SECURITIES PURCHASE AGREEMENT
Exhibit 10.1
This
SECURITIES PURCHASE
AGREEMENT (the “Agreement”), dated as of April
22, 2021, by and between TEGO CYBER
INC., a Nevada corporation, with headquarters located at
0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxx 00000 (the
“Company”), and ANALYTICO SERVICES INC., a Quebec
corporation, with an address at 0000 Xxx X’Xxxxx,
Xxxxx-Xxxxxxx, Xxxxxx, Xxxxxx, X0X 0X0 (the
“Buyer”).
WHEREAS:
A. The Company and the
Buyer are executing and delivering this Agreement in reliance upon
the exemption from securities registration afforded by Section
4(a)(2) of the Securities Act of 1933, as amended (the “1933
Act”) and Rule 506(b) promulgated by the United States
Securities and Exchange Commission (the “SEC”) under
the 1933 Act;
B. Buyer desires to
purchase from the Company, and the Company desires to issue and
sell to the Buyer, upon the terms and conditions set forth in this
Agreement, a Convertible Promissory Note of the Company, in the
aggregate principal amount of $55,245.39 (as the principal amount
thereof may be increased pursuant to the terms thereof, and
together with any note(s) issued in replacement thereof or as a
dividend thereon or otherwise with respect thereto in accordance
with the terms thereof, in the form attached hereto as Exhibit A (the
“Note”), convertible into shares of common stock,
$0.001 par value per share, of the Company (the “Common
Stock”), upon the terms and subject to the limitations and
conditions set forth in such Note;
C. Buyer desires to
purchase from the Company, and the Company desires to issue and
sell to the Buyer, upon the terms and conditions set forth in this
Agreement, a Warrant in accordance with the terms thereof, in the
form attached hereto as Exhibit B (the
“Warrant”), exercisable into shares of Common Stock,
upon the terms and subject to the limitations and conditions set
forth in such Warrant; and
NOW THEREFORE, in consideration of the
foregoing and of the agreements and covenants herein contained, and
for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the
Buyer hereby agree as follows:
1.
Purchase and Sale of Note and Warrant.
a. Purchase of Note and Warrant.
On the Closing Date (as defined below), the Company shall issue and
sell to the Buyer and the Buyer agrees to purchase from the Company
the Note and the Warrant, subject to the express terms of the Note,
the Warrant, and this Agreement as the case may be.
b. Form of Payment. On the Closing
Date, the Buyer shall pay the purchase price of $50,683.84 (the
“Purchase Price”) for the Note, by wire transfer of
immediately available funds, in accordance with the Company’s
written wiring instructions, against delivery of the Note, and the
Warrant, and the Company shall deliver such duly executed Note, and
Warrant on behalf of the Company, to the Buyer.
c. Closing Date. Subject to the
satisfaction (or written waiver) of the conditions thereto set
forth in Section 6 and Section 7 below, the date and time of the
issuance and sale of the Note and Warrant pursuant to this
Agreement (the “Closing Date”) shall be 4:00 PM,
Eastern Time on the date first written above, or such other
mutually agreed upon time.
d. Closing. The closing of the
transactions contemplated by this Agreement (the
“Closing”) shall occur on the Closing Date at such
location as may be agreed to by the parties (including via exchange
of electronic signatures).
2. Buyer’s Representations and
Warranties. The Buyer represents and warrants to the Company
as of the Closing Date that:
a. Investment Purpose. As of the
Closing Date, the Buyer is purchasing the Note and Warrant and the
shares of Common Stock issuable upon conversion or exercise of or
otherwise pursuant to the Note or Warrant and such additional
shares of Common Stock, if any, as are issuable on account of
interest on the Note and Warrant pursuant to this Agreement, such
shares of Common Stock being collectively referred to herein as the
“Conversion Shares” and, collectively with the Note,
and Warrant, the “Securities”) for its own account and
not with a present view towards the public sale or distribution
thereof, except pursuant to sales registered or exempted from
registration under the 1933 Act; provided, however, that by making the
representations herein, the Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with
or pursuant to a registration statement or an exemption under the
1933 Act.
b. Accredited Investor Status. The
Buyer is an “accredited investor” as that term is
defined in Rule 501(a) of Regulation D (an “Accredited
Investor”).
c. Reliance on Exemptions. The
Buyer understands that the Securities are being offered and sold to
it in reliance upon specific exemptions from the registration
requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the
Buyer’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the
Securities.
d. Information. The Buyer and its
advisors, if any, have been, and for so long as any of the
Securities remain outstanding will continue to be, furnished with
all materials relating to the business, finances and operations of
the Company and materials relating to the offer and sale of the
Securities which have been requested by the Buyer or its advisors.
The Buyer and its advisors, if any, have been, and for so long as
the Note or Warrant remains outstanding will continue to be,
afforded the opportunity to ask questions of the Company regarding
its business and affairs. Notwithstanding the foregoing, the
Company has not disclosed to the Buyer any material nonpublic
information regarding the Company or otherwise and will not
disclose such information unless such information is disclosed to
the public prior to or promptly following such disclosure to the
Buyer. Neither such inquiries nor any other due diligence
investigation conducted by Buyer or any of its advisors or
representatives shall modify, amend or affect Buyer’s right
to rely on the Company’s representations and warranties
contained in Section 3 below.
e. Governmental Review. The Buyer
understands that no United States federal or state agency or any
other government or governmental agency has passed upon or made any
recommendation or endorsement of the Securities.
