Document:

Unassociated Document

Exhibit 10.1

 

CTD HOLDINGS, INC.

 

SECURITIES PURCHASE AND COLLABORATION AGREEMENT

 

This Securities Purchase and Collaboration Agreement (this “Agreement”) is made and entered into as of April 9, 2014, by and among CTD Holdings, Inc., a Florida corporation (the “Company”), and Novit Limited Partnership a company organized under the laws of Delaware (“NLP”) (“Investor”)

 

RECITALS

 

WHEREAS, the Company desires to issue, and the Investor desires to purchase, an aggregate of 4,000,000 shares (the “Shares”), of the Company’s common stock, par value $0.0001 per share (“Common Stock”), in a private placement, at a price of $0.25 per share for an aggregate purchase price of $1,000,000;

 

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

 

1.   AGREEMENT TO PURCHASE AND SELL SHARES.

 

Subject to the terms and conditions of this Agreement, the Investor agrees to purchase, and the Company agrees to sell and issue to such Investor, at the Closing (as defined below), the Shares at a price of $0.25 per share.

 

2.   CLOSING.

 

(a)   Closing.  The Closing of the sale and purchase of the Shares under this Agreement (the “Closing”) shall take place remotely at 10:00 a.m. on the date hereof by the exchange of documents and signatures, or at such other time or place as the Company and the Investor mutually agree (the date of the Closing is hereinafter referred to as the “Closing Date”).

 

(b)   Delivery.  At the Closing, subject to the terms and conditions hereof, the Company will deliver to the Investor a certificate representing the number of Shares to be purchased at the Closing by the Investor (or, at the Company’s election, an executed irrevocable order to the Company’s transfer agent giving instructions for the issuance and delivery of such a certificate to the Investor), against payment of the purchase price therefor by check made payable to the order of, or wire transfer to, the Company.

 

  

  

  

 

3.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth in the Disclosure Letter delivered by the Company to NLP at the Closing, the Company hereby represents and warrants to NLP that as of the Closing Date (except with respect to any representations and warranties that speak as of a specified date, which shall be true and correct as of such date):

 

(a)   Organization Good Standing and Qualification.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida and has all corporate power and authority required (i) to own, operate and occupy its properties and to carry on its business as presently conducted and (ii) to enter into this Agreement and to consummate the transactions contemplated hereby.  The Company is qualified to do business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect.  As used in this Agreement, “Material Adverse Effect” means a material adverse effect on, or a material adverse change in, the business, operations, financial condition, results of operations, properties, prospects, assets or liabilities of the Company, taken as a whole, or on the transactions contemplated hereby and the other agreements, instruments and documents contemplated hereby or on the authority or ability of the Company to perform its obligations under this Agreement.

 

(b)   Capitalization.  The capitalization of the Company, prior to the issuance of the Shares, is as follows:

 

(i) The authorized capital stock of the Company consists of 100 million shares of Common Stock, and five million shares of Preferred Stock, par value $0.0001 per share (the “Preferred Stock”).

 

(ii) As of the date hereof, the issued and outstanding capital stock of the Company consisted of (A) 48,562,355 shares of Common Stock and (B) no shares of Preferred Stock.  The issued and outstanding shares of Common Stock have been duly authorized and validly issued, are fully paid and nonassessable and have not been issued in violation of and are not otherwise subject to any preemptive or other similar rights.

 

(iii) The Company does not have any stock option or similar stock incentive plans. Except as set forth in the Disclosure Letter, there are no outstanding subscriptions, options, warrants, convertible or exchangeable securities or other rights granted to or by the Company to purchase shares of Common Stock or other securities of the Company and there are no commitments, plans or arrangements to issue any shares of Common Stock or any security convertible into or exchangeable for Common Stock. There are no outstanding securities or instruments of the Company which contain any redemption or similar provisions; there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Shares; and none of the Company’s capital stock is subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company. Except as set forth in the SEC Documents (as defined below), there are no shareholder agreements, voting agreements, or other similar arrangements, with respect to the Company’s capital stock to which the Company is a party or, to the Company’s knowledge, between or among any of the Company’s stockholders.

 

  

  

  

 

(c)   Subsidiaries.  Except as set forth in the SEC Documents, the Company does not have any Subsidiaries, and the Company does not own any capital stock of, assets comprising the business of, obligations of, or any other interest (including any equity or partnership interest) in, any person or entity.  As used herein "Subsidiaries" means any entity in which the Company, directly or indirectly, owns any capital stock or holds an equity or similar interest.  Each Subsidiary of the Company (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida, (ii) has all corporate power and authority required to own, operate and occupy its properties and to carry on its business as presently conducted, and (iii) is qualified to do business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect.

 

(d)   Due Authorization.  All corporate actions on the part of the Company necessary for (i) the authorization, execution and delivery of, and the performance of all obligations of the Company under, this Agreement, and (ii) the authorization, issuance, and delivery of the Shares, have been taken, and this Agreement constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its respective terms.

 

(e)   Valid Issuance of Shares.

 

(i)  Shares.  Upon issuance in accordance with the terms hereof and the payment therefor by the Investor, the Shares will be duly authorized, validly issued, fully paid and non-assessable free and clear from all taxes, liens, claims and encumbrances, and will not be subject to any preemptive rights or similar rights.

 

(ii)  Compliance with Securities Laws.  Subject to the accuracy of the representations made by the Investor in Section 4 hereof, the Shares will be issued and sold to the Investor in compliance with an applicable exemption from the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the “Securities Act”).

 

(f)   Governmental Consents.  No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, or notice to, any federal, state or local governmental authority (each, a “Governmental Entity”) on the part of the Company is required in connection with the issuance and sale of the Shares to the Investor, except such filings as have been made prior to the date hereof, and such additional post-Closing filings as may be required to comply with applicable state and federal securities laws.

 

(g)   Non-Contravention.  The execution, delivery and performance of this Agreement by the Company, and the consummation by the Company of the transactions contemplated hereby and thereby, do not (i) contravene or conflict with the Articles of Incorporation or Bylaws of the Company; (ii) assuming the accuracy of the representations and warranties made by the Investor in Section 4 hereof, constitute a violation in any respect of any provision of any federal, state, local or foreign law, rule, regulation, order, judgment or decree applicable to the Company; or (iii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) or require any consent under, give rise to any right of termination, amendment, cancellation or acceleration of, or to a loss of any material benefit to which the Company or any of its Subsidiaries is entitled under, or result in the creation or imposition of any lien, claim or encumbrance on any assets of the Company or any of its Subsidiaries under, any contract to which the Company or any of its Subsidiaries is a party or any permit, license or similar right relating to the Company or any of its Subsidiaries.

