Document:

ex4.1

  
 BERGIO INTERNATIONAL, INC.
 2011 INCENTIVE STOCK AND AWARD PLAN
 

 1. Purpose of the Plan.
 

 (a) This 2011 Incentive Stock and Award Plan (the “Plan”) is intended as an incentive to retain in the employ of, and as directors, officers, consultants, attorneys, advisors and employees to, Bergio International, Inc., a Delaware corporation (the “Company”), and any Subsidiary of the Company, within the meaning of Section 424(f) of the United States Internal Revenue Code of 1986, as amended (the “Code”), persons of training, experience and ability, to attract new directors, officers, consultants, attorneys, advisors and employees whose services are considered valuable, to encourage the sense of proprietorship and to stimulate the active interest of such persons in the development and financial success of the Company and its Subsidiaries.
 

 (b) It is further intended that certain options granted pursuant to the Plan shall constitute incentive stock options within the meaning of Section 422 of the Code (the “Incentive Options”) while certain other options granted pursuant to the Plan shall be nonqualified stock options (the “Nonqualified Options”). Incentive Options and Nonqualified Options are hereinafter referred to collectively as “Options.”
 

 (c) The Company intends that the Plan meet the requirements of Rule 16b-3 (“Rule 16b-3”) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that transactions of the type specified in subparagraphs (c) to (f) inclusive of Rule 16b-3 by officers and directors of the Company pursuant to the Plan will be exempt from the operation of Section 16(b) of the Exchange Act. Further, the Plan is intended to satisfy the performance-based compensation exception to the limitation on the Company’s tax deductions imposed by Section 162(m) of the Code with respect to those Options for which qualification for such exception is intended. In all cases, the terms, provisions, conditions and limitations of the Plan shall be construed and interpreted consistent with the Company’s intent as stated in this Section 1.
 

 2. Administration of the Plan.
 

 (a) The Board of Directors of the Company (the “Board”) shall appoint and maintain as administrator of the Plan a Committee (the “Committee”) consisting of one (1) director. The Committee, subject to Sections 3, 5 and 6 hereof, shall have full power and authority to designate recipients of Options and restricted stock (“Restricted Stock”) and to determine the terms and conditions of the respective Option and Restricted Stock agreements (which need not be identical) and to interpret the provisions and supervise the administration of the Plan. The Committee shall have the authority, without limitation, to designate which Options granted under the Plan shall be Incentive Options and which shall be Nonqualified Options. To the extent any Option does not qualify as an Incentive Option, it shall constitute a separate Nonqualified Option.
 

 (b) Subject to the provisions of the Plan, the Committee shall interpret the Plan and all Options and Restricted Stock granted under the Plan, shall make such rules as it deems necessary for the proper administration of the Plan, shall make all other determinations necessary or advisable for the administration of the Plan, and shall correct any defects or supply any omission or reconcile any inconsistency in the Plan or in any Options or Restricted Stock granted under the Plan in the manner and to the extent that the Committee deems desirable to carry into effect the Plan or any Options or Restricted Stock. The act or determination of a majority of the Committee shall be the act or determination of the Committee and any decision reduced to writing and signed by all of the members of the Committee shall be fully effective as if it had been made by a majority of the Committee at a meeting duly held for such purpose. Subject to the provisions of the Plan, any action taken or determination made by the Committee pursuant to this and the other Sections of the Plan shall be conclusive on all parties.
 

 

 

 

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 (c) In the event that for any reason the Committee is unable to act or if there shall be no such Committee, or if the Board otherwise determines to administer the Plan, then the Plan shall be administered by the Board, and references herein to the Committee (except in the proviso to this sentence) shall be deemed to be references to the Board, and any such grant, award or other acquisition may be approved or ratified in any other manner contemplated by subparagraph (d) of Rule 16b-3; provided, however, that grants to the Company’s Chief Executive Officer or to any of the Company’s other four most highly compensated officers that are intended to qualify as performance-based compensation under Section 162(m) of the Code may only be granted by the Committee.
 

 3. Designation of Optionees and Grantees.
 

 (a) The persons eligible for participation in the Plan as recipients of Options (the “Optionees”) or Restricted Stock (the “Grantees” and together with Optionees, the “Participants”) shall include directors, officers and employees of, and consultants, attorneys and advisors to, the Company or any Subsidiary; provided that Incentive Options may only be granted to employees of the Company and any Subsidiary. In selecting Participants, and in determining the number of shares to be covered by each Option or award of Restricted Stock granted to Participants, the Committee may consider any factors it deems relevant, including, without limitation, the office or position held by the Participant or the Participant’s relationship to the Company, the Participant’s degree of responsibility for and contribution to the growth and success of the Company or any Subsidiary, the Participant’s length of service, promotions and potential. A Participant who has been granted an Option or Restricted Stock hereunder may be granted an additional Option or Options, or Restricted Stock if the Committee shall so determine.
 

 (b) In the absence of any date specified for grant, the Committee’s grant of Options or award of Restricted Stock shall be deemed to have been made effective on the first business day of each March, June, September or December of any calendar year, or on such other pre-determined dates as maybe set by the Committee (the “Pre-Determined Grant Dates”). Notwithstanding the foregoing, the Committee may grant Options or award restricted Stock to any employee, officer, director, consultant, attorney or advisor to the Company as an inducement to such person, in consideration for such person to enter into any agreement or to provide to the Company, for prior services rendered, or for any other reason determined by the Committee for award, in its sole discretion other than on a Pre-Determined Grant Date.
 

 4. Stock Reserved for the Plan. Subject to adjustment as provided in Section 8 hereof, a total of thirty five million (35,000,000) shares of the Company’s common stock, par value $0.001 per share (the “Stock”), shall be subject to the Plan. The maximum number of shares of Stock that may be subject to Options shall conform to any requirements applicable to performance-based compensation under Section 162(m) of the Code, if qualification as performance-based compensation under Section 162(m) of the Code is intended. The shares of Stock subject to the Plan shall consist of unissued shares, treasury shares or previously issued shares held by any Subsidiary of the Company, and such amount of shares of Stock shall be and is hereby reserved for such purpose. Any of such shares of Stock that may remain unsold and that are not subject to outstanding Options at the termination of the Plan shall cease to be reserved for the purposes of the Plan, but until termination of the Plan the Company shall at all times reserve a sufficient number of shares of Stock to meet the requirements of the Plan. Should any Option or Restricted Stock expire or be canceled prior to its exercise or vesting in full or should the number of shares of Stock to be delivered upon the exercise or vesting in full of any Option or Restricted Stock be reduced for any reason, the shares of Stock theretofore subject to such Option or Restricted Stock may be subject to future Options or Restricted Stock under the Plan, except where such reissuance is inconsistent with the provisions of Section 162(m) of the Code where qualification as performance-based compensation under Section 162(m) of the Code is intended.
 

 5. Terms and Conditions of Options. Options granted under the Plan shall be subject to the following conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable:
 

 

 

 

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 (a) Option Price. The purchase price of each share of Stock purchasable under an Incentive Option shall be determined by the Committee at the time of grant, but shall not be less than 100% of the Fair Market Value (as defined below) of such share of Stock on the date the Option is granted; provided, however, that with respect to an Optionee who, at the time such Incentive Option is granted, owns (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or of any Subsidiary, the purchase price per share of Stock shall be at least 110% of the Fair Market Value per share of Stock on the date of grant. The purchase price of each share of Stock purchasable under a Nonqualified Option shall not be less than 100% of the Fair Market Value of such share of Stock on the date the Option is granted. The exercise price for each Option shall be subject to adjustment as provided in Section 8 below. “Fair Market Value” means the closing price on the final trading day immediately prior to the grant of the Stock on the principal securities exchange on which shares of Stock are listed (if the shares of Stock are so listed), or on the NASDAQ Stock Market, OTC Markets or OTC Bulletin Board (if the shares of Stock are regularly quoted on the NASDAQ Stock Market, OTC Markets or OTC Bulletin Board, as the case may be), or, if not so listed, the mean between the closing bid and asked prices of publicly traded shares of Stock in the over the counter market, or, if such bid and asked prices shall not be available, as reported by any nationally recognized quotation service selected by the Company, or as determined by the Committee in a manner consistent with the provisions of the Code. Anything in this Section 5(a) to the contrary notwithstanding, in no event shall the purchase price of a share of Stock be less than the minimum price permitted under the rules and policies of any national securities exchange on which the shares of Stock are listed;
 

 (b) Option Term. The term of each Option shall be fixed by the Committee, but no Option shall be exercisable more than ten (10) years after the date such Option is granted and in the case of an Incentive Option granted to an Optionee who, at the time such Incentive Option is granted, owns (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or of any Subsidiary, no such Incentive Option shall be exercisable more than five (5) years after the date such Incentive Option is granted; and
 

 (c) Exercisability. (i) Subject to Section 5(i) hereof, Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at the time of grant; provided, however, that in the absence of any Option vesting periods designated by the Committee at the time of grant, Options shall vest and become exercisable in equal amounts on each fiscal year of the Company through the five (5) year anniversary of the date of grant; and provided further that no Options shall be exercisable until such time as any vesting limitation required by Section 16 of the Exchange Act, and related rules, shall be satisfied if such limitation shall be required for continued validity of the exemption provided under Rule 16b-3(d)(3).
 

 (ii) Upon the occurrence of a Change in Control (as defined below), the Committee may accelerate the vesting and exercisability of outstanding Options, in whole or in part, as determined by the Committee in its sole discretion. In its sole discretion, the Committee may also determine that, upon the occurrence of a Change in Control, each outstanding Option shall terminate within a specified number of days after notice to the Optionee thereunder, and each such Optionee shall receive, with respect to each share of Company Stock subject to such Option, an amount equal to the excess of the Fair Market Value of such shares immediately prior to such Change in Control over the exercise price per share of such Option; such amount shall be payable in cash, in one or more kinds of property (including the property, if any, payable in the transaction) or a combination thereof, as the Committee shall determine in its sole discretion.
 

 (iii) For purposes of the Plan, unless otherwise defined in an employment agreement between the Company and the applicable Optionee, a “Change in Control” shall be deemed to have occurred if:
 

 (A) a tender offer (or series of related offers) shall be made and consummated for the ownership of fifty percent (50%) or more of the outstanding voting securities of the Company, unless as a result of such tender offer more than fifty percent (50%) of the outstanding voting securities of the surviving or resulting corporation shall be owned in the aggregate by the stockholders of the Company (as of the time immediately prior to the commencement of such offer), any employee benefit plan of the Company or its Subsidiaries, and their affiliates;
 

 

 

 

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 (B) the Company shall be merged or consolidated with another corporation, unless as a result of such merger or consolidation more than fifty percent (50%) of the outstanding voting securities of the surviving or resulting corporation shall be owned in the aggregate by the stockholders of the Company (as of the time immediately prior to such transaction), any employee benefit plan of the Company or its Subsidiaries, and their affiliates;
   
 (C) the Company shall sell substantially all of its assets to another corporation that is not wholly owned by the Company, unless as a result of such sale more than fifty percent (50%) of such assets shall be owned in the aggregate by the stockholders of the Company (as of the time immediately prior to such transaction), any employee benefit plan of the Company or its Subsidiaries and their affiliates; or
 

 (D) a Person (as defined below) shall acquire fifty percent (50%) or more of the outstanding voting securities of the Company (whether directly, indirectly, beneficially or of record), unless as a result of such acquisition more than fifty percent (50%) of the outstanding voting securities of the surviving or resulting corporation shall be owned in the aggregate by the stockholders of the Company (as of the time immediately prior to the first acquisition of such securities by such Person), any employee benefit plan of the Company or its Subsidiaries, and their affiliates.
 

 (iv) Notwithstanding Section 5(c)(iii) above, if Change of Control is defined in an employment agreement between the Company and the relevant Optionee, then, with respect to such Optionee, Change of Control shall have the meaning ascribed to it in such employment agreement.
 

 (v) For purposes of this Section 5(c), ownership of voting securities shall take into account and shall include ownership as determined by applying the provisions of Rule 13d-3(d)(I)(i) (as in effect on the date hereof) under the Exchange Act. In addition, for such purposes, “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; provided, however, that a Person shall not include (A) the Company or any of its Subsidiaries; (B) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Subsidiaries; (C) an underwriter temporarily holding securities pursuant to an offering of such securities; or (D) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company.
 

 (d) Method of Exercise. Options to the extent then exercisable may be exercised in whole or in part at any time during the option period, by giving written notice to the Company specifying the number of shares of Stock to be purchased, accompanied by payment in full of the purchase price, in cash, or by check or such other instrument as may be acceptable to the Committee. As determined by the Committee, in its sole discretion, at or after grant, payment in full or in part may be made at the election of the Optionee (i) in the form of Stock owned by the Optionee (based on the Fair Market Value of the Stock) which is not the subject of any pledge or security interest, (ii) in the form of shares of Stock withheld by the Company from the shares of Stock otherwise to be received with such withheld shares of Stock having a Fair Market Value equal to the exercise price of the Option, or (iii) by a combination of the foregoing, such Fair Market Value determined by applying the principles set forth in Section 5(a), provided that the combined value of all cash and cash equivalents and the Fair Market Value of any shares surrendered to the Company is at least equal to such exercise price and except with respect to (ii) above, such method of payment will not cause a disqualifying disposition of all or a portion of the Stock received upon exercise of an Incentive Option. An Optionee shall have the right to dividends and other rights of a stockholder with respect to shares of Stock purchased upon exercise of an Option at such time as the Optionee (i) has given written notice of exercise and has paid in full for such shares, and (ii) has satisfied such conditions that may be imposed by the Company with respect to the withholding of taxes.
 

 

 

 

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 (e) Non-transferability of Options. Options are not transferable and may be exercised solely by the Optionee during his lifetime or after his death by the person or persons entitled thereto under his will or the laws of descent and distribution. The Committee, in its sole discretion, may permit a transfer of a Nonqualified Option to (i) a trust for the benefit of the Optionee, (ii) a member of the Optionee’s immediate family (or a trust for his or her benefit) or (iii) pursuant to a domestic relations order. Any attempt to transfer, assign, pledge or otherwise dispose of, or to subject to execution, attachment or similar process, any Option contrary to the provisions hereof shall be void and ineffective and shall give no right to the purported transferee.
 

 (f) Termination by Death. Unless otherwise determined by the Committee, if any Optionee’s employment with or service to the Company or any Subsidiary terminates by reason of death, the Option may thereafter be exercised, to the extent then exercisable (or on such accelerated basis as the Committee shall determine at or after grant), by the legal representative of the estate or by the legatee of the Optionee under the will of the Optionee, until the one (1) year anniversary of the date of such death (or, if later, such time as the Option may be exercised pursuant to Section 14(d) hereof) or until the expiration of the stated term of such Option as provided under the Plan, whichever period is shorter.
 

 (g) Termination by Reason of Disability. Unless otherwise determined by the Committee, if any Optionee’s employment with or service to the Company or any Subsidiary terminates by reason of Disability (as defined below), then any Option held by such Optionee may thereafter be exercised, to the extent it was exercisable at the time of termination due to Disability (or on such accelerated basis as the Committee shall determine at or after grant), but may not be exercised after ninety (90) days after the date of such termination of employment or service (or, if later, such time as the Option may be exercised pursuant to Section 14(d) hereof) or the expiration of the stated term of such Option, whichever period is shorter; provided, however, that, if the Optionee dies within such ninety (90) day period, any unexercised Option held by such Optionee shall thereafter be exercisable to the extent to which it was exercisable at the time of death for a period of one (1) year after the date of such death (or, if later, such time as the Option may be exercised pursuant to Section 14(d) hereof) or for the stated term of such Option, whichever period is shorter. “Disability” shall mean an Optionee’s total and permanent disability; provided that if Disability is defined in an employment agreement between the Company and the relevant Optionee, then, with respect to such Optionee, Disability shall have the meaning ascribed to it in such employment agreement.
 

 (h) Termination by Reason of Retirement. (i) Unless otherwise determined by the Committee, if any Optionee’s employment with or service to the Company or any Subsidiary terminates by reason of Normal or Early Retirement (as such terms are defined below), any Option held by such Optionee may thereafter be exercised to the extent it was exercisable at the time of such Retirement (or on such accelerated basis as the Committee shall determine at or after grant), but may not be exercised after ninety (90) days after the date of such termination of employment or service (or, if later, such time as the Option may be exercised pursuant to Section 14(d) hereof) or the expiration of the stated term of such Option, whichever date is earlier; provided, however, that, if the Optionee dies within such ninety (90) day period, any unexercised Option held by such Optionee shall thereafter be exercisable, to the extent to which it was exercisable at the time of death, for a period of one (1) year after the date of such death (or, if later, such time as the Option may be exercised pursuant to Section 14(d) hereof) or for the stated term of such Option, whichever period is shorter.
 

