date, the Company shall be a party
to any transaction (including, without limitation, a merger,
consolidation, sale of all or substantially all of the
Company’s assets or recapitalization of its capital stock) in
which the previously outstanding shares of Common Stock shall be
changed into or exchanged for different securities of the Company
or common stock or other securities of another corporation or
interests in a noncorporate entity or other property (including
cash) or the Company shall make a distribution on its shares of
Common Stock, other than regular cash dividends on its outstanding
stock, or any combination of any of the foregoing (each such
transaction being herein called the “
Transaction
” and the date
of consummation of the Transaction being herein called the
“
Consummation
Date
”), then as a condition of the consummation of
such Transaction, lawful and adequate provisions shall be made so
that the Warrant Holder, upon the exercise hereof at any time on or
after the Consummation Date and prior to the Expiration Date, shall
be entitled to receive, and this Agreement shall thereafter
represent the right to receive, in lieu of the Warrant
Shares
issuable upon
such exercise prior to the Consummation Date, the highest amount of
securities or other property to which the Warrant Holder would
actually have been entitled as a stockholder upon the consummation
of the Transaction if the Warrant Holder had exercised the Warrant
immediately prior thereto. The provisions of this Section
6(e)
shall similarly apply to successive
Transactions.
7.
Taxes
.
The Warrant Holder acknowledges that upon exercise of the Warrant
the Warrant Holder may be deemed to have taxable income in respect
of the Warrant and/or the Warrant Shares. The Warrant Holder
acknowledges that any income or other taxes due from it with
respect to the Warrant or the Warrant Shares issuable pursuant to
the Warrant shall be the Warrant Holder’s
responsibility.
8.
Reservation
of Warrant Shares
. From and after the Issue Date, the
Company shall at all times reserve and keep available for issue
upon exercise of this Warrant 110% of the number of its authorized
but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of this Warrant.
9.
Representations
and Warranties
.
(a)
Representations and Warranties by the
Company
. The representations and warranties of the Company
set forth in Section 2.1 of the Purchase Agreement are true and
correct as of the Issue Date.
(b)
Representations and Warranties by the
Warrant Holder
. The representations and warranties of the
Warrant Holder set forth in Section 2.2 of the Purchase Agreement
are true and correct as of the Issue Date.
10.
Registration
Rights
.
The
Company acknowledges that the Warrant Shares are subject to the
Registration Rights Agreement.
11.
Noncircumvention
.
The Company hereby covenants and agrees that the Company will not,
by amendment of its certificate of incorporation or bylaws, or
through any reorganization, transfer of assets, consolidation,
merger, scheme of arrangement, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of this Warrant,
and will at all times in good faith carry out all the provisions of
this Warrant and take all action as may be required to protect the
rights of the Holder. Without limiting the generality of the
foregoing, the Company (i) shall not increase the par value of any
shares of Common Stock receivable upon the exercise of this Warrant
above the Exercise Price then in effect and (ii) shall take all
such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable
shares of Common Stock upo
n the exercise of this
Warrant.
12.
Reissuance
Of Warrants
.
(a)
Transfer of
Warrant
. If this Warrant
is to be transferred, the Warrant Holder shall surrender this
Warrant to the Company and an opinion of counsel from an attorney
regularly engaged in the practice of securities law, whereupon the
Company will forthwith issue and deliver upon the order of the
Warrant Holder a new Warrant (in accordance with Section 12(d)),
registered as the Warrant Holder may request, representing the
right to purchase the number of Warrant Shares being transferred by
the Warrant Holder and, if less than the total number of Warrant
Shares then underlying this Warrant is being transferred, a new
Warrant (in accordance with Section 11(d)) to the Warrant Holder
representing the right to purchase the number of Warrant Shares not
being transferred.
(b)
Lost,
Stolen or Mutilated Warrant
. Upon receipt by
the Company of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant, and, in
the case of loss, theft or destruction, of any indemnification and
payment of any required bond undertaking by the Warrant Holder to
the Company in customary form and, in the case of mutilation, upon
surrender and cancellation of this Warrant, the Company shall
execute and deliver to the Warrant Holder a new Warrant (in
accordance with Section 12(d)) representing the right to purchase
the Warrant Shares then underlying this Warrant.
(c)
Exchangeable for Multiple
Warrants
. This Warrant is
exchangeable, upon the surrender hereof by the Warrant Holder at
the principal office of the Company, for a new Warrant or Warrants
(in accordance with Section 12(d)) representing in the aggregate
the right to purchase the number of Warrant Shares then underlying
this Warrant, and each such new Warrant will represent the right to
purchase such portion of such Warrant Shares as is designated by
the Warrant Holder at the time of such surrender; provided,
however, that no Warrants for fractional shares of Common Stock
shall be given.
(d)
Issuance
of New Warrants
13.
Whenever the
Company is required to issue a new Warrant pursuant to the terms of
this Warrant, such new Warrant (i) shall be of like tenor with this
Warrant, (ii) shall represent, as indicated on the face of such new
Warrant, the right to purchase the Warrant Shares then underlying
this Warrant (or in the case of a new Warrant being issued pursuant
to Section 12
(a)
or Section 12
(c)
, the Warrant Shares designated by the
Warrant Holder which, when added to the number of shares of Common
Stock underlying the other new Warrants issued in connection with
such issuance, does not exceed the number of Warrant Shares then
underlying this Warrant), (iii) shall have an issuance date, as
indicated on the face of such new Warrant which is the same as the
Issuance Date, and (iv) shall have the same rights and conditions
as this Warrant.
14.
Amendment
And Waiver
. Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained
the written consent of the holders of a majority of the Warrant
Shares underlying the outstanding Warrants.
15.
Dispute
Resolution
. In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant
Shares issuable pursuant hereto, the Company shall promptly issue
to the Warrant Holder the number of Warrant Shares that are not
disputed and resolve such dispute in accordance with this Section
15. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares
issuable pursuant hereto, the Company shall submit the disputed
determinations or arithmetic calculations via facsimile within two
(2) Business Days of receipt of the Exercise Notice giving rise to
such dispute, as the case may be, to the Warrant Holder. If the
Warrant Holder and the Company are unable to agree upon such
determination or calculation of the Exercise Price or the Warrant
Shares within three (3) Business Days of such disputed
determination or arithmetic calculation being submitted to the
Warrant Holder, then the Company shall, within two (2) Business
Days submit via facsimile (a) the disputed determination of the
Exercise Price to an independent, reputable investment bank
selected by the Company and approved by the Warrant Holder or (b)
the disputed arithmetic calculation of the Warrant Shares to the
Company’s independent, outside accountant. The Company shall
cause the investment bank or the accountant, as the case may be, to
perform the determinations or calculations and notify the Company
and the Warrant Holder of the results no later than ten (10)
Business Days from the time it receives the disputed determinations
or calculations. Such investment bank’s or accountant’s
determination or calculation, as the case may be, shall be binding
upon all parties absent demonstrable error. The party whose
calculation is furthest from the investment bank’s or
accountant’s determination or calculation, as the case may
be, shall be obligated to pay the fees and expenses of such
investment bank or accountant.
16.
Remedies,
Other Obligations, Breaches And Injunctive Relief
. The
remedies provided in this Warrant shall be cumulative and in
addition to all other remedies available under this Warrant and the
other Transaction Documents, at law or in equity (including a
decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the right of the Warrant Holder to
pursue actual damages for any failure by the Company to comply with
the terms of this Warrant. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to
the Warrant Holder and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event
of any such breach or threatened breach, the holder of this Warrant
shall be entitled, in addition to all other available remedies, to
an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being
required. The Company shall provide all information and
documentation to the Warrant Holder that is requested by the Holder
to enable the Holder to confirm the Company’s compliance with
the terms and conditions of this Warrant (including, without
limitation, compliance with Section 6 hereof).
