Exhibit 10.1
INVESTMENTAGREEMENT
INVESTMENTAGREEMENT(this“AGREEMENT”),datedasofJuly 16,2014byandbetweenENERGIEHOLDINGS,INC.,aDelawarecorporation(the“Company”),andDutchessOpportunityFund,II, LP, a DelawareLimitedPartnership(the“Investor”).
WHEREAS,theparties desirethat,uponthetermsandsubject tothe conditionscontained herein,theInvestorshallinvestuptofivemilliondollars($5,000,000)topurchasetheCompany'sCommonStockwith$.0001parvaluepershare(the“CommonStock”);
WHEREAS,suchinvestmentswillbemadeinrelianceupontheprovisionsofSection4(2) undertheSecuritiesActof1933, asamended(the“1933Act”),Rule506ofRegulationD, andtherules andregulations promulgatedthereunder, and/or upon suchother exemptionfromtheregistrationrequirementsofthe 1933Act as May be availablewithrespect to any or alloftheinvestmentsinCommonStock to bemade hereunder; and
WHEREAS,contemporaneouslywiththeexecutionanddelivery ofthisAgreement, theparties heretoareexecutinganddeliveringaRegistrationRightsAgreementsubstantiallyintheform attachedhereto (the“RegistrationRightsAgreement”)pursuanttowhichtheCompanyhas agreedtoprovidecertainregistrationrightsunderthe1933Act,andtherulesandregulations promulgatedthereunder, and applicable statesecuritieslaws.
NOWTHEREFORE,inconsiderationoftheforegoingrecitals,whichshallbeconsideredanintegralpartofthisAgreement,the covenantsandagreementssetforthhereafter,andothergood andvaluableconsideration, thereceiptand sufficiencyofwhichishereby acknowledged,theCompanyandtheInvestorherebyagreeasfollows:
SECTION1.DEFINITIONS.
AsusedinthisAgreement,thefollowingtermsshall havethefollowingmeanings specifiedorindicatedbelow,andsuch meaningsshall beequallyapplicable to thesingularand pluralformsofsuchdefinedterms.
“1933Act” shall havethemeaningsetforthintherecitalsofthisAgreement.
“1934Act” shallmeanthe SecuritiesExchangeActof1934,asitmaybeamended.
“AAA”shall havethe meaningspecifiedin Section11.
“Affiliate” shall havethemeaningspecifiedin Section5(H).
“Agreement”shallmeanthis InvestmentAgreement.
“ArticlesofIncorporation”shall havethemeaningspecifiedin Section4(C).
“By-laws”shall havethemeaningspecifiedin Section4(C).
“Closing” shall havethemeaningspecifiedin Section2(E).
“ClosingDate” shall havethemeaning specifiedin Section2(E).
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“CommonStock” shall havethe meaning setforth in therecitalsofthisAgreement.
“Company”shall havethemeaningsetforthinthe preambleofthisAgreement.
“Control” or“Controls”shall havethe meaning specifiedin Section5(H).
“DTC”shall havethemeaningspecifiedin Section2(E).
“DWAC” shall havethemeaningspecifiedin Section2(E).
“EffectiveDate”shallmeanthedatetheSECdeclareseffectiveunderthe1933Actthe
RegistrationStatementcoveringtheSecurities.
“EquityLineTransactionDocuments”shallmeanthisAgreementandtheRegistration
RightsAgreement.
“FAST”shall havethemeaningspecifiedin Section2(E).
“Fee Shares” shall havethemeaningspecifiedin Section11.
“Indemnities” shall havethe meaningspecifiedin Section10.
“Indemnified Liabilities”shall havethe meaning specifiedin Section10.
“Indemnitor” shall havethe meaningspecifiedin Section10.
“Investor” shall havethemeaningindicatedin thepreambleofthisAgreement.
“MaterialAdverseEffect” shall havethemeaningspecifiedin Section4(A).
“MaximumCommonStockIssuance” shall havethe meaningspecifiedin Section 2(F).
“MinimumAcceptablePrice”withrespecttoanyPutNoticeDateshallbetheprice defined bytheCompanyintheapplicable Put Notice.
“OpenMarketAdjustmentAmount”shall havethemeaningspecifiedin Section2(G).
“OpenMarketSharePurchase” shall havethemeaningspecifiedin Section2(G).
“OpenPeriod”shallmeantheperiodbeginningonandincludingtheTradingDayimmediatelyfollowingtheEffectiveDateandendingontheearliertooccurof(i)thedatewhichisthirty-six(36)monthsfromtheEffectiveDate;or(ii)terminationoftheAgreementin accordancewith Section9,below.
“PricingPeriod”shallmeanthefive(5)consecutiveTradingDaysbeginningonthePutNoticeDateandending onandincludingthedatethatisfour(4)TradingDaysaftersuchPutNoticeDate.
“PrincipalMarket”shallmeantheNasdaqCapitalMarket,theNYSEAmex,theNewYorkStockExchange, theNasdaqGlobalMarket,theNasdaqGlobalSelectMarketor theOTCBulletinBoard,whicheveristheprincipalmarketonwhichtheCommonStockis listed.
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“Prospectus”shallmeantheprospectus,preliminaryprospectusandsupplemental prospectususedin connectionwiththeRegistrationStatement.
“PurchaseAmount”shallmeanthetotalamountbeingpaidbytheInvestorona
particularClosingDate to purchasethe Securities.
“PurchasePrice”shallmeanninety-fourpercent(94%)ofthelowestdailyVWAP(as defined herein)oftheCommonStockduring thePricingPeriod.
“Put” shall havethemeaningsetforthin Section2(B)hereof.
“PutAmount” shall havethemeaningsetforth inSection2(B)hereof.
“PutNotice”shallmean awrittennoticeintheformattachedheretoasExhibitC,senttotheInvestorby theCompanystatingthePutAmountinU.S.dollarstheCompanyintendstoselltotheInvestorpursuanttothe termsoftheAgreementandstating thecurrentnumberofSharesissued and outstandingon suchdate.
“PutNoticeDate”shallmeanthe TradingDay,assetforthbelow,immediatelyfollowingtheday onwhichthe InvestorreceivesaPutNotice,howeveraPutNoticeshallbedeemed deliveredon (a)theTradingDayitis receivedbyfacsimile oremail bytheInvestorifsuchnoticeisreceivedpriortonoonEasternTime,or (b) theimmediatelysucceedingTradingDayifitisreceivedbyfacsimileorotherwiseafternoonEasternTimeonaTradingDay.NoPutNoticemaybedeemeddeliveredonadaythatisnotaTradingDay.
“PutRestriction”shallmeanthedaysduringthePricingPeriod.Duringthistime,the
Companyshall notbeentitled todeliveranotherPutNotice.
“PutShares Due”shallhavethe meaning specified inSection2(G).
“RegistrationRightsAgreement”shallhavethemeaningsetforthintherecitalsofthis
Agreement.
“RegistrationStatement”meanstheregistrationstatementoftheCompanyfiledunder
the1933Act coveringtheresale bytheInvestoroftheCommonStockissuable hereunder.
“RelatedParty”shall havethemeaning specifiedin Section5(H).
“Resolutions” shall havethemeaningspecifiedin Section7(E).
“SEC”shallmeantheU.S.Securities &ExchangeCommission.
“SECDocuments” shallhavethe meaningspecifiedin Section4(F).
“Securities”shallmeanthesharesofCommonStockissuedpursuanttothetermsofthe
Agreement.
“Shares” shallmeanthesharesoftheCompany’sCommonStock.
“Subsequent Purchasers”shall havethemeaningspecifiedin Section2(G).
“Subsidiaries”shall havethemeaningspecifiedinSection4(A).
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“TradingDay”shallmeananydayonwhichthePrincipalMarketfortheCommonStock
isopenfortrading,fromthehoursof9:30amuntil 4:00pm BostonTime.
“VWAP”shallmeanthe volumeweightedaverage priceduringaTradingDay.
SECTION2.PURCHASEANDSALEOFCOMMONSTOCK.
(A)PURCHASEANDSALEOFCOMMONSTOCK.Subjecttothe termsand conditionssetforthherein,theCompanymayissueandsell totheInvestor,andtheInvestor shallpurchase fromtheCompany,up to thatnumberofShareshavinganaggregatePurchasePriceoffivemilliondollars($5,000,000).
(B)DELIVERY OFPUTNOTICES.Subjecttothe termsandconditionsoftheEquity LineTransactionDocuments,andfromtimetotimeduringthe OpenPeriod,theCompanymay,initssolediscretion,deliveraPutNoticetotheInvestorwhich statesthe dollaramount(designatedinU.S.Dollars) (the“PutAmount”)ofShareswhichtheCompanyintendsto selltotheInvestoronaClosingDate(the“Put”).ThePutAmountshallbeequal touptoeither1)two hundredpercent(200%) oftheaveragedailyvolume(U.S.market only)oftheCommonStockforthethree(3) TradingDays priortothe applicablePutNoticeDate,multiplied bythe averageofthethree(3)dailyclosingpricesimmediatelyprecedingthePutDateor2)onehundredthousanddollars($100,000).DuringtheOpenPeriod,theCompany shallnotbeentitledto submitaPutNoticeuntilthePricingPeriodforthepriorPuthasbeencompleted.TheCommonStockidentifiedinthePutNoticeshallbepurchasedforapriceequaltothe PurchasePrice.
(C)COMPANY’SRIGHTTOSUSPEND.OneachPutNoticesubmittedtotheInvestorby theCompany,theCompany shallhavetheoptiontospecifyaSuspensionPrice forthatPut.IntheeventtheCommonStock fallsbelowtheSuspensionPrice,thePutshallbetemporarily suspended.ThePutshall resumeatsuchtimeastheCommonStockisabovetheSuspensionPrice, providedthe datesforthePricingPeriodforthat particularPut arestillvalid.IntheeventthePricingPeriodhasbeencomplete, any sharesabovetheSuspensionPriceduetotheInvestorshallbesoldtotheInvestor bytheCompanyattheSuspensionPrice underthetermsofthisAgreement.TheSuspensionPriceforaPutmay notbechangedbytheCompany once submittedtotheInvestor.
(D)CONDITIONS TOINVESTOR'SOBLIGATIONTOPURCHASESHARES.Notwithstandinganythingtothecontrary inthis Agreement,theCompanyshall notbeentitled to deliveraPutNoticeandtheInvestor shallnotbeobligatedtopurchaseanySharesataClosing unless eachofthefollowingconditionsaresatisfied:
(1) aRegistrationStatementshallhavebeendeclaredeffectiveandshallremaineffectiveandavailable for theresaleofalltheRegistrableSecurities(asdefinedintheRegistrationRightsAgreement)atalltimesuntiltheClosingwithrespecttothesubjectPutNotice;
(2)atalltimesduringtheperiodbeginningontherelatedPutNoticeDate and endingonand includingtherelatedClosingDate,theCommonStockshall have beenlisted onthePrincipalMarketandshall nothavebeensuspendedfromtradingthereonforaperiodoftwo(2) consecutiveTradingDays duringtheOpenPeriodandtheCompanyshallnot have beennotifiedof anypendingorthreatened proceedingorotheractiontosuspendthetradingoftheCommonStock;
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(3)theCompanyhascompliedwithitsobligationsandisotherwisenotin breachoforindefaultunderthisAgreement, theRegistrationRightsAgreementor any other agreementexecutedinconnectionherewithwhichhasnotbeencuredpriortodeliveryofthePutNotice;
(4)noinjunctionshall havebeenissuedand remaininforce,oraction commencedby agovernmentalauthoritywhichhasnotbeenstayedorabandoned,prohibitingthepurchaseortheissuanceoftheSecurities;and
(5)theissuanceoftheSecuritiespursuantto thisAgreementwill notviolate anyshareholderapprovalrequirementsofthePrincipalMarket.
