EXHIBIT 10.1

SUBSCRIPTION AGREEMENT

 

THIS SUBSCRIPTION AGREEMENT (this “Agreement”), is dated as of December 4, 2012,
by and between MusclePharm Corporation, a Nevada corporation (the “Company”),
and the subscribers identified on Schedule 1 hereto (the “Subscribers”).

 

WHEREAS, the Company and the Subscribers are executing and delivering this
Agreement in reliance upon an exemption from securities registration afforded by
the provisions of Section 4(2), Section 4(6) and/or Regulation D (“Regulation
D”) as promulgated by the United States Securities and Exchange Commission (the
“Commission”) under the Securities Act of 1933, as amended (the “1933 Act”);

 

WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to the Subscribers, as
provided herein, and the Subscribers shall purchase, in the aggregate, (i) up to
$1,000,000 of principal amount (“Principal Amount”) promissory notes of the
Company (“Note” or “Notes”), a form of which is annexed hereto as Exhibit A; and
(ii) shares of the Company’s $0.001 par value Common Stock (“Incentive Shares”)
(the “Offering”).  The Notes and the Incentive Shares are collectively referred
to herein as the “Securities”; and

 

WHEREAS, the aggregate proceeds of the sale of the Notes and the Incentive
Shares contemplated hereby (“Purchase Price”) shall be held in escrow by Grushko
& Mittman, P.C., 515 Rockaway Avenue, Valley Stream, New York 11581 (the “Escrow
Agent”) pursuant to the terms of an Escrow Agreement to be executed by the
parties substantially in the form attached hereto as Exhibit B (the “Escrow
Agreement”).

 

NOW, THEREFORE, in consideration of the mutual covenants and other agreements
contained in this Agreement the Company and the Subscribers hereby agree as
follows:

 

1.             Closing.  Subject to the satisfaction or waiver of the terms and
conditions of this Agreement, on the “Closing Date,” Subscribers shall purchase
and the Company shall sell to such Subscribers the Notes and Shares as described
in Section 2 below.  The date the Escrow Agent releases the funds received from
one or more Subscribers to the Company and releases the Escrow Documents (as
defined in the Escrow Agreement) to the parties in accordance with the
provisions of the Escrow Agreement shall be the Closing Date with respect to
such released funds and Escrow Documents, and such release is referred to herein
as the “Closing.” There shall be only one Closing.

 

2.             Notes and Incentive Shares.

 

(a)          Notes.   Subject to the satisfaction or waiver of the terms and
conditions of this Agreement, on the Closing Date, each Subscriber shall
purchase from the Company, and the Company shall sell to each such Subscriber, a
Note in the Principal Amount designated on Schedule 1 hereto for each such
Subscriber’s Purchase Price indicated thereon.  

 

(b)          Incentive Shares. On the Closing Date, the Company will issue to
each Subscriber, its pro-rata portion of an aggregate 50,000 Incentive
Shares.  The Incentive Shares will be fully paid and non-assessable.

 

(c)          Allocation of Purchase Price.   The Purchase Price will be
allocated among the components of the Securities so that each component of the
Securities will be fully paid and non-assessable, and acquired for value.

 

 

 

 

3.             Subscriber Representations and Warranties.  Each of the
Subscribers hereby represents and warrants to and agrees with the Company with
respect only to such Subscriber that:

 

(a)          Organization and Standing of the Subscriber.  Subscriber, to the
extent applicable, is an entity duly formed, validly existing and in good
standing under the laws of the jurisdiction of its formation.

 

(b)          Authorization and Power.  Such Subscriber has the requisite power
and authority to enter into and perform this Agreement and the other Transaction
Documents and to purchase the Note and Incentive Shares being sold to it
hereunder.  The execution, delivery and performance of this Agreement and the
other Transaction Documents by such Subscriber 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
Subscriber or its board of directors or stockholders, if applicable, is
required.  This Agreement and the other Transaction Documents have been duly
authorized, executed and delivered by such Subscriber and constitutes, or shall
constitute, when executed and delivered, a valid and binding obligation of such
Subscriber, enforceable against Subscriber in accordance with the terms thereof.

 

(c)          No Conflicts.  The execution, delivery and performance of this
Agreement and the other Transaction Documents and the consummation by such
Subscriber of the transactions contemplated hereby and thereby or relating
hereto do not and will not (i) result in a violation of such Subscriber’s
charter documents, bylaws or other organizational documents, if applicable; (ii)
conflict with nor constitute a default (or an event which with notice or lapse
of time or both would become a default) under any agreement to which such
Subscriber is a party; nor (iii) result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or governmental agency
applicable to such Subscriber or its properties (except for such conflicts,
defaults and violations as would not, individually or in the aggregate, have a
material adverse effect on Subscriber).  Such Subscriber is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement and the other
Transaction Documents nor to purchase the Securities in accordance with the
terms hereof, provided that for purposes of the representation made in this
sentence, such Subscriber is assuming and relying upon the accuracy of the
relevant representations and agreements of the Company herein.

 

(d)          Information on Company.   Such Subscriber has been furnished with
or has had access to the EDGAR Website of the Commission to the Company’s
filings, as amended, made with the Commission through the third business day
preceding the Closing Date, referred to herein collectively as the
“Reports”.  Subscribers are not deemed to have any knowledge of any information
not included in the Reports unless such information is delivered in the manner
described in the next sentence.  In addition, such Subscriber may have received
in writing from the Company such other information concerning its operations,
financial condition and other matters as such Subscriber has requested in
writing, identified thereon as OTHER WRITTEN INFORMATION (such other information
is collectively, the “Other Written Information”), and considered all factors
such Subscriber deems material in deciding on the advisability of investing in
the Securities.  Such Subscriber was afforded (i) the opportunity to ask such
questions as such Subscriber deemed necessary of, and to receive answers from,
representatives of the Company concerning the merits and risks of acquiring the
Securities; (ii) the right of access to information about the Company and its
financial condition, results of operations, business, properties, management and
prospects sufficient to enable such Subscriber to evaluate the Securities; and
(iii) the opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to acquiring the
Securities.

 

 

 

 

(e)          Information on Subscriber.   Such Subscriber is, and, unless the
Company is notified by the Subscribers otherwise, an “accredited investor,” as
such term is defined in Regulation D promulgated by the Commission under the
1933 Act, is experienced in investments and business matters, has made
investments of a speculative nature and has purchased securities of United
States publicly-owned companies in private placements in the past and, with its
representatives, has such knowledge and experience in financial, tax and other
business matters as to enable such Subscriber to utilize the information made
available by the Company to evaluate the merits and risks of and to make an
informed investment decision with respect to the proposed purchase, which
represents a speculative investment.  Such Subscriber has the authority and is
duly and legally qualified to purchase and own the Securities.  Such Subscriber
is able to bear the risk of such investment for an indefinite period and to
afford a complete loss thereof.  The information set forth on Schedule 1 hereto
regarding such Subscriber is accurate.

 

(f)          Purchase of Notes and Incentive Shares.  On the Closing Date, such
Subscriber will purchase the Note and Incentive Shares as principal for its own
account for investment only and not with a view toward, or for resale in
connection with, the public sale or any distribution thereof.