f. Transfer or Re-sale. The Buyer
understands that (i) the sale or resale of the Securities has not
been and is not being registered under the 1933 Act or any
applicable state securities laws, and the Securities may not be
transferred unless (a) the Securities are sold pursuant to an
effective registration statement under the 1933 Act, (b) the Buyer
shall have delivered to the Company, at the cost of the Company, an
opinion of counsel (which may be the Legal Counsel Opinion (as
defined below)) that shall be in form, substance and scope
customary for opinions of counsel in comparable transactions to the
effect that the Securities to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration, which
opinion shall be accepted by the Company, (c) the Securities are
sold or transferred to an “affiliate” (as defined in
Rule 144 promulgated under the 1933 Act (or a successor rule)
(“Rule 144”)) of the Buyer who agrees to sell or
otherwise transfer the Securities only in accordance with this
Section 2(f) and who is an Accredited Investor, (d) the Securities
are sold pursuant to Rule 144 or other applicable exemption, or (e)
the Securities are sold pursuant to Regulation S under the 1933 Act
(or a successor rule) (“Regulation S”), and the Buyer
shall have delivered to the Company, at the cost of the Company, an
opinion of counsel that shall be in form, substance and scope
customary for opinions of counsel in corporate transactions, which
opinion shall be accepted by the Company; (ii) any sale of such
Securities made in reliance on Rule 144 may be made only in
accordance with the terms of said Rule and further, if said Rule is
not applicable, any re-sale of such Securities under circumstances
in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the
0000 Xxx) may require compliance with some other exemption under
the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other person is under any
obligation to register such Securities under the 1933 Act or any
state securities laws or to comply with the terms and conditions of
any exemption thereunder (in each case).
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g. Legends. The Buyer understands
that until such time as the Note, and, upon conversion of the Note
in accordance with its respective terms, the Conversion Shares,
have been registered under the 1933 Act or may be sold pursuant to
Rule 144, Rule 144A under the 1933 Act, Regulation S, or other
applicable exemption without any restriction as to the number of
securities as of a particular date that can then be immediately
sold, the Securities may bear a restrictive legend in substantially
the following form (and a stop-transfer order may be placed against
transfer of the certificates for such Securities):
“NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
[CONVERTIBLE/EXERCISABLE] HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE
SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
PURSUANT TO RULE 144, RULE 144A, REGULATION S, OR OTHER APPLICABLE
EXEMPTION UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.”
The
legend set forth above shall be removed and the Company shall issue
a certificate for the applicable shares of Common Stock without
such legend to the holder of any Security upon which it is stamped
or (as requested by such holder) issue the applicable shares of
Common Stock to such holder by electronic delivery by crediting the
account of such holder’s broker with The Depository Trust
Company (“DTC”),
if, unless otherwise required by applicable state securities laws,
(a) such Security is registered for sale under an effective
registration statement filed under the 1933 Act or otherwise may be
sold pursuant to Rule 144, Rule 144A, Regulation S, or other
applicable exemption without any restriction as to the number of
securities as of a particular date that can then be immediately
sold, or (b) the Company or the Buyer provides the Legal Counsel
Opinion (as contemplated by and in accordance with Section 4(m)
hereof) to the effect that a public sale or transfer of such
Security may be made without registration under the 1933 Act, which
opinion shall be accepted by the Company so that the sale or
transfer is effected. The Company shall be responsible for the fees
of its transfer agent and all DTC fees associated with any such
issuance, up to a maximum of $500 per issuance. The Buyer agrees to
sell all Securities, including those represented by a
certificate(s) from which the legend has been removed, in
compliance with applicable prospectus delivery requirements, if
any. In the event that the Company does not accept the opinion of
counsel provided by the Buyer with respect to the transfer of
Securities pursuant to an exemption from registration, such as Rule
144, Rule 144A, Regulation S, or other applicable exemption at the
Deadline (as defined in the Note), it will be considered an Event
of Default pursuant to Section 3.2 of the Note.
h. Authorization; Enforcement.
This Agreement has been duly and validly authorized by the Buyer
and has been duly executed and delivered on behalf of the Buyer,
and this Agreement constitutes a valid and binding agreement of the
Buyer enforceable in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting
creditors’ rights generally and except as may be limited by
the exercise of judicial discretion in applying principles of
equity.
i. Manipulation of Price. The
Buyer has not, and to its knowledge no one acting on its behalf
has: (i) taken, directly or indirectly, any action designed to
cause or to result, or that could reasonably be expected to cause
or result, in the stabilization or manipulation of the price of any
security of the Company, (ii) sold, bid for, purchased, or paid any
compensation for soliciting purchases of, any Stock in the open
market, or (iii) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other
securities of the Company.
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j. No Shorting. Buyer and its
affiliates shall be prohibited from engaging directly or indirectly
in any short selling or hedging transactions with respect to any
securities of the Company while this Note is
outstanding.
3. Representations and Warranties of the
Company. The Company represents and warrants to the Buyer as
of the Closing Date that:
a. Organization and Qualification.