Ifany oftheeventsdescribedinclauses(1)through(5)aboveoccursduringaPricingPeriod,thentheInvestorshallhavenoobligationtopurchasetheCommonStocksubjecttothe applicable PutNotice.
(E)MECHANICSOFPURCHASEOFSHARESBYINVESTOR.The closingofthe purchasebytheInvestorofShares(a“Closing”)shalloccuronthedatewhichisnolaterthanfive(5)TradingDaysfollowingtheapplicablePutNoticeDate(eacha“ClosingDate”).OneachClosingDate,(I)theCompany shalldelivertotheInvestorpursuanttothisAgreement, certificatesrepresentingtheSharestobeissuedtotheInvestoronsuch dateandregisteredinthenameoftheInvestor;and(II)theInvestorshalldelivertotheCompanythePurchasePricetobepaid forsuchShares,basedon thePutAmountsetforthinSection2(B).Inlieuof deliveringphysicalcertificatesrepresentingtheSecuritiesandprovidedthattheCompany'stransferagentthenisparticipatinginTheDepositoryTrustCompany(“DTC”)FastAutomatedSecuritiesTransfer(“FAST”)program,uponrequestoftheInvestor,theCompany shalluseall commerciallyreasonableeffortstocauseitstransferagenttoelectronicallytransmittheSecuritiesbycreditingtheaccountoftheInvestor'sprimebroker(asspecifiedbytheInvestorwithinareasonableperiodinadvanceoftheInvestor's notice)withDTC throughitsDepositWithdrawalAgentCommission (“DWAC”) system.
TheCompany understandsthatadelayintheissuanceofSecuritiesbeyondtheClosingDatecouldresultineconomicdamage to theInvestor.After theEffectiveDate,as compensationtotheInvestorforsuchloss,theCompany agreestomakepaymentstotheInvestorforlateissuanceofSecurities(deliveryofSecuritiesaftertheapplicableClosing Date)in accordancewiththefollowing schedule(where“No.ofDaysLate”isdefined asthenumberoftradingdaysbeyondtheClosingDate,withtheAmounts beingcumulative.):
LATEPAYMENTFOREACHNO.OFDAYS LATE
| 1 | $100 |
| 2 | $200 |
| 3 | $300 |
| 4 | $400 |
| 5 | $500 |
| 6 | $600 |
| 7 | $700 |
| 8 | $800 |
| 9 | $900 |
| 10 | $1000 |
| Over10 | $1,000+$200foreachBusiness |
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Daylatebeyond 10days
TheCompany shallmakeany paymentsincurredunderthisSectioninimmediately available fundsupondemandbytheInvestor.NothinghereinshalllimittheInvestor'srightto pursueactualdamagesfortheCompany'sfailuretoissueanddelivertheSecuritiestotheInvestor,exceptthatsuchlatepaymentsshalloffsetanysuch actual damagesincurred bytheInvestor, andanyOpen MarketAdjustmentAmount, assetforthbelow.
(F)OVERALLLIMITONCOMMONSTOCKISSUABLE.Notwithstandinganything containedherein tothe contrary,ifduringtheOpenPeriodtheCompanybecomeslistedonan exchangethatlimitsthenumberof sharesofCommonStockthatmay beissuedwithout shareholderapproval,thenthenumberofSharesissuableby theCompany andpurchasablebythe Investor,shallnotexceedthatnumberofthe sharesofCommonStockthatmaybeissuablewithoutshareholderapproval (the“MaximumCommonStockIssuance”).If suchissuanceof sharesofCommonStockcouldcauseadelistingon thePrincipalMarket,thentheMaximumCommonStockIssuanceshallfirstbeapprovedby theCompany'sshareholdersinaccordancewithapplicablelaw and theBy-lawsandArticlesofIncorporationoftheCompany,asamended.Theparties understand andagreethattheCompany'sfailuretoseekorobtainsuch shareholderapprovalshallinnoway adverselyaffectthevalidity and dueauthorizationoftheissuanceandsaleofSecuritiesor theInvestor'sobligationinaccordancewiththetermsand conditionshereoftopurchaseanumberofSharesintheaggregate uptotheMaximumCommonStockIssuancelimitation, andthat such approval pertains onlytothe applicabilityoftheMaximumCommonStock Issuancelimitationprovided in thisSection2(H).
(G)OPENMARKETADJUSTMENT.If,bythethird(3rd)businessdayafteraClosingDate,theCompanyfailstodeliver anyportionoftheSecuritiessubjecttoaPutNoticetotheInvestor(the“PutSharesDue”)andtheInvestorpurchases,inanopenmarkettransactionorotherwise, sharesofCommonStock necessarytomakedeliverybytheInvestorofsharesinrespectofsalesto subsequentpurchasers,pursuant totransactions enteredinto beforetheClosingDate(“SubsequentPurchasers”),which such shares ofCommonStockwouldhavebeendeliveredtotheInvestorbytheCompany butfor theCompany’sfailuretoso deliver(the“OpenMarketSharePurchase”),thentheCompany shallpay totheInvestor,in additiontoany otheramountsduetoInvestorpursuanttothePut,andnotinlieuthereof,theOpenMarketAdjustmentAmount (asdefinedbelow).The“OpenMarketAdjustmentAmount”istheamountequalto theexcess,ifany,of(x)the Investor's total purchaseprice (including brokerage commissions,ifany)forthe OpenMarketSharePurchase minus (y)thenet proceeds(afterbrokeragecommissions,ifany)receivedbytheInvestor from thesaleof thePutSharesDuetosuchSubsequentPurchasers. TheCompany shall paytheOpenMarketAdjustmentAmounttotheInvestorinimmediatelyavailablefundswithinfive(5) businessdaysofwrittendemandbytheInvestor.Bywayofillustrationand notinlimitationoftheforegoing,iftheInvestorpurchases sharesofCommonStock havingatotal purchase price(including brokeragecommissions)of$11,000 tocoveranOpenMarketSharePurchasewithrespectto sharesofCommonStockit soldtoSubsequentPurchasersfornetproceedsof$10,000,theOpenMarketAdjustmentAmountwhichtheCompanywillberequiredto pay totheInvestorwill be$1,000.
(H)LIMITATIONONAMOUNTOFOWNERSHIP.Notwithstandinganythingto the contraryinthisAgreement,innoeventshalltheInvestorbeentitledtopurchasethatnumberofShares,whichwhenaddedtothe sumofthe numberof sharesofCommonStockbeneficially
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owned(assuchtermisdefinedunderSection13(d)andRule13d-3ofthe1934Act),bytheInvestor,would exceed4.99%of the numberofsharesofCommonStockoutstandingontheClosingDate, asdetermined inaccordancewith Rule 13d-1(j)ofthe1934Act.
SECTION3.INVESTOR'SREPRESENTATIONS,WARRANTIESANDCOVENANTS.The
InvestorrepresentsandwarrantstotheCompany,and covenants,that:
(A)SOPHISTICATEDINVESTOR.TheInvestorhas,byreasonofitsbusinessandfinancial experience,suchknowledge,sophisticationandexperienceinfinancial andbusinessmattersandinmakinginvestmentdecisionsofthistypethatitiscapableof(1)evaluatingthemeritsandrisksofaninvestmentintheSecuritiesandmakinganinformedinvestment decision;(2)protectingitsowninterest;and(3)bearingtheeconomicriskofsuchinvestmentforanindefiniteperiodoftime.
(B)AUTHORIZATION;ENFORCEMENT. TheInvestorhas therequisitepowerand authoritytoenterintoandperformthisAgreementandtheRegistrationRightsAgreement.The executionanddeliveryoftheEquityLineTransactionDocumentsbytheInvestorand the consummationbyitofthetransactions contemplatedhereby andthereby havebeenduly andvalidly authorizedbytheInvestor'sgeneralpartnersandnofurtherconsentorauthorizationisrequiredbyitspartners.ThisAgreementhasbeenduly andvalidly authorized,executedand deliveredonbehalfoftheInvestorandisavalid andbindingagreementoftheInvestor enforceableagainsttheInvestorinaccordancewithitsterms,subjectastoenforceability togeneralprinciplesofequity andtoapplicablebankruptcy,insolvency,reorganization,moratorium,liquidation and othersimilarlaws relatingto,oraffecting generally, the enforcementofapplicable creditors'rights andremedies.
(C)SECTION9OFTHE1934ACT.DuringthetermofthisAgreement,theInvestorwillcomplywiththeprovisionsofSection9ofthe 1934Act,andtherulespromulgatedthereunder,withrespecttotransactionsinvolvingtheCommonStock.TheInvestoragreesnottoselltheCompany'sstockshort,eitherdirectlyorindirectlythroughitsaffiliates,principalsor advisors,theCompany'scommonstockduring thetermofthisAgreement.
(D)ACCREDITEDINVESTOR.Investorisan“AccreditedInvestor”asthattermis
defined inRule 501(a)ofRegulationDofthe1933 Act.
(E)NOCONFLICTS.Theexecution,delivery andperformanceofthe TransactionDocumentsbytheInvestorandtheconsummationbytheInvestorofthetransactions contemplatedherebyandtherebywillnot(1)resultinaviolationofthepartnershipagreement orotherorganizational documentsoftheInvestor,(2) conflictwith,or constitute amaterial default (or aneventwhichwithnotice orlapseof timeorbothwouldbecomeamaterialdefault) under, orgivetoothersanyrightsoftermination, amendment, acceleration orcancellationof, anymaterialagreement,contract,indenturemortgage,indebtednessorinstrument towhichtheInvestorisa party,ortothe Investor’sknowledgeresultin aviolation ofany law,rule,regulation, order,judgmentordecree(includingUnitedStatesfederalandstate securitieslawsandregulations)applicabletotheInvestororbywhichany property orassetof theInvestorisbound oraffected.
(F)NOVIOLATIONS.ExceptasdisclosedinSchedule3(f),theInvestorisnotinviolationofany termof, orindefaultunder,thepartnershipagreementofotherorganizational documentsoftheInvestororanymaterialcontract,agreement, mortgage,indebtedness,indenture,instrument,judgment,decreeororderorany statute,ruleorregulationapplicableto
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the Investor,exceptforconflicts,defaults, terminations,amendments,accelerations, cancellationsandviolationsthatwouldnot,individually orintheaggregate,constituteorreasonably beexpectedtoconstituteamaterialadverseeffectonthe Investor.ThebusinessoftheInvestorisnotbeingconducted,and shallnotbeconducted,inviolationofanylaw,statute, ordinance, rule,orderor regulationofanygovernmentalauthority oragency,regulatory or self-regulatoryagency,orcourt,exceptforviolationsthesanctionsforwhicheither,individually orintheaggregate,wouldnothaveor reasonablybeexpectedtohaveamaterialadverseeffectontheInvestor.ExceptasspecificallycontemplatedbythisAgreement andasrequiredunderthe
1933Actoranysecuritieslawsofanystates,totheInvestor’sknowledge,theInvestorisnot
required toobtainanyconsent,authorization,permitororderof,ormakeanyfilingorregistration(exceptthefilingofaregistrationstatementasoutlinedintheRegistrationRightsAgreement)with,anycourt,governmentalauthority oragency, regulatory orself-regulatory agency orotherthirdpartyinorderforittoexecute,deliverorperform any ofitsobligations under,orcontemplatedby,theEquityLineTransactionDocumentsin accordancewiththetermshereoforthereof except forthoseconsents,authorizations,permits,ordersorfilingsas have been obtained or effected on or priortothedate hereof and areinfullforce andeffect asofthedatehereof.ExceptasdisclosedinSchedule3(f),the Investorisunawareofanyfactsor circumstanceswhichmightgiveriseto anyviolation or default setforth inthisSection3(F).
