EXHIBIT 10.1

EQUITY CREDIT AGREEMENT

BY AND BETWEEN

PURAMED BIOSCIENCE, INC.

AND

SOUTHRIDGE PARTNERS II, LP

Dated
February 2, 2010

 
 

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THIS EQUITY CREDIT AGREEMENT entered into as of the 2th day of February, 2010
(this "AGREEMENT"), by and between SOUTHRIDGE PARTNERS II, LP, Delaware limited
partnership ("INVESTOR"), and PURAMED BIOSCIENCE, INC., a corporation organized
and existing under the laws of the State of Minnesota (the "COMPANY").

WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to Investor, from time to
time as provided herein, and Investor shall purchase, up to Seven Million Five
Hundred Thousand Dollars ($7,500,000) of its Common Stock (as defined below);
and

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I
CERTAIN DEFINITIONS

Section 1.1                      DEFINED TERMS as used in this Agreement, the
following terms shall have the following meanings specified or indicated (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined)

"AGREEMENT" shall have the meaning specified in the preamble hereof.

"BLACKOUT NOTICE" shall mean a written notice from the Company to the Investor
with respect to the existence of a Potential Material Event.

“BLACKOUT PERIOD" shall have the meaning specified in Section 2.6

“BLACKOUT SHARES" shall have the meaning specified in Section 2.6

"BY-LAWS" shall have the meaning specified in Section 4.8.

"CERTIFICATE" shall have the meaning specified in Section 4.8.

"CLAIM NOTICE" shall have the meaning specified in Section 9.3(a).

"CLOSING" shall mean one of the closings of a purchase and sale of shares of
Common Stock pursuant to Section 2.3.

“CLOSING BID PRICE” shall mean the closing bid price as reported by the
Principal Market.

"CLOSING CERTIFICATE" shall mean the closing certificate of the Company in the
form of Exhibit D hereto.

"CLOSING DATE" shall mean, with respect to a Closing, the sixth (6th) Trading
Day following the Put Date related to such Closing, or such earlier date as the
Company and

 
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Investor shall agree, provided all conditions to such Closing have been
satisfied on or before such Trading Day.

"COMMITMENT PERIOD" shall mean the period commencing on the Effective Date, and
ending on the earlier of (i) the date on which Investor shall have purchased Put
Shares pursuant to this Agreement for an aggregate Purchase Price of the Maximum
Commitment Amount, (ii) the date this Agreement is terminated pursuant to
Section 2.5, or (iii) the date occurring twenty four (24) months from the date
of commencement of the Commitment Period.

"COMMON STOCK" shall mean the Company's common stock, $0.001 par value per
share, and any shares of any other class of common stock whether now or
hereafter authorized, having the right to participate in the distribution of
dividends (as and when declared) and assets (upon liquidation of the Company).

"COMMON STOCK EQUIVALENTS" shall mean any securities that are convertible into
or exchangeable for Common Stock or any options or other rights to subscribe for
or purchase Common Stock or any such convertible or exchangeable securities.
 
 
"COMPANY" shall have the meaning specified in the preamble to this Agreement.

"CONDITION SATISFACTION DATE" shall have the meaning specified in Section 7.2.

"DAMAGES" shall mean any loss, claim, damage, liability, cost and expense
(including, without limitation, reasonable attorneys' fees and disbursements and
costs and expenses of expert witnesses and investigation).

"DISPUTE PERIOD" shall have the meaning specified in Section 9.3(a).

“DOLLAR VOLUME” shall mean the product of (a) the Closing Bid Price times (b)
the volume on the Principal Market on a Trading Day.

"DTC" shall have the meaning specified in Section 2.3.

"DWAC" shall have the meaning specified in Section 2.3.

"EFFECTIVE DATE" shall mean the date on which the SEC first declares effective a
Registration Statement, or any amendment thereof, registering the Registrable
Securities as set forth in Section 7.2(a) or, if later, the date on which the
Company and the Investor originally executed and delivered this Agreement.

"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934 and the rules and
regulations promulgated thereunder.

 
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"FAST" shall have the meaning specified in Section 2.3.

"FINRA" shall mean the Financial Industry Regulatory Authority, Inc.

“FLOOR PRICE” shall have the meaning specified in Section 2.1. In no event shall
the Floor Price be less than the greater of 80% of the average of the closing
bid prices for the 3 trading days ending immediately prior to the date of
delivery of the Draw Down Notice

"INDEMNIFIED PARTY" shall have the meaning specified in Section 9.3(a).

"INDEMNIFYING PARTY" shall have the meaning specified in Section 9.3(a).

"INDEMNITY NOTICE" shall have the meaning specified in Section 9.3(b).

"INVESTMENT AMOUNT" shall mean the dollar amount (within the range specified in
Section 2.2) to be invested by Investor to purchase Put Shares with respect to
any Put as notified by the Company to Investor in accordance with Section 2.2.

"INVESTOR" shall have the meaning specified in the preamble to this Agreement.

"LEGEND" shall have the meaning specified in Section 8.1.

"MARKET PRICE" shall mean the average of the lowest two (2) Closing Bid Prices
during the Valuation Period.

"MATERIAL ADVERSE EFFECT" shall mean any effect on the business, operations,
properties, or financial condition of the Company that is material and adverse
to the Company and/or any condition, circumstance, or situation that would
prohibit or otherwise materially interfere with the ability of the Company to
enter into and perform its obligations under any of (a) this Agreement and (b)
the Registration Rights Agreement.

"MAXIMUM COMMITMENT AMOUNT" shall mean Seven Million Five Hundred Thousand
Dollars ($7,500,000).

“MAXIMUM PUT AMOUNT” shall mean, with respect to any Put, the lesser of (a) Five
Hundred Thousand Dollars ($500,000), or (b) Two Hundred percent (200%) of the
average of the Dollar Volume for the twenty (20) Trading Days immediately
preceding the Put Date.

"NEW BID PRICE" shall have the meaning specified in Section 2.6.

 
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"OLD BID PRICE" shall have the meaning specified in Section 2.6.

"OUTSTANDING" shall mean, with respect to the Common Stock, at any date as of
which the number of shares of Common Stock is to be determined, all issued and
outstanding shares of Common Stock, including all shares of Common Stock
issuable in respect of outstanding convertible securities, scrip or any
certificates representing fractional interests in shares of Common Stock;
provided, however, that Outstanding shall not include any shares of Common Stock
then directly or indirectly owned or held by or for the account of the Company.

"PERSON" shall mean an individual, a corporation, a partnership, an association,
a trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.

"POTENTIAL MATERIAL EVENT" shall mean any of the following: (a) the possession
by the Company of material information not ripe for disclosure in a Registration
Statement, which shall be evidenced by determinations in good faith by the Board
of Directors of the Company that disclosure of such information in the
Registration Statement would be detrimental to the business and affairs of the
Company, or (b) any material engagement or activity by the Company which would,
in the good faith determination of the Board of Directors of the Company, be
adversely affected by disclosure in a Registration Statement at such time, which
determination shall be accompanied by a good faith determination by the Board of
Directors of the Company that the Registration Statement would be materially
misleading absent the inclusion of such information.

"PRINCIPAL MARKET" shall mean the Nasdaq Global Market, or other principal
exchange which is at the time the principal trading exchange or market for the
Common Stock.

"PURCHASE PRICE" shall mean 92% of the Market Price on such date on which the
Purchase Price is calculated in accordance with the terms and conditions of this
Agreement.

"PUT" shall mean the right of the Company to require the Investor to purchase
shares of Common Stock, subject to the terms and conditions of this Agreement.

"PUT DATE" shall mean any Trading Day during the Commitment Period that a Put
Notice is deemed delivered pursuant to Section 2.2(b).

