FIRST AMENDMENT TO SECURITIES PURCHASE AGREEMENT
Exhibit 10.01
Execution Version
FIRST AMENDMENT TO SECURITIES PURCHASE AGREEMENT
This First Amendment to Securities Purchase Agreement (this “Amendment”) is dated as of August 16, 2016, and is by and among DISCOVERY ENERGY CORP., a Nevada corporation (the “Company”), DEC FUNDING LLC, a Texas limited liability company (“Original Purchaser”) and TEXICAN ENERGY CORPORATION, a Texas corporation (“New Purchaser”). The Company, Original Purchaser and New Purchaser are hereinafter sometimes collectively referred to as the “Parties” and each individually as a “Party”.
WHEREAS, the Company and Original Purchaser previously entered into that certain Securities Purchase Agreement dated May 27, 2016 (the “SPA”);
(a) Subject to the satisfaction of the conditions precedent set forth in Section 5, each of the Company, Original Purchaser and New Purchaser agree to amend the SPA to reflect the modifications where indicated in the conformed version of the Agreement attached hereto as Exhibit A (the “Conformed Securities Purchase Agreement”).
(b) Subject to the satisfaction of the conditions precedent set forth in Section 5, each of the Company, Original Purchaser and New Purchaser agree to amend the Disclosure Schedule to reflect the modifications where indicated in the conformed version of the Disclosure Schedule attached hereto as Exhibit B.
(a) solely with respect to purchases of Debentures by New Purchaser pursuant to Section 6, Original Purchaser hereby consents to the form of Senior Secured Convertible Debenture attached to this Amendment as Exhibit C; and
(b) pursuant to Section 4.9 of the Agreement, Original Purchaser hereby agrees that the Company may use the Additional DEC Proceeds for general corporate purposes (excepting from such general corporate purposes any of the uses expressly prohibited by Section 4.9 in the lines therein following the phrase “and shall not, for the avoidance of doubt”).
(a) Each Party shall have delivered an executed counterpart of its signature page to this Amendment, the Additional Australian Security Agreement (as defined in the Conformed Securities Purchase Agreement), the Additional Australian Pledge Agreement (as defined in the Conformed Securities Purchase Agreement) and the Additional Subsidiary Guaranty (as defined in the Conformed Securities Purchase Agreement) to each other Party;
(b) The Company shall have received from New Purchaser via wire transfer, in immediately available funds, the principal amount of the Initial Debenture;
(c) The Company shall have delivered the Initial Debenture to New Purchaser;
(d) The Company shall have received from Original Purchaser via wire transfer, in immediately available funds, the sum of $200,000 (the “Additional DEC Proceeds”); and
(e) The Company shall have delivered to Original Purchaser (i) a Debenture in a principal amount of $200,000 and (ii) a Warrant registered in the name of Original Purchaser to purchase up to 750,000 shares of Common Stock, with an exercise price equal to $0.20 per share of Common Stock, subject to adjustment as set forth therein.
(a) Concurrent with the satisfaction of the conditions precedent set forth in Section 5, the Company hereby sells, and New Purchaser hereby purchases, a Debenture in a principal amount of $250,000 (the “Initial Debenture”).
(b) Upon not less than five (5) Trading Days’ advance notice from New Purchaser upon the New Purchaser’s request, the Company agrees to sell, and New Purchaser agrees to purchase, Debentures in a principal amount equal to any Xxxxxx Charges paid by New Purchaser, subject to and in accordance with the covenants and conditions applicable to each Supplemental Closing Date set forth in Section 2.1(b) of the Agreement; provided that (i) for the purposes of Section 2.1(b) of the Agreement, New Purchaser shall be deemed to have funded an amount equal to such Xxxxxx Charges to the Company in full satisfaction of New Purchaser’s obligation to transfer to the Company the principal amount of the respective Debentures so purchased and (ii) the aggregate sales and purchases under this Section 6(b) shall not exceed $150,000. “Xxxxxx Charges” means the $30,000 monthly amount owing from New Purchaser to Xxxxxx Energy, LLC from time to time pursuant to the Consulting Agreement. “Consulting Agreement” means a Consulting Agreement among Xxxxxx Energy, LLC, New Purchaser, the Company and Discovery Energy SA Pty Ltd, as amended from time to time.
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(c) From the date hereof until September 30, 2018, New Purchaser, in its sole discretion and upon five (5) Trading Days’ advance notice to the Company, has the right to from time to time purchase one or more Debentures from the Company in a principal amount determined in accordance with the following schedule:
(i) From the date hereof until December 31, 2016, an aggregate principal amount not to exceed (A) $1,250,000 less (B) the amounts previously purchased by New Purchaser pursuant to Section 6(b);
(ii) From January 1, 2017 until March 31, 2017, an aggregate principal amount not to exceed (A) $1,250,000 less (B) the amounts previously purchased by New Purchaser pursuant to Section 6(b) less (C) the greater of (1) $137,500 and (2) the amounts previously purchased by New Purchaser pursuant to this Section 6(c);
(iii) From April 1, 2017 until June 30, 2017, an aggregate principal amount not to exceed (A) $1,250,000 less (B) the amounts previously purchased by New Purchaser pursuant to Section 6(b) less (C) the greater of (1) $275,000 and (2) the amounts previously purchased by New Purchaser pursuant to this Section 6(c);
(iv) From July 1, 2017 until September 30, 2017, an aggregate principal amount not to exceed (A) $1,250,000 less (B) the amounts previously purchased by New Purchaser pursuant to Section 6(b) less (C) the greater of (1) $412,500 and (2) the amounts previously purchased by New Purchaser pursuant to this Section 6(c);
(v) From October 1, 2017 until December 31, 2017, an aggregate principal amount not to exceed (A) $1,250,000 less (B) the amounts previously purchased by New Purchaser pursuant to Section 6(b) less (C) the greater of (1) $550,000 and (2) the amounts previously purchased by New Purchaser pursuant to this Section 6(c);
(vi) From January 1, 2018 until March 31, 2018, an aggregate principal amount not to exceed (A) $1,250,000 less (B) the amounts previously purchased by New Purchaser pursuant to Section 6(b) less (C) the greater of (1) $687,500 and (2) the amounts previously purchased by New Purchaser pursuant to this Section 6(c);
(vii) From April 1, 2018 until June 30, 2018, an aggregate principal amount not to exceed (A) $1,250,000 less (B) the amounts previously purchased by New Purchaser pursuant to Section 6(b) less (C) the greater of (1) $825,500 and (2) the amounts previously purchased by New Purchaser pursuant to this Section 6(c); and
(viii) From July 1, 2018 until September 30, 2018, an aggregate principal amount not to exceed (A) $1,250,000 less (B) the amounts previously purchased by New Purchaser pursuant to Section 6(b) less (C) the greater of (1) $962,500 and (2) the amounts previously purchased by New Purchaser pursuant to this Section 6(c).
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Subject to and in accordance with the covenants and conditions applicable to each Supplemental Closing Date set forth in Section 2.1(b) of the Agreement, upon the expiration of such five (5) Trading Days’ notice from New Purchaser of a purchase in accordance with the preceding schedule, New Purchaser agrees to purchase and the Company agrees to sell Debentures in a principal amount elected by New Purchaser in such notice.
Section 7 Representations and Warranties.
(a) As of the date of the effectiveness of this Amendment, and after giving effect to the amendments in Section 3, the Company hereby represents and warrants to New Purchaser and Original Purchaser that the representations and warranties of the Company and its Subsidiaries contained in the Agreement and in each other Transaction Document are true and correct on and as of such date (unless as of a specific date therein in which case they shall be accurate as of such date).
(b) As of the date of the effectiveness of this Amendment, New Purchaser hereby represents and warrants to the Company that the representations and warranties applicable to New Purchaser contained in the Agreement are true and correct on and as of such date.
(c) As of the date of the effectiveness of this Amendment, Original Purchaser hereby represents and warrants to the Company that the representations and warranties applicable to Original Purchaser contained in the Agreement are true and correct on and as of such date.
(a) Each of the Parties acknowledges and agrees that from and after the date of the effectiveness of this Amendment, each reference in the SPA to “this Agreement”, “herein”, “hereof”, “hereunder” or other words of like import shall mean and be a reference to the Agreement.
(b) This Amendment, the Agreement, the Disclosure Schedule (as amended hereby) and the other Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the Parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
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[Signature Page Follows]
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Execution Version
COMPANY: | ||
DISCOVERY ENERGY CORP. | ||
By: | ||
Xxxxx X. Xxxxxxxxxxx, Chairman | ||
ORIGINAL PURCHASER: | ||
DEC FUNDING LLC | ||
By: | ||
Xxxxxx Xxxxxxx, Manager | ||
NEW PURCHASER: | ||
TEXICAN ENERGY CORPORATION | ||
By: | ||
Name: | ||
Title: | ||
Address for Notice: | ||
One Xxxxx Center, Ste. 1150 | ||
000 Xxxxxx Xx. | ||
Xxxxxxx, Xxxxx 00000 |
Signature Page to First Amendment to Securities Purchase Agreement
Execution Version
EXHIBIT A
Conformed Version of the Agreement
(see attached)
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this “Agreement”) is dated as of May 27, 2016, between DISCOVERY ENERGY CORP., a Nevada corporation (the “Company”), DEC FUNDING LLC, a Texas limited liability company (“Original Purchaser”) and each other purchaser from time to time signatory hereto (together with Original Purchaser, each, including its successors and assigns, a “Purchaser” and collectively the “Purchasers”).
ARTICLE I.
“Acquiring Person” shall have the meaning ascribed to such term in Section 4.7.
“Action” shall have the meaning ascribed to such term in Section 3.1(j).
“Additional Australian Pledge Agreements” means one or more Specific Security Agreements (Shares), entered into from time to time between Company and a Purchaser (other than the Original Purchaser), in the form of the Initial Australian Pledge Agreement, as may be amended, restated or otherwise modified from time to time.
“Additional Australian Security Agreements” means one or more General Security Agreements, entered into from time to time between the Australian Subsidiary and a Purchaser (other than the Original Purchaser), in the form of the Initial Australian Security Agreement, as may be amended, restated or otherwise modified from time to time.