(G)OPPORTUNITYTODISCUSS. TheInvestorhasreceivedallmaterials relatingtotheCompany'sbusiness,financeandoperationswhichithasrequested.TheInvestorhashad anopportunitytodiscussthebusiness,managementandfinancialaffairsoftheCompanywiththeCompany'smanagement.
(H)INVESTMENTPURPOSES.TheInvestorispurchasingtheSecuritiesforitsown accountforinvestmentpurposesandnotwithaviewtowardsdistributionandagrees toresellor otherwisedisposeoftheSecuritiessolelyinaccordancewiththeregistrationprovisionsofthe
1933Act(orpursuanttoanexemptionfromsuchregistrationprovisions).
(I)NOREGISTRATIONASADEALER.TheInvestorisnotandwillnotberequiredtoberegisteredasa“dealer”underthe1934Act,eitherasaresultofitsexecutionand performanceofitsobligationsunderthisAgreementorotherwise.
(J)GOODSTANDING.TheInvestorisaLimitedPartnership,duly organized,validlyexistingand ingoodstandinginthestateofDelaware.
(K)TAXLIABILITIES. TheInvestorunderstandsthatitisliable foritsowntaxliabilities.
SECTION4.REPRESENTATIONSANDWARRANTIESOFTHECOMPANY.ExceptassetforthintheSchedulesattachedhereto, orasdisclosedintheCompany'sSECDocuments,theCompanyrepresents andwarrantstotheInvestorthat:
(A)ORGANIZATIONANDQUALIFICATION.TheCompanyisacorporationduly organizedandvalidlyexistingingoodstandingunderthelawsoftheStateofDelaware,USA andhas therequisitecorporate powerandauthorizationtoownitspropertiesandtocarryonits businessasnow being conducted.BoththeCompany andthecompaniesitownsorcontrols(“Subsidiaries”)aredulyqualified to dobusiness and are ingoodstanding ineveryjurisdictioninwhichitsownershipof property orthenature ofthebusinessconductedbyitmakessuchqualificationnecessary,excepttotheextentthatthefailureto besoqualifiedorbeingood standingwould nothave aMaterialAdverseEffect.As usedinthisAgreement, “Material
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AdverseEffect”means any materialadverseeffecton(1)theproperties,assets,operations,resultsofoperations,orfinancialconditionoftheCompany anditsSubsidiaries,ifany,takenas awhole,(2)thetransactionscontemplatedhereby orbytheagreements andinstrumentstobe enteredintoinconnectionherewith,or(3)theauthority orability oftheCompanytoperformits obligationsundertheEquityLineTransactionDocumentsotherthanasaresultof(a)changes adverselyaffectingtheUnitedStateseconomy (solongastheCompanyisnot disproportionately affectedthereby),(b)changesadverselyaffectingtheindustryinwhichtheCompany operates(solongastheCompanyisnotdisproportionately affectedthereby),(c) the announcementorconsummationofthetransactionscontemplated bythisAgreement,and(d) changesinthemarket priceoftheCommonStock.
(B)AUTHORIZATION;ENFORCEMENT;COMPLIANCEWITHOTHERINSTRUMENTS.
(1)TheCompanyhastherequisitecorporatepowerandauthoritytoenterintoandperform theEquity LineTransactionDocuments,andtoperformitsobligations contemplated herebyandthereby.
(2)Theexecutionanddelivery oftheEquity Line TransactionDocumentsbytheCompany andthe consummationbyitofthetransactions contemplatedherebyandthereby,includingwithoutlimitationthereservationforissuanceandtheissuanceoftheSecurities pursuanttothisAgreement,havebeendulyandvalidlyauthorizedbytheCompany'sBoardofDirectorsandnofurtherconsentorauthorizationisrequiredbytheCompany,itsBoardofDirectors,oritsshareholders.
(3)TheEquityLineTransactionDocumentshavebeendulyandvalidly executedand deliveredbytheCompany.
(4)TheEquity LineTransactionDocumentsconstitutethevalidandbinding obligationsoftheCompanyenforceableagainsttheCompanyinaccordancewiththeirterms, exceptassuchenforceabilitymaybelimitedbygeneralprinciplesofequity orapplicable bankruptcy,insolvency,reorganization,moratorium,liquidationorsimilarlawsrelatingto,oraffectinggenerally,theenforcementofcreditors'rights andremedies.
(C)CAPITALIZATION.Asofthedatehereof,theauthorizedcapitalstockoftheCompany consistsof250,000,000sharesofCommonStockwith$.0001parvaluepershare,of asofJuly15,2014,51,400,000shareswereissuedandoutstanding.ExceptasdisclosedintheCompany’spubliclyavailablefilingswith theSEC:(1)no sharesoftheCompany'scapital stockare subjecttopreemptiverights orany othersimilarrightsoranyliensorencumbrances sufferedorpermittedbytheCompany;(2)thereare nooutstandingdebtsecurities;(3)thereare nooutstandingsharesofcapital stock,options,warrants,scrip,rightstosubscribe to,callsor commitmentsofanycharacterwhatsoeverrelatingto,or securitiesorrightsconvertible into,any sharesofcapitalstockoftheCompany oranyofitsSubsidiaries,orcontracts,commitments, understandingsorarrangementsbywhichtheCompany oranyofitsSubsidiariesisormay becomeboundtoissueadditionalsharesof capitalstockoftheCompany oranyofitsSubsidiariesoroptions,warrants,scrip,rightstosubscribe to,callsorcommitmentsofany characterwhatsoeverrelating to,orsecuritiesorrights convertibleinto,any sharesofcapital stockoftheCompany orany ofitsSubsidiaries; (4)therearenoagreementsorarrangements underwhichtheCompany orany ofitsSubsidiariesisobligatedtoregisterthe saleof anyoftheirsecuritiesunderthe 1933Act(excepttheRegistrationRightsAgreement);(5)thereareno outstanding securitiesoftheCompany or anyofitsSubsidiarieswhich contain anyredemption
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orsimilarprovisions,andthere areno contracts,commitments,understandingsor arrangements bywhichtheCompanyoranyofitsSubsidiariesis ormay becomeboundtoredeemasecurity oftheCompany oranyofitsSubsidiaries;(6)there arenosecuritiesorinstrumentscontaininganti-dilutionorsimilarprovisionsthatwillbetriggeredby theissuanceoftheSecuritiesasdescribedinthisAgreement;(7) theCompany doesnothaveanystock appreciationrightsor“phantomstock”plansoragreementsoranysimilarplanoragreement; and(8)thereisnodispute astotheclassificationofanysharesoftheCompany'scapitalstock.
TheCompany hasfurnishedtotheInvestor,ortheInvestorhashadaccessthroughtheSEC’sEDGARwebsiteto,trueandcorrect copiesoftheCompany's ArticlesofIncorporation, as amendedandineffectonthedatehereof(the“ArticlesofIncorporation”),andtheCompany'sBy-laws,asineffectonthe date hereof(the“By-laws”),andthetermsofallsecurities convertibleintoorexercisableforCommonStockandthematerialrightsoftheholdersthereofinrespectthereto.
(D)ISSUANCEOFSHARES.TheCompanyhasreserved5,000,000SharesforissuancepursuanttothisAgreement,whichhavebeendulyauthorizedandreservedforissuance(subject toadjustment pursuant totheCompany'scovenantsetforthinSection5(F) below)pursuant tothisAgreement.UponissuanceinaccordancewiththisAgreement, theSecuritieswillbevalidlyissued,fully paid forand non-assessableandfreefromalltaxes,liens andchargeswithrespecttotheissue thereof. IntheeventtheCompany cannotregistera sufficientnumberofSharesforissuance pursuant tothisAgreement,theCompanywilluseits besteffortstoauthorizeandreserveforissuancethe numberofSharesrequiredfortheCompanyto performitsobligations hereunder assoon asreasonablypracticable.
(E)NOCONFLICTS.Theexecution,deliveryandperformanceoftheEquityLineTransactionDocumentsbytheCompanyandtheconsummationbytheCompanyofthetransactionscontemplated hereby andtherebywillnot(I)resultinaviolationoftheArticlesofIncorporation,anyCertificateofDesignations,PreferencesandRightsofany outstandingseriesofpreferred stockoftheCompany or theBy-laws;or (II)conflictwith,orconstitutea material default (or aneventwhichwithnoticeorlapseof timeorbothwouldbecomeamaterialdefault) under,orgivetoothersanyrightsoftermination,amendment,acceleration orcancellationof, anymaterialagreement,contract,indenturemortgage,indebtednessorinstrument towhichtheCompany or any ofitsSubsidiariesis a party, ortotheCompany's knowledgeresultin aviolationofanylaw,rule,regulation,order,judgmentordecree(includingUnitedStatesfederal and state securitieslawsandregulations andtherules andregulationsofthePrincipalMarket or principal securities exchange ortradingmarket onwhichtheCommonStockistraded orlisted)applicabletotheCompany oranyofitsSubsidiariesorbywhichany propertyorassetoftheCompany oranyofitsSubsidiariesisbound oraffected.ExceptasdisclosedinSchedule
4(e), neithertheCompany noritsSubsidiariesisinviolation ofanytermof,orindefault under,theArticlesofIncorporation, anyCertificateofDesignations,Preferences andRightsofany outstanding seriesofpreferred stockoftheCompany ortheBy-laws ortheir organizational charterorby-laws,respectively,orany contract,agreement, mortgage,indebtedness,indenture,instrument,judgment, decreeororder orany statute,ruleorregulation applicabletotheCompany oritsSubsidiaries, exceptforpossible conflicts,defaults,terminations, amendments, accelerations, cancellations andviolationsthatwouldnotindividually orinthe aggregate haveorconstitute aMaterialAdverseEffect.ThebusinessoftheCompany anditsSubsidiariesisnot beingconducted, andshall notbeconducted,inviolationofanylaw, statute, ordinance,rule,orderor regulationofanygovernmental authority oragency,regulatory or self-regulatoryagency, or court, exceptforpossibleviolationsthesanctionsforwhich eitherindividually orintheaggregatewould not have aMaterialAdverseEffect.Except as specifically
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contemplatedbythisAgreementandasrequired underthe1933Actoranysecuritieslawsof any states,totheCompany'sknowledge, theCompanyisnotrequiredtoobtainany consent, authorization,permitororderof,or makeanyfilingorregistration(exceptthefilingofaregistrationstatementasoutlinedintheRegistrationRightsAgreementbetweentheParties)with,anycourt, governmentalauthorityoragency,regulatoryorself-regulatoryagency orotherthirdpartyinorder forittoexecute,deliverorperformanyofits obligationsunder,or contemplatedby,theEquity LineTransactionDocumentsinaccordancewiththeterms hereof or thereof.All consents,authorizations,permits,orders,filings andregistrationswhichtheCompanyisrequiredto obtainpursuant tothe precedingsentencehavebeenobtainedoreffected on or priortothe date hereofand areinfullforce andeffect as ofthe date hereof.Except as disclosedinSchedule 4(e),theCompany anditsSubsidiaries are unawareof anyfactsorcircumstanceswhichmightgiverisetoanyviolationordefaultofany oftheforegoing.TheCompanyisnot,andwillnotbe,inviolationofthelistingrequirementsofthePrincipalMarketasineffecton thedatehereofandon eachoftheClosingDates andisnotawareof anyfactswhichwouldreasonablyleadtodelistingoftheCommonStockbythePrincipalMarketintheforeseeablefuture.