17.
Transfer
.
This Warrant may be offered for sale, sold, transferred or assigned
without the consent of the Company.
18.
Severability
.
If any provision of this Warrant is prohibited by law or otherwise
determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited,
invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the
invalidity or unenforceability of such provision shall not affect
the validity of the remaining provisions of this Warrant so long as
this Warrant as so modified continues to express, without material
change, the original intentions of the parties as to the subject
matter hereof and the prohibited nature, invalidity or
unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal
obligations of the parties or the practical realization of the
benefits that would otherwise be conferred upon the parties. The
parties will endeavor in good faith negotiations to replace the
prohibited, invalid or unenforceable provision(s) with a valid
provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable
provision(s).
19.
Certain
Definitions
. For purposes of this Warrant, the following
terms shall have the following meanings:
(a)
“
Business Day
” means any day other
than Saturday, Sunday or other day on which commercial banks in The
City of New York are authorized or required by law to remain
closed.
(b)
“
Closing Bid Price
” and
“
Closing Sale
Price
” means, for any security as of any date, the
last closing bid price and last trade price, respectively, for such
security on the Principal Market, as reported by Bloomberg, or, if
the Principal Market begins to operate on an extended hours basis
and does not designate the closing bid price or the closing trade
price, as the case may be, then the last bid price or the last
trade price, respectively, of such security prior to 4:00:00 p.m.,
New York time, as reported by Bloomberg, or, if the Principal
Market is not the principal securities exchange or trading market
for such security, the last closing bid price or last trade price,
respectively, of such security on the principal securities exchange
or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last
closing bid price or last trade price, respectively, of such
security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no closing
bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask
prices, respectively, of any market makers for such security as
reported in the “pink sheets” by OTC Markets Group,
Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the
Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Bid
Price or the Closing Sale Price, as the case may be, of such
security on such date shall be the fair market value as mutually
determined by the Company and the Holder. If the Company and the
Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved pursuant to Section
15. All such determinations to be appropriately adjusted for any
stock dividend, stock split, stock combination or other similar
transaction during the applicable calculation period.
(c)
“
Options
” means any rights,
warrants or options to subscribe for or purchase shares of Common
Stock or Common Stock Equivalents.
(d)
“
Principal Market
” means OTCQX US
Exchange until such time as the Company effects its proposed
up-listing to the Nasdaq Capital Market, and shall thereafter mean
the Nasdaq Capital Market or any successor exchange on which the
Common Stock is traded.
(e)
“
Trading Day
” means, as applicable,
(x) with respect to all price determinations relating to the
Common
(f)
Stock, any
day on which the Common Stock is traded on the Principal Market,
or, if the Principal Market is not the principal trading market for
the Common Stock, then on the principal securities exchange or
securities market on which the Common Stock is then traded,
provided that “Trading Day” shall not include any day
on which the Common Stock is scheduled to trade on such exchange or
market for less than 4.5 hours or any day that the Common Stock is
suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not
designate in advance the closing time of trading on such exchange
or market, then during the hour ending at 4:00:00 p.m., New York
time) unless such day is otherwise designated as a Trading Day in
writing by the Holder or (y) with respect to all determinations
other than price determinations relating to the Common Stock, any
day on which The New York Stock Exchange (or any successor thereto)
is open for trading of securities.
20.
Assignability
.
Notwithstanding anything contained herein to the contrary, subject
to the transfer and securities law restrictions set forth in this
Agreement, the Warrant Holder may assign, convey or transfer, in
whole or in part, its rights under this Agreement and provide
written notice to Company of any such assignment, conveyance or
transfer. Upon any transfer, assignment, pledge, hypothecation or
other disposition of the Warrant or of any rights granted hereunder
in accordance with the terms of this Section 20, the Company shall
if necessary issue or re-issue warrant agreements reflecting the
appropriate rights and entitlements of the Warrant Holder and any
transferee, assignee or pledgee after giving effect to such
transfer, assignment or pledge.
[signatures on following page]
IN
WITNESS WHEREOF, the undersigned hereby execute this Agreement as
of the day and year first above written.
COMPANY
:
YOUNGEVITY
INTERNATIONAL, INC.
By:___________________________
Name:
Steven Wallach
Title: Chairman
and CEO
WARRANT HOLDER
:
___________________________
[Signature
Page – Warrant Agreement]
-14-
EXHIBIT A
NOTICE OF EXERCISE
The
undersigned holder hereby exercises the right to purchase
_________________ shares of Common Stock (“
Warrant Shares
”) of
Youngevity International, Inc., a Delaware corporation (the
“
Company
”), evidenced by
the attached Series D Warrant No. ___ (the “
Warrant
”). Capitalized
terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.
1. Form
of Exercise Price. The Warrant Holder intends that payment of the
Exercise Price shall be made as:
____________
a
“
Cash
Exercise
” with respect to _________________ Warrant
Shares; or
____________
a
“
Cashless
Exercise
” with respect to _______________ Warrant
Shares.
2.
Payment of Exercise Price. In the event that the holder has elected
a Cash Exercise with respect to some or all of the Warrant Shares
to be issued pursuant hereto, the holder shall pay the Aggregate
Exercise Price in the sum of $___________________ to the Company in
accordance with the terms of the Warrant.
3.
Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the
Warrant.
Date:
_______________ __, ______
Name
of Registered Holder
Name:
Title:
Exhibit
4.4
REGISTRATION RIGHTS AGREEMENT
This
Registration Rights Agreement (this “
Agreement
”) is made and
entered into as of July __, 2017 by and among
Youngevity International, Inc.
, a
Delaware corporation (the “
Company
”), and the
purchasers listed on
Schedule I
hereto (the
“
Purchasers
”).
This
Agreement is being entered into pursuant to the Note Purchase
Agreement dated as of the date hereof among the Company and the
Purchasers (the “
Purchase
Agreement
”).
The
Company and the Purchasers hereby agree as follows:
1.
Definitions
.
Capitalized terms
used and not otherwise defined herein shall have the meanings given
such terms in the Purchase Agreement. As used in this Agreement,
the following terms shall have the following meanings:
“
Advice
” shall have
meaning set forth in Section 3(m).
“
Affiliate
” means, with
respect to any Person, any other Person which directly or
indirectly through one or more intermediaries Controls, is
controlled by, or is under common control with, such Person. For
the avoidance of doubt, with respect to a Purchaser which is a
general or limited partnership, an Affiliate shall be deemed to
include affiliated partnerships managed by the same management
company or managing general partner or by an entity which controls,
is controlled by, or is under common control with, such management
company or managing general partner.
“
Board
” shall have meaning
set forth in Section 3(n).
“
Business Day
” means any
day except Saturday, Sunday and any day which shall be a legal
holiday or a day on which banking institutions in the State of New
York generally are authorized or required by law or other
government actions to close.
“
Closing Date
” means the
date of the closing of the purchase and sale of the Units pursuant
to the Purchase Agreement.
“
Commission
” means the
Securities and Exchange Commission.
“
Common Stock
” means the
Company’s common stock, par value $0.001 per
share.
“
Control
” (including the
terms “controlling”, “controlled by” or
“under common control with”) means the possession,
direct or indirect, of the power to direct or cause the direction
of the management and policies of a Person, whether through the
ownership of voting securities, by contract or
otherwise.