The Company and each of its Subsidiaries (as defined below), if
any, is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is
incorporated, with full power and authority (corporate and other)
to own, lease, use and operate its properties and to carry on its
business as and where now owned, leased, used, operated and
conducted. Schedule 3(a), if attached hereto, sets forth a list of
all of the Subsidiaries of the Company and the jurisdiction in
which each is incorporated. The Company and each of its
Subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which its
ownership or use of property or the nature of the business
conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a
Material Adverse Effect. “Material Adverse Effect”
means any material adverse effect on the business, operations,
assets, financial condition or prospects of the Company or its
Subsidiaries, if any, taken as a whole, or on the transactions
contemplated hereby or by the agreements or instruments to be
entered into in connection herewith. “Subsidiaries”
means any corporation or other organization, whether incorporated
or unincorporated, in which the Company owns, directly or
indirectly, any equity or other ownership interest.
b. Authorization; Enforcement. (i)
The Company has all requisite corporate power and authority to
enter into and perform this Agreement, the Note, and to consummate
the transactions contemplated hereby and thereby and to issue the
Securities, in accordance with the terms hereof and thereof, (ii)
the execution and delivery of this Agreement, the Note, and the
Conversion Shares by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including without
limitation, the issuance of the Note, as well as the issuance and
reservation for issuance of the Conversion Shares issuable upon
conversion of the Note) have been duly authorized by the
Company’s Board of Directors and no further consent or
authorization of the Company, its Board of Directors, its
shareholders, or its debt holders is required, (iii) this Agreement
and the Note (together with any other instruments executed in
connection herewith or therewith) have been duly executed and
delivered by the Company by its authorized representative, and such
authorized representative is the true and official representative
with authority to sign this Agreement, the Note and the other
instruments documents executed in connection herewith or therewith
and bind the Company accordingly, and (iv) this Agreement
constitutes, and upon execution and delivery by the Company of the
Note, each of such instruments will constitute, a legal, valid and
binding obligation of the Company, enforceable against the Company
in accordance with their terms.
c. Capitalization; Governing
Documents. As of April 15, 2021 the authorized capital stock
of the Company consists of: 50,000,000 authorized shares of Common
Stock, of which 13,800,236 shares were issued and outstanding. All
of such outstanding shares of capital stock of the Company and the
Conversion Shares, are, or upon issuance will be, duly authorized,
validly issued, fully paid and non-assessable. No shares of capital
stock of the Company are subject to preemptive rights or any other
similar rights of the shareholders of the Company or any liens or
encumbrances imposed through the actions or failure to act of the
Company. As of the effective date of this Agreement, other than as
publicly announced prior to such date and reflected in the SEC
Documents (as defined in this Agreement) of the Company (i) there
are no outstanding options, warrants, scrip, rights to subscribe
for, puts, calls, rights of first refusal, agreements,
understandings, claims or other commitments or rights of any
character whatsoever relating to, or securities or rights
convertible into or exchangeable for any shares of capital stock of
the Company or any of its Subsidiaries, or arrangements by which
the Company or any of its Subsidiaries is or may become bound to
issue additional shares of capital stock of the Company or any of
its Subsidiaries, (ii) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to
register the sale of any of its or their securities under the 1933
Act and (iii) there are no anti-dilution or price adjustment
provisions contained in any security issued by the Company (or in
any agreement providing rights to security holders) that will be
triggered by the issuance of any of the Securities. The Company has
furnished to the Buyer true and correct copies of the
Company’s Certificate of Incorporation as in effect on the
date hereof (“Certificate of Incorporation”), the
Company’s Bylaws, as in effect on the date hereof (the
“By-laws”), and the terms of all securities convertible
into or exercisable for Common Stock of the Company and the
material rights of the holders thereof in respect
thereto.
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d. Issuance of Conversion Shares.
The Conversion Shares are duly authorized and reserved for issuance
and, upon conversion of the Note in accordance with its terms, will
be validly issued, fully paid and non- assessable, and free from
all taxes, liens, claims and encumbrances with respect to the issue
thereof and shall not be subject to preemptive rights or other
similar rights of shareholders of the Company and will not impose
personal liability upon the holder thereof.
e. No Broker-Dealer
Acknowledgement. Absent a final adjudication from a court of
competent jurisdiction stating otherwise, so long as any amount on
this Note remains outstanding, the Company shall not to any person,
institution, governmental or other entity, state, claim, allege, or
in any way assert, that Holder is currently, or ever has been a
broker-dealer under the Securities Exchange Act of
1934.
f. Acknowledgment of Dilution. The
Company understands and acknowledges the potentially dilutive
effect of the Conversion Shares to the Common Stock upon the
conversion of the Note or exercise of the Warrant. The Company
further acknowledges that its obligation to issue, upon conversion
of the Note or exercise of the Warrant, the Conversion Shares, in
accordance with this Agreement, the Note, and the Warrant are
absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other
shareholders of the Company.
g. Ranking; No Conflicts. The Note
shall be a subordinate debt obligation of the Company. The
execution, delivery and performance of this Agreement and the Note
by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without
limitation, the issuance and reservation for issuance of the
Conversion Shares) will not (i) conflict with or result in a
violation of any provision of the Certificate of Incorporation or
Bylaws, or (ii) violate or conflict with, or result in a breach of
any provision of, or constitute a default (or an event which with
notice or lapse of time or both could become a default) under, or
give to others any rights of termination, amendment, acceleration
or cancellation of, any agreement, note, evidence of indebtedness,
indenture, patent, patent license or instrument to which the
Company or any of its Subsidiaries is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the
Company or its securities is subject) applicable to the Company or
any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect), or (iv) trigger any
anti-dilution and/or ratchet provision contained in any other
contract in which the Company is a party thereto or any security
issued by the Company. Neither the Company nor any of its
Subsidiaries is in violation of its Certificate of Incorporation,
By-laws or other organizational documents and neither the Company
nor any of its Subsidiaries is in default (and no event has
occurred which with notice or lapse of time or both could put the
Company or any of its Subsidiaries in default) under, and neither
the Company nor any of its Subsidiaries has taken any action or
failed to take any action that would give to others any rights of
termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of
its Subsidiaries is a party or by which any property or assets of
the Company or any of its Subsidiaries is bound or affected, except
for possible defaults as would not, individually or in the
aggregate, have a Material Adverse Effect. The businesses of the
Company and its Subsidiaries, if any, are not being conducted, and
shall not be conducted so long as the Buyer owns any of the
Securities, in violation of any law, ordinance or regulation of any
governmental entity. Except as specifically contemplated by this
Agreement and as required under the 1933 Act and any applicable
state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or
registration with, any court, governmental agency, regulatory
agency, self-regulatory organization or stock market or any third
party in order for it to execute, deliver or perform any of its
obligations under this Agreement and the Note in accordance with
the terms hereof or thereof or to issue and sell the Note in
accordance with the terms hereof and, upon conversion of the Note,
issue Conversion Shares. All consents, authorizations, orders,
filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected
on or prior to the date hereof. The Company and its Subsidiaries
are unaware of any facts or circumstances which might give rise to
any of the foregoing.