(F)SECDOCUMENTS;FINANCIALSTATEMENTS.Asofthe datehereof,theCompanyhasfiledallreports,schedules,forms,statementsandotherdocumentsrequiredto befiledbyitwiththeSECpursuanttothereportingrequirementsofthe1934Act(alloftheforegoingfiledpriorto thedatehereofandall exhibitsincluded thereinandfinancial statements and schedulesthereto and documentsincorporated byreferencetherein beinghereinafterreferredtoasthe"SECDocuments").TheCompany hasdeliveredtotheInvestororitsrepresentatives,orthey have hadaccessthroughtheSEC’sEDGARwebsiteto,trueand completecopiesoftheSECDocuments.Asoftheirrespectivefilingdates,theSECDocuments compliedinallmaterial respectswiththerequirementsofthe 1934ActandtherulesandregulationsoftheSECpromulgatedthereunderapplicabletotheSECDocuments,andnoneoftheSECDocuments, atthetimetheywerefiledwiththeSEC, contained any untrue statementof a materialfactoromittedtostatea materialfactrequired tobestated thereinornecessarytomake thestatementstherein,inlightofthe circumstancesunderwhichtheyweremade,notmisleading.Asoftheirrespective dates,thefinancial statementsoftheCompanyincluded in theSECDocumentscompliedastoforminallmaterialrespectswithapplicableaccountingrequirementsandthepublishedrulesandregulationsoftheSECwithrespect thereto.Suchfinancialstatementshavebeenpreparedinaccordancewith generallyaccepted accounting principles,andaudited by afirm thatisamemberamemberof thePublicCompaniesAccountingOversightBoard("PCAOB")consistently applied,duringtheperiodsinvolved(except(I) asmay beotherwiseindicatedinsuchfinancial statementsorthenotesthereto,or(II)inthecaseofunauditedinterimstatements,totheextenttheymayexcludefootnotesormay becondensed orsummarystatements)andfairly presentinallmaterialrespectsthefinancial positionoftheCompany asofthedatesthereofandtheresultsofitsoperationsandcashflowsfortheperiodsthen ended(subject,inthecase ofunauditedstatements,tonormalyear-end auditadjustments).Nootherwritteninformationprovidedby oronbehalfoftheCompanytotheInvestorwhichisnotincludedin theSECDocuments,including,withoutlimitation,informationreferred to inSection 4(D)ofthisAgreement,contains anyuntruestatementofamaterialfactor omitstostate anymaterialfactnecessarytomakethestatementstherein,inthelightofthe circumstance underwhichtheyareorwere made, notmisleading.NeithertheCompanynoranyofitsSubsidiariesorany oftheirofficers,directors,employeesoragentshaveprovidedtheInvestorwithany material,nonpublicinformationwhichwasnotpubliclydisclosedpriorto the datehereofandanymaterial,nonpublicinformationprovidedtotheInvestorbytheCompanyoritsSubsidiariesorany oftheirofficers,directors, employeesoragentspriortoanyClosingDate shall bepubliclydisclosed bytheCompanypriorto suchClosingDate.
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(G)ABSENCEOFCERTAINCHANGES.Exceptas otherwisesetforthintheSECDocuments,theCompanydoesnotintendtochangethebusinessoperationsoftheCompanyinanymaterialway.TheCompany hasnottakenany steps,anddoesnotcurrently expecttotakeanysteps,toseekprotectionpursuanttoanybankruptcylaw nordoestheCompany oritsSubsidiarieshaveanyknowledge orreasontobelievethatitscreditorsintendtoinitiateinvoluntarybankruptcyproceedings.
(H)ABSENCEOFLITIGATIONAND/ORREGULATORYPROCEEDINGS.Exceptas setforthintheSECDocuments,thereisnoaction,suit,proceeding,inquiry orinvestigation beforeorby any court,public board,governmentagency,self-regulatory organizationorbody pendingor,totheknowledgeoftheexecutiveofficersofCompany oranyofitsSubsidiaries,threatenedagainstoraffectingtheCompany,theCommonStockorany oftheCompany'sSubsidiariesoranyoftheCompany'sortheCompany'sSubsidiaries'officersordirectorsintheircapacities assuch,inwhich anadversedecisioncould have aMaterialAdverseEffect.
(I)ACKNOWLEDGMENTREGARDING INVESTOR'SPURCHASEOFSHARES.TheCompany acknowledgesandagrees thattheInvestorisactingsolelyinthecapacityofanarm'slengthpurchaserwithrespecttotheEquityLineTransactionDocumentsandthetransactions contemplatedhereby andthereby.TheCompanyfurtheracknowledgesthattheInvestorisnot actingasafinancialadvisororfiduciaryoftheCompany (orinanysimilarcapacity)withrespecttotheEquityLineTransactionDocumentsandthetransactions contemplatedhereby andtherebyandanyadvicegivenbytheInvestor or anyofitsrespectiverepresentativesoragentsinconnectionwiththeEquity Line TransactionDocumentsandthetransactionscontemplated hereby andtherebyis merelyincidentaltotheInvestor'spurchaseoftheSecurities,andisnot beingreliedonbytheCompany.TheCompanyfurtherrepresentstotheInvestorthattheCompany'sdecision to enterintotheEquityLineTransactionDocumentshasbeenbasedsolely on theindependentevaluationbytheCompanyanditsrepresentatives.
(J)NOUNDISCLOSEDEVENTS,LIABILITIES,DEVELOPMENTSORCIRCUMSTANCES.Exceptas setforthintheSECDocuments,asofthedatehereof,noevent,liability,development orcircumstancehasoccurredorexists,ortotheCompany'sknowledgeis contemplatedtooccur,withrespecttotheCompany oritsSubsidiariesortheirrespective business,properties,assets,prospects,operationsorfinancial condition,thatwouldbe requiredtobedisclosedbytheCompanyunderapplicablesecuritieslawsonaregistrationstatementfiledwiththeSECrelatingtoanissuanceandsale bytheCompanyofitsCommonStockandwhich hasnot beenpubliclyannounced.
(K)EMPLOYEERELATIONS.NeithertheCompany noranyofitsSubsidiariesisinvolvedinanyunionlabordisputenor,tothe knowledgeoftheCompany oranyofitsSubsidiaries,isanysuchdisputethreatened.NeithertheCompany noranyofitsSubsidiariesis aparty toa collectivebargainingagreement,andtheCompany anditsSubsidiariesbelievethatrelationswiththeiremployees aregood.Noexecutiveofficer(asdefinedinRule501(f)ofthe
1933Act)hasnotifiedtheCompanythatsuchofficerintendstoleavetheCompany'semployor otherwiseterminatesuchofficer'semploymentwiththeCompany.
(L) INTELLECTUALPROPERTYRIGHTS.TheCompany anditsSubsidiariesownor possessadequaterights orlicensestouseall trademarks,tradenames,servicemarks,servicemarkregistrations, servicenames,patents,patentrights,copyrights,inventions,licenses, approvals,governmental authorizations,tradesecretsand rightsnecessarytoconducttheirrespectivebusinessesasnowconducted.ExceptassetforthintheSECDocuments,noneof
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theCompany'strademarks, trade names,servicemarks,servicemarkregistrations,service names, patents, patentrights, copyrights,inventions,licenses,approvals,government authorizations,tradesecretsorotherintellectualpropertyrightsnecessarytoconductits businessas noworasproposedtobeconductedhave expiredorterminated,orareexpectedto expireorterminatewithintwo(2)yearsfromthedateofthisAgreement. TheCompany anditsSubsidiariesdonothaveanyknowledge ofany infringementbytheCompanyoritsSubsidiariesoftrademark,tradenamerights,patents, patent rights,copyrights,inventions,licenses, service names,servicemarks,servicemarkregistrations,tradesecretorothersimilarrightsofothers, orofany such developmentofsimilaroridenticaltrade secrets ortechnicalinformation by othersand,exceptassetforthintheSECDocuments,thereisno claim,actionorproceeding beingmadeorbrought against,orto theCompany's knowledge, beingthreatenedagainst,theCompany oritsSubsidiariesregardingtrademark,tradename,patents,patentrights,invention, copyright,license, service names, servicemarks, servicemarkregistrations,trade secret or otherinfringement;andtheCompanyanditsSubsidiariesareunawareofanyfactsor circumstanceswhichmightgiverisetoany oftheforegoing.TheCompany anditsSubsidiaries havetaken commerciallyreasonable securitymeasuresto protectthesecrecy, confidentiality andvalueofalloftheirintellectual properties.
(M)ENVIRONMENTALLAWS. TheCompany anditsSubsidiaries(I)are,to theknowledgeoftheCompany anditsSubsidiaries,incompliancewithanyandallapplicableforeign,federal,stateandlocallawsand regulations relating to theprotectionofhumanhealth and safety, the environmentorhazardousor toxic substances orwastes,pollutants or contaminants("EnvironmentalLaws");(II) have, tothe knowledgeoftheCompany,receivedall permits,licenses orotherapprovalsrequiredofthemunderapplicableEnvironmentalLawsto conduct their respectivebusinesses;and(III)arein compliance, totheknowledge oftheCompany,withallterms andconditionsof anysuchpermit,licenseorapprovalwhere,ineachofthethree(3)foregoingcases,thefailureto socomplywouldhave,individually orinthe aggregate,aMaterialAdverseEffect.
(N)TITLE.TheCompany anditsSubsidiarieshave goodandmarketabletitletoall personalpropertyownedby themwhichismaterialto thebusinessoftheCompany anditsSubsidiaries,ineachcase freeandclearofallliens,encumbrancesanddefectsexceptsuchas aredescribedintheSECDocumentsorsuch asdonotmateriallyaffectthevalueofsuch property anddonotinterferewiththeusemadeandproposedtobemadeofsuchproperty bytheCompany orany ofitsSubsidiaries.Anyrealproperty andfacilitiesheldunderleasebytheCompany orany ofitsSubsidiariesareheldbythemundervalid,subsistingand enforceableleaseswithsuchexceptionsasarenotmaterialanddonotinterferewiththe usemadeand proposedto bemadeof suchpropertyandbuildingsbytheCompanyanditsSubsidiaries.
(O)INSURANCE.EachoftheCompany'sSubsidiariesareinsured byinsurersofrecognizedfinancialresponsibilityagainstsuchlossesand risksandinsuchamountsasmanagementoftheCompanyreasonably believestobeprudentandcustomaryinthe businessesinwhichtheCompanyanditsSubsidiariesareengaged.NeithertheCompany nor any ofitsSubsidiarieshasbeenrefusedanyinsurancecoveragesoughtorappliedforand neithertheCompany noritsSubsidiarieshasanyreasontobelievethatitwillnotbeabletorenewitsexistinginsurancecoverageasandwhensuchcoverageexpiresortoobtain similar coveragefromsimilarinsurersasmaybenecessarytocontinueitsbusinessatacostthatwould nothave aMaterialAdverseEffect.
(P)REGULATORYPERMITS.TheCompanyanditsSubsidiarieshaveinfullforceand
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effectallcertificates,approvals,authorizationsandpermitsfromtheappropriatefederal,state,localor foreignregulatory authoritiesandcomparableforeignregulatoryagencies,necessaryto own,lease or operatetheirrespective properties and assets and conduct theirrespective businesses,andneithertheCompany noranysuchSubsidiaryhasreceivedanynoticeof proceedingsrelatingtotherevocation or modificationofanysuch certificate,approval, authorizationorpermit,except forsuch certificates,approvals,authorizationsorpermitswhichif notobtained,orsuch revocations ormodificationswhich,wouldnothaveaMaterialAdverseEffect.
(Q)INTERNALACCOUNTINGCONTROLS.TheCompany andeachofitsSubsidiariesmaintainasystemofinternalaccountingcontrolssufficienttoprovidereasonableassurancethat(I)transactions areexecutedinaccordancewithmanagement's generalorspecific authorizations;(II) transactionsarerecordedas necessarytopermitpreparationoffinancial statementsinconformitywith generally acceptedaccountingprinciplesby afirmwithmembershiptothePCAOB andtomaintain assetaccountability;(III) reasonable controls to safeguardassetsareinplace;and(IV)therecorded accountabilityforassetsiscomparedwiththeexistingassetsat reasonableintervalsandappropriate actionis takenwithrespect toany differences.
