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Exhibit 10.1
 
 
Indirect Primary Offering Agreement
 
 
THIS AGREEMENT dated as of the 29th day of July 2010 (the “Agreement”) between
Crisnic Fund, S.A., (the “Investor”), and Enhance Skin Products Inc., a
corporation organized and existing under the laws of the State of Nevada (the
“Company”).
 
WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to the Investor, from time to
time as provided herein, and the Investor shall purchase from the Company up to
Two Million Dollars ($2,000,000) of the Company’s common stock, par value $0.001
per share (the “Common Stock”); and
 
WHEREAS, such investments will be made in reliance upon the provisions of
Regulation D (“Regulation D”) of the Securities Act of 1933, as amended, and the
regulations promulgated thereunder (the “Securities Act”), and or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder.
 
NOW, THEREFORE, the parties hereto agree as follows:
 
ARTICLE I.
Certain Definitions
 
Section 1.1.     “Advance” shall mean the portion of the Commitment Amount
requested by the Company in the Advance Notice.
 
Section 1.2.     “Advance Date” shall mean the first (1st) Trading Day after
expiration of the applicable Pricing Period for each Advance.
 
Section 1.3.     “Advance Notice” shall mean a written notice in the form of
Exhibit A attached hereto to the Investor executed by an officer of the Company
and setting forth the Advance amount that the Company requests from the
Investor.
 
Section 1.4.     “Advance Notice Date” shall mean each date the Company delivers
(in accordance with Section 2.2(b) of this Agreement) to the Investor an Advance
Notice requiring the Investor to advance funds to the Company, subject to the
terms of this Agreement.  No Advance Notice Date shall be less than five (5)
Trading Days after the prior Advance Notice Date.
 
Section 1.5.    “Bid Price” shall mean, on any date, (i) the closing bid price
of the Common Stock, as reported by the OTCBB if the Common Stock is traded on
the OTC Bulletin Board; (ii) the closing bid price of the Common Stock, as
reported by
 
 
 
 

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Bloomberg if the Common Stock is traded on a Principal Market other than the OTC
Bulletin Board; or (iii) the highest reported bid price for the Common Stock, as
furnished by FINRA, if the Common Stock is not traded on a Principal Market.
 
Section 1.6.     “Closing” shall mean one of the closings of a purchase and sale
of Common Stock pursuant to Section 2.3.
 
Section 1.7.     “Commitment Amount” shall mean the aggregate amount of up to
Two Million Dollars ($2,000,000) which the Investor has agreed to provide to the
Company in order to purchase the Company’s Common Stock pursuant to the terms
and conditions of this Agreement.
 
Section 1.8.     “Commitment Period” shall mean the period commencing on the
earlier to occur of (i) the Effective Date, or (ii) such earlier date as the
Company and the Investor may mutually agree in writing, and expiring on the
earliest to occur of (x) the date on which the Investor shall have made payment
of Advances pursuant to this Agreement in the aggregate amount of the Commitment
Amount, (y) the date this Agreement is terminated pursuant to Section 10.2 or
(z) the date occurring twenty four (24) months after the Effective Date.
 
Section 1.9.     “Common Stock” shall mean the Company’s common stock, par value
$0.001 per share.
 
Section 1.10.   “Condition Satisfaction Date” shall have the meaning set forth
in Section 7.2.
 
Section 1.11.   “Damages” shall mean any loss, claim, damage, liability, costs
and expenses (including, without limitation, reasonable attorney’s fees and
disbursements and costs and expenses of expert witnesses and investigation).
 
Section 1.12.   “Effective Date” shall mean the date on which the SEC first
declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in Section 7.2(a).
 
Section 1.13.   “Exchange Act” shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
 
Section 1.14.    “FINRA” shall mean the Financial Industry Regulatory Authority.
 
Section 1.15.   “Material Adverse Effect” shall mean any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to enter into and perform any of its obligations
under this Agreement or the Registration Rights Agreement in any material
respect.
 
Section 1.16.   “Market Price” shall mean the VWAP of the Common Stock during
the Pricing Period as defined by Bloomberg.
 
 
 
 
 

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Section 1.17.   “Maximum Advance Amount” shall be Five Hundred Thousand Dollars
($500,000) per Advance Notice, but in no case more than One Million Dollars
($1,000,000) in any thirty-day (30) calendar period.
 
Section 1.18.   “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.
 
Section 1.19.   “Pricing Period” shall mean the five (5) consecutive Trading
Days after the Advance Notice Date subject to any reduction pursuant to Section
2.2(c).
 
Section 1.20.   “Principal Market” shall mean the Nasdaq National Market, the
Nasdaq Capital Market, the American Stock Exchange, the OTC Bulletin Board or
the New York Stock Exchange, whichever is at the time the principal trading
exchange or market for the Common Stock.
 
Section 1.21.   “Purchase Price” shall be set at one hundred percent (100%) of
the Market Price during the Pricing Period.
 
Section 1.22.   “Registrable Securities” shall mean the shares of Common Stock
to be issued hereunder (i) in respect of which the Registration Statement has
not been declared effective by the SEC, (ii) which have not been sold under
circumstances meeting all of the applicable conditions of Rule 144 (or any
similar provision then in force) under the Securities Act (“Rule 144”) or (iii)
which have not been otherwise transferred to a holder who may trade such shares
without restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend.
 
Section 1.23.   “Registration Rights Agreement” shall mean the Registration
Rights Agreement subnstantially in the form annexed hereto as Exhibit B,
regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company and the Investor.
 
Section 1.24.   “Registration Statement” shall mean a registration statement on
Form S-1 (if use of such form is then available to the Company pursuant to the
rules of the SEC and, if not, on such other 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 in accordance with the intended method of distribution of such
securities), for the registration of the resale by the Investor of the
Registrable Securities under the Securities Act.
 
Section 1.25.   “Regulation D” shall have the meaning set forth in the recitals
of this Agreement.
 
 
 
 
 

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Section 1.26.   “SEC” shall mean the United States Securities and Exchange
Commission.
 
Section 1.27.   “Securities Act” shall have the meaning set forth in the
recitals of this Agreement.
 