“
Effectiveness Date
” means
with respect to the Registration Statement under Section 2(a), the
earlier of: (A) the one eightieth (180
th
) day following the
later to occur of: (i) the Final Closing Date; or (ii) or in the
event the Registration Statement receives a “full
review” by the Commission, the two hundred and tenth
(210
th
)
following the Final Closing Date; or (B)
the date which is within three (3) Business Days
after the date on which the Commission informs the Company: (i)
that the Commission will not review the Registration Statement; or
(ii)
that the Company may request the acceleration of
the effectiveness of the Registration Statement;
provided
,
however
,
that if the Effectiveness Date falls on a
Saturday, Sunday
or any other day which shall be a legal holiday or a day on which
the Commission is authorized or required by law or other government
actions to close, the Effectiveness Date shall be the following
Business Day
.
“
Effectiveness Period
”
shall have the meaning set forth in Section 2(a).
“
Event
” shall have the
meaning set forth in Section 7(c).
“
Event Date
” shall have
the meaning set forth in Section 7(c).
“
Exchange Act
” means the
Securities Exchange Act of 1934, as amended.
“
Filing Date
” means with
respect to a Registration Statement under Section 2(a), the date
that is the ninetieth (90
th
) day following the
later to occur of: (i) the Final Closing Date; or (ii) the
effective date of the Prior Registration Statement;
provided
,
however
that
if the Filing Date falls on a
Saturday,
Sunday or any other day which shall be a legal holiday or a day on
which the Commission is authorized or required by law or other
government actions to close, the Filing Date shall be the following
Business Day.
“
Holder
” or
“
Holders
” means the holder
or holders, as the case may be, from time to time of Registrable
Securities.
“
Indemnified Party
” shall
have the meaning set forth in Section 5(c).
“
Indemnifying Party
” shall
have the meaning set forth in Section 5(c).
“
Losses
” shall have the
meaning set forth in Section
5(a).
“
Offering
” means the
offering made pursuant to Section 4(a)(2) of the Securities Act and
Rule 506 promulgated thereunder of Units of Securities of the
Company pursuant to the Purchase Agreement.
“
Person
” means an
individual or a corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political
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.
“
Prospectus
” means the
prospectus included in the Registration Statement (including,
without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under
the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by the Registration
Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material
incorporated by reference in such Prospectus.
“
Purchase Agreement
” means
the Note Purchase Agreement, dated as of July [ ], 2017 between the
Company and each of the Purchasers.
“
Registrable Securities”
means, collectively (i) the shares of
Common Stock issuable upon conversion of the 8% convertible notes
(the “
Notes
”)
issued in the Offering (the “Note Shares”); (ii) the
shares of Common Stock issuable upon exercise of the Series D
warrants (the “Warrants”) issued in the Offering (the
“
Warrant
Shares
”); (iii) the
shares of Common Stock underlying the warrants issued to the
Placement Agent pursuant to the Purchase Agreement (the
“Placement Agent Shares”); and (iv) any securities
issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event with respect to the
foregoing;
provided
, that the Holder has
completed and delivered to the Company a Selling Stockholder
Questionnaire; and
provided
,
further
, that the Note Shares,
Warrant Shares and placement Agent Shares shall cease to be
Registrable Securities upon the earlier to occur of the following:
(A) sale pursuant to a Registration Statement or Rule 144 under the
Securities Act (in which case, only such security sold shall cease
to be a Registrable Security), (B) becoming eligible for sale by
the Holder pursuant to Rule 144, without limitation, or (C) one
year after the date of this Agreement
.
“
Registration Statement
”
means either: (a) an appropriate pre-effective or post-effective
amendment to the Prior Registration Statement including therein the
Registrable Securities; or (b) a registration statement and any
additional registration statements contemplated by Section 2,
including (in each case) the Prospectus, amendments and supplements
to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material
incorporated by reference in such registration
statement.
“
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.
“
Rule 158
” means Rule 158
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.
“
Rule 415
” means Rule 415
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.
“
Rule 416
” means Rule 416
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.
“
Rule 424
” means Rule 424
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 Act
” means the
Securities Act of 1933, as amended.
“
SEC Guidance
” means: (i)
any publicly available written or oral guidance of the Commission
staff, or any comments, requirements or requests of the Commission
staff; and (ii) the Securities Act.
“
Selling Stockholder
Questionnaire
” means a questionnaire in the form
attached as
Exhibit
B
hereto, or such other form of questionnaire as may
reasonably be adopted by the Company from time to
time.
“
Warrants
” means the
warrants to purchase shares of Common Stock issued to the
Purchasers pursuant to the Purchase Agreement.
2.
Resale
Registration
.
(a) On
or prior to the Filing Date, the Company shall prepare and file
with the Commission a “resale” Registration Statement
providing for the resale of all Registrable Securities by means of
an offering to be made on a continuous basis pursuant to Rule 415.
The Registration Statement shall be on Form S-1 or Form S-3
(
or another appropriate form in
accordance herewith
). The Company shall: (i) include the
Registrable Securities in the Registration Statement; and (ii) use
its commercially reasonable efforts to cause the Registration
Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event
prior to the Effectiveness Date, and to keep such Registration
Statement continuously effective under the Securities Act until
such date as is the earlier of (x) the date when all Registrable
Securities covered by such Registration Statement have been sold,
(y) the date on which the Registrable Securities may be sold
without any restriction pursuant to Rule 144 as determined by the
counsel to the Company pursuant to a written opinion letter,
addressed to the Company’s transfer agent to such effect or
(z) one year after the date hereof (the “
Effectiveness Period
”).
The Company shall request that the effective time of the
Registration Statement be 4:00 p.m. Eastern Time on the
Effectiveness Date. If at any time and for any reason, an
additional Registration Statement is required to be filed because
at such time the actual number of Registrable Securities exceeds
the number of Registrable Securities remaining under the
Registration Statement and such Registrable Securities are not
saleable under Rule 144, without limitation, the Company shall have
ninety (90) Business Days to file such additional Registration
Statement, and the Company shall use its commercially reasonable
efforts to cause such additional Registration Statement to be
declared effective by the Commission as soon as possible, but in no
event later than one hundred twenty (120) days after such filing;
provided
,
however
that if the
prior Registration Statement was filed within six (6) months of
such ninety (90) or one hundred twenty (120) day period, then the
ninety (90) and one hundred twenty (120) days shall commence
immediately after the expiration of the date that is six (6) months
after the filing of the prior Registration Statement, unless then
current securities laws permit the earlier registration of
same.
(b)
Notwithstanding
anything to the contrary set forth in this Section 2, in the event
the Commission does not permit the Company to register all of
the
Registrable Securities
in
the Registration Statement because of the Commission’s
application of Rule 415,
the number of Registrable
Securities to be registered on such Registration Statement will be
reduced in the order of the Registrable Securities represented by
the total number of Note Shares and Warrant Shares owned by the
Holders, applied on a pro rata basis,
The Company shall use its commercially reasonable
efforts to file additional Registration Statements to register
the
Registrable Securities
that
were not registered in the initial Registration Statement and are
not saleable under Rule 144 without limitation as promptly as
possible but in no event later than on the Filing Date and in a
manner permitted by the Commission. For purposes of this Section
2(b), “
Filing
Date
”
means with
respect to each subsequent Registration Statement filed pursuant
hereto,
the later of: (i) ninety (90)
days following the sale of substantially all of the Registrable
Securities included in the initial Registration Statement or any
subsequent Registration Statement and; (ii) six (6) months
following the effective date of the initial Registration Statement
or any subsequent Registration Statement, as applicable, or such
earlier date as permitted by the Commission.
For purposes of
this Section 2(b), “
Effectiveness Date
” means
with respect to each subsequent Registration Statement filed
pursuant hereto, the earlier of:
(A)
the one hundred twentieth (120) day following the filing date of
such Registration Statement (or in the event such Registration
Statement receives a “full review” by the Commission,
the one hundred fiftieth (150
th
)
day following such filing date); or (B) the date which is within
three (3) Business Days after the date on which the Commission
informs the Company: (i) that the Commission will not review such
Registration Statement; or (ii)
that the Company may request the acceleration of
the effectiveness of such Registration Statement;
provided
that
,
if the Effectiveness Date falls on a Saturday, Sunday or any other
day which shall be a legal holiday or a day on which the Commission
is authorized or required by law or other government actions to
close, the Effectiveness Date shall be the following Business
Day.