“Additional Subsidiary Guarantees” means one or more Deeds of Guarantee and Indemnity, entered into from time to time from the Australian Subsidiary in favor of a Purchaser (other than the Original Purchaser), in the form of the Initial Subsidiary Guarantee, as may be amended, restated or otherwise modified from time to time.
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“Agent” shall have the meaning ascribed to such term in the Security Agreement.
“Agreement Date” means May 27, 2016.
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“Australian Pledge Agreement” means, collectively, the Initial Australian Pledge Agreement and the Additional Australian Pledge Agreements ..
“Australian Security Agreement” means, collectively, the Initial Australian Security Agreement and the Additional Australian Security Agreements.
“Australian Subsidiary” means Discovery Energy SA Pty Ltd, a company formed under the laws of Australia.
“Board of Directors” means the board of directors of Company.
“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
“Capital Raise” shall have the meaning assigned to such term in Section 2.1(c).
“Closing” means the closing of the purchase and sale of the Closing Securities pursuant to Section 2.1.
“Closing Date” means the first Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) each Purchaser’s obligations to pay the Principal Amount and (ii) Company’s obligations to deliver the Debentures, in each case, have been satisfied or waived, but in no event later than the third Trading Day following the date hereof.
“Closing Securities” means the Debentures and the Warrants.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock” means the common stock of Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.
“Common Stock Equivalents” means any securities of Company or its Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Company Counsel” means Xxxxxx and Xxxxx, LLP, with offices located at 0000 XxXxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000.
“Contingent Obligation” shall have the meaning ascribed to such term in Section 3.1(aa).
“Conversion Price” shall have the meaning ascribed to such term in the Debentures.
“Debentures” means the Senior Secured Convertible Debentures due, subject to the terms therein, five years from the Closing Date, issued by Company to Purchasers hereunder, in the form of Exhibit A attached hereto or such other form as may be approved in writing by Original Purchaser.
“Deposit Account Control Agreement” means the deposit account control agreement, dated on or about the Agreement Date, among Company, Agent and Xxxxx Fargo Bank, N.A., together with any other deposit account control agreements executed in favor of Agent, each as may be amended, restated or otherwise modified from time to time.
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“Designated Jurisdiction” means any country or territory to the extent that such country or territory is the subject of any Sanction.
“Disclosure Schedule” means the disclosure schedule referred to in the first paragraph of Section 3.1 hereof.
“Evaluation Date” shall have the meaning ascribed to such term in Section 3.1(r).
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exempt Capital Raise” means (a) one or more Capital Raises constituting issuances of Common Stock of up to an aggregate issuance price of $2,000,000 (i) at an issuance price equal to not less than the Conversion Price until such time as Company has raised $20,000,000 in Capital Raises other than Exempt Capital Raises and (ii) thereafter, at an issuance price equal to not less than $0.20 per share of Common Stock or (b) an Exempt Issuance (as defined in the Debentures).
“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.
“First Amendment” means the First Amendment to Securities Purchase Agreement dated August 16, 2016 by and among Company, Original Purchaser and New Purchaser.
“First Amendment Date” means August 16, 2016.
“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).
“Indebtedness” shall have the meaning ascribed to such term in Section 3.1(aa).
“Initial Australian Pledge Agreement” means the Specific Security Agreement (Shares), dated the Closing Date between Company and Original Purchaser, as may be amended, restated or otherwise modified from time to time.
“Initial Australian Security Agreement” means the General Security Agreement, dated the Closing Date, between the Australian Subsidiary and Original Purchaser, as may be amended, restated or otherwise modified from time to time.
“Initial Subsidiary Guarantee” means the Deed of Guarantee and Indemnity, dated the Closing, by Australian Subsidiary in favor of Original Purchaser, as may be amended, restated or otherwise modified from time to time.
“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).
“Legend Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).
“Legend Removal Qualification Event” shall have the meaning ascribed to such term in Section 4.1(c).
“Liberty” means Liberty Petroleum Corporation, an Arizona corporation, together with any other holders of the Liberty Debt.
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“Liberty Debt” means that certain Indebtedness in the current principal amount of $587,724 payable by Company to Liberty, as evidenced by the Liberty Loan Documents.
“Liberty Loan Documents” means that certain Promissory Note dated as of September 26, 2013 made by Company in favor of Liberty in the original principal amount of $542,294, as amended by the Thirteenth Amendment to Consolidated Promissory Note dated as of May 5, 2016 fixing the outstanding principal amount at $587,724, extending the maturity date to July 20, 2016 and providing for payment in cash and shares of Common Stock, as amended, restated or otherwise modified from time to time, together with any other documents evidencing, describing or securing the Liberty Debt, each as may be amended, restated or otherwise modified from time to time.
“Lien” means a lien, charge, pledge (fixed or floating), security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“Majority Purchasers” means, at any time, one or more Purchasers holding over fifty percent (50%) in outstanding principal amount of the Debentures at such time.
“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).
“Material Permits” shall have the meaning ascribed to such term in Section 3.1(m) and shall include, without limitation, the Petroleum Exploration License.
“Maximum Rate” shall have the meaning ascribed to such term in Section 5.17.
“New Purchaser” means Texican Energy Corporation, a Texas corporation.
“PEL 512 Area” means the real property located in the State of South Australia more particularly described in and covered by the Petroleum Exploration License.
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Petroleum Exploration License” means that certain Petroleum Exploration License issued to Australian Subsidiary by the Energy Resource Division of the Department for Manufacturing, Innovation, Trade, Resources and Energy on October 26, 2012, otherwise referred to as PEL 512.
“Principal Amount” means, (a) with respect to the Debentures issued to Original Purchaser on the Closing Date, $3,500,000 and (b) with respect to any Debentures issued on any Supplemental Closing Date, the principal amount of such Debentures in an aggregate amount not to exceed $1,700,000.
“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.
“Public Information Failure” shall have the meaning ascribed to such term in Section 4.3(b).
“Public Information Failure Payments” shall have the meaning ascribed to such term in Section 4.3(b).
“Purchaser Designees” shall have the meaning ascribed to such term in Section 4.17.
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“Purchaser Party” shall have the meaning ascribed to such term in Section 4.10.
“Registration Rights Agreement” means the Registration Rights Agreement, dated the date hereof, among Company and Purchasers, as may be amended, restated or otherwise modified from time to time.
“Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale of the Underlying Shares by each Purchaser as provided for in the Registration Rights Agreement.
“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).
“Required Minimum” means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon exercise in full of all Warrants or conversion in full of all Debentures, ignoring any conversion or exercise limits set forth therein, and assuming that the Conversion Price is at all times on and after the date of determination 75% of the then Conversion Price on the Trading Day immediately prior to the date of determination.
“Right of First Offer” shall have the meaning ascribed to such term in Section 2.1(c).
“Right of First Offer Termination Date” means the later to occur of (a) June 30, 2017 and (b) that date which is six (6) months after the date on which Original Purchaser first receives a written certification from the Chief Executive Officer or the Chief Financial Officer of Company that the seismic data financed with the Debentures issued on the Closing Date with respect to the XXX 000 Xxxx has been interpreted and that Company has generated a first prospect for drilling.
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Sanction(s)” means any sanction administered or enforced by the United States Government (including, without limitation, OFAC), the United Nations Security Council, the European Union, Her Majesty’s Treasury (“HMT”), the Government of the Commonwealth of Australia or other relevant sanctions authority.
“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).
“Securities” means the Debentures, the Warrants, the Warrant Shares and the Underlying Shares.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Security Agreement” means the Security Agreement, dated the date hereof, between Company and Agent, as may be amended, restated or otherwise modified from time to time.
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“Security Documents” shall mean the Security Agreement, the Subsidiary Guarantees, the Australian Security Agreement, the Australian Pledge Agreement, the Deposit Account Control Agreements and any other documents and filing required thereunder in order to grant Agent a first priority security interest in the assets of Company and the Subsidiaries as provided in the Security Agreement, including all UCC-1 filing receipts and evidence of all mortgage or other required filings necessary to perfect the first priority security interest in Company’s Intellectual Property Rights (such filings, the “US IP Filings”) and fixed and floating pledges in the assets of the Australian Subsidiary as provided in the Australian Security Agreement, including all filing receipts and evidence of all required filings necessary to perfect the fixed pledge over the Australian Subsidiary’s Intellectual Property Rights (such filings, the “Australian IP Filings” and, together with the US IP Filings, the “IP Filings”).
“Subsidiary” means any subsidiary of Company as set forth on the Disclosure Schedule (including the Australian Subsidiary) and shall, where applicable, also include any direct or indirect subsidiary of Company formed or acquired after the date hereof.
“Subsidiary Guarantee” means the Initial Subsidiary Guarantee and the Additional Subsidiary Guarantees.
“Trading Day” means a day on which the principal Trading Market is open for trading.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, the OTC Bulletin Board or the OTCQB over-the-counter bulletin board service maintained by OTC Markets Group Inc. (or any successors to any of the foregoing).
“Transaction Documents” means this Agreement, the Debentures, the Warrants, the Registration Rights Agreement, the Security Agreement, the Australian Security Agreement, the Australian Pledge Agreement, the Subsidiary Guarantee, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.
“Transfer Agent” means Transfer Online, Inc., the current transfer agent of Company, with a mailing address of 000 XX Xxxxxx Xx., Xxxxxxxx, XX 00000 and a facsimile number of (000) 000-0000, and any successor transfer agent of Company.
“Underlying Shares” means the shares of Common Stock issued and issuable upon conversion or redemption of the Debentures and upon exercise of the Warrants and issued and issuable in lieu of the cash payment of interest and other amounts on the Debentures in accordance with the terms of the Debentures.
“Variable Rate Transaction” shall have the meaning ascribed to such term in Section 4.13.
“VWAP” means, for any date, when the price determined by the first of the following clauses that applies: (a) if the Common Stock is listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)) or (b) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by Majority Purchasers and reasonably acceptable to Company, the fees and expenses of which shall be paid by Company.