Section 1.28.   “SEC Documents” shall mean Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and Proxy Statements
of the Company as supplemented to the date hereof, filed by the Company for a
period of at least twelve (12) months immediately preceding the date hereof or
the Advance Date, as the case may be, until such time as the Company no longer
has an obligation to maintain the effectiveness of a Registration Statement as
set forth in the Registration Rights Agreement.
 
Section 1.29.   “Trading Day” shall mean any day during which the New York Stock
Exchange shall be open for business.
 
Section 1.30.   “VWAP” shall mean the volume weighted average price of the
Company’s Common Stock, (i) as reported by the OTCBB if the Common Stock is
traded on the OTC Bulletin Board; (ii) as reported by Bloomberg if the Common
Stock is traded on a Principal Market other than the OTC Bulletin Board; or
(iii) as furnished by FINRA, if the Common Stock is not traded on a Principal
Market.
 
 
ARTICLE II.
Advances
 
Section 2.1.     Advances.
 
Subject to the terms and conditions of this Agreement (including, without
limitation, the provisions of Article VII hereof), the Company, at its sole and
exclusive option, may issue and sell to the Investor, and the Investor shall
purchase from the Company, shares of the Company’s Common Stock by the delivery,
in the Company’s sole discretion, of Advance Notices.  The number of shares of
Common Stock that the Investor shall purchase pursuant to each Advance shall be
determined by dividing the amount of the Advance by the Purchase Price. No
fractional shares shall be issued. Fractional shares shall be rounded to the
next higher whole number of shares.  The aggregate maximum amount of all
Advances that the Investor shall be obligated to make under this Agreement shall
not exceed the Commitment Amount.
 
Section 2.2.     Mechanics.
 
(a)         Advance Notice.  At any time during the Commitment Period, the
Company may require the Investor to purchase shares of Common Stock by
delivering an Advance Notice to the Investor, subject to the conditions set
forth in Section 7.2;
 
 
 
 

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provided, however, the amount for each Advance as designated by the Company in
the applicable Advance Notice shall not be more than the Maximum Advance Amount
and the aggregate amount of the Advances pursuant to this Agreement shall not
exceed the Commitment Amount.  The Company acknowledges that the Investor may
sell shares of the Company’s Common Stock corresponding with a particular
Advance Notice after the Advance Notice is received by the Investor.  There
shall be a minimum of five (5) Trading Days between each Advance Notice Date.
 
(b)         Date of Delivery of Advance Notice.  An Advance Notice shall be
deemed delivered on (i) the Trading Day it is received by facsimile or otherwise
by the Investor if such notice is received prior to 5:00 pm Eastern Time, or
(ii) the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 5:00 pm Eastern Time on a Trading Day or at any time on a day
which is not a Trading Day.  No Advance Notice may be deemed delivered on a day
that is not a Trading Day.
 
(c)         Minimum Acceptable Price.. The Company may set a minimum acceptable
price (the “Minimum Acceptable Price”) in connection with each Advance
Notice.  In the event the Company does set a Minimum Acceptable Price, the
Investor shall not sell shares acquired by it under such Advance Notice at a
price lower than the Minimum Acceptable Price.  Subject to the next sentence,
upon the issuance by the Company of an Advance Notice with a Minimum Acceptable
Price, if any of the closing Bid Prices during the Pricing Period are below the
Minimum Acceptable Price (i) the Company shall automatically reduce the amount
of the Advance set forth in such Advance Notice by twenty percent (20%) for each
Trading Day during the Pricing Period that the closing Bid Price of the Common
Stock is below the Minimum Acceptable Price (each such day, an “Excluded Day”),
and (ii) each Excluded Day shall be excluded from the Pricing Period for
purposes of determining the Market Price.  The number of shares of Common Stock
to be delivered to the Investor at the Closing (in accordance with Section 2.3
of this Agreement) shall correspond with the Advance Notice amount as reduced
pursuant to clause (i) above.  The Company, and only the Company, may waive the
Minimum Acceptable Price with respect to any particular Advance Notice by
providing the Investor with written notice of waiver on or prior to the Advance
Date.
 
Section 2.3.     Closings.  Within two (2) Trading Days of each Advance Date (i)
the Company shall deliver to the Investor by DWAC transfer such number of shares
of the Common Stock registered in the name of the Investor as shall equal (x)
the amount of the Advance specified in such Advance Notice pursuant to Section
2.1 herein, divided by (y) the Purchase Price and (ii) upon receipt of such
shares, the Investor shall deliver to the Company the amount of the Advance
specified in the Advance Notice by wire transfer of immediately available
funds.  In addition, on or prior to the Advance Date, each of the Company and
the Investor shall deliver to the 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.  To the extent the
Company has not paid the fees, expenses, and disbursements of the Investor in
 
 
 
 

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accordance with Section 12.4, the amount of such fees, expenses, and
disbursements may be deducted by the Investor (and shall be paid to the relevant
party) directly out of the proceeds of the Advance with no reduction in the
amount of shares of the Company’s Common Stock to be delivered on such Advance
Date.
 
(a)    Company’s Obligations Upon Closing.
 
(i)         The Company shall deliver to the Investor by DWAC transfer the
shares of Common Stock applicable to the Advance in accordance with Section
2.3.  The certificates evidencing such shares shall be free of restrictive
legends.
 
(ii)         the Company’s Registration Statement with respect to the resale of
the shares of Common Stock delivered in connection with the Advance shall have
been declared effective by the SEC;   
 
(iii)        the Company shall have obtained all material permits and
qualifications required by any applicable state for the offer and sale of the
Registrable Securities, or shall have the availability of exemptions
therefrom.  The sale and issuance of the Registrable Securities shall be legally
permitted by all laws and regulations to which the Company is subject;
 
(iv)        the Company shall have filed with the SEC in a timely manner all
reports, notices and other documents required of a “reporting company” under the
Exchange Act and applicable Commission regulations;
 
(v)         the fees as set forth in Section 12.4 below shall have been paid or
can be withheld as provided in Section 2.3; and
 
(vi)        the Company’s transfer agent shall be DWAC eligible.
 
(vii)       All of the Company’s representations and warranties contained in
this agreement shall remain true and accurate.
 
(b)    Investor’s Obligations Upon Closing.
 