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h. SEC Documents; Financial
Statements. The Company has timely filed all reports,
schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of
the Securities Exchange Act of 1934, as amended (the “1934
Act”) (all of the foregoing filed prior to the date hereof
and all exhibits included therein and financial statements and
schedules thereto and documents (other than exhibits to such
documents) incorporated by reference therein, being hereinafter
referred to herein as the “SEC Documents”). As of their
respective dates, the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were
filed with the SEC, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading. None of the statements made in any such SEC Documents
is, or has been, required to be amended or updated under applicable
law (except for such statements as have been amended or updated in
subsequent filings prior the date hereof). As of their respective
dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with United States
generally accepted accounting principles, consistently applied,
during the periods involved and fairly present in all material
respects the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments). Except as set forth in the
financial statements of the Company included in the SEC Documents,
the Company has no liabilities, contingent or otherwise, other than
(i) liabilities incurred in the ordinary course of business
subsequent to December 31, 2020, and (ii) obligations under
contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting
principles to be reflected in such financial statements, which,
individually or in the aggregate, are not material to the financial
condition or operating results of the Company. The Company is not
subject to the reporting requirements of the 1934 Act as of the
date of this Agreement. The Company has never been a “shell
company” as described in Rule 144(i)(1)(i).
i. Absence of Certain Changes.
Since December 31, 2020, there has been no material adverse change
and no material adverse development in the assets, liabilities,
business, properties, operations, financial condition, results of
operations, prospects or 1934 Act reporting status of the Company
or any of its Subsidiaries.
j. Absence of Litigation. There is
no action, suit, claim, proceeding, inquiry or investigation before
or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company or
any of its Subsidiaries, threatened against or affecting the
Company or any of its Subsidiaries, or their officers or directors
in their capacity as such, that could have a Material Adverse
Effect. The SEC Documents contain a complete list and summary
description of any pending or, to the knowledge of the Company,
threatened proceeding against or affecting the Company or any of
its Subsidiaries, without regard to whether it would have a
Material Adverse Effect. The Company and its Subsidiaries are
unaware of any facts or circumstances which might give rise to any
of the foregoing. Notwithstanding the foregoing, the Buyer
acknowledges the existence of all litigations disclosed and
outstanding the SEC Documents.
k. Intellectual Property. The
Company and each of its Subsidiaries owns or possesses the
requisite licenses or rights to use all patents, patent
applications, patent rights, inventions, know-how, trade secrets,
trademarks, trademark applications, service marks, service names,
trade names and copyrights (“Intellectual Property”)
necessary to enable it to conduct its business as now operated
(and, as presently contemplated to be operated in the future);
there is no claim or action by any person pertaining to, or
proceeding pending, or to the Company’s knowledge threatened,
which challenges the right of the Company or of a Subsidiary with
respect to any Intellectual Property necessary to enable it to
conduct its business as now operated (and, as presently
contemplated to be operated in the future); to the best of the
Company’s knowledge, the Company’s or its
Subsidiaries’ current and intended products, services and
processes do not infringe on any Intellectual Property or other
rights held by any person; and the Company is unaware of any facts
or circumstances which might give rise to any of the foregoing. The
Company and each of its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of their
Intellectual Property.
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l. No Materially Adverse Contracts,
Etc. Neither the Company nor any of its Subsidiaries is
subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation which in the
judgment of the Company’s officers has or is expected in the
future to have a Material Adverse Effect. Neither the Company nor
any of its Subsidiaries is a party to any contract or agreement
which in the judgment of the Company’s officers has or is
expected to have a Material Adverse Effect.
m. Tax Status. The Company and
each of its Subsidiaries has made or filed all federal, state and
foreign income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries
has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes) and has paid all taxes
and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has
set aside on its books provisions reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. There are no unpaid
taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know
of no basis for any such claim. The Company has not executed a
waiver with respect to the statute of limitations relating to the
assessment or collection of any foreign, federal, state or local
tax. None of the Company’s tax returns is presently being
audited by any taxing authority.
n. Transactions with Affiliates.
Except for arm’s length transactions pursuant to which the
Company or any of its Subsidiaries makes payments in the ordinary
course of business upon terms no less favorable than the Company or
any of its Subsidiaries could obtain from third parties and other
than the grant of stock options described in the SEC Documents,
none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer,
director, trustee or partner.
o. Disclosure. All information
relating to or concerning the Company or any of its Subsidiaries
set forth in this Agreement and provided to the Buyer pursuant to
Section 2(d) hereof and otherwise in connection with the
transactions contemplated hereby is true and correct in all
material respects and the Company has not omitted to state any
material fact necessary in order to make the statements made herein
or therein, in light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or
exists with respect to the Company or any of its Subsidiaries or
its or their business, properties, prospects, operations or
financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the
Company but which has not been so publicly announced or disclosed
(assuming for this purpose that the Company’s reports filed
under the 1934 Act are being incorporated into an effective
registration statement filed by the Company under the 1933
Act).
p. Acknowledgment Regarding Buyer’s
Purchase of Securities. The Company acknowledges and agrees
that the Buyer is acting solely in the capacity of arm’s
length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges
that the Buyer is not acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any
statement made by the Buyer or any of its respective
representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation
and is merely incidental to the Buyer’s purchase of the
Securities. The Company further represents to the Buyer that the
Company’s decision to enter into this Agreement has been
based solely on the independent evaluation of the Company and its
representatives.