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“Warrants” means the Common Stock purchase warrants delivered to Original Purchaser at the Closing in accordance with Section 2.2(a) hereof and upon the closing of the First Amendment, which Warrants shall be exercisable immediately and have a term of exercise equal to three years from the Closing Date, in the form of Exhibit B attached hereto.
“Warrant Shares” means the shares of Common Stock issuable upon exercise of the Warrants.
ARTICLE II.
2.1 Closing; Supplemental Closing Dates; Right of First Offer.
(a) On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the parties hereto, Company agrees to sell, and Original Purchaser agrees to purchase $3,500,000 in principal amount of the Debentures. Original Purchaser shall deliver to Company or at Company’s written direction, via wire transfer of immediately available funds equal to the Principal Amount, and Company shall deliver to Original Purchaser the Debenture and Warrant, and Company and Original Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of Company Counsel or such other location as the parties shall mutually agree.
(b) After the Closing Date through and including September 30, 2018, Company shall have the ability (without the consent of the then current Purchasers) to issue, upon three (3) Trading Days’ advance notice to Purchasers, up to an additional $1,700,000 in principal amount of the Debentures in one or more additional closings (the date of each such additional closing, a “Supplemental Closing Date”) upon the same terms and conditions as one or more of the Debentures. Any applicable Purchasers shall deliver to Company or at Company’s written direction, via wire transfer of immediately available funds equal to the Principal Amount of such Debentures, and Company shall deliver to such Purchasers the additional Debenture, and Company and such Purchaser shall deliver the other items set forth in Section 2.2 deliverable at each Supplemental Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3 with respect thereto, each Supplemental Closing shall occur at the offices of Company Counsel or such other location as the parties shall mutually agree. Notwithstanding anything in this clause (b) to the contrary, subject to the terms of the First Amendment, no Purchaser is obligated to purchase any such additional Debentures.
(c) From and after the Closing Date through and including the Right of First Offer Termination Date, Purchasers shall have a right of first offer (the “Right of First Offer”) with respect to any proposed new Indebtedness or equity issuances of Company (each, a “Capital Raise”) other than an Exempt Capital Raise up to an aggregate principal amount of $20,000,000 at an issuance price or conversion price of $0.20 per share of common stock or an equity issuance permitted under Section 7(h) of the Debentures. Company shall provide Original Purchaser with written notice of any proposed Capital Raise other than an Exempt Capital Raise, setting forth the proposed terms and conditions thereof, at least thirty (30) days prior to the proposed closing date of such Capital Raise (each such notice, a “Notice of Capital Raise”). Original Purchaser shall advise Company within fifteen (15) Trading Days of its receipt of such Notice of Capital Raise whether or not Original Purchaser intends to exercise its Right of First Offer with respect to such Capital Raise; it being understood that (i) Original Purchaser’s failure to so notify Company of its intent within such fifteen (15) Trading Day period shall constitute a refusal by Original Purchaser to exercise its Right of First Offer; (ii) any offer given by Original Purchaser shall be upon substantially the same terms (including interest rate and conversion price) as the Debentures and (iii) if Original Purchaser exercises its Right of First Offer, the other Purchasers shall, if requested by Original Purchaser, have the right (but not the obligation) to participate in such Capital Raise in such amounts as approved by Original Purchaser and Company. If Original Purchaser declines or is deemed to refuse to exercise its Right of First Offer hereunder, Company may proceed with such Capital Raise, so long as (i) such offer and sale is otherwise permitted under this Agreement and the Debentures, (ii) such offer and sale is on terms no more advantageous to the purchaser thereof than those set forth in the Notice of Capital Raise, (iii) it does so within 90 days from the date of the Notice of Capital Raise. Nothing in this clause (c) is intended to limit Purchasers’ right to consent to any additional Capital Raise which is not permitted by Section 7(a) and/or 7(h) of the Debentures.
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(a) On or prior to the Closing Date (and, with respect to clause (iii) below, each Supplemental Closing Date), Company shall deliver or cause to be delivered to each Purchaser the following:
(i) this Agreement duly executed by Company;
(ii) a legal opinion of Company Counsel and a legal opinion of Xxxxxx X. Xxxxxxxxx, Australian counsel to Australian Subsidiary, in each case addressed to Purchasers and Agent and in form and substance satisfactory to Original Purchaser;
(iii) a Debenture with a principal amount equal to the Principal Amount issued to each Purchaser, registered in the name of such Purchaser;
(iv) a Warrant registered in the name of Original Purchaser to purchase up to $2,625,000 of Common Stock, with an exercise price equal to $0.20 per share of Common Stock, subject to adjustment as set forth therein;
(v) the Registration Rights Agreement duly executed by Company; and
(vi) the Security Agreement, the Initial Australian Security Agreement and the Initial Australian Pledge Agreement, each duly executed by Company and Australian Subsidiary party thereto, along with all of the Security Documents (other than the Deposit Account Control Agreements, which Company covenants and agrees to deliver within thirty (30) days of the Closing Date), including the Initial Subsidiary Guarantee, duly executed by the parties thereto.
(b) On or prior to the Closing Date, Purchasers shall deliver or cause to be delivered the following:
(i) to Company, this Agreement duly executed by Purchasers and Agent;
(ii) to Company, the Registration Rights Agreement, duly executed by Purchasers;
(iii) to Company, the Security Agreement and Initial Australian Security Agreement, each duly executed by Agent; and
(iv) to Company, the Principal Amount of the Debentures issued to each Purchaser at the Closing.
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(a) The obligations of Company hereunder in connection with Purchasers and Agent in respect of the Closing (and, with respect to clauses (i) and (ii) below, on each Supplemental Closing Date) are subject to the following conditions being met:
(i) the accuracy in all respects at the time of the Closing or on the Supplemental Closing Date, as applicable, of the representations and warranties of Purchasers contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);
(ii) all obligations, covenants and agreements of Purchasers required to be performed at or prior to the Closing or the Supplemental Closing Date, as applicable, shall have been performed; and
(iii) the delivery by Purchasers and Agent of the items set forth in Section 2.2(b) of this Agreement.
(b) The obligations of Purchasers hereunder in connection with the Closing (and, with respect to clauses (i) through (iv) below, on each Supplemental Closing Date) are subject to the following conditions being met:
(i) the accuracy in all respects when made at the time of the Closing or on the Supplemental Closing Date, as applicable, of the representations and warranties of Company and its Subsidiaries contained herein or in any other Transaction Document (unless as of a specific date therein);
(ii) all obligations, covenants and agreements of Company and its Subsidiaries required to be performed at or prior to the Closing or the Supplemental Closing Date, as applicable, shall have been performed;
(iii) the delivery by Company of the items set forth in Section 2.2(a)(iii) of this Agreement;
(iv) from the date hereof to the Closing Date (or, if applicable, the Supplemental Closing Date), trading in the Common Stock shall not have been suspended by the Commission or Company’s principal Trading Market and, at any time prior to the Closing Date (or, if applicable, the Supplemental Closing Date), trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity 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 Purchaser, makes it impracticable or inadvisable to purchase the Closing Securities at the Closing or the Supplemental Closing Date, as applicable; and
(v) Purchasers shall have completed to its satisfaction its due diligence investigation of Company and its Subsidiaries.
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(a) not later than five (5) Business Days after Closing, the original share certificate issued to Company by the Australian Subsidiary, together with any stock powers or other documents related thereto as reasonably requested by Original Purchaser; and
(b) not later than thirty (30) days after Closing, Deposit Account Control Agreements (or their equivalent, if any, under Australian law) with respect to Company’s and the Australian Subsidiary’s deposit accounts described in the Schedules to the Security Agreement.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
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(dd) Anti-Corruption Laws. Company and its Subsidiaries have conducted their business in compliance with the United States Foreign Corrupt Practices Act of 1977, the UK Xxxxxxx Xxx 0000 and other similar anti-corruption legislation in other jurisdictions, and have instituted and maintained policies and procedures designed to promote and achieve compliance with such laws.
(ff) Seniority. As of the Closing, no Indebtedness or other claim (other than Indebtedness payable pursuant to the Liberty Loan Documents and trade payables entered into in the ordinary course of business) against Company is senior to the Debentures in right of payment, whether with respect to interest or upon liquidation or dissolution, or otherwise, other than indebtedness secured by purchase money security interests (which is senior only as to underlying assets covered thereby) and capital lease obligations (which is senior only as to the property covered thereby).
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(ii) Stock Option Plans. Company has not granted any stock options.
(jj) Office of Foreign Assets Control (“OFAC”); Sanctions. Neither Company nor any Subsidiary, nor, to the knowledge of Company, any director, officer, employee, agent, affiliate or representative of Company or any Subsidiary, is an individual or entity that is, or is owned or controlled by any individual or entity that is (i) currently the subject or target of any Sanctions, (ii) included on OFAC’s List of Specially Designated Nationals, HMT’s Consolidated List of Financial Sanctions Targets and the Investment Ban List, or any similar list enforced by any other relevant sanctions authority or (iii) located, organized or resident in a Designated Jurisdiction.
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Company acknowledges and agrees that the representations contained in Section 3.2 shall not modify, amend or affect Purchasers’ right to rely on Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transaction contemplated hereby.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
(a) The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to Company or to an Affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b), Company may require the transferor thereof to provide to Company an opinion of counsel selected by the transferor and reasonably acceptable to Company, the form and substance of which opinion shall be reasonably satisfactory to Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and the Registration Rights Agreement and shall have the rights and obligations of Purchaser under this Agreement, the Registration Rights Agreement and the other Transaction Documents.
(b) Each Purchaser agrees to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in the following form:
[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE] [CONVERTIBLE]] HAS [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 EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO COMPANY. THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement and the Registration Rights Agreement and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the applicable Purchaser’s expense, Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities, including, if the Securities are subject to registration pursuant to the Registration Rights Agreement, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of Selling Stockholders (as defined in the Registration Rights Agreement) thereunder.