(i)          Upon receipt of the shares referenced in Section 2.3(a)(i) above
and provided the Company is in compliance with its obligations in Section 2.3,
the Investor shall deliver to the Company the amount of the Advance specified in
the Advance Notice by wire transfer of immediately available funds.  If the
Investor believes the Company is not in compliance with its obligations in
Section 2.3, the Investor shall return the shares to the Company; and
 
(ii)         with respect to each Advance, the Investor shall have provided the
Company with written notice of the states in which the Investor intends to sell
the Registrable Securities, so that the Company can register or qualify with
each applicable state securities regulator or administrator the sale of those
Registrable Securities in such
 
 
 
 

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states or, alternatively, take any and all action necessary or appropriate to
qualify for an applicable exemption from such registration or qualification.
 Failure to provide such notice shall negate the Investor's ability to consider
that the Company has breached the provisions of Section 2.3 (a) (iii).
 
ARTICLE III.
Representations and Warranties of Investor
 
Investor hereby represents and warrants to, and agrees with, the Company that
the following are true and correct as of the date hereof and as of each Advance
Date:
 
Section 3.1.     Organization and Authorization.  The Investor is duly
incorporated or organized and validly existing in the jurisdiction of its
incorporation or organization and has all requisite power and authority to
purchase and hold the securities issuable hereunder.  The decision to invest and
the execution and delivery of this Agreement by such Investor, the performance
by such Investor of its obligations hereunder and the consummation by such
Investor of the transactions contemplated hereby have been duly authorized and
requires no other proceedings on the part of the Investor.  The undersigned has
the right, power and authority to execute and deliver this Agreement and all
other instruments (including, without limitations, the Registration Rights
Agreement), on behalf of the Investor.  This Agreement has been duly executed
and delivered by the Investor and, assuming the execution and delivery hereof
and acceptance thereof by the Company, will constitute the legal, valid and
binding obligations of the Investor, enforceable against the Investor in
accordance with its terms.
 
Section 3.2.     Evaluation of Risks.  The Investor has such knowledge and
experience in financial, tax and business matters as to be capable of evaluating
the merits and risks of, and bearing the economic risks entailed by, an
investment in the Company and of protecting its interests in connection with
this transaction.  It recognizes that its investment in the Company involves a
high degree of risk.
 
Section 3.3.     No Legal Advice from the Company.  The Investor acknowledges
that it had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with his or 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 3.4.     Investment Purpose. The securities are being purchased by the
Investor for its own account, and for investment purposes.  The Investor agrees
not to assign or in any way transfer the Investor’s rights to the securities or
any interest therein and acknowledges that the Company will not recognize any
purported assignment or
 
 
 
 

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transfer except in accordance with applicable Federal and state securities
laws.  No other person has or will have a direct or indirect beneficial interest
in the securities.  The Investor agrees not to sell, hypothecate or otherwise
transfer the Investor’s securities unless the securities are registered under
Federal and applicable state securities laws or unless, in the opinion of
counsel satisfactory to the Company, an exemption from such laws is available.
 
Section 3.5.     Accredited Investor.  The Investor is an “Accredited Investor”
as that term is defined in Rule 501(a)(3) of Regulation D of the Securities Act.
 
Section 3.6.     Information.  The Investor and its advisors (and its counsel),
if any, have been furnished with all materials relating to the business,
finances and operations of the Company and information it deemed material to
making an informed investment decision.  The Investor and its advisors, if any,
have been afforded the opportunity to ask questions of the Company and its
management.  Neither such inquiries nor any other due diligence investigations
conducted by such Investor or its advisors, if any, or its representatives shall
modify, amend or affect the Investor’s right to rely on the Company’s
representations and warranties contained in this Agreement.  The Investor
understands that its investment involves a high degree of risk.  The Investor is
in a position regarding the Company, which, based upon employment, family
relationship or economic bargaining power, enabled and enables such Investor to
obtain information from the Company in order to evaluate the merits and risks of
this investment.  The Investor has sought such accounting, legal and tax advice,
as it has considered necessary to make an informed investment decision with
respect to this transaction.
 
Section 3.7.     Receipt of Documents. The Investor and its counsel have
received and read in their entirety:  (i) this Agreement and the Exhibits
annexed hereto; (ii) the Company’s Form 10-K, as amended, for the year ended
April 30, 2009; and (iii) answers to all questions the Investor submitted to the
Company regarding an investment in the Company; and the Investor has relied on
the information contained therein and has not been furnished any other
documents, literature, memorandum or prospectus.
 
Section 3.8.     Registration Rights Agreement.  The parties have entered into
the Registration Rights Agreement dated the date hereof.
 
Section 3.10.   Not an Affiliate.  The Investor is not an officer, director or a
person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with the Company or any
“Affiliate” of the Company (as that term is defined in Rule 405 of the
Securities Act).
 
Section 3.11.   Trading Activities.  The Investor’s trading activities with
respect to the Company’s Common Stock shall be in compliance with all applicable
federal and state securities laws, rules and regulations and the rules and
regulations of the Principal Market on which the Company’s Common Stock is
listed or traded. Neither the Investor nor its affiliates has an open short
position in the Common Stock of the Company, the Investor agrees that it shall
not, and that it will cause its affiliates not to, engage in any short sales of
the Common Stock.
 
 
 
 

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ARTICLE IV.
Representations and Warranties of the Company
 
Except as stated below, on the disclosure schedules attached hereto or in the
SEC Documents (as defined herein), the Company hereby represents and warrants
to, and covenants with, the Investor that the following are true and correct as
of the date hereof:
 
Section 4.1.    Organization and Qualification. The Company is duly incorporated
or organized and validly existing in the jurisdiction of its incorporation or
organization and has all requisite corporate power to own its properties and to
carry on its business as now being conducted. Each of the Company and its
subsidiaries 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 by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a Material
Adverse Effect on the Company and its subsidiaries taken as a whole.
 