 (ii) For purposes of this paragraph (h), “Normal Retirement” shall mean retirement from active employment with the Company or any Subsidiary on or after the normal retirement date specified in the applicable Company or Subsidiary pension plan or if no such pension plan, age 65, and “Early Retirement” shall mean retirement from active employment with the Company or any Subsidiary pursuant to the early retirement provisions of the applicable Company or Subsidiary pension plan or if no such pension plan, age 55.
 

 

 

 

 

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 (i) Other Terminations. Unless otherwise determined by the Committee upon grant, if any Optionee’s employment with or service to the Company or any Subsidiary is terminated by such Optionee for any reason other than death, Disability or Normal or Early Retirement, and except as provided in Section 5(i)(ii) and (iii) below, the Option shall thereupon terminate, except that the portion of any Option that was exercisable on the date of such termination of employment or service may be exercised for the lesser of ninety (90) days after the date of termination (or, if later, such time as the Option may be exercised pursuant to Section 14(d) hereof) or the balance of such Option’s term, which ever period is shorter. The transfer of an Optionee from the employ of or service to the Company to the employ of or service to a Subsidiary, or vice versa, or from one Subsidiary to another, shall not be deemed to constitute a termination of employment or service for purposes of the Plan.
 

 (i) In the event that the Optionee’s employment or service with the Company or any Subsidiary is terminated by the Company or such Subsidiary for Cause (as defined below) any unexercised portion of any Option shall immediately terminate in its entirety. For purposes hereof, unless otherwise defined in an employment agreement between the Company and the relevant Optionee, “Cause” shall exist upon in the event such Optionee has been accused of fraud, dishonesty or act detrimental to the interests of the Company or any Subsidiary of the Company, has been accused of or convicted of an act of willful and material embezzlement or fraud against the Company or any Subsidiary of the Company or has been accused or convicted of a felony under any state or federal statute; provided, however, that it is specifically understood that Cause shall not include any act of commission or omission in the good faith exercise of such Optionee’s business judgment as a director, officer or employee of the Company, as the case may be, or upon the advice of counsel to the Company. Notwithstanding the foregoing, if Cause is defined in an employment agreement between the Company and the relevant Optionee, then, with respect to such Optionee, Cause shall have the meaning ascribed to it in such employment agreement.
 

 (ii) In the event that an Optionee is removed as a director, officer or employee by the Company at any time other than for Cause or resigns as a director, officer or employee for Good Reason (as defined below), the Option granted to such Optionee may be exercised by the Optionee, to the extent the Option was exercisable on the date such Optionee ceases to be a director, officer or employee. Such Option may be exercised at any time within one (1) year after the date the Optionee ceases to be a director, officer or employee (or, if later, such time as the Option may be exercised pursuant to Section 14(d) hereof), or the date on which the Option otherwise expires by its terms; whichever period is shorter, at which time the Option shall terminate; provided, however, if the Optionee dies before the Options terminate and are no longer exercisable, the terms and provisions of Section 5(f) shall control. For purposes of this Section 5(i), and unless otherwise defined in an employment agreement between the Company and the relevant Optionee, “Good Reason” shall exist upon the occurrence of the following:
 

 (A) the assignment to Optionee of any duties materially inconsistent with the position in the Company that Optionee held immediately prior to the assignment; or
 

 (B) a Change of Control resulting in a significant adverse alteration in the status or conditions of Optionee’s participation with the Company or other nature of Optionee’s responsibilities from those in effect prior to such Change of Control, including, without limitation, any significant alteration in Optionee’s responsibilities immediately prior to such Change in Control.
 

 (iii) Notwithstanding the foregoing, if Good Reason is defined in an employment agreement between the Company and the relevant Optionee, then, with respect to such Optionee, Good Reason shall have the meaning ascribed to it in such employment agreement.
 

 (j) Limit on Value of Incentive Option. The aggregate Fair Market Value, determined as of the date the Incentive Option is granted, of Stock for which Incentive Options are exercisable for the first time by any Optionee during any calendar year under the Plan (and/or any other stock option plans of the Company or any Subsidiary) shall not exceed $100,000.
 

 

 

 

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 6. Terms and Conditions of Restricted Stock. Restricted Stock may be granted under this Plan aside from, or in association with, any other award and shall be subject to the following conditions and shall contain such additional terms and conditions (including provisions relating to the acceleration of vesting of Restricted Stock upon a Change of Control), not inconsistent with the terms of the Plan, as the Committee shall deem desirable.
 

 (a) Grantee rights. A Grantee shall have no rights to an award of Restricted Stock unless and until Grantee accepts the award within the period prescribed by the Committee and, if the Committee shall deem desirable, makes payment to the Company in cash, or by check or such other instrument as may be acceptable to the Committee. After acceptance and issuance of a certificate or certificates, as provided for below, the Grantee shall have the rights of a stockholder with respect to Restricted Stock subject to the non-transferability and forfeiture restrictions described in Section 6(d) below.
 

 (b) Issuance of Certificates. The Company shall issue in the Grantee’s name a certificate or certificates for the shares of Common Stock associated with the award promptly after the Grantee accepts such award.
 

 (c) Delivery of Certificates. Unless otherwise provided, any certificate or certificates issued evidencing shares of Restricted Stock shall not be delivered to the Grantee until such shares are free of any restrictions specified by the Committee at the time of grant.
 

 (d) Forfeitability, Non-transferability of Restricted Stock. Shares of Restricted Stock are forfeitable until the terms of the Restricted Stock grant have been satisfied. Shares of Restricted Stock are not transferable until the date on which the Committee has specified such restrictions have lapsed. Unless otherwise provided by the Committee at or after grant, distributions in the form of dividends or otherwise of additional shares or property in respect of shares of Restricted Stock shall be subject to the same restrictions as such shares of Restricted Stock,
 e) Change of Control. Upon the occurrence of a Change in Control as defined in Section 5(c)(iii) above, the Committee may accelerate the vesting of outstanding Restricted Stock, in whole or in part, as determined by the Committee in its sole discretion.
 

 (f) Termination of Employment. Unless otherwise determined by the Committee at or after grant, in the event the Grantee ceases to be an employee or otherwise associated with the Company for any other reason, all shares of Restricted Stock theretofore awarded to him which are still subject to restrictions shall be forfeited and the Company shall have the right to complete the blank stock power. The Committee may provide (on or after grant) that restrictions or forfeiture conditions relating to shares of Restricted Stock will be waived in whole or in part in the event of termination resulting from specified causes, and the Committee may in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock.
 

 7. Term of Plan. No Option or award of Restricted Stock shall be granted pursuant to the Plan on or after the date which is ten (10) years from the effective date of the Plan, but Options and awards of Restricted Stock theretofore granted may extend beyond that date.
 

 8. Capital Change of the Company.
 (a) In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, or other change in corporate structure affecting the Stock, the Committee shall make an appropriate and equitable adjustment in the number and kind of shares reserved for issuance under the Plan and in the number and option price of shares subject to outstanding Options granted under the Plan, to the end that after such event each Optionee’s proportionate interest shall be maintained (to the extent possible) as immediately before the occurrence of such event. The Committee shall, to the extent feasible, make such other adjustments as may be required under the tax laws so that any Incentive Options previously granted shall not be deemed modified within the meaning of Section 424(h) of the Code. Appropriate adjustments shall also be made in the case of outstanding Restricted Stock granted under the Plan.
 

 

 

 

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 (b) The adjustments described above will be made only to the extent consistent with continued qualification of the Option under Section 422 of the Code (in the case of an Incentive Option) and Section 409A of the Code.
 9. Purchase for Investment/Conditions. Unless the Options and shares covered by the Plan have been registered under the Securities Act of 1933, as amended (the “Securities Act”), or the Company has determined that such registration is unnecessary, each person exercising or receiving Options or Restricted Stock under the Plan may be required by the Company to give a representation in writing that such person is acquiring the securities for such person’s own account for investment and not with a view to, or for sale in connection with, the distribution of any part thereof. The Committee may impose any additional or further restrictions on awards of Options or Restricted Stock as shall be determined by the Committee at the time of award.
 

 10. Taxes.
 

 (a) The Company may make such provisions as it may deem appropriate, consistent with applicable law, in connection with any Options or Restricted Stock granted under the Plan with respect to the withholding of any taxes (including income or employment taxes) or any other tax matters.
 

 (b) If any Grantee, in connection with the acquisition of Restricted Stock, makes the election permitted under Section 83(b) of the Code (that is, an election to include in gross income in the year of transfer the amounts specified in Section 83(b)), such Grantee shall notify the Company of the election with the Internal Revenue Service pursuant to regulations issued under the authority of Code Section 83(b).
 

 (c) If any Grantee shall make any disposition of shares of Stock issued pursuant to the exercise of an Incentive Option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Grantee shall notify the Company of such disposition within ten (10) days thereof.
 

 11. Effective Date of Plan. The Plan shall be effective on May 9, 2011; provided, however, that if, and only if, certain options are intended to qualify as Incentive Stock Options, the Plan must subsequently be approved by majority vote of the Company’s stockholders no later than May 9, 2012, and further, that in the event certain Option grants hereunder are intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Code, the requirements as to stockholder approval set forth in Section 162(m) of the Code are satisfied.
 

 12. Amendment and Termination. (a) The Board may amend, suspend, or terminate the Plan, except that no amendment shall be made that would impair the rights of any Participant under any Option or Restricted Stock theretofore granted without the Participant’s consent, and except that no amendment shall be made which, without the approval of the stockholders of the Company, would:
 

 (i) materially increase the number of shares that may be issued under the Plan, except as is provided in Section 8;
 

 (ii) materially increase the benefits accruing to the Participants under the Plan;
 

 	 	 	
	 

	 (iii)
	 materially modify the requirements as to eligibility for participation in the Plan;

 

 (iv) decrease the exercise price of an Incentive Option to less than 100% of the Fair Market Value per share of Stock on the date of grant thereof or the exercise price of a Nonqualified Option to less than 100% of the Fair Market Value per share of Stock on the date of grant thereof;
 

 (v) extend the term of any Option beyond that provided for in Section 5(b); or
 

 (vi) except as otherwise provided in Sections 5(d) and 8 hereof, reduce the exercise price of outstanding Options or effect repricing through cancellations and re-grants of new Options.
 

 

 

 

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 (b) Subject to the forgoing, the Committee may amend the terms of any Option theretofore granted, prospectively or retrospectively, but no such amendment shall impair the rights of any Optionee without the Optionee’s consent.
 

 (c) It is the intention of the Board that the Plan comply strictly with the provisions of Section 409A of the Code and Treasury Regulations and other Internal Revenue Service guidance promulgated thereunder (the “Section 409A Rules”) and the Committee shall exercise its discretion in granting awards hereunder (and the terms of such awards), accordingly. The Plan and any grant of an award hereunder may be amended from time to time (without, in the case of an award, the consent of the Participant) as may be necessary or appropriate to comply with the Section 409A Rules.
 

 13. Government Regulations. The Plan, and the grant and exercise of Options or Restricted Stock hereunder, and the obligation of the Company to sell and deliver shares under such Options and Restricted Stock shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies, national securities exchanges and interdealer quotation systems as may be required.
 

 14. General Provisions.
 

 (a) Certificates. All certificates for shares of Stock delivered under the Plan shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, or other securities commission having jurisdiction, any applicable Federal or state securities law, any stock exchange or interdealer quotation system upon which the Stock is then listed or traded and the Committee may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions.
 

 (b) Employment Matters. Neither the adoption of the Plan nor any grant or award under the Plan shall confer upon any Participant who is an employee of the Company or any Subsidiary any right to continued employment or, in the case of a Participant who is a director, continued service as a director, with the Company or a Subsidiary, as the case may be, nor shall it interfere in any way with the right of the Company or any Subsidiary to terminate the employment of any of its employees, the service of any of its directors or the retention of any of its consultants, attorneys or advisors at any time.
 

 (c) Limitation of Liability. No member of the Committee, or any officer or employee of the Company acting on behalf of the Committee, shall be personally liable for any action, determination or interpretation taken or made in good faith with respect to the Plan, and all members of the Committee and each and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination or interpretation.
 

 (d) Registration of Stock. Notwithstanding any other provision in the Plan, no Option may be exercised unless and until the Stock to be issued upon the exercise thereof has been registered under the Securities Act and applicable state securities laws, or are, in the opinion of counsel to the Company, exempt from such registration in the United States. The Company shall not be under any obligation to register under applicable federal or state securities laws any Stock to be issued upon the exercise of an Option granted hereunder in order to permit the exercise of an Option and the issuance and sale of the Stock subject to such Option, although the Company may in its sole discretion register such Stock at such time as the Company shall determine. If the Company chooses to comply with such an exemption from registration, the Stock issued under the Plan may, at the direction of the Committee, bear an appropriate restrictive legend restricting the transfer or pledge of the Stock represented thereby, and the Committee may also give appropriate stop transfer instructions with respect to such Stock to the Company’s transfer agent.
 

 

 

 

 9
 
 (e) Transferability in accordance with SEC Release No. 33-7646 entitled “Registration of Securities on Form S-8,” as effective April 7, 1999. Notwithstanding anything to the contrary as may be contained in this Plan regarding rights as to transferability or lack thereof, all options granted hereunder may and shall be transferable to the extent permitted in accordance with SEC Release No. 33-7646 entitled “Registration of Securities on Form S-8,” as effective April 7, 1999, and in particular in accordance with that portion of such Release which expands Form S-8 to include stock option exercised by family members so that the rules governing the use of Form S-8 (i) do not impede legitimate intra-family transfer of options and (ii) may facilitate transfer for estate planning purposes, all as more specifically defined in Article III, Sections A and B thereto, the contents of which are herewith incorporated by reference.
 

 15. Non-Uniform Determinations. The Committee’s determinations under the Plan, including, without limitation, (i) the determination of the Participants to receive awards, (ii) the form, amount and timing of such awards, (iii) the terms and provisions of such awards and (ii) the agreements evidencing the same, need not be uniform and may be made by it selectively among Participants who receive, or who are eligible to receive, awards under the Plan, whether or not such Participants are similarly situated.
 

 16. Governing Law. The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the internal laws of the State of New York, without giving effect to principles of conflicts of laws, and applicable federal law.
 

 

 

 

 

 

 

 10
 
 Exhibit 10.2
 

 BERGIO INTERNATIONAL, INC.
 FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT
 EMPLOYEE
 

 THIS STOCK OPTION AGREEMENT (the “Agreement”) entered into as of the [●] day of [●] 20[●] by and between Bergio International, Inc. (the “Company”) and [●] (the “Optionee”).
 

 WHEREAS, pursuant to the authority of the Board of Directors (the “Board”), the Company has granted the Optionee the right to purchase common stock, $.001 par value per share (“Common Stock”), of the Company pursuant to stock options granted under an equity incentive plan approved by the Board (the “Plan”).
 

 NOW THEREFORE, in consideration of the mutual covenants and promises hereafter set forth and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
 

 1. Grant of Non-Qualified Options. The Company hereby irrevocably grants to the Optionee, as a matter of separate agreement and not in lieu of salary or other compensation for services, the right and option to purchase all or any part of an aggregate of [●] shares of authorized but unissued or treasury common stock of the Company (the “Options”) on the terms and conditions herein set forth. The Common Stock shall be unregistered under the Securities Act of 1933, as amended (the “Securities Act”), unless the Company voluntarily files a registration statement covering such shares Common Stock with the Securities and Exchange Commission. The Options are not intended to be Incentive Stock Options as defined by Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).
 

 2. Price. The exercise price of the shares of Common Stock subject to the Options granted hereunder shall be $[●] per share.
 

 3. Vesting.
 

 (a) The Options shall vest [quarterly] [annual] over a [●] year period, subject to the Optionee continuing to perform services for the Company in the capacity in which the grant was received on each applicable vesting date. In lieu of fractional vesting, the number of Options shall be rounded up each time until fractional Options are eliminated.
 

 (b) Subject to Sections 3(c) and 4 of this Agreement, Options may be exercised by providing to the Company the Notice of Option Exercise in the form attached hereto as Exhibit A after vesting, and remain exercisable until 5:30 p.m. New York time on the date that is the tenth (10th) year anniversary of the date of this Agreement.
 