"PUT NOTICE" shall mean a written notice, substantially in the form of Exhibit B
hereto, to Investor setting forth the Investment Amount with respect to which
the Company intends to require Investor to purchase shares of Common Stock
pursuant to the terms of this Agreement.

 
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"PUT SHARES" shall mean all shares of Common Stock issued or issuable pursuant
to a Put that has been exercised or may be exercised in accordance with the
terms and conditions of this Agreement.

"REGISTRABLE SECURITIES" shall mean the (a) Put Shares, (b) the Blackout Shares,
(c) and any securities issued or issuable with respect to any of the foregoing
by way of exchange, stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities when (i) a
Registration Statement has been declared effective by the SEC and such
Registrable Securities have been disposed of pursuant to a Registration
Statement, (ii) such Registrable Securities have been sold under circumstances
under which all of the applicable conditions of Rule 144 are met, (iii) such
time as such Registrable Securities have been otherwise transferred to holders
who may trade such shares without restriction under the Securities Act or (iv)
in the opinion of counsel to the Company, which counsel shall be reasonably
acceptable to Investor, such Registrable Securities may be sold without
registration under the Securities Act or the need for an exemption from any such
registration requirements and without any time, volume or manner limitations
pursuant to Rule 144(b)(i) (or any similar provision then in effect) under the
Securities Act.

"REGISTRATION RIGHTS AGREEMENT" shall mean the registration rights agreement in
the form of Exhibit A hereto.

"REGISTRATION STATEMENT" shall mean a registration statement on such form
promulgated by the SEC for which the Company then qualifies and which counsel
for the Company shall deem appropriate and which form shall be available for the
resale of the Registrable Securities to be registered thereunder in accordance
with the provisions of this Agreement and the Registration Rights Agreement and
in accordance with the intended method of distribution of such securities, for
the registration of the resale by Investor of the Registrable Securities under
the Securities Act.

"REGULATION D" shall mean Regulation D promulgated under the Securities Act.

"REMAINING PUT SHARES" shall have the meaning specified in Section 2.6.

"RULE 144" shall mean Rule 144 under the Securities Act or any similar provision
then in force under the Securities Act.

"SEC" shall mean the Securities and Exchange Commission.

"SECURITIES ACT" shall have the meaning specified in the recitals of this
Agreement.

 
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"SEC DOCUMENTS" shall mean, as of a particular date, all reports and other
documents file by the Company pursuant to Section 13(a) or 15(d) of the Exchange
Act since the beginning of the Company's then most recently completed fiscal
year as of the time in question (provided that if the date in question is within
ninety days of the beginning of the Company's fiscal year, the term shall
include all documents filed since the beginning of the second preceding fiscal
year).

“SHORT SALES” shall mean all “short sales” as defined in Rule 200 of Regulation
SHO under the Exchange Act (but shall not be deemed to include the location
and/or reservation of borrowable shares of Common Stock).

"SUBSCRIPTION DATE" shall mean the date on which this Agreement is executed and
delivered by the Company and Investor.

"THIRD PARTY CLAIM" shall have the meaning specified in Section 9.3(a).

“TRADING DAY” shall mean a day on which the Principal Market shall be open for
business.

“TRANSACTION DOCUMENTS” shall mean this Equity Credit Agreement, the
Registration Rights Agreement, Closing Certificate, and the Transfer Agent
Instructions.

"TRANSFER AGENT" shall mean the transfer agent for the Common Stock (and to any
substitute or replacement transfer agent for the Common Stock upon the Company's
appointment of any such substitute or replacement transfer agent).

"UNDERWRITER" shall mean any underwriter participating in any disposition of the
Registrable Securities on behalf of Investor pursuant to a Registration
Statement.

"VALUATION EVENT" shall mean an event in which the Company at any time during a
Valuation Period takes any of the following actions:

(a)           subdivides or combines the Common Stock;

(b)           pays a dividend in shares of Common Stock or makes any other
distribution of shares of Common Stock, except for dividends paid with respect
to any series of preferred stock authorized by the Company, whether existing now
or in the future;

(c)           issues any options or other rights to subscribe for or purchase
shares of Common Stock other than pursuant to this Agreement and the price per
share for which shares of Common Stock may at any time thereafter be issuable
pursuant to such options or other rights shall be less than the Closing Bid
Price in effect immediately prior to such issuance;

 
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(d)           issues any securities convertible into or exchangeable for shares
of Common Stock and the consideration per share for which shares of Common Stock
may at any time thereafter be issuable pursuant to the terms of such convertible
or exchangeable securities shall be less than the Closing Bid Price  in effect
immediately prior to such issuance;

(e)           issues shares of Common Stock otherwise than as provided in the
foregoing subsections (a) through (d), at a price per share less, or for other
consideration lower, than the Closing Bid Price in effect immediately prior to
such issuance, or without consideration; or

(f)           makes a distribution of its assets or evidences of indebtedness to
the holders of Common Stock as a dividend in liquidation or by way of return of
capital or other than as a dividend payable out of earnings or surplus legally
available for dividends under applicable law or any distribution to such holders
made in respect of the sale of all or substantially all of the Company's assets
(other than under the circumstances provided for in the foregoing  subsections
(a) through (e).

"VALUATION PERIOD" shall mean the period of five (5) Trading Days immediately
following the date on which the applicable Put Notice is deemed to be delivered
and during which the Purchase Price of the Common Stock is valued; provided,
however, that if a Valuation Event occurs during any Valuation Period, a new
Valuation Period shall begin on the Trading Day immediately after the occurrence
of such Valuation Event and end on the fifth (5th) Trading Day thereafter.

 
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK

Section 2.1                      INVESTMENTS.

(a)           PUTS.  Upon the terms and conditions set forth herein (including,
without limitation, the provisions of Article VII), on any Put Date the Company
may exercise a Put by the delivery of a Put Notice. The number of Put Shares
that Investor shall purchase pursuant to such Put shall be determined by
dividing the Investment Amount specified in the Put Notice by the Purchase Price
with respect to such Put Notice.
 
 
(b)           RESTRICTED SHARES.  As a condition for the execution of this
Agreement by the Investor, the Company shall deliver to the Investor 25,000
shares of Common Stock with restrictive securities legend (“Restricted
Shares”).  The Restricted Shares shall be delivered to the Investor prior to or
on the execution of this Agreement.

(c)           FLOOR PRICE.   The Company must specify a Floor Price in each such
Put Notice.  In the event that during a Valuation Period, the Bid Price on a
Trading Day is below

 
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the Floor Price, the Investor shall be under no obligation to fund   one-fifth
of the Put Amount for each such Trading Day and the Put Amount shall be adjusted
accordingly. In the event that during a Valuation Period, the Bid Price on any
three (3) Trading Days - not necessarily consecutive - is below the Floor Price,
the balance of the Investor's obligation for the Put Amount under such put shall
terminate on the last of such Trading Days and the Put Amount shall be adjusted
accordingly.

Section 2.2                      MECHANICS.

(a)           PUT NOTICE. At any time and from time to time during the
Commitment Period, the Company may deliver a Put Notice to Investor, subject to
the conditions set forth in Section 7.2; provided, however, that the Investment
Amount identified in the applicable Put Notice shall not be greater than the
Maximum Put Amount and, when taken together with any prior Put Notices, shall
not exceed the Maximum Commitment.
 
 
(b)           DATE OF DELIVERY OF PUT NOTICE. A Put Notice shall be deemed
delivered on (i) the Trading Day it is received by facsimile or otherwise by
Investor if such notice is received on or prior to 12:00 noon New York time, or
(ii) the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 12:00 noon New York time on a Trading Day or at anytime on a day
which is not a Trading Day.