 

  

  

  

 

(h)   Litigation.  There is no material action, suit, proceeding, claim, arbitration or investigation pending or, to the Company’s knowledge, threatened:  (i) against the Company, its Subsidiaries, their activities, properties or assets, (ii) any officer, director or employee of the Company or any of its Subsidiaries in connection with such officer’s, director’s or employee’s relationship with, or actions taken on behalf of, the Company or its Subsidiaries, or (iii) that seeks to prevent, enjoin, alter, challenge or delay the transactions contemplated by this Agreement.  Neither the Company nor any of its Subsidiaries is a party to or subject to the provisions of, any order, writ, injunction, judgment or decree of any court or government agency or instrumentality.  The Company and its Subsidiaries have, to the Company’s knowledge, in all material respects, complied with all laws, regulations and orders applicable to their business, and have all material permits and licenses required thereby.

 

(i)   Compliance with Law and Charter Documents; Regulatory Permits.  Neither the Company nor any of its Subsidiaries is in violation or default of any provisions of its articles of incorporation, bylaws or similar organizational document, as applicable.  The Company and its Subsidiaries have materially complied and are currently in material compliance with all applicable judgments, decrees, statutes, laws, rules, regulations and orders of the United States of America and all states thereof, foreign countries and other governmental bodies and agencies having jurisdiction over the Company’s and its Subsidiaries’ business or properties, and neither the Company nor any of its Subsidiaries has received notice that it is in material violation of any statute, rule or regulation of any governmental authority applicable to it.  Neither the Company nor any of its Subsidiaries is in default (and there exists no condition which, with or without the passage of time or giving of notice or both, would constitute a default) in any material respect in the performance of any bond, debenture, note or any other evidence of indebtedness in any indenture, mortgage, deed of trust or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which any of them are bound or by which the properties of any of them are bound.  The Company and its Subsidiaries possess all certificates, authorizations and permits issued by the appropriate regulatory authorities necessary to conduct their business as described in the SEC Documents, except where the failure to possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect, and the Company has not received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.

 

  

  

  

 

(j)   SEC Documents.

 

(i)  Reports.  Since January 1, 2013, the Company has filed in a timely manner (giving effect, where applicable, to any deferral periods provided under Rule 12b-25 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) all reports, schedules, forms, statements and other documents required to be filed by it with the Securities and Exchange Commission (the “SEC”) pursuant to the reporting requirements of the Exchange Act and the rules and regulations promulgated thereunder.  The Company has filed on the SEC’s EDGAR system, prior to the date hereof, its Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (the “Form 10-K”), and any Current Report on Form 8-K (“Form 8-Ks”) required to be filed by the Company with the SEC for events occurring since January 1, 2013 (the Form 10-K and Form 8-Ks, together with all exhibits, schedules and other attachments that are filed with such documents, are collectively referred to herein as the “SEC Documents”).  Each SEC Document, as of its date (or, if amended or superseded by a filing prior to the Closing Date, then on the date of such filing), did not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.  Each SEC Document, as it may have been subsequently amended by filings made by the Company with the SEC prior to the date hereof, complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to such SEC Document.  As of their respective dates, any financial statements of the Company included in the SEC Documents complied as to form and substance in all material respects with applicable accounting requirements and published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied in the United States (“GAAP”), during the periods involved (except in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements), correspond to the books and records of the Company and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of operations and cash flows for the periods then ended.  The Company is not required to file and will not be required to file any agreement, note, lease, mortgage, deed or other instrument entered into prior to the date of this Agreement and to which the Company is a party or by which the Company is bound which has not been previously filed or incorporated by reference as an exhibit to the SEC Documents.

 

(ii)  Sarbanes-Oxley.  The Chief Executive Officer and the Chief Financial Officer of the Company have signed, and the Company has furnished to the SEC, all certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 as of the date hereof.  Such certifications contain no exceptions to the matters certified therein and have not been modified or withdrawn; and neither the Company nor any of its officers has received notice from any Governmental Entity questioning or challenging the accuracy of such certifications.  The Company is otherwise in compliance with all applicable effective provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations issued thereunder by the SEC.

 

(k)   Absence of Certain Changes.  Except as set forth in Section 3(k) of the Disclosure Letter or in the SEC Documents, since December 31, 2012, the business and operations of the Company and its Subsidiaries have been conducted in the ordinary course consistent with past practice, and there has not been:

 

(i)  Any declaration, setting aside or payment of any dividend or other distribution of the assets of the Company with respect to any shares of capital stock of the Company;

 

(ii)  any repurchase, redemption or other acquisition by the Company of any outstanding shares of the Company’s capital stock;

 

(iii) any damage, destruction or loss to the Company’s or its Subsidiaries’ properties or assets, whether or not covered by insurance, except for such occurrences, individually and collectively, that have not had, and would not reasonably be expected to have, a Material Adverse Effect;

 

  

  

  

 

(iv)   any waiver by the Company or any of its Subsidiaries of a valuable right or of a material debt owed to it, except for such waivers, individually and collectively, that have not had, and would not reasonably be expected to have, a Material Adverse Effect;

 

(v)    any material change by the Company in its accounting principles, methods or practices or in the manner in which it keeps its accounting books and records, except any such change required by a change in GAAP or by the SEC;

 

(vi)   any material change or amendment to, or any waiver of any material right under a material contract or arrangement by which the Company, any of its Subsidiaries or any of their assets or properties is bound or subject that could be expected to have a Material Adverse Effect;

 

(vii)  any other event or condition of any character, except for such events and conditions that have not resulted, and are not reasonably expected to result either individually or collectively, in a Material Adverse Effect;

 

(viii) any sale of any assets, individually or in the aggregate, in excess of $10,000 outside of the ordinary course of business, other than the sale of inventory; or

 

(ix)   any capital expenditures, individually or in the aggregate, in excess of $10,000 outside of the ordinary course of business.

 

(l)   Intellectual Property.  To the Company’s knowledge, the Company and its Subsidiaries own or possess sufficient rights to use all patents, patent rights, inventions, trade secrets, know-how, trademarks, or other intellectual property (collectively, “Intellectual Property”), which are necessary to conduct their business as currently conducted.  To the Company’s knowledge, neither the Company nor any of its Subsidiaries has infringed any patents of others with respect to any Intellectual Property.  There is no claim, action or proceeding pending, or to the Company’s knowledge, threatened, against the Company or any of its Subsidiaries with respect to any Intellectual Property.  The Company has no knowledge of any infringement or improper use by any third party with respect to any Intellectual Property of the Company or any of its Subsidiaries.

 

(m)   Registration Rights.  The Company is not currently subject to any agreement providing any person or entity any rights (including piggyback registration rights) to have any securities of the Company registered with the SEC or registered or qualified with any other governmental authority.