 (c) However, notwithstanding any other provision of this Agreement, at the option of the Board in its sole and absolute discretion, all Options shall be immediately forfeited in the event any of the following events occur:
 

 (i) The termination of the Optionee's employment with the Company for Cause or without Good Reason, as such terms are defined in the employment agreement of such Optionee, or if such term or terms is not defined in the employment agreement or there is not an employment agreement, as defined by the 2011 Incentive Stock and Award Plan of the Company;
 

 (ii) The Optionee purchases or sells securities of the Company without written authorization in accordance with the Company’s insider trading policy then in effect, if any;
 

 

 

 

 11
 
 (iii) The Optionee (A) discloses, publishes or authorizes anyone else to use, disclose or publish, without the prior written consent of the Company, any proprietary or confidential information of the Company, including, without limitation, any information relating to existing or potential customers, business methods, financial information, trade or industry practices, sales and marketing strategies, employee information, vendor lists, business strategies, intellectual property, trade secrets or any other proprietary or confidential information or (B) directly or indirectly uses any such proprietary or confidential information for the individual benefit of the Optionee or the benefit of a third party;
 

 (iv) During the term of employment and for a period of two (2) years thereafter, the Optionee disrupts or damages, impairs or interferes with the business of the Company or its Affiliates by recruiting, soliciting or otherwise inducing any of their respective employees to enter into employment or other relationship with any other business entity, or terminate or materially diminish their relationship with the Company or its Affiliates, as applicable;
 

 (v) During the term of employment and for a period of one (1) year thereafter, the Optionee solicits or directs business of any person or entity who is (A) a customer of the Company or its Affiliates at any time or (B) solicited to be a “prospective customer” of the Company or its Affiliates, in any case either for such Optionee or for any other person or entity. For purposes of this clause (v), “prospective customer” means a person or entity that contacted, or is contacted by, the Company or its Affiliates regarding the provision of services to or on behalf of such person or entity; provided that the Optionee has actual knowledge of such prospective customer;
 

 (vi) The Optionee fails to reasonably cooperate to effect a smooth transition of the Optionee’s duties and to ensure that the Company is apprised of the status of all matters the Optionee is handling or is unavailable for consultation after termination of employment of the Optionee if such availability is a condition of any agreement to which the Company and the Optionee are parties;
 

 (vii) The Optionee fails to assign all of such Optionee’s rights, title and interest in and to any and all ideas, inventions, formulas, source codes, techniques, processes, concepts, systems, programs, software, computer data bases, trademarks, service marks, brand names, trade names, compilations, documents, data, notes, designs, drawings, technical data and/or training materials, including improvements thereto or derivatives therefrom, whether or not patentable or subject to copyright or trademark or trade secret protection, developed and produced by the Optionee used or intended for use by or on behalf of the Company or the Company’s clients;
 

 (viii) The Optionee acts in a disloyal manner to the Company, such as making comments, whether oral or in writing, that tend to disparage or injure (i) the reputation or business of the Company or its Affiliates, or is likely to result in discredit to, or loss of business, reputation or goodwill of, the Company or its Affiliates or (ii) its directors, officers or stockholders; or
 

 (ix) A finding by the Board that the Optionee has acted against the interests of the Company or in a manner that has or may have a detrimental effect on the Company.
 

 (d) For purposes of this Agreement, “Affiliate” means with respect to a person or entity, any other person or entity controlled by, in control of or under common control with such person or entity, and “controlled,” “controlled by,” and “under common control with” shall mean direct or indirect possession of the power to direct or cause the direction of management or policies (whether through ownership of voting securities, by contract or otherwise) of a person or entity.
 

 4. Termination of Relationship.
 

 (a) If for any reason, except death as provided below, the Board has deemed that the Optionee has ceased to perform the services for which the Options were granted, all unvested options shall be automatically and irrefutably forfeited effective ninety (90) days from the date the Optionee ceases to perform such services, except as otherwise provided herein.
 

 

 

 12
 
 (b) If the Optionee shall die while performing services for the Company, such Optionee’s estate or any Transferee (as defined hereinafter) shall have the right until the one (1) year anniversary of the date of death to exercise the Optionee’s vested Options, subject to Section 3(c) hereof. For the purpose of this Agreement, “Transferee” shall mean an individual to whom such Optionee’s vested Options are transferred by will or by the laws of descent and distribution.
 

 5. Profits on the Sale of Certain Shares; Redemption. If any of the events specified in Section 3(c) of this Agreement occur prior to the one (1) year anniversary of the last date the Optionee performed services for which the Options were granted (the “Termination Date”), all profits earned from the sale of the Company’s securities, including the sale of shares of Common Stock underlying the Options, during the two (2) year period commencing one (1) year prior to the Termination Date shall be forfeited and forthwith paid by the Optionee to the Company (and a copy of the documentation of the sale, including, without limitation, the purchase price therefor shall be provided to the Company) within ten (10) days after the Optionee receives written demand from the Company for such payment. Further, in such event, the Company may at its option redeem shares of Common Stock acquired upon exercise of the Options by payment of the exercise price to the Optionee. The Company’s rights under this Section 5 do not lapse one year from the Termination Date, but are a contract right subject to any appropriate statutory limitation period.
 

 6. Transfer. No transfer of the Options by the Optionee by will or by the laws of descent and distribution shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and a copy of the letters testamentary or such other evidence as the Board may deem necessary to establish the authority of the estate and the acceptance by the Transferee or Transferees of the terms and conditions of the Options.
 

 7. Method of Exercise. The Options shall be exercisable by a written notice which shall:
 

 (a) state the election to exercise the Options, the number of shares to be exercised, the natural person in whose name the stock certificate or certificates for such shares of Common Stock is to be registered and such person’s address and social security number (or if more than one, the names, addresses and social security numbers of such persons);
 

 (b) contain such representations and agreements as to the holder’s investment intent with respect to such shares of Common Stock as set forth in Section 11 hereof;
 

 (c) be signed by the person or persons entitled to exercise the Options and, if the Options are being exercised by any person or persons other than the Optionee, be accompanied by proof, satisfactory to counsel for the Company, of the right of such person or persons to exercise the Options; and
 

 (d) be accompanied by full payment of the purchase or exercise price in United States dollars in cash or by bank or cashier's check, certified check or money order.
 

 The certificate or certificates for shares of Common Stock as to which the Options shall be exercised shall be registered in the name of the person or persons exercising the Options.
 

 8. Sale of Shares Acquired Upon Exercise of Options. If the Optionee is an officer (as defined by Section 16(b) of the Securities Exchange Act of 1934, as amended (“Section 16(b)”), any shares of the Company’s Common Stock acquired pursuant to Options granted hereunder cannot be sold by the Optionee, subject to Rule 144 promulgated under the Securities Act, until at least six (6) months elapse from the date of grant of the Options, except in the case of death or disability or if the grant was exempt from the short-swing profit provisions of Section 16(b).
 

 9. Adjustments. Upon the occurrence of any of the following events, the Optionee’s rights with respect to Options granted to such Optionee hereunder shall be adjusted as hereinafter provided unless otherwise specifically provided in a written agreement between the Optionee and the Company relating to such Options:
 

 

 

 13
 
 (a) If the shares of Common Stock shall be subdivided or combined into a greater or smaller number of shares, respectively, or if the Company shall issue any shares of its Common Stock as a stock dividend on its outstanding shares of Common Stock, the number of shares of Common Stock deliverable upon the exercise of the Options shall be appropriately increased or decreased proportionately, and appropriate adjustments shall be made in the exercise price per share to reflect such subdivision, combination or stock dividend, as applicable;
 

 (b) If the Company is to be consolidated with or acquired by another entity pursuant to an acquisition, the board of directors of any entity assuming the obligations of the Company hereunder (the “Successor Board”) shall either (i) make appropriate provision for the continuation of such Options by substituting on an equitable basis for the shares then subject to such Options the consideration payable with respect to the outstanding shares of Common Stock of the Company in connection with such acquisition or (ii) terminate all Options in exchange for a cash payment equal to the excess of the fair market value, as calculated in accordance with the Plan (the “Fair Market Value”) of the shares of Common Stock subject to such Options over the exercise price thereof;
 

 (c) In the event of a recapitalization or reorganization of the Company (other than a transaction described in Section 9(b) above) pursuant to which securities of the Company or of another corporation are issued with respect to the outstanding shares of Common Stock, the Optionee upon exercising the Options shall be entitled to receive for the purchase price paid upon such exercise, the securities such Optionee would have received if such Optionee had exercised such Optionee’s Options prior to such recapitalization or reorganization;
 

 (d) Except as expressly provided herein, no issuance by the Company of shares of Common Stock of any class or securities convertible into shares of Common Stock of any class shall affect, and no adjustment by reason thereof shall be made with respect to, the number or exercise price of shares subject to Options. No adjustments shall be made for dividends or other distributions paid in cash or in property other than securities of the Company;
 

 (e) No fractional shares shall be issued and the Optionee shall receive from the Company cash based on the Fair Market Value of the shares of Common Stock in lieu of such fractional shares; or
 

 (f) The Board or the Successor Board shall determine the specific adjustments to be made under this Section 9, and its determination shall be conclusive. If the Optionee receives securities or cash in connection with a corporate transaction described in Section 9(a), (b) or (c) above as a result of owning such restricted Common Stock, such securities or cash shall be subject to all of the conditions and restrictions applicable to the restricted Common Stock with respect to which such securities or cash were issued, unless otherwise determined by the Board or the Successor Board.
 

 10. Necessity to Become Holder of Record. Neither the Optionee, the Optionee’s estate, nor the Transferee have any rights as a shareholder with respect to any shares of Common Stock covered by the Options until such Optionee, estate or Transferee, as applicable, shall have become the holder of record of such shares of Common Stock. No adjustment shall be made for cash dividends or cash distributions, ordinary or extraordinary, in respect of such shares of Common Stock for which the record date is prior to the date on which such Optionee, estate or Transferee, as applicable, shall become the holder of record thereof.
 

 11. Conditions to Exercise of Options.
 

 (a) In order to enable the Company to comply with the Securities Act and relevant state law, the Company may require the Optionee, the Optionee’s estate or any Transferee, as a condition of the exercising of the Options granted hereunder, to give written assurance satisfactory to the Company that the shares of Common Stock subject to the Options are being acquired for such Optionee’s, estate’s or Transferee’s, as applicable, own account, for investment only, with no view to the distribution of same, and that any subsequent resale of any such shares of Common Stock either shall be made pursuant to a registration statement under the Securities Act and applicable state law which has become effective and is current with regard to the shares of Common Stock being sold, or shall be pursuant to an exemption from registration under the Securities Act and applicable state law.
 

 

 

 14
 
 (b) The Options are subject to the requirement that, if at any time the Board shall determine, in its sole and absolute discretion, that the listing, registration or qualification of the shares of Common Stock subject to the Options upon any securities exchange, quotation system or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary as a condition of, or in connection with the issue or purchase of such shares of Common Stock under the Options, the Options may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected.
 

 12. Duties of Company. The Company will at all times during the term of the Options:
 

 (a) Reserve and keep available for issue such number of shares of its authorized and unissued shares of Common Stock as will be sufficient to satisfy the requirements of this Agreement;
 

 (b) Pay all original issue taxes with respect to the issue of shares of Common Stock pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection therewith; and
 

 (c) Use its best efforts to comply with all laws and regulations which, in the opinion of counsel for the Company, shall be applicable thereto.
 

 13. Severability. In the event any parts of this Agreement are found to be void, the remaining provisions of this Agreement shall nevertheless be binding with the same effect as though the void parts were deleted.
 

 14. Arbitration. Any controversy, dispute or claim arising out of or relating to this Agreement, or its interpretation, application, implementation, breach or enforcement which the parties hereto are unable to resolve by mutual agreement, shall be settled by submission by either party of the controversy, claim or dispute to binding arbitration in New York County, New York (unless the parties agree in writing to a different location), before a single arbitrator in accordance with the rules of the American Arbitration Association then in effect. The decision and award made by the arbitrator shall be final, binding and conclusive on all parties hereto for all purposes, and judgment may be entered thereon in any court having jurisdiction thereof.
 

 15. Benefit. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their legal representatives, successors and assigns.
 

 16. Notices and Addresses. All notices, offers, acceptance and any other acts under this Agreement (except payment) shall be in writing, and shall be sufficiently given if delivered to the addressees in person, by FedEx or similar receipted delivery, or by facsimile delivery as follows:
 

 The Optionee: [●]
 [●]
 [●]
 Facsimile: [●]
 

 	 	 	 	
	 The Company:
	 Bergio International, Inc.
 12 Daniel Road East
 Fairfield, NJ 07007
 Facsimile: (212) 707-8180
 

	 

	 

	 with a copy 
 (which shall 
 not constitute notice) to:
	 Lucosky Brookman LLP
 33 Wood Avenue South, 6th Floor
 Iselin, NJ 08830
 Attn: Joseph M. Lucosky, Esq.
 Facsimile: (732) 395-4401

 

 

 

 

 15
 
 or to such other address as either of them, by notice to the other, may designate from time to time. The transmission confirmation receipt from the sender’s facsimile machine shall be evidence of successful facsimile delivery. Time shall be counted to, or from, as the case may be, the delivery in person or by mailing.
 

 17. Attorney’s Fees. In the event that there is any controversy or claim arising out of or relating to this Agreement, or to the interpretation, breach or enforcement thereof, and any action or proceeding is commenced to enforce the provisions of this Agreement, the prevailing party shall be entitled from the non-prevailing party to its reasonable attorneys’ fee, costs and expenses.
 

 18. Governing Law. This Agreement and any dispute, disagreement, or issue of construction or interpretation arising hereunder whether relating to its execution, its validity, the obligations provided herein or performance, shall be governed or interpreted according to the laws of the State of New York without regard to choice of law considerations.
 

 19. Oral Evidence. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior oral and written agreements between the parties hereto with respect to the subject matter hereof. Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated except by a statement in writing signed by the party or parties against which enforcement or the change, waiver discharge or termination is sought.
 

 20. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. The execution of this Agreement may be made by facsimile signature, which shall be deemed to be an original.
 

 21. Section Headings. Section headings herein have been inserted for reference only and shall not be deemed to limit or otherwise affect, in any matter, or be deemed to interpret in whole or in part, any of the terms or provisions of this Agreement.
 

 

 

 

 

 

 16
 
 IN WITNESS WHEREOF the parties hereto have set their hand the day and year first above written.
 

 	 	
	 

	 BERGIO INTERNATIONAL, INC.

 

 

 

 By: ___________________________________
 Name: Berge Abajian
 Title: Chief Executive Officer
 

 

 OPTIONEE:
 

 

 

 By: ___________________________________
 Name: _________________________________
 Title: __________________________________
 Address: _______________________________
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 17
 
 EXHIBIT A
 

 FORM OF NOTICE OF OPTION EXERCISE
 

 

 To: Bergio International, Inc. (the “Company”)
 

 (1) The undersigned hereby elects to purchase __________ shares of Common Stock of the Company (the “Shares”) pursuant to the terms of the Option Agreement by and between the Company and the undersigned dated as of __________ ___, 20__, and tenders herewith payment of the exercise price in full as set forth below.
 

 (2) Payment shall take the form of (check applicable box):
 

 [ ] in lawful money of the United States in the form of a check made payable by the undersigned to the Company;
 

 [ ] in lawful money of the United States in the form of a wire transfer to the account specified by the Company; or
 

 [ ] in the form of shares of Common Stock pursuant to Section 5(d) of the Plan.
 

 (3) Please issue a certificate or certificates representing the Shares in the name of the undersigned or in such other name as is specified below:
 

 ____________________________________
 

 The Shares shall be delivered via overnight courier (with tracking information to be provided to the undersigned) to the following address:
 

 _____________________________
 _____________________________
 _____________________________
 Attn: ________________________
 Tel: _________________________
 

 

 

 OPTIONEE
 

 

 __________________________________
 

 

 

 

 18
 
 Exhibit 10.3
 

 BERGIO INTERNATIONAL, INC.
 FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT
 

 NON-EMPLOYEE
 

 

 THIS STOCK OPTION AGREEMENT (the “Agreement”) entered into as of the [●] day of [●] 20[●] by and between Bergio International, Inc. (the “Company”) and [●] (the “Optionee”).
 

 WHEREAS, pursuant to the authority of the Board of Directors (the “Board”), the Company has granted the Optionee the right to purchase common stock, $.001 par value per share (“Common Stock”), of the Company pursuant to stock options granted under an equity incentive plan approved by the Board (the “Plan”).
 

 NOW THEREFORE, in consideration of the mutual covenants and promises hereafter set forth and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
 

 1. Grant of Non-Qualified Options. The Company hereby irrevocably grants to the Optionee, as a matter of separate agreement and not in lieu of salary or other compensation for services, the right and option to purchase all or any part of an aggregate of [●] shares of authorized but unissued or treasury common stock of the Company (the “Options”) on the terms and conditions herein set forth. The Common Stock shall be unregistered under the Securities Act of 1933, as amended (the “Securities Act”), unless the Company voluntarily files a registration statement covering such shares of Common Stock with the Securities and Exchange Commission. The Options are not intended to be Incentive Stock Options as defined by Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).
 

 2. Price. The exercise price of the shares of Common Stock subject to the Options granted hereunder shall be $[●] per share.
 

 3. Vesting.
 

 (a) The Options shall vest [quarterly] [annually] over a [●] year period, subject to the Optionee continuing to perform services for the Company in the capacity in which the grant was received on each applicable vesting date. In lieu of fractional vesting, the number of Options shall be rounded up each time until fractional Options are eliminated.
 