Section 2.3                      CLOSINGS. On or prior to each Closing Date for
any Put, (a) the Company shall deliver to the Investor one or more certificates,
at Investor's option, representing the Put Shares purchased by Investor pursuant
to Section 2.1 herein, registered in the name of Investor and (b) Investor shall
deliver the Investment Amount specified in the Put Notice by wire transfer of
immediately available funds to an account designated by the Company within
twenty four (24) hours of receipt of the Put Shares. In lieu of delivering
physical certificates representing the Common Stock issuable in accordance with
clause (a) of this Section 2.3, and provided that the Transfer Agent then is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer ("FAST") program, upon request of Investor, the Company shall use its
commercially reasonable efforts to cause the Transfer Agent to electronically
transmit, prior to the applicable Closing Date, the applicable Put Shares by
crediting the account of the Investor's prime broker with DTC through its
Deposit Withdrawal Agent Commission ("DWAC") system, and provide proof
satisfactory to the Investor of such delivery.  In addition, on or prior to such
Closing Date, each of the Company and Investor shall deliver to each other all
documents, instruments and writings required to be delivered by either of them
pursuant to this Agreement in order to implement and effect the transactions
contemplated herein.
 
 
Section 2.4                      [INTENTIONALLY OMITTED]

Section 2.5                      [INTENTIONALLY OMITTED]
 
 
Section 2.6                      BLACKOUT SHARES.

 
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(a)           If at any time or from time to time after the date of
effectiveness of the Registration Statement, the Company delivers a Blackout
Notice to the Investor, the Investor shall not offer or sell any Put Shares,
Warrant Shares, or Blackout Shares (as defined below), or engage in any other
transaction involving or relating the such shares, from the time of the Blackout
Notice until Investor receives written notice from the Company that such
Potential Material Event either has been disclosed to the public or no longer
constitutes a Potential Material Event (such period, a "Blackout Period").

(b)           In the event that, (i) within fifteen (15) Trading Days following
any Closing Date, the Company delivers a Blackout Notice to Investor, and (ii)
the Closing Bid Price on the Trading Day immediately preceding the applicable
Blackout Period ("OLD BID PRICE") is greater than the Closing Bid Price on the
first Trading Day following such Blackout Period that Investor may sell its
Registrable Securities pursuant to an effective Registration Statement ("NEW BID
PRICE"), then the Company shall issue to Investor the number of additional
shares of Registrable Securities (the "BLACKOUT SHARES") equal to the excess of
(x) the product of the number of Put Shares held by Investor immediately prior
to the Blackout Period that were issued on the most recent Closing Date (the
"REMAINING PUT SHARES") multiplied by the Old Bid Price, divided by the New Bid
Price, over (y) the Remaining Put Shares.

Section 2.7                      [INTENTIONALLY OMITTED]

           Section 2.8                      LIQUIDATED DAMAGES. Each of the
Company and Investor acknowledge and agree that the requirement to issue
Blackout Shares under Section 2.6 shall give rise to liquidated damages and not
penalties. Each of the Company and Investor further acknowledge that (a) the
amount of loss or damages likely to be incurred is incapable or is difficult to
precisely estimate, (b) the amount specified in such Section bears a reasonable
proportion and is not plainly or grossly disproportionate to the probable loss
likely to be incurred by Investor in connection with a Blackout Period, and (c)
each of the Company and Investor are sophisticated business parties and have
been represented by sophisticated and able legal and financial counsel and
negotiated this Agreement at arm's length.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR

Investor represents and warrants to the Company that:

Section 3.1                      INTENT. Investor is entering into this
Agreement for its own account and Investor has no present arrangement (whether
or not legally binding) at any time to sell the Common Stock to or through any
person or entity; provided, however, that Investor reserves the right to dispose
of the Common Stock at any time in accordance with federal and state securities
laws applicable to such disposition.

Section 3.2                      NO LEGAL ADVICE FROM THE COMPANY.  The Investor
acknowledges that it has had the opportunity to review this Agreement and the
transactions

 
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contemplated by this Agreement with its own legal counsel and investment and tax
advisors.  The Investor is relying solely on such counsel and advisors and not
on any statements or  representations of the Company or any of its
representatives or agents for legal, tax or investment advice with respect to
this investment, the transactions contemplated by this Agreement or the
securities laws of any jurisdiction.

Section 3.3                      SOPHISTICATED INVESTOR. Investor is a
sophisticated investor (as described in Rule 506(b)(2)(ii) of Regulation D) and
an accredited investor (as defined in Rule 501 of Regulation D), and Investor
has such experience in business and financial matters that it is capable of
evaluating the merits and risks of an investment in the Common Stock. Investor
acknowledges that an investment in the Common Stock is speculative and involves
a high degree of risk.

Section 3.4                      AUTHORITY. (a) Investor has the requisite power
and authority to enter into and perform its obligations under this Agreement and
the transactions contemplated hereby in accordance with its terms; (b) the
execution and delivery of this Agreement and the Registration Rights Agreement,
and the consummation by it of the transactions contemplated hereby and thereby
have been duly authorized by all necessary action and no further consent or
authorization of Investor or its partners is required; and (c) each of this
Agreement and the Registration Rights Agreement has been duly authorized and
validly executed and delivered by Investor and constitutes a valid and binding
obligation of Investor enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.

Section 3.5                      NOT AN AFFILIATE. Investor is not an officer,
director or "affiliate" (as that term is defined in Rule 405 of the Securities
Act) of the Company.

Section 3.6                      ORGANIZATION AND STANDING. Investor is a
limited partnership duly organized, validly existing and in good standing under
the laws of the Delaware and has all requisite power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
Investor is duly qualified and in good standing in every jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, other than those in which the failure so to qualify
would not have a material adverse effect on Investor.

Section 3.7                      ABSENCE OF CONFLICTS. The execution and
delivery of this Agreement and any other document or instrument contemplated
hereby, and the consummation of the transactions contemplated hereby and
thereby, and compliance with the requirements hereof and thereof, will not (a)
violate any law, rule, regulation, order, writ, judgment, injunction, decree or
award binding on Investor, (b) violate any provision of any indenture,
instrument or agreement to which Investor is a party or is subject, or by which
Investor or any of its assets is bound, or conflict with or constitute a
material default thereunder, (c) result in the creation or imposition of any
lien pursuant to the terms of any such indenture, instrument or

 
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agreement, or constitute a breach of any fiduciary duty owed by Investor to any
third party, or (d) require the approval of any third-party (that has not been
obtained) pursuant to any material contract, instrument, agreement, relationship
or legal obligation to which Investor is subject or to which any of its assets,
operations or management may be subject.

Section 3.8                      DISCLOSURE; ACCESS TO INFORMATION. Investor had
an opportunity to review copies of the SEC Documents filed on behalf of the
Company and has had access to all publicly available information with respect to
the Company.

Section 3.9                      MANNER OF SALE. At no time was Investor
presented with or solicited by or through any leaflet, public promotional
meeting, television advertisement or any other form of general solicitation or
advertising.

Section 3.10 FINANCIAL CAPABILITY. Investor presently has the financial capacity
and the necessary capital to perform its obligations hereunder.
 
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Investor that, except as disclosed in the
SEC Documents:

Section 4.1                      ORGANIZATION OF THE COMPANY. The Company is a
corporation duly organized and validly existing and in good standing under the
laws of the State of Minnesota and has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted.  The Company is duly qualified as a foreign corporation 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, other than those in which the failure so to qualify would not have a
Material Adverse Effect.

Section 4.2                      AUTHORITY. (a) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement and the Registration Rights Agreement and to issue the Put
Shares,  Restricted Shares and Blackout Shares, if any; (b) the execution and
delivery of this Agreement and the Registration Rights Agreement by the Company
and the consummation by it of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action and no further
consent or authorization of the Company or its Board of Directors or
stockholders is required; and (c) each of this Agreement and the Registration
Rights Agreement has been duly executed and delivered by the Company and
constitutes 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, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
 
 

 
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Section 4.3                      CAPITALIZATION. As of the date hereof, the
authorized capital stock of the Company consists of (i) 45,000,000 shares of
Common Stock, $0.001 par value per share, of which 13,281,894 shares are
outstanding as of the date hereof.