 

  

  

  

 

(n)   Title to Property and Assets.  Except as set forth in the SEC Documents, the properties and assets of the Company and its Subsidiaries (including real property) are respectively owned by them, free and clear of all mortgages, deeds of trust, liens, charges, encumbrances and security interests except for (i) statutory liens for the payment of current taxes that are not yet delinquent and (ii) liens, encumbrances and security interests that are in the ordinary course of business and do not materially detract from the value of the properties and assets of the Company, taken as a whole.  With respect to the property and assets leased by the Company and its Subsidiaries, the Company and its Subsidiaries are in compliance with such leases in all material respects and such leases are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries. All facilities, machinery, equipment, fixtures, vehicles and other properties owned, leased or used by the Company and its Subsidiaries are in good operating condition and repair and are reasonably fit and usable for the purposes for which they are being used.

 

(o)   Taxes.  The Company and its Subsidiaries have filed or have obtained currently effective extensions with respect to all federal, state, county, local and foreign tax returns which are required to be filed by them, such returns are complete and accurate in all material respects and all taxes shown thereon to be due have been timely paid with exceptions not material to the Company and its Subsidiaries, taken as a whole.  No material controversy with respect to taxes of any type with respect to the Company or any of its Subsidiaries is pending or, to the Company’s knowledge, threatened.  The Company and its Subsidiaries have withheld or collected from each payment made to their employees the amount of all taxes required to be withheld or collected therefrom and have paid all such amounts to the appropriate taxing authorities when due (including, but not limited to, federal income taxes, Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes).  Neither the Company nor any of its Subsidiaries has any material tax liability relating to income, properties or assets as of the Closing that is not adequately provided for.

 

(p)   Insurance.  The Company and its Subsidiaries maintain insurance of the types and in the amounts that the Company reasonably believes is prudent and adequate for their businesses, all of which insurance is in full force and effect in all material respects. Neither the Company nor any of its Subsidiaries has been refused any insurance coverage sought or applied for by them, and the Company does not have any reason to believe that it will not be able to renew any such existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.

 

(q)   Labor Relations.

 

(i) No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company or any of its Subsidiaries.

 

(ii) Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or employs any member of a union.  No executive officer (as defined in Rule 501(f) of the Securities Act) of the Company has notified the Company that such officer intends to leave the Company or otherwise terminate such officer’s employment with the Company.  No executive officer of the Company, to the knowledge of the Company, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer does not subject the Company to any liability with respect to any of the foregoing matters.

 

  

  

  

 

(iii) The Company and its Subsidiaries are in compliance with all federal, state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

(r)   Transactions with Affiliates.  Except as set forth in the SEC Documents or the Disclosure Letter, none of the officers, directors or employees of the Company or any of its Subsidiaries has entered into any transaction with the Company or any of its Subsidiaries that would be or will be required to be disclosed pursuant to Item 404(a) of Regulation S-K of the SEC.

 

(s)   General Solicitation.  Neither the Company, nor any of its affiliates, nor any other person or entity authorized by the Company to act on its behalf has engaged in a general solicitation or general advertising (within the meaning of Regulation D of the Securities Act) of investors with respect to offers or sales of the Shares.

 

(t)   No Integrated Offering.  Neither the Company, nor any affiliate of the Company, nor, to the Company’s knowledge any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Shares to be integrated with prior offerings by the Company for purposes of the Securities Act.

 

(u)   Investment Company.  The Company is not now, and after the sale of the Shares under this Agreement and the application of the net proceeds from the sale of the Shares will not be, an “investment company,” a company controlled by an “investment company,” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

(v)   Application of Anti-Takeover Provisions.  There is no control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s Articles of Incorporation (or other charter documents) that would become applicable to the Investor as a result of the issuance of the Shares.

 

(w)   Registration Matters.  The Company has taken no action designed to terminate, or likely to have the effect of terminating, the registration of the Common Stock under the Exchange Act.

 

  

  

  

 

(x)   Environmental Matters.

 

(i) The Company and its Subsidiaries have complied in all material respects with all applicable Environmental Laws (as defined below).  There is no pending or, to the Company’s knowledge, threatened civil or criminal litigation, written notice of violation, formal administrative proceeding, or investigation, inquiry or information request by any Governmental Entity, relating to any Environmental Law involving the Company or any of its Subsidiaries. “Environmental Law” means any federal, state, local or foreign law, statute, rule or regulation or the common law relating to the environment or occupational health and safety, including any statute, regulation, administrative decision or order pertaining to (A) treatment, storage, disposal, generation and transportation of industrial, toxic or hazardous materials or substances or solid or hazardous waste; (B) air, water and noise pollution; (C) groundwater and soil contamination; (D) the release or threatened release into the environment of industrial, toxic or hazardous materials or substances, or solid or hazardous waste, including emissions, discharges, injections, spills, escapes or dumping of pollutants, contaminants or chemicals; (E) the protection of wild life, marine life and wetlands, including all endangered and threatened species; (F) storage tanks, vessels, containers, abandoned or discarded barrels and other closed receptacles; (G) health and safety of employees and other persons; or (H) manufacturing, processing, using, distributing, treating, storing, disposing, transporting or handling of materials regulated under any law as pollutants, contaminants, toxic or hazardous materials or substances, or oil or petroleum products or solid or hazardous waste.  As used above, the terms “release” and “environment” shall have the meaning set forth in the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”).

 

(ii) Neither the Company nor any of its Subsidiaries has any material liabilities or material obligations arising from the release of any Materials of Environmental Concern (as defined below) into the environment. “Materials of Environmental Concern” shall mean any chemicals, pollutants or contaminants, hazardous substances (as such term is defined under CERCLA), solid wastes and hazardous wastes (as such terms are defined under the Resource Conservation and Recovery Act), toxic materials, oil or petroleum and petroleum products or any other material subject to regulation under any Environmental Law.

 

(iii) Neither the Company nor any of its Subsidiaries is a party to or bound by any court order, administrative order, consent order or other agreement with any Governmental Entity entered into in connection with any legal obligation or liability arising under any Environmental Law.

 

(iv) There is no material environmental liability, to the Company’s knowledge, of any solid or hazardous waste transporter or treatment, storage or disposal facility that has been used by the Company or any of its Subsidiaries.