 (b) Subject to Sections 3(c) and 4 of this Agreement, Options may be exercised by providing to the Company the Notice of Option Exercise in the form attached hereto as Exhibit A after vesting, and remain exercisable until 5:30 p.m. New York time on the date that is the fifth (5th) year anniversary of the date of this Agreement.
 

 (c) However, notwithstanding any other provision of this Agreement, at the option of the Board in its sole and absolute discretion, all Options shall be immediately forfeited in the event any of the following events occur:
 

 (i) The Optionee purchases or sells securities of the Company without written authorization in accordance with the Company’s insider trading policy then in effect, if any;
 

 

 

 

 

 19
 
 (ii) The Optionee (A) discloses, publishes or authorizes anyone else to use, disclose or publish, without the prior written consent of the Company, any proprietary or confidential information of the Company, including, without limitation, any information relating to existing or potential customers, business methods, financial information, trade or industry practices, sales and marketing strategies, employee information, vendor lists, business strategies, intellectual property, trade secrets or any other proprietary or confidential information or (B) directly or indirectly uses any such proprietary or confidential information for the individual benefit of the Optionee or the benefit of a third party;
 

 (iii) Except as prior approved by the Board in writing or listed on Schedule I to this Agreement, the Optionee directly or indirectly owns, manages, controls or participate in the ownership, management or control of, or be employed or engaged by or otherwise affiliated or associated as an officer, director, partner, consultant, independent contractor, agent, representative or otherwise, with any other person or entity that competes with the business of the Company or any of its Affiliates (as defined hereinafter) in any geographical area in which the Company or any of its Affiliates conducts its business or promotes its products or services; provided, however, that the ownership of not more than one percent (1%) of the stock of a company whose equity interests are publicly traded on a nationally recognized stock exchange or over-the-counter shall not be deemed a violation of this provision;
 

 (iv) The Optionee disrupts or damages, impairs or interferes with the business of the Company or its Affiliates by recruiting, soliciting or otherwise inducing any of their respective employees to enter into employment or other relationship with any other business entity, or terminate or materially diminish their relationship with the Company or its Affiliates, as applicable; or
 

 (v) The Optionee solicits or directs business of any person or entity who is (A) a customer of the Company or its Affiliates at any time or (B) solicited to be a “prospective customer” of the Company or its Affiliates, in any case either for such Optionee or for any other person or entity; provided that the Optionee has actual knowledge of such prospective customer. For purposes of this clause (v), “prospective customer” means a person or entity that contacted, or is contacted by, the Company or its Affiliates regarding the provision of services to or on behalf of such person or entity.
 

 (d) For purposes of this Agreement, “Affiliate” means with respect to a person or entity, any other person or entity controlled by, in control of or under common control with such person or entity, and “controlled,” “controlled by,” and “under common control with” shall mean direct or indirect possession of the power to direct or cause the direction of management or policies (whether through ownership of voting securities, by contract or otherwise) of a person or entity.
 

 4. Termination of Relationship.
 

 (a) If for any reason, except death as provided below, the Board has deemed that the Optionee has ceased to perform the services for which the Options were granted, all unvested options shall be automatically and irrefutably forfeited effective ninety (90) from the date the Board has deemed that the Optionee has ceased to perform such services, except as otherwise provided herein.
 

 (b) If the Optionee shall die while performing services for the Company, such Optionee’s estate or any Transferee (as defined hereinafter) shall have the right until the one (1) year anniversary of the date of death to exercise the Optionee’s vested Options, subject to Section 3(c) hereof. For the purpose of this Agreement, “Transferee” shall mean an individual to whom such Optionee’s vested Options are transferred by will or by the laws of descent and distribution.
 

 

 

 

 20
 
 5. Profits on the Sale of Certain Shares; Redemption. If any of the events specified in Section 3(c) of this Agreement occur prior to the one (1) year anniversary of the last date the Optionee performed services for which the Options were granted (the “Termination Date”), all profits earned from the sale of the Company’s securities, including the sale of shares of Common Stock underlying the Options, during the two (2) year period commencing one (1) year prior to the Termination Date shall be forfeited and forthwith paid by the Optionee to the Company (and a copy of the documentation of the sale, including, without limitation, the purchase price therefor shall be provided to the Company) within ten (10) days after the Optionee receives written demand from the Company for such payment. Further, in such event, the Company may at its option redeem shares of Common Stock acquired upon exercise of the Options by payment of the exercise price to the Optionee. The Company’s rights under this Section 5 do not lapse one year from the Termination Date, but are a contract right subject to any appropriate statutory limitation period.
 

 6. Transfer. No transfer of the Options by the Optionee by will or by the laws of descent and distribution shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and a copy of the letters testamentary or such other evidence as the Board may deem necessary to establish the authority of the estate and the acceptance by the Transferee or Transferees of the terms and conditions of the Options.
 

 7. Method of Exercise. The Options shall be exercisable by a written notice which shall:
 

 (a) state the election to exercise the Options, the number of shares to be exercised, the natural person in whose name the stock certificate or certificates for such shares of Common Stock is to be registered and such person’s address and social security number (or if more than one, the names, addresses and social security numbers of such persons);
 

 (b) contain such representations and agreements as to the holder’s investment intent with respect to such shares of Common Stock as set forth in Section 11 hereof;
 

 ) be signed by the person or persons entitled to exercise the Options and, if the Options are being exercised by any person or persons other than the Optionee, be accompanied by proof, satisfactory to counsel for the Company, of the right of such person or persons to exercise the Options; and
 

 (d) be accompanied by full payment of the purchase or exercise price in United States dollars in cash or by bank or cashier's check, certified check or money order.
 

 The certificate or certificates for shares of Common Stock as to which the Options shall be exercised shall be registered in the name of the person or persons exercising the Options.
 

 8. Sale of Shares Acquired Upon Exercise of Options. If the Optionee is an officer (as defined by Section 16(b) of the Securities Exchange Act of 1934, as amended (“Section 16(b)”), any shares of the Company’s Common Stock acquired pursuant to Options granted hereunder cannot be sold by the Optionee, subject to Rule 144 promulgated under the Securities Act, until at least six (6) months elapse from the date of grant of the Options, except in the case of death or disability or if the grant was exempt from the short-swing profit provisions of Section 16(b).
 

 9. Adjustments. Upon the occurrence of any of the following events, the Optionee’s rights with respect to Options granted to such Optionee hereunder shall be adjusted as hereinafter provided unless otherwise specifically provided in a written agreement between the Optionee and the Company relating to such Options:
 

 

 

 

 

 21
 
 (a) If the shares of Common Stock shall be subdivided or combined into a greater or smaller number of shares, respectively, or if the Company shall issue any shares of its Common Stock as a stock dividend on its outstanding shares of Common Stock, the number of shares of Common Stock deliverable upon the exercise of the Options shall be appropriately increased or decreased proportionately, and appropriate adjustments shall be made in the exercise price per share to reflect such subdivision, combination or stock dividend, as applicable;
 

 (b) If the Company is to be consolidated with or acquired by another entity pursuant to an acquisition, the board of directors of any entity assuming the obligations of the Company hereunder (the “Successor Board”) shall either (i) make appropriate provision for the continuation of such Options by substituting on an equitable basis for the shares then subject to such Options the consideration payable with respect to the outstanding shares of Common Stock of the Company in connection with such acquisition or (ii) terminate all Options in exchange for a cash payment equal to the excess of the fair market value, as calculated in accordance with the Plan (the “Fair Market Value”), of the shares of Common Stock subject to such Options over the exercise price thereof;
 

 (c) In the event of a recapitalization or reorganization of the Company (other than a transaction described in Section 9(b) above) pursuant to which securities of the Company or of another corporation are issued with respect to the outstanding shares of Common Stock, the Optionee upon exercising the Options shall be entitled to receive for the purchase price paid upon such exercise, the securities such Optionee would have received if such Optionee had exercised such Optionee’s Options prior to such recapitalization or reorganization;
 

 (d) Except as expressly provided herein, no issuance by the Company of shares of Common Stock of any class or securities convertible into shares of Common Stock of any class shall affect, and no adjustment by reason thereof shall be made with respect to, the number or exercise price of shares subject to Options. No adjustments shall be made for dividends or other distributions paid in cash or in property other than securities of the Company;
 

 (e) No fractional shares shall be issued and the Optionee shall receive from the Company cash based on the Fair Market Value of the shares of Common Stock in lieu of such fractional shares; or
 

 (f) The Board or the Successor Board shall determine the specific adjustments to be made under this Section 9, and its determination shall be conclusive. If the Optionee receives securities or cash in connection with a corporate transaction described in Section 9(a), (b) or (c) above as a result of owning such restricted Common Stock, such securities or cash shall be subject to all of the conditions and restrictions applicable to the restricted Common Stock with respect to which such securities or cash were issued, unless otherwise determined by the Board or the Successor Board.
 

 10. Necessity to Become Holder of Record. Neither the Optionee, the Optionee’s estate, nor the Transferee have any rights as a shareholder with respect to any shares of Common Stock covered by the Options until such Optionee, estate or Transferee, as applicable, shall have become the holder of record of such shares of Common Stock. No adjustment shall be made for cash dividends or cash distributions, ordinary or extraordinary, in respect of such shares of Common Stock for which the record date is prior to the date on which such Optionee, estate or Transferee, as applicable, shall become the holder of record thereof.
 

 

 

 

 

 

 22
 
 11. Conditions to Exercise of Options.
 

 (a) In order to enable the Company to comply with the Securities Act and relevant state law, the Company may require the Optionee, the Optionee’s estate or any Transferee, as a condition of the exercising of the Options granted hereunder, to give written assurance satisfactory to the Company that the shares of Common Stock subject to the Options are being acquired for such Optionee’s, estate’s or Transferee’s, as applicable, own account, for investment only, with no view to the distribution of same, and that any subsequent resale of any such shares of Common Stock either shall be made pursuant to a registration statement under the Securities Act and applicable state law which has become effective and is current with regard to the shares of Common Stock being sold, or shall be pursuant to an exemption from registration under the Securities Act and applicable state law.
 

 (b) The Options are subject to the requirement that, if at any time the Board shall determine, in its sole and absolute discretion, that the listing, registration or qualification of the shares of Common Stock subject to the Options upon any securities exchange, quotation system or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary as a condition of, or in connection with the issue or purchase of such shares of Common Stock under the Options, the Options may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected.
 

 12. Duties of Company. The Company will at all times during the term of the Options:
 

 (a) Reserve and keep available for issue such number of shares of its authorized and unissued shares of Common Stock as will be sufficient to satisfy the requirements of this Agreement;
 

 (b) Pay all original issue taxes with respect to the issue of shares of Common Stock pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection therewith; and
 

 (c) Use its best efforts to comply with all laws and regulations which, in the opinion of counsel for the Company, shall be applicable thereto.
 

 13. Severability. In the event any parts of this Agreement are found to be void, the remaining provisions of this Agreement shall nevertheless be binding with the same effect as though the void parts were deleted.
 

 14. Arbitration. Any controversy, dispute or claim arising out of or relating to this Agreement, or its interpretation, application, implementation, breach or enforcement which the parties hereto are unable to resolve by mutual agreement, shall be settled by submission by either party of the controversy, claim or dispute to binding arbitration in New York County, New York (unless the parties agree in writing to a different location), before a single arbitrator in accordance with the rules of the American Arbitration Association then in effect. The decision and award made by the arbitrator shall be final, binding and conclusive on all parties hereto for all purposes, and judgment may be entered thereon in any court having jurisdiction thereof.
 

 15. Benefit. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their legal representatives, successors and assigns.
 

 

 

 

 

 23
 
 16. Notices and Addresses. All notices, offers, acceptance and any other acts under this Agreement (except payment) shall be in writing, and shall be sufficiently given if delivered to the addressees in person, by FedEx or similar receipted delivery, or by facsimile delivery as follows:
 

 	 	
	 The Optionee:
	 [●]

	 

	 [●]

	 

	 [●]

	 

	 Facsimile: [●]

 

 	 	
	 The Company:
	 Bergio International, Inc.

	 

	 12 Daniel Road East

	 

	 Fairfield, NJ 07007

	 

	 Facsimile: (212) 707-8180

 

 	 	
	 with a copy (which shall not constitute notice) to:
	 Lucosky Brookman LLP

	 

	 33 Wood Avenue South, 6th Floor

	 

	 Iselin, NJ 08830

	 

	 Attn: Joseph M. Lucosky, Esq.

	 

	 Facsimile: (732) 395-4401

 

 or to such other address as either of them, by notice to the other, may designate from time to time. The transmission confirmation receipt from the sender’s facsimile machine shall be evidence of successful facsimile delivery. Time shall be counted to, or from, as the case may be, the delivery in person or by mailing.
 

 17. Attorney’s Fees. In the event that there is any controversy or claim arising out of or relating to this Agreement, or to the interpretation, breach or enforcement thereof, and any action or proceeding is commenced to enforce the provisions of this Agreement, the prevailing party shall be entitled from the non-prevailing party to its reasonable attorneys’ fee, costs and expenses.
 

 18. Governing Law. This Agreement and any dispute, disagreement, or issue of construction or interpretation arising hereunder whether relating to its execution, its validity, the obligations provided herein or performance, shall be governed or interpreted according to the laws of the State of New York without regard to choice of law considerations.
 

 19. Oral Evidence. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior oral and written agreements between the parties hereto with respect to the subject matter hereof. Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated except by a statement in writing signed by the party or parties against which enforcement or the change, waiver discharge or termination is sought.
 

 20. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. The execution of this Agreement may be made by facsimile signature, which shall be deemed to be an original.
 

 21. Section Headings. Section headings herein have been inserted for reference only and shall not be deemed to limit or otherwise affect, in any matter, or be deemed to interpret in whole or in part, any of the terms or provisions of this Agreement.
 

 

 

 

 24
 
 IN WITNESS WHEREOF the parties hereto have set their hand the day and year first above written.
 

 	 	
	 

	 BERGIO INTERNATIONAL, INC.

 

 

 

 By: _____________________________
 Name: Berge Abajian
 Title: Chief Executive Officer
 

 

 OPTIONEE:
 

 

 By: ______________________________
 Name: ____________________________
 Title: _____________________________
 Address: __________________________
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 25
 
 SCHEDULE I
 

 COMPETING ACTIVITIES
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 26
 
 EXHIBIT A
 

 FORM OF NOTICE OF OPTION EXERCISE
 

 

 To: Bergio International, Inc. (the “Company”)
 

 (1) The undersigned hereby elects to purchase __________ shares of Common Stock of the Company (the “Shares”) pursuant to the terms of the Option Agreement by and between the Company and the undersigned dated as of ________ ___, 20__, and tenders herewith payment of the exercise price in full as set forth below.
 

 (2) Payment shall take the form of (check applicable box):
 

 [ ] in lawful money of the United States in the form of a check made payable by the undersigned to the Company;
 

 [ ] in lawful money of the United States in the form of a wire transfer to the account specified by the Company; or
 

 [ ] in the form of shares of Common Stock pursuant to Section 5(d) of the Plan.
 

 (3) Please issue a certificate or certificates representing the Shares in the name of the undersigned or in such other name as is specified below:
 

 ____________________________________
 

 The Shares shall be delivered via overnight courier (with tracking information to be provided to the undersigned) to the following address:
 

 _____________________________
 _____________________________
 _____________________________
 Attn: ________________________
 Tel: _________________________
 

 

 

 OPTIONEE
 

 

 __________________________________
 

 

 

 

 

 

 

 27EXHIBIT 10.18

EXHIBIT 10.18

 

COMMON STOCK PURCHASE AGREEMENT

 

DATED AS OF OCTOBER 1, 2012

 

BY AND BETWEEN

 

CYCLONE POWER TECHNOLOGIES, INC.