(R)NOMATERIALLYADVERSECONTRACTS,ETC.NeithertheCompanynoranyofitsSubsidiariesissubjecttoany charter,corporateorotherlegalrestriction,oranyjudgment, decreeororderwhichinthejudgmentoftheCompany'sofficershasoris expectedinthefuturetohaveaMaterialAdverseEffect.Neither theCompany norany ofitsSubsidiariesis apartyto anycontractoragreementwhichinthejudgmentoftheCompany'sofficershasorisexpectedto have aMaterialAdverseEffect.
(S)TAXSTATUS.TheCompanyandeachofitsSubsidiarieshasmadeorfiledallUnitedStatesfederalandstateincomeandallothertaxreturns,reportsanddeclarationsrequiredbyanyjurisdictiontowhichitissubject (unless and onlytothe extent that theCompany andeachofitsSubsidiarieshassetasideonitsbooksprovisionsreasonably adequateforthepaymentof allunpaidandunreportedtaxes)andhaspaidalltaxesandothergovernmental assessmentsandchargesthatarematerialin amount, shown ordeterminedtobe dueonsuchreturns,reportsanddeclarations,exceptthosebeing contestedingoodfaithand has set aside onits booksprovisionreasonablyadequateforthe paymentof alltaxesfor periods subsequenttothe periodstowhich suchreturns,reports or declarations apply.There arenounpaidtaxesinanymaterialamountclaimedtobeduebythetaxingauthorityof anyjurisdiction, andtheofficersoftheCompanyknowofnobasisforanysuch claim.
(T)CERTAINTRANSACTIONS.ExceptassetforthintheSECDocumentsfiledatleastten(10)dayspriortothe datehereofandexceptforarm'slengthtransactionspursuanttowhichtheCompanymakespaymentsintheordinarycourseofbusinessupontermsnolessfavorablethantheCompany couldobtainfromdisinterestedthirdpartiesandotherthanthegrantofstock options disclosedintheSECDocumentsorstockoptionsgrantedinthefutureas contemplated by currentcompensationagreementsorplansdisclosedintheSECDocuments,noneoftheofficers,directors, oremployeesoftheCompanyispresently aparty toany transactionwiththeCompany oranyofitsSubsidiaries(other thanforservicesas employees,officersand directors),includinganycontract,agreementorotherarrangement providingforthefurnishingofservicestoorby,providing forrentalofreal orpersonalproperty toorfrom,orotherwiserequiringpaymentstoorfromanyofficer, directororsuchemployeeor,totheknowledgeoftheCompany,anycorporation,partnership,trustorotherentityinwhichanyofficer,director,orany
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suchemployeehasa substantialinterest or isanofficer,director,trusteeorpartner.
(U)DILUTIVEEFFECT.TheCompanyunderstandsandacknowledgesthatthenumberofsharesofCommonStockissuableuponpurchasespursuanttothisAgreementwillincreaseincertaincircumstancesincluding,butnotnecessarilylimitedto, thecircumstancewhereinthetradingpriceoftheCommonStock declines duringthe period betweentheEffectiveDate andthe end of theOpenPeriod. TheCompany'sexecutive officersand directorshave studied andfullyunderstandthenatureofthetransactionscontemplatedby thisAgreementandrecognizethattheyhaveapotentialdilutiveeffectonthe shareholdersoftheCompany. TheBoardofDirectorsoftheCompany has concluded,initsgoodfaithbusinessjudgment,andwith full understandingoftheimplications,that suchissuanceisinthebestinterestsoftheCompany.TheCompany specifically acknowledgesthat,subject to suchlimitations asareexpressly setforthintheEquity LineTransactionDocuments,itsobligationtoissuesharesofCommonStock uponpurchasespursuanttothisAgreementisabsoluteandunconditionalregardlessofthe dilutiveeffectthatsuchissuancemay haveontheownershipinterestsofothershareholdersoftheCompany.
(V)LOCK-UP.TheCompanyshallcauseitsofficersanddirectorstorefrainfromselling
CommonStockduringeachPricingPeriod.
(W)NOGENERALSOLICITATION.NeithertheCompany,noranyofitsaffiliates,nor anypersonactingonitsbehalf,hasengagedinanyformofgeneralsolicitationorgeneral advertising(withinthemeaningofRegulationD)inconnectionwiththeofferorsaleoftheCommonStock tobeofferedassetforth inthisAgreement.
(X)NOBROKERS,FINDERS OR FINANCIALADVISORYFEES ORCOMMISSIONS.Nobrokers,findersorfinancialadvisoryfeesorcommissionswillbepayablebytheCompany,itsagents orSubsidiaries,withrespect tothetransactionscontemplatedbythisAgreement, exceptasotherwise disclosed in thisAgreement.
SECTION5.COVENANTSOFTHECOMPANY
(A)EFFORTS. TheCompanyshalluseallcommercially reasonableefforts totimely satisfyeachoftheconditionssetforthin Section8ofthisAgreement.
(B)BLUESKY.TheCompanyshall,atitssolecostandexpense,onorbeforeeachoftheClosingDates,take suchactionastheCompanyshallreasonablydetermineisnecessarytoqualifytheSecuritiesfor, or obtainexemptionfortheSecuritiesfor,saletotheInvestor at eachoftheClosingspursuanttothisAgreementunderapplicablesecuritiesor“BlueSky”lawsofsuchstatesoftheUnitedStates,asreasonablyspecifiedby theInvestor,andshallprovide evidenceofanysuchactionsotakentotheInvestoronorpriortotheClosingDate.
(C)REPORTINGSTATUS.Untiloneofthefollowingoccurs,theCompanyshallfile allreportsrequiredtobefiledwiththeSECpursuanttothe1934Act,andtheCompanyshall notterminateits status, ortakeanactionorfail totakeany action,whichwouldterminateits statusasareporting company underthe1934Act: (1) thisAgreement terminatespursuanttoSection9,or(2)thedateonwhichthe InvestorhassoldalltheSecurities;provided thattheInvestor shall promptlynotifytheCompanyafter the Investor hassold alltheSecurities.
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(D)USE OFPROCEEDS.TheCompanywilluse theproceedsfromthesaleoftheSecurities(excludingamountspaidbytheCompanyfor feesasset forthintheEquity LineTransactionDocuments)forgeneralcorporateandworkingcapital purposesandacquisitionsor assets,businessesoroperationsor forotherpurposesthattheBoardofDirectors,initsgoodfaith, deemsto be inthebestinterestoftheCompany.
(E)FINANCIALINFORMATION.DuringtheOpenPeriod,theCompanyagrees tomakeavailable to theInvestorvia theSEC’s EDGARwebsiteorotherelectronic means thefollowingdocumentsand informationon theformssetforth:(1)withinfive(5)TradingDaysafterthefilingthereofwiththeSEC,acopyofitsAnnualReportsonForm10-K,itsQuarterlyReports onForm10-Q,anyCurrentReportson Form8-KandanyRegistrationStatementsor amendmentsfiledpursuanttothe1933Act;(2)copiesof anynoticesandotherinformationmade available or giventotheshareholdersoftheCompanygenerally,contemporaneouslywiththemaking available orgivingthereoftothe shareholders; and(3)withintwo(2) calendar daysoffiling or deliverythereof, copiesof all documentsfiledwith, and all correspondence sentto,thePrincipalMarket,anysecuritiesexchangeor market,or the FinancialIndustryRegulatoryAuthority,unlesssuchinformationismaterial nonpublicinformation.
(F)RESERVATION OFSHARES.TheCompanyshallreserve5,000,000SharesfortheissuanceoftheSecuritiestotheInvestorasrequiredhereunder.IntheeventthattheCompany determines thatitdoesnothaveasufficientnumberofauthorizedsharesofCommonStocktoreserveand keepavailableforissuanceasdescribedinthisSection5(F), theCompany shalluseall commercially reasonableefforts toincreasethenumberofauthorized sharesofCommonStockby seekingshareholderapprovalforthe authorizationofsuch additional shares.
(G)LISTING.TheCompanyshallpromptlysecureandmaintainthelistingofalloftheRegistrableSecurities(as definedintheRegistrationRightsAgreement)onthePrincipalMarketandeachother nationalsecuritiesexchangeandautomatedquotationsystem,if any, uponwhichsharesofCommonStockare thenlisted(subjecttoofficialnoticeofissuance)and shallmaintain, suchlistingof allRegistrableSecuritiesfromtimetotimeissuable underthetermsoftheEquity Line TransactionDocuments.NeithertheCompany norany ofitsSubsidiaries shalltakeany actionwhichwouldbereasonably expectedtoresultinthe delisting or suspensionoftheCommonStock onthePrincipalMarket(excluding suspensionsof notmorethanone(1)tradingdayresultingfrombusinessannouncementsbytheCompany).TheCompany shallpromptly providetotheInvestorcopiesof any noticesitreceivesfrom thePrincipalMarketregardingthecontinuedeligibility oftheCommonStockforlistingonsuch automatedquotation systemor securities exchange.TheCompany shall pay allfees and expensesin connectionwith satisfyingitsobligationsunderthis Section5(G).
(H)TRANSACTIONSWITHAFFILIATES.TheCompanyshallnot,andshallcause eachofitsSubsidiariesnot to,enterinto,amend, modify orsupplement,or permitanySubsidiaryto enterinto,amend,modifyorsupplement,anyagreement,transaction, commitmentorarrangementwithanyofitsoranySubsidiary'sofficers,directors,personswhowereofficersordirectorsatanytimeduringtheprevioustwo(2)years,shareholderswho beneficiallyown5%ormoreoftheCommonStock,orAffiliatesorwithanyindividual relatedby blood,marriageoradoptiontoany suchindividualorwithany entityinwhichany suchentity orindividualownsa5%ormorebeneficialinterest(eacha“RelatedParty”),exceptfor (1) customaryemployment arrangementsandbenefitprogramsonreasonableterms,(2)any agreement,transaction,commitmentorarrangementonanarms-length basisontermsnolessfavorablethantermswhichwould havebeen obtainablefrom a disinterestedthird party other
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thansuchRelatedParty,(3)anyagreement,transaction,commitmentorarrangementwhichis approvedby amajorityofthedisinteresteddirectorsoftheCompany,or (4)extensionsor amendmentsofany existingemploymentagreement.Forpurposeshereof,any directorwhois alsoanofficeroftheCompanyoranySubsidiaryoftheCompany shallnotbeadisinterested directorwithrespecttoanysuchagreement,transaction,commitmentor arrangement.“Affiliate”forpurposeshereofmeans,withrespectto anypersonorentity,anotherpersonorentity that, directly orindirectly,(1)hasa5%ormoreequityinterestinthatpersonorentity,(2)has5%ormorecommon ownershipwiththatperson orentity, (3)controls thatperson orentity,or (4)is undercommoncontrolwiththatpersonorentity.“Control”or“Controls”forpurposeshereofmeansthatapersonorentityhasthepower,directly orindirectly,toconductorgovernthe policies ofanother personor entity.
(I)FILINGOF FORM8-K.On orbeforethedatewhich isfour(4)TradingDaysafterthedateofexecutionofthisAgreement,theCompany shallfileaCurrentReportonForm8-KwiththeSECdescribingthetermsofthetransactioncontemplatedbytheEquityLineTransactionDocumentsintheformrequiredbythe 1934Act,ifsuchfilingis required.