 

  

  

  

 

(y)   Benefit Plans.  Except as set forth in the Disclosure Letter, neither the Company, any of its Subsidiaries or any Plan Affiliate (as defined below) has maintained, sponsored, adopted, made contributions to or obligated itself to make contributions to or to pay any benefits or grant rights under or with respect to any material Employee Benefit Plan (as defined below), whether written, oral, voluntary or pursuant to a collective bargaining agreement or law, under which the Company or any of its Subsidiaries has any unfunded liability, nor has the Company or any of its Subsidiaries otherwise failed to meet any of its material obligations under any Employee Benefit Plan.  “Plan Affiliate” means any person or entity with which the Company or any of its Subsidiaries constitutes all or part of a controlled group of corporations, a group of trades or businesses under common control or an affiliated service group, as each of those terms are defined in Section 414 of the Internal Revenue Code (the “Code”).  “Employee Benefit Plan” means, collectively, each bonus, deferred compensation, incentive compensation, stock purchase, stock option, severance or termination pay, health or other medical, life, disability or other insurance, supplemental unemployment benefit, profit sharing, pension, retirement, supplemental retirement or other employee benefit plan, program, agreement or arrangement, whether written or unwritten, formal or informal, maintained or contributed to or required to be contributed to by any person for the benefit of any employee or former employee of the Company or its affiliates or their dependents or beneficiaries, as well as the compensation practices and policies regarding vacations, sick leaves, leaves of absence and all perquisites of employment other than those mandated by any legal requirement and shall include to the extent applicable to the Company, without limitation, “Employee Pension Benefit Plans” (as defined in Section 3(2) of ERISA (as defined below), “Employee Welfare Benefit Plan” (as defined in Section 3(1) of ERISA) and “Multi-employer Plan” (as defined in section 3(37) of ERISA)), but shall exclude any such arrangements or perquisites that do not exceed, individually or in the aggregate, $300 per month per any particular person.  “ERISA” means the Employee Retirement Income Security Act of 1974 and any law of any foreign jurisdiction of similar import.  The Company has made all “matching” contributions required pursuant to the terms of the Company’s 401(k) plan or otherwise promised to employees (in writing or orally).

 

(z)   Foreign Corrupt Practices Act; Etc.  Each of the Company, its Subsidiaries and their respective officers, directors, employees, agents and other persons acting on behalf of the Company or its Subsidiaries are in compliance with and have not violated the Foreign Corrupt Practices Act of 1977, as amended, or any rules and regulations thereunder, or any similar laws of any foreign jurisdiction.  To the Company's knowledge, no governmental or political official in any country is or has been employed by, or acted as a consultant to or held any beneficial ownership interest in the Company or any of its Subsidiaries.  The Company, its Subsidiaries and their respective officers, directors, employees and agents are in compliance with and have not violated the U.S. money laundering laws or regulations, the U.S. Bank Secrecy Act, as amended by the USA Patriot Act of 2001 (including any recordkeeping or reporting requirements thereunder), or the anti-money laundering laws or regulations of any jurisdiction.

 

(aa)   Brokers.  Except as set forth in the Disclosure Letter, the Company has not engaged any brokers, finders or agents, or incurred, or will incur, directly or indirectly, any liability for brokerage or finder’s fees or agents’ commissions or any similar charges in connection with this Agreement and the transactions contemplated hereby.

 

4.    REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE NLP.  The NLP Party hereby represents and warrants, severally and not jointly, to the Company, and agrees that:

 

(a)   Organization, Good Standing and Qualification.  The NLP Party is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. The NLP Party has all power and authority required to enter into this Agreement and to consummate the transactions contemplated hereby and thereby.

 

  

  

  

 

(b)   Authorization.  The execution of this Agreement and the performance by the NLP Party of the transactions contemplated by this Agreement have been duly authorized by all necessary action on the part of the NLP Party.  This Agreement has been duly executed by the NLP Party and constitutes such NLP Party’s legal, valid and binding obligation, enforceable in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and  the effect of rules of law governing the availability of equitable remedies.

 

(c)   Purchase for Own Account. The Shares are being acquired without a view to the resale or distribution thereof, except pursuant to sales registered or exempted under the Securities Act and in compliance with applicable federal and state securities laws.  The Investor represents that it has not been formed for the specific purpose of acquiring the Shares.  Notwithstanding the foregoing, the parties hereto acknowledge the Investor’s right at all times to sell or otherwise dispose of all or any part of such securities in compliance with applicable federal and state securities laws and the laws of any other applicable jurisdiction, and as otherwise contemplated by this Agreement.

 

(d)   Investment Experience.  The Investor understands that the purchase of the Shares involves substantial risk.  The Investor has experience as an investor in securities of companies and acknowledges that it can bear the economic risk of its investment in the Shares and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of this investment in the Shares and protecting its own interests in connection with this investment, and has so evaluated the merits and risks of such investment.

 

(e)   Accredited Investor Status.  At the time the Investor was offered the Shares, it was, and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the Securities Act and was (and at the date hereof is) resident in the state or other jurisdiction indicated on the signature pages hereof.

 

(f)   Reliance Upon Representations.   NLP understands that the issuance and sale of the Shares to the Investor will not be registered under the Securities Act, the securities laws of any State of the United States or the securities laws of any other applicable jurisdiction, on the ground that such issuance and sale will be exempt from registration under the Securities Act pursuant to Section 4(a)(2) thereof, and exempt from any comparable registration requirement under the securities laws of any other applicable jurisdiction, and that the Company’s reliance on such exemption is based on the Investor’s representations set forth herein.

 

(g)   Receipt of Information.  The Investor has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the issuance and sale of the Shares, the business, properties, prospects, management and financial condition of the Company and to obtain any additional information requested and has received and considered all information it deems relevant to make an informed decision to purchase the Shares.  Neither such inquiries nor any other investigation conducted by or on behalf of NLP or their representatives or counsel shall modify, amend or affect the Investor’s right to rely on the truth, accuracy and completeness of such information and the Company’s representations and warranties contained in this Agreement.

 

  

  

  

 

(h)   Restricted Securities.   Novit L.P. understands that the Shares have not been registered under the Securities Act or the securities laws of any State.

 

(i)   Legend.  Novit L.P.  agrees that the certificates for the Shares shall bear a legend substantially as follows:

 

“THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS ESTABLISHED BY EVIDENCE TO SUCH EFFECT, THE FORM AND SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.”

 

Certificates evidencing the Shares shall not contain any legend (i) while a registration statement covering the resale of such security is effective under the Securities Act, (ii) following any sale of such Shares pursuant to Rule 144, or (iii) if such Shares are eligible for sale under Rule 144(b)(1) without reliance on the conditions set forth in rule 144(c)(1) relating to the availability of current public information.

 

5.    COVENANTS RELATING TO CLOSING.

 

(a)   Best Efforts.  Each party shall use its best efforts timely to satisfy each of the conditions to be satisfied by it prior to the Closing of the purchase and sale of the Shares as provided in Sections 6 and 7 of this Agreement.

 

(b)   Blue Sky.  The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Shares for sale to the Investor at the Closing pursuant to this Agreement under applicable securities or "Blue Sky" laws of the states of the United States (or to obtain an exemption from such qualification).  The Company shall make all filings and reports relating to the offer and sale of the Securities required under applicable securities or "Blue Sky" laws of the states of the United States following the Closing Date.