Section 4.2.    Authorization, Enforcement, Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter into
and perform this Agreement, the Registration Rights Agreement and any related
agreements, in accordance with the terms hereof and thereof, (ii) the execution
and delivery of this Agreement, the Registration Rights Agreement and any
related agreements by the Company and the consummation by it of the transactions
contemplated hereby and thereby, have been duly authorized by the Company’s
Board of Directors and no further consent or authorization is required by the
Company, its Board of Directors or its stockholders, (iii) this Agreement, the
Registration Rights Agreement and any related agreements have been duly executed
and delivered by the Company, (iv) this Agreement, the Registration Rights
Agreement and assuming the execution and delivery thereof and acceptance by the
Investor and any related agreements constitute the valid and binding obligations
of the Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors’
rights and remedies.
 
Section 4.3.    Capitalization. The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock. All of such outstanding shares
have been validly issued and are fully paid and nonassessable. No shares of
Common Stock are subject to preemptive rights or any other similar rights or any
liens or encumbrances suffered or permitted by the Company. Except as disclosed
in the SEC Documents, as of the date hereof, (i) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any
 
 
 
 

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of its subsidiaries, or contracts, commitments, understandings or arrangements
by which the Company or any of its subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries, (ii) there
are no outstanding debt securities (iii) there are no outstanding registration
statements other than on Form S-1 and (iv) there are no agreements or
arrangements under which the Company or any of its subsidiaries is obligated to
register the sale of any of their securities under the Securities Act (except as
set out in or pursuant to the Registration Rights Agreement). There are no
securities or instruments containing anti-dilution or similar provisions that
will be triggered by this Agreement or any related agreement or the consummation
of the transactions described herein or therein. The Company has furnished to
the Investor true and correct copies of the Company’s Certificate of
Incorporation, as amended and as in effect on the date hereof (the “Certificate
of Incorporation”), and the Company’s By-laws, as in effect on the date hereof
(the “By-laws”), and the terms of all securities convertible into or exercisable
for Common Stock and the material rights of the holders thereof in respect
thereto.
 
Section 4.4.    No Conflict. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby will not (i) result in a violation of the Certificate of
Incorporation, any certificate of designations of any outstanding series of
preferred stock of the Company or By-laws or (ii) conflict with or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, or result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and the rules and regulations of the
Principal Market on which the Common Stock is quoted) applicable to the Company
or any of its subsidiaries or by which any material property or asset of the
Company or any of its subsidiaries is bound or affected and which would cause a
Material Adverse Effect. Except as disclosed in the SEC Documents, neither the
Company nor its subsidiaries is in violation of any term of or in default under
its Articles of Incorporation or By-laws or their organizational charter or
by-laws, respectively, or any material contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its subsidiaries. The business
of the Company and its subsidiaries is not being conducted in violation of any
material law, ordinance, regulation of any governmental entity. Except as
specifically contemplated by this Agreement and as required under the Securities
Act and any applicable state securities laws, the Company is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under or contemplated by this
Agreement or the Registration Rights Agreement in accordance with the terms
hereof or thereof. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The
Company and its subsidiaries are unaware of any fact or circumstance which might
give rise to any of the foregoing.
 
 
 
 

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Section 4.5.     SEC Documents; Financial Statements.  The Company has filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC under the Exchange Act since June 30, 2008.  The Company has
delivered to the Investor or its representatives, or made available through the
SEC’s website at http://www.sec.gov, true and complete copies of the SEC
Documents.  As of their respective dates, the financial statements of the
Company disclosed in the SEC Documents (the “Financial Statements”) complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto.  Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
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 its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).  No other information provided by or on behalf of the Company to
the Investor which is not included in the SEC Documents contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
 
Section 4.6.     10b-5.  The SEC Documents do not include any untrue statements
of material fact, nor do they omit to state any material fact required to be
stated therein necessary to make the statements made, in light of the
circumstances under which they were made, not misleading.
 
Section 4.7.     No Default. Except for defaults in the payment of salaries to
officers of the Company and the payment of fees to one consultant of the
Company, the Company is not in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust or other material instrument or agreement to
which it is a party or by which it is or its property is bound and neither the
execution, nor the delivery by the Company, nor the performance by the Company
of its obligations under this Agreement or any of the exhibits or attachments
hereto will conflict with or result in the breach or violation of any of the
terms or provisions of, or constitute a default or result in the creation or
imposition of any lien or charge on any assets or properties of the Company
under its Certificate of Incorporation, By-Laws, any material indenture,
mortgage, deed of trust or other material agreement applicable to the Company or
instrument to which the Company is a party or by which it is bound, or any
statute, or any decree, judgment, order, rules or regulation of any court or
governmental agency or body having jurisdiction over the Company or its
properties, in each case which default, lien or charge is likely to cause a
Material Adverse Effect on the Company’s business or financial condition.
 
Section 4.8.     Absence of Events of Default. Except for defaults in the
payment of salaries to officers of the Company and the payment of fees to one
consultant of the Company, no Event of Default, as defined in the
 
 
 
 

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respective agreement to which the Company is a party, and no event which, with
the giving of notice or the passage of time or both, would become an Event of
Default (as so defined), has occurred and is continuing, which would have a
Material Adverse Effect on the Company’s business, properties, prospects,
financial condition or results of operations.
 
Section 4.9.     Intellectual Property Rights.  The Company and its subsidiaries
own or possess adequate rights or licenses to use all material trademarks, trade
names, service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted.   The Company and its subsidiaries do not have any
knowledge of any infringement by the Company or its subsidiaries of trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service mark registrations, trade secret or other
similar rights of others, and, to the knowledge of the Company, there is no
claim, action or proceeding being made or brought against, or to the Company’s
knowledge, being threatened against, the Company or its subsidiaries regarding
trademark, trade name, patents, patent rights, invention, copyright, license,
service names, service marks, service mark registrations, trade secret or other
infringement; and the Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
 
Section 4.10.     Employee Relations.  Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened.  None of the
Company’s or its subsidiaries’ employees is a member of a union and the Company
and its subsidiaries believe that their relations with their employees are good.
 
Section 4.11.     Environmental Laws.  The Company and its subsidiaries are (i)
in compliance with any and all applicable material foreign, federal, state and
local laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants (“Environmental Laws”), (ii) have received all permits, licenses
or other approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (iii) are in compliance with all terms
and conditions of any such permit, license or approval.
 