Except as otherwise disclosed in the SEC Documents, there are no outstanding
securities which are convertible into shares of Common Stock, whether such
conversion is currently exercisable or exercisable only upon some future date or
the occurrence of some event in the future.

All of the outstanding shares of Common Stock of the Company have been duly and
validly authorized and issued and are fully paid and non-assessable.
 
 
Section 4.4                      COMMON STOCK. The Company has registered the
Common Stock pursuant to Section 12(b) or 12(g) of the Exchange Act and is in
full compliance with all reporting requirements of the Exchange Act, and the
Company has maintained all requirements for the continued listing or quotation
of the Common Stock, and such Common Stock is currently listed or quoted on the
Principal Market. The Company has taken no action designed to, or which to its
knowledge is likely to have the effect of, terminating the registration of the
Common Stock under the Exchange Act nor has the Company received any
notification that the SEC is contemplating terminating such registration.

Section 4.5                      SEC DOCUMENTS. The Company may make available
to Investor true and complete copies of the SEC Documents (including, without
limitation, proxy information and solicitation materials). To the Company’s
knowledge, the Company has not provided to Investor any information that,
according to applicable law, rule or regulation, should have been disclosed
publicly prior to the date hereof by the Company, but which has not been so
disclosed. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and other federal, state and local laws, rules and
regulations applicable to such SEC Documents, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Documents comply as to form and substance in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except (a) as may be otherwise indicated in such financial statements or the
notes thereto or (b) 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 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).
 
 

 
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Section 4.6                      VALID ISSUANCES. When issued and paid for as
herein provided, the Put Shares, the Restricted Shares, and the Blackout Shares,
if any, shall be duly and validly issued, fully paid, and non-assessable.
Neither the sales of the Put Shares or the Blackout Shares, if any, pursuant to,
nor the Company's performance of its obligations under, this Agreement or the
Registration Rights Agreement shall (a) result in the creation or imposition of
any liens, charges, claims or other encumbrances upon the Put Shares, Warrant
Shares or Blackout Shares, if any, or any of the assets of the Company, or (b)
entitle the holders of outstanding shares of Common Stock to preemptive or other
rights to subscribe to or acquire the Common Stock or other securities of the
Company. The Put Shares, Warrant Shares and Blackout Shares, if any, shall not
subject Investor to personal liability, in excess of the subscription price by
reason of the ownership thereof.

Section 4.7                      [INTENTIONALLY OMITTED]

Section 4.8                      [INTENTIONALLY OMITTED]

Section 4.9                      NO CONFLICTS. The execution, delivery and
performance of this Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby, including without limitation the
issuance of the Put Shares and the Blackout Shares, if any, do not and will not
(a) result in a violation of the Certificate or By-Laws or (b) conflict with, or
constitute a material default (or an event that with notice or lapse of time or
both would become a material default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
indenture, instrument or any "lock-up" or similar provision of any underwriting
or similar agreement to which the Company is a party, or (c) result in a
violation of any federal, state or local law, rule, regulation, order, judgment
or decree (including federal and state securities laws and regulations)
applicable to the Company or by which any property or asset of the Company is
bound or affected (except for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect) nor is the
Company otherwise in violation of, conflict with or in default under any of the
foregoing. The business of the Company is not being conducted in violation of
any law, ordinance or regulation of any governmental entity, except for possible
violations that either singly or in the aggregate do not and will not have a
Material Adverse Effect. The Company is not required under federal, state or
local 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 this
Agreement or issue and sell the Common Stock in accordance with the terms hereof
(other than any SEC, FINRA or state securities filings that may be required to
be made by the Company subsequent to any Closing, any registration statement
that may be filed pursuant hereto, and any shareholder approval required by the
rules applicable to companies whose common stock trades on the Nasdaq Global
Market); provided that, for purposes of the representation made in this
sentence, the Company is assuming and relying upon the accuracy of the relevant
representations and agreements of Investor herein.

 
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Section 4.10                      NO MATERIAL ADVERSE CHANGE. Since September
30, 2009 no event has occurred that would have a Material Adverse Effect on the
Company, except as disclosed in the SEC Documents.
 
Section 4.11                      NO UNDISCLOSED LIABILITIES. The Company has no
liabilities or obligations that are material, individually or in the aggregate,
and that are not disclosed in the SEC Documents or otherwise publicly announced,
other than those incurred in the ordinary course of the Company's businesses
since September 30, 2009 and which, individually or in the aggregate, do not or
would not have a Material Adverse Effect on the Company.

Section 4.12                      NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since
September 30, 2009, no event or circumstance has occurred or exists with respect
to the Company or its businesses, properties, operations or financial condition,
that, under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents.

Section 4.13                      [INTENTIONALLY OMITTED]

Section 4.14                      LITIGATION AND OTHER PROCEEDINGS. Except as
may be set forth in the SEC Documents, there are no lawsuits or proceedings
pending or to the knowledge of the Company threatened, against the Company, nor
has the Company received any written or oral notice of any such action, suit,
proceeding or investigation, which would have a Material Adverse Effect. Except
as set forth in the SEC Documents, no judgment, order, writ, injunction or
decree or award has been issued by or, so far as is known by the Company,
requested of any court, arbitrator or governmental agency which would have a
Material Adverse Effect.
 
 
Section 4.15                      MATERIAL NON-PUBLIC INFORMATION. The Company
is not in possession of, nor has the Company or its agents disclosed to
Investor, any material non-public information that (a) if disclosed, would
reasonably be expected to have a materially adverse effect on the price of the
Common Stock or (b) according to applicable law, rule or regulation, should have
been disclosed publicly by the Company prior to the date hereof but which has
not been so disclosed.

Section 4.16                      [INTENTIONALLY OMITTED]

Section 4.17                      [INTENTIONALLY OMITTED]

ARTICLE V
COVENANTS OF INVESTOR

Section 5.1                        COMPLIANCE WITH LAW; TRADING IN SECURITIES.
Investor's trading activities with respect to shares of the Common Stock will be
in compliance with all applicable state and federal securities laws, rules and
regulations and the rules and regulations of FINRA and the Principal Market on
which the Common Stock is listed or quoted.

 
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Section 5.2                        SHORT SALES AND CONFIDENTIALITY. Neither
Investor nor any affiliate of the Investor acting on its behalf or pursuant to
any understanding with it will execute any Short Sales during the period from
the date hereof to the end of the Commitment Period.  For the purposes hereof,
and in accordance with Regulation SHO, the sale after delivery of a Put Notice
of such number of shares of Common Stock reasonably expected to be purchased
under a Put Notice shall not be deemed a Short Sale.

Other than to other Persons party to this Agreement, Investor has maintained the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction).

ARTICLE VI
COVENANTS OF THE COMPANY

Section 6.1                        REGISTRATION RIGHTS. The Company shall use
commercially reasonable efforts to cause the Registration Statement to remain in
full force and effect and the Company shall comply in all respects with the
terms thereof.

Section 6.2                        RESERVATION OF COMMON STOCK. As of the date
hereof, the Company has available and the Company shall reserve and keep
available at all times, free of preemptive rights shares of Common Stock for the
purpose of enabling the Company to satisfy its obligation to issue the Put
Shares.  The Company will, from time to time as needed in advance of a Closing
Date, reserve and keep available until the consummation of such Closing, free of
preemptive rights sufficient shares of Common Stock for the purpose of enabling
the Company to satisfy its obligation to issue the Put Shares to be issued in
connection therewith. The number of shares so reserved from time to time, as
theretofore increased or reduced as hereinafter provided, may be reduced by the
number of shares actually delivered hereunder.