 

(g)          Compliance with Securities Act.   Such Subscriber understands and
agrees that the Securities have not been registered under the 1933 Act or any
applicable state securities laws, by reason of their issuance in a transaction
that does not require registration under the 1933 Act (based in part on the
accuracy of the representations and warranties of the Subscriber contained
herein), and that the Securities must be held indefinitely unless a subsequent
disposition is registered under the 1933 Act or any applicable state securities
laws or is exempt from such registration.  In any event, and subject to
compliance with applicable securities laws, the Subscriber may enter into lawful
hedging transactions in the course of hedging the position they assume and the
Subscriber may also enter into lawful short positions or other derivative
transactions relating to the Securities, or interests in the Securities, and
deliver the Securities, or interests in the Securities, to close out their short
or other positions or otherwise settle other transactions, or loan or pledge the
Securities, or interests in the Securities, to third parties who in turn may
dispose of these Securities.

 

(h)          Incentive Shares Legend.  Except as otherwise provided herein, the
Incentive Shares shall bear the following or similar legend:

 

“THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR APPLICABLE
STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES.”

 

 

 

 

(i)          Notes Legend.  The Notes shall bear the following legend:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL
(WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO
RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

(j)          Communication of Offer.  The offer to sell the Securities was
directly communicated to such Subscriber by the Company.  At no time was such
Subscriber presented with or solicited by any leaflet, newspaper or magazine
article, radio or television advertisement, or any other form of general
advertising or solicited or invited to attend a promotional meeting otherwise
than in connection and concurrently with such communicated offer.

 

(k)          Restricted Securities.   Notwithstanding anything to the contrary
contained in this Agreement, such Subscriber may transfer (without restriction
and without the need for an opinion of counsel) the Securities to its Affiliates
(as defined below) provided that each such Affiliate is an “accredited investor”
under Regulation D and such Affiliate agrees to be bound by the terms and
conditions of this Agreement. For the purposes of this Agreement, an “Affiliate”
of any person or entity means any other person or entity directly or indirectly
controlling, controlled by or under direct or indirect common control with such
person or entity.  For purposes of this definition, “control” means the power to
direct the management and policies of such person or firm, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.

 

(l)          No Governmental Review.  Such Subscriber understands that no United
States federal or state agency or any other governmental or state agency has
passed on or made recommendations or endorsement of the Securities or the
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.

 

(m)          Correctness of Representations.  Subscriber represents that the
foregoing representations and warranties are true and correct as of the date
hereof and, unless Subscriber otherwise notifies the Company prior to the
Closing Date, shall be true and correct as of the Closing Date.

 

(n)          Survival.  The foregoing representations and warranties shall
survive the Closing Date.

 

 

 

 

4.             Company Representations and Warranties.  Except as set forth in
the Schedules, the Company represents and warrants to and agrees with each
Subscriber that:

 

(a)          Due Incorporation.   The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power to own
its properties and to carry on its business as presently conducted.  The Company
is duly qualified as a foreign corporation to do business and is in good
standing in each jurisdiction where the nature of the business conducted or
property owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a Material
Adverse Effect (as defined herein).  For purposes of this Agreement, a “Material
Adverse Effect” shall mean a material adverse effect on the financial condition,
results of operations, prospects, properties or business of the Company and its
Subsidiaries taken as a whole.  For purposes of this Agreement, “Subsidiary”
means, with respect to any entity at any date, any direct or indirect
corporation, limited or general partnership, limited liability company, trust,
estate, association, joint venture or other business entity of which (A) more
than 30% of (i) the outstanding capital stock having (in the absence of
contingencies) ordinary voting power to elect a majority of the board of
directors or other managing body of such entity, (ii) in the case of a
partnership or limited liability company, the interest in the capital or profits
of such partnership or limited liability company or (iii) in the case of a
trust, estate, association, joint venture or other entity, the beneficial
interest in such trust, estate, association or other entity business is, at the
time of determination, owned or controlled directly or indirectly through one or
more intermediaries, by such entity, or (B) is under the actual control of the
Company.  As of the Closing Date, all of the Company’s Subsidiaries and the
Company’s other ownership interests therein are set forth on Schedule 4(a).  The
Company represents that it owns all of the equity of the Subsidiaries and rights
to receive equity of the Subsidiaries set forth on Schedule 4(a), free and clear
of all liens, encumbrances and claims, except as set forth on Schedule 4(a).  No
person or entity other than the Company has the right to receive any equity
interest in the Subsidiaries.  Except as set forth on Schedule 4(a), the Company
further represents that neither the Company nor the Subsidiaries have been known
by any other names for the five (5) years preceding the date of this Agreement.

 

(b)          Outstanding Stock.  All issued and outstanding shares of capital
stock and equity interests in the Company have been duly authorized and validly
issued and are fully paid and non-assessable.

 

(c)          Authority; Enforceability.  This Agreement, the Notes, Incentive
Shares, the Escrow Agreement, and any other agreements delivered or required to
be delivered together with or pursuant to this Agreement or in connection
herewith (collectively “Transaction Documents”) have been duly authorized,
executed and delivered by the Company and are valid and binding agreements of
the Company, enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors’ rights generally and
to general principles of equity.   The Company has full corporate power and
authority necessary to enter into and deliver the Transaction Documents and to
perform its obligations thereunder.

 

(d)          Capitalization and Additional Issuances.   The authorized and
outstanding capital stock of the Company on an actually issued and on a fully
diluted basis and all outstanding rights to acquire or receive, directly or
indirectly, any equity of the Company or any of the Subsidiaries as of the date
of this Agreement and the Closing Date (not including the Securities) are set
forth on Schedule 4(d).  Except as set forth on Schedule 4(d), there are no
options, warrants, or rights to subscribe to, securities, rights, understandings
or obligations convertible into or exchangeable for or granting any right to
subscribe for any shares of capital stock or other equity interest of the
Company.  The only officer, director, employee and consultant stock option or
stock incentive plan or similar plan currently in effect is described on
Schedule 4(d).  There are no preemptive rights affecting the Company’s Common
Stock or equity.

 

 

 

 

(e)          Consents.  No consent, approval, authorization or order of any
court, governmental agency or body or arbitrator having jurisdiction over the
Company, Subsidiaries or any of their Affiliates, any Principal Market, or the
Company’s stockholders is required for the execution by the Company of the
Transaction Documents and compliance and performance by the Company of its
obligations under the Transaction Documents, including, without limitation, the
issuance and sale of the Securities.  The Transaction Documents and the
Company’s performance of its obligations thereunder has been approved by the
Company’s board of directors in accordance with the Company’s Articles of
Incorporation and applicable law.  Any federal or state securities law
qualifications and filings, with respect to the Offering will, in the case of
qualifications, be effective upon Closing and will, in the case of filings, be
made within the time prescribed by law.