(c)
Each
Holder agrees to furnish to the Company a completed Selling
Stockholder Questionnaire not more than ten (10) Business Days
following the date of this Agreement. Each Holder further agrees
that it shall not be entitled to be named as a selling security
holder in the Registration Statement or use the Prospectus for
offers and resales of Registrable Securities at any time, unless
such Holder has returned to the Company a completed and signed
Selling Stockholder Questionnaire. If a Holder of Registrable
Securities returns a Selling Stockholder Questionnaire after the
deadline specified in the previous sentence, the Company shall use
its commercially reasonable efforts to take such actions as are
required to name such Holder as a selling security holder in the
Registration Statement or any pre-effective or post-effective
amendment thereto and to include (to the extent not theretofore
included) in the Registration Statement the Registrable Securities
identified in such late Selling Stockholder Questionnaire;
provided
that the
Company shall not be required to file an additional Registration
Statement solely for such shares. Each Holder acknowledges and
agrees that the information in the Selling Stockholder
Questionnaire will be used by the Company in the preparation of the
Registration Statement and hereby consents to the inclusion of such
information in the Registration Statement.
3.
Registration
Procedures
.
In connection with
the Company’s registration obligations hereunder, the Company
shall:
(a)
Prepare and file with the
Commission, on or prior to the Filing Date, a Registration
Statement on Form S-1 or Form S-3 (or another appropriate form in
accordance herewith) in accordance with the plan of distribution as
set forth on Exhibit A hereto and inaccordance with applicable law,
and cause the Registration Statement to become effective and remain
effective as provided herein; provided, however, that not less than
five (5) Business Days prior to the filing of the Registration
Statement or any relatedProspectus or any amendment or supplement
thereto, the Company shall: (i) furnish to the Holders copies of
all such documents proposed to be filed, which documents will be
subject to the review of such Holders; and (ii) cause its officers
and directors, counsel and independent certified public accountants
to respond to such inquiries as shall be necessary to conduct a
reasonable review of such documents. The Company shall not file the
Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Purchasers shall reasonably object
in writing within three (3) Business Days of their receipt
thereof.
(b)
(i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective
as to the applicable Registrable Securities for the Effectiveness
Period and prepare and file with the Commission such additional
Registration Statements as necessary in order to register for
resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by
any required Prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424 (or any similar provisions
then in force) promulgated under the Securities Act; (iii) respond
as promptly as possible, but in no event later than sixty (60)
Business Days (unless such shorter period is requested by the
Commission), to any comments received from the Commission with
respect to the Registration Statement or any amendment thereto and
as promptly as possible provide the Holders true and complete
copies of all correspondence from and to the Commission relating to
the Registration Statement; (iv) file the final prospectus pursuant
to Rule 424 of the Securities Act no later than two (2) Business
Days following the date the Registration Statement is declared
effective by the Commission; and (v) comply in all material
respects with the provisions of the Securities Act and the Exchange
Act with respect to the disposition of all Registrable Securities
covered by the Registration Statement during the Effectiveness
Period in accordance with the intended methods of disposition by
the Holders thereof set forth in the Registration Statement as so
amended or in such Prospectus as so supplemented.
(c)
Notify the Holders of Registrable Securities as promptly as
possible (i) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is filed;
with respect to the Registration Statement or any post-effective
amendment, when the same has become effective; (ii) of the issuance
by the Commission of any stop order suspending the effectiveness of
the Registration Statement covering any or all of the Registrable
Securities or the initiation or threatening of any Proceedings for
that purpose; (iii) of the receipt by the Company of any
notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities
for sale in any jurisdiction, or the initiation or threatening of
any Proceeding for such purpose; and (iv) of the occurrence of any
event that makes any statement made in the Registration Statement
or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement,
Prospectus or other documents so that, in the case of the
Registration Statement or the Prospectus, as the case may be, it
will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary
to make the statements therein (in the case of the Prospectus, in
the light of the circumstances under which they were made) not
misleading.
(d)
Use its commercially reasonable efforts to avoid the issuance of,
or, if issued, obtain the withdrawal of, as promptly as possible:
(i) any order suspending the effectiveness of the Registration
Statement; or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable
Securities for sale in any
jurisdiction.
(e)
If requested by the Holders of a majority in interest of the
Registrable Securities: (i) promptly incorporate in a Prospectus
supplement or post-effective amendment to the Registration
Statement such information as the Company reasonably agrees should
be included therein; and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as soon as
practicable after the Company has received notification of the
matters to be incorporated in such Prospectus supplement or
post-effective amendment.
(f)
If requested by any
Holder, furnish to such Holder, without charge, at least one
conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, all
documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent requested by such Person
(including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the
Commission.
(g)
Promptly deliver to
each Holder, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment
or supplement thereto as such Persons may reasonably request; and
subject to the provisions of Sections 3(m) and 3(n), the Company
hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders in connection
with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement
thereto.
(h)
Prior to any resale
of Registrable Securities, use its commercially reasonable efforts
to register or qualify or cooperate with the selling Holders in
connection with the registration or qualification (or exemption
from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder
requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a
Registration Statement;
provided
,
however
, that the Company shall
not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any
action that would subject it to general service of process in any
such jurisdiction where it is not then so subject or subject the
Company to any material tax in any such jurisdiction where it is
not then so subject.
(i)
Cooperate with the Holders to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be
sold pursuant to a Registration Statement, which certificates, to
the extent permitted by the Purchase Agreement and applicable
federal and state securities laws, shall be free of all restrictive
legends, and to enable such Registrable Securities to be in such
denominations and registered in such names of the Holder in
connection with any sale of Registrable Securities.
(j)
Upon the occurrence of any event contemplated by Section 3(c)(vi),
as promptly as possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement
or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and
file any other required document so that, as thereafter delivered,
neither the Registration Statement nor such Prospectus will contain
an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus, in the light of
the circumstances under which they were made) not
misleading.
(k)
Use its commercially reasonable efforts to cause all Registrable
Securities relating to the Registration Statement, to continue to
be quoted or listed on a securities exchange, quotation system or
market, if any, on which similar securities issued by the Company
are then listed or traded as and when required pursuant to the
Purchase Agreement.
(l)
Comply in all material respects with all applicable rules and
regulations of the Commission and make generally available to its
security holders all documents filed or required to be filed with
the Commission, including, but not limited, to, earning statements
satisfying the provisions of Section 11(a) of the Securities Act
and Rule 158 not later than forty-five (45) days after the end of
any 12-month period (or ninety (90) days after the end of any
12-month period if such period is a fiscal year) commencing on the
first day of the first fiscal quarter of the Company after the
effective date of the Registration Statement, which statement shall
conform to the requirements of Rule 158.
(m) The
Company may require each selling Holder to furnish to the Company a
certified statement as to the number of shares of Common Stock
beneficially owned by such Holder and the natural persons thereof
that have voting and dispositive control over the Registrable
Securities. During any periods that the Company is unable to meet
its obligations hereunder with respect to the registration of the
Registrable Securities solely because any Holder fails to furnish
such information within five (5) Business Days of the
Company’s request, any liquidated damages that are accruing
at such time as to such Holder only shall be tolled and any Event
that may otherwise occur solely because of such delay shall be
suspended as to such Holder only, until such information is
delivered to the Company.