Section 6.3                        LISTING OF COMMON STOCK.  If the Company
applies to have the Common Stock traded on any other Principal Market, it shall
include in such application the Put Shares, the Restricted Shares, and the
Blackout Shares, if any, and shall take such other action as is necessary or
desirable in the reasonable opinion of Investor to cause the Common Stock to be
listed on such other Principal Market as promptly as possible. The Company shall
use its commercially reasonable efforts to continue the listing and trading of
the Common Stock on the Principal Market (including, without limitation,
maintaining sufficient net tangible assets) and will comply in all respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of the FINRA and the Principal Market.

Section 6.4                        EXCHANGE ACT REGISTRATION. The Company shall
take all commercially reasonable steps to cause the Common Stock to continue to
be registered under Section 12(g) or 12(b) of the Exchange Act, will use its
commercially reasonable efforts to comply in all material respects with its
reporting and filing obligations under said act, and will not take any action or
file any document (whether or not permitted by said act or the rules

 
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thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under the Exchange Act. 

Section 6.5                        NOTICE OF CERTAIN EVENTS AFFECTING
REGISTRATION; SUSPENSION OF RIGHT TO MAKE A PUT. The Company shall promptly
notify Investor upon the occurrence of any of the following events in respect of
a registration statement or related prospectus in respect of an offering of
Registrable Securities: (a) receipt of any request by the SEC or any other
federal or state governmental authority during the period of effectiveness of
the registration statement for amendments or supplements to the Registration
Statement or related prospectus; (b) the issuance by the SEC or any other
federal or state governmental authority of any stop order suspending the
effectiveness of any Registration Statement or the initiation of any proceedings
for that purpose; (c) receipt 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; (d) the happening of any event that makes any
statement made in such Registration Statement or related prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in the
registration statement, related prospectus or documents so that, in the case of
a Registration Statement, 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 not misleading, and that in the case of
the related prospectus, 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 light of the circumstances
under which they were made, not misleading; and (e) the Company's reasonable
determination that a post-effective amendment to the registration statement
would be appropriate, and the Company shall promptly make available to Investor
any such supplement or amendment to the related prospectus. The Company shall
not deliver to Investor any Put Notice during the continuation of any of the
foregoing events.

Section 6.6                        CONSOLIDATION; MERGER.  The Company shall not
at any time after the date hereof effect any merger or consolidation of the
Company unless the resulting successor or acquiring entity (if not the Company)
assumes by written instrument the obligation to deliver to Investor such shares
of Common Stock and/or securities as Investor is entitled to receive pursuant to
this Agreement.

Section 6.7                        REIMBURSEMENT.  If (i) Investor, other than
by reason of its gross negligence or willful misconduct, becomes involved in any
capacity in any action, proceeding or investigation brought by any shareholder
of the Company, in connection with or as a result of the consummation of the
transactions contemplated by the Transaction Documents, or if Investor is
impleaded in any such action, proceeding or investigation by any person, or (ii)
Investor, other than by reason of its gross negligence or willful misconduct or
by reason of its trading of the Common Stock in a manner that is illegal under
the federal securities laws, becomes involved in any capacity in any action,
proceeding or investigation brought by the SEC against or involving the Company
or in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if Investor is impleaded in any
such action,

 
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proceeding or investigation by any person, then in any such case, the Company
will reimburse Investor for its reasonable legal and other expenses (including
the cost of any investigation and preparation) incurred in connection therewith,
as such expenses are incurred. The reimbursement obligations of the Company
under this section shall be in addition to any liability which the Company may
otherwise have, shall extend upon the same terms and conditions to any
affiliates of Investor that are actually named in such action, proceeding or
investigation, and partners, directors, agents, employees and controlling
persons (if any), as the case may be, of Investor and any such affiliate, and
shall be binding upon and inure to the benefit of any successors, assigns, heirs
and personal representatives of the Company, Investor and any such affiliate and
any such person.

Section 6.8                        DILUTION.  The number of shares of Common
Stock issuable as Put Shares may increase substantially in certain
circumstances, including, but not necessarily limited to, the circumstance
wherein the trading price of the Common Stock declines during the period between
the Effective Date and the end of the Commitment Period.  The Company’s
executive officers and directors have studied and fully understand the nature of
the transactions contemplated by this Agreement and recognize that they have a
potential dilutive effect.  The board of directors of the Company has concluded,
in its good faith business judgment, that such issuance is in the best interests
of the Company.  The Company specifically acknowledges that its obligation to
issue the Put Shares is binding upon the Company and enforceable regardless of
the dilution such issuance may have on the ownership interests of other
shareholders of the Company.

Section 6.9                        CERTAIN AGREEMENTS. The Company covenants and
agrees that it will not, without the prior written consent of the Investor,
enter into any other equity line of credit agreement with a third party during
the Commitment Period having terms and conditions substantially comparable to
this Agreement.  For the avoidance of doubt, nothing contained in the
Transaction Documents shall restrict, or require the Investor's consent for, any
agreement providing for the issuance or distribution of (or the issuance or
distribution of) any equity securities pursuant to any agreement or arrangement
that is not commonly understood to be an "equity line of credit."
 
 
ARTICLE VII
CONDITIONS TO DELIVERY OF
PUT NOTICES AND CONDITIONS TO CLOSING

Section 7.1                        CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
COMPANY TO ISSUE AND SELL COMMON STOCK. The obligation hereunder of the Company
to issue and sell the Put Shares to Investor incident to each Closing is subject
to the satisfaction, at or before each such Closing, of each of the conditions
set forth below.

(a)           ACCURACY OF INVESTOR'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Investor shall be true and correct in all
material respects as of the date of this Agreement and as of the date of each
such Closing as

 
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though made at each such time, except for changes which have not had a Material
Adverse Effect.

(b)           PERFORMANCE BY INVESTOR. Investor 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
Investor at or prior to such Closing.

(c)           Principal Market Regulation. The Company shall not issue any Put
Shares, Restricted Shares or Blackout Shares, if any, and the Investor shall not
have the right to receive any Put Shares, Restricted Shares or Blackout Shares,
if the issuance of such shares would exceed the aggregate number of shares of
Common Stock which the Company may issue without breaching the Company’s
obligations under the rules or regulations of the Principal Market (the
“EXCHANGE CAP”), except that such limitation shall not apply in the event that
the Company obtains the approval of its stockholders as required by the
applicable rules of the Principal Market for issuances of Common Stock in excess
of such amount, which such approval the Company will use its best efforts to
obtain. Until such approval is obtained, Investor shall not be issued under the
Transaction Documents, shares of Common Stock in an amount greater than the
Exchange Cap.

Section 7.2                      CONDITIONS PRECEDENT TO THE RIGHT OF THE
COMPANY TO DELIVER A PUT NOTICE AND THE OBLIGATION OF INVESTOR TO PURCHASE PUT
SHARES. The right of the Company to deliver a Put Notice and the obligation of
Investor hereunder to acquire and pay for the Put Shares incident to a Closing
is subject to the satisfaction, on (i) the date of delivery of such Put Notice
and (ii) the applicable Closing Date (each a "CONDITION SATISFACTION DATE"), of
each of the following conditions:
 
 
(a)           EFFECTIVE REGISTRATION STATEMENT. As set forth in the Registration
Rights Agreement, a Registration Statement, and any amendment or supplement
thereto, shall have previously become effective for the resale by Investor of
the Registrable Securities subject to such Put Notice, and such Registration
Statement shall remain effective on each Condition Satisfaction Date and (i)
neither the Company nor Investor shall have received notice that the SEC has
issued or intends to issue a stop order with respect to such Registration
Statement or that the SEC otherwise has suspended or withdrawn the effectiveness
of such Registration Statement, either temporarily or permanently, or intends or
has threatened to do so (unless the SEC's concerns have been addressed and
Investor is reasonably satisfied that the SEC no longer is considering or
intends to take such action), and (ii) no other suspension of the use or
withdrawal of the effectiveness of such Registration Statement or related
prospectus shall exist.