(J)CORPORATEEXISTENCE. TheCompanyshalluseall commerciallyreasonableeffortstopreserve andcontinuethecorporate existenceoftheCompany.
(K)NOTICEOFCERTAINEVENTSAFFECTINGREGISTRATION;SUSPENSIONOFRIGHTTOMAKEAPUT.TheCompanyshallpromptlynotifytheInvestorupon the occurrenceofanyofthefollowingeventsinrespectofaRegistrationStatementor related prospectusin respectofanofferingoftheSecurities:(1)receiptofany requestforadditionalinformationby theSEC oranyotherfederal orstate governmentalauthorityduringtheperiodofeffectivenessoftheRegistrationStatementforamendmentsorsupplementsto theRegistrationStatementor relatedprospectus;(2)theissuancebytheSECoranyotherfederalorstategovernmentalauthorityofanystopordersuspendingtheeffectivenessofanyRegistrationStatement ortheinitiationofanyproceedingsforthat purpose;(3)receiptofanynotificationwithrespecttothesuspensionofthequalification orexemptionfromqualificationofanyoftheSecuritiesforsaleinanyjurisdiction ortheinitiationor noticeof anyproceedingfor such purpose; (4) thehappeningofany eventthat makes any statement madeinsuchRegistrationStatementorrelatedprospectusorany documentincorporatedordeemedtobeincorporatedtherein byreference untruein anymaterialrespect orthatrequiresthemakingof any changesintheRegistration Statement, relatedprospectus ordocuments sothat,inthe caseofaRegistrationStatement,itwillnotcontainanyuntruestatementofamaterialfactoromittostate any materialfactrequiredtobestatedthereinornecessary tomakethestatements thereinnotmisleading,andthatinthecaseoftherelatedprospectus,itwillnotcontainany untrue statementofamaterialfactoromittostateanymaterialfactrequiredtobestatedthereinor necessaryto make the statementstherein,in thelightofthe circumstancesunderwhichtheywere made,not misleading;and(5) theCompany's reasonable determinationthata post-effective amendmenttotheRegistrationStatementwould be appropriate, andtheCompany shallpromptly makeavailabletoInvestoranysuchsupplementoramendmenttotherelated prospectus.TheCompany shallnotdelivertotheInvestoranyPutNoticeduringthe continuationofanyoftheforegoingeventsinthis Section5(K).
(L)REIMBURSEMENT.If(I)the Investorbecomesinvolvedinany capacityinany action,proceedingorinvestigationbroughtby any shareholderoftheCompany,inconnectionwithorasaresultoftheconsummationofthetransactionscontemplatedbytheEquityLineTransactionDocuments,oriftheInvestorisimpleadedin any such action,proceedingorinvestigation byanyperson(otherthan as aresultof a breachoftheInvestor’srepresentations
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andwarranties setforth in thisAgreement);or(II)the Investorbecomesinvolvedin anycapacityinanyaction,proceedingorinvestigationbroughtbytheSECagainstorinvolvingtheCompany(unlesstheCompanyisinvolvedintheaction,proceedingorinvestigationasawitnessonly)orinconnectionwithorasaresultoftheconsummationofthetransactionscontemplatedbytheEquityLineTransactionDocuments (other thanasaresultofabreachoftheInvestor’srepresentationsandwarranties setforthinthisAgreement),orifthisInvestorisimpleadedin anysuchaction,proceedingorinvestigation byanyperson,theninanysuchcase,theCompanywillreimburse the Investorforitsactual,reasonablelegal andotherexpenses(includingthe costofanyinvestigation and preparation)incurredin connectiontherewith, as suchexpenses areincurred.Inaddition,otherthanwithrespecttoanymatterinwhichtheInvestorisanamedparty,theCompanywillpay totheInvestorthecharges,asreasonably determinedbytheInvestor, forthetimeofany officersoremployeesoftheInvestordevotedto appearingandpreparingtoappearaswitnesses,assistinginpreparationforhearings, trialsor pretrialmatters,orotherwisewith respecttoinquiries,hearing,trials,andotherproceedingsrelatingtothesubjectmatterofthisAgreement. The reimbursementobligationsoftheCompany underthissectionshall bein additiontoanyliabilitywhichtheCompanymayotherwisehave, shallextend uponthe sameterms and conditionsto any affiliatesoftheInvestorthat are actually namedinsuchaction,proceedingorinvestigation,andpartners,directors, agents, employees, attorneys,accountants, auditors and controlling persons(ifany), asthe casemay be,ofInvestorandany suchaffiliate,andshallbebindinguponandinuretothebenefitofany successorsoftheCompany,the Investorand anysuchaffiliateand anysuchperson.However,inall events,iftheInvestorisfoundtobeguiltyofviolationsofthefederal orstate securitieslaws (orpleads“nocontest”orothersimilarpleaorsettles aninvestigation orpleadingwithouta specificfindingofliabilitybutisstillsubjecttocivilorcriminalliability),theCompanywillhavenoresponsibilitytopay anyoftheInvestor’sfeesandexpensesregardless ofwhetherornottheCompanyisor isalsofoundtohave liability.
(M)TRANSFERAGENT.UponeffectivenessoftheRegistrationStatement,andfor solongastheRegistrationStatementiseffective,theCompany shalldeliverinstructionstoitstransferagent toissueSharestotheInvestorthatarecoveredfor resalebytheRegistrationStatementfreeofrestrictive legends.
(N)ACKNOWLEDGEMENTOFTERMS.TheCompany hereby representsandwarrantstotheInvestor that:(1)itisvoluntarilyenteringintothisAgreementofitsownfreewill,(2)itisnotenteringthisAgreementundereconomicduress,(3) thetermsofthisAgreementarereasonableandfairtotheCompany, and(4)theCompanyhas hadindependentlegal counselofitsownchoosingreviewthisAgreement,advisetheCompanywithrespecttothisAgreement, andrepresenttheCompany in connectionwiththisAgreement.
SECTION6.CONDITIONSOFTHECOMPANY'SOBLIGATIONTOSELL.Theobligation hereunderoftheCompanytoissueandselltheSecuritiestotheInvestorisfurthersubjecttothe satisfaction,atorbefore eachClosingDate,of eachofthe following conditions setforth below.These conditions are fortheCompany's sole benefit andmay bewaivedbytheCompanyatanytime initssolediscretion.
(A)TheInvestorshallhaveexecutedthisAgreementandtheRegistrationRights
Agreementanddelivered thesametotheCompany.
(B)TheInvestorshallhavedeliveredtotheCompanythePurchasePricefortheSecuritiesbeingpurchasedbytheInvestorbetweentheendofthePricingPeriodandtheClosingDatevia aPutSettlementSheet(heretoattached asExhibitD).Immediately after
| ELED INVESTMENT AGREEMENT JULY.2014 | 18 | |
receiptofconfirmationofdeliveryofsuchSecuritiestotheInvestor,theInvestor,bywiretransferofimmediatelyavailable funds pursuanttothewireinstructionsprovidedbytheCompany,will disbursethefundsconstitutingthePurchaseAmount.
(C)TherepresentationsandwarrantiesoftheInvestorshallbetrueand correctinallmaterial respectsasofthedatewhenmadeand asoftheapplicableClosingDateasthoughmade at thattime andtheInvestorshall have performed,satisfied and compliedinallmaterialrespectswiththecovenants,agreementsandconditionsrequired by theEquityLineTransactionDocumentstobeperformed,satisfied orcompliedwith bytheInvestoronorbefore suchClosingDate.
(D)Nostatute,rule,regulation,executiveorder,decree,rulingorinjunctionshall havebeenenacted,entered,promulgatedorendorsedbyanycourtorgovernmentalauthorityofcompetentjurisdictionwhichprohibitstheconsummationof anyofthetransactions contemplatedbythisAgreement.
SECTION7.FURTHERCONDITIONSOFTHEINVESTOR'SOBLIGATIONTOPURCHASE.TheobligationoftheInvestorhereundertopurchaseSharesissubjectto thesatisfaction,on or before each ClosingDate,ofeachofthefollowing conditionssetforthbelow.
(A)TheCompanyshallhaveexecutedtheEquityLineTransactionDocumentsand
CommitmentSharesanddelivered thesametotheInvestor.
(B)TheCommonStockshall beauthorizedforquotationon thePrincipalMarketandtradingintheCommonStockshallnothavebeensuspendedbythePrincipalMarketortheSEC,atanytime beginningon thedate hereofandthrough and includingthe respective ClosingDate(excluding suspensionsof notmorethan one(1)TradingDayresultingfrombusiness announcements bytheCompany, providedthatsuch suspensionsoccurpriortotheCompany's deliveryofthePutNoticerelatedtosuchClosing).
(C)TherepresentationsandwarrantiesoftheCompanyshallbetrueandcorrectin allmaterialrespectsasofthedatewhenmadeandasoftheapplicableClosingDateas thoughmadeat that timeandtheCompany shallhaveperformed,satisfiedandcompliedinallmaterialrespectswiththecovenants,agreementsandconditionsrequired by theEquityLineTransactionDocumentstobeperformed, satisfiedor compliedwithbytheCompanyonor beforesuchClosingDate.TheInvestormayrequest an update asofsuchClosingDateregarding therepresentationcontainedin Section4(C)above.
(D)TheCompanyshallhaveexecutedanddeliveredto theInvestorthe certificatesrepresenting,orhave executedelectronicbook-entrytransferof, theSecurities(insuch denominationsastheInvestor shallrequest) being purchasedbytheInvestor at suchClosing.
(E)TheBoardofDirectorsoftheCompanyshall have adoptedresolutions consistentwithSection4(B)(2)above (the “Resolutions”) andsuchResolutionsshallnothavebeen amendedorrescindedpriortosuchClosingDate.
(F)Nostatute,rule,regulation,executiveorder,decree,rulingorinjunctionshall havebeenenacted,entered,promulgatedorendorsedby anycourtorgovernmentalauthorityof competentjurisdictionwhichprohibitstheconsummationof anyofthetransactions contemplatedbythisAgreement.
| ELED INVESTMENT AGREEMENT JULY.2014 | 19 | |
(G)TheRegistrationStatementshall beeffectiveoneachClosingDateandnostop ordersuspending theeffectivenessoftheRegistrationstatementshallbeineffect orto theCompany'sknowledgeshallbependingor threatened.Furthermore,oneachClosingDate(1) neithertheCompany northeInvestorshallhavereceivednoticethattheSEChasissuedorintendstoissueastoporderwithrespectto suchRegistrationStatementorthattheSEC otherwise has suspended orwithdrawnthe effectiveness ofsuchRegistrationStatement,eithertemporarily orpermanently,orintendsorhasthreatened todoso(unlesstheSEC'sconcerns havebeenaddressedandInvestorisreasonablysatisfiedthattheSECnolongerisconsidering orintendstotakesuch action),and(2)noothersuspensionoftheuse orwithdrawaloftheeffectivenessofsuchRegistrationStatementorrelatedprospectusshallexist.
(H)At thetimeofeachClosing, theRegistrationStatement (includinginformation or documentsincorporatedbyreferencetherein)andanyamendmentsorsupplementsthereto shallnotcontainanyuntrue statementof amaterialfactoromittostate anymaterialfactrequiredtobestatedthereinornecessarytomakethestatementsthereinnotmisleading orwhichwouldrequire publicdisclosureoranupdate supplementtotheprospectus.
(I)Ifapplicable,theshareholdersoftheCompany shallhaveapprovedtheissuanceofanySharesinexcessoftheMaximumCommonStockIssuanceinaccordancewithSection
2(H)ortheCompanyshallhaveobtainedappropriateapprovalpursuanttotherequirementsof
DelawarelawandtheCompany’sArticlesofIncorporationand By-laws.