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(c) Certificates evidencing the Underlying Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) while a registration statement (including the Registration Statement) covering the resale of such security is effective under the Securities Act, (ii) following any sale of such Underlying Shares pursuant to Rule 144, provided that the purchaser is not an Affiliate of Company, (iii) following the six-month anniversary of the Closing Date if such Underlying Shares are eligible for sale under Rule 144 without volume or manner-of-sale restrictions and as of such date Company is in compliance with the current public information required under Rule 144 as to such Underlying Shares, or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission) (each such event being a “Legend Removal Qualification Event”). Upon request, Company shall cause its counsel to issue a legal opinion to the Transfer Agent, if required by the Transfer Agent, promptly after a Legend Removal Qualification Event and the delivery to Company or Company’s counsel of any reasonable certifications requested by Company or Company’s counsel in connection with the issuance of such opinion to effect the removal of the legend hereunder with respect to any qualifying Underlying Shares. Following an applicable Legend Removal Qualification Event, Company will no later than three (3) Trading Days following the delivery by a Purchaser to Company or the Transfer Agent (with notice to Company) of (i) a legended certificate representing Underlying Shares (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer) or (ii) a Notice of Exercise or Notice of Conversion in the manner stated in the Warrants or Debentures to effect the exercise of a Warrant or conversion of a Debenture in accordance with its terms, and, in each case, any reasonable certifications from Purchaser requested by Company or Company’s counsel in order to effectuate a legend removal (such third Trading Day, the “Legend Removal Date”), deliver or cause to be delivered to a Purchaser a certificate representing such Underlying Shares that is free from all restrictive and other legends. In addition, promptly upon request of a Purchaser, Company shall cause its counsel to promptly, but in no event later than two (2) Trading Days after such request and the delivery to Company or Company’s counsel of any reasonable certifications requested by Company or Company’s counsel, issue a legal opinion to the Transfer Agent at any time after the six month anniversary of the Closing Date if required by the Transfer Agent to transfer any of the Underlying Shares, which legal opinion shall provide that Purchaser may transfer any of the Underlying Shares free of restriction during the 10 Trading Days following the date of such legal opinion and that the transferee thereof shall receive the Underlying Shares free from all restrictive and other legends, provided that the transferee is not an Affiliate of Company. Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4. Upon the request of a Purchaser, certificates for Underlying Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to such Purchaser by crediting the account of Purchaser’s brokerage firm with the Depository Trust Company System as directed by such Purchaser.
(d) In addition to such Purchaser’s other available remedies, Company shall pay to each Purchaser, in cash, as partial liquidated damages and not as a penalty, for each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on the date such Securities are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 4.1(c), $5 per Trading Day (increasing to $10 per Trading Day five (5) Trading Days after such damages have begun to accrue) for each Trading Day commencing on the third Trading Day following the Legend Removal Date, until such certificate is delivered without a legend. Nothing herein shall limit such Purchaser’s right to pursue actual damages for such Company’s failure to deliver certificates representing any Securities as required by the Transaction Documents, and Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.
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(e) Each Purchaser, severally and not jointly with the other Purchasers, agrees with Company that such Purchaser will sell any Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if Securities are sold pursuant to the Registration Statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing Securities as set forth in this Section 4.1 is predicated upon Company’s reliance upon this understanding.
(f) Each Purchaser hereby acknowledges that Company was previously a “shell” company, as that term is defined in Rule 405 of the Securities Act and Rule 12b-2 under the Exchange Act. As a result of this former status and the application of subsection (i)(2) of Rule 144, periods of time may arise in which Purchaser may not rely upon the resale exemption provided for by Rule 144. Purchaser hereby agrees that, between the time that Company has notified Purchaser in writing that such resales may not be undertaken pursuant to Rule 144 and the time that Company has notified Purchaser in writing that such resales may resume, Purchaser shall not resell any Underlying Shares pursuant to Rule 144. Purchaser shall be entitled to resell any Underlying Shares pursuant to any effective and current Registration Statement or pursuant to any available resale exemption other than Rule 144. Company agrees to notify promptly Purchaser whenever the resale exemption provided for by Rule 144 become unavailable and whenever such exemption becomes available again; provided, however, that no such notice need be given solely because Company has filed an extension for any of its Quarterly Reports on Form 10-Q or Annual Reports on Form 10-K.
4.3 Furnishing of Information; Public Information.
(a) During the time a Purchaser continues to hold any Securities, Company covenants to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by Company after the date hereof pursuant to the Exchange Act even if Company is not then subject to the reporting requirements of the Exchange Act.
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(b) At any time during the period commencing from the six (6) month anniversary of the date hereof and ending on the date a Purchaser ceases to hold any Securities, if Company shall fail for any reason to satisfy the current public information requirement under Rule 144(c) (a “Public Information Failure”) then, in addition to such Purchaser’s other available remedies, Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, by reason of any such delay in or reduction of its ability to sell the Securities, an amount in cash equal to one percent (1.0%) of the aggregate Principal Amount of such Purchaser’s Securities on the day of a Public Information Failure and on every thirtieth (30th) day (pro rated for periods totaling less than 30 days) thereafter until the earlier of (a) the date such Public Information Failure is cured and (b) such time that such public information is no longer required for the Purchasers to transfer the Underlying Shares pursuant to Rule 144. The payments to which a Purchaser shall be entitled pursuant to this Section 4.3(b) are referred to herein as “Public Information Failure Payments.” Public Information Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information Failure Payments are incurred and (ii) the fifth (5th) Business Day after the event or failure giving rise to the Public Information Failure Payments is cured. In the event Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 1.5% per month (prorated for partial months) until paid in full. Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Public Information Failure, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.
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4.11 Reservation and Listing of Securities.
(a) Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may then be required to fulfill its obligations in full under the Transaction Documents.
(b) If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Required Minimum on such date, then the Board of Directors shall use commercially reasonable efforts to amend Company’s certificate of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the Required Minimum at such time, as soon as possible and in any event not later than the 75th day after such date.
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(c) Company shall, if applicable: (i) in the time and manner required by the principal Trading Market, prepare and file with such Trading Market an additional shares listing application covering a number of shares of Common Stock at least equal to the Required Minimum on the date of such application, (ii) take all steps necessary to cause such shares of Common Stock to be approved for listing or quotation on such Trading Market as soon as possible thereafter, (iii) provide to Purchasers evidence of such listing or quotation and (iv) maintain the listing or quotation of such Common Stock on any date at least equal to the Required Minimum on such date on such Trading Market or another Trading Market.
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ARTICLE V.
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5.4 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto or via email at the email address set forth on the signature pages attached hereto (if an email address is so provided) at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto or via email at the email address set forth on the signature pages attached hereto (if an email address is so provided) on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. If an email address is provided for a party on the signature pages attached hereto, notice to such party given by other means hereunder shall also be given by email, provided, that failure to deliver a duplicate notice by email shall not constitute a failure to deliver the applicable notice. The address for such notices and communications shall be as set forth on the signature pages attached hereto or as such address may be modified by a party by written notice in accordance herewith.
5.9 Governing Law. Except as otherwise provided therein, all questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York, County of New York (the “New York Courts”). Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action, suit or proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of Company under Section 4.10, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
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(Signature Pages Follow)
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Execution Version
COMPANY: | ||
DISCOVERY ENERGY CORP. | ||
By: | ||
Xxxxx X. Xxxxxxxxxxx, Chairman |
Address for Notice: | |
Xxx Xxxxxxxx Xxxxx, Xxxxx 0000 | |
Xxxxxxx, Xxxxx 00000 | |
Facsimile No.: (000) 000-0000 | |
Email: xxxxxxxxxxxx0@xxxxxxx.xxx and xxx@xxxxxxxxxxxxxxx.xxx | |
With a copy to: | |
Xxxxxx and Xxxxx, LLP | |
0000 XxXxxxxx Xxxxxx, Xxxxx 0000 | |
Xxxxxxx, Xxxxx 00000 | |
Attention: Xxxxxx X. Xxxxxxx | |
Facsimile No.: (000) 000-0000 | |
Email: xxxxxx.xxxxxxx@xxxxxxxxxxx.xxx | |
PURCHASER: |
DEC FUNDING LLC | ||
By: | ||
Xxxxxx Xxxxxxx, Manager |
Address for Notice: | |
c/o Avista Capital Partners | |
0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000 | |
Xxxxxxx, Xxxxx 00000 | |
Attention: Xxxxxx Xxxxxxx | |
Facsimile No.: (000) 000-0000 | |
Email: xxxxxxx@xxxxxxxxx.xxx | |
With a copy to: | |
Xxxxx Lord LLP | |
000 Xxxxxxxxxx Xxxxxx | |
Xxxxxx, Xxxxxxxxxxxxx 00000 | |
Attention: Xxxxxx Xxxxxxx, Esq. | |
Facsimile: (000) 000-0000 | |
Email: xxxxxx.xxxxxxx@xxxxxxxxx.xxx |
Exhibit A to First Amendment to Securities Purchase Agreement
EXHIBIT B
Conformed Version of the Disclosure Schedule
(see attached)
DISCLOSURE SCHEDULE
to the
SECURITIES PURCHASE AGREEMENT
by and among
a Nevada corporation (the “Company”)
and
DEC FUNDING LLC,
a Texas limited liability company (“Original Purchaser”)
and
each other Purchaser from time to time signatory thereto (together with Original Purchaser, each, including its successors and assigns, a “Purchaser” and collectively the “Purchasers”)
May 27, 2016
The following schedules (collectively, the “Disclosure Schedule”) correspond with the sections referenced in that certain Securities Purchase Agreement (“Agreement”) dated as of May 27, 2016, between DISCOVERY ENERGY CORP., a Nevada corporation (the “Company”), DEC FUNDING LLC, a Texas limited liability company (“Original Purchaser”), and each other purchaser from time to time signatory thereto (together with Original Purchaser, each, including its successors and assigns, a “Purchaser” and collectively the “Purchasers”). Company is delivering this Disclosure Schedule in compliance with the provisions of the Agreement. Capitalized terms not otherwise defined in this Disclosure Schedule have the meanings given to them in the Agreement.
This Disclosure Schedule is arranged in schedules corresponding to the lettered and numbered sections of the Agreement. The disclosure contained in the corresponding section of the Disclosure Schedule shall qualify any representation otherwise made in the Agreement to the extent of the disclosure contained in the corresponding section of the Disclosure Schedule only to the extent such disclosure is reasonably apparent on its face, without any independent knowledge on the part of the reader regarding the matter disclosed, that such disclosure is responsive to such other representations.