(b)           ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company shall be true and correct in all
material respects as of each Condition Satisfaction Date as though made at each
such time (except for representations and warranties specifically made as of a
particular date) with respect to all periods, and as to all events and
circumstances occurring or existing to and including each

 
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Condition Satisfaction Date, except for any conditions which have temporarily
caused any representations or warranties herein to be incorrect and which have
been corrected with no continuing impairment to the Company or Investor.

(c)           PERFORMANCE BY THE COMPANY. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement and the Registration Rights Agreement
to be performed, satisfied or complied with by the Company at or prior to each
Condition Satisfaction Date.

(d)           NO INJUNCTION. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
adopted by any court or governmental authority of competent jurisdiction that
prohibits or directly and materially adversely affects any of the transactions
contemplated by this Agreement, and no proceeding shall have been commenced that
may have the effect of prohibiting or materially adversely affecting any of the
transactions contemplated by this Agreement.

(e)           ADVERSE CHANGES. Since the date of filing of the Company's most
recent SEC Document, no event that had or is reasonably likely to have a
Material Adverse Effect has occurred.

(f)           NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The
trading of the Common Stock shall not have been suspended by the SEC, the
Principal Market or the FINRA and the Common Stock shall have been approved for
listing or quotation on and shall not have been delisted from the Principal
Market.

(g)           LEGAL OPINION. The Company shall have caused to be delivered to
Investor, prior to the first Closing, an opinion of the Company's legal
addressed to Investor.

(h)           FIVE PERCENT LIMITATION. On each Closing Date, the number of Put
Shares then to be purchased by Investor shall not exceed the number of such
shares that, when aggregated with all other shares of Registrable Securities
then owned by Investor beneficially or deemed beneficially owned by Investor,
would result in Investor owning more than 4.99% of all of such Common Stock as
would be outstanding on such Closing Date, as determined in accordance with
Section 16 of the Exchange Act and the regulations promulgated thereunder. For
purposes of this Section, in the event that the amount of Common Stock
outstanding as determined in accordance with Section 16 of the Exchange Act and
the regulations promulgated thereunder is greater on a Closing Date than on the
date upon which the Put Notice associated with such Closing Date is given, the
amount of Common Stock outstanding on such Closing Date shall govern for
purposes of determining whether Investor, when aggregating all purchases of
Common Stock made pursuant to this Agreement and Blackout Shares, if any, would
own more than 4.99% of the Common Stock following such Closing Date.

 
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(i)           Principal Market Regulation. The Company shall not issue any Put
Shares, or Blackout Shares, if any, and the Investor shall not have the right to
receive any Put Shares, or Blackout Shares, if the issuance of such shares would
exceed the Exchange Cap, except that such limitation shall not apply in the
event that the Company obtains the approval of its stockholders as required by
the applicable rules of the Principal Market for issuances of Common Stock in
excess of such amount, which such approval the Company will use its best efforts
to obtain. Until such approval is obtained, Investor shall not be issued under
the Transaction Documents, shares of Common Stock in an amount greater than the
Exchange Cap.

(j)           NO KNOWLEDGE. The Company shall have no knowledge of any event
more likely than not to have the effect of causing such Registration Statement
to be suspended or otherwise ineffective (which event is more likely than not to
occur within the fifteen Trading Days following the Trading Day on which such
Notice is deemed delivered).

(k)           SHAREHOLDER VOTE. The issuance of shares of Common Stock with
respect to the applicable Closing, if any, shall not violate the shareholder
approval requirements of the Principal Market.

(l)           NO VALUATION EVENT. No Valuation Event shall have occurred since
the Put Date.

(m)           OTHER. On each Condition Satisfaction Date, Investor shall have
received a certificate in substantially the form and substance of Exhibit D
hereto, executed by an executive officer of the Company and to the effect that
all the conditions to such Closing shall have been satisfied as at the date of
each such certificate.

ARTICLE VIII
LEGENDS

Section 8.1                        LEGENDS. Prior to the execution hereof, the
Company shall execute the Transfer Agent Instructions in the form annexed hereto
as Exhibit E.  Until such time as the Registrable Securities have been
registered under the Securities Act, as contemplated by the Registration Rights
Agreement, and sold in accordance with an effective Registration Statement or
otherwise in accordance with another effective registration statement, or until
such Registrable Securities can otherwise be sold without restriction, whichever
is earlier, each certificate representing Registrable Securities will bear the
following legend (the "LEGEND"):

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT

 
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TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.

 
The Company warrants that it will give the Transfer Agent no instructions
inconsistent with the provisions hereof. It is the intent and purpose of such
instructions, as provided therein, to require the Transfer Agent to issue to
Investor certificates evidencing shares of Common Stock incident to a Closing,
free of the Legend; provided that (a) a Registration Statement shall then be
effective, (b) Investor confirms to the Transfer Agent and the Company that it
has sold or intends to sell such Common Stock to a third party which is not an
affiliate of Investor or the Company and Investor agrees to redeliver the
certificate representing such shares of Common Stock to the Transfer Agent to
add the Legend in the event the Common Stock is not sold, and (c) Investor
confirms to the transfer agent and the Company that Investor has complied, or
will comply  with the prospectus delivery requirement under the Securities Act.
 
 
Section 8.2                        NO OTHER LEGEND OR STOCK TRANSFER
RESTRICTIONS. No legend other than the one specified in Section 8.1 has been or
shall be placed on the share certificates representing the Common Stock.
 

Section 8.3                        COVER.  If the Company fails for any reason
to take or cause to be taken all steps necessary on the part of the Company to
deliver the Put Shares on such Closing Date and the holder of the Put Shares (a
"Investor") purchases, in an open market transaction or otherwise, shares of
Common Stock (the "Covering Shares") in order to make delivery in satisfaction
of a sale of Common Stock by such Investor (the "Sold Shares"), which delivery
such Investor anticipated to make using the Put Shares (a "Buy-In"), then the
Company shall pay to such Investor, in addition to all other amounts
contemplated in other provisions of the Transaction Documents, and not in lieu
thereof, the Buy-In Adjustment Amount (as defined below). The "Buy-In Adjustment
Amount" is the amount equal to the excess, if any, of (x) such Investor’s total
purchase price (including brokerage commissions, if any) for the Covering Shares
over (y) the net proceeds (after brokerage commissions, if any) received by such
Investor from the sale of the Sold Shares. The Company shall pay the Buy-In
Adjustment Amount to such Investor in immediately available funds immediately
upon demand by such Investor. By way of illustration and not in limitation of
the foregoing, if such Investor purchases Covering Shares having a total
purchase price (including brokerage commissions) of $11,000 to cover a Buy-In
with respect to shares of Common Stock that it sold for net proceeds of $10,000,
the Buy-In Adjustment Amount that the Company will be required to pay to such
Investor will be $1,000.

Section 8.4                        INVESTOR'S COMPLIANCE. Nothing in this
Article VIII shall affect in any way Investor's obligations under any agreement
to comply with all applicable securities laws upon resale of the Common Stock.

 
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ARTICLE IX
NOTICES; INDEMNIFICATION

Section 9.1                      NOTICES. All notices, demands, requests,
consents, approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall be (a)
personally served, (b) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (c) delivered by reputable air courier
service with charges prepaid, or (d) transmitted by hand delivery, telegram, or
facsimile, addressed as set forth below or to such other address as such party
shall have specified most recently by written notice given in accordance
herewith. Any notice or other communication required or permitted to be given
hereunder shall be deemed effective (i) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (ii) on the second business day following the date of mailing by express
courier service or on the fifth business day after deposited in the mail, in
each case, fully prepaid, addressed to such address, or upon actual receipt of
such mailing, whichever shall first occur.