-6-
q. No Integrated Offering. Neither
the Company, nor any of its affiliates, nor any person acting on
its or their behalf, has directly or indirectly made any offers or
sales in any security or solicited any offers to buy any security
under circumstances that would require registration under the 1933
Act of the issuance of the Securities to the Buyer. The issuance of
the Securities to the Buyer will not be integrated with any other
issuance of the Company’s securities (past, current or
future) for purposes of any shareholder approval provisions
applicable to the Company or its securities.
r. No Brokers. Other than the use
of Xxxxxx, Xxxxx & Company, Inc., the Company has taken no
action which would give rise to any claim by any person for
brokerage commissions, transaction fees or similar payments
relating to this Agreement or the transactions contemplated
hereby.
s. Permits; Compliance. The
Company and each of its Subsidiaries is in possession of all
franchises, grants, authorizations, licenses, permits, easements,
variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on
its business as it is now being conducted (collectively, the
“Company Permits”), and there is no action pending or,
to the knowledge of the Company, threatened regarding suspension or
cancellation of any of the Company Permits. Neither the Company nor
any of its Subsidiaries is in conflict with, or in default or
violation of, any of the Company Permits, except for any such
conflicts, defaults or violations which, individually or in the
aggregate, would not reasonably be expected to have a Material
Adverse Effect. Since December 31, 2020, neither the Company nor
any of its Subsidiaries has received any notification with respect
to possible conflicts, defaults or violations of applicable laws,
except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have
a Material Adverse Effect.
t.
Environmental Matters.
(i) There are, to the
Company’s knowledge, with respect to the Company or any of
its Subsidiaries or any predecessor of the Company, no past or
present violations of Environmental Laws (as defined below),
releases of any material into the environment, actions, activities,
circumstances, conditions, events, incidents, or contractual
obligations which may give rise to any common law environmental
liability or any liability under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 or similar
federal, state, local or foreign laws and neither the Company nor
any of its Subsidiaries has received any notice with respect to any
of the foregoing, nor is any action pending or, to the
Company’s knowledge, threatened in connection with any of the
foregoing. The term ”Environmental Laws” means all
federal, state, local or foreign laws relating to pollution or
protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface
or subsurface strata), including, without limitation, laws relating
to emissions, discharges, releases or threatened releases of
chemicals, pollutants contaminants, or toxic or hazardous
substances or wastes (collectively, “Hazardous
Materials”) into the environment, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as
all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated
or approved thereunder.
(ii) Other
than those that are or were stored, used or disposed of in
compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, leased or
used by the Company or any of its Subsidiaries, and no Hazardous
Materials were released on or about any real property previously
owned, leased or used by the Company or any of its Subsidiaries
during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of
the Company’s or any of its Subsidiaries’
business.
(iii) There
are no underground storage tanks on or under any real property
owned, leased or used by the Company or any of its Subsidiaries
that are not in compliance with applicable law.
-7-
u. Title to Property. The Company
and its Subsidiaries have good and marketable title in fee simple
to all real property and good and marketable title to all personal
property owned by them which is material to the business of the
Company and its Subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as are described in
Schedule 3(u), if attached hereto, or such as would not have a
Material Adverse Effect. Any real property and facilities held
under lease by the Company and its Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions
as would not have a Material Adverse Effect.
v. Insurance. The Company and each
of its Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in
the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has any reason
to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
Upon written request the Company will provide to the Buyer true and
correct copies of all policies relating to directors’ and
officers’ liability coverage, errors and omissions coverage,
and commercial general liability coverage.
w. Internal Accounting Controls.
The Company and each of its Subsidiaries maintain a system of
internal accounting controls sufficient, in the judgment of the
Company’s board of directors, to provide reasonable assurance
that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with
management’s general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
x. Foreign Corrupt Practices.
Neither the Company, nor any of its Subsidiaries, nor any director,
officer, agent, employee or other person acting on behalf of the
Company or any Subsidiary has, in the course of his actions for, or
on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; made any direct or
indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices
Act of 1977, as amended, or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.
y. Solvency. The Company (after
giving effect to the transactions contemplated by this Agreement)
is solvent (i.e.,
its assets have a fair market value in excess of the amount
required to pay its probable liabilities on its existing debts as
they become absolute and matured) and currently the Company has no
information that would lead it to reasonably conclude that the
Company would not, after giving effect to the transaction
contemplated by this Agreement, have the ability to, nor does it
intend to take any action that would impair its ability to, pay its
debts from time to time incurred in connection therewith as such
debts mature. The Company’s financial statements for its most
recent fiscal year end and interim financial statements have been
prepared assuming the Company will continue as a going concern,
which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business.
z. No Investment Company. The
Company is not, and upon the issuance and sale of the Securities as
contemplated by this Agreement will not be an “investment
company” required to be registered under the Investment
Company Act of 1940 (an “Investment Company”). The
Company is not controlled by an Investment Company.
-8-
aa.