If the
Registration Statement refers to any Holder by name or otherwise as
the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name
or otherwise is not required by the Securities Act or any similar
federal statute then in force) the deletion of the reference to
such Holder in any amendment or supplement to the Registration
Statement filed or prepared subsequent to the time that such
reference ceases to be required.
Each
Holder covenants and agrees that it will not sell any Registrable
Securities under the Registration Statement until the Company has
electronically filed the Prospectus as then amended or supplemented
as contemplated in Section 3(g) and notice from the Company that
the Registration Statement and any post-effective amendments
thereto have become effective as contemplated by Section
3(c).
Each
Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence
of any event of the kind described in Section 3(c)(ii), 3(c)(iii),
3(c)(iv), 3(c)(v), 3(c)(vi) or 3(n), such Holder will forthwith
discontinue disposition of such Registrable Securities under the
Registration Statement until such Holder’s receipt of the
copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 3(j), or until it is advised in
writing (the “
Advice
”) by the Company
that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental
filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration
Statement.
(n)
If (i) there is material non-public information regarding the
Company which the Company’s Board of Directors (the
“
Board
”) determines not to
be in the Company’s best interest to disclose and which the
Company is not otherwise required to disclose; (ii) there is a
significant business opportunity (including, but not limited to,
the acquisition or disposition of assets (other than in the
ordinary course of business) or any merger, consolidation, tender
offer or other similar transaction) available to the Company which
the Board determines not to be in the Company’s best interest
to disclose; or (iii) the Company is required to file a
post-effective amendment to the Registration Statement to
incorporate the Company’s quarterly and annual reports and
audited financial statements on Forms 10-Q and 10-K, then the
Company may (x) postpone or suspend filing of a registration
statement for a period not to exceed forty-five (45) consecutive
days or (y) postpone or suspend effectiveness of a registration
statement for a period not to exceed forty-five (45) consecutive
days;
provided
that
the Company may not postpone or suspend effectiveness of a
registration statement under this Section 3(n) for more than ninety
(90) days in the aggregate during any three hundred sixty (360) day
period;
provided
,
however
, that no
such postponement or suspension shall be permitted for consecutive
twenty (20) day periods arising out of the same set of facts,
circumstances or transactions.
4.
Registration
Expenses
.
All
fees and expenses incident to the performance of or compliance with
this Agreement by the Company, except as and to the extent
specified in this Section 4, shall be borne by the Company whether
or not the Registration Statement is filed or becomes effective and
whether or not any Registrable Securities are sold pursuant to the
Registration Statement. The fees and expenses referred to in the
foregoing sentence shall include, without limitation: (i) all
registration and filing fees (including, without limitation, fees
and expenses (A) with respect to filings required to be made with
any securities exchange or market on which Registrable Securities
are required hereunder to be listed, if any, (B) with respect to
filing fees required to be paid to the Financial Industry
Regulatory Authority, Inc. (including, without limitation, pursuant
to FINRA Rule 5110) and (C) in compliance with state securities or
Blue Sky laws (including, without limitation, fees and
disbursements of one counsel for the Holders up to a maximum amount
of $5,000 in connection with Blue Sky qualifications of the
Registrable Securities and determination of the eligibility of the
Registrable Securities for investment under the laws of such
jurisdictions as the Holders of a majority of Registrable
Securities may designate)); (ii) printing expenses (including,
without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing
of prospectuses is requested by the holders of a majority of the
Registrable Securities included in the Registration Statement);
(iii) messenger, telephone and delivery expenses; (iv) Securities
Act liability insurance, if the Company so desires such insurance;
and (v) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions
contemplated by this Agreement, including, without limitation, the
Company’s independent public accountants (including the
expenses of any comfort letters or costs associated with the
delivery by independent public accountants of a comfort letter or
comfort letters). In addition, the Company shall be responsible for
all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement
(including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the
expense of any annual audit, the fees and expenses incurred in
connection with the listing of the Registrable Securities on any
securities exchange if required hereunder. The Company shall not be
responsible for any discounts, commissions, transfer taxes or other
similar fees incurred by the Holders in connection with the sale of
the Registrable Securities.
5.
Indemnification
.
(a)
Indemnification
by the Company
. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each
Holder, the officers, directors, managers, partners, members,
shareholders, agents, brokers, investment advisors and employees of
each of them, each Person who controls any such Holder (within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, agents and employees of
each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, costs
of preparation and attorneys’ fees) and expenses
(collectively, “
Losses
”), as incurred,
arising out of or relating to any violation of securities laws or
untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus,
or arising out of or relating to any omission of a material fact
required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which
they were made) not misleading, except to the extent, but only to
the extent, that such untrue statements or omissions are based
solely upon information regarding such Holder or such other
Indemnified Party furnished in writing to the Company by such
Holder for use therein. The Company shall notify the Holders
promptly of the institution, threat or assertion of any Proceeding
of which the Company is aware in connection with the transactions
contemplated by this Agreement.
(b)
Indemnification
by Holders
. Each Holder shall, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within
the meaning of Section 15 of the Securities Act and Section 20 of
the Exchange Act), and the directors, officers, agents and
employees of such controlling Persons, to the fullest extent
permitted by applicable law, from and against all Losses, as
incurred, arising out of or based upon any untrue statement of a
material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or
supplement thereto, or arising out of or based upon any omission of
a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of
prospectus or supplement thereto, in the light of the circumstances
under which they were made) not misleading, to the extent, but only
to the extent, that such untrue statement or omission is contained
in any information so furnished in writing by such Holder or other
Indemnifying Party to the Company specifically for inclusion in the
Registration Statement or such Prospectus. Notwithstanding anything
to the contrary contained herein, each Holder shall be liable under
this Section 5(b) only for the lesser of (a) the actual damages
incurred or (b) that amount as does not exceed the gross proceeds
to such Holder as a result of the sale of his/her/its Registrable
Securities pursuant to such Registration Statement.
(c)
Conduct of Indemnification
Proceedings
. If any Proceeding shall be brought or asserted
against any Person entitled to indemnity hereunder (an
“
Indemnified
Party
”), such Indemnified Party promptly shall
promptly notify the Person from whom indemnity is sought (the
“
Indemnifying
Party”
) in writing, and the Indemnifying Party shall
be entitled to assume the defense thereof, including the employment
of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with
defense thereof;
provided
that the failure of
any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be
finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such
failure shall have proximately and materially adversely prejudiced
the Indemnifying Party.
An
Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense
of such Indemnified Party or Parties unless: (1) the Indemnifying
Party has agreed in writing to pay such fees and expenses; or (2)
the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or
(3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such parties shall have been advised by
counsel that a conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party
notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall be responsible for employing only one
separate counsel and shall not have the right to assume the defense
thereof and such counsel shall be at the expense of the
Indemnifying Party). The Indemnifying Party shall not be liable for
any settlement of any such Proceeding effected without its written
consent, which consent shall not be unreasonably withheld or
delayed. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any
pending or threatened Proceeding in respect of which any
Indemnified Party is a party and indemnity has been sought
hereunder, unless such settlement includes an unconditional release
of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
(d)
Contribution
.
If a claim for indemnification under Section 5(a) or 5(b) is due
but unavailable to an Indemnified Party because of a failure or
refusal of a governmental authority to enforce such indemnification
in accordance with its terms (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses, in
such proportion as is appropriate to reflect the relative benefits
received by the Indemnifying Party on the one hand and the
Indemnified Party on the other from the offering of the Notes and
Warrants. If, but only if, the allocation provided by the foregoing
sentence is not permitted by applicable law, the allocation of
contribution shall be made in such proportion as is appropriate to
reflect not only the relative benefits referred to in the foregoing
sentence but also the relative fault, as applicable, of the
Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as
well as any other relevant equitable considerations. The relative
fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action
in question, including any untrue statement of a material fact or
omission of a material fact, has been taken or made by, or relates
to information supplied by, such Indemnifying Party or Indemnified
Party, and the
parties’ relative intent,
knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to
include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys’ or other reasonable fees or expenses
incurred by such party in connection with any Proceeding to the
extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was
available to such party in accordance with its terms. In no event
shall any selling Holder be required to contribute an amount under
this Section 5(d) in excess of the gross proceeds received by such
Holder upon sale of such Holder’s Registrable Securities
pursuant to the Registration Statement giving rise to such
contribution obligation.