 

  

  

  

 

6.    CONDITIONS TO THE INVESTOR’S OBLIGATIONS AT CLOSING.  The obligations of the Investor to purchase Shares at the Closing are subject to the fulfillment or waiver, on or before the Closing (unless otherwise indicated below), of each of the following conditions:

 

(a)   Representations and Warranties.  Each of the representations and warranties of the Company contained in Section 3 shall be true and correct in all material respects on and as of the Closing Date (except for representations and warranties that speak as of a specific date) (provided, however, that such materiality qualification shall only apply to representations or warranties not otherwise qualified by materiality or Material Adverse Effect) and on and as of the date of such Closing with the same effect as though such representations and warranties had been made as of the Closing (except for representations and warranties that speak as of a specific date).

 

(b)   Performance.  The Company shall have performed and complied  in all material respects with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before such Closing, and shall have obtained all approvals, consents and qualifications necessary to complete the sale of the Shares described herein.

 

(c)   Securities Exemptions.  The offer and sale of the Shares to the Investor pursuant to this Agreement shall be exempt from the registration requirements of the Securities Act and the registration and/or qualification requirements of all applicable state and foreign securities laws.

 

(d)   No Suspension of Trading of Common Stock.  The Common Stock of the Company shall be quoted on OTCQB or a similar successor quotation system.

 

(e)   Board Size; Appointment. The Company shall have increased the size of the Board to six (6) members and shall have taken all action necessary to cause to be appointed to the Board F. Patrick Ostronic, such appointment to take effect as of the Closing Date (or such other date as the parties may agree).

 

(f)   No Statute or Rule Challenging Transaction.  No statute, rule, regulation, executive order, decree, ruling, injunction, action, proceeding or interpretation shall have been enacted, entered, promulgated, endorsed or adopted by any court or governmental authority of competent jurisdiction or any self-regulatory organization or the staff of any of the foregoing, having authority over the matters contemplated hereby which questions the validity of, or challenges or prohibits the consummation of, any of the transactions contemplated by this Agreement.

 

7.    CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AT CLOSING.  The obligations of the Company to the Investor under this Agreement are subject to the fulfillment or waiver, on or before the Closing, of each of the following conditions:

 

(a)   Representations and Warranties.  The representations and warranties of NLP contained in Section 4 shall be true and correct in all material respects on and as of the Closing Date.

 

  

  

  

 

(b)   Securities Exemptions.  The offer and sale of the Shares to the Investor pursuant to this Agreement shall be exempt from the registration requirements of the Securities Act and the registration and/or qualification requirements of all applicable state and foreign securities laws.

 

(c)   Payment of Purchase Price.  The Investor shall have delivered to the Company by wire transfer of immediately available funds, full payment of the purchase price for the Shares to be purchased at the Closing.

 

(d)   No Statute or Rule Challenging Transaction.  No statute, rule, regulation, executive order, decree, ruling, injunction, action, proceeding or interpretation shall have been enacted, entered, promulgated, endorsed or adopted by any court or governmental authority of competent jurisdiction or any self-regulatory organization or the staff of any of the foregoing, having authority over the matters contemplated hereby which questions the validity of, or challenges or prohibits the consummation of, any of the transactions contemplated by this Agreement.

 

8.    PRODUCT COLLABORATION.

 

(a)   In partial consideration of the investment in the Shares by Investor, the Company agrees to give USP Zdrowie Sp. z o.o., a company organized under the laws of Poland and an affiliated entity of Investor (“USP”) a “first look” at any new products involving cyclodextrin technology developed or formulated by the Company after the date of this Agreement (such a product, the “New Product”).  For purposes of implementing the foregoing, the Company agrees that it will not market, nor enter into an agreement with a third party for the sale or marketing of, any New Product in the Region for any Designated Uses, until a period of 60 days (the “First Look Period”) has passed from written notice identifying the New Product by the Company to USP (or until earlier notice from USP to the Company that it elects not to pursue development or use of the New Product). For purposes of this Agreement, the “Region” shall mean Poland, Ukraine, Lithuania and Bulgaria, and the “Designated Uses” shall mean the over-the-counter pharmaceutical markets for human drug products.  If, during the First Look Period, USP decides in its sole discretion that it may be interested in developing or using the New Product in the Region, the parties will work in good faith toward a license or distributorship arrangement relating to the New Product, in such form as the parties may agree. If a definitive agreement is not reached by the end of the First Look Period, the Company or its designee may market or sell the relevant New Product in the Region for any purpose, but the parties may at their election continue to negotiate a license or distributorship agreement in their discretion.

 

(b)   At USP’s sole discretion, USP or its affiliates may invite the Company or its agents or representatives to explore the use of the Company’s cyclodextrin technology in the development, improvement, or reformulation of existing products in USP’s or its affiliates’ drug portfolios. In this event, the Company and USP agree to work in good faith to reach a definitive agreement concerning the relative cost-sharing, intellectual property rights, royalty arrangements and other terms of such an agreement.

 

(c)   Nothing in this Section 8 is intended to create a binding obligation on behalf of either the Company or its affiliates, or USP of its affiliates, to purchase, sell, or license any products of either party, or to enter into any definitive agreement with respect to any products of either party, which obligations (if any) will be set out in a definitive agreement between the relevant parties.

 

  

  

  

 

(d)   The parties’ respective obligations under this Section 8 may be terminated by either USP or the Company following the third anniversary of this Agreement, upon 60 days’ notice to the other party.  In addition, each party’s respective obligations under this Section 8 will automatically terminate upon a Change of Control of the Company.  For these purposes, a “Change of Control” means the occurrence of any of the following: (i) the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, to any individual, partnership, corporation, limited liability company or any other entity; or (ii) the acquisition by any “person” or “group” (within the meaning of Section 13(d) and 14(d)(2) of the Exchange Act), including any group acting for the purpose of acquiring, holding, voting or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) in a single transaction or in a related series of transactions, by way of merger, consolidation or other business combination or purchase of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of a sufficient number of shares of all classes of stock then outstanding of the Company ordinarily entitled to vote in the election of directors, empowering such “person” or “group” to elect a majority of the members of the Board of Directors of the Company, who did not have such power before such transaction.

 

9.   MISCELLANEOUS.

 

(a)   Successors and Assigns. The terms and conditions of this Agreement will inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties.  Notwithstanding the foregoing, neither the Company nor the NLP Parties shall be permitted to assign its rights or obligations under this Agreement without the prior written consent of NLP or the Company, respectively.