No Off-Balance Sheet
Arrangements. There is no transaction, arrangement, or other
relationship between the Company or any of its Subsidiaries and an
unconsolidated or other off-balance sheet entity that is required
to be disclosed by the Company in its 1934 Act filings and is not
so disclosed or that otherwise could be reasonably likely to have a
Material Adverse Effect.
bb.
No Disqualification
Events. None of the Company, any of its predecessors, any
affiliated issuer, any director, executive officer, other officer
of the Company participating in the offering hereunder, any
beneficial owner of twenty percent (20%) or more of the
Company’s outstanding voting equity securities, calculated on
the basis of voting power, nor any promoter (as that term is
defined in Rule 405 under the 0000 Xxx) connected with the Company
in any capacity at the time of sale (each, an “Issuer Covered
Person”) is subject to any of the “Bad Actor”
disqualifications described in Rule 506(d)(1)(i) to (viii) under
the 1933 Act (a “Disqualification Event”), except for a
Disqualification Event covered by Rule 506(d)(2) or (d)(3). The
Company has exercised reasonable care to determine whether any
Issuer Covered Person is subject to a Disqualification
Event.
cc.
Manipulation of
Price. The Company has not, and to its knowledge no one
acting on its behalf has: (i) taken, directly or indirectly, any
action designed to cause or to result, or that could reasonably be
expected to cause or result, in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale
or resale of any of the Securities, (ii) sold, bid for, purchased,
or paid any compensation for soliciting purchases of, any of the
Securities, or (iii) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other
securities of the Company.
dd.
Bank Holding Company
Act. Neither the Company nor any of its Subsidiaries is
subject to the Bank Holding Company Act of 1956, as amended (the
“BHCA”) and to regulation by the Board of Governors of
the Federal Reserve System (the “Federal Reserve”).
Neither the Company nor any of its Subsidiaries or affiliates owns
or controls, directly or indirectly, five percent (5%) or more of
the outstanding shares of any class of voting securities or
twenty-five percent (25%) or more of the total equity of a bank or
any entity that is subject to the BHCA and to regulation by the
Federal Reserve. Neither the Company nor any of its Subsidiaries or
affiliates exercises a controlling influence over the management or
policies of a bank or any entity that is subject to the BHCA and to
regulation by the Federal Reserve.
ee.
Illegal or Unauthorized
Payments; Political Contributions. Neither the Company nor
any of its Subsidiaries nor, to the Company’s knowledge, any
of the officers, directors, employees, agents or other
representatives of the Company or any of its Subsidiaries or any
other business entity or enterprise with which the Company or any
Subsidiary is or has been affiliated or associated, has, directly
or indirectly, made or authorized any payment, contribution or gift
of money, property, or services, whether or not in contravention of
applicable law, (i) as a kickback or bribe to any person or (ii) to
any political organization, or the holder of or any aspirant to any
elective or appointive public office except for personal political
contributions not involving the direct or indirect use of funds of
the Company or any of its Subsidiaries.
ff. Breach
of Representations and Warranties by the Company. The
Company agrees that if the Company breaches any of the
representations or warranties set forth in this Section 3 and in
addition to any other remedies available to the Buyer pursuant to
this Agreement, it will be considered an Event of Default under
Section 3 of the Note.
4.
ADDITIONAL COVENANTS, AGREEMENTS AND
ACKNOWLEDGEMENTS.
a. Best Efforts. The parties shall
use their best efforts to satisfy timely each of the conditions
described in Section 6 and 7 of this Agreement.
b. Use of Proceeds. The Company
shall use the proceeds for business development and working
capital, and not for the repayment of any indebtedness owed to
officers, directors or employees of the Company or their affiliates
or in violation or contravention of any applicable law, rule or
regulation.
-9-
c. Usury. To the extent it may
lawfully do so, the Company hereby agrees not to insist upon or
plead or in any manner whatsoever claim, and will resist any and
all efforts to be compelled to take the benefit or advantage of,
usury laws wherever enacted, now or at any time hereafter in force,
in connection with any action or proceeding that may be brought by
the Buyer in order to enforce any right or remedy under this
Agreement, the Note and any document, agreement or instrument
contemplated thereby. Notwithstanding any provision to the contrary
contained in this Agreement, the Note and any document, agreement
or instrument contemplated thereby, it is expressly agreed and
provided that the total liability of the Company under this
Agreement, the Note or any document, agreement or instrument
contemplated thereby for payments which under applicable law are in
the nature of interest shall not exceed the maximum lawful rate
authorized under applicable law (the “Maximum Rate”),
and, without limiting the foregoing, in no event shall any rate of
interest or default interest, or both of them, when aggregated with
any other sums which under applicable law in the nature of interest
that the Company may be obligated to pay under this Agreement, the
Note and any document, agreement or instrument contemplated thereby
exceed such Maximum Rate. It is agreed that if the maximum contract
rate of interest allowed by law applicable to this Agreement, the
Note and any document, agreement or instrument contemplated thereby
is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate
of interest allowed by law will be the Maximum Rate applicable to
this Agreement, the Note and any document, agreement or instrument
contemplated thereby from the effective date thereof forward,
unless such application is precluded by applicable law. If under
any circumstances whatsoever, interest in excess of the Maximum
Rate is paid by the Company to the Buyer with respect to
indebtedness evidenced by this Agreement, the Note and any
document, agreement or instrument contemplated thereby, such excess
shall be applied by the Buyer to the unpaid principal balance of
any such indebtedness or be refunded to the Company, the manner of
handling such excess to be at the Buyer’s
election.
d. Restriction on Activities.