Section 4.12.     Title.  Except as set forth in the SEC Documents, the Company
has good and marketable title to its properties and material assets owned by it,
free and clear of any pledge, lien, security interest, encumbrance, claim or
equitable interest other than such as are not material to the business of the
Company.  Any real property and facilities held under lease by the Company and
its subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
 
Section 4.13.     Insurance.  The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company
 
 
 
 

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believes to be prudent and customary in the businesses in which the Company and
its subsidiaries are engaged.  Neither the Company nor any such subsidiary has
been refused any insurance coverage sought or applied for and neither the
Company nor any such subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not materially and adversely affect
the condition, financial or otherwise, or the earnings, business or operations
of the Company and its subsidiaries, taken as a whole.
 
Section 4.14.     Regulatory Permits.  The Company and its subsidiaries possess
all material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
 
Section 4.15.     Internal Accounting Controls.  Except as set forth in the SEC
Documents, the Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
 
Section 4.16.     No Material Adverse Effects, etc.  Except as set forth in the
SEC Documents, neither the Company nor any of its subsidiaries is subject to any
charter, corporate or other legal restriction, or any judgment, decree, order,
rule or regulation which in the judgment of the Company’s officers has or is
expected in the future to have a Material Adverse Effect on the business,
properties, operations, financial condition, results of operations or prospects
of the Company or its subsidiaries.  Except as set forth in the SEC Documents,
neither the Company nor any of its subsidiaries is in breach of any contract or
agreement which breach, in the judgment of the Company’s officers, has or is
expected to have a Material Adverse Effect on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries.
 
Section 4.17.     Absence of Litigation.  Except as set forth in the SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board, government agency, self-regulatory organization
or body pending against or affecting the Company, the Common Stock or any of the
Company’s subsidiaries, wherein an unfavorable decision, ruling or finding would
(i) have a Material Adverse Effect on the transactions contemplated hereby (ii)
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations
 
 
 
 

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under, this Agreement or any of the documents contemplated herein, or (iii)
except as expressly disclosed in the SEC Documents, have a Material Adverse
Effect on the business, operations, properties, financial condition or results
of operation of the Company and its subsidiaries taken as a whole.
 
Section 4.18.     Subsidiaries.  Except as disclosed in the SEC Documents, the
Company does not presently own or control, directly or indirectly, any interest
in any other corporation, partnership, association or other business entity.
 
Section 4.19.     Tax Status.  Except as disclosed in the SEC Documents, the
Company and each of its subsidiaries has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject and (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) has paid
all taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations
apply.  There are no unpaid taxes in any material amount claimed to be due by
the taxing authority of any jurisdiction, and the officers of the Company know
of no basis for any such claim.
 
Section 4.20.     Certain Transactions.  Except as set forth in the SEC
Documents none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company (other than for services
as employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Company, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
 
Section 4.21.     Fees and Rights of First Refusal.  The Company is not
obligated to offer the securities offered hereunder on a right of first refusal
basis or otherwise to any third parties including, but not limited to, current
or former shareholders of the Company, underwriters, brokers, agents or other
third parties.The Company certifies that there are no finders’ fees payable in
connection with the transactions contemplated by the Agreement.
 
Section 4.22.     Use of Proceeds.  The Company shall use the net proceeds from
this offering for general corporate purposes, including, without limitation, the
payment of loans incurred by the Company.  However, in no event shall the
Company use the net proceeds from this offering for the payment (or loan to any
such person for the payment) of any judgment, or other liability, incurred by
any executive officer, officer, director or employee of the Company.
 
 
 
 

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Section 4.23.    Further Representation and Warranties of the Company.  For so
long as any securities issuable hereunder held by the Investor remain
outstanding, the Company acknowledges, represents, warrants and agrees that it
will use its best efforts to maintain the listing of its Common Stock on the
Principal Market.
 
Section 4.24.     Opinion of Counsel.  Investor shall receive an opinion letter
from counsel to the Company, dated as of each Closing Date, substantially in the
form annexed hereto as Exhibit C.
 
Section 4.25.     Opinion of Counsel.  The Company will obtain for the Investor,
at the Company’s expense, any and all opinions of counsel which may be
reasonably required in order to sell the securities issuable hereunder without
restriction.
 
Section 4.26.     Dilution.  The Company is aware and acknowledges that issuance
of shares of the Company’s Common Stock could cause dilution to existing
shareholders and could significantly increase the outstanding number of shares
of Common Stock.
 
ARTICLE V.
Indemnification
 
The Investor and the Company represent to the other the following with respect
to itself:
 
Section 5.1.     Indemnification.
 
(a)         In consideration of the Investor’s execution and delivery of this
Agreement, and in addition to all of the Company’s other obligations under this
Agreement, the Company shall defend, protect, indemnify and hold harmless the
Investor, and all of its officers, directors, partners, members, attorneys,
employees and agents (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement) (collectively,
the “Investor Indemnitees”) from and against any and all actions, causes of
action, suits, claims, losses, costs, penalties, fees, liabilities and damages,
and expenses in connection therewith (irrespective of whether any such Investor
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys’ fees and disbursements (the
“Indemnified Liabilities”), incurred by the Investor Indemnitees or any of them
as a result of, or arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Company in this Agreement
or the Registration Rights Agreement or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in this Agreement or the
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any cause of action, suit or claim
brought or made against such Investor Indemnitee not arising out of any action
or inaction of an Investor Indemnitee, and arising out of or resulting from the
execution, delivery, performance or enforcement of this Agreement or any other
instrument,
 
 
 
 

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document or agreement executed pursuant hereto by any of the Investor
Indemnitees.  To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.
 