The addresses for such communications shall be:
 
 
If to the Company:                                           

Puramed Bioscience, Inc.
Attn: Jim Higgins
1326 Shofield Avenue
Shofield, WI 54476
Tel:  (715) 359-6373
Fax:  (715) 355-3093

With a copy to:

Anslow & Jaclin, LLP
Attn: Joseph M. Lucosky, Esq.
195 Route 9 South
Manalapan, NJ 07726
Tel:  (732) 409-1212
Fax: (732) 577-1188

If to Investor:

Southridge Partners II, LP
90 Grove Street
Ridgefield, Connecticut 06877
Tel: 203-431-8300
Fax: 203-431-8301

 
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Either party hereto may from time to time change its address or facsimile number
for notices under this Section 9.1 by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.

Section 9.2                        INDEMNIFICATION.  The Company agrees to
indemnify and hold harmless Investor and its officers, directors, employees, and
agents, and each Person or entity, if any, who controls Investor within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
together with the Controlling Persons (as defined in the Registration Rights
Agreement) from and against any Damages, joint or several, and any action in
respect thereof to which Investor, its partners, affiliates, officers,
directors, employees, and duly authorized agents, and any such Controlling
Person becomes subject to, resulting from, arising out of or relating to any
misrepresentation, breach of warranty or nonfulfillment of or failure to perform
any covenant or agreement on the part of Company contained in this Agreement, as
such Damages are incurred, except to the extent such Damages result primarily
from Investor's failure to perform any covenant or agreement contained in this
Agreement or Investor's or its officer’s, director’s, employee’s, agent’s or
Controlling Person’s negligence, recklessness or bad faith in performing its
obligations under this Agreement.

Section 9.3                        METHOD OF ASSERTING INDEMNIFICATION CLAIMS.
All claims for indemnification by any Indemnified Party (as defined below) under
Section 9.2 shall be asserted and resolved as follows:

(a)           In the event any claim or demand in respect of which any person
claiming indemnification under any provision of Section 9.2 (an "INDEMNIFIED
PARTY") might seek indemnity under Section 9.2 is asserted against or sought to
be collected from such Indemnified Party by a person other than a party hereto
or an affiliate thereof (a "THIRD PARTY CLAIM"), the Indemnified Party shall
deliver a written notification, enclosing a copy of all papers served, if any,
and specifying the nature of and basis for such Third Party Claim and for the
Indemnified Party's claim for indemnification that is being asserted under any
provision of Section 9.2 against any person (the "INDEMNIFYING PARTY"), together
with the amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such Third Party Claim (a "CLAIM NOTICE") with
reasonable promptness to the Indemnifying Party. If the Indemnified Party fails
to provide the Claim Notice with reasonable promptness after the Indemnified
Party receives notice of such Third Party Claim, the Indemnifying Party shall
not be obligated to indemnify the Indemnified Party with respect to such Third
Party Claim to the extent that the Indemnifying Party's ability to defend has
been prejudiced by such failure of the Indemnified Party. The Indemnifying Party
shall notify the Indemnified Party as soon as practicable within the period
ending thirty (30) calendar days following receipt by the Indemnifying Party of
either a Claim Notice or an Indemnity Notice (as defined below) (the "DISPUTE
PERIOD") whether the Indemnifying Party disputes its liability or the amount of
its liability to the Indemnified Party under Section 9.2 and whether the
Indemnifying Party desires, at its sole cost and expense, to defend the
Indemnified Party against such Third Party Claim.

 
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(i)           If the Indemnifying Party notifies the Indemnified Party within
the Dispute Period that the Indemnifying Party desires to defend the Indemnified
Party with respect to the Third Party Claim pursuant to this Section 9.3(a),
then the Indemnifying Party shall have the right to defend, with counsel
reasonably satisfactory to the Indemnified Party, at the sole cost and expense
of the Indemnifying Party, such Third Party Claim by all appropriate
proceedings, which proceedings shall be vigorously and diligently prosecuted by
the Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party in the case of any settlement that provides for any relief
other than the payment of monetary damages or that provides for the payment of
monetary damages as to which the Indemnified Party shall not be indemnified in
full pursuant to Section 9.2). The Indemnifying Party shall have full control of
such defense and proceedings, including any compromise or settlement thereof;
provided, however, that the Indemnified Party may, at the sole cost and expense
of the Indemnified Party, at any time prior to the Indemnifying Party's delivery
of the notice referred to in the first sentence of this clause (i), file any
motion, answer or other pleadings or take any other action that the Indemnified
Party reasonably believes to be necessary or appropriate to protect its
interests; and provided further, that if requested by the Indemnifying Party,
the Indemnified Party will, at the sole cost and expense of the Indemnifying
Party, provide reasonable cooperation to the Indemnifying Party in contesting
any Third Party Claim that the Indemnifying Party elects to contest. The
Indemnified Party may participate in, but not control, any defense or settlement
of any Third Party Claim controlled by the Indemnifying Party pursuant to this
clause (i), and except as provided in the preceding sentence, the Indemnified
Party shall bear its own costs and expenses with respect to such participation.
Notwithstanding the foregoing, the Indemnified Party may takeover the control of
the defense or settlement of a Third Party Claim at any time if it irrevocably
waives its right to indemnity under Section 9.2 with respect to such Third Party
Claim.
 
    (ii)           If the Indemnifying Party fails to notify the Indemnified
Party within the Dispute Period that the Indemnifying Party desires to defend
the Third Party Claim pursuant to Section 9.3(a), or if the Indemnifying Party
gives such notice but fails to prosecute vigorously and diligently or settle the
Third Party Claim, or if the Indemnifying Party fails to give any notice
whatsoever within the Dispute Period, then the Indemnified Party shall have the
right to defend, at the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which proceedings shall be
prosecuted by the Indemnified Party in a reasonable manner and in good faith or
will be settled at the discretion of the Indemnified Party(with the consent of
the Indemnifying Party, which consent will not be unreasonably withheld). The
Indemnified Party will have full control of such defense and proceedings,
including any compromise or settlement thereof; provided, however, that if
requested by the Indemnified Party, the Indemnifying Party will, at the sole
cost and expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnified Party and its counsel in contesting any Third Party Claim which
the Indemnified Party is contesting. Notwithstanding the foregoing provisions of
this clause (ii), if the Indemnifying Party has notified the Indemnified Party
within the Dispute Period that the Indemnifying Party disputes its liability or
the amount of its liability hereunder to the Indemnified Party with

 
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respect to such Third Party Claim and if such dispute is resolved in favor of
the Indemnifying Party in the manner provided in clause (iii) below, the
Indemnifying Party will not be required to bear the costs and expenses of the
Indemnified Party's defense pursuant to this clause (ii) or of the Indemnifying
Party's participation therein at the Indemnified Party's request, and the
Indemnified Party shall reimburse the Indemnifying Party in full for all
reasonable costs and expenses incurred by the Indemnifying Party in connection
with such litigation. The Indemnifying Party may participate in, but not
control, any defense or settlement controlled by the Indemnified Party pursuant
to this clause (ii), and the Indemnifying Party shall bear its own costs and
expenses with respect to such participation.
 