 

(f)          No Violation or Conflict.  Upon Closing, and assuming the
representations and warranties of the Subscribers in Section 3 are true and
correct, neither the issuance nor the sale of the Securities nor the performance
of the Company’s obligations under the Transaction Documents by the Company,
will:

 

(i)          violate, conflict with, result in a breach of, or constitute a
default (or an event which with the giving of notice or the lapse of time or
both would be reasonably likely to constitute a default) under (A) the articles
or certificate of incorporation, charter or bylaws of the Company, (B) to the
Company’s knowledge, any decree, judgment, order, law, treaty, rule, regulation
or determination applicable to the Company of any court, governmental agency or
body, or arbitrator having jurisdiction over the Company or over the properties
or assets of the Company or any of its Affiliates, (C) the terms of any bond,
debenture, note or any other evidence of indebtedness, or any agreement, stock
option or other similar plan, indenture, lease, mortgage, deed of trust or other
instrument to which the Company or any of its Affiliates is a party, by which
the Company or any of its Affiliates is bound, or to which any of the properties
of the Company or any of its Affiliates is subject, or (D) the terms of any
“lock-up” or similar provision of any underwriting or similar agreement to which
the Company, or any of its Affiliates is a party except, in each case, any
violation, conflict, breach, or default that would not have a Material Adverse
Effect; or

 

(ii)         result in the creation or imposition of any lien, charge or
encumbrance upon the Securities or any of the assets of the Company or any of
its Affiliates except in favor of each Subscriber as described herein; or

 

(iii)        except as set forth on Schedule 4(f)(iii), result in the activation
of any anti-dilution rights or a reset or repricing of any debt, equity or
security instrument of any creditor or equity holder of the Company, or the
holder of the right to receive any debt, equity or security instrument of the
Company nor result in the acceleration of the due date of any obligation of the
Company; or

 

(iv)         result in the triggering of any rights of first refusal,
participation rights, piggy-back or other registration rights of any person or
entity holding securities of the Company or having the right to receive
securities of the Company or pursuant to any agreement with the Company.

 

 

 

 

(g)          The Securities.  The Securities upon issuance:

 

(i)          are, or will be, free and clear of any security interests, liens,
claims or other encumbrances, subject only to restrictions upon transfer under
the 1933 Act and any applicable state securities laws;

 

(ii)         have been or will be duly and validly authorized and on the dates
of issuance of the Notes and Incentive Shares, such Notes and Incentive Shares
will be duly and validly issued, fully paid and non-assessable;

 

(iii)        will not have been issued or sold in violation of any preemptive or
other similar rights of the holders of any securities of the Company or rights
to acquire securities or debt of the Company;

 

(iv)         will not subject the holders thereof to personal liability by
reason of being such holders; and

 

(v)          assuming the representations and warranties of the Subscribers as
set forth in Section 3 hereof are true and correct, will not result in a
violation of Section 5 under the 1933 Act.

 

(h)          Litigation.  There is no pending or, to the best knowledge of the
Company, threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its Affiliates that would affect the execution by the Company or the
complete and timely performance by the Company of its obligations under the
Transaction Documents.  Except as disclosed in the Reports, there is no pending
or, to the best knowledge of the Company, basis for or threatened action, suit,
proceeding or investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company, or any of its Affiliates which
litigation if adversely determined would have a Material Adverse Effect.

 

(i)          No Market Manipulation.  The Company and its Affiliates have not
taken, and will not take, directly or indirectly, any action designed to, or
that might reasonably be expected to, cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Securities or affect the price at which the Securities may be issued or
resold.

 

(j)          Information Concerning Company.  The Reports and Other Written
Information contain all material information relating to the Company and its
operations and financial condition as of their respective dates which
information is required to be disclosed therein.   Since December 31, 2011, and
except as disclosed in the Reports or modified in Other Written Information or
in the Schedules hereto, there has been no Material Adverse Effect relating to
the Company. The Reports and Other Written Information including the financial
statements included therein do not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, taken as a whole, not misleading in light of the
circumstances and when made.  The financial statements of the Company included
in the Reports comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission or other applicable rules and regulations with respect thereto.  Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles (“GAAP”) applied on a consistent basis
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements), and fairly present in all material respects
the financial position of the Company and its subsidiaries 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).

 

 

 

 

(k)          Solvency.  Based on the financial condition of the Company as of
the Closing Date and except as set forth in the Reports, after giving effect to
the receipt by the Company of the proceeds from the sale of the Securities
hereunder, (i) the Company’s fair saleable value of its assets exceeds the
amount that will be required to be paid on or in respect of the Company’s
existing debts and other liabilities (including known contingent liabilities) as
they mature; (ii) the Company’s assets do not constitute unreasonably small
capital to carry on its business for the current fiscal year as now conducted
and as proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof; and (iii)
the current cash flow of the Company, together with the proceeds the Company
would receive, were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all amounts on or
in respect of its debt when such amounts are required to be paid.  The Company
does not intend to incur debts beyond its ability to pay such debts as they
mature (taking into account the timing and amounts of cash to be payable on or
in respect of its debt).

 

(l)          Defaults.  The Company is not in violation of its articles of
incorporation or bylaws.   The Company is (i) not in default under or in
violation of any other material agreement or instrument to which it is a party
or by which it or any of its properties are bound or affected, which default or
violation would have a Material Adverse Effect, (ii) not in default with respect
to any order of any court, arbitrator or governmental body or subject to or
party to any order of any court or governmental authority arising out of any
action, suit or proceeding under any statute or other law respecting antitrust,
monopoly, restraint of trade, unfair competition or similar matters which
default would have a Material Adverse Effect, or (iii) not in violation of any
statute, rule or regulation of any governmental authority which violation would
have a Material Adverse Effect.

 

(m)          No Integrated Offering.   Neither the Company, nor any of its
Affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security of the Company nor solicited
any offers to buy any security of the Company under circumstances that would
cause the offer of the Securities pursuant to this Agreement to be integrated
with prior offerings by the Company for purposes of the 1933 Act or any
applicable stockholder approval provisions, including, without limitation, under
the rules and regulations of the OTCQB [as defined in Section 4(v)].  No prior
offering will impair the exemptions relied upon in this Offering or the
Company’s ability to timely comply with its obligations hereunder.  Neither the
Company nor any of its Affiliates will take any action or suffer any inaction or
conduct any offering other than the transactions contemplated hereby that may be
integrated with the offer or issuance of the Securities or that would impair the
exemptions relied upon in this Offering or the Company’s ability to timely
comply with its obligations hereunder.

 

(n)          No General Solicitation.  Neither the Company, nor any of its
Affiliates, nor to its knowledge, any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the 1933 Act) in connection with the offer or sale
of the Securities.

 

(o)          No Undisclosed Liabilities.  Other than as set forth in the
Reports, the Company has no liabilities or obligations which are material,
individually or in the aggregate, other than those incurred in the ordinary
course of the Company’s business since December 31, 2011, and which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.

 

 

 

 

(p)          Dilution.   The Company’s executive officers and directors
understand the nature of the Securities being sold hereby and recognize that the
issuance of the Securities will have a potential dilutive effect on the equity
holdings of other holders of the Company’s equity or rights to receive equity of
the Company.  The board of directors of the Company has concluded, in its good
faith business judgment, that the issuance of the Securities is in the best
interests of the Company.  The Company specifically acknowledges that its
obligation to issue the Incentive Shares is binding upon the Company and
enforceable regardless of the dilution such issuance may have on the ownership
interests of other stockholders of the Company or parties entitled to receive
equity of the Company.

 

(q)          No Disagreements with Accountants and Lawyers.  There are no
material disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise between the Company and the accountants and lawyers
previously and presently employed by the Company, including but not limited to
disputes or conflicts over payment owed to such accountants and lawyers, nor
have there been any such disagreements during the two years prior to the Closing
Date.

 

(r)          Investment Company.   Neither the Company nor any Affiliate of the
Company is an “investment company” within the meaning of the Investment Company
Act of 1940, as amended.

 

(s)          Foreign Corrupt Practices.  Neither the Company, nor to the
knowledge of the Company, any agent or other person acting on behalf of the
Company, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any person
acting on its behalf of which the Company is aware) which is in violation of
law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.