(b)         In consideration of the Company’s execution and delivery of this
Agreement, and in addition to all of the Investor’s other obligations under this
Agreement, the Investor shall defend, protect, indemnify and hold harmless the
Company and all of its officers, directors, shareholders, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the “Company
Indemnitees”) from and against any and all Indemnified Liabilities incurred by
the Company Indemnitees or any of them as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any representation or
warranty made by the Investor in this Agreement, the Registration Rights
Agreement, or any instrument or document contemplated hereby or thereby executed
by the Investor, (b) any breach of any covenant, agreement or obligation of the
Investor(s) contained in this Agreement, the Registration Rights Agreement or
any other certificate, instrument or document contemplated hereby or thereby
executed by the Investor, or (c) any cause of action, suit or claim brought or
made against such Company Indemnitee based on misrepresentations or due to a
breach by the Investor and arising out of or resulting from the execution,
delivery, performance or enforcement of this Agreement or any other instrument,
document or agreement executed pursuant hereto by any of the Company
Indemnitees. To the extent that the foregoing undertaking by the Investor may be
unenforceable for any reason, the Investor shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.
 
(c)         The obligations of the parties to indemnify or make contribution
under this Section 5.1 shall survive termination.
 
ARTICLE VI.
Covenants of the Company
 
Section 6.1.     Registration Rights.  The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall comply
in all material respects with the terms thereof.
 
Section 6.2.     Listing of Common Stock.  The Company shall maintain the Common
Stock’s authorization for quotation on the Principal Market.
 
Section 6.3.     Exchange Act Registration.  The Company will cause its Common
Stock to continue to be registered under Section 12(g) of the Exchange Act, will
file in a timely manner all reports and other documents required of it as a
reporting company
 
 
 
 

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under the Exchange Act and will not take any action or file any document
(whether or not permitted by Exchange Act or the rules thereunder) to terminate
or suspend such registration or to terminate or suspend its reporting and filing
obligations under said Exchange Act.
 
Section 6.4.    Transfer Agent Instructions.  Upon effectiveness of the
Registration Statement the Company shall deliver instructions to its transfer
agent to issue shares of Common Stock to the Investor free of restrictive
legends before each Advance Date.
 
Section 6.5.     Corporate Existence.  The Company will take all steps necessary
to preserve and continue the corporate existence of the Company.
 
Section 6.6.     Notice of Certain Events Affecting Registration; Suspension of
Right to Make an Advance.  The Company will immediately notify the Investor upon
its becoming aware of the occurrence of any of the following events in respect
of a registration statement or related prospectus relating to an offering of
Registrable Securities: (i) receipt of any request for additional information 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; (ii) the issuance by the SEC
or any other Federal or state governmental authority of  any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose; (iii) 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; (iv) the happening of any event
that makes any statement made in the Registration Statement or related
prospectus of 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 the 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 (v) the Company’s
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Investor any such supplement or amendment to the related prospectus.  The
Company shall not deliver to the Investor any Advance Notice during the
continuation of any of the foregoing events.
 
Section 6.7.     Issuance of the Company’s Common Stock.  The sale of the shares
of Common Stock shall be made in accordance with the provisions and requirements
of Regulation D and any applicable state securities law.
 
Section 6.8.    Review of Public Disclosures.  All SEC filings (including,
without limitation, all filings required under the Exchange Act, which include
Forms 10-Q, 10-K and  8-K, etc) and other public disclosures made by the
 
 
 
 

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Company, including, without limitation, all press releases, investor relations
materials, and scripts of analysts meetings and calls, shall be reviewed and
approved for release by the Company’s attorneys and, if containing financial
information, the Company’s independent certified public accountants.
 
Section 6.9.    Market Activities.  The Company will not, directly or
indirectly, (i) take any action designed to cause or result in, or that
constitutes or might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Common Stock or (ii) sell, bid for or purchase the Common
Stock, or pay anyone any compensation for soliciting purchases of the Common
Stock.
 
Section 6.10    Expectations Regarding Advance Notices.  Within ten (10) days
after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company must notify the Investor, in
writing, as to its reasonable expectations as to the dollar amount it intends to
raise during such calendar quarter, if any, through the issuance of Advance
Notices.  Such notification shall constitute only the Company’s good faith
estimate and shall in no way obligate the Company to raise such amount, or any
amount, or otherwise limit its ability to deliver Advance Notices.  The failure
by the Company to comply with this provision can be cured by the Company’s
notifying the Investor, in writing, at any time as to its reasonable
expectations with respect to the current calendar quarter.
 
Section 6.11    Restriction on Sale of Capital Stock.  During the Commitment
Period, the Company shall not issue or sell, without the prior written consent
of the Investor, (i) any Common Stock or Preferred Stock without consideration
or for a consideration per share less than the Bid Price of the Common Stock
determined immediately prior to its issuance, (ii) issue or sell any Preferred
Stock warrant, option, right, contract, call, or other security or instrument
granting the holder thereof the right to acquire Common Stock without
consideration or for a consideration per share less than such Common Stock’s Bid
Price determined immediately prior to its issuance, or (iii) file any
registration statement on Form S-8.
 
Section 6.12    Consolidation; Merger.  The Company shall not, at any time after
the date hereof, effect any merger or consolidation of the Company with or into,
or a transfer of all or substantially all the assets of the Company to another
entity (a “Consolidation Event”) unless the resulting successor or acquiring
entity (if not the Company) assumes by written instrument the obligation to
deliver to the Investor such shares of stock and/or securities as the Investor
is entitled to receive pursuant to this Agreement.
 
Section 6.13    Issuance of the Company’s Common Stock.  The sale of the shares
of Common Stock shall be made in accordance with the provisions and requirements
of Regulation D and any applicable state securities law.
 
 
 
 

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ARTICLE VII.
Conditions for Advance and Conditions to Closing
 
Section 7.1.     Conditions Precedent to the Obligations of the Company.  The
obligation hereunder of the Company to issue and sell the shares of Common Stock
to the Investor incident to each Closing is subject to the satisfaction, or
waiver by the Company, at or before each such Closing, of each of the conditions
set forth below.
 
(a)         Accuracy of the Investor’s Representations and Warranties.  The
representations and warranties of the Investor shall be true and correct in all
material respects.
 
(b)         Performance by the Investor.  The Investor shall have performed,
satisfied and complied in all 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 Investor at or prior to such
Closing.
 