 

(b)   Governing Law; Submission to Jurisdiction.  This Agreement will be governed by and construed and enforced under the internal laws of the State of Florida, without reference to principles of conflict of laws or choice of laws. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. The Company hereby irrevocably and unconditionally submits, for itself and its property to the exclusive jurisdiction of any Florida state court or federal court of the United States sitting in the State of Florida, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement.

 

(c)   Survival.  The representations and warranties contained in this Agreement shall survive the Closing and the issuance of the Shares.

 

(d)   Counterparts.  This Agreement may be executed in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

 

  

  

  

 

(e)   Headings.  The headings and captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.  All references in this Agreement to sections, paragraphs, exhibits and schedules will, unless otherwise provided, refer to sections and paragraphs hereof and exhibits and schedules attached hereto, all of which exhibits and schedules are incorporated herein by reference.

 

(f)   Notices.  Any notices and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been given (i) when delivered by hand (with written confirmation of receipt); (ii) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (iii) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next business day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail (in each case, return receipt requested, postage pre-paid). Such communications must be sent to the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9(f)):

 

If to the Company:

 

CTD Holdings, Inc.

14120 N.W. 126th Terrace

Alachua, Florida 32615

Tel: (386) 418-8060

Fax: (321) 244-8351

Email: rick@cyclodex.com

Attention: C.E. Rick Strattan

 

If to the Investor:

 

Novit L.P.

966 Hungerford Drive

Rockville, MD 20850

Tel: (301) 279-0002

Email: p.ostronic@uspiusa.com

Attention: F. Patrick Ostronic

 

(g)   Amendments and Waivers. This Agreement may be amended and the observance of any term of this Agreement may be waived only with the written consent of the Company and NLP.  Any amendment effected in accordance with this Section 9(g) will be binding upon the Company, the NLP Party and their respective successors and permitted assigns.

 

(h)   Severability.  If any provision of this Agreement is held to be unenforceable under applicable law, such provision will be excluded from this Agreement and the balance of the Agreement will be interpreted as if such provision were so excluded and will be enforceable in accordance with its terms.

 

  

  

  

 

(i)   Entire Agreement.  This Agreement, together with all exhibits and schedules hereto and thereto constitutes the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes any and all prior negotiations, correspondence, agreements, understandings, duties or obligations between the parties with respect to the subject matter hereof.

 

(j)   Meaning of Include and Including.  Whenever in this Agreement the word “include” or “including” is used, it shall be deemed to mean “include, without limitation” or “including, without limitation,” as the case may be, and the language following “include” or “including” shall not be deemed to set forth an exhaustive list.

 

(k)   Fees, Costs and Expenses.  Each party shall pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery and performance of this Agreements and the parties respective obligations arising hereunder, including fees of legal counsel.

 

(l)   Waivers.  No waiver by any party to this Agreement 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 provision, 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.

 

 [Remainder of page intentionally left blank.]

 

  

  

  

 

IN WITNESS WHEREOF, the parties hereto have executed this Securities Purchase and Collaboration Agreement as of the date and year first above written.

 

	 	
CTD Holdings, Inc.

	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	 
Name: C.E. Rick Strattan 

	 
	 	 	 
Title: Chief Executive Officer

	 

 

	 	
Novit, L.P.

	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	 
Name:

	 
	 	 	 
Title: 

	 

 

 

	
Signature Page

to Securities Purchase and Collaboration Agreementf10k2013ex4ii_healthrev.htm

Exhibit 4.2

 

THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO HEALTH REVENUE ASSURANCE HOLDINGS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

 

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

 

WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

1.              Issuance. In consideration of good and valuable consideration as set forth in the Purchase Agreement (defined below), including without limitation the Purchase Price (as defined in the Purchase Agreement), the receipt and sufficiency of which are hereby acknowledged by Health Revenue Assurance Holdings, Inc., a Nevada corporation (the "Company"); Tonaquint, Inc., a Utah corporation, its successors and/or registered assigns (the "Holder"), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until the date which is the last calendar day of the month in which the fifth anniversary of the Issue Date occurs (the "Expiration Date"), [_____] fully paid and nonassessable shares (the "Warrant Shares") of the Company's common stock, par value $0.001 per share (the "Common Stock"), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this "Warrant"). This Warrant is being issued pursuant to the terms of that certain Securities Purchase Agreement dated October [__], 2013, to which the Company and the Holder are parties (as the same may be amended from time to time, the "Purchase Agreement").

 

Unless otherwise indicated herein, capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Purchase Agreement.

 

This Warrant was originally issued to the Holder on October [__], 2013 (the "Issue Date").

 

2.             Exercise of Warrant.

 

2.1.           General.

 

(a)           This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to the Company (either by delivery to the Company or by email or facsimile transmission) a completed and duly executed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the "Notice of Exercise"). The date such Notice of Exercise is either faxed, emailed or delivered to the Company shall be the "Exercise Date," provided that, if such exercise represents the full exercise of the outstanding balance of the Warrant, the Holder shall tender this Warrant to the Company within five (5) Trading Days thereafter, but only if the Warrant Shares to be delivered pursuant to the Notice of Exercise have been delivered to the Holder as of such date. The Notice of Exercise shall be executed by the Holder and shall indicate (i) the number of Delivery Shares (as defined below) to be issued pursuant to such exercise, and (ii) if applicable (as provided below), whether the exercise is a cashless exercise.

  

  

  

 

For purposes of this Warrant, the term "Trading Day" means any day during which the principal market on which the Common Stock is traded (the "Principal Market") shall be open for business.

 

(b)           Notwithstanding any other provision contained herein or in any other Transaction Document to the contrary, at any time prior to the Expiration Date, the Holder may elect a "cashless" exercise of this Warrant for any Warrant Shares whereby the Holder shall be entitled to receive a number of shares of Common Stock equal to (i) the excess of the Current Market Value (as defined below) over the aggregate Exercise Price of the Exercise Shares (as defined below), divided by (ii) the Adjusted Price of the Common Stock (as defined below).

 

For the purposes of this Warrant, the following terms shall have the following meanings:

 

"Adjusted Price of the Common Stock" shall mean the lower of (i) the lowest Conversion Price of any Conversion under the Note, and (ii) the Exercise Price, without regard to whether the Note remains outstanding or has been fully repaid, cancelled or otherwise retired, on any relevant Exercise Date.

 

"Current Market Value" shall mean an amount equal to the Market Price of the Common Stock (as defined below), multiplied by the number of Exercise Shares specified in the applicable Notice of Exercise.

 

"Closing Price" shall mean the 4:00 P.M. last sale price of the Common Stock on the Principal Market on the relevant Trading Day(s), as reported by Bloomberg LP (or if that service is not then reporting the relevant information regarding the Common Stock, a comparable reporting service of national reputation selected by the Holder and reasonably acceptable to the Company) ("Bloomberg") for the relevant date.