 

(t)          Reporting Company/Shell Company.  The Company is a publicly-held
company subject to reporting obligations pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended (the “1934 Act”).  Pursuant to the
provisions of the 1934 Act, the Company has timely filed all reports and other
materials required to be filed thereunder with the Commission during the twelve
months preceding the date of this Agreement and the Closing Date.  As of the
Closing Date, the Company is not and was not a “shell company” nor a “former
shell company” as those terms are employed in Rule 144 under the 1933 Act.

 

(u)          Listing.  The Company’s Common Stock is quoted on the OTCQB of the
OTC Markets Group, Inc. (“OTCQB”) under the symbol MSLP.  The Company has not
received any pending oral or written notice that its Common Stock is not
eligible nor will become ineligible for quotation on the OTCQB nor that its
Common Stock does not meet all requirements for the continuation of such
quotation and the Company satisfies all of the requirements on issuance for the
continued quotation of its Common Stock on the OTCQB.

 

(v)          DTC Status.   The Company’s transfer agent is a participant in the
Depository Trust Company Automated Securities Transfer Program. The name,
mailing address, street address, telephone number, fax number, contact person
and email address of the Company transfer agent is set forth on Schedule 4(v)
hereto.

 

 

 

 

(w)          Anti-Takeover Provisions.  The Company and its Board of Directors
will have taken as of the Closing Date all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s Articles of Incorporation (or
similar charter documents) or the laws of its jurisdiction of incorporation that
are or could become applicable to the Subscribers as a result of the Subscribers
and the Company fulfilling their obligations or exercising their rights under
the Transaction Documents, including without limitation as a result of the
Company’s issuance of the Notes and Incentive Shares and the Subscribers’
ownership of the Notes and Incentive Shares.

 

(x)          Title to Assets.  The Company has good and marketable title to all
of its real and personal property reflected in the Reports, free and clear of
any mortgages, pledges, charges, liens, security interests or other
encumbrances, except for those that, individually or in the aggregate, do not
cause and are not reasonably likely to cause a Material Adverse Effect. All
leases of the Company are valid and subsisting and in full force and effect.

 

(y)          Compliance with Law. The business of the Company has been and is
presently being conducted in accordance with all applicable federal, state,
local and foreign governmental laws, rules, regulations and ordinances, except
for such noncompliance that, individually or in the aggregate, would not cause a
Material Adverse Effect. The Company has all franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals
necessary for the conduct of its business as now being conducted by it unless
the failure to possess such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

(z)          Taxes. Other than as set forth in the Reports, the Company has
accurately prepared and filed all federal, state, foreign and other tax returns
required by law to be filed by it, has paid or made provisions for the payment
of all taxes shown to be due and all additional assessments, and adequate
provisions have been and are reflected in the financial statements of the
Company for all current taxes and other charges to which the Company is subject
and that are not currently due and payable. None of the federal income tax
returns of the Company have been audited by the Internal Revenue Service (the
“IRS”). The Company has no knowledge of any additional assessments, adjustments
or contingent tax liability (whether federal or state) of any nature whatsoever,
whether pending or threatened against the Company for any completed tax period,
nor of any basis for any such assessment, adjustment or contingency.

 

(aa)        Intellectual Property. The Company owns or possesses all patents,
trademarks, domain names (whether or not registered) and any patentable
improvements or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations as set forth in the Reports, and all
rights with respect to the foregoing, which are necessary for the conduct of its
business as now conducted without any conflict with the rights of others except
for such conflicts that would not result in a Material Adverse Effect.

 

 

 

 

(bb)         Environmental Compliance. The Company has obtained all approvals,
authorization, certificates, consents, licenses, orders and permits or other
similar authorizations of all governmental authorities, or from any other
person, that are required under any Environmental Laws and used in its business
or in the business of any of its subsidiaries, unless the failure to possess
such approvals, authorizations, certificates, consents, licenses, orders or
permits, individually or in the aggregate could not reasonably be expected to
have a Material Adverse Effect. “Environmental Laws” shall mean all applicable
laws relating to the protection of the environment, including, without
limitation, all requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges, releases or
threatened releases of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature, into the air, surface water, groundwater or land, or relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, material or wastes, whether solid, liquid or
gaseous in nature. Except for such instances as would not individually or in the
aggregate have a Material Adverse Effect, the Company is also in compliance with
all other limitations, restrictions, conditions, standards, requirements,
schedules and timetables required or imposed under all Environmental Laws and
there are no past or present events, conditions, circumstances, incidents,
actions or omissions relating to or in any way affecting the Company that
violate or may violate any Environmental Law after the Closing Date or that may
give rise to any environmental liability, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, study or investigation (i)
under any Environmental Law, or (ii) based on or related to the manufacture,
processing, distribution, use, treatment, storage (including without limitation
underground storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous substance.

 

(cc)         Books and Records, Internal Accounting Controls. The books and
records of the Company and its Subsidiaries accurately reflect in all material
respects the information relating to the business of the Company and its
Subsidiaries, the location and collection of their assets, and the nature of all
transactions giving rise to the obligations or accounts receivable of the
Company or any Subsidiary. Other than as set forth in the Reports, the Company
and each of its Subsidiaries maintain a system of internal accounting controls
sufficient, in the judgment of the Company, to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate actions are taken with respect to any differences.
Other than as set forth in the Reports, the Company has established disclosure
controls and procedures (as defined in 1934 Act Rules 13a-15(e) and 15d-15(e))
for the Company and designed such disclosure controls and procedures to ensure
that material information relating to the Company, including its Subsidiaries,
is made known to the certifying officers by others within those entities.

 

(dd)         Material Agreements. Neither the Company nor any Subsidiary is a
party to any written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement, a copy of which would be required to be filed
with the Commission as an exhibit to a registration statement on Form S-1 or
applicable form (collectively, “Material Agreements”) if the Company was
registering securities under the Securities Act that has not been filed with the
Commission. The Company has in all material respects performed all the
obligations required to be performed by them to date under the foregoing
agreements, has received no notice of default and is not in default under any
Material Agreement now in effect, the result of which could cause a Material
Adverse Effect. No written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement of the Company or of any Subsidiary limits the
payment of dividends on the Common Stock.

 

(ee)         Transactions with Affiliates. Except as set forth in the Reports,
there are no loans, leases, agreements, contracts, royalty agreements,
management contracts or arrangements or other continuing transactions between
(i) the Company or any Subsidiary on the one hand, and (ii) on the other hand,
any officer or director of the Company, or any of its Subsidiaries, or any
Affiliate.

 

 

 

 

(ff)          Sarbanes-Oxley Act. Other than as set forth in the Reports, the
Company is in material compliance with the applicable provisions of the
Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), and the rules and
regulations promulgated thereunder that are effective, and intends to comply
with other applicable provisions of the Sarbanes-Oxley Act and the rules and
regulations promulgated thereunder upon the effectiveness of such provisions.

 

(gg)         Off-Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company or any Subsidiary of the
Company and an unconsolidated or other off balance sheet entity that is not
disclosed in its financial statements that should be disclosed in accordance
with GAAP and that would be reasonably likely to have a Material Adverse Effect.

 

(hh)         Material Non-Public Information. Except with respect to the
transactions contemplated hereby that will be publicly disclosed, the Company
has not provided any Subscriber or its agents or counsel with any information
that the Company believes constitutes material non-public information.

 

(ii)         Company Predecessor and Subsidiaries.  The Company makes each of
the representations contained in Sections 4(a), (b), (c), (d), (e), (f), (h),
(j), (k), (l), (o), (q), (r), (s), (t), (u), (v), (w), (x), (y), (z), (aa),
(bb), (cc), (dd) and (ff) of this Agreement, as same relate or could be
applicable to each Subsidiary.  All representations made by or relating to the
Company of a historical or prospective nature and all undertakings described in
Section 8 shall relate, apply and refer to the Company and Subsidiaries and
their predecessors and successors.