Section 7.2.     Conditions Precedent to the Right of the Company to Deliver an
Advance Notice.  The right of the Company to deliver an Advance Notice is
subject to the fulfillment by the Company, on such Advance Notice (a “Condition
Satisfaction Date”), of each of the following conditions:
 
(a)         Registration of the Common Stock with the SEC.  The Company shall
have filed with the SEC a Registration Statement with respect to the resale of
the Registrable Securities in accordance with the terms of the Registration
Rights Agreement. As set forth in the Registration Rights Agreement, the
Registration Statement shall have previously become effective and shall remain
effective on each Condition Satisfaction Date and (i) neither the Company nor
the Investor shall have received notice that the SEC has issued or intends to
issue a stop order with respect to the Registration Statement or that the SEC
otherwise has suspended or withdrawn the effectiveness of the Registration
Statement, either temporarily or permanently, or intends or has threatened to do
so (unless the SEC’s concerns have been addressed and the 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
the Registration Statement or related prospectus shall exist.  The Registration
Statement must have been declared effective by the SEC prior to the first
Advance Notice Date.
 
(b)         Authority.  The Company shall have obtained all permits and
qualifications required by any applicable state in accordance with the
Registration Rights Agreement for the offer and sale of the shares of Common
Stock, or shall have the availability of exemptions therefrom.  The sale and
issuance of the shares of Common Stock shall be legally permitted by all laws
and regulations to which the Company is subject.
 
 
 
 

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(c)         Fundamental Changes. There shall not exist any fundamental changes
to the information set forth in the Registration Statement which would require
the Company to file a post-effective amendment to the Registration Statement.
 
(d)         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.
 
(e)         No Injunction.  No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits or directly and 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 adversely affecting any of the transactions
contemplated by this Agreement.
 
(f)         No Suspension of Trading in or Delisting of Common Stock.  The
trading of the Common Stock is not suspended by the SEC or the Principal Market
(if the Common Stock is traded on a Principal Market).  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 (if the
Common Stock is traded on a Principal Market).  The Company shall not have
received any notice threatening the continued listing of the Common Stock on the
Principal Market (if the Common Stock is traded on a Principal Market).
 
(g)           Not used
 
(h)         No Knowledge.  The Company has no knowledge of any event which would
be more likely than not to have the effect of causing such Registration
Statement to be suspended or otherwise ineffective.
 
(i)         Executed Advance Notice.  The Investor shall have received the
Advance Notice executed by an officer of the Company and the representations
contained in such Advance Notice shall be true and correct as of each Condition
Satisfaction Date.
 
ARTICLE VIII.
Due Diligence Review; Non-Disclosure of Non-Public Information
 
Section 8.1  Due Diligence Review.  Prior to the filing of the Registration
Statement the Company shall make available for inspection and review by the
Investor, advisors to and representatives of the Investor, any underwriter
participating in any disposition of the Registrable Securities on behalf of the
Investor pursuant to the Registration Statement, any such registration statement
or amendment or supplement thereto or any blue sky, NASD or other filing, all
financial and other records, all SEC
 
 
 
 

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Documents and other filings with the SEC, and all other corporate documents and
properties of the Company as may be reasonably necessary for the purpose of such
review, and cause the Company’s officers, directors and employees to supply all
such information reasonably requested by the Investor or any such
representative, advisor or underwriter in connection with such Registration
Statement (including, without limitation, in response to all questions and other
inquiries reasonably made or submitted by any of them), prior to and from time
to time after the filing and effectiveness of the Registration Statement for the
sole purpose of enabling the Investor and such representatives, advisors and
underwriters and their respective accountants and attorneys to conduct initial
and ongoing due diligence with respect to the Company and the accuracy of the
Registration Statement.
 
Section 8.2.     Non-Disclosure of Non-Public Information.
 
(a)         The Company covenants and agrees that it shall refrain from
disclosing, and shall cause its officers, directors, employees and agents to
refrain from disclosing, any material non-public information to the Investor
without also disseminating such information to the public, unless prior to
disclosure of such information the Company identifies such information as being
material non-public information and provides the Investor with the opportunity
to accept or refuse to accept such material non-public information for review.
 
(b)         Nothing herein shall require the Company to disclose non-public
information to the Investor or its advisors or representatives, and the Company
represents that it does not disseminate non-public information to any investors
who purchase stock in the Company in a public offering, to money managers or to
securities analysts, provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if any, underwriters, of any
event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration Statement
would cause such prospectus to include a material misstatement or to omit a
material fact required to be stated therein in order to make the statements,
therein, in light of the circumstances in which they were made, not misleading.
Nothing contained in this Section 8.2 shall be construed to mean that such
persons or entities other than the Investor (without the written consent of the
Investor prior to disclosure of such information) may not obtain non-public
information in the course of conducting due diligence in accordance with the
terms of this Agreement and nothing herein shall prevent any such persons or
entities from notifying the Company of their opinion that based on such due
diligence by such persons or entities, that the Registration Statement contains
an untrue statement of material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.
 
 
 
 

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ARTICLE IX.
Choice of Law/Jurisdiction
 
Section 9.1.     Governing Law.  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 conflict of laws.  The parties further agree that any
action between them shall be heard in New York, and expressly consent to the
jurisdiction and venue of the Superior Court of County, sitting in New York, and
the United States District Court of County, sitting in , New York,  for the
adjudication of any civil action asserted pursuant to this paragraph.
 
ARTICLE X.
Assignment; Termination
 
Section 10.1.   Assignment.  Neither this Agreement nor any rights of the
Company hereunder may be assigned to any other Person.
 
Section 10.2.   Termination.
 
(a)         The obligations of the Investor to make Advances under Article II
hereof shall terminate at the expiration of the Commitment Period.
 
(b)         The obligation of the Investor to make an Advance to the Company
pursuant to this Agreement shall terminate permanently (including with respect
to an Advance Date that has not yet occurred) in the event that (i) there shall
occur any stop order or suspension of the effectiveness of the Registration
Statement for an aggregate of fifty (50) Trading Days, other than due to the
acts of the Investor, during the Commitment Period, or (ii) the Company shall at
any time fail materially to comply with the requirements of Article VI and such
failure is not cured within thirty (30) days after receipt of written notice
from the Investor, provided, however, that this termination provision shall not
apply to any period commencing upon the filing of a post-effective amendment to
such Registration Statement and ending upon the date on which such post
effective amendment is declared effective by the SEC.
 