Commencing as of the date first above written, and until the
earlier of payment of the Note in full or full conversion of the
Note, the Company shall not, directly or indirectly, without the
Buyer’s prior written consent, which consent shall not be
unreasonably withheld: (a) change the nature of its business in any
material respect; (b) sell, divest, acquire, change the structure
of any material assets other than in the ordinary course of
business.
e. Listing. The Company will
within one hundred and eighty (180) of the Effective Date hereof
and thereafter for so long as the Buyer owns any of the Securities,
maintain the listing and trading of its Common Stock on the
Principal Market or any equivalent replacement exchange or
electronic quotation system (including but not limited to the Pink
Sheets electronic quotation system) and will comply in all respects
with the Company’s reporting, filing and other obligations
under the bylaws or rules of the Financial Industry Regulatory
Authority (“FINRA”) and such exchanges, as applicable.
The Company shall promptly provide to the Buyer copies of any
notices it receives from the Principal Market and any other
exchanges or electronic quotation systems on which the Common Stock
is then traded regarding the continued eligibility of the Common
Stock for listing on such exchanges and quotation
systems.
f. Corporate Existence. The
Company will, so long as the Buyer beneficially owns any of the
Securities, maintain its corporate existence and shall not sell all
or substantially all of the Company’s assets, except in the
event of a merger or consolidation or sale of all or substantially
all of the Company’s assets, where the surviving or successor
entity in such transaction (i) assumes the Company’s
obligations hereunder and under the agreements and instruments
entered into in connection herewith and (ii) is a publicly traded
corporation whose Common Stock is listed for trading or quotation
on the Principal Market, any tier of the NASDAQ Stock Market, the
New York Stock Exchange or the NYSE MKT.
g. No Integration. The Company
shall not make any offers or sales of any security (other than the
Securities) under circumstances that would require registration of
the Securities being offered or sold hereunder under the 1933 Act
or cause the offering of the Securities to be integrated with any
other offering of securities by the Company for the purpose of any
stockholder approval provision applicable to the Company or its
securities.
-10-
h. Breach of Covenants. The
Company acknowledges and agrees that if the Company breaches any of
the covenants set forth in this Section 4, in addition to any other
remedies available to the Buyer pursuant to this Agreement, it will
be considered an Event of Default under Section 3.4 of the
Note.
i. Compliance with 1934 Act; Public
Information Failures. Company shall remain current its
quarterly, annual and current reports with the Securities and
Exchange Commission and shall become subject to the 1934 Act within
180 days. For so long as the Buyer beneficially owns the Note, or
any Conversion Shares, the Company shall comply with the reporting
requirements of the 1934 Act; and the Company shall continue to be
subject to the reporting requirements of the 1934 Act, once subject
thereto. During the period that the Buyer beneficially owns the
Note, if the Company shall (i) fail for any reason to satisfy the
requirements of Rule 144(c)(1), including, without limitation, the
failure to satisfy the current public information requirements
under Rule 144(c) or (ii) if the Company has ever been an issuer
described in Rule 144(i)(1)(i) or becomes such an issuer in the
future, and the Company shall fail to satisfy any condition set
forth in Rule 144(i)(2) (each, a “Public Information
Failure”) then, as partial relief for the damages to the
Buyer by reason of any such delay in or reduction of its ability to
sell the Securities (which remedy shall not be exclusive of any
other remedies available pursuant to this Agreement, the Note, or
at law or in equity), the Company shall pay to the Buyer an amount
in cash equal to three percent (3%) of the Purchase Price on each
of the day of a Public Information Failure and on every thirtieth
day (pro-rated for periods totaling less than thirty days)
thereafter until the date such Public Information Failure is cured.
The payments to which a holder shall be entitled pursuant to this
Section 4(k) 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 (iii) the third business day after the event or failure giving
rise to the Public Information Failure Payments is cured. In the
event the Company fails to make Public Information Failure Payments
in a timely manner, such Public Information Failure Payments shall
bear interest at the rate of 2% per month (prorated for partial
months) until paid in full. As used in this Agreement, the term
“business day” shall mean any day other than a
Saturday, Sunday or a day on which commercial banks in the city of
New York, New York are authorized or required by law or executive
order to remain closed.
j. Disclosure of Transactions and Other
Material Information. By 9:00 a.m., New York time, four (4)
Business Days following the date this Agreement has been fully
executed and funded, the Company shall file a Current Report on
Form 8-K describing the terms of the transactions contemplated by
this Agreement in the form required by the 1934 Act and attaching
this Agreement, the form of Note (the “8-K Filing”).
From and after the filing of the 8-K Filing with the SEC, the Buyer
shall not be in possession of any material, nonpublic information
received from the Company, any of its Subsidiaries or any of their
respective officers, directors, employees or agents that is not
disclosed in the 8-K Filing. In addition, effective upon the filing
of the 8-K Filing, the Company acknowledges and agrees that any and
all confidentiality or similar obligations under any agreement,
whether written or oral, between the Company, any of its
Subsidiaries or any of their respective officers, directors,
affiliates, employees or agents, on the one hand, and the Buyer or
any of its affiliates, on the other hand, shall
terminate.
k. Legal Counsel Opinions. Upon
the request of the Buyer from to time to time, the Company shall be
responsible, at its cost, for promptly supplying to the
Company’s transfer agent and the Buyer a customary legal
opinion letter of its counsel (the “Legal Counsel
Opinion”) to the effect that the resale of the Conversion
Shares by the Buyer or its affiliates, successors and assigns is
exempt from the registration requirements of the 1933 Act pursuant
to Rule 144, provided the requirements of Rule 144 are satisfied
and provided the Conversion Shares are not then registered under
the 1933 Act for resale pursuant to an effective registration
statement, or other applicable exemption, provided the requirements
of such other applicable exemption are satisfied. Buyer will take
no action or inaction that would invalidate the proposed opinion.