(J)TheconditionstosuchClosingsetforthinSection2(E)shallhavebeensatisfied onorbefore such ClosingDate.
(K)TheCompany shallhavecertifiedtotheInvestorthe numberofSharesofCommonStockoutstandingwhen aPutNoticeisgiven totheInvestor.The Company'sdeliveryofaPutNoticetotheInvestor constitutestheCompany'scertificationofthereservationforissuanceofthenecessarynumberof sharesofCommonStocksubjecttoa PutNotice.
SECTION8.TERMINATION.ThisAgreementshallterminateuponanyofthefollowing events:
(A)whentheInvestorhaspurchasedanaggregateoffivemilliondollars$5,000,000intheCommonStockoftheCompanypursuanttothisAgreement;or,
(B)on thedatewhich isthirty-six(36)monthsaftertheEffective Date; or,
(C)uponwrittennoticeoftheCompanytotheInvestor.Anyandallshares,or penalties,ifany,due underthisAgreementshallbeimmediately payableanddueuponterminationofthisAgreement.
SECTION9.SUSPENSION.TheCompany’srighttocausetheInvestortopurchaseSharespursuanttoa Put Notice, andtheInvestor’sobligation topurchaseSharesunderthisAgreement shallbesuspendeduponany ofthefollowingevents,andshall remainsuspendeduntilsuch eventis rectified:
(A)ThetradingoftheCommonStockissuspendedby theSEC,thePrincipalMarket orFINRAforaperiodoftwo(2) consecutiveTradingDaysduringtheOpen Period; or,
| ELED INVESTMENT AGREEMENT JULY.2014 | 20 | |
(B)TheCommonStockceasestoberegisteredunderthe1934ActorlistedortradedonthePrincipalMarket.Immediatelyupon theoccurrenceofoneoftheabove-described events,theCompany shall sendwrittennoticeof sucheventtotheInvestor.
SECTION 10.INDEMNIFICATION.Inconsiderationoftheparties’mutualobligationssetforthintheTransactionDocuments,eachof theparties(insuchcapacity,an“Indemnitor”) shall defend,protect,indemnify andholdharmlesstheotherandalloftheotherparty'sshareholders,officers,directors,employees,counsel,and directorindirectinvestorsandanyoftheforegoing person'sagentsorother representatives(including,withoutlimitation, thoseretainedin connectionwiththetransactionscontemplatedbythisAgreement)(collectively,the“Indemnitees”)from and against any and all actions, causesof action, suits, claims,losses, costs,penalties,fees,liabilities and damages, andreasonable expensesin connectiontherewith(irrespectiveofwhetherany suchIndemniteeisapartytotheactionforwhichindemnification hereunderissought), andincludingreasonableattorneys'feesanddisbursements(the“IndemnifiedLiabilities”),incurredby anyIndemnitee asaresultof,orarisingoutof,orrelatingto(A)anymaterial misrepresentationorbreachofanyrepresentationorwarrantymade bytheIndemnitorintheEquity Line TransactionDocumentsorany othercertificate,instrumentor documentcontemplatedherebyorthereby;(B)anymaterial breach ofanycovenant,agreement orobligationoftheIndemnitorcontainedintheEquity Line TransactionDocuments orany other certificate,instrumentordocumentcontemplated hereby orthereby;or(C)any causeofaction, suitorclaimbroughtormadeagainstsuchIndemniteebyathirdpartyandarisingoutoforresultingfrom theexecution,delivery,performanceorenforcementoftheEquityLineTransactionDocuments or any other certificate,instrument or document contemplated hereby orthereby,exceptinsofar as(Y) any such misrepresentation,breachor any untruestatement, allegeduntruestatement,omissionoralleged omissionismadein relianceuponandin conformitywithinformationfurnishedtoIndemnitorwhichisspecifically intendedforuseinthe preparationofany suchRegistrationStatement,preliminary prospectus,prospectusor amendmentstotheprospectus,(Z)any such IndemnifiedLiabilitiesresultedorarosefromthe breachbytheIndemniteeparty heretoofanyrepresentation,warranty,covenantoragreementof suchIndemniteecontainedintheEquity Line TransactionDocumentsorthenegligence,recklessness,willfulmisconductor badfaithof suchIndemnitee.Totheextentthattheforegoingundertakingby theIndemnitormaybe unenforceableforanyreason,theIndemnitor shallmakethemaximum contribution tothepaymentand satisfactionofeach ofthe Indemnified Liabilitieswhichispermissibleunderapplicablelaw.Theindemnity provisionscontainedherein shallbeinadditiontoany causeof action orsimilarrightsIndemnitormayhave,andanyliabilitiestheIndemnitorortheIndemniteesmaybesubjectto.
SECTION 11.GOVERNINGLAW;DISPUTESSUBMITTEDTOARBITRATION.Alldisputes arisingunderthisagreement shall begovernedby andinterpretedinaccordancewiththelawsoftheCommonwealthofMassachusetts,without regardto principles ofconflictoflaws.The parties to thisagreementwillsubmitalldisputesarisingunder thisagreementtoarbitrationinBoston,MA before a single arbitratoroftheAmericanArbitrationAssociation(“AAA”).The arbitratorshallbe selected byapplication oftherulesoftheAAA, orbymutualagreementofthe parties,exceptthatsuch arbitratorshall be an attorneyadmitted to practicelawinCommonwealthofMassachusetts.No party tothisAgreementwillchallengethejurisdictionorvenueprovisions asprovidedinthis section.Nopartytothis agreementwill challengethejurisdictionorvenueprovisions asprovidedinthis section.Nothing contained hereinshall preventthepartyfromobtaining aninjunction.
LEGALEXPENSES;FEESHARESANDMISCELLANEOUSEXPENSES.Exceptasotherwise setforthintheEquityLineTransactionDocuments,eachpartyshallpaythe feesandexpenses
| ELED INVESTMENT AGREEMENT JULY.2014 | 21 | |
ofitsadvisers,counsel,theaccountantsandotherexperts,ifany,andall other expensesincurredby suchpartyincidenttothenegotiation,preparation,execution,deliveryand performanceofthisAgreement.Any attorneys'feesandexpensesincurredby eithertheCompany ortheInvestorinconnectionwiththepreparation,negotiation,executionanddeliveryofanyamendmentstothisAgreement orrelatingtotheenforcementoftherightsofanyparty,aftertheoccurrenceofanybreachofthetermsofthisAgreementbyanotherpartyorany defaultby anotherpartyinrespectofthetransactionscontemplatedhereunder,shallbepaidon demandby thepartywhichbreachedtheAgreementand/ordefaulted,asthecasemaybe.TheCompany shall pay all stamp andothertaxes and dutiesleviedin connectionwiththeissuanceofanySecurities.TheCompany haspaidfifteenthousanddollars ($15,000)forthe preparationoftheEquityLineTransactionDocuments.IftheCompanyisnotDWACeligibleatthetimeof aPutClosing,therewillbea$2,000chargeon eachClosingDatetocovercostsassociatedwith, but notlimitedto: deposit costs,legalreviewfees andwirefees.IftheCompanyis DWAC eligibleatthetimeofaPutClosing,therewill bea$500charge oneachClosingDate.
SECTION 12.COUNTERPARTS.ThisAgreementmaybeexecutedintwoormoreidentical counterparts,allofwhichshall be considered oneand the sameagreementandshall becomeeffectivewhencounterparts havebeensignedby eachparty anddeliveredtotheotherparty; provided thatafacsimilesignatureshall beconsidereddueexecutionandshall bebindinguponthe signatorytheretowith thesameforceandeffectasifthesignaturewereanoriginal signature.
SECTION 13.HEADINGS;SINGULAR/PLURAL.TheheadingsofthisAgreementarefor convenienceofreferenceandshallnotformpartof,oraffecttheinterpretationof, thisAgreement.Wheneverrequiredby thecontextofthisAgreement,thesingular shallincludethe plural andmasculineshallincludethefeminine.
SECTION 14.SEVERABILITY.IfanyprovisionofthisAgreement shallbeinvalidor unenforceable inanyjurisdiction,suchinvalidityorunenforceabilityshallnotaffectthevalidityor enforceabilityoftheremainderofthisAgreementinthatjurisdictionorthevalidityor enforceabilityofanyprovisionofthisAgreementin anyotherjurisdiction.
SECTION 15.ENTIREAGREEMENT;AMENDMENTS.ThisAgreementistheFINALAGREEMENTbetweentheCompanyandtheInvestorwithrespecttotheterms andconditions setforthherein, and,thetermsofthisAgreementmaynot becontradicted byevidenceof prior, contemporaneous,orsubsequentoral agreementsoftheParties.NoprovisionofthisAgreementmaybeamendedotherthanbyaninstrumentinwritingsignedby theCompany andtheInvestor, and noprovision hereofmay bewaived otherthan by aninstrumentinwriting signedbythepartyagainstwhom enforcementissought.TheexecutionanddeliveryoftheEquity LineTransactionDocumentsshallnot altertheforceandeffectof anyother agreements betweentheParties, andtheobligationsunderthoseagreements.
SECTION 16.NOTICES.AnynoticesorothercommunicationsrequiredorpermittedtobegivenunderthetermsofthisAgreementmustbeinwritingandwillbedeemedto havebeen delivered(A)uponreceipt,when deliveredpersonally;(B)uponreceipt,when sentbyfacsimile oremailwiththesigneddocumentattachedinPDFformat (providedconfirmationoftransmissionismechanically or electronicallygenerated andkept onfile bythe sending party); or(C)one(1)day after depositwithanationallyrecognized overnightdelivery service,ineach caseproperlyaddressedtothe party toreceivethesame.Theaddressesand facsimile numbersfor suchcommunications shall be:
| ELED INVESTMENT AGREEMENT JULY.2014 | 22 | |
IftotheCompany:
ENERGIEHOLDINGS,INC.
4885WardRoad,Suite300
WheatRidge,Colorado80033
Telephone:(720)963-8055
IftotheInvestor:
DutchessOpportunityFund,II,LP
50Commonwealth Avenue,Suite2
Boston,MA 02116
Telephone:(617)301-4700
Eachpartyshallprovidefive(5)dayspriorwrittennoticetotheotherpartyofanychangein addressorfacsimile number.
SECTION 17.NOASSIGNMENT.ThisAgreementandanyrights,agreementsorobligations hereunder maynotbeassigned,by operationoflaw,mergerorotherwise,andany purported assignmentbya partywithout priorwritten consentofthe other partywillbe nullandvoidand notbinding onsuchotherparty.Subjectto thepreceding sentence,alloftheterms, agreements,covenants, representations,warrantiesandconditionsofthisAgreementare binding upon,andinuretothe benefitofandare enforceableby,the partiesandtheirrespective successorsandassigns.
SECTION 18.NOTHIRDPARTYBENEFICIARIES.ThisAgreementisintendedforthebenefitofthepartiesheretoandisnotfor thebenefitof,normayany provision hereofbeenforced by, anyotherperson,exceptthattheCompany acknowledgesthatthe rightsofthe Investormaybe enforcedbyitsgeneralpartner.
SECTION 19.SURVIVAL.TheindemnificationprovisionssetforthinSection11,shallsurvive eachoftheClosingsandtheterminationofthis Agreement.
SECTION 20.PUBLICITY.TheCompanyandtheInvestorshallconsultwitheachotherinissuingany pressreleasesorotherwisemakingpublicstatementswithrespecttothetransactionscontemplated hereby andnoparty shallissueany suchpressreleaseor otherwisemake anysuchpublicstatementwithoutthepriorconsentoftheotherparty,which consentshall notbeunreasonablywithheldordelayed,exceptthat nopriorconsentshallberequiredifsuch disclosureisrequiredbylaw,inwhich such casethe disclosing party shall providethe other partywithpriornoticeof suchpublicstatement. TheInvestoracknowledgesthatthisAgreement andallorpartof theEquityLineTransactionDocumentsmay bedeemedtobe“material contracts”asthat termisdefinedbyItem601(b)(10)ofRegulationS-B,andthattheCompanymay thereforeberequiredtofilesuchdocumentsasexhibitstoreportsorregistration statementsfiledunderthe1933Actorthe1934Act.TheInvestorfurtheragreesthatthestatusof such documents andmaterials asmaterial contracts shall be determined solelybytheCompany,in consultationwith itscounsel.
