Exhibit 10.1
SUBSCRIPTION AGREEMENT
This Subscription Agreement (this
“Agreement”) is made as of September 18, 2008, by
and between Avicena Group, Inc., a Delaware corporation (the
“Company”), and the persons or entities executing this
agreement on the Signature Pages attached hereto (the
“Subscribers”). For purposes of this Agreement, the
Subscriber will mean each of the Subscribers party to this
Agreement.
In consideration of the
Company’s agreement to sell the Securities (as defined below)
to the Subscriber, upon the terms and conditions set forth herein,
the Subscriber agrees and represents to the Company as
follows:
1. The Subscription. The Subscriber
hereby subscribes to purchase the number of “Units” set
forth on its Signature Page, at a price of $5,000 per Unit. Each
Unit shall consist of one share of the Company’s newly
designated Series D Preferred Stock, having a par value of $0.001
and a stated value of $5,000 per share (the “Series D
Stock”), and one (1) warrant (the “Class D
Warrant”) to purchase an additional 650,000 shares of the
Company’s Common Stock, par value $0.001 per share (the
“Common Stock”). The Series D Stock and Class D
Warrants subscribed for under this Agreement are referred to
collectively as the “Securities”. The total number of
shares of Series D Stock issued pursuant to this Agreement shall be
200 (two hundred).
2. On the date hereof, each share of
Series D Stock shall be convertible into 1,000,000 (one million)
shares of the Common Stock, for a total of 200,000,000 (two hundred
million) shares of Common Stock upon conversion of all the Series D
Stock issued pursuant to this Agreement, all as more specifically
set forth in Section 5 of the Amended and Restated Certificate
of Designation of the Relative Rights and Preferences (the
“CoD”) of the Series D Stock (subject to adjustment in
certain circumstances as set forth in Clause 6.c below). The Series
D Stock shall have the voting rights as set forth in the COD, which
includes the right to a number of votes equal to the number of
shares of Common Stock into which the shares of Series D Stock then
held by Subscriber could then be converted; for greater certainty
the Series D Stock will be entitled to vote as if converted into
Common Stock representing 200,000,000 votes from the Closing of
this Agreement. The Series D Stock’s entitlement to vote its
200,000,000 shares (as reflected on the pro forma capitalization
table attached hereto as exhibit A) will not be impacted on any
matter to be voted on if the Company’s total authorized
shares outstanding have not been increased at time the vote occurs
sufficient such to have provisioned for conversion of the Series D
Stock. The Company and its officers will use their best efforts as
soon as reasonably practical following issuance of the Series D
stock, to seek stockholder approval for, among other things,
amending the certificate of incorporation to increase the
authorized capital stock to a number sufficient to allow for
conversion of the Series D stock.
3. The Company acknowledges
receiving $700,000 for the Units, with an additional $300,000 to be
paid by wire transfer of immediately available funds upon the
execution of this Agreement.
4. The Company will not sell more
than 200 Units without the written consent of Subscribers holding a
majority of the Units issued pursuant to this Agreement (the
“Majority Subscribers”).
5. Upon execution of this Agreement,
the Majority Subscribers shall designate one additional member to
the Company’s Board of Directors which shall then total a
maximum of 4 board members after the one addition.
6. Representations and Covenants of
the Company. The Company represents, warrants and covenants to the
Subscriber as follows:
a. Due Authorization. Upon their
delivery to the Subscriber, the Securities will be duly authorized,
validly issued, fully paid and non-assessable.
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b. No Breach; No Conflicts. The
execution, delivery and performance of this Agreement, the Class D
Warrant and the Series D Certificate of Designations by the
Company, the performance by the Company of its obligations
thereunder and the consummation by the Company of the transactions
contemplated herein and therein do not and will not
(i) violate any provision of the Company’s Certificate
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 acceleration or
redemption of any agreement, note, bond, instrument or obligation
to which the Company is a party or by which it or its properties or
assets are bound, including without limitation the Certificates of
Designations for the Company’s Series A and Series C
Preferred Stock, except for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a material adverse
effect on the Company or its assets, results of operations or
financial condition.
c. Post-closing Covenant. Until such
time as a New Financing has occurred, the Company covenants that,
if any of the conversion prices of its Series A Convertible
Preferred Stock, Series B Convertible Preferred Stock and Series C
Convertible Preferred Stock (“Prior Preferred”) are
reduced to an amount that is less than $.05 per share (subject to
adjustments for stock splits, combinations and the like), the
Company will reduce the conversion price of the Series D Stock by
an amount such that the Subscribers’ ownership of the
Company’s outstanding capital stock relative to the holders
of Prior Preferred as of the date hereof is not reduced, as
reflected on the pro forma capitalization table attached hereto as
Exhibit A. “New Financing” shall mean the
Company’s entering into an agreement with one or more third
parties that contemplates the issuance of at least $10,000,000 of
the Company’s equity securities.
7. Representations of the
Subscriber. The Subscriber hereby represents and warrants to the
Company as indicated below, understanding that the Company will
rely on such representations in issuing the Securities to the
Subscriber:
a. Due Authorization. The Subscriber
has full legal capacity to execute and deliver this Agreement and
to carry out fully and perform his, her or its obligations
hereunder. If the Subscriber is an entity, (i) such Subscriber
is duly organized, validly existing and in good standing in its
jurisdiction of incorporation or organization; and (ii) such
Subscriber has taken all necessary corporate or limited liability
company action (a) to duly approve the execution, delivery,
and performance of this Agreement and (b) to consummate the
transactions contemplated under this Agreement and pursuant to such
action has duly executed and delivered this Agreement. This
Agreement has been duly executed by the Subscriber, and constitutes
the valid and legally binding obligation of the Subscriber,
enforceable against him, her or it in accordance with its terms,
except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws or
equitable principals relating to the availability of specific
performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions
may be limited by applicable law.
b. No Conflicts. None of the
execution and delivery of this Agreement, the consummation of any
of the transactions contemplated hereby, compliance with or
fulfillment of the terms, conditions and provisions hereof or
thereof will:
i. conflict with, violate, result
(with the giving of notice or passage of time or both) in a breach
of the terms, conditions or provisions of, or constitute a default,
an event of default or an event creating rights of acceleration,
termination or cancellation or a loss of rights under:
A. any agreement to which the
Subscriber is a party or any of his, her or its assets or
properties is subject or by which the Subscriber is
bound,
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B. any court order to which the
Subscriber is a party or any of his, her or its assets or
properties is subject or by which the Subscriber is bound,
or
C. any requirements of law
material