 

(jj)         Correctness of Representations.  The Company represents that the
foregoing representations and warranties are true and correct as of the date
hereof in all material respects, and, unless the Company otherwise notifies the
Subscribers prior to the Closing Date, shall be true and correct in all material
respects as of the Closing Date; provided, that, if such representation or
warranty is made as of a different date, in which case such representation or
warranty shall be true as of such date.

 

(kk)        Survival.  The foregoing representations and warranties shall
survive the Closing Date for one year and shall not be required to be updated
after the Closing.

 

5.             Regulation D Offering/Legal Opinions.  The offer and issuance of
the Securities to the Subscribers is being made pursuant to the exemption from
the registration provisions of the 1933 Act afforded by Section 4(2) or Section
4(6) of the 1933 Act and/or Rule 506 of Regulation D promulgated thereunder.  On
the Closing Date, the Company will provide an opinion reasonably acceptable to
the Subscribers from the Company’s legal counsel opining on the availability of
an exemption from registration under the 1933 Act as it relates to the offer and
issuance of the Securities and other matters reasonably requested by
Subscribers.  A form of the legal opinion is annexed hereto as Exhibit C.  The
Company will provide, at the Company’s expense, to the Subscribers and the
Company’s transfer agent, such other legal opinions, if any, as are reasonably
necessary in each Subscriber’s opinion for the issuance and resale of Incentive
Shares and Notes pursuant to an effective registration statement, Rule 144 under
the 1933 Act or an exemption from registration.

 

6.             Redemption.   The Note shall be prepayable, redeemable or
callable by the Company, without the Subscriber’s consent as set forth in the
Note.

 

 

 

 

7.             Fees.

 

(a)          Broker’s Commission.   The Company on the one hand, and each
Subscriber (for such Subscriber only) on the other hand, agrees to indemnify the
other against and hold the other harmless from any and all liabilities to any
persons claiming brokerage commissions or similar fees on account of services
purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby and
arising out of such party’s actions.  The Company represents that to the best of
its knowledge, no person is entitled to receive fees, commissions, finder’s
fees, due diligence fees or similar payments in connection with the Offering.
Anything in this Agreement to the contrary notwithstanding, each Subscriber is
providing indemnification only for such Subscriber’s own actions and not for any
action of any other Subscriber.  The liability of the Company and each
Subscriber’s liability hereunder is several and not joint.

 

(b)          Fees.   At the Closing, the Company shall pay to each of Grushko &
Mittman, P.C. and Jones & Keller, P.C. fees as set forth on Schedule 7(b)
(“Fees”) as payment for services rendered in connection with the transactions
described in the Transaction Documents and other related services. The Fees will
be payable out of funds held pursuant to the Escrow Agreement.  Grushko &
Mittman, P.C. will be reimbursed at Closing by the Company for all lien
searches, filing fees, and reasonable printing and shipping costs for the
closing statements to be delivered to Subscribers.

 

8.             Covenants of the Company.  The Company covenants and agrees with
the Subscribers as follows:

 

(a)          Stop Orders.  Subject to the prior notice requirement described in
Section 8(m), the Company will advise the Subscribers for so long as at least
25,000 Incentive Shares are owned of record Subscribers (the “End Date”), within
twenty-four hours after it receives notice of issuance by the Commission, any
state securities commission or any other regulatory authority of any stop order
or of any order preventing or suspending any offering of any securities of the
Company, or of the suspension of the qualification of the Common Stock of the
Company for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.  The Company will not issue any stop transfer
order or other order impeding the sale, resale or delivery of any of the
Securities, except as may be required by any applicable federal or state
securities laws provided at least five (5) days prior notice of such instruction
is given to the Subscribers.

 

(b)          Listing/Quotation.  The Company shall promptly secure the quotation
or listing of the Incentive Shares upon each national securities exchange, or
automated quotation system upon which the Company’s Common Stock is quoted or
listed and upon which such Incentive Shares are or become eligible for quotation
or listing (subject to official notice of issuance) and shall maintain same
until the End Date. The Company will maintain the quotation or listing of its
Common Stock on the NYSE Amex Equities, Nasdaq Capital Market, Nasdaq Global
Market, Nasdaq Global Select Market, Bulletin Board, New York Stock Exchange,
OTCQB or OTCQX automated quotation system maintained by OTC Markets Group, Inc.,
or any similar organization or agency succeeding to its functions of reporting
prices (whichever of the foregoing is at the time the principal trading exchange
or market for the Common Stock (the “Principal Market”), and will comply in all
respects with the Company’s reporting, filing and other obligations under the
bylaws or rules of the Principal Market, as applicable. Subject to the
limitation set forth in Section 8(i), the Company will provide Subscribers with
copies of all notices it receives notifying the Company of the threatened and
actual delisting of the Common Stock from any Principal Market.  As of the date
of this Agreement and the Closing Date, the OTCQB is the Principal Market.

 

(c)          Market Regulations.  If required, the Company shall notify the
Commission, the Principal Market and applicable state authorities, in accordance
with their requirements, of the transactions contemplated by this Agreement, and
shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Securities to the Subscribers and promptly provide copies
thereof to the Subscribers.

 

 

 

 

(d)          Filing Requirements.  From the date of this Agreement and until the
End Date, the Company will (A) comply in all respects with its reporting and
filing obligations under the 1934 Act, (B) voluntarily comply with all reporting
requirements that are applicable to an issuer with a class of shares registered
pursuant to Section 12(g) of the 1934 Act even if the Company is not subject to
such reporting requirements sufficient to permit Subscriber to be able to resell
the Incentive Shares pursuant to Rule 144(b)(i), and (C) comply with all
requirements related to any registration statement filed pursuant to this
Agreement.  The Company will use its commercially reasonable efforts not to take
any action or file any document (whether or not permitted by the 1933 Act or the
1934 Act or the rules thereunder) to terminate or suspend such registration or
to terminate or suspend its reporting and filing obligations under said acts
until the End Date.  Until the End Date, the Company will continue the listing
or quotation of the Common Stock on a Principal Market and will comply in all
respects with the Company’s reporting, filing and other obligations under the
bylaws or rules of the Principal Market.  The Company agrees to timely file a
Form D with respect to the Securities if required under Regulation D.

 

(e)          Use of Proceeds.   The proceeds of the Offering will be
substantially employed by the Company for the purposes set forth on Schedule
8(e) hereto.  Except as described on Schedule 8(e), the Purchase Price may not
and will not be used for accrued and unpaid officer and director salaries, nor
payment of financing related debt nor redemption of outstanding notes or equity
instruments of the Company nor non-trade payables outstanding on the Closing
Date.

 

(f)          DTC Program.  From and after the Closing Date and until the End
Date, the Company will employ as the transfer agent for the Common Stock and
Incentive Shares a participant in the Depository Trust Company Automated
Securities Transfer Program and use its best efforts to cause the Common Stock
to be transferable pursuant to such program.

 

(g)          Taxes.   From the date of this Agreement and until the End Date,
the Company will promptly pay and discharge, or cause to be paid and discharged,
when due and payable, all lawful taxes, assessments and governmental charges or
levies imposed upon the income, profits, property or business of the Company;
provided, however, that any such tax, assessment, charge or levy need not be
paid if the validity thereof shall currently be contested in good faith by
appropriate proceedings and if the Company shall have set aside on its books
adequate reserves with respect thereto, and provided, further, that the Company
will pay all such taxes, assessments, charges or levies forthwith upon the
commencement of proceedings to foreclose any lien which may have attached as
security therefore.