SECTION 21.FURTHERASSURANCES.Eachpartyshalldoandperform,orcausetobe doneandperformed,allsuchfurtheractsandthings,andshall executeanddeliverall such
| ELED INVESTMENT AGREEMENT JULY.2014 | 23 | |
otheragreements,certificates,instrumentsanddocuments,as theotherpartymay reasonablyrequestinordertocarry outtheintentandaccomplishthepurposesofthisAgreementandthe consummationofthetransactionscontemplatedhereby.
SECTION 22.NOSTRICTCONSTRUCTION.ThelanguageusedinthisAgreementwillbe deemedtobe thelanguagechosenby theparties toexpresstheirmutualintent,andnorulesof strictconstructionwillbeappliedagainstany party,asthepartiesmutually agreethateachhas had afull andfairopportunitytoreviewthisAgreement and seek theadviceofcounsel onit.
SECTION 23.REMEDIES.TheInvestorshallhaveallrightsandremediessetforthinthisAgreementandtheRegistrationRightsAgreementandallrightsandremedieswhichsuch holders have beengranted at anytime underany otheragreement orcontract and alloftherightswhichthe Investorhasbylaw.Any personhavinganyrightsunderany provisionofthisAgreementshallbeentitledtoenforcesuchrightsspecifically(withoutposting a bondorother security),torecoverdamagesbyreasonof anydefaultorbreachofanyprovisionofthisAgreement,includingtherecoveryofreasonableattorneysfees andcosts,andtoexerciseall otherrightsgrantedbylaw.
SECTION 24.PAYMENTSETASIDE.TotheextentthattheCompanymakesapaymentor paymentstotheInvestorhereunderorundertheRegistrationRightsAgreementortheInvestor enforcesorexercisesits rightshereunderorthereunder,andsuchpaymentorpaymentsorthe proceedsof suchenforcementorexerciseor anypartthereof aresubsequentlyinvalidated, declared to befraudulent orpreferential,setaside,recoveredfrom,disgorged byorare requiredtoberefunded,repaidorotherwiserestoredtotheCompany,atrustee, receiverorany other personunderanylaw(including,withoutlimitation,anybankruptcylaw,stateor federallaw, commonlaw or equitablecauseof action),thentotheextentofanysuchrestorationthe obligationorpartthereoforiginallyintendedtobesatisfied shallberevivedandcontinuedinfullforceandeffectasifsuch paymenthad notbeenmade orsuch enforcementorsetoffhad not occurred.
SECTION 25.PRICINGOFCOMMONSTOCK.ForpurposesofthisAgreement,theVWAPoftheCommonStockshallbeasreportedona directfeed service.
SECTION 26.NON-DISCLOSUREOFNON-PUBLICINFORMATION.
(A)TheCompanyshallnotdisclosenon-publicinformationconcerningtheCompanytotheInvestor,itsadvisors, or itsrepresentatives.
(B)NothinghereinshallrequiretheCompanytodisclosenon-publicinformationtotheInvestororitsadvisorsorrepresentatives,provided,however,thatnotwithstandinganything hereintothecontrary, theCompanywill,ashereinaboveprovided,immediately notifythe advisorsandrepresentativesoftheInvestorand,ifany,underwriters,ofany eventorthe existenceofanycircumstance(withoutany obligationtodisclosethespecificeventor circumstance)ofwhichitbecomes aware,constitutingnon-publicinformation(whetherornotrequestedoftheCompany specifically orgenerallyduringthe courseofduediligenceby such persons or entities),which,if not disclosedinthe prospectusincludedintheRegistrationStatementwould cause suchprospectustoinclude amaterialmisstatementortoomit amaterialfact requiredtobestatedthereininordertomakethestatements,therein,inlightofthe circumstancesinwhichtheyweremade,notmisleading.NothingcontainedinthisSection29 shallbeconstruedtomeanthatsuchpersonsorentitiesother thantheInvestor (withoutthewrittenconsentoftheInvestorpriortodisclosureofsuchinformation)maynotobtainnon-public
| ELED INVESTMENT AGREEMENT JULY.2014 | 24 | |
informationinthecourseofconductingduediligenceinaccordancewiththetermsofthisAgreementandnothinghereinshallpreventanysuchpersonsorentitiesfromnotifyingtheCompany oftheiropinionthatbasedonsuchduediligenceby suchpersonsorentities, that theRegistrationStatementcontainsanuntruestatementofmaterialfactor omitsa materialfactrequired tobestatedintheRegistrationStatementornecessarytomake thestatements containedtherein,in lightofthecircumstancesinwhichtheywere made,notmisleading.
SECTION 27.ACKNOWLEDGEMENTSOFTHEPARTIES.NotwithstandinganythinginthisAgreementtothecontrary,thepartiesheretoherebyacknowledgeandagreetothefollowing:(A)theInvestor makes norepresentationsorcovenantsthatitwillnotengageintradinginthe securitiesoftheCompany,otherthantheInvestorwillnotsell shortanyoftheCompany's common stockatany timeduring aPricingPeriod;(B)theCompany shall,by8:30a.m.BostonTimeonthefourthTradingDayfollowingthedate hereof,fileacurrentreportonForm8-K disclosingthematerialtermsofthetransactionscontemplatedhereby andintheotherEquity LineTransactionDocuments;(C)theCompany has not and shall not providematerial non- publicinformationtotheInvestorunlesspriortheretotheInvestorshallhaveexecutedawritten agreementregardingtheconfidentiality anduseof suchinformation;and(D)theCompany understandsandconfirmsthattheInvestorwillberelying ontheacknowledgementssetforthin clauses(A)through (C)aboveiftheInvestoreffectsanytransactionsinthe securitiesoftheCompany.
[Signature Page Follows]
| ELED INVESTMENT AGREEMENT JULY.2014 | 25 | |
SIGNATUREPAGEOFINVESTMENTAGREEMENT
YoursignatureonthisSignaturePageevidencesyouragreement tobeboundbythetermsandconditionsoftheInvestmentAgreementandtheRegistrationRightsAgreementasofthe datefirstwrittenabove.
Theundersignedsignatoryhereby certifiesthathehasreadandunderstandstheInvestmentAgreement, andthe representationsmadebytheundersignedinthisInvestmentAgreementaretrueandaccurate,andagreestobebound by itsterms.
DUTCHESSOPPORTUNITY FUND,II,L.P.
| | By: | |
| | Douglas H. Leighton | |
| | Managing Member of: | |
| | Dutchess Capital Management, II, LLC General Partner to: | |
| | Dutchess Opportunity Fund, II, LP | |
| | ENERGIE HOLDINGS, INC. | |
| |  | |
| | | |
| | By: | |
| | Harold Hansen | |
| | Cheif Executive Officer | |
| ELED INVESTMENT AGREEMENT JULY.2014 | 26 | |
LISTOF EXHIBITS
EXHIBIT ARegistration RightsAgreement
EXHIBIT BOpinionofCompany'sCounsel
EXHIBIT CPutNotice
EXHIBIT DPutSettlementSheet
| ELED INVESTMENT AGREEMENT JULY.2014 | 27 | |
EXHIBITA
REGISTRATIONRIGHTSAGREEMENT(Attached)
A-1
EXHIBITB
OPINIONOFCOMPANY’SCOUNSEL
(Attached)
B-1
EXHIBITC
FORMOFPUTNOTICE
Date:
RE:PutNotice Number
DearMr.Leighton:
Thisistoinformyouthatasoftoday,ENERGIEHOLDINGS,INC.aDelawarecorporation(the"Company"),herebyelectstoexerciseitsrightpursuanttotheInvestmentAgreement enteredintowith DutchessOpportunityFundII,LP(“Dutchess”)torequireDutchessto purchasesharesofitscommonstock.TheCompany herebycertifies that:
1.Theundersignedis thedulyelectedoftheCompany.
2.Therearenofundamentalchangestotheinformation setforthintheRegistrationStatementwhich wouldrequiretheCompanytofileaposteffectiveamendment totheRegistrationStatement.
3.TheCompanyhas performedin allmaterialrespectsallcovenantsandagreementstobe performedby theCompanyandhascompliedinallmaterialrespectswith all obligationsandconditionscontainedin thisAgreementonorpriorto thePutNoticeDate,andshallcontinuetoperform in allmaterialrespects allcovenants and agreementsto beperformed bytheCompanythroughtheapplicablePutDate.Allconditionstothedelivery of thisPutNotice aresatisfiedasofthedatehereof.
4.Theundersignedherebyrepresents,warrantsand covenantsthatithasmadeallfilings(“SECFilings”) required tobemade byitpursuanttoapplicablesecuritieslaws(including,withoutlimitation,allfilingsrequiredunder theSecuritiesExchangeActof1934,whichincludeForms10-Q,10-K,8-K,etc.).AllSEC FilingsandotherpublicdisclosuresmadebytheCompany,including,withoutlimitation,allpressreleases, analystsmeetings andcalls, etc.(collectively, the “Public Disclosures”), havebeenreviewed andapprovedforreleasebytheCompany’s attorneysand,ifcontainingfinancialinformation, the Company’sindependentcertifiedpublicaccountants.Noneof theCompany’sPublicDisclosurescontain any untruestatement ofamaterialfactoromittostateanymaterialfactrequiredtobestatedthereinor necessary tomakethe statements therein, inthe lightofthe circumstances underwhich theyweremade, notmisleading.
5.Theamountof thisputisuptoshares.
6.ThePricingPeriodrunsfromuntil.
7.TheSuspensionPriceis$.
8.Thecurrentnumberofsharesissuedandoutstandingas ofthe Companyare:
9.Thenumberofsharescurrentlyavailableforresalepursuantto theRegistrationStatementonFormS-
1forthe EquityLineare:.
[CompanyName]
| | [Company Name] |
| | | | |
| | By: | | |
| | Name: | | |
| | Title: | | |
EXHIBITD
FORMOF PUTSETTLEMENTSHEET
Date:
RE:ENERGIEHOLDINGS, INC.
Dear:
Pursuant tothePutgivenbyENERGIEHOLDINGS,INC.toDutchessOpportunity Fund,II,LP on20__,wearenowsubmittingtheamountofcommonsharesforyoutoissue toDutchess.
PleasedeliversharestoDutchessOpportunityFund,II,LPimmediatelyandsendviaDWACtothefollowing account:
XXXXXX
Oncethesesharesarereceivedbyus,we will havethefundswired totheCompany.Regards,
DouglasH.Leighton
| DATE | PRICE |
| Date of Day 1 | VWAP of Day 1 |
| Date of Day 2 | VWAP of Day 2 |
| Date of Day 3 | VWAP of Day 3 |
| Date of Day 4 | VWAP of Day 4 |
| Date of Day 5 | VWAP of Day 5 |
| LOWEST VWAP IN PRICING PERIOD | | |
| | | |
| PUT AMOUNG | | |
| | | |
| PURCHASE PRICE (NINETY-FOUR PERCENT (94%)) | | |
| | | |
| AMOUNT OF SHARES DUE | | |
Theundersignedhas completedthisPutasofthis_thdayof_,20_.
| | ENERGIE HOLDINGS, INC. | |
| | | | |
| | By: | | |
| | Name: | | |
| | Title: | | |