 

AND

 

GEM GLOBAL YIELD FUND LIMITED

 

 

 

  

  

  

 

TABLE OF CONTENTS

 

Page

 

	
ARTICLE I DEFINITIONS

	
1

	
Section 1.1

	
Definitions

	
1

	 	 	 
	
ARTICLE II PURCHASE AND SALE OF COMMON STOCK

	4
	
Section 2.1

	
Purchase and Sale of Stock

	
4

	
Section 2.2

	
The Shares

	
4

	
Section 2.3

	
Registration Statement

	
4

	
Section 2.4

	
Purchase Price and Effective Date

	
4

	
Section 2.5

	
Current Report

	
4

	 	 	 
	
ARTICLE III REPRESENTATIONS AND WARRANTIES

	
4

	
Section 3.1

	
Representations and Warranties of the Company

	
4

	
Section 3.2

	
Representatives and Warranties of the Purchaser

	
10

	 	 	 
	
ARTICLE IV COVENANTS

	
11

	
Section 4.1

	
Securities Compliance

	
11

	
Section 4.2

	
Registration and Listing

	
11

	
Section 4.3

	
Warrant

	
12

	
Section 4.4

	
Registration Rights Agreement

	
12

	
Section 4.5

	
Compliance with Laws

	
12

	
Section 4.6

	
Keeping of Records and Books of Account

	
12

	
Section 4.7

	
Limitations on Holdings and Issuances

	
12

	
Section 4.8

	
Registration Statement

	
13

	
Section 4.9

	
Other Agreements and Other Financings

	
13

	
Section 4.10

	
Stop Orders

	
13

	
Section 4.11

	
Selling Restrictions; Volume Limitations

	
13

	
Section 4.12

	
Structuring Fee

	
14

	
Section 4.13

	
Non-Public Information

	
14

	
Section 4.14

	
DWAC Eligibility

	
14

	 	 	 
	
ARTICLE V OPINION OF COUNSEL AND CERTIFICATE; CONDITIONS TO THE SALE AND PURCHASE OF THE SHARES

	
14

	
Section 5.1

	
Opinion of Counsel and Certificate

	
14

	
Section 5.2

	
Conditions Precedent to the Obligation of the Company to Sell the Shares

	
14

	
Section 5.3

	
Conditions Precedent to the Obligation of the Purchaser To Accept a Draw Down and Purchase the Shares

	
15

	 	 	 
	
ARTICLE VI DRAW DOWN TERMS

	
17

	
Section 6.1

	
Draw Down Terms

	
17

	
Section 6.2

	
Aggregate Limit

	
18

	 	 	 
	
ARTICLE VII Termination

	
19

	
Section 7.1

	
Term, Termination by Mutual Consent

	
19

 

  

  

  

 

	
Section 7.2

	
Other Termination

	
19

	
Section 7.3

	
Effect of Termination

	
19

	 	 	 
	ARTICLE VIII INDEMNIFICATION	19
	
Section 8.1

	
General Indemnity

	
19

	
Section 8.2

	
Indemnification Procedures

	
20

	 	 	 
	ARTICLE IX MISCELLANEOUS	22
	
Section 9.1

	
Fees and Expenses

	
22

	
Section 9.2

	
Specific Enforcement, Consent to Jurisdiction

	
22

	
Section 9.3

	
Entire Agreement; Amendment

	
22

	
Section 9.4

	
Notices

	
22

	
Section 9.5

	
Waivers

	
23

	
Section 9.6

	
Headings

	
24

	
Section 9.7

	
Successors and Assigns

	
24

	
Section 9.8

	
Governing Law

	
24

	
Section 9.9

	
Survival

	
24

	
Section 9.10

	
Counterparts

	
24

	
Section 9.11

	
Publicity

	
24

	
Section 9.12

	
Severability

	
24

	
Section 9.13

	
Further Assurances

	
24

 

  

  

  

 

COMMON STOCK PURCHASE AGREEMENT

 

This COMMON STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of October 1, 2012, is made by and between Cyclone Power Technologies, Inc., a Florida corporation (the “Company”) and GEM Global Yield Fund Limited, a company incorporated under the laws of the Cayman Islands (the “Purchaser”).

 

RECITALS

 

WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Purchaser and the Purchaser shall purchase up to a maximum of Two Million Five Hundred Thousand Dollars ($2,500,000) of the Company’s common stock, $0.0001 par value per share (the “Common Stock”).

 

NOW, THEREFORE, the parties hereto agree as follows:

 

AGREEMENT

 

ARTICLE I

DEFINITIONS

 

Section 1.1   Definitions.

 

(a)            “Aggregate Limit” shall have the meaning assigned to such term in Section 2.1 hereof.

 

(b)           “Articles” shall have the meaning assigned to such term in Section 3.1(c) hereof.

 

(c)           “Bylaws” shall have the meaning assigned to such term in Section 3.1(c) hereof.

 

(d)           “Commission” shall mean the Securities and Exchange Commission or any successor entity.

 

(e)           “Commission Documents” shall mean, as of a particular date, all reports, schedules, forms, statements and other documents filed by the Company with the Commission pursuant to the reporting requirements of the Exchange Act, including material filed pursuant to Section 13(a) or 15(d) of the Exchange Act, and shall include all information contained in such filings and all filings incorporated by reference therein.

 

(f)           “Common Stock” shall have the meaning assigned to such term in the Recitals.

 

(g)           “Daily Closing Price” shall mean the closing bid price of the Common Stock, as recorded by the Principal Market, on a particular day.

 

(h)           “Draw Down” means the transactions contemplated under Section 6.1 of this Agreement.

 

  

1

  

 

(i)           “Draw Down Amount” means the actual amount of proceeds to be paid by the Purchaser and received by the Company on the Settlement Date in connection with a Draw Down.

 

(j)           “Draw Down Amount Requested” shall mean the amount of a Draw Down requested by the Company in its Draw Down Notice as provided in Section 6.1(h) hereof.

 

(k)           “Draw Down Exercise Date” shall have the meaning assigned to such term in Section 6.1(h) hereof.

 

(l)           “Draw Down Limit” shall have the meaning assigned to such term in Section 6.1(a) hereof.

 

(m)           “Draw Down Notice” shall mean a notice sent by the Company to exercise a Draw Down as provided in Section 6.1(h) hereof.

 

(n)           “Draw Down Pricing Period” shall mean a period of ten (10) consecutive Trading Days commencing with the first Trading Day designated in the Draw Down Notice, or such other period mutually agreed upon by the Purchaser and the Company.

 

(o)           “Effective Date” shall mean the date of the execution and delivery this Agreement.

 

(p)           “Environmental Laws” shall have the meaning assigned to such term in Section 3.1(r) hereof.

 

(q)           “Event Period” shall have the meaning assigned to such term in Section 7.2 hereof.

 

(r)           “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder.

 

(s)           “GAAP” shall mean generally accepted accounting principles in the United States of America as applied by the Company.

 

(t)           “Indebtedness” shall have the meaning assigned to such term in Section 3.1(k) hereof.

 

(u)           “Investment Period” shall have the meaning assigned to such term in Section 7.1 hereof.

 

(v)           “Market Capitalization” shall be calculated on the Trading Day preceding each Draw Down Pricing Period and shall be the product of (x) the number of shares of Common Stock outstanding and (y) the closing bid price of the Common Stock, both as determined by Bloomberg Financial LP using the DES and HP functions.

 

(w)           “Material Adverse Effect” shall mean any effect on the business, operations, properties or financial condition of the Company that is material and adverse to the Company and its subsidiaries and affiliates, taken as a whole, and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company to enter into and perform any of its obligations under this Agreement in any material respect.

 

  

2

  

 

(x)           “Material Agreements” shall have the meaning assigned to such term in Section 3.1(s) hereof.

 

(y)           “Material Change in Ownership” shall mean that (i) the owners of 5% or more of the outstanding Common Stock and (ii) the Company’s officers and directors, shall beneficially own in the aggregate less than 15% of the outstanding Common Stock.

 

(z)           “Other Financing” shall have the meaning assigned to such term in Section 4.10(b) hereof.

 

(aa)         “Plan” shall have the meaning assigned to such term in Section 3.1(y) hereof.

 

(bb)         “Principal Market” shall mean the OTC Bulletin Board or any U.S. national securities exchange on which the Common Stock is traded.

 

(cc)          “Purchase Price” shall have the meaning assigned to such term in Section 6.1(a) hereof.

 

(dd)          “Registration Statement” shall mean the registration statement on Form S-1 under the Securities Act, to be filed by the Company with the Commission with respect to the registration of the Shares to be issued under the Draw Downs, pursuant to the Registration Rights Agreement attached hereto as Exhibit A hereto (the “Registration Rights Agreement”).

 

(ee)           “Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder.

 

(ff)            “Settlement Date” shall have the meaning assigned to such term in Section 6.1(d) hereof.

 

(gg)          “Shares” shall mean, collectively, the registered shares of Common Stock of the Company issuable to the Purchaser upon exercise of any Draw Down and those shares of Common Stock issuable to the Purchaser upon exercise of the Warrants.

 

(hh)          “Significant Subsidiary” shall have the meaning assigned to such term in Section 3.1(g) hereof.

 

(ii)            “Subsidiary” shall mean any corporation or other entity of which at least a majority of the securities or other ownership interest having ordinary voting power (absolutely or contingently) for the election of directors or other persons performing similar functions are at the time owned directly or indirectly by the Company and/or any of its other subsidiaries.

 

(jj)            Threshold Price” is the lowest price at which the Company may sell Shares during a Draw Down Pricing Period, as set forth in the Draw Down Notice.

 

  

3

  

 

(kk)          “Trading Day” shall mean a trading day on the Principal Market.

 

(ll)            “Warrants” shall have the meaning assigned to such term in Section 4.3 hereof.

 

ARTICLE II

PURCHASE AND SALE OF COMMON STOCK

 

Section 2.1   Purchase and Sale of Stock.  Subject to the terms and conditions of this Agreement, the Company shall issue and sell to the Purchaser and the Purchaser shall purchase from the Company during the Investment Period (as defined in Section 7.1) up to a maximum of $2,500,000 of Common Stock (the “Aggregate Limit”) on a firm commitment basis. The aggregate dollar amount of all Draw Down Amounts pursuant to the terms and conditions of this Agreement shall not exceed the Aggregate Limit.

 

Section 2.2   The Shares.  The Company has or will have authorized and has or will have reserved, and covenants to continue to so reserve once reserved, free of preemptive rights and other similar contractual rights of stockholders, a sufficient number of its authorized but unissued shares of its Common Stock to cover the Shares to be issued in connection with all Draw Downs requested under this Agreement and to be issued in connection with the exercise of the Warrants, in any case prior to the issuance to the Purchaser of such Shares under this Agreement.

 

Section 2.3   Registration Statement.  The Company shall prepare and file an S-1 Registration Statement with the Commission in accordance with the provisions of the Securities Act and the Registration Rights Agreement.

 

Section 2.4   Purchase Price and Effective Date.  In consideration of and in express reliance upon the representations, warranties, covenants, terms and conditions of this Agreement, the Company agrees to issue and sell to the Purchaser, and the Purchaser agrees to purchase, that number of the Shares to be issued in connection with each Draw Down in accordance with the terms and conditions of this Agreement.

 

Section 2.5   Current Report. As soon as practicable, but in any event not later than 5:30 p.m. (New York time) on the fourth Trading Day immediately following the Effective Date, the Company shall file with the Commission a report on Form 8-K relating to the transactions contemplated by, and describing the material terms and conditions of, this Agreement (the “Current Report”). The Current Report shall include a copy of this Agreement as an exhibit. The Company heretofore has provided the Purchaser a reasonable opportunity to comment on a draft of such Current Report and has given due consideration to such comments.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

Section 3.1   Representations and Warranties of the Company.  The Company hereby makes the following representations and warranties to the Purchaser as of the date hereof and as of the Effective Date:

 

  

4

  

 

(a)           Organization, Good Standing and Power.  The Company is a corporation duly incorporated, validly existing and in good standing under the laws of Florida and has the requisite corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted.  Except as set forth in Schedule 3.1(a), as of the Effective Date, the Company does not have any Subsidiaries.  The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary except for any jurisdiction in which the failure to be so qualified will not have a Material Adverse Effect.

 

(b)           Authorization, Enforcement.  The Company has the requisite corporate power and authority to enter into and perform this Agreement and to issue and sell the Shares in accordance with the terms hereof.  Except for approvals of the Company’s Board of Directors  or a committee thereof as may be required in connection with any issuance and sale of Shares to the Purchaser hereunder, the execution, delivery and performance of this Agreement by the Company and the consummation by it of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action, and, except as contemplated by Section 2.2, no further consent or authorization of the Company or its Board of Directors or stockholders is required.  This Agreement has been duly executed and delivered by the Company.  This Agreement constitutes, or shall constitute when executed and delivered, a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application.

 

(c)           Capitalization.  The authorized capital stock of the Company and the shares thereof issued and outstanding as of the Effective Date are set forth in the Commission Documents or on Schedule 3.1(c) attached hereto.  All of the outstanding shares of Common Stock have been duly and validly authorized, and are fully paid and nonassessable. Except as set forth in Schedule 3.1(c), as of the Effective Date, no shares of Common Stock are entitled to preemptive rights or registration rights and there are no outstanding options, warrants, scrip, rights to subscribe to, call or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company.  Furthermore, except as set forth in Schedule 3.1(c), there are no contracts, commitments, understandings, or arrangements by which the Company is or may become bound to issue additional shares of the capital stock of the Company or options, securities or rights convertible into shares of capital stock of the Company.  Except for customary transfer restrictions contained in agreements entered into by the Company in order to sell restricted, as of the Effective Date, the Company is not a party to, and it has no knowledge of, any agreement restricting the voting or transfer of any shares of the capital stock of the Company.  The offer and sale of all capital stock, convertible securities, rights, warrants, or options of the Company issued prior to the Effective Date complied in all material respects with all applicable federal and state securities laws, and no stockholder has a right of rescission or damages with respect thereto which would have a Material Adverse Effect.  The Company has furnished or made available to the Purchaser true and correct copies of the Company’s Certificate of Incorporation as in effect on the Effective Date (the “Articles”), and the Company’s Bylaws as in effect on the Effective Date (the “Bylaws”).

 

  

5

  

 

(d)           Issuance of Shares.  The Shares to be issued under this Agreement have been or will be (prior to issuance to the Purchaser hereunder) duly authorized by all necessary corporate action and, when paid for or issued in accordance with the terms hereof, the Shares shall be validly issued and outstanding, fully paid and nonassessable, and the Purchaser shall be entitled to all rights accorded to a holder of Common Stock.

 

(e)           No Conflicts.  The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated herein do not (i) violate any provision of the Company’s Articles or Bylaws, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company is a party, (iii) create or impose a lien, charge or encumbrance on any property of the Company under any agreement or any commitment to which the Company is a party or by which the Company is bound or by which any of its respective properties or assets are bound, or (iv) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries are bound or affected, except, in all cases, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect.  The Company is not required under federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement, or issue and sell the Shares to the Purchaser in accordance with the terms hereof (other than any filings which may be required to be made by the Company with the Commission or the Principal Market subsequent to the Effective Date, including the Registration Statement and any registration statement, amendment, prospectus or prospectus supplement which may be filed pursuant hereto); provided, however, that, for purposes of the representation made in this sentence, the Company is assuming and relying upon the accuracy of the representations, warranties and agreements of the Purchaser herein.

 

(f)           Commission Documents, Financial Statements.  The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act and, as of the Effective Date the Company has timely filed all Commission Documents.  The Company has delivered or made available to the Purchaser true and complete copies of the Commission Documents filed with the Commission since March 31, 2012 and prior to the Effective Date.  The Company has not provided to the Purchaser any information which, according to applicable law, rule or regulation, should have been disclosed publicly by the Company but which has not been so disclosed, other than with respect to the transactions contemplated by this Agreement.  As of their respective filing dates, the Commission Documents complied in all material respects with the requirements of the Exchange Act and other federal, state and local laws, rules and regulations applicable to it, and, as of its date, the Commission Documents did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  The financial statements of the Company included in the Commission Documents 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 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).

 

  

6

  

 

(g)           No Material Adverse Effect or Material Change in Ownership.  Since the filing of the March 31, 2012 Form 10-Q, no Material Adverse Effect or any Material Change in Ownership has occurred or exists with respect to the Company.

 

(h)           No Undisclosed Liabilities. Neither the Company nor any of its subsidiaries has any liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) that would be required to be disclosed on a balance sheet of the Company or any Subsidiary (including the notes thereto) in conformity with GAAP and are not disclosed in the Commission Documents.

 

(i)           No Undisclosed Events or Circumstances.  No event or circumstance has occurred or exists with respect to the Company or its subsidiaries or their respective businesses, properties, prospects, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed.

 

(j)           Indebtedness.  The Commission Documents as of the date hereof and the Effective Date set forth all outstanding secured and unsecured Indebtedness of the Company, or for which the Company or any Subsidiary has commitments through such date.  For the purposes of this Agreement, “Indebtedness” shall mean (a) any liabilities for borrowed money or amounts owed in excess of $1,000,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of Indebtedness of others in excess of $1,000,000, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present value of any lease payments in excess of $1,000,000 due under leases required to be capitalized in accordance with GAAP.  Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.

 

(k)           Title To Assets.  Except as set forth in Schedule 3.1(k), each of the Company and its Subsidiaries has good and marketable title to all of their respective real and personal property reflected in the Commission Documents, free of any mortgages, pledges, charges, liens, security interests or other encumbrances, except for those that do not or would not have a Material Adverse Effect.  All said real property leases of the Company are valid and subsisting and in full force and effect in all material respects.

 

(l)           Actions Pending.  There is no action, suit, claim, investigation or proceeding pending or, to the knowledge of the Company, threatened against the Company or any Subsidiary which questions the validity of this Agreement or the transactions contemplated hereby or any action taken or to be taken pursuant hereto or thereto.  There is no action, suit, claim, investigation or proceeding pending or, to the knowledge of the Company, threatened, against or involving the Company, any Subsidiary or any of their respective properties or assets and which, if determined adversely to the Company or its Subsidiary, would have a Material Adverse Effect.