The disclosure of information in this Disclosure Schedule is not to be construed as an admission that any such information is material to Company, and its business or operations. Subject to the foregoing, this Disclosure Schedule is qualified in its entirety by reference to the specific provisions of the Agreement, and none of the disclosures contained in this Disclosure Schedule are intended to constitute, and shall not be construed as constituting, representations or warranties, except to the extent specifically provided in the Agreement.
The following is the only direct subsidiary of the Company. The Company has no indirect subsidiaries.
Discovery Energy SA Pty Ltd, an Australian company
Schedule 3.1(g)
Capitalization
· | Shares Authorized, Issued and Outstanding as of 5/16/2016: |
Security | # of Shareholders | Issued | Outstanding | Authorized | ||||||||||||
Common Stock | 101 | 140,189,501 | 140,189,501 | 500,000,000 | ||||||||||||
Preferred Stock | NA | 0 | 0 | 10,000,000 |
· | Common Stock Owned by Affiliates: |
Affiliate Name | Position | Shares Controlled | Ownership % | |||||||
Xxxxx X Xxxxxxxxxxx | Chairman | 48,300,000 | 34.45 | % | ||||||
Xxxxx X XxXxxxxx | CEO/Director | 36,705,460 | 26.18 | % | ||||||
Xxxxxxx X Xxxxxx | CFO/Director | 10,607,106 | 7.57 | % | ||||||
Xxxxxxx X Xxxxxx | President/COO | 2,501,616 | 1.78 | % | ||||||
Total | 98,114,182 | 69.99 | % |
· | Shares of Common Stock Issued Within the Previous Quarter |
Subscriber Name | Receipt Date | Amount | Price/Share | Shares Issued | ||||||||||
Xxxx X Xxxxxx & Xxxx X Xxxxxx | 22-Feb-16 | $ | 20,000 | $ | 0.200 | 100,000 |
· | Options, Warrants or Other Rights to Purchase Common Stock |
The Warrants
Schedule 3.1(n)
None
Note: The Petroleum Exploration License is neither real nor personal property under applicable Australian law.
Note: There are no liens in favor of Liberty pursuant to the Liberty Loan Documents.
Insurance
Directors & Officers Liability Insurance
Executive Edge - Broad Form Management Liability Insurance Policy
llinois National Insurance Company
POLICY NUMBER: 29102229
Expires December 17, 2016
Transactions With Affiliates and Employees
None, except for the Shareholder Debt as described on Schedule 3.1(aa).
Each of the shareholders listed below has certain rights pursuant to Registration Rights Agreements to cause Company to effect the registration under the Securities Act of the shares of Common Stock listed opposite their names below.
Subscriber Name | Receipt Date | Amount | Price/Share | Shares Issued | ||||||||||
Xxxxxx Xxxx | 25-Nov-11 | $ | 100,000 | $ | 0.125 | 800,000 | ||||||||
Xxxxxx Xxxxxxx J | 5-Dec-11 | $ | 25,000 | $ | 0.125 | 200,000 | ||||||||
Xxxxxxx Living Trust | 2-Dec-11 | $ | 50,000 | $ | 0.125 | 400,000 | ||||||||
Xxxxx Xxxxxxx-1 | 21-Dec-11 | $ | 75,000 | $ | 0.125 | 600,000 | ||||||||
Xxxxx Xxxx Xxxx-1 | 21-Dec-11 | $ | 75,000 | $ | 0.125 | 600,000 | ||||||||
Xxxxxxxx Xxxx R | 21-Dec-11 | $ | 50,000 | $ | 0.125 | 400,000 | ||||||||
Durpe (JRD) Trust | 24-Jan-12 | $ | 100,000 | $ | 0.125 | 800,000 | ||||||||
RWM Partnership No.1, Ltd | 27-Jan-12 | $ | 50,000 | $ | 0.125 | 400,000 | ||||||||
Xxxxxxxx Xxxx S. | 27-Jan-12 | $ | 50,000 | $ | 0.125 | 400,000 | ||||||||
Xxxxxxx Xxxxxx A | 31-Jan-12 | $ | 100,000 | $ | 0.125 | 800,000 | ||||||||
Xxxxxx Xxxxxxx | 2-Feb-12 | $ | 100,000 | $ | 0.125 | 800,000 | ||||||||
Xxxxxx Xxx-1 | 7-Feb-12 | $ | 12,500 | $ | 0.125 | 100,000 | ||||||||
Xxxxx, Xxxxxxxxx | 13-Feb-12 | $ | 25,000 | $ | 0.125 | 200,000 | ||||||||
Xxxxx, Xxxxxxx | 13-Feb-12 | $ | 25,000 | $ | 0.125 | 200,000 | ||||||||
Xxxxx, Xxxx Xxxx-2 | 13-Feb-12 | $ | 50,000 | $ | 0.125 | 400,000 | ||||||||
Xxxxx, Xxxxxxx-2 | 13-Feb-12 | $ | 50,000 | $ | 0.125 | 400,000 | ||||||||
Rich Royal Propert (X. Xxxxx) | 13-Feb-12 | $ | 50,000 | $ | 0.125 | 400,000 | ||||||||
Xxxxxx Xxxxx | 15-Feb-12 | $ | 50,000 | $ | 0.125 | 400,000 | ||||||||
Xxxxxxx, Xxxxx (2) | 24-Feb-12 | $ | 22,500 | $ | 0.125 | 180,000 | ||||||||
Xxxxxx, Xxxxx | 1-Mar-12 | $ | 25,000 | $ | 0.125 | 200,000 | ||||||||
Xxxxxx Xxx-2 | 14-Mar-12 | $ | 12,500 | $ | 0.125 | 100,000 | ||||||||
Xxxxxxxx, Xxxxx | 22-Mar-12 | $ | 12,500 | $ | 0.125 | 100,000 | ||||||||
Birarda, Xxxxxxx | 28-Mar-12 | $ | 31,250 | $ | 0.125 | 250,000 | ||||||||
JCECBI Ltd (Xxxxxx) | 31-Mar-12 | $ | 100,000 | $ | 0.125 | 800,000 | ||||||||
Xxxxxxx, Xxxxx | 27-Apr-12 | $ | 5,000 | $ | 0.125 | 40,000 | ||||||||
Xxxxxxxx, Xxxxx | 22-May-12 | $ | 12,500 | $ | 0.125 | 100,000 | ||||||||
Xxxxxxx Living Trust | 8-Oct-12 | $ | 50,000 | $ | 0.125 | 400,000 | ||||||||
Xxxxxxxx Xxxx R | 11-Oct-12 | $ | 50,000 | $ | 0.125 | 400,000 | ||||||||
Xxxxxx Xxxxxxx J | 8-Oct-12 | $ | 50,000 | $ | 0.125 | 400,000 | ||||||||
Xxxxxxx Xxxxxx A | 9-Oct-12 | $ | 100,000 | $ | 0.125 | 800,000 | ||||||||
Xxxxx Xxxxxxx - 3 | 13-Nov-12 | $ | 75,000 | $ | 0.125 | 600,000 | ||||||||
Xxxxx Xxxx - 3 | 13-Nov-12 | $ | 75,000 | $ | 0.125 | 600,000 | ||||||||
Xxxxxxx Xxxxxxx | 26-Nov-12 | $ | 150,000 | $ | 0.125 | 1,200,000 | ||||||||
E. L. Ecclestone | 27-Feb-13 | $ | 500,000 | $ | 0.125 | 4,000,000 | ||||||||
Xxxx X Xxxx | 27-May-14 | $ | 20,000 | $ | 0.400 | 50,000 | ||||||||
Xxxxxx Xxxxxxxx & Xxxxx Xxxxxxxx | 27-May-14 | $ | 20,000 | $ | 0.400 | 50,000 | ||||||||
Xxxxxxxx Xxxxxxx III | 27-May-14 | $ | 15,000 | $ | 0.400 | 37,500 | ||||||||
Xxxxxxxx-Xxxxxxxx Properties | 31-Mar-15 | $ | 200,000 | $ | 0.300 | 666,667 | ||||||||
Xxxxxxx Xxxxx | 22-Jun-15 | $ | 50,000 | $ | 0.500 | 100,000 | ||||||||
Xxxx X Xxxxxx & Xxxx X Xxxxxx | 4-Sep-15 | $ | 50,000 | $ | 0.600 | 83,333 | ||||||||
Xxxx X Xxxxxx & Xxxx X Xxxxxx | 22-Feb-16 | $ | 20,000 | $ | 0.200 | 100,000 |
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Schedule 3.1(aa)
Solvency and Indebtedness
Company has the following unsecured indebtedness:
Xxxxx Xxxxxxxxxxx Demand Notes | ||||||||||
Note # | Original Date | Amended | Amount | File Name | ||||||
Xxxxx Xxxxxxxxxxx Demand Notes | ||||||||||
4 | 31-Mar-14 | $ | 25,000 | KDS-Note d4 Original Demand 140331 | ||||||
4a | 31-Mar-16 | KDS-Note a4 140331 Amendment 3-31-2016 | ||||||||
5 | 5-May-14 | $ | 3,100 | KDS-Note d5 Original Demand 140505 | ||||||
5a | 5-May-16 | KDS-Note a5 140505 Amendment 5-5-2016 | ||||||||
6 | 16-Jul-14 | $ | 10,000 | KDS-Note d6 Original Demand 140716 | ||||||
6a | 16-Jul-16 | KDS-Note a6 140716 Amendment 7-16-2016 | ||||||||
7 | 29-Sep-14 | $ | 16,000 | KDS-Note d7 Original Demand 140929 | ||||||
7a | 29-Sep-15 | KDS-Note a7 140929 Amendment 9-29-2015 | ||||||||
8 | 17-Dec-14 | $ | 6,000 | KDS-Note d8 Original Demand 141217 | ||||||
8a | 17-Dec-15 | KDS-Note a8 141217 Amendment 12-17-2015 | ||||||||
9 | 29-Jan-15 | $ | 2,500 | KDS-Note d9 Original Demand 150129 | ||||||
9a | 29-Jan-16 | KDS-Note a9 150129 Amendment 1-29-2016 | ||||||||
10 | 20-Nov-15 | $ | 10,000 | KDS-Note d10 Original Demand 151120 | ||||||
11 | 15-Jan-16 | $ | 5,000 | KDS-Note d11 Original Demand 160115 | ||||||
12 | 2-Feb-16 | $ | 7,000 | KDS-Note d12 Original Demand 160202 | ||||||
13 | 4-Feb-16 | $ | 7,000 | KDS-Note d13 Original Demand 160204 | ||||||
14 | 13-May-16 | $ | 4,600 | KDS-Note d14 Original Demand 160513 | ||||||
Xxxxxxx X. Xxxxxx Demand Notes | ||||||||||
10 | 9-Mar-15 | $ | 4,000 | WEB Demand Note-10 150309 | ||||||
10a | 9-Mar-16 | WEB Demand Note-10 150309 Amendment 03-09-16 | ||||||||
11 | 11-Aug-15 | $ | 3,000 | WEB Demand Note-11 150811 | ||||||
11a | 11-Aug-16 | WEB Demand Note-10 150309 Amend 08-11-16 | ||||||||
12 | 16-Dec-15 | $ | 5,353 | WEB Demand Note-12 151216 | ||||||
13 | 15-Jan-16 | $ | 1,500 | WEB Demand Note-13 160115 | ||||||
14 | 19-Jan-16 | $ | 3,500 | WEB Demand Note-14 160119 | ||||||
15 | 3-Feb-16 | $ | 4,000 | WEB Demand Note-15 160203 | ||||||
16 | 4-Feb-16 | $ | 10,000 | WEB Demand Note-16 160204 | ||||||
16 | 20-Apr-16 | $ | 1,800 | WEB Demand Note-17 160420 | ||||||
Emteeco (X.X. Xxxxxxxx) Demand Note | ||||||||||
1 | 20-Dec-13 | $ | 17,000 | Emteeco Demand Original Note 121220 | ||||||
1a | 20-Dec-14 | $ | 17,000 | Emteeco Note 131220 Amendment 12-20-2014 | ||||||
2a | 20-Dec-15 | $ | 17,000 | Emteeco Note 131220 Amendment 12-20-2015 | ||||||
Liberty Petroleum Demand Note | ||||||||||
1 | 26-Sep-13 | $ | 542,294 | Liberty Note Amendment Agreement 10-02-2013 | ||||||
12a | 5-Jan-16 | $ | 587,724 | 12th Amendment to Consolidated Note 01-05-2016 | ||||||
13a | 5-May-16 | $ | 587,724 | 13th Amendment to Consolidated Note 05-05-2016 | ||||||
14a | 20-July-16 | $ | 587,724 | 14th Amend Consolidated Note 07-20-2016 |
Company has the following other Indebtedness:
The Debentures
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Schedule 3.1(gg)
No Disagreements with Accountants and Lawyers.