    (iii)           If the Indemnifying Party notifies the Indemnified Party
that it does not dispute its liability or the amount of its liability to the
Indemnified Party with respect to the Third Party Claim under Section 9.2 or
fails to notify the Indemnified Party within the Dispute Period whether the
Indemnifying Party disputes its liability or the amount of its liability to the
Indemnified Party with respect to such Third Party Claim, the amount of Damages
specified in the Claim Notice shall be conclusively deemed a liability of the
Indemnifying Party under Section 9.2 and the Indemnifying Party shall pay the
amount of such Damages to the Indemnified Party on demand. If the Indemnifying
Party has timely disputed its liability or the amount of its liability with
respect to such claim, the Indemnifying Party and the Indemnified Party shall
proceed in good faith to negotiate a resolution of such dispute; provided,
however, that if the dispute is not resolved within thirty (30) days after the
Claim Notice, the Indemnifying Party shall be entitled to institute such legal
action as it deems appropriate.

(b)           In the event any Indemnified Party should have a claim under
Section 9.2 against the Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver a written notification of a claim for
indemnity under Section 9.2 specifying the nature of and basis for such claim,
together with the amount or, if not then reasonably ascertainable, the estimated
amount, determined in good faith, of such claim (an "INDEMNITY NOTICE") with
reasonable promptness to the Indemnifying Party. The failure by any Indemnified
Party to give the Indemnity Notice shall not impair such party's rights
hereunder except to the extent that the Indemnifying Party demonstrates that it
has been irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim or the amount of the claim
described in such Indemnity Notice or fails to notify the Indemnified Party
within the Dispute Period whether the Indemnifying Party disputes the claim or
the amount of the claim described in such Indemnity Notice, the amount of
Damages specified in the Indemnity Notice will be conclusively deemed a
liability of the Indemnifying Party under Section 9.2 and the Indemnifying Party
shall pay the amount of such Damages to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability or the amount of its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such dispute;
provided, however, that if the dispute is not resolved within thirty (30) days
after the Claim Notice, the Indemnifying Party shall be entitled to institute
such legal action as it deems appropriate.

 
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(c)           The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar rights of the Indemnified Party against the
Indemnifying Party or others, and (ii) any liabilities the Indemnifying Party
may be subject to.

ARTICLE X
MISCELLANEOUS

Section 10.1                      GOVERNING LAW; JURISDICTION. This Agreement
shall be governed by and interpreted in accordance with the laws of the State of
New York without regard to the principles of conflicts of law. Each of the
Company and Investor hereby submit to the exclusive jurisdiction of the United
States Federal and state courts located in New York County, New York with
respect to any dispute arising under this Agreement, the agreements entered into
in connection herewith or the transactions contemplated hereby or thereby.

Section 10.2                      JURY TRIAL WAIVER.  The Company and the
Investor hereby waive a trial by jury in any action, proceeding or counterclaim
brought by either of the parties hereto against the other in respect of any
matter arising out of or in connection with this Agreement.

Section 10.3                      ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Company and Investor and their respective
successors and permitted assigns. Neither this Agreement nor any rights of
Investor or the Company hereunder may be assigned by either party to any other
person without the prior written consent of the other party.
 
 
Section 10.4                      THIRD PARTY BENEFICIARIES. This Agreement is
intended for the benefit of the Company and Investor and their respective
successors and permitted assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.

Section 10.5                      TERMINATION. The Company may terminate this
Agreement at any time by written notice to the Investor. Additionally, this
Agreement shall terminate at the end of Commitment Period or as otherwise
provided herein (unless extended by the agreement of the Company and Investor);
provided, however, that the provisions of Articles V, VI, VIII, and Sections
9.2, 9.3 10.1, 10.2 and 10.4 shall survive the termination of this Agreement.

Section 10.6                      ENTIRE AGREEMENT, AMENDMENT; NO WAIVER. This
Agreement and the instruments referenced herein contain the entire understanding
of the Company and Investor with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor Investor makes any representation, warranty, covenant or undertaking
with respect to such matters. No provision of this Agreement may be waived or
amended other than by an instrument in writing signed by the party to be charged
with enforcement.

 
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Section 10.7                      FEES AND EXPENSES. Each of the Company and
Investor agrees to pay its own expenses in connection with the preparation of
this Agreement and performance of its obligations hereunder, except that the
Company shall pay Investor upon execution hereof, a single fee of $5,000 to
cover its expenses related to the consummation of this Agreement.  In addition,
the Company shall pay all reasonable fees and expenses incurred by the Investor
in connection with any amendments, modifications or waivers of this Agreement or
the Registration Rights Agreement or incurred in connection with the enforcement
of this Agreement and the Registration Rights Agreement, including, without
limitation, all reasonable attorneys fees and expenses. The Company shall pay
all stamp or other similar taxes and duties levied in connection with issuance
of the Shares pursuant hereto.

Section 10.8                      [INTENTIONALLY OMITTED]

Section 10.9                      COUNTERPARTS. This Agreement may be executed
in multiple counterparts, each of which may be executed by less than all of the
Company and shall be deemed to be an original instrument which shall be
enforceable against the parties actually executing such counterparts and all of
which together shall constitute one and the same instrument. This Agreement may
be delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the parties so delivering this
Agreement.

 
Section 10.10        SURVIVAL; SEVERABILITY. The representations, warranties,
covenants and agreements of the Company hereto shall survive each Closing
hereunder for a period of one (1) year thereafter. In the event that any
provision of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
in full force and effect without said provision; provided that such severability
shall be ineffective if it materially changes the economic benefit of this
Agreement to any party.

Section 10.11                    RESERVED

Section 10.12                    NO STRICT CONSTRUCTION. The language used in
this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied
against any party.

Section 10.13                    EQUITABLE RELIEF. The Company recognizes that
in the event that it fails to perform, observe, or discharge any or all of its
obligations under this Agreement, any remedy at law may prove to be inadequate
relief to Investor. The Company therefore agrees that Investor shall be entitled
to temporary and permanent injunctive relief in any such case without the
necessity of proving actual damages.

Section 10.14                    TITLE AND SUBTITLES. The titles and subtitles
used in this Agreement are used for the convenience of reference and are not to
be considered in construing or interpreting this Agreement.

Section 10.15                    REPORTING ENTITY FOR THE COMMON STOCK. The
reporting entity relied upon for the determination of the Closing Bid Price of
the Common Stock on any

 
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given Trading Day for the purposes of this Agreement shall be the Principal
Market or any successor thereto. The written mutual consent of Investor and the
Company shall be required to employ any other reporting entity.

Section 10.16                    PUBLICITY.   The Company and Investor shall
consult with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and no party
shall issue any such press release or otherwise make any such public statement
without the prior written consent of the other parties, which consent shall not
be unreasonably withheld or delayed, except that no prior consent shall be
required if such disclosure is required by law, in which such case the
disclosing party shall provide the other parties with prior notice of such
public statement. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of Investor without the prior written consent of such
Investor, except to the extent required by law. Investor acknowledges that this
Agreement and all or part of the Transaction Documents may be deemed to be
"material contracts" as that term is defined by Item 601(b)(10) of Regulation
S-K, and that the Company may therefore be required to file such documents as
exhibits to reports or registration statements filed under the Securities Act or
the Exchange Act. Investor further agrees that the status of such documents and
materials as material contracts shall be determined solely by the Company, in
consultation with its counsel.

[SIGNATURES ON FOLLOWING PAGE]

 
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[SIGNATURE PAGE]

IN WITNESS WHEREOF, the parties hereto have caused this Equity Credit Agreement,
as amended and restated, to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.

SOUTHRIDGE PARTNERS II, LP

By:  Southridge Advisors LLC

By:           /s/ Stephen Hcks
                                Name:  Stephen Hicks
Title: Manager

PURAMED BIOSCIENCE, INC.

By:           /s/ Russell Mitchell
Name: Russell Mitchell
Title: Chief Executive Officer

 
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EXHIBITS

EXHIBIT A                                                      Registration
Rights Agreement

EXHIBIT B                                                      Put Notice

EXHIBIT D                                                      Closing
Certificate

 
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