 

  

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(m)           Compliance With Law.  The business of the Company and the subsidiaries has been and is presently being conducted in all material respects in accordance with all applicable federal, state and local governmental laws, rules, regulations and ordinances, except as, individually or in the aggregate, do not or would not have a Material Adverse Effect.  The Company and each of its subsidiaries have 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, except where the failure to possess such franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals, individually or in the aggregate, do not or would not have a Material Adverse Effect.

 

(n)           Certain Fees.  No brokers, finders or financial advisory fees or commissions will be payable by the Company or any Subsidiary with respect to the transactions contemplated by this Agreement; except that finder’s fee will be payable to GEMIA Inc., and Gulf Partners LLC, or their respective affiliated entities, in connection with this transaction.

 

(o)           Disclosure.  Neither this Agreement nor the Commission Documents or any other documents, certificates or instruments furnished to the Purchaser by or on behalf of the Company in connection with the transactions contemplated by this Agreement contain any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made herein or therein, in the light of the circumstances under which they were made herein or therein, not misleading.

 

(p)           Operation Of Business.  The Company or one or more of its subsidiaries owns or controls all patents, trademarks, service marks, trade names, copyrights, licenses and authorizations of the Company as set forth in the Commission Documents, and all rights with respect to the foregoing, which are necessary for the conduct of its business as now conducted without, to the Company’s knowledge, any conflict with the rights of others, except to the extent that any such conflict would not have a Material Adverse Effect.

 

(q)           [Intentionally Omitted].

 

(r)           Material Agreements.  The Company is not 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 an annual report on Form 10-K (collectively, “Material Agreements”) which has not been filed in the Commission Documents.  The Company has in all material respects performed all the obligations required to be performed by them to date under the Material Agreements, have received no notice of default by the Company thereunder and, to the best of the Company’s knowledge, are not in default under any Material Agreement now in effect, the result of which would have a Material Adverse Effect.

 

  

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(s)           Transactions With Affiliates.  Except as set forth in the Commission Documents, there are no loans, leases, agreements, contracts, royalty agreements, management contracts or arrangements or other continuing transactions exceeding $100,000 between (a) the Company or any Subsidiary, on the one hand, and (b) any person or entity who would be covered by Item 404(a) of Regulation S-K, on the other hand.

 

(t)           Securities Act.  The Company will comply in all material respects with all applicable federal and state securities laws in connection with the offer, issuance and sale of the Shares hereunder.  The Company will comply, when so filed, in all material respects with the provisions of the Securities Act.  The Commission has not issued any order preventing or suspending the use of the Registration Statement.  The Registration Statement, in the form in which it will become effective, and also in such form as it may be amended or supplemented from time to time, will comply in all material respects with the provisions of the Securities Act and will not at any such time contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein in the light of the circumstances under which they are made, not misleading.  The Company has not distributed and, prior to the completion of the distribution of the Shares, will not distribute any offering material in connection with the offering and sale of the Shares other than the Registration Statement, the related prospectus or other materials, if any, permitted by the Securities Act.

 

(u)           Employees.  As of the date hereof and as of the Effective Date, the Company does not have any collective bargaining arrangements or agreements covering any of its employees.  As of the date hereof and as of the Effective Date, no officer, consultant or key employee of the Company whose termination, either individually or in the aggregate, would have a Material Adverse Effect, has terminated or, to the knowledge of the Company, has any present intention of terminating his or her employment or engagement with the Company.

 

(v)           Use of Proceeds.  The proceeds from the sale of the Shares will be used by the Company for general corporate purposes including for acquisitions and working capital.

 

(w)           Investment Company Act Status.  The Company is not, and as a result of and immediately upon Effective Date will not be, an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.

 

(x)           ERISA.  No liability to the Pension Benefit Guaranty Corporation has been incurred with respect to any Plan by the Company or any of its subsidiaries which is or would have a Material Adverse Effect.  The execution and delivery of this Agreement and the issue and sale of the Shares will not involve any transaction which is subject to the prohibitions of Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Internal Revenue Code of 1986, as amended.  As used in this Section 3.1(y), the term “Plan” shall mean an “employee pension benefit plan” (as defined in Section 3 of ERISA) which is or has been established or maintained, or to which contributions are or have been made, by the Company or any Subsidiary or by any trade or business, whether or not incorporated, which, together with the Company or any Subsidiary, is under common control, as described in Section 414(b) or (c) of the Code.

 

(y)           (Intentionally Omitted).

 

  

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(z)           Acknowledgment Regarding Purchaser’s Purchase of Shares.  The Company acknowledges and agrees that the Purchaser is acting solely in the capacity of an arm’s length purchaser with respect to this Agreement and the transactions contemplated hereunder.  The Company further acknowledges that the Purchaser is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereunder and any advice given by the Purchaser or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereunder is merely incidental to the Purchaser’s purchase of the Shares.

 

Section 3.2   Representatives and Warranties of the Purchaser.  The Purchaser hereby makes the following representations and warranties to the Company:

 

(a)           Organization and Standing of the Purchaser.  The Purchaser is a company duly incorporated, validly existing and in good standing under the laws of the Cayman Islands.

 

(b)           Authorization and Power.  The Purchaser has the requisite corporate power and authority to enter into and perform this Agreement and to purchase the Shares in accordance with the terms hereof.  The execution, delivery and performance of this Agreement by Purchaser and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action, and no further consent or authorization of the Purchaser, its Board of Directors or stockholders is required.  This Agreement has been duly executed and delivered by the Purchaser.  This Agreement constitutes, or shall constitute when executed and delivered, a valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership, or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application.

 

(c)           No Conflicts.  The execution, delivery and performance of this Agreement and the consummation by the Purchaser of the transactions contemplated hereby and thereby or relating hereto do not and will not (i) result in a violation of such Purchaser’s charter documents or bylaws 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 material agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Purchaser is a party, (iii) create or impose or lien, charge or encumbrance on any property of the Purchaser under any agreement or any commitment to which the Purchaser is party or by which the Purchaser is bound or by which any of its respective properties or assets are bound, or (iv) result in a violation of any law, rule, or regulation, or any order, judgment or decree of any court or governmental agency applicable to the Purchaser or its properties, except for such conflicts, defaults and violations as would not, individually or in the aggregate, prohibit or otherwise interfere with the ability of the Purchaser to enter into and perform its obligations under this Agreement in any material respect.  The Purchaser is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or to purchase the Shares in accordance with the terms hereof; provided, however, that for purposes of the representation made in this sentence, the Purchaser is assuming and relying upon the accuracy of the representations, warranties and agreements of the Company herein.

 

  

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(d)           Accredited Investor.  The Purchaser is an “accredited investor” as defined in Regulation D promulgated under the Securities Act.

 

(e)           Financial Risks. The Purchaser acknowledges that it is able to bear the financial risks associated with an investment in the Shares. The Purchaser is capable of evaluating the risks and merits of an investment in the Shares by virtue of its experience as an investor and its knowledge, experience, and sophistication in financial and business matters and the Purchaser is capable of bearing the entire loss of its investment in the Shares.

 

(f)           Information.  The Purchaser and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Shares which have been requested by the Purchaser.  The Purchaser and its advisors, if any, have been afforded the opportunity to ask questions of the Company.  The Purchaser has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Shares.  The Purchaser understands that it (and not the Company) shall be responsible for its own tax liabilities that may arise as a result of this investment or the transactions contemplated by this Agreement.

 

ARTICLE IV

COVENANTS

 

The Company covenants with the Purchaser, and the Purchaser covenants with the Company, as follows, which covenants of one party are for the benefit of the other party, during the Investment Period.

 

Section 4.1   Securities Compliance.

 

(a)           The Company shall notify the Commission and the Principal Market, if applicable, in accordance with their rules and regulations, 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 Shares to the Purchaser. The Company agrees that it shall, within the time required under the Exchange Act file a report on Form 8-K disclosing this Agreement and the transaction contemplated hereby.

 

(b)           The Company shall take such action, if any, as is reasonably necessary in order to obtain an exemption for or to qualify any subsequent resale of the Shares by the Investor, in each case, under applicable securities or “Blue Sky” laws of the states of the United States in such states as is reasonably requested by the Investor from time to time, and shall provide evidence of any such action so taken to the Investor.

 

Section 4.2   Registration and Listing.  The Company will take all action necessary to cause its Common Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange Act, will comply in all material respects with its reporting and filing obligations under the Exchange Act and take all action necessary to maintain compliance with such reporting and filing obligations, and will not take any action or file any document (whether or not permitted by the Securities Act) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under the Exchange Act or Securities Act, except as permitted herein.  The Company will take all action necessary to continue the listing or trading of its Common Stock and the listing of the Shares purchased by Purchaser hereunder on Principal Market or any relevant market or system, if applicable, and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Principal Market or any relevant market or system.

 

  

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Section 4.3   Warrant.  On the Effective Date, the Company shall deliver to the Purchaser a common stock purchase warrant, in the form attached hereto as Exhibit B (the “Warrant”), to purchase up to 5,000,000 shares of Common Stock at an exercise price per share of $0.27, with an expiration date that is the fifth anniversary of the Effective Date, subject to the terms and conditions of the Warrant, including the vesting schedule set forth therein.  The Company shall issue additional warrants to the Purchaser, pursuant to terms agreed upon by both parties, after the Company has issued, and the Purchaser has purchased, $2 million dollars worth of Common Stock through the exercise of Draw Downs.

 

Section 4.4   Registration Rights Agreement.  The Company and the Purchaser shall enter into the Registration Rights Agreement with respect to the Shares, dated the Effective Date, in the form of Exhibit A attached hereto.

 

Section 4.5   Compliance with Laws.

 

(a)           The Company shall comply with all applicable laws, rules, regulations and orders (including without limitation Rule 415(a)(4) under the Securities Act) noncompliance with which would have a Material Adverse Effect.

 

(b)           The Purchaser shall comply with all applicable laws, rules, regulations and orders in connection with this Agreement and the transactions contemplated hereby.  Without limiting the foregoing, the Purchaser shall comply with the requirements of the Securities Act and the Exchange Act including without limitation Rule 415(a)(4) under the Securities Act and Rule 10b-5 and Regulation M under the Exchange Act.

 

Section 4.6   Keeping of Records and Books of Account.  The Company shall keep adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied, reflecting all financial transactions of the Company, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made.

 

Section 4.7   Limitations on Holdings and Issuances.  Notwithstanding anything in this Agreement to the contrary, at no time may the Company issue, and at no time shall the Purchaser be obligated to purchase, any Shares which would result in the Purchaser beneficially owning, directly or indirectly, at the time of such proposed issuance more than 4.9% of the number of shares of Common Stock issued and outstanding as of the date of such proposed issuance; provided, however, that upon the Purchaser providing the Company with sixty-one (61) days notice (pursuant to Section 9.4 hereof) (the "Waiver Notice") that the Purchaser would like to waive this Section 4.7 with regard to any or all Shares issuable pursuant to this Agreement, this Section 4.7 will be of no force or effect with regard to all or a portion of the Shares referenced in the Waiver Notice until the date that the Purchaser notifies the Company (pursuant to Section 9.4 hereof) that the Purchaser revokes the Waiver Notice; provided, further, that during the sixty-one (61) day period prior to the expiration of the Investment Period, the Purchaser may waive this Section 4.7 by providing a Waiver Notice at any time during such sixty-one (61) day period.

 

  

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Section 4.8   Registration Statement. Within 30 days of the Effective Date, the Company shall cause the Registration Statement to be filed and seek that it be declared effective pursuant to the terms of the Registration Rights Agreement.  The Registration Statement shall register with the Commission the Shares to be issued under the Draw Downs. The Purchaser shall not be obligated to accept a Draw Down request from the Company unless the Registration Statement is then effective and the prospectus included in the Registration Statement is then current and in compliance with all applicable rules.

 

Section 4.9   Other Agreements and Other Financings.

 

(a)           The Company shall not enter into any agreement in which the terms of such agreement would restrict or impair the right to perform of the Company or any Subsidiary under this Agreement or the Articles.

 

(b)           The Company shall not enter into any agreement, the principal purpose of which is to secure an Other Financing (as defined below) during the Investment Period.  “Other Financing” shall mean an “equity line” that is substantially similar to the financing provided for under this Agreement.

 

Section 4.10   Stop Orders.  The Company will advise the Purchaser promptly and, if requested by the Purchaser, will confirm such advice in writing: (i) of the Company’s receipt of notice of any request by the Commission for amendment of or a supplement to the Registration Statement, any related prospectus or for additional information; (ii) of the Company’s receipt of notice of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of the suspension of qualification of the Shares for offering or sale in any jurisdiction or the initiation of any proceeding for such purpose; and (iii) of the Company becoming aware of the happening of any event, which makes any statement of a material fact made in the Registration Statement (as then amended or supplemented) untrue or which requires the making of any additions to or changes in the Registration Statement (as then amended or supplemented) in order to state a material fact required by the Securities Act to be stated therein or necessary in order to make the statements therein not misleading.  If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, the Company will make commercially reasonable efforts to obtain the withdrawal of such order at the earliest possible time.

 

Section 4.11   Selling Restrictions; Volume Limitations.

 

(a)           The Purchaser covenants that during the Investment Period neither the Purchaser nor any of its affiliates nor any entity managed by the Purchaser will, directly or indirectly, sell any securities of the Company except the Shares that it owns or has the right to purchase pursuant to the provisions of a Draw Down Notice.  During the Investment Period, neither the Purchaser nor any of its affiliates nor any entity managed by the Purchaser will enter into a short position with respect to shares of Common Stock of the Company, including in any account of the Purchaser’s or in any account directly or indirectly managed by the Purchaser or any affiliate of the Purchaser or any entity managed by the Purchaser.  During the Investment Period, the Purchaser shall not grant any option to purchase or acquire any right to dispose or otherwise dispose for value of any shares of Common Stock or any securities convertible into, or exchangeable for, or warrants to purchase, any shares of Common Stock, or enter into any swap, hedge or other agreement that transfers, in whole or in part, the economic risk of ownership of the Common Stock, except for such sales permitted by the preceding two sentences.  In addition, on a daily Trading Day basis, the Purchaser agrees to restrict the volume of sales of Shares by the Purchaser, its affiliates and any entity managed by the Purchaser to no more than ten percent (10%) (or such other percentage based on the length of the Draw Down Pricing Period) of the Shares purchased pursuant to such Draw Down Notice.

 

  

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(b)           In addition to the foregoing, in connection with any sale of the Company’s securities (including any short sale permitted by the preceding paragraph), the Purchaser shall comply in all respects with all applicable laws, rules, regulations and orders, including, without limitation, the requirements of the Securities Act and the Exchange Act, including, without limitation, Rule 415(a)(4) under the Securities Act and Regulation M and Rule 10b-5 under the Exchange Act.

 

Section 4.12   Structuring Fee.

 

(a)            The Purchaser will receive a structuring fee from the Company equal to one and one half percent (1.5%) of the Aggregate Limit. Twenty-five percent (25%) of the Fee shall be payable on the Settlement Date of the first four (4) Drawn Downs provided the full Fee is paid  within 12 months from the filing of the Registration Statement. The Company may choose to pay any Fee or portion thereof in common stock at a price equal to the Purchase Price as set forth in Section 6.1 at the time such Fee is due.

 

Section 4.13   Non-Public Information.  Neither the Company nor any of its directors, officers or agents shall disclose any material non-public information about the Company to the Purchaser.

 

Section 4.14   DWAC Eligibility.  The Company shall use its reasonable best efforts to cause the Common Stock and its transfer agent to be, at the time of each Draw Down, eligible to participate in the DWAC system (“DWAC Eligible”).

 

ARTICLE V

OPINION OF COUNSEL AND CERTIFICATE; CONDITIONS TO THE SALE AND PURCHASE OF THE SHARES

 

Section 5.1   Opinion of Counsel and Certificate.  In connection with the execution and delivery of this Agreement, the Purchaser has received (i) an opinion of outside counsel to the Company, dated the Effective Date, in the form of Exhibit C hereto, and (ii) a certificate from the Company, dated the Effective Date, in the form of Exhibit D hereto.

 

Section 5.2   Conditions Precedent to the Obligation of the Company to Sell the Shares.  The obligation hereunder of the Company to issue and sell the Shares to the Purchaser under any Draw Down Notice is subject to the satisfaction or waiver of each of the conditions set forth below.  These conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion.

 

  

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(a)           Accuracy of the Purchaser’s Representations and Warranties.  Except for representations and warranties that are expressly made as of a particular date, the representations and warranties of the Purchaser in this Agreement shall be true and correct in all material respects as of the date when made and as of each Draw Down Exercise Date and each Settlement Date as though made at that time.

 

(b)           Registration Statement.  The Company shall have the necessary amount of Shares available to be registered pursuant to the Registration Rights Agreement.  The Company shall take all reasonable steps to have the Registration Statement declared effective by the Commission. There shall be no stop order suspending effectiveness of the Registration Statement.