None.
Exhibit B to First Amendment to Securities Purchase Agreement
COMPANY: | ||
DISCOVERY ENERGY CORP. | ||
By: | ||
Xxxxx X. Xxxxxxxxxxx, Chairman |
PURCHASER: | |||
DEC FUNDING LLC | |||
By: | |||
Name: |
|||
Title: |
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EXHIBIT C
Form of New Purchaser Debenture
(see attached)
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAS 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 EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
Original Issue Date: [ , 201_] | [$_______________ ] |
SENIOR SECURED CONVERTIBLE DEBENTURE
DUE MAY 27, 2021
THIS SENIOR SECURED CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued Senior Secured Convertible Debentures of Discovery Energy Corp., a Nevada corporation, (the “Company”), having its principal place of business at Xxx Xxxxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000, designated as its Senior Secured Convertible Debentures due May 27, 2021 (this debenture, the “Debenture” and, collectively with the other debentures of such series, the “Debentures”).
FOR VALUE RECEIVED, Company promises to pay to [________________ ] or its registered assigns (the “Holder” and collectively with the holders of the other Debentures, the “Holders”), or shall have paid pursuant to the terms hereunder, the principal sum of [$_____________________ ]1 on May 27, 2021 (the “Maturity Date”) or such earlier date as this Debenture is required or permitted to be repaid as provided hereunder, and to pay interest to Holder on the aggregate unconverted and then outstanding principal amount of this Debenture in accordance with the provisions hereof. This Debenture is subject to the following additional provisions:
Section 1. Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Debenture, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement (as defined below) and (b) the following terms shall have the following meanings:
“Alternate Consideration” shall have the meaning set forth in Section 5(d).
“Annual License Milestone Compliance Certificate” shall have the meaning set forth in Section 8(a)(x).
1 NTD: Prior to issuance, parties to complete all bracketed items, including the Original Issue Date, Holder, principal sum (including the reference on Schedule 1) and Conversion Price (see 4(b)).
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“Bankruptcy Event” means any of the following events: (a) Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to Company or any Significant Subsidiary thereof, (b) there is commenced against Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 20 days after commencement, (c) Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) Company or any Significant Subsidiary thereof seeks or suffers any appointment of any administrator, receiver, custodian or the like for it or any substantial part of its property that is not discharged or stayed within 20 calendar days after such appointment, (e) Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) Company or any Significant Subsidiary thereof calls a meeting of its creditors or makes application to a court to call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts, (g) Company or any Significant Subsidiary becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due or (h) Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
“Buy-In” shall have the meaning set forth in Section 4(c)(v).
“Change of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of Company, by contract or otherwise) of in excess of 50% of the voting securities of the Company (other than by means of conversion or exercise of the Debentures and the Securities issued together with the Debentures), (b) Company merges into or consolidates with any other Person, or any Person merges into or consolidates with Company and, after giving effect to such transaction, the stockholders of Company immediately prior to such transaction own less than 50% of the aggregate voting power of Company or the successor entity of such transaction, (c) Company sells or transfers all or substantially all of its assets to another Person and the stockholders of Company immediately prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a three year period of more than one-half of the members of the Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the Original Issue Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who are members on the date hereof) or (e) the execution by Company of an agreement to which Company is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.
“Conversion Date” shall have the meaning set forth in Section 4(a).
“Conversion Price” shall have the meaning set forth in Section 4(b).
“Conversion Schedule” means the Conversion Schedule in the form of Schedule 1 attached hereto.
“Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of this Debenture in accordance with the terms hereof.
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“Debenture Register” shall have the meaning set forth in Section 2(b).
“Event of Default” shall have the meaning set forth in Section 8(a).
“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of Company pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of Company, provided that any such issuance shall only be to a Person (or to the equityholders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset (including, but not primarily, securities) in a business synergistic with the business of Company and shall provide to Company additional benefits in addition to the investment of funds, but shall not include a transaction in which Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities, provided that such agreements have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities.
“Fundamental Transaction” shall have the meaning set forth in Section 5(d).
“Holder Optional Redemption” shall have the meaning set forth in Section 6(a).
“Holder Optional Redemption Date” shall have the meaning set forth in Section 6(a).
“Holder Optional Redemption Notice” shall have the meaning set forth in Section 6(a).
“Holder Optional Redemption Notice Date” shall have the meaning set forth in Section 6(a).
“Interest Settlement Date” shall have the meaning set forth in Section 2(a)(i).
“Majority Holders” means, at any time, one or more Holders holding over fifty percent (50%) in outstanding principal amount of the Debentures at such time.
“Mandatory Default Amount” means the sum of (a) 100% of the outstanding principal amount of this Debenture, (b) 100% of the accrued and unpaid interest hereon and (c) 100% of the interest on the outstanding principal amount of this Debenture which would have been payable under Section 2(a) between the date of the relevant Event of Default and the Maturity Date, plus all other amounts, costs, expenses and liquidated damages due in respect of this Debenture.
“New York Courts” shall have the meaning set forth in Section 9(d).
“Notice of Conversion” shall have the meaning set forth in Section 4(a).
“Optional Redemption Amount” means the sum of (a) 120% of the then outstanding principal amount of the Debenture and 100% of accrued and unpaid interest on the outstanding principal amount of this Debenture, plus (b) all liquidated damages and other amounts due hereunder in respect of the Debenture.
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“Original Issue Date” means the date of the first issuance of the first Debenture, regardless of any transfers of any Debenture and regardless of the number of instruments which may be issued to evidence all such Debentures.
“Permitted Indebtedness” means (a) the indebtedness evidenced by the Debentures, (b) indebtedness incurred in connection with any inventory financing transaction and any refinancing or modification of the terms thereof; provided, that such financing is secured only by inventory, (c) any indebtedness permitted pursuant to the definition of Permitted Lien, (d) any indebtedness that has been expressly subordinated in right of payment to the indebtedness under the Debentures, provided that the terms of such subordination have been approved by Majority Holders, (e) the Liberty Debt and Shareholder Debt and (f) Capital Raises provided by Original Purchaser following the exercise of its Right of First Offer (as defined in the Purchase Agreement).
“Permitted Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of Company) have been established in accordance with GAAP, (b) Liens imposed by law which were incurred in the ordinary course of Company’s business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary course of Company’s business, and which (x) do not individually or in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Company and its consolidated Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien, (c) Liens incurred by banks and other financial institutions on deposit and securities accounts and other accounts with such banks or financial institutions not to exceed $100,000 at any time, (d) purchase money security interest in equipment (including capital leases), (e) Liens securing judgments for the payment of money not constituting an Event of Default and (f) Liens incurred in connection with indebtedness referred to in clause (a) or (b) of Permitted Indebtedness.
“Petroleum Exploration License” means that certain Petroleum Exploration License issued to Australian Subsidiary by the Energy Resource Division of the Department for Manufacturing, Innovation, Trade, Resources and Energy on October 26, 2012, otherwise referred to as PEL 512.
“Purchase Agreement” means the Securities Purchase Agreement, dated as of May 27, 2016 among Company and the original Holders, as amended, modified or supplemented from time to time in accordance with its terms.
“Purchase Right” shall have the meaning set forth in Section 5(c).