The
parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation that does not
take into account the equitable considerations referred to in the
immediately preceding paragraph. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent
misrepresentation.
The
indemnity and contribution agreements contained in this Section are
in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties pursuant to applicable law.
6.
Rule
144
.
Unless
and until such time as the Holder can sell the Registrable
Securities pursuant to Rule 144, the Company covenants to timely
file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to Section 13(a) or 15(d) of
the Exchange Act. As long as any Holder owns Warrants or
Registrable Securities, if the Company is not required to file
reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it
will prepare and furnish to the Holders and make publicly available
in accordance with Rule 144(c) promulgated under the Securities
Act, annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be
required to be included in reports required by Section 13(a) or
15(d) of the Exchange Act, as well as any other information
required thereby, in the time period that such filings would have
been required to have been made under the Exchange Act. The Company
further covenants that it will take such further action as any
Holder may reasonably request, all to the extent reasonably
required from time to time to enable such Person to sell the Note
Shares and the Warrant Shares without registration under the
Securities Act within the limitation of the exemptions provided by
Rule 144 promulgated under the Securities Act, including providing
any legal opinions relating to such sale pursuant to Rule 144. Upon
the request of any Holder, the Company shall deliver to such Holder
a written certification of a duly authorized officer as to whether
it has complied with such requirements.
7.
Miscellaneous
.
(a)
Remedies
.
In the event of a breach by the Company or by a Holder of any of
their obligations under this Agreement, such Holder or the Company,
as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery
of damages, will be entitled to specific performance of its rights
under this
Agreement.
Each of the Company and each Holder agrees that monetary damages
would not provide
adequate compensation for any
losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the
event of any action for specific performance in respect of such
breach, it shall waive the defense that a remedy at law would be
adequate.
(b)
No
Inconsistent Agreements
. The Company has not entered into,
and shall not enter into on or after the date of this Agreement,
any agreement with respect to its securities that is inconsistent
with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof.
(c)
Failure
to File Registration Statement and Other Events
. The Company
and the Holders agree that the Holders will suffer damages if the
Registration Statement is not filed on or prior to the Filing Date
and not declared effective by the Commission on or prior to the
Effectiveness Date and maintained in the manner contemplated herein
during the Effectiveness Period or if certain other events occur.
The Company and the Holders further agree that it would not be
feasible to ascertain the extent of such damages with precision.
Accordingly, if (A) the Registration Statement is not filed on or
prior to the Filing Date; or (B) the Registration Statement is not
declared effective by the Commission on or prior to the
Effectiveness Date; or (C) the Company fails to file with the
Commission a request for acceleration in accordance with Rule 461
promulgated under the Securities Act within three (3) Business Days
of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that a Registration
Statement will not be “reviewed,” or not subject to
further review; or (D) the Registration Statement is filed with and
declared effective by the Commission but thereafter ceases to be
effective as to all Registrable Securities at any time prior to the
expiration of the Effectiveness Period, without being succeeded
immediately by a subsequent Registration Statement filed with and
declared effective by the Commission in accordance with Section
2(a) hereof; or (E) the Company has breached Section 3(n) of this
Agreement; or (F) trading in the Common Stock shall be suspended
for any reason for more than three (3) consecutive Business Days or
twelve (12) Business Days in the aggregate for any twelve (12)
month period, (any such failure or breach being referred to as an
“
Event
,” and for purposes
of clauses (A) and (B) the date on which such Event occurs, or for
purposes of clauses (C) and (F) the date on which such three (3)
Business Day period is exceeded, or for purposes of clause (D)
after more than fifteen (15) Business Days, being referred to as
“
Event
Date
”), then the Company shall pay an amount in cash
as liquidated damages to each Holder equal to one percent (1%) of
the amount of the Holder’s initial investment in the Units
for each calendar month or portion thereof thereafter from the
Event Date until the applicable Event is cured;
provided
,
however
, that in no event shall
the amount of liquidated damages payable at any time and from time
to time to any Holder pursuant to this Section 7(e) exceed an
aggregate of ten percent (10%) of the amount of the Holder’s
initial investment in the Units; and
provided
,
further
, that in the event the
Commission does not permit all of the Registrable Securities to be
included in the Registration Statement because of its application
of Rule 415, liquidated damages payable pursuant to this Section
shall only be payable by the Company based on the portion of the
Holder’s initial investment in the Units that corresponds to
the number of such Holder’s Registrable Securities permitted
to be registered by the Commission in such Registration Statement
pursuant to Rule 415. For further clarification, the parties
understand that no liquidated damages shall be payable pursuant to
this Section with respect to any Registrable Securities that the
Company is not permitted to include on such Registration Statement
due to the Commission’s application of Rule 415 or otherwise.
In addition, no liquidated damages shall be payable with respect to
Registrable Securities that may be sold pursuant to Rule 144.
Notwithstanding anything to the contrary in this paragraph (e), if
(a) any of the Events described in clauses (A), (B), (C), (D) or
(F) shall have occurred, (b) on or prior to the applicable Event
Date, the Company shall have exercised its rights under Section
3(n) hereof and (c) the postponement or suspension permitted
pursuant to such Section 3(n) shall remain effective as of such
applicable Event Date, then the applicable Event Date shall be
deemed instead to occur on the second Business Day following the
termination of such postponement or suspension. Liquidated damages
payable by the Company pursuant to this Section 7(f) shall be
payable on the Event Date and the first (1
st
) Business Day of
each thirty (30) day period following the Event Date.
Notwithstanding anything to the contrary contained herein, in no
event shall any liquidated damages be payable with respect to the
Warrants or the Warrant Shares.
(d)
Amendments
and Waivers
. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the same shall be in
writing and signed by the Company and the Holders of a majority of
the then outstanding Registrable Securities.
(e)
Notices
.
Whenever notice is required to be given under this Agreement,
unless otherwise provided herein, such notice shall be given in
accordance with Section 7.4 of the Purchase Agreement.
(f)
Successors
and Assigns
. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted
assigns and shall inure to the benefit of each Holder and its
successors and assigns. The Company may not assign this Agreement
or any of its rights or obligations hereunder without the prior
written consent of each Holder. Each Purchaser may assign its
rights hereunder in the manner and to the Persons as permitted
under the Purchase Agreement.
(g)
Assignment
of Registration Rights
. The rights of each Holder hereunder,
including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this
Agreement, shall be automatically assignable by each Holder to any
Person who acquires all or a portion
of the Warrants or the Registrable
Securities if: (i) the Holder agrees in writing with the transferee
or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such
assignment; (ii) the Company is, within a reasonable time after
such transfer or assignment, furnished with written notice of (a)
the name and address of such transferee or assignee, and (b) the
securities with respect to which such registration rights are being
transferred or assigned; (iii) following such transfer or
assignment the further disposition of such securities by the
transferee or assignees is restricted under the Securities Act and
applicable state securities laws unless such securities are
registered in a Registration Statement under this Agreement (in
which case the Company shall be obligated to amend such
Registration Statement to reflect such transfer or assignment) or
are otherwise exempt from registration; (iv) at or before the time
the Company receives the written notice contemplated by clause (ii)
of this Section, the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions of this Agreement;
and (v) such transfer shall have been made in accordance with the
applicable requirements of the Purchase Agreement. The rights to
assignment shall apply to the Holders (and to subsequent)
successors and assigns.