(c)         The Company may terminate this Agreement by providing the Investor
thirty (30) days (the “Notice Period”) advance written notice.   The Investor
shall not be obligated to accept any Advance Notices during the Notice
Period.   Upon termination of this Agreement the Company shall have no further
obligations to the Investor under this Agreement or the Registration Rights
Agreement, provided however the Company shall remain obligated to Comply with
its obligations under Section 3 of the Registration Rights Agreement and any and
all related obligations during such time as the Investor has sold all of the
Registrable Securities, as this term is defined in the Registration Rights
Agreement.
 
 
 
 

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ARTICLE XI.
Notices
 
Section 11.1.    Notices.  Any notices, consents, waivers, or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile,
provided a copy is mailed by U.S. certified mail, return receipt requested;
(iii) three (3) days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same.  The addresses and facsimile numbers for such communications
shall be:
 
If to the Company, to:
Enhance Skin Products Inc.
695 South Colorado Boulevard
Suite 480
Denver, CO 80246
Attention:     Samuel Asculai PhD.
Telephone:   416-644-8318
Facsimile:
 
With a copy to:
Law offices of
 
Attention:
Telephone:
Facsimile:
 
If to the Investor(s):
Crisnic Fund, S.A C/O
Lexperts Abogados Con Hotel Office Center
San Jose, Costa Rica
Attention:  Anthony Gentile        
Portfolio Manager
Telephone:  (506) 8875-1726
Facsimile:   (506) 2291-4952
 
With a Copy (which shall not constiture notice)  to:
Cutler Law Group
3355 W Alabama, Suite 1150
Houston, TX 77098
 
 
 
 

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Telephone:  (713) 888-0040
Facsimile:  (800) 836-0714
 
Each party shall provide five (5) days’ prior written notice to the other party
of any change in address or facsimile number.
 
ARTICLE XII.
Miscellaneous
 
Section 12.1.    Counterparts.  This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party.  In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof, though failure to deliver such copies shall not affect the
validity of this Agreement.
 
Section 12.2.    Entire Agreement; Amendments.  This Agreement supersedes all
other prior oral or written agreements between the Investor, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the 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.
 
Section 12.3.    Reporting Service for the Common Stock.  The reporting service
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg, L.P. or any successor thereto.  The written mutual consent of the
Investor and the Company shall be required to employ any other reporting
service.
 
Section 12.4.    Fees and Expenses.  The Company hereby agrees to pay the
following fees:
 
 
(a)
Expense Fee.  Each of the parties shall pay its own fees and expenses (including
the fees of any attorneys, accountants, appraisers or others engaged by such
party) in connection with this Agreement and the transactions contemplated
hereby, except that the Company shall pay a Due Diligence Expense Fee of Ten
Thousand Dollars ($10,000) in cash, $5,000 of which has been previously paid to
Investor and $5,000 of which will be paid from the first Advance hereunder.

 
 

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(b)
Shares. Company shall issue to Investor One Million Seven Hundred and Fifty
Thousand shares of Restricted Common Stock.

 
(c)
Commitment Fees. On each Advance Date the Company shall pay to the Investor,
directly out of the gross proceeds of each Advance, an amount equal to one
percent (1%) of the amount of each Advance.  The Company hereby agrees that if
such payment, as is described above, is not made by the Company on the Advance
Date, such payment shall be made as outlined and mandated by Section 2.3 of this
Agreement.

 
Section 12.5.    Confidentiality.  If for any reason the transactions
contemplated by this Agreement are not consummated, each of the parties hereto
shall keep confidential any information obtained from any other party (except
information publicly available or in such party’s domain prior to the date
hereof, and except as required by court order) and shall promptly return to the
other parties all schedules, documents, instruments, work papers or other
written information without retaining copies thereof, previously furnished by it
as a result of this Agreement or in connection herein.
 
IN WITNESS WHEREOF, the parties hereto have caused this Indirect Primary
Offering Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
 
COMPANY:
Enhance Skin Products Inc.
 
By:
 
 
Name:      Samuel Asculai PhD.
Title:        CEO
 
 
INVESTOR:  Crisnic Fund, S.A.
 
By:
 
 
Name:      Anthony Gentile
Title:        Portfolio Manager
 
 

 

 
 

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EXHIBIT A
ADVANCE NOTICE
Enhanced Skin Care Products, Inc.
 
The undersigned, Samuel Asculai, hereby certifies, with respect to the sale of
shares of Common Stock of Enhance Skin Products Inc. (the “Company”) issuable in
connection with this Advance Notice, delivered pursuant to the Indirect Primary
Offering Agreement (the “Agreement”), as follows:
 
1.         The undersigned is the duly elected Chief Executive Officer of the
Company.
 
2.         There are no fundamental changes to the information set forth in the
Registration Statement which would require the Company to file a post effective
amendment to the Registration Statement.
 
3.         The Company has performed in all material respects all covenants and
agreements to be performed by the Company and has complied in all material
respects with all obligations and conditions contained in the Agreement on or
prior to the Advance Notice Date, and shall continue to perform in all material
respects all covenants and agreements to be performed by the Company through the
applicable Advance Date.  All conditions to the delivery of this Advance Notice
are satisfied as of the date hereof.
 
4.         The undersigned hereby represents, warrants and covenants that it has
made all filings (“SEC Filings”) required to be made by it pursuant to
applicable securities laws (including, without limitation, all filings required
under the Securities Exchange Act of 1934, which include Forms 10-Q or 10-QSB,
10-K or 10-KSB, 8-K, etc.).  All SEC Filings and other public disclosures made
by the Company, including, without limitation, all press releases, analysts
meetings and calls, etc. (collectively, the “Public Disclosures”), have been
reviewed and approved for release by the Company’s attorneys and, if containing
financial information, the Company’s independent certified public
accountants.  None of the Company’s Public Disclosures 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.
 
5.         The Advance requested is _____________________.
 
6.          The Minimum Acceptable Price is _____________________.
 
The undersigned has executed this Certificate this ____ day
of  _________________.
 
Enhance Skin Products Inc.
 
 
 

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By:
 
Name:
 
Title:
 
If Returning This Advance Notice via Facsimile Please Send To:  (___) ___-____
 
If by Mail, via Federal Express To:  ______________________________________
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 

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