“Registration Rights Agreement” means the Registration Rights Agreement, dated as of May 27, 2016 among Company and the original Holders, as amended, modified or supplemented from time to time in accordance with its terms.
“Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale of the Underlying Shares by Holder as provided for in the Registration Rights Agreement.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
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“Share Delivery Date” shall have the meaning set forth in Section 4(c)(ii).
“Shareholder Debt” means that certain Indebtedness (a) payable to Xxxxx X. Xxxxxxxxxxx in the aggregate principal amount of $96,200.00, (b) payable to Xxxxxxx Xxxxxx in the aggregate principal amount of $33,153.00, and (c) payable to EMTEECO Holdings Ltd. in the aggregate principal amount of $17,000.00, each as of the Closing Date.
“Successor Entity” shall have the meaning set forth in Section 5(d).
“Trading Day” means a day on which the principal Trading Market is open for trading.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board or the OTCQB over-the-counter bulletin board service maintained by OTC Markets Group Inc. (or any successors to any of the foregoing).
Section 2. Interest and Prepayment.
a) Interest.
i. So long as no Event of Default has occurred and is continuing, the aggregate unconverted and then outstanding principal amount of this Debenture shall accrue interest from the Original Issue Date at the rate of eight percent (8%) per annum, compounded quarterly, which accrued interest shall be added to the outstanding principal balance of this Debenture on the last day of each calendar quarter (each such date, an “Interest Settlement Date”) (or, if such Interest Settlement Date is not a Business Day, on the immediately succeeding Business Day) and shall thereafter itself, as part of the principal balance, accrue interest at the rate set forth above, compounding quarterly on each Interest Settlement Date. All such accrued interest added to the principal balance of this Debenture pursuant to the immediately preceding sentence shall be payable on the same terms and subject to the same conditions set forth herein.
ii. Notwithstanding the foregoing clause (i), Company may provide Purchaser with written notice (each, a “Cash Pay Notice”) of its intent to pay all or a portion of the interest which would otherwise accrue on the next succeeding Interest Settlement Date in cash. Any Cash Pay Notice shall be delivered at least ten (10) Business Days prior to the applicable Interest Settlement Date and shall be irrevocable.
iii. Upon the occurrence and during the continuance of an Event of Default, the aggregate unconverted and then outstanding principal amount of this Debenture shall accrue interest at the rate of twelve percent (12%) per annum and otherwise shall accrue and/or be paid in cash consistent with clauses (i) and (ii) above.
b) Interest Calculations. Interest shall be calculated on the basis of a 365-day year, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made. Interest shall cease to accrue with respect to any principal amount converted, provided that Company actually delivers the Conversion Shares within the time period required by Section 4(c)(ii) herein. Interest hereunder will be paid to the Person in whose name this Debenture is registered in the records of Company regarding registration and transfers of this Debenture (the “Debenture Register”).
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c) Prepayment. Except as otherwise set forth in this Debenture, Company may not prepay any portion of the principal amount of this Debenture without the prior written consent of Holder.
Section 3. Registration of Transfers and Exchanges.
a) Different Denominations. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations, as requested by Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.
b) Investment Representations. This Debenture has been issued subject to certain investment representations of the original Holder set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations.
c) Reliance on Debenture Register. Prior to due presentment for transfer to Company of this Debenture, Company and any agent of Company may treat the Person in whose name this Debenture is duly registered on the Debenture Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture is overdue, and neither Company nor any such agent shall be affected by notice to the contrary.
a) Voluntary Conversion. This Debenture shall be convertible, in whole or in part, into shares of Common Stock at the option of Holder, at any time and from time to time. Holder shall effect conversions by delivering to Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”), specifying therein the principal amount of this Debenture to be converted and, if Holder determines in its sole discretion to convert such accrued and unpaid interest (or a portion thereof), the amount of accrued and unpaid interest thereon to be converted and the date on which such conversion shall be effected; provided that Holder may only convert the portion of the accrued interest that corresponds to the principal being converted (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder. To effect conversions hereunder, Holder shall not be required to physically surrender this Debenture to Company unless the entire principal amount of this Debenture, plus all accrued and unpaid interest thereon, has been so converted or otherwise been repaid to Holder. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Debenture in an amount equal to the principal amount converted in such conversion. Holder and Company shall maintain records showing the principal amount(s) converted and the date of such conversion(s). Company may deliver an objection to any Notice of Conversion within two (2) Business Days of delivery of such Notice of Conversion. In the event of any dispute or discrepancy, the records of Holder shall be controlling and determinative in the absence of manifest error. Holder, and any assignee by acceptance of this Debenture, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Debenture, the unpaid and unconverted principal amount of this Debenture may be less than the amount stated on the face hereof.
b) Conversion Price. The Conversion Price in effect on any Conversion Date shall be equal to [$0.__]2 and shall be subject to adjustment as provided in Section 5 (the “Conversion Price”).
2 NTD: For Debentures with an Original Issue Date prior to January 1, 2017, the Conversion Price will be $0.16. For each Debenture with an Original Issue Date on or after January 1, 2017 the Conversion Price will be $0.20.
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Section 5. Certain Adjustments.
a) Stock Dividends and Stock Splits. If Company, at any time while this Debenture is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by Company upon conversion of, or payment of interest on, the Debentures), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
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b) Subsequent Equity Sales. If, at any time while this Debenture is outstanding, Company or any Subsidiary, as applicable, sells or grants any option to purchase or reprices or reduce the conversion or exercise price of any outstanding Securities, grants any right to reprice, or otherwise disposes of or issues, any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price, other than in connection with any Common Stock Equivalents outstanding on the Original Issue Date (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents 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 lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced to equal the Base Conversion Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no adjustment will be made under this Section 5(b) in respect of an Exempt Issuance. If Company enters into a Variable Rate Transaction, despite the prohibition set forth in the Purchase Agreement, Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion price at which such securities may be converted or exercised. Company shall notify Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 5(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, Holder is entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether Holder accurately refers to the Base Conversion Price in the Notice of Conversion.
c) Subsequent Rights Offerings. If Company, at any time while this Debenture is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and not to Holder) entitling them to subscribe for or purchase shares of Common Stock (the “Purchase Rights”), then, upon any conversion of this Debenture, Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights that Holder could have acquired if Holder had held the number of Conversion Shares issued upon such conversion of this Debenture immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.
d) Pro Rata Distributions. If Company, at any time while this Debenture is outstanding, shall distribute to all holders of Common Stock (and not to Holder) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security other than the Common Stock (a “Distribution”), then, upon any conversion of this Debenture, Holder shall be entitled to participate in such Distribution to the same extent that Holder would have participated therein if Holder had held the number of Conversion Shares issued upon such conversion of this Debenture immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution.
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e) Fundamental Transaction. If, at any time while this Debenture is outstanding, (i) Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of Company with or into another Person, (ii) Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, (v) Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent conversion of this Debenture, Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Debenture is convertible immediately prior to such Fundamental Transaction. For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in such Fundamental Transaction, and Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Debenture following such Fundamental Transaction. Company shall cause any successor entity in a Fundamental Transaction in which Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of Company under this Debenture and the other Transaction Documents (as defined in the Purchase Agreement) in accordance with the provisions of this Section 5(d) pursuant to written agreements in form and substance reasonably satisfactory to Holder and approved by Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Debenture, deliver to Holder in exchange for this Debenture a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Debenture which is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Debenture (without regard to any limitations on the conversion of this Debenture) prior to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Debenture immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Debenture and the other Transaction Documents referring to “Company” shall refer instead to the Successor Entity), and may exercise every right and power of Company and shall assume all of the obligations of Company under this Debenture and the other Transaction Documents with the same effect as if such Successor Entity had been named as Company herein.
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e) Calculations. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of Company) issued and outstanding.
f) Notice to Holder.
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a) Optional Redemption at Election of Holder. Subject to the provisions of this Section 6, at any time after either (i) the date Company announces a Change of Control Transaction or (ii) the date Company or any Subsidiary enters into an agreement providing for the sale of a material portion of their respective assets, Holder may deliver a notice to Company (a “Holder Optional Redemption Notice” and the date such notice is deemed delivered hereunder, the “Holder Optional Redemption Notice Date”) of its irrevocable election to cause Company redeem some or all of the then outstanding principal amount of this Debenture for cash in an amount equal to the Optional Redemption Amount on the later of (i) the 5th Trading Day following the Holder Optional Redemption Notice Date or (ii) the date such applicable transaction triggering such redemption right is consummated (such date, the “Holder Optional Redemption Date” and such redemption, the “Holder Optional Redemption”). The Optional Redemption Amount is payable in full on the Holder Optional Redemption Date. Any Holder Optional Redemption shall be applied ratably to all Holders that submit a Holder Optional Redemption based on their (or their predecessor’s) initial purchases of Debentures pursuant to the Purchase Agreement. Company hereby agrees to publicly disclose any Change of Control Transaction or entry into an asset sale agreement which would trigger a redemption right hereunder within one Trading Day from the date such agreement or transaction is entered into.
b) Redemption Procedure. The payment of cash pursuant to a Holder Optional Redemption shall be payable on the applicable Holder Optional Redemption Date. If any portion of the payment pursuant to a Holder Optional Redemption shall not be paid by Company by the Holder Optional Redemption Date, interest shall accrue on the aggregate amount payable by Company at the Default Rate until such amount is paid in full.