(h)
Counterparts
.
This Agreement may be executed in any number of counterparts, each
of which when so executed shall be deemed to be an original and,
all of which taken together shall constitute one and the same
Agreement and shall become effective when counterparts have been
signed by each party and delivered to the other parties hereto, it
being understood that all parties need not sign the same
counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as
if such facsimile signature were the original thereof.
(i)
Governing
Law; Jurisdiction
.
This
Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York, without giving effect to
any of the conflicts of law principles which would result in the
application of the substantive law of another jurisdiction. This
Agreement shall not be interpreted or construed with any
presumption against the party causing this Agreement to be drafted.
The Company and the Holders agree that venue for any dispute
arising under this Agreement will lie exclusively in the state or
federal courts located in New York County, New York, and the
parties irrevocably waive any right to raise
forum non conveniens
or any other
argument that New York is not the proper venue. The Company and the
Holders irrevocably consent to personal jurisdiction in the state
and federal courts of the state of New York. The Company and the
Holders consent to process being served in any such suit, action or
proceeding by mailing a copy thereof 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 in this Section 7(l) shall
affect or limit any right to serve process in any other manner
permitted by law. The Company and the Holders hereby agree that the
prevailing party in any suit, action or proceeding arising out of
or relating to this Agreement or the Purchase Agreement, shall be
entitled to reimbursement for reasonable legal fees from the
non-prevailing party. The parties hereby waive all rights to a
trial by jury.
(j)
Cumulative
Remedies
. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
(k)
Severability
.
If any term, provision, covenant or restriction of this Agreement
is held to be invalid, illegal, void or unenforceable in any
respect, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect
and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their reasonable efforts to find and
employ an alternative means to achieve the same or substantially
the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and
declared
to be the
intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid,
illegal, void or unenforceable.
(l)
Headings
.
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.
(m)
Shares
Held by the Company and its Affiliates
. Whenever the consent
or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by
the Company or its Affiliates (other than any Holder or transferees
or successors or assigns thereof if such Holder is deemed to be an
Affiliate solely by reason of its holdings of such Registrable
Securities) shall not be counted in determining whether such
consent or approval was given by the Holders of such required
percentage.
(n)
Independent
Nature of Purchasers
. The Company acknowledges that the
obligations of each Purchaser under the Transaction Documents are
several and not joint with the obligations of any other Purchaser,
and no Purchaser shall be responsible in any way for the
performance of the obligations of any other Purchaser under the
Transaction Documents. The Company acknowledges that the decision
of each Purchaser to purchase Securities pursuant to the Purchase
Agreement has been made by such Purchaser independently of any
other Purchaser and independently of any information, materials,
statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or of its
Subsidiaries which may have been made or given by any other
Purchaser or by any agent or employee of any other Purchaser, and
no Purchaser or any of its agents or employees shall have any
liability to any Purchaser (or any other person) relating to or
arising from any such information, materials, statements or
opinions. The Company acknowledges that nothing contained herein,
or in any Transaction Document, and no action taken by any
Purchaser pursuant hereto or thereto (including, but not limited
to, the (i) inclusion of a Purchaser in the Registration Statement
and (ii) review by, and consent to, such Registration Statement by
a Purchaser) shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Purchasers are in any way
acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents. The
Company acknowledges that each Purchaser 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 Purchaser to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that it has
elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not
because it was required or requested to do so by the Purchasers.
The Company acknowledges that such procedure with respect to the
Transaction Documents in no way creates a presumption that the
Purchasers are in any way acting in concert or as a group with
respect to the Transaction Documents or the transactions
contemplated hereby or thereby.
[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed by their respective authorized
persons as of the date first indicated above.
YOUNGEVITY
INTERNATIONAL, INC.
Name:
Stephan Wallach
Title:
Chief Executive Officer
PURCHASERS:
______________________________
[Signature
Page to Registration Rights Agreement]
Schedule I
Purchasers
Exhibit A
Plan of Distribution
The
selling security holders and any of their pledgees, donees,
assignees and successors-in-interest may, from time to time, sell
any or all of their shares of common stock being offered under this
prospectus on any stock exchange, market or trading facility on
which shares of our common stock are traded or in private
transactions. These sales may be at fixed or negotiated prices. The
selling security holders may use any one or more of the following
methods when disposing of shares:
●
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
●
block
trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
●
purchases
by a broker-dealer as principal and resales by the broker-dealer
for its account;
●
an
exchange distribution in accordance with the rules of the
applicable exchange;
●
privately
negotiated transactions;
●
to
cover short sales made after the date that the registration
statement of which this prospectus is a part is declared effective
by the Commission;
●
broker-dealers
may agree with the selling security holders to sell a specified
number of such shares at a stipulated price per share;
●
a
combination of any of these methods of sale; and
●
any
other method permitted pursuant to applicable law.
The
shares may also be sold under Rule 144 under the Securities Act of
1933, as amended (“Securities Act”), if available,
rather than under this prospectus. The selling security holders
have the sole and absolute discretion not to accept any purchase
offer or make any sale of shares if they deem the purchase price to
be unsatisfactory at any particular time.
The
selling security holders may pledge their shares to their brokers
under the margin provisions of customer agreements. If a selling
security holder defaults on a margin loan, the broker may, from
time to time, offer and sell the pledged shares.
Broker-dealers
engaged by the selling security holders may arrange for other
broker-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling security holders (or, if
any broker-dealer acts as agent for the purchaser of shares, from
the purchaser) in amounts to be negotiated, which commissions as to
a particular broker or dealer may be in excess of customary
commissions to the extent permitted by applicable law.
If
sales of shares offered under this prospectus are made to
broker-dealers as principals, we would be required to file a
post-effective amendment to the registration statement of which
this prospectus is a part. In the post-effective amendment, we
would be required to disclose the names of any participating
broker-dealers and the compensation arrangements relating to such
sales.
The
selling security holders and any broker-dealers or agents that are
involved in selling the shares offered under this prospectus may be
deemed to be “underwriters” within the meaning of the
Securities Act in connection with these sales. Commissions received
by these broker-dealers or agents and any profit on the resale of
the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Any
broker-dealers or agents that are deemed to be underwriters may not
sell shares offered under this prospectus unless and until we set
forth the names of the underwriters and the material details of
their underwriting arrangements in a supplement to this prospectus
or, if required, in a replacement prospectus included in a
post-effective amendment to the registration statement of which
this prospectus is a part.
The
selling security holders and any other persons participating in the
sale or distribution of the shares offered under this prospectus
will be subject to applicable provisions of the Exchange Act, and
the rules and regulations under that act, including Regulation M.
These provisions may restrict activities of, and limit the timing
of purchases and sales of any of the shares by, the selling
security holders or any other person. Furthermore, under Regulation
M, persons engaged in a distribution of securities are prohibited
from simultaneously engaging in market making and other activities
with respect to those securities for a specified period of time
prior to the commencement of such distributions, subject to
specified exceptions or exemptions. All of these limitations may
affect the marketability of the shares.
If
any of the shares of common stock offered for sale pursuant to this
prospectus are transferred other than pursuant to a sale under this
prospectus, then subsequent holders could not use this prospectus
until a post-effective amendment or prospectus supplement is filed,
naming such holders. We offer no assurance as to whether any of the
selling security holders will sell all or any portion of the shares
offered under this prospectus.
We have
agreed to pay all fees and expenses we incur incident to the
registration of the shares being offered under this prospectus.
However, each selling security holder and purchaser is responsible
for paying any discounts, commissions and similar selling expenses
they incur.