 

(c)           Performance by the Purchaser.  The Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Purchaser at or prior to each Draw Down Exercise Date and each Settlement Date, as applicable.

 

(d)           No Injunction.  No statute, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement.

 

(e)           No Suspension, Etc.  Trading in the Common Stock shall not have been suspended by the Commission or  Principal Market, and, at any time prior to each Draw Down Exercise Date and applicable Settlement Date, none of the events described in clauses (i), (ii) and (iii) of Section 4.11 hereof shall have occurred, trading in securities generally as reported on the Principal Market shall not have been suspended or limited, nor shall a banking moratorium have been declared either by the United States or State authorities, nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity or crisis of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of the Company, makes it impracticable or inadvisable to issue the Shares.

 

(f)           No Proceedings or Litigation.  No action, suit or proceeding before any arbitrator or any governmental authority shall have been commenced, and no investigation by any governmental authority shall have been threatened, against the Company or any of the officers, directors or affiliates of the Company seeking to restrain, prevent or change the transactions contemplated by this Agreement, or seeking damages in connection with such transactions.

 

Section 5.3   Conditions Precedent to the Obligation of the Purchaser To Accept a Draw Down and Purchase the Shares.  The obligation hereunder of the Purchaser to accept a Draw Down and to acquire and pay for the Shares is subject to the satisfaction or waiver, at or before each Draw Down Exercise Date and each Settlement Date, of each of the conditions set forth below.  The conditions are for the Purchaser’s sole benefit and may be waived by the Purchaser at any time in its sole discretion.

 

  

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(a)           Accuracy of the Company’s Representations and Warranties.  Except for representations and warranties that are expressly made as of a particular date, each of the representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Draw Down Exercise Date, as though made at that time, including, without limitation, under Section 3.1(h) hereof.

 

(b)           Registration Statement.  The Company shall have the necessary amount of Shares registered pursuant to the Registration Rights Agreement.  The Company shall take all reasonable steps to have the Registration Statement on Form S-1 declared effective by the Commission.  There shall be no stop order suspending effectiveness of the Registration Statement.

 

(c)           No Suspension.  Trading in the Common Stock shall not have been suspended by the Commission or Principal Market, and, at any time prior to such Draw Down Exercise Date, trading in securities generally as reported on the Principal Market shall not have been suspended or limited, nor shall a banking moratorium have been declared either by the United States or State authorities, nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity or crisis of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of the Purchaser, makes it impracticable or inadvisable to issue the Shares.

 

(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 to be performed, satisfied or complied with by the Company at or prior to each Draw Down Exercise Date and each Settlement Date and shall have delivered the Compliance Certificate substantially in the form attached hereto as Exhibit E.

 

(e)           No Material Adverse Effect or Material Change in Ownership.  No Material Adverse Effect or Material Change in Ownership shall have occurred to the Company.

 

(f)           No Injunction.  No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement.

 

(g)           No Proceedings or Litigation.  No action, suit or proceeding before any arbitrator or any governmental authority shall have been commenced, and no investigation by any governmental authority shall have been threatened, against the Company or any subsidiary, or any of the officers, directors or affiliates of the Company or any subsidiary seeking to restrain, prevent or change the transactions contemplated by this Agreement, or seeking damages in connection with such transactions.

 

(h)           Aggregate Limit.  The issuance and sale of the Shares issuable pursuant to such Draw Down Notice will not violate Section 6.2 hereof.

 

(i)            Shares Authorized.  The Shares issuable pursuant to such Draw Down Notice will have been duly authorized by all necessary corporate action of the Company.

 

  

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(j)            Due Diligence. Prior to each Settlement Date and from time to time as reasonably requested by the Purchaser, the Company shall make available for inspection and review by the Purchaser, its advisors and representatives, and any underwriter participating in any disposition of the Shares on behalf of the Purchaser pursuant to the Registration Statement, any amendment, prospectus or prospectus supplement thereto, or any blue sky, FINRA or other filing, all financial and other records, all documents and filings with the Commission, and all other corporate documents and properties of the Company as may be reasonably necessary for the purpose of such review.  In addition, the Company shall cause its officers, directors and employees to supply all such information reasonably requested by the Purchaser or any such representative, advisor or underwriter and to respond to all questions and other inquiries reasonably made or submitted by any such individuals or entities.

 

(k)           Opinion of Counsel.  Subsequent to the effective date of the Registration Statement and prior to the first Draw Down under this Agreement, the Purchaser shall have received an opinion of counsel to the Company in substantially the form set forth as Exhibit F hereto or as otherwise reasonably acceptable to the Purchaser’s counsel.

 

ARTICLE VI

DRAW DOWN TERMS

 

Section 6.1   Draw Down Terms.  Subject to the satisfaction of the conditions set forth in this Agreement, and subject to Section 6.2 below, the parties agree (unless otherwise mutually agreed upon by the parties in writing) as follows:

 

(a)           The Company may, in its sole discretion, issue a Draw Down Notice (as defined in Section 6.1(h) hereof) for a specified Draw Down Amount Requested.  The Purchaser shall be obligated to accept the Draw Down Notice, provided that the Purchaser, in its sole discretion, shall not be obligated to accept more than fifty percent (50%) of the Draw Down Amount Requested and shall have the option to purchase up to two hundred percent (200%) of the Draw Down Amount Requested.  Subject to Section 6.1(g) below, the Purchaser shall pay a per Share amount equal to ninety percent (90%) of the weighted average Daily Closing Price during the Draw Down Pricing Period (the “Purchase Price”).  Subject to Section 4.7 hereof, the Draw Down Amount Requested shall not exceed four hundred percent (400%) (the “Draw Down Limit”) of the average daily trading volume for the ten (10) Trading Days immediately preceding the Draw Down Exercise Date.

 

(b)           Prior to commencement of the Draw Down Pricing Period, the Company shall deliver the Shares to be purchased in such Draw Down to the Purchaser.  If Shares delivered to the Purchaser prior to commencement of the Draw Down Pricing Period are delivered in certificated form and not DWAC Eligible, then the Drawing Down Pricing Period shall not begin until the Shares are cleared by an appointed clearing agent.

 

(c)           Only one Draw Down shall be allowed in each Draw Down Pricing Period.

 

(d)           Each Draw Down shall be settled on the first Trading Day after the end of each Draw Down Pricing Period (the “Settlement Date”).

 

(e)           At the end of each Draw Down Pricing Period, the Purchaser’s total Draw Down commitment under this Agreement shall be reduced by the total amount of the Draw Down Amount for such Draw Down Pricing Period.

 

  

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(f)           Each Draw Down will automatically expire immediately after the last Trading Day of each Draw Down Pricing Period.

 

(g)          If the Daily Closing Price on a given Trading Day in the Draw Down Pricing Period, multiplied by ninety percent (90%), is less than the Threshold Price, then the total amount of the Draw Down Amount Requested will be reduced by 1/10th (or such other fraction based on the length of the Draw Down Pricing Period) and no Shares will be purchased or sold with respect to such Trading Day, unless otherwise agreed by the Parties.

 

(h)          As a condition to exercise of any Draw Down, the Company must (i) provide a notice to the Purchaser of the Company’s exercise of any Draw Down via facsimile transmission before commencement of trading on the first Trading Day of the Draw Down Pricing Period covered by such notice (the “Draw Down Notice”), substantially in the form attached hereto as Exhibit G and (ii) deliver the Shares to the Purchaser or its designees via DWAC, if the Company is approved for DWAC in an amount equal to the Draw Down Amount Requested (which amount shall be adjusted in the event that the amount accepted by the Purchaser pursuant to Section 6.1(a) hereof is different that the Draw Down Amount Requested).  The date the Company delivers the Draw Down Notice and the Shares in accordance with this Section 6.1(h) shall be a “Draw Down Exercise Date.”  The Draw Down Notice shall specify the Draw Down Amount Requested, set the Threshold Price for such Draw Down and designate the first Trading Day of the Draw Down Pricing Period that the Company wishes to grant to the Purchaser during the Draw Down Pricing Period.

 

(i)           On each Settlement Date, the Purchaser shall provide the Company a closing notice in the form of Exhibit G attached hereto and shall make payment for the Shares acquired pursuant to this Agreement to the Company’s designated account by wire transfer of immediately available funds, provided that the Shares were received by the Purchaser in accordance with 6.1(b) hereof.

 

(j)           If the Company tenders a Draw Down by delivering a Draw Down Notice to the Purchaser, and the Purchaser fails to make payment for the shares on the Settlement Date, the Shares issuable upon exercise of the Warrants and the structuring fee to be paid to the Purchaser pursuant to Section 4.12 shall be reduced by the percentage amount equal to the quotient of the Draw Down Amount divided by $2,000,000, but only if Purchaser does not make payment for the shares within three (3) Trading Days after notice thereof by the Company to Purchaser.

 

Section 6.2   Aggregate Limit.  Notwithstanding anything to the contrary herein, in no event may the Company issue a Draw Down Notice to the extent that the sale of shares of Common Stock pursuant thereto and pursuant to all prior Draw Down Notices issued hereunder would cause the Company to sell or the Purchaser to purchase shares of Common Stock which in the aggregate are in excess of the Aggregate Limit.  If the Company issues a Draw Down Notice that otherwise would permit the Purchaser to purchase shares of Common Stock which would cause the aggregate purchases by Purchaser hereunder to exceed the Aggregate Limit, such Draw Down Notice shall be void ab initio to the extent of the amount by which the dollar value of shares or number of shares, as the case may be, of Common Stock otherwise issuable pursuant to such Draw Down Notice or together with the dollar value of shares or number of shares, as the case may be, of all other Common Stock purchased by the Purchaser pursuant hereto would exceed the Aggregate Limit.

 

  

18

  

 

ARTICLE VII

TERMINATION

 

Section 7.1   Term, Termination by Mutual Consent.  Unless earlier terminated as provided hereunder, this Agreement shall terminate automatically on the earlier of (i) twenty four (24) consecutive months from the Effective Date (the “Investment Period”) and (ii) the date the Purchaser shall have purchased the Aggregate Limit.  This Agreement may be terminated at any time by mutual written consent of the parties, effective as of the date of such mutual written consent unless otherwise provided in such written consent.

 

Section 7.2    Other Termination.  The Company shall inform the Purchaser, and the Purchaser shall have the right to terminate this Agreement within the subsequent thirty (30) days (the “Event Period”), effective upon written notice to the Company under Section 9.4 in the Event Period, if during the Investment Period (x) the Company enters into a definitive agreement with any third party, the principal purpose of which is to secure any equity line financing which provides for an Other Financing as defined in 4.9(b) above, or (y) an event resulting in a Material Adverse Effect or Material Change in Ownership has occurred.  In such event, the Purchaser may terminate this Agreement upon one (1) business day’s prior written notice during the Event Period.

 

Section 7.3   Effect of Termination.  In the event of termination by the Company or the Purchaser, written notice thereof shall forthwith be given to the other party as provided in Section 9.4 and the transactions contemplated by this Agreement shall be terminated without further action by either party.  If this Agreement is terminated as provided in Section 7.1 or 7.2 herein, this Agreement shall become void and of no further force and effect, except as provided in Section 9.9 hereof.  Nothing in this Section 7.3 shall be deemed to release the Company or the Purchaser from any liability for any breach under this Agreement, or to impair the rights of the Company and the Purchaser to compel specific performance by the other party of its obligations under this Agreement.

 

ARTICLE VIII

INDEMNIFICATION

 

Section 8.1 General Indemnity.

 

(a)           Indemnification by the Company.  The Company will indemnify and hold harmless the Purchaser, GEM and each person who controls the Purchaser or GEM within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act from and against any losses, claims, damages, liabilities and expenses (including reasonable costs of defense and investigation and all attorneys’ fees) to which the Purchaser, GEM and each such controlling person may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities and expenses (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained, or incorporated by reference, in the Registration Statement relating to Common Stock being sold to the Purchaser (including any prospectus relating thereto), or any amendment or supplement to it, or (ii) the omission or alleged omission to state in the Registration Statement or any document incorporated by reference in the Registration Statement, a material fact required to be stated therein or necessary to make the statements therein not misleading.  Pursuant to Section 8.2 hereof, the Company will reimburse the Purchaser, GEM and each such controlling person promptly upon demand for any legal or other costs or expenses reasonably incurred by the Purchaser, GEM or such controlling person in investigating, defending against, or preparing to defend against any such claim, action, suit or proceeding.

 

  

19

  

 

(b)           Indemnification by the Purchaser.  The Purchaser will indemnify and hold harmless the Company, each of its directors and officers, and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act from and against any losses, claims, damages, liabilities and expenses (including reasonable costs of defense and investigation and all attorneys fees) to which the Company and each such controlling person may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages, liabilities and expenses (or actions in respect thereof) arise out of or are based upon (i) an untrue statement, alleged untrue statement, omission or alleged omission, included in the Registration Statement in reliance upon, and in conformity with, written information furnished by the Purchaser to the Company for inclusion in the Registration Statement, or (ii) the omission or alleged omission to state in the Registration Statement a material fact required to be stated therein or necessary to make the statements therein not misleading, to the extent, but only to the extent, the untrue statement, alleged untrue statement, omission or alleged omission was made in reliance upon, and in conformity with, written information furnished by the Purchaser to the Company for inclusion in the Registration Statement.  Pursuant to Section 8.2 hereof, the Purchaser will reimburse the Company and each such director, officer or controlling person promptly upon demand for any legal or other costs or expenses reasonably incurred by the Company or the other person in investigating, defending against, or preparing to defend against any such loss, claim, damage, liability or expense.

 

Section 8.2   Indemnification Procedures.  Promptly after a person receives notice of a claim or the commencement of an action for which the person intends to seek indemnification under Section 8.1, the person will notify the indemnifying party in writing of the claim or commencement of the action, suit or proceeding; provided, however, that failure to notify the indemnifying party will not relieve the indemnifying party from liability under Section 8.1, except to the extent it has been materially prejudiced by the failure to give notice.  The indemnifying party will be entitled to participate in the defense of any claim, action, suit or proceeding as to which indemnification is being sought, and if the indemnifying party acknowledges in writing the obligation to indemnify the party against whom the claim or action is brought, the indemnifying party may (but will not be required to) assume the defense against the claim, action, suit or proceeding with counsel satisfactory to it.  After an indemnifying party notifies an indemnified party that the indemnifying party wishes to assume the defense of a claim, action, suit or proceeding, the indemnifying party will not be liable for any legal or other expenses incurred by the indemnified party in connection with the defense against the claim, action, suit or proceeding except that if, in the opinion of counsel to the indemnifying party, one or more of the indemnified parties should be separately represented in connection with a claim, action, suit or proceeding, the indemnifying party will pay the reasonable fees and expenses of one separate counsel for the indemnified parties.  Each indemnified party, as a condition to receiving indemnification as provided in Section 8.1, will cooperate in all reasonable respects with the indemnifying party in the defense of any action or claim as to which indemnification is sought.  No indemnifying party will be liable for any settlement of any action effected without its prior written consent.  No indemnifying party will, without the prior written consent of the indemnified party, effect any settlement of a pending or threatened action with respect to which an indemnified party is, or is informed that it may be, made a party and for which it would be entitled to indemnification, unless the settlement includes an unconditional release of the indemnified party from all liability and claims which are the subject matter of the pending or threatened action.

 

  

20

  

 

If for any reason the indemnification provided for in this Agreement is not available to, or is not sufficient to hold harmless, an indemnified party in respect of any loss or liability referred to in Section 8.1 as to which it is entitled to indemnification thereunder, each indemnifying party will, in lieu of indemnifying the indemnified party, contribute to the amount paid or payable by the indemnified party as a result of such loss or liability, (i) in the proportion which is appropriate to reflect the relative benefits received by the indemnifying party on the one hand and by the indemnified party on the other from the sale of Shares which is the subject of the claim, action, suit or proceeding which resulted in the loss or liability or (ii) if that allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits of the sale of such Shares, but also the relative fault of the indemnifying party and the indemnified party with respect to the statements or omissions which are the subject of the claim, action, suit or proceeding that resulted in the loss or liability, as well as any other relevant equitable considerations.

 

  

21

  

 

ARTICLE IX

MISCELLANEOUS

 

Section 9.1   Fees and Expenses.  Each party shall bear its own fees and expenses related to the transactions contemplated by this Agreement; provided, however, that the Company shall pay, at the Effective Date, all reasonable attorneys’ fees and expenses (exclusive of disbursements and out-of-pocket expenses) incurred by the Purchaser up to $30,000 in connection with the preparation, negotiation, execution and delivery of this Agreement.  In addition, the Company shall pay all reasonable attorneys’ fees and expenses incurred by the Purchaser in connection with any amendments, modifications or waivers of this Agreement.  The Company shall pay all stamp or other similar taxes and duties levied in connection with issuance of the Shares pursuant hereto.