 

"Delivery Shares" means those shares of Common Stock issuable and deliverable upon the exercise of this Warrant.

 

"Exercise Price" shall mean $0.40 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

 

"Exercise Shares" shall mean those Warrant Shares subject to an exercise of the Warrant by the Holder.

 

"Market Price of the Common Stock" shall mean the higher of: (i) the Closing Price of the Common Stock on the Issue Date; and (ii) the VWAP (as defined below) of the Common Stock for the Trading Day that is two (2) Trading Days prior to the Exercise Date.

 

"Note" shall have the meaning set forth in the Purchase Agreement.

 

"Transaction Documents" or "Transaction Document" shall have the meaning set forth in the Purchase Agreement.

 

"VWAP" shall mean the volume-weighted average price of the Common Stock on the Principal Market for a particular Trading Day or set of Trading Days, as the case may be, as reported by Bloomberg.

  

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(c)            If the Notice of Exercise form elects a "cash" exercise (or if the cashless exercise referred to in the immediately preceding subsection (b) is not available in accordance with the terms hereof), the Exercise Price per share of Common Stock for the Delivery Shares shall be payable, at the election of the Holder, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by the Company at the request of the Holder.

 

(d)           Upon the appropriate payment to the Company, if any, of the Exercise Price for the Delivery Shares, together with the surrender of this Warrant (if required), the Company shall promptly, but in no case later than the date that is three (3) Trading Days following the date the Exercise Price is paid to the Company (or with respect to a "cashless exercise," the date that is three (3) Trading Days following the Exercise Date), deliver or cause the Company's Transfer Agent to deliver the applicable Delivery Shares electronically via the Deposit/Withdrawal at Custodian ("DWAC") system to the account designated by the Holder on the Notice of Exercise. If for any reason the Company is not able to so deliver the Delivery Shares via the DWAC system, notwithstanding its best efforts to do so, such shall constitute a breach of this Warrant (and thus an Event of Default under the Note), and the Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to the Holder or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of the Holder or its designee, representing the applicable number of Delivery Shares. For the avoidance of doubt, the Company has not met its obligation to deliver Delivery Shares within the required timeframe set forth above unless Holder or its broker, as applicable, has actually received the Delivery Shares (whether electronically or in certificated form) no later than the close of business on the latest possible delivery date pursuant to the terms set forth above.

 

(e)            If Delivery Shares are delivered later than as required under subsection (d) immediately above, the Company agrees to pay, in addition to all other remedies available to the Holder in the Transaction Documents, a late charge equal to the greater of (i) $2,000.00 and (ii) 2% of the product of (1) the sum of the number of shares of Common Stock not issued to the Holder on a timely basis and to which the Holder is entitled multiplied by (2) the Closing Sale Price (as defined in the Note) of the Common Stock on the Trading Day immediately preceding the last possible date which the Company could have issued such shares of Common Stock to the Holder without violating this Warrant, per Trading Day until such Delivery Shares are delivered. The Company shall pay any late charges incurred under this subsection in immediately available funds upon demand; provided, however, that, at the option of the Holder (without notice to the Company), such amount owed may be added to the principal amount of the Note. Furthermore, in addition to any other remedies which may be available to the Holder, in the event that the Company fails for any reason to effect delivery of the Delivery Shares as required under subsection (d) immediately above, the Holder may revoke all or part of the relevant Warrant exercise by delivery of a notice to such effect to the Company, whereupon the Company and the Holder shall each be restored to their respective positions immediately prior to the exercise of the relevant portion of this Warrant, except that the late charge described above shall be payable through the date notice of revocation or rescission is given to the Company.

 

(f)            The Holder shall be deemed to be the holder of the Delivery Shares issuable to it in accordance with the provisions of this Section 2.1 on the Exercise Date.

 

  

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2.2.           Ownership Limitation. Notwithstanding anything to the contrary contained in this Warrant or the other Transaction Documents, if at any time the Holder shall or would be issued shares of Common Stock under any of the Transaction Documents, but such issuance would cause the Holder (together with its Affiliates) to own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (the "Maximum Percentage"), the Company must not issue to the Holder shares of the Common Stock which would exceed the Maximum Percentage. The shares of Common Stock issuable to the Holder that would cause the Maximum Percentage to be exceeded are referred to herein as the "Ownership Limitation Shares". The Company will reserve the Ownership Limitation Shares for the exclusive benefit of the Holder. From time to time, the Holder may notify the Company in writing of the number of the Ownership Limitation Shares that may be issued to the Holder without causing the Holder to exceed the Maximum Percentage. Upon receipt of such notice, the Company shall be unconditionally obligated to immediately issue such designated shares to the Holder, with a corresponding reduction in the number of the Ownership Limitation Shares. Notwithstanding the forgoing, the term "4.99%" above shall be replaced with "9.99%" at such time as the Market Capitalization of the Common Stock is less than $5,000,000.00. Notwithstanding any other provision contained herein, if the term "4.99%" is replaced with "9.99%" pursuant to the preceding sentence, such change to "9.99%" shall be permanent. For purposes of this Agreement, the term "Market Capitalization of the Common Stock" shall mean the product equal to (A) the average VWAP (as defined in the Note) of the Common Stock for the immediately preceding fifteen (15) Trading Days, multiplied by (B) the aggregate number of outstanding shares of Common Stock as reported on the Company's most recently filed Form 10-Q or Form 10-K. By written notice to the Company, the Holder may increase, decrease or waive the Maximum Percentage as to itself but any such waiver will not be effective until the 61st day after delivery thereof. The foregoing 61-day notice requirement is enforceable, unconditional and non-waivable and shall apply to all Affiliates and assigns of the Holder.

 

3.             Mutilation or Loss of Warrant. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will execute and deliver to the Holder a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

 

4.             Rights of the Holder. The Holder shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in the Company, either at law or in equity, and the rights of the Holder with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against the Company except to the extent set forth herein.

 

5.             Protection Against Dilution and Other Adjustments.

 

5.1.          Capital Adjustments. If the Company shall at any time prior to the expiration of this Warrant subdivide the Common Stock, by split-up or stock split, or otherwise, or combine its Common Stock, or issue additional shares of its Common Stock as a dividend, the number of Warrant Shares issuable upon the exercise of this Warrant shall forthwith be automatically increased proportionately in the case of a subdivision, split or stock dividend, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the Exercise Price, Conversion Price (in the event of a cashless exercise), and other applicable amounts, but the aggregate purchase price payable for the total number of Warrant Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section 5.1 shall become effective automatically at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend.