We and
the selling security holders have agreed to indemnify one another
against certain losses, damages and liabilities arising in
connection with this prospectus, including liabilities under the
Securities Act.
Exhibit B
Selling Stockholder Notice and Questionnaire
The
undersigned understands that Youngevity International, Inc. (the
“
Company
”) intends to file
with the Securities and Exchange Commission a registration
statement on Form S-1 (the “
Resale Registration
Statement
”) for the registration and the resale under
Rule 415 of the Securities Act of 1933, as amended (the
“
Securities
Act
”), of the Registrable Securities in accordance
with the terms of the Registration Rights Agreement entered into by
the Company and the undersigned (the “
Agreement
”). All
capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto in the Agreement.
In
order to sell or otherwise dispose of any Registrable Securities
pursuant to the Resale Registration Statement, a holder of
Registrable Securities generally will be required to be named as a
selling stockholder in the related prospectus or a supplement
thereto (as so supplemented, the “
Prospectus
”), deliver the
Prospectus to purchasers of Registrable Securities (including
pursuant to Rule 172 under the Securities Act) and be bound by the
provisions of the Agreement (including certain indemnification
provisions, as described below). Holders must complete and deliver
this Notice and Questionnaire in order to be named as selling
stockholders in the Prospectus.
Holders of Registrable Securities who do not
complete, execute and return this Notice and Questionnaire within
ten (10) Business Days following the date of the Agreement (1) will
not be named as selling stockholders in the Resale Registration
Statement or the Prospectus and (2) may not use the Prospectus for
resales of Registrable Securities.
Certain
legal consequences arise from being named as a selling stockholder
in the Resale Registration Statement and the Prospectus. Holders of
Registrable Securities are advised to consult their own securities
law counsel regarding the consequences of being named or not named
as a selling stockholder in the Resale Registration Statement and
the Prospectus.
NOTICE
The
undersigned holder (the “
Selling Stockholder
”) of
Registrable Securities hereby gives notice to the Company of its
intention to sell or otherwise dispose of Registrable Securities
owned by it and listed below in Item (3), unless otherwise
specified in Item (3), pursuant to the Resale Registration
Statement. The undersigned, by signing and returning this Notice
and Questionnaire, understands and agrees that it will be bound by
the terms and conditions of this Notice and Questionnaire and the
Agreement.
The
undersigned hereby provides the following information to the
Company and represents and warrants that such information is
accurate and complete:
QUESTIONNAIRE
(a)
Full Legal Name of
Selling Stockholder:
(b)
Full Legal Name of
Registered Holder (if not the same as (a) above) through which
Registrable Securities Listed in Item 3 below are
held:
(c)
Full Legal Name of
Natural Control Person (which means a natural person who directly
or indirectly alone or with others has power to vote or dispose of
the securities covered by the questionnaire):
2.
Address
for Notices to Selling Stockholder:
|
|
|
|
|
|
|
Telephone:
|
|
Fax:
|
|
Contact
Person:
|
|
E-mail
address of Contact
Person:________________________________________________
|
3.
Beneficial
Ownership of Registrable Securities:
(a)
Type
and Number of Registrable Securities beneficially
owned:
|
___________________________________________________________________________
|
|
___________________________________________________________________________
|
|
___________________________________________________________________________
|
(b)
Number
of shares of Common Stock to be registered pursuant to this Notice
for resale:
|
___________________________________________________________________________
|
|
___________________________________________________________________________
|
|
___________________________________________________________________________
|
(a)
Are
you a broker-dealer?
Yes
☐
No
☐
(b)
If “yes” to Section 4(a),
did you receive your Registrable Securities as compensation for
investment banking services to the Company?
Yes
☐
No
☐
Note:
If no,
the Commission’s staff has indicated that you should be
identified as an underwriter in the Registration
Statement.
(c)
Are
you an affiliate of a broker-dealer?
Yes
☐
No
☐
Note:
If
yes, provide a narrative explanation below:
(d)
If you
are an affiliate of a broker-dealer, do you certify that you bought
the Registrable Securities in the ordinary course of business, and
at the time of the purchase of the Registrable Securities to be
resold, you had no agreements or understandings, directly or
indirectly, with any person to distribute the Registrable
Securities?
Yes
☐
No
☐
Note:
If no,
the Commission’s staff has indicated that you should be
identified as an underwriter in the Registration
Statement.
5.
Beneficial
Ownership of Other Securities of the Company Owned by the Selling
Stockholder.
Except as set forth below in this Item 5, the undersigned is not
the beneficial or registered owner of any securities of the Company
other than the Registrable Securities listed above in Item
3.
Type
and amount of other securities beneficially owned:
______________________________________________________________________________
______________________________________________________________________________
6.
Relationships
with the Company:
Except as set forth below, neither the undersigned nor any of its
affiliates, officers, directors or principal equity holders (owners
of 5% of more of the equity securities of the undersigned) has held
any position or office or has had any other material relationship
with the Company (or its predecessors or affiliates) during the
past three years.
State
any exceptions here:
______________________________________________________________________________
______________________________________________________________________________
The undersigned has reviewed the form of Plan of Distribution
attached as Exhibit A to the Agreement, and hereby confirms that,
except as set forth below, the information contained therein
regarding the undersigned and its plan of distribution is correct
and complete.
State
any exceptions here:
______________________________________________________________________________
______________________________________________________________________________
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The
undersigned agrees to promptly notify the Company of any
inaccuracies or changes in the information provided herein that may
occur subsequent to the date hereof and prior to the effective date
of any applicable Resale Registration Statement. All notices
hereunder shall be made in writing, by hand delivery, confirmed or
facsimile transmission, first-class mail or air courier
guaranteeing overnight delivery at the address set forth below. In
the absence of any such notification, the Company shall be entitled
to continue to rely on the accuracy of the information in this
Notice and Questionnaire.
By
signing below, the undersigned consents to the disclosure of the
information contained herein in its answers to Items (1) through
(7) above and the inclusion of such information in the Resale
Registration Statement and the Prospectus. The undersigned
understands that such information will be relied upon by the
Company in connection with the preparation or amendment of any such
Registration Statement and the Prospectus.
By
signing below, the undersigned acknowledges that it understands its
obligation to comply, and agrees that it will comply, with the
provisions of the Exchange Act and the rules and regulations
thereunder, particularly Regulation M in connection with any
offering of Registrable Securities pursuant to the Resale
Registration Statement. The undersigned also acknowledges that it
understands that the answers to this Questionnaire are furnished
for use in connection with Registration Statements filed pursuant
to the Agreement and any amendments or supplements thereto filed
with the Commission pursuant to the Securities Act.
The
undersigned hereby acknowledges and is advised of the following
Interpretation A.65 of the July 1997 SEC Manual of Publicly
Available Telephone Interpretations regarding short
selling:
“An Issuer filed a Form S-3 registration statement for a
secondary offering of common stock which is not yet effective. One
of the selling stockholders wanted to do a short sale of common
stock “against the box” and cover the short sale with
registered shares after the effective date. The issuer was advised
that the short sale could not be made before the registration
statement become effective, because the shares underlying the short
sale are deemed to be sold at the time such sale is made. There
would, therefore, be a violation of Section 5 if the shares were
effectively sold prior to the effective date.”
By
returning this Questionnaire, the undersigned will be deemed to be
aware of the foregoing interpretation.
I
confirm that, to the best of my knowledge and belief, the foregoing
statements (including without limitation the answers to this
Questionnaire) are correct.
IN
WITNESS WHEREOF the undersigned, by authority duly given, has
caused this Questionnaire to be executed and delivered either in
person or by its duly authorized agent.
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Dated:_________________________
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Beneficial
Owner: _______________
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By:__________________________
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Name:
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Title:
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