 

Section 9.2   Specific Enforcement, Consent to Jurisdiction.

 

(a)           The Company and the Purchaser 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 either party shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement by the other party and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which either party may be entitled by law or equity.

 

(b)           Each of the Company and the Purchaser (i) hereby irrevocably submits to the jurisdiction of the United States District Court and other courts of the United States sitting in the State of New York for the purposes of any suit, action or proceeding arising out of or relating to this Agreement, and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper.  Each of the Company and the Purchaser consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing in this Section shall affect or limit any right to serve process in any other manner permitted by law.

 

Section 9.3   Entire Agreement; Amendment.  This Agreement represents the entire agreement of the parties with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by either party relative to subject matter hereof not expressly set forth herein.  No provision of this Agreement may be amended other than by a written instrument signed by both parties hereto.

 

Section 9.4   Notices.  Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery, by telex (with correct answer back received), telecopy or facsimile (with telecopy or facsimile machine confirmation of delivery received) 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 address for such communications shall be:

 

  

22

  

 

	
If to the Company:

	
Cyclone Power Technologies Inc.

	
  

	
601 NE 26th Court

	
  

	
Pampano Beach, FL 33064

	
  

	
Attn: Christopher Nelson, President and General Counsel

	
With copies to:

	
Joel Mayersohn, Esq.

	
  

	
Roetzel & Andress

	
  

	
350 East Las Olas Boulevard

	
  

	
Las Olas Centre II, Suite 1150

	
  

	
P.O. Box 30310

	
  

	
Fort Lauderdale, FL 33303-0310

	
  

	
Direct Dial Number: 954-759-2739

	
  

	
Main Phone Number: 954-462-4150

	
  

	
Fax: 954-462-4260

 

	
If to the Purchaser:

	
GEM Global Yield Fund Limited

	
  

	
c/o CM Group

	
  

	
Commerce House

	
  

	
1 Bowring Road

	
  

	
Ramsey

	
  

	
Isle of Man

	
  

	
IM8 2LQ

 

	
With copies to:

	
Kramer Levin Naftalis & Frankel LLP

	
  

	
1177 Avenue of the Americas

	
  

	
New York, New York 10036

	
  

	
Telephone Number:  (212) 715-9100

	
  

	
Fax:  (212) 715-8000

	
  

	
Attention:  Christopher S. Auguste, Esq.

 

Either party hereto may from time to time change its address for notices by giving at least ten (10) days advance written notice of such changed address to the other party hereto.

 

Section 9.5   Waivers.  No waiver by either party of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provisions, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.  No provision of this Agreement may be waived other than in a written instrument signed by the party against whom enforcement of such waiver is sought.

 

  

23

  

 

Section 9.6   Headings.  The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof.

 

Section 9.7   Successors and Assigns.  The Neither party may assign this Agreement to any person without the prior consent of the other party.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns.  The assignment by a party to this Agreement of any rights hereunder shall not affect the obligations of such party under this Agreement.

 

Section 9.8   Governing Law.  This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to the choice of law provisions.

 

Section 9.9   Survival.  The representations and warranties of the Company and the Purchaser contained in Article III and the covenants contained in Article IV shall survive the execution and delivery hereof until the termination of this Agreement, and the agreements and covenants set forth in Article VIII of this Agreement shall survive the execution and delivery hereof.

 

Section 9.10   Counterparts.  This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and shall become effective when counterparts have been signed by each party and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart.  In the event any signature is delivered by facsimile transmission, the party using such means of delivery shall cause four additional executed signature pages to be physically delivered to the other parties within five days of the execution and delivery hereof.

 

Section 9.11   Publicity.  On or after the Effective Date, the Company may issue a press release or otherwise make a public statement or announcement with respect to this Agreement or the transactions contemplated hereby or the existence of this Agreement (including, without limitation, by filing a copy of this Agreement with the Commission); provided, however, that prior to issuing any such press release, making any such public statement or announcement, the Company shall consult with the Purchaser on the form and substance of such press release or other disclosure.

 

Section 9.12   Severability.  The provisions of this Agreement are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement, and this Agreement shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of such provision, had never been contained herein, so that such provisions would be valid, legal and enforceable to the maximum extent possible.

 

Section 9.13   Further Assurances.  From and after the date of this Agreement, upon the request of the Purchaser or the Company, each of the Company and the Purchaser shall execute and deliver such instrument, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.

 

  

24

  

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officer as of the date first above written.

 

	 	 
CYCLONE POWER TECHNOLOGIES, INC.

 

 

	 
	 	 	 	 
	 	
By: 

	/s/ Christopher Nelson	 
	 	 	Name: Christopher Nelson	 
	 	 	 
Title: President

	 

 

	 	 
 
GEM GLOBAL YIELD FUND LIMITED

	 
	 	 	 	 
	 	
By: 

	/s/ Clive Needham	 
	 	 	Name: Clive Needham	 
	 	 	 
Title: Director

	 

 

Signature Page to Common Stock Purchase Agreement

  

  

  

 

Schedule 3.1 (a) – Subsidiaries

 

The Company has two subsidiaries, as follows:

 

Cyclone-WHE LLC – currently 82.5% owned by the Company

 

Cyclone-TeamSteam USA LLC – currently 100% owned by the Company

 

  

  

  

 

Schedule 3.1 (c) – Registration Rights, Warrants, Options

 

 

Registration Rights (as of June 1, 2012):

 

The Company has granted piggy-back registration rights (which can be deferred at the insistence of the Investor) with respect to the following number of shares and warrants:

 

Shares: 2,200,000 – expires 6 month from issuance

Warrants: 5,061,251

 

 

Warrants (as of June 1, 2012):

 

Total Outstanding                                           Avg. Exercise Price

6,581,751*                                                          $0.20/share

 

*With respect to 5,061,251 warrants, the Company has agreed to a price adjustment provision, which provides that the current strike price will be adjusted if the Company issues stock (or equity convertible into stock) at a price lower than $.20/share.

 

 

Options (as of June 1, 2012):

 

Total Outstanding                                           Avg. Exercise Price

7,130,000                                               $0.20/share

 

All information in this Schedule 3.1 (c) is further defined in the Company Commission Documents, specifically, its Form 10-Q for the period ended March 31, 2012, and Form 10-K for the year ended December 31, 2011.

 

  

  

  

Schedule 3.1 (k) - Liens

 

 

Schoell Marine, a company owned by Harry Schoell, the Company’s CEO and founder, has a UCC-1 lien on the patent of the Company, which secures a 6% demand loan in the amount of $461,806.

  

  

  

 

EXHIBIT A

Registration Rights Agreement

(see attached)

  

  

  

EXHIBIT B

Warrant

(see attached)

 

  

  

  

 

EXHIBIT C

Opinion of Counsel

Law Firm of Christopher M. Nelson

1182 Canoe Point

Delray Beach, FL 33444

October 1, 2012

Re:           $2,500,000 Aggregate Offering of Common Stock of Cyclone Power Technologies Inc.

Ladies and Gentlemen:

 

We have acted as special counsel to Cyclone Power Technologies Inc., a Florida corporation (the “Company”), in connection with the Common Stock Purchase Agreement dated as of October 1, 2012 between you and the Company (the “Purchase Agreement”).  This letter is being furnished to you pursuant to Section 5.1 of the Purchase Agreement.

 

As such counsel, we have examined such matters of fact and questions of law as we have considered appropriate for purposes of this letter.  We have examined, among other things, the following:  the Certificate of Incorporation and Bylaws of the Company and certain resolutions of the Board of Directors of the Company relating to the Purchase Agreement and the transactions contemplated thereby.

 

As to facts material to the opinions, statements and assumptions expressed herein, we have, with your consent, relied upon oral or written statements and representations of officers and other representatives of the Company and others. We have not independently verified such factual matters.

 

We are opining herein as to the effect on the subject transaction only of the Florida Corporation Law, and we express no opinion with respect to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction or any other laws, or as to any matters of municipal law or the laws of any local agencies within any state.

 

Subject to the foregoing and the other matters set forth herein, it is our opinion that, as of the date hereof:

 

1.           The Company and each of its Subsidiaries is duly qualified to do business as a foreign corporation and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary except for any jurisdiction in which the failure to be so qualified will not have a Material Adverse Effect.

 

  

  

  

 

2.           The execution of, and performance of the obligations under, the Purchase Agreement, and the issuance and sale of the Shares by the Company pursuant to the Purchase Agreement will not, as of the date hereof:  (i) 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 material agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company is a party, (ii) create or impose a lien, charge or encumbrance on any property of the Company under any agreement or any commitment to which the Company is a party or by which the Company is bound or by which any of its respective properties or assets are bound, (iii) to my knowledge, result in a violation of any federal or state order, judgment or decree applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries are bound or affected, except, in all cases, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect, (iv) violate the Company’s Governing Documents; (v) violate any federal or New York statute, rule or regulation applicable to the Company; or (vi) require any consents, approvals, or authorizations to be obtained by the Company, or any registrations, declarations or filings to be made by the Company, in each case, under any federal or New York statute, rule or regulation applicable to the Company that have not been obtained or made.

 

3.           There is no action, suit, claim, investigation or proceeding pending or, to my knowledge, threatened against the Company or any Subsidiary which questions the validity of the Purchase Agreement or the transactions contemplated hereby or any action taken or to be taken pursuant hereto or thereto.  There is no action, suit, claim, investigation or proceeding pending or, to my knowledge, threatened, against or involving the Company, any Subsidiary or any of their respective properties or assets and which, if determined adversely to the Company or its Subsidiary, would have a Material Adverse Effect.

 

4.           The execution, delivery and performance of the Purchase Agreement have been duly authorized by all necessary corporate action of the Company, and the Purchase Agreement has been duly executed and delivered by the Company.

 

This letter is furnished only to you in your capacity as purchaser under the Purchase Agreement and is solely for your benefit in connection with the transactions covered hereby.  This letter may not be relied upon by you for any other purpose, or furnished to, assigned to, quoted to, or relied upon by any other person, firm or other entity for any purpose (including any person, firm or other entity that acquires Shares from you) without our prior written consent, which may be granted or withheld in our sole discretion. I am a member of the Bar of the State of Florida. To the extent that New York law is stated in this letter, I am assuming that such law is materially similar to Florida law; but I make no legal opinion to New York law. 

 

	 	 
Very truly yours,

Law Firm of Christopher M. Nelson

/s/ Christopher Nelson

Christopher Nelson,

For the Firm

 

  

  

  

EXHIBIT D

COMMON STOCK PURCHASE AGREEMENT

CERTIFICATE OF THE COMPANY

CLOSING CERTIFICATE

 

October 1, 2012

 

The undersigned, Cyclone Power Technologies Inc., a Florida corporation (the “Company”), delivers this certificate in connection with the Common Stock Purchase Agreement, dated as of October 1, 2012 (the “Agreement”), by and among the Company and GEM Global Yield Fund (the “Purchaser”), and hereby certifies on the date hereof, that (capitalized terms used herein without definition have the meanings assigned to them in the Agreement):

 

1.           Attached hereto as Exhibit A is a true, complete and correct copy of the Certificate of Incorporation of the Company as filed with the Secretary of State of the State of Florida.  The Certificate of Incorporation of the Company has not been further amended or restated, and no document with respect to any amendment to the Certificate of Incorporation of the Company has been filed in the office of the Secretary of State of the State of Florida since the date shown on the face of the state certification relating to the Company’s Certificate of Incorporation, which is in full force and effect on the date hereof, and no action has been taken by the Company in contemplation of any such amendment or the dissolution, merger or consolidation of the Company.

 

2.           Attached hereto as Exhibit B is a true and complete copy of the Bylaws of the Company, as amended and restated through, and as in full force and effect on, the date hereof, and no proposal for any amendment, repeal or other modification to the Amended and Restated By-laws of the Company has been taken or is currently pending before the Board of Directors or stockholders of the Company.

 

3.           The Board of Directors of the Company has approved the transactions contemplated by the Agreement; said approval has not been amended, rescinded or modified and remains in full force and effect as of the date hereof.

 

4.           Each person who, as an officer of the Company, or as attorney-in-fact of an officer of the Company, signed (i) the Agreement and (ii) any other document delivered prior hereto or on the date hereof in connection with the transactions contemplated by the Agreement, was duly elected, qualified and acting as such officer or duly appointed and acting as such attorney-in-fact, and the signature of each such person appearing on any such document is his genuine signature.

 

  

  

  

IN WITNESS WHEREOF, I have signed my name as of the date first above written.

 

	 	 
 
Cyclone Power Technologies, Inc.

/s/ Frankie Fruge

Name: Frankie Fruge

Title:  COO and Director

  

  

  

 

EXHIBIT E TO THE

COMMON STOCK PURCHASE AGREEMENT

COMPLIANCE CERTIFICATE

 

In connection with the issuance of shares of common stock of Cyclone Power Technologies, Inc. (the “Company”) pursuant to the Draw Down Notice, dated ___________, delivered by the Company to GEM Global Yield Fund (the “Purchaser”) pursuant to Article VI of the Common Stock Purchase Agreement dated as of October 1, 2012, by and between the Company and GEM  Global Yield Fund (the “Agreement”), the undersigned hereby certifies as follows:

 

1.           The undersigned is the duly elected ______________ of the Company.

 

2.           Except as set forth in the attached Schedule, the representations and warranties of the Company set forth in Section 3.1 of the Agreement are true and correct in all material respects as though made on and as of the date hereof, except for representations and warranties that speak as of a particular date.

 

3.           The Company has performed in all material respects all covenants and agreements to be performed by the Company on or prior to the Draw Down Exercise Date and the Settlement Date related to the Draw Down Notice and has complied in all material respects with all obligations and conditions contained in Section 5.3 of the Agreement.

 

Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Agreement.

 

The undersigned has executed this Certificate this _____ day of _________, ____.

 

	 	 
 
 
By:                                                                            

 

Name:                                                                       

 

Title:                                                                         

  

  

  

EXHIBIT F

COMMON STOCK PURCHASE AGREEMENT

FORM OF DRAW DOWN NOTICE

 

Reference is made to the Common Stock Purchase Agreement dated as of ______, 2012, (the “Purchase Agreement”) by and between Cyclone Power Technologies, Inc., a Florida corporation (the “Company”) and GEM Global Yield Fund Limited, a company incorporated under the laws of the Cayman Islands.  Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Purchase Agreement.

 

In accordance with and pursuant to Section 6.1 of the Purchase Agreement, the Company hereby issues this Draw Down Notice to exercise a Draw Down request for the Draw Down Amount indicated below.

 

	
Draw Down Amount:

	  	  
	
Draw Down Pricing Period start date:

	  	  
	
Draw Down Pricing Period end date:

	  	  
	
Settlement Date:

	  	  
	
Draw Down Threshold Price:

	  	  
	
Dollar Amount and Number of Shares of Common Stock Currently Unissued under the Registration Statement:

	  	  
	
Dollar Amount and Number of Shares of Common Stock Currently Available under the Aggregate Limit:

	  	  

	 	 	 	 	 
	Dated:	 	 	By:	 
	 	 	 	 	
Name:

	 	 	 	 	
Title:

	 	 	 	 	 
	 	 	 	 
Address:

Facsimile No.

	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	
Name:

Title:

	 	 	 

 

  

  

  

EXHIBIT G TO THE

COMMON STOCK PURCHASE AGREEMENT

FORM OF CLOSING NOTICE

 

	
To:

	
[The Company]

 

Attention:  [●]

 

 

We refer to the common stock purchase agreement (the "Agreement") dated [●] 2012 between us, GEM Global Yield Fund Limited and yourselves and to the Draw Down Notice delivered to us on [●] 20[●].  Terms defined in the Agreement have the same meaning herein.

 

We hereby give you notice pursuant to Section 6.1(i) of the Agreement that we accept the Draw Down Notice, being [●] per cent. of the Draw Down Amount stated therein.  [The reason that such number of shares of Common Stock represents a smaller/greater number than the number of shares of Common Stock set forth in the Draw Down Notice is as follows: [●].]

 

The average of the Closing Bid Prices in the Pricing Period (excluding any Closing Bid Prices pursuant to Section 6.1(g)) is [●] and the resulting Purchase Price is [●] ([●] per cent. of such average Closing Bid Price).  The aggregate Purchase Price pursuant to this Closing Notice is therefore [●].  Copy extracts from Bloomberg showing each of the Closing Bid Prices during the Pricing Period are attached.

 

Please deliver such shares of Common Stock in accordance with the following instructions: [●].

 

Electronic book entry transfer requested (check one) (1) YES ____ NO _____

 

[CREST] Participant ID:_____________________

 

[CREST] Account ID:__________________

 

 

 

	
  

	
Signed by: __________________________

 

	
  

	
Name: _____________________________

 

	
  

	
Date: ______________________________

 

	
  

	
For and on behalf of

 

	
  

	
Gem Global Yield Fund Limited

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