 

5.2.          Reclassification, Reorganization and Consolidation. In case of any reclassification, capital reorganization, or change in the capital stock of the Company (other than as a result of a subdivision, combination, or stock dividend provided for in Section 5.1 above), then the Company shall make appropriate provision so that the Holder shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a holder of the same number of shares of Common Stock as were purchasable by the Holder immediately prior to such reclassification, reorganization, or change. In any such case appropriate provisions shall be made with respect to the rights and interest of the Holder so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per Warrant Share payable hereunder, provided the aggregate purchase price shall remain the same.

 

  

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5.3.          Subsequent Equity Sales. If the Company or any subsidiary thereof, as applicable, at any time and from time to time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition of) any Common Stock (including any Common Stock issued under the Note, whether upon any type of conversion or any Deemed Issuance (as defined in the Note)), preferred shares convertible into Common Stock, or debt, warrants, options or other instruments or securities which are convertible into or exercisable for shares of Common Stock (together herein referred to as "Equity Securities"), at an effective price per share less than the Exercise Price (such lower price, the "Base Share Price" and such issuance collectively, a "Dilutive Issuance") (if the holder of the Common Stock or Equity Securities so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options, or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance), then (a) the Exercise Price shall be reduced and only reduced to equal the Base Share Price, and (b) the number of Warrant Shares issuable upon the exercise of this Warrant shall be increased to an amount equal to the number of Warrant Shares the Holder could purchase hereunder for an aggregate Exercise Price, as reduced pursuant to subsection (a) above, equal to the aggregate Exercise Price payable immediately prior to such reduction in Exercise Price. Such adjustments shall be made whenever such Common Stock or Equity Securities are issued. The Company shall notify the Holder, in writing, no later than the Trading Day following the issuance of any Common Stock or Equity Securities subject to this Section 5.3, indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price, or other pricing terms (such notice, the "Dilutive Issuance Notice"). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 5.3, upon the occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is entitled to receive the increased number of Warrant Shares provided for in subsection (b) above at an Exercise Price equal to the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise. Additionally, following the occurrence of a Dilutive Issuance, all references in this Warrant to "Warrant Shares" shall be a reference to the Warrant Shares as increased pursuant to subsection (b) above, and all references in this Warrant to "Exercise Price" shall be a reference to the Exercise Price as reduced pursuant to subsection (a) above, as the same may occur from time to time hereunder.

 

5.4.          Notice of Adjustment. Without limiting any other provision contained herein, when any adjustment is required to be made in the number or kind of shares purchasable upon exercise of this Warrant, or in the Exercise Price, pursuant to the terms hereof, the Company shall promptly notify the Holder of such event and of the number of Warrant Shares or other securities or property thereafter purchasable upon exercise of this Warrant.

 

  

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5.5.           Exceptions to Adjustment. Notwithstanding the provisions of Sections 5.3 and 5.4, no adjustment to the Exercise Price shall be effected as a result of an Excepted Issuance. "Excepted Issuances" shall mean, collectively, (a) the Company's issuance of securities in connection with strategic license agreements and other partnering arrangements so long as any such issuances are not for the purpose of raising capital and in which holders of such securities or debt are not at any time granted registration rights, and (b) the Company's issuance of Common Stock or the issuance or grant of options to purchase Common Stock to employees, directors, officers and consultants, authorized by the Company's board of directors pursuant to plans or agreements which are authorized, constituted or in effect as of the Issue Date.

 

6.             Certificate as to Adjustments. In each case of any adjustment or readjustment in the shares of Common Stock issuable on the exercise of this Warrant, the Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional shares of Common Stock issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock outstanding or deemed to be outstanding, and (c) the Exercise Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Warrant. The Company will forthwith mail a copy of each such certificate to the Holder and any Warrant Agent (as defined below) appointed pursuant to Section 8 hereof. Nothing in this Section 6 shall be deemed to limit any other provision contained herein.

 

7.             Transfer to Comply with the Securities Act. This Warrant, and the Warrant Shares, have not been registered under the 1933 Act. None of the Warrant Shares may be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to the Company that registration is not required under the 1933 Act; provided, however, that the foregoing restrictions on transfer shall not apply to the transfer of any security to an affiliate of the Holder. Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for the Company, setting forth the restrictions on transfer contained in this Section 7. Any such transfer shall be accompanied by a transferor assignment substantially in the form attached to this Warrant as Exhibit B (the "Transferor Assignment"), executed by the transferor and the transferee and submitted to the Company. Upon receipt of the duly executed Transferor Assignment, the Company shall register the transferee thereon as the new Holder on the books and records of the Company and such transferee shall be deemed a "registered holder" or "registered assign" for all purposes hereunder, and shall have all the rights of the Holder.

 

8.             Warrant Agent. The Company may, by written notice to the Holder, appoint an agent (a "Warrant Agent") for the purpose of issuing shares of Common Stock on the exercise of this Warrant pursuant hereto, exchanging this Warrant pursuant hereto, and replacing this Warrant pursuant hereto, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such Warrant Agent.

 

9.             Transfer on the Company's Books. Until this Warrant is transferred on the books of the Company, the Company may treat the Holder as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

  

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10.           Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled "Notices" in the Purchase Agreement, the terms of which are incorporated herein by reference.

 

11.           Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement and all the other Transaction Documents, taken together, contain the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.

 

12.           Descriptive Headings. Descriptive headings of the sections of this Warrant are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by an officer thereunto duly authorized as of the Issue Date.

	  	COMPANY:
	  	 	  
	  	
Health Revenue Assurance Holdings, Inc.

 

	  	By:	 
	  	Printed Name: 	
                                                 

	  	
Title:

	
 

 

[Signature page to Warrant]

 

  

  

  

 

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

SECRETARY'S CERTIFICATE

 

I, [___], hereby certify that I am the duly elected, qualified and acting Secretary of Health Revenue Assurance Holdings, Inc., a Nevada corporation (the "Company"), and am authorized to execute this Secretary's Certificate (this "Certificate") on behalf of the Company. This Certificate is delivered in connection with (i) that certain $[___] Convertible Promissory Note issued by the Company to Tonaquint, Inc., a Utah corporation ("Tonaquint"), on [___] (the "Note"), and (ii) that certain Warrant to Purchase Shares of Common Stock issued by the Company to Tonaquint, on [___] (the "Warrant").

 

Solely in my capacity as Secretary, I certify that Schedule 1 attached hereto is a true, accurate and complete copy of all of the resolutions adopted by the Board of Directors of the Company (the "Resolutions") approving and authorizing the execution, delivery and performance of the Note, the Warrant, and related documents to which the Company is a party on the date hereof, and the transactions contemplated thereby. Such Resolutions have not been amended, rescinded or modified since their adoption and remain in effect as of the date hereof.

 

IN WITNESS WHEREOF, I have made this Secretary's Certificate effective as of [___].

 

	 	
Health Revenue Assurance Holdings, Inc.

 

	 	 
	 	
Printed Name:                   

	 	
Title: Secretary

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