 

(h)          Properties.  From the date of this Agreement and until the End
Date, the Company will use commercially reasonable efforts to keep all
properties necessary for the conduct of its business in good repair, working
order and condition, reasonable wear and tear excepted, and from time to time
make all necessary and proper repairs, renewals, replacements, additions and
improvements thereto; and the Company will at all times comply with each
provision of all leases and claims to which it is a party or under which it
occupies or has rights to property if the breach of such provision could
reasonably be expected to have a Material Adverse Effect.  The Company will not
abandon any of its assets except for those assets which have negligible or
marginal value or for which it is reasonably prudent to do so under the
circumstances.

 

 

 

 

(i)          Confidentiality/Public Announcement.   From the date of this
Agreement and until the End Date, the Company agrees that except in connection
with a Form 8-K, Form 10-Q, Form 10-K and a registration statement or statements
regarding the Subscribers’ Securities or in correspondence with the Commission
regarding same, it will not disclose publicly or privately the identity of the
Subscribers unless expressly agreed to in writing by Subscribers or only to the
extent required by law and then only upon not less than two (2) days prior
notice to Subscribers.  Not later than four (4) business days after the Closing
Date, the Company will file on Form 8-K describing the Offering as required by
the 1934 Act.  In the event that the Company believes that a notice or
communication to Subscribers contains material, nonpublic information relating
to the Company or Subsidiaries, except as required to be delivered in connection
with this Agreement, the Company shall so indicate to Subscribers prior to
delivery of such notice or information.  Subscribers will be granted two (2)
business days to notify the Company that Subscriber elects not to receive such
information. In the case that Subscriber elects not to receive such information,
the Company will not deliver such information to Subscribers. In the absence of
any such Company indication, Subscribers shall be allowed to presume that all
matters relating to such notice and information do not constitute material,
nonpublic information relating to the Company or Subsidiaries.  

 

(j)          Non-Public Information.  The Company covenants and agrees that
except for the Reports, Other Written Information and schedules and exhibits to
this Agreement and the Transaction Documents, which information the Company
undertakes to publicly disclose on the Form 8-K described in Section 8(i) above,
neither it nor any other person acting on its behalf will at any time provide
any Subscriber or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto such
Subscriber, its agent or counsel shall have agreed in writing to accept such
information as described in Section 8(i) above.  The Company understands and
confirms that the Subscribers shall be relying on the foregoing representations
in effecting transactions in securities of the Company.  The Company agrees that
any information known to Subscriber not already made public by the Company may
be made public and disclosed by the Subscriber.

 

(k)          Negative Covenants.   So long as a Note is outstanding, without the
consent of a Majority in Interest as defined in Section 11(j), the Company will
not and will not permit any of its Subsidiaries to directly or indirectly:

 

(i)          create, incur, assume or suffer to exist any pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
security title, mortgage, security deed or deed of trust, easement or
encumbrance, or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any lease or title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to give, any
financing statement perfecting a security interest under the Uniform Commercial
Code or comparable law of any jurisdiction) (each, a “Lien”) upon any of its
property, whether now owned or hereafter acquired except for (a) Liens upon the
Company’s intellectual property in connection with a license, development,
manufacturing or distribution transaction or other partnering arrangement; (b)
Liens imposed by law for taxes that are not yet due or are being contested in
good faith and for which adequate reserves have been established in accordance
with GAAP; (c) carriers’, warehousemen’s, mechanic’s, material men’s,
repairmen’s and other like Liens imposed by law, arising in the ordinary course
of business and securing obligations that are not overdue by more than 30 days
or that are being contested in good faith and by appropriate proceedings; (d)
pledges and deposits made in the ordinary course of business in compliance with
workers’ compensation, unemployment insurance and other social security laws or
regulations; (e) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature, in each case in the ordinary course of
business; (f) Liens created with respect to the financing of the purchase of new
property in the ordinary course of the Company’s business up to the amount of
the purchase price of such property; and (g) easements, zoning restrictions,
rights-of-way and similar encumbrances on real property imposed by law or
arising in the ordinary course of business that do not secure any monetary
obligations and do not materially detract from the value of the affected
property (each of (a) through (g), a “Permitted Lien”);

 

 

 

 

(ii)         amend its certificate of incorporation, bylaws or its charter
documents so as to materially and adversely affect any rights of the
Subscribers;

 

(iii)        repay, repurchase or offer to repay, repurchase or otherwise
acquire or make any cash dividend or cash distribution in respect of any of its
Common Stock, preferred stock, or other equity securities other than to the
extent permitted or required under the Transaction Documents; or

 

(iv)         except as set forth on Schedule 8(k)(iv), engage in any
transactions with any officer, director, employee or any Affiliate of the
Company, including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $50,000
other than (i) for payment of salary and bonuses approved by the Compensation
Committee of the Company’s Board of Directors, or fees for services rendered,
pursuant to and on the terms of a written contract in effect at least five days
prior to the Closing Date, which contracts may be extended on terms customary
and reasonable within the marketplace, (ii) reimbursement for authorized
expenses incurred on behalf of the Company, (iii) for other employee benefits,
including stock option agreements under any stock option plan of the Company
disclosed in the Reports or on Schedule 4(d), or (iv) other transactions
disclosed in the Reports.

 

(l)          Offering Restrictions.  For so long as Notes are outstanding,
except for the Excepted Issuances (defined below), the Company will not enter
into an agreement to issue nor issue any equity, convertible debt or other
securities convertible into Common Stock or equity of the Company nor modify any
of the foregoing which may be outstanding at anytime, without the prior written
consent of the Subscribers which consent may be withheld for any
reason.  Excepted Issuances means (i) full or partial consideration in
connection with a bona fide strategic merger, acquisition, consolidation or
purchase of substantially all of the securities or assets of a corporation or
other entity so long as such issuances are not for the purpose of raising
capital and which holders of such securities or debt are not at any time granted
registration rights, (ii) the Company’s issuance of securities in connection
with bona fide strategic license agreements and other bona fide partnering
arrangements so long as such issuances are not for the purpose of raising
capital and which holders of such securities or debt are not at any time granted
registration rights, (iii) the Company’s issuance of Common Stock or the
issuances or grants of options to purchase Common Stock to employees, directors,
and consultants, pursuant to plans described on Schedule 4(d) as such plans are
constituted on the Closing Date or contemplated to be amended or adopted as
described on Schedule 4(d), (iv) the exercise, exchange or conversion of any
securities exercisable, exchangeable or convertible for Common Stock issued and
outstanding on the date of this Agreement on the unamended terms disclosed in
the Reports and which securities are also described on Schedule 8(p), and (v)
any offering the proceeds of which are used to repay in full all amounts payable
in connection with the Notes promptly, but in no event later than within three
business days after the closing of such offering (collectively, the foregoing
(i) through (v) are “Excepted Issuances”).

 

 

 

 

(m)          Seniority.  Except for Permitted Liens, until the Notes are fully
satisfied, without written consent of a Majority in Interest, the Company and
Subsidiaries shall not grant nor allow any security interest to be taken in any
assets of the Company or any Subsidiary or any Subsidiary’s assets, nor except
for Permitted Debt, issue or amend any debt, equity or other instrument which
would give the holder thereof directly or indirectly, a right in any equity or
assets of the Company or any Subsidiary or any right to payment equal to or
superior to any right of the Subscribers as holders of the Notes in or to such
equity, assets or payment, nor issue or incur any debt not in the ordinary
course of business.