a) other than for the Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any Indebtedness;
b) other than for Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;
c) amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of Holder;
d) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock or Common Stock Equivalents other than as to the Conversion Shares or Warrant Shares as permitted or required under the Transaction Documents;
e) repay, repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness using the proceeds of the Debentures issued on the Closing Date;
f) pay cash dividends or distributions on any equity securities of Company;
g) enter into any transaction with any Affiliate of Company which would be required to be disclosed in any public filing with the Commission, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested directors of Company (even if less than a quorum otherwise required for board approval);
h) issue any additional Common Stock or securities of Company or any of its Subsidiaries other than (i) pursuant to an Exempt Capital Raise; (ii) up to 1,400,000 shares of Common Stock to employees and other service providers of Company as compensation for services provided to Company provided that the issue price for such Common Stock exceeds the then effective Conversion Price; (iii) up to 1,150,895 shares of Common Stock to Liberty in partial payment of the Liberty Debt pursuant to the terms of the Liberty Loan Documents or (iv) issuance of stock options (or shares of Common Stock in exchange for such stock options) pursuant to Company’s stock option plan in effect on the Closing Date;
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i) make any investments other than (i) investments in cash and/or cash equivalents and (ii) investments by Company in the Australian Subsidiary;
j) dissolve, liquidate, merge, consolidate or otherwise alter or modify Company’s or any Subsidiaries’ corporate name, mailing address, principal place of business, structure, status or existence or enter into or engage in any operation or activity materially different from that presently conducted by Company or such Subsidiary; make any substantial change in its executive management, or form any Subsidiary;
k) sell, lease, transfer or otherwise dispose of its properties, assets, rights, licenses and franchises to any Person, except sales of production or inventory in the ordinary course of its business or turn over the management of, or enter a management contract with respect to, such properties, assets, rights, licenses and franchises or enter into any arrangement, directly or indirectly, with any Person whereby it shall sell or transfer any property, real, personal or mixed, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property; or
l) enter into any agreement with respect to any of the foregoing.
a) “Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
i. any default in the payment of (A) the principal amount of any Debenture or (B) interest, liquidated damages and other amounts owing to any Holder of a Debenture, as and when the same shall become due and payable (whether on an Interest Settlement Date, a Conversion Date or the Maturity Date or by acceleration or otherwise), and solely with respect to payment of interest in cash after delivery of a Cash Pay Notice such failure continues for three (3) Trading Days after an Interest Settlement Date;
ii. Company shall fail to observe or perform any other covenant or agreement contained in a Transaction Document (other than (x) a breach by Company of its obligations to deliver shares of Common Stock to Holder upon conversion or a breach by Company of its obligations to deliver shares of Common Stock to the holder of a Warrant upon exercise thereof which breaches are addressed in clause (vii) below or (y) any failure by Company to observe or perform any covenant or agreement contained in the Registration Rights Agreement, except as set forth in clause (x) below) which failure, unless a cure period is specifically provided with respect to such failure to observe or perform, is not cured, if possible to cure, within the earlier to occur of (A) 4 Trading Days after notice of such failure sent by Holder or by any other Holder to Company and (B) 7 Trading Days after Company has become or should have become aware of such failure;
iii. any representation or warranty made in this Debenture or any other Transaction Documents, any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to Holder shall be untrue or incorrect in any material respect as of the date when made or deemed made;
iv. a Bankruptcy Event shall occur;
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v. Company or any Subsidiary shall default on any of its obligations under (A) the Liberty Debt or (B) any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that, in the case of this clause (B): (1) involves an obligation greater than $75,000, whether such indebtedness now exists or shall hereafter be created, and (2) results in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;
vi. Company shall be a party to any Change of Control Transaction or a Fundamental Transaction or shall agree to sell or dispose of all or in excess of 50% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change of Control Transaction);
vii. Company shall fail for any reason to deliver certificates to Holder prior to the third Trading Day after the Share Delivery Date pursuant to Section 4(c) or fail to deliver certificates to a holder of Warrants prior to the third Trading Day after the Warrant Share Delivery Date (as defined in the Warrants) or Company shall provide at any time notice to Holder, including by way of public announcement, of Company’s intention to not honor requests for conversions of any Debentures in accordance with the terms hereof or exercise of the Warrants in accordance with the terms thereof;
viii. any monetary judgment, writ or similar final process shall be entered against Company, any Subsidiary or any of their respective property or other assets for more than $75,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of 45 calendar days;
ix. Company fails to meet the current public information requirements under Rule 144 in respect of the Underlying Shares for more than 10 consecutive Trading Days;
x. Company shall fail to pay when due any liquidated damages under the Registration Rights Agreement as and when the same shall become due and payable and such failure continues for 30 calendar days;
xi. Company shall fail to deliver a certificate of a responsible officer of Company (each such certificate, an “Annual License Milestone Certificate”) to Purchaser at least 90 days prior to the required completion date for each “minimum work requirement” to be completed under the Petroleum Exploration License certifying (A) that Company has adequate funds to fulfill the applicable annual minimum work requirement in accordance with the terms of the Petroleum Exploration License; (B) that Company expects to be able to fulfill the applicable annual minimum work requirement in accordance with the terms of the Petroleum Exploration License and (C) as to other matters relating to the Petroleum Exploration License as requested by Purchaser;
xii. termination of the Petroleum Exploration License; or
xiii. either (A) Company delivers an Annual License Milestone Certificate which indicates a prospective non-compliance with the certifications required by subclauses (A) and/or (B) in clause (xi) above or (B) Company fails to meet any of the annual minimum work requirements set forth in the Petroleum Exploration License.
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b) Remedies Upon Event of Default. If any Event of Default has occurred and is continuing, the outstanding principal amount of this Debenture, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Majority Holders’ election, immediately due and payable in cash at the Mandatory Default Amount. Commencing 5 calendar days after the occurrence of any Event of Default that results in the eventual acceleration of this Debenture, interest on the Mandatory Default Amount shall accrue at the Default Rate. Upon the payment in full of the Mandatory Default Amount, Holder shall promptly surrender this Debenture to or as directed by Company. In connection with such acceleration described herein, Holder need not provide, and Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and Holder shall have all rights as a holder of the Debenture until such time, if any, as Holder receives full payment pursuant to this Section 8(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.
a) Notices. Any and all notices or other communications or deliveries to be provided by Holder hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile or email, or sent by an internationally recognized overnight courier service, addressed to Company, set forth in the Purchase Agreement, or such other facsimile number, email address or address as Company may specify for such purposes by notice to Holder delivered in accordance with this Section 9(a). Any and all notices or other communications or deliveries to be provided by Company hereunder shall be in writing and delivered, by facsimile or email, or sent by an internationally recognized overnight courier service addressed to each Holder at the facsimile number, email address or address of Holder appearing on the books of Company, or if no such facsimile number, email address or address appears on the books of Company, at the principal place of business of Holder, as set forth in the Purchase Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile or email at the facsimile number or email address set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile or email at the facsimile number or email address set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given. If an email address is provided for a party on the signature pages attached hereto, notice to such party given by other means hereunder shall also be given by email, provided, that failure to deliver a duplicate notice by email shall not constitute a failure to deliver the applicable notice.
b) Absolute Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation of Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct debt obligation of Company. This Debenture ranks pari passu with all other Debentures now or hereafter issued under the terms set forth herein.
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c) Lost or Mutilated Debenture. If this Debenture shall be mutilated, lost, stolen or destroyed, Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof and a lost Debenture affidavit, reasonably satisfactory to Company.
d) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Debenture shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, County of New York (the “New York Courts”) unless otherwise specified therein. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Debenture and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS DEBENTURE OR THE TRANSACTIONS CONTEMPLATED HEREBY. IF ANY PARTY SHALL COMMENCE AN ACTION OR PROCEEDING TO ENFORCE ANY PROVISIONS OF THIS DEBENTURE, THEN THE PREVAILING PARTY IN SUCH ACTION OR PROCEEDING SHALL BE REIMBURSED BY THE OTHER PARTY FOR ITS ATTORNEYS FEES AND OTHER COSTS AND EXPENSES INCURRED IN THE INVESTIGATION, PREPARATION AND PROSECUTION OF SUCH ACTION OR PROCEEDING.
e) Waiver. Any waiver by Company or Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture. The failure of Company or Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture on any other occasion. Any waiver by Company or Holder must be in writing.
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g) Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.
h) Headings. The headings contained herein are for convenience only, do not constitute a part of this Debenture and shall not be deemed to limit or affect any of the provisions hereof.
i) Secured Obligation. The obligations of Company under this Debenture are secured by all assets of Company and each Subsidiary (other than the Petroleum Exploration License) pursuant to the Security Agreement and the Australian Security Agreement, each dated as of May 27, 2016 among Company, the relevant Subsidiaries of Company and Agent.
j) Amendments. This Debenture and each of the other Debentures issued under the Purchase Agreement may be amended upon the written consent of Company and the Majority Holders.
(Signature Pages Follow)
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DISCOVERY ENERGY CORP. | ||
By: | ||
Xxxxx X. Xxxxxxxxxxx, Chairman | ||
Facsimile No. for delivery of Notices: | ||
(000) 000-0000 | ||
Email address for delivery of Notices: | ||
xxxxxxxxxxxx0@xxxxxxx.xxx | ||
xxx@xxxxxxxxxxxxxxx.xxx |
Signature Page to Senior Secured Convertible Debenture (Texican)
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal under the Senior Secured Convertible Debenture due May 27, 2021 of Discovery Energy Corp., a Nevada corporation (the “Company”), into shares of common stock (the “Common Stock”), of Company according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by Company in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.
By the delivery of this Notice of Conversion, the undersigned represents and warrants to the Company that the undersigned’s representations and warranties contained in Section 3.2 of the Purchase Agreement (as defined in the Debenture), including that the undersigned is either (i) an “accredited investor” as defined in Rule 501(a) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act as of the giving of this Notice of Conversion, are true and correct as of the giving of this Notice of Conversion.
The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.
Conversion calculations:
Date to Effect Conversion:
Principal Amount of Debenture to be Converted:
Accrued and Unpaid Interest on Amount of Debenture to be Converted:
Number of shares of Common Stock to be issued:
Signature: | |
Name: | |
Address for Delivery of Common Stock Certificates: |
Or
DWAC Instructions:
Broker No:_________________________
Account No:_______________________
Schedule 1
CONVERSION SCHEDULE
The Senior Secured Convertible Debentures due on May 27, 2021 in the aggregate principal amount of [$__________ ] issued by Discovery Energy Corp., a Nevada corporation. This Conversion Schedule reflects conversions made under Section 4 of the above referenced Debenture.
Dated:
Date of Conversion (or for first entry, Original Issue Date) |
Amount of Conversion | Aggregate Principal Amount Remaining Subsequent to Conversion (or original Principal Amount) |
Company Attest | |||
Exhibit C to First Amendment to Securities Purchase Agreement