 

(n)          Notices.   For so long as the Subscribers hold any Notes or
Incentive Shares, the Company will maintain a United States address and United
States fax number for notice purposes under the Transaction Documents.

 

(o)          Notice of Event of Default.  The Company agrees to notify
Subscriber of the occurrence of an Event of Default (as defined and employed in
the Transaction Documents) not later than five (5) business days after any of
the Company’s officers or directors becomes aware of such Event of Default.

 

9.             Covenants of the Company Regarding Indemnification.

 

(a)          The Company agrees to indemnify, hold harmless, reimburse and
defend the Subscribers, the Subscribers’ officers, directors, agents, counsel,
Affiliates, members, managers, control persons, and principal shareholders,
against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the
Subscribers or any such person which results, arises out of or is based upon (i)
any material misrepresentation by Company or breach of any representation or
warranty by Company in this Agreement or in any Exhibits or Schedules attached
hereto in any Transaction Document, or other agreement delivered pursuant hereto
or in connection herewith, now or after the date hereof; or (ii) after any
applicable notice and/or cure periods, any breach or default in performance by
the Company of any covenant or undertaking to be performed by the Company
hereunder, or any other agreement entered into by the Company and Subscribers
relating hereto. In no event shall Indemnification be provided by the Company in
respect of punitive or exemplary damages.

 

(b)          In no event shall the liability of the Subscribers or permitted
successor hereunder or under any Transaction Document or other agreement
delivered in connection herewith be greater in amount than the dollar amount of
the net proceeds actually received by such Subscriber or successor upon the sale
of Incentive Shares.

 

 

 

 

10.           Additional Post-Closing Obligations.

 

10.1.        Piggy-Back Registrations.   If at any time after one year after the
Closing Date there is not an effective registration statement covering all of
the Incentive Shares and the Company determines to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others under the 1933 Act of any of its equity securities, but
excluding Forms S-4 or S-8 and similar forms which do not permit such
registration and the Shares may not be sold under Rule 144, then the Company
shall send to each holder of any of the Securities written notice of such
determination and, if within fifteen calendar days after receipt of such notice,
any such holder shall so request in writing, the Company shall include in such
registration statement all or any part of the Incentive Shares such holder
requests to be registered and which inclusion of such Incentive Shares will not
be subject to customary underwriter cutbacks applicable to all holders of
registration rights and any cutbacks in accordance with guidance provided by the
Securities and Exchange Commission (including, but not limited to, Rule
415).  The obligations of the Company under this Section may be waived by any
holder of any of the Securities entitled to registration rights under this
Section 10.1. The holders whose Incentive Shares are included or required to be
included in such registration statement are granted the same rights, benefits,
liquidated or other damages and indemnification granted to other holders of
securities included in such registration statement.  In no event shall the
liability of any holder of Securities or permitted successor in connection with
any Incentive Shares included in any such registration statement be greater in
amount than the dollar amount of the net proceeds actually received by such
Subscriber upon the sale of the Incentive Shares sold pursuant to such
registration or such lesser amount in proportion to all other holders of
Securities included in such registration statement. All expenses incurred by the
Company in complying with Section 10, including, without limitation, all
registration and filing fees, printing expenses (if required), fees and
disbursements of counsel and independent public accountants for the Company,
fees and expenses (including reasonable counsel fees) incurred in connection
with complying with state securities or “blue sky” laws, fees of the NASD,
transfer taxes, and fees of transfer agents and registrars, are called
“Registration Expenses.” All underwriting discounts and selling commissions
applicable to the sale of registrable securities are called “Selling Expenses.”
The Company will pay all Registration Expenses in connection with the
registration statement under Section 10.  Selling Expenses in connection with
each registration statement under Section 10 shall be borne by the holder and
will be apportioned among such holders in proportion to the number of Shares
included therein for a holder relative to all the Securities included therein
for all selling holders, or as all holders may agree.

 

10.2.        Unlegended Shares and 144 Sales.

 

(a)          Delivery of Unlegended Shares.  Within three (3) business days
(such third (3rd) day being the “Unlegended Shares Delivery Date”) after the day
on which the Company has received (i) a notice that Incentive Shares or any
other Common Stock held by Subscriber has been duly sold pursuant to the plan of
distribution in a registration statement or Rule 144 under the 1933 Act, (ii) a
representation that the prospectus delivery requirements, or the requirements of
Rule 144, as applicable and if required, have been satisfied, (iii) the original
share certificates representing the shares of Common Stock that have been sold,
and (iv) in the case of sales under Rule 144, customary representation letters
of the Subscriber and, if required, Subscriber’s broker regarding compliance
with the requirements of Rule 144, the Company at its expense, (y) shall
deliver, and shall cause legal counsel selected by the Company to deliver to its
transfer agent (with copies to Subscriber) an appropriate instruction and
opinion of such counsel, directing the delivery of shares of Common Stock
without any legends including the legend set forth in Section 4(h) above (the
“Unlegended Shares”); and (z) cause the transmission of the certificates
representing the Unlegended Shares together with a legended certificate
representing the balance of the submitted Common Stock certificate, if any, to
the Subscriber at the address specified in the notice of sale, via express
courier, by electronic transfer or otherwise on or before the Unlegended Shares
Delivery Date.

 

(b)          DWAC.   In lieu of delivering physical certificates representing
the Unlegended Shares, upon request of a Subscriber, so long as the certificates
therefor do not bear a legend and the Subscriber is not obligated to return such
certificate for the placement of a legend thereon, the Company shall cause its
transfer agent to electronically transmit the Unlegended Shares by crediting the
account of Subscriber’s prime broker with the Depository Trust Company through
its Deposit Withdrawal Agent Commission system.  Such delivery must be made on
or before the Unlegended Shares Delivery Date.

 

 

 

 

11.           Miscellaneous.

 

(a)          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 (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) 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.  Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) 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 (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Company, to: MusclePharm
Corporation, 4721 Ironton Street, Building A, Denver, CO 80239, Attn: Brad J.
Pyatt, Chief Executive Officer, facsimile: (800) 490-7165, with a copy by
facsimile only to: Jones & Keller, P.C., 1999 Broadway, Suite 3150, Denver, CO
80202, Attn: Reid A. Godbolt, Esq., facsimile: (303) 573-8133, and (ii) if to
the Subscribers, to: the addresses and fax numbers indicated on Schedule 1
hereto, with an additional copy by fax only to (which shall not constitute
notice): Grushko & Mittman, P.C., 515 Rockaway Avenue, Valley Stream, New York
11581, facsimile: (212) 697-3575.

 

(b)          Entire Agreement; Assignment.  This Agreement and other documents
delivered in connection herewith represent the entire agreement between the
parties hereto with respect to the subject matter hereof and may be amended only
by a writing executed by both parties.  Neither the Company nor the Subscribers
has relied on any representations not contained or referred to in this Agreement
and the documents delivered herewith.   No right or obligation of the Company
shall be assigned without prior notice to and the written consent of the
Subscribers.

 

(c)          Counterparts/Execution.  This Agreement may be executed in any
number of counterparts and by the different signatories hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.  This
Agreement may be executed by facsimile transmission, PDF, electronic signature
or other similar electronic means with the same force and effect as if such
signature page were an original thereof.

 

(d)          Law Governing this Agreement.  This Agreement shall be governed by
and construed in accordance with the laws of the State of New York without
regard to principles of conflicts of laws. Any action brought by either party
against the other concerning the transactions contemplated by this Agreement
shall be brought only in the state courts of New York or in the federal courts
located in the state and county of New York.  The parties to this Agreement
hereby irrevocably waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non conveniens.  The parties executing
this Agreement and other agreements referred to herein or delivered in
connection herewith on behalf of the Company agree to submit to the in personam
jurisdiction of such courts and hereby irrevocably waive trial by jury.  The
prevailing party shall be entitled to recover from the other party its
reasonable attorney’s fees and costs.  In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law.  Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any
agreement.  Each party hereby irrevocably waives personal service of process and
consents to process being served in any suit, action or proceeding in connection
with this Agreement or any other Transaction Document by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof.  Nothing contained herein shall be deemed
to limit in any way any right to serve process in any other manner permitted by
law.

 

 

 

 

(e)          Specific Enforcement, Consent to Jurisdiction.  The Company and
Subscribers acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached.  It is
accordingly agreed that the parties shall be entitled to seek an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof, this being in addition
to any other remedy to which any of them may be entitled by law or
equity.  Subject to Section 11(d) hereof, the Company and each Subscriber hereby
irrevocably waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction in
New York of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper.  Nothing in this Section shall affect or limit any right to serve
process in any other manner permitted by law.

 

(f)          Damages.   In the event the Subscriber is entitled to receive any
liquidated or other damages pursuant to the Transactions Documents, the
Subscriber may elect to receive the greater of actual damages or such liquidated
damages.  In the event the Subscriber is granted rights under different sections
of the Transaction Documents relating to the same subject matter or which may be
exercised contemporaneously, or pursuant to which damages or remedies are
different, Subscriber is granted the right in Subscriber’s absolute discretion
to proceed under such section as Subscriber elects.

 

(g)          Maximum Payments.   Nothing contained herein or in any document
referred to herein or delivered in connection herewith shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law.  In the event that the rate
of interest or dividends required to be paid or other charges hereunder exceed
the maximum permitted by such law, any payments in excess of such maximum shall
be credited against amounts owed by the Company to the Subscribers and thus
refunded to the Company.  The Company agrees that it may not and actually waives
any right to challenge the effectiveness or applicability of this Section 11(g).

 

(h)          Calendar Days.   All references to “days” in the Transaction
Documents shall mean calendar days unless otherwise stated.  The terms “business
days” and “trading days” shall mean days that the New York Stock Exchange is
open for trading for three or more hours.  Time periods shall be determined as
if the relevant action, calculation or time period were occurring in New York
City.  Any deadline that falls on a non-business day in any of the Transaction
Documents shall be automatically extended to the next business day and interest,
if any, shall be calculated and payable through such extended period.

 

(i)          Captions: Certain Definitions.  The captions of the various
sections and paragraphs of this Agreement have been inserted only for the
purposes of convenience; such captions are not a part of this Agreement and
shall not be deemed in any manner to modify, explain, enlarge or restrict any of
the provisions of this Agreement.  As used in this Agreement the term “person”
shall mean and include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.

 

 

 

 

(j)          Consent.   As used in this Agreement and the Transaction Documents
and any other agreement delivered in connection herewith, “Consent of the
Subscribers” or similar language means the consent of holders of more than fifty
percent (50%) of the relevant component of the outstanding Principal Amount of
Notes or Incentive Shares, as the case may be, on the date consent is requested
(such Subscribers being a “Majority in Interest”).  A Majority in Interest may
consent to take or forebear from any action permitted under or in connection
with the Transaction Documents, modify any Transaction Documents or waive any
default or requirement applicable to the Company, Subsidiaries or Subscribers
under the Transaction Documents provided the effect of such action does not
waive any accrued interest or accrued damages and further provided that the
relative rights of the Subscribers to each other remains unchanged.

 

(k)          Severability.  In the event that any term or provision of this
Agreement shall be finally determined to be superseded, invalid, illegal or
otherwise unenforceable pursuant to applicable law by an authority having
jurisdiction and venue, that determination shall not impair or otherwise affect
the validity, legality or enforceability: (i) by or before that authority of the
remaining terms and provisions of this Agreement, which shall be enforced as if
the unenforceable term or provision were deleted, or (ii) by or before any other
authority of any of the terms and provisions of this Agreement.

 

(l)          Successor Laws.  References in the Transaction Documents to laws,
rules, regulations and forms shall also include successors to and functionally
equivalent replacements of such laws, rules, regulations and forms.  A successor
rule to Rule 144(b)(1)(i) shall include any rule that would be available to a
non-Affiliate of the Company for the sale of Common Stock not subject to volume
restrictions and after a six month holding period.

 

(m)          Independent Nature of Subscribers.     The Company acknowledges
that the obligations of each Subscriber under the Transaction Documents are
several and not joint with the obligations of any other Subscriber, and no
Subscriber shall be responsible in any way for the performance of the
obligations of any other Subscriber under the Transaction Documents. The Company
acknowledges that each Subscriber has represented that the decision of each
Subscriber to purchase Securities has been made by such Subscriber independently
of any other Subscriber and independently of any information, materials,
statements or opinions as to the business, affairs, operations, assets,
properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company which may have been made or given by any
other Subscriber or by any agent or employee of any other Subscriber, and no
Subscriber or any of its agents or employees shall have any liability to any
other Subscriber (or any other person) relating to or arising from any such
information, materials, statements or opinions.  The Company acknowledges that
nothing contained in any Transaction Document, and no action taken by any
Subscriber pursuant hereto or thereto shall be deemed to constitute the
Subscribers as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Subscribers are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents.  The Company acknowledges that it has
elected to provide all Subscribers with the same terms and Transaction Documents
for the convenience of the Company and not because Company was required or
requested to do so by the Subscribers.  The Company acknowledges that such
procedure with respect to the Transaction Documents in no way creates a
presumption that the Subscribers are in any way acting in concert or as a group
with respect to the Transaction Documents or the transactions
contemplated thereby.

 

(n)          Equal Treatment.   No consideration shall be offered or paid to any
person to amend or consent to a waiver or modification of any provision of the
Transaction Documents unless the same consideration is also offered and paid to
all the Subscribers and their permitted successors and assigns.

 

 

 

 

(o)          Adjustments.   The Imputed Value, amount of Incentive Shares,
trading volume amounts, price/volume amounts and similar figures in the
Transaction Documents shall be equitably adjusted and as otherwise described in
this Agreement, the Notes and other Transaction Documents.

 

[-SIGNATURE PAGES FOLLOW-]

 

 

 

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)

 

Please acknowledge your acceptance of the foregoing Subscription Agreement by
signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.

 

 

  MUSCLEPHARM CORPORATION   a Nevada corporation       By:  /s/ Brad J. Pyatt  
  Name: Brad J. Pyatt
Title: CEO           Dated: December 4, 2012

  

Subscribers:

 

By: /s/ Brett Nesland       Name: Brett Nesland                           By:
/s/ Michael Brauser       Name: Michael Brauser                           By:
/s/ Stuart Smith       Name: Stuart Smith                           By: /s/
Barry Honig       Name: Barry Honig                             Frost Gamma
Investments Trust                 By: /s/ Philip Frost       Name: Philip Frost
      Title: Trustee                             Sandor Capital Master Fund    
            By: /s/ John S. Lemak       Name: John S. Lemak       Title: Manager