Buyer will provide the customary representations to counsel in
order to provide such an opinion. Should the Company’s legal
counsel fail for any reason other than that the requirements of
said exemption are unavailable in the reasonable opinion of counsel
to issue the Legal Counsel Opinion, the Buyer may, at the
Company’s cost, secure another legal counsel to issue the
Legal Counsel Opinion, and the Company will instruct its transfer
agent to accept such opinion. The Company hereby agrees that it may
never take the position that it is a “shell company” in
connection with its obligations under this Agreement or
otherwise.
-11-
l. Most-Favored Nation. While the
Note or any principal amount, interest or fees or expenses due
thereunder remain outstanding and unpaid, the Company shall not
enter into any subsequent public or private offering of its
securities (including securities convertible into shares of Common
Stock) with any individual or entity (an “Other
Investor”) that has the effect of establishing rights or
otherwise benefiting such Other Investor in a manner more favorable
in any material respect to such Other Investor than the rights and
benefits established in favor of the Buyer by this Agreement. In
the event the Company enters into such an agreement with said more
favorable terms, this Agreement shall automatically, without
further action of the parties, be amended to include those more
favorable terms into this Agreement.
m. Non-Public Information. The
Company covenants and agrees that neither it, nor any other person
acting on its behalf will provide the Buyer or its agents or
counsel with any information that constitutes, or the Company
reasonably believes constitutes, material non-public information,
unless prior thereto the Buyer shall have consented to the receipt
of such information and agreed with the Company to keep such
information confidential. The Company understands and confirms that
the Buyer shall be relying on the foregoing covenant in effecting
transactions in securities of the Company. To the extent that the
Company delivers any material, non-public information to the Buyer
without such Buyer’s consent, the Company hereby covenants
and agrees that such Buyer shall not have any duty of
confidentiality to the Company, any of its Subsidiaries, or any of
their respective officers, directors, agents, employees or
affiliates, not to trade on the basis of, such material, non-public
information, provided that the Buyer shall remain subject to
applicable law. To the extent that any notice provided, information
provided, or any other communications made by the Company, to the
Buyer, constitutes or contains material non-public information
regarding the Company or any Subsidiaries, the Company shall
simultaneously file such notice or other material information with
the SEC pursuant to a Current Report on Form 8-K. In addition to
any other remedies provided by this Agreement or the related
transaction documents, if the Company provides any material
non-public information to the Buyer without their prior written
consent, and it fails to immediately (no later than that business
day) file a Form 8-K disclosing this material non-public
information, it shall pay the Buyer as partial liquidated damages
and not as a penalty a sum equal to $1,000 per day beginning with
the day the information is disclosed to the Buyer and ending and
including the day the Form 8-K disclosing this information is
filed.
5. Transfer Agent Instructions.
The Company shall issue irrevocable instructions to the
Company’s transfer agent to issue certificates, registered in
the name of the Buyer or its nominee, upon conversion of the Note,
the Conversion Shares, in such amounts as specified from time to
time by the Buyer to the Company in accordance with the terms
thereof (the “Irrevocable Transfer Agent
Instructions”). In the event that the Company proposes to
replace its transfer agent, the Company shall provide, prior to the
effective date of such replacement, a fully executed Irrevocable
Transfer Agent Instructions in a form as initially delivered
pursuant to this Agreement (including but not limited to the
provision to irrevocably reserved shares of Common Stock in the
Reserved Amount (as defined in the Note)) signed by the successor
transfer agent to the Company and the Company. Prior to
registration of the Conversion Shares under the 1933 Act or the
date on which the Conversion Shares may be sold pursuant to Rule
144, Rule 144A, Regulation S, or other applicable exemption without
any restriction as to the number of Securities as of a particular
date that can then be immediately sold, all such certificates shall
bear the restrictive legend specified in Section 2(g) of this
Agreement. The Company warrants that: (i) no instruction other than
the Irrevocable Transfer Agent Instructions referred to in this
Section 5 will be given by the Company to its transfer agent and
that the Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in
this Agreement and the Note; (ii) it will not direct its transfer
agent not to transfer or delay, impair, and/or hinder its transfer
agent in transferring (or issuing)(electronically or in
certificated form) any certificate for Securities to be issued to
the Buyer upon conversion of or otherwise pursuant to the Note as
and when required by the Note and this Agreement; (iii) it will not
fail to remove (or directs its transfer agent not to remove or
impairs, delays, and/or hinders its transfer agent from removing)
any restrictive legend (or to withdraw any stop transfer
instructions in respect thereof) on any certificate for any
Securities issued to the Buyer upon conversion of or otherwise
pursuant to the Note as and when required by the Note and this
Agreement and (iv) it will provide any required corporate
resolutions and issuance approvals to its transfer agent within 6
hours of each conversion of the Note. Nothing in this Section shall
affect in any way the Buyer’s obligations and agreement set
forth in Section 2(g) hereof to comply with all applicable
prospectus delivery requirements, if any, upon re-sale of the
Securities. If the Buyer provides the Company, at the cost of the
Company, with (i) an opinion of counsel in form, substance and
scope customary for opinions in comparable transactions, to the
effect that a public sale or transfer of such Securities may be
made without registration under the 1933 Act and such sale or
transfer is effected or (ii) the Buyer provides reasonable
assurances that the Securities can be sold pursuant to Rule 144,
Rule 144A, Regulation S, or other applicable exemption, the Company
shall permit the transfer, and, in the case of the Securities,
promptly instruct its transfer agent to issue one or more
certificates, free from restrictive legend, in such name and in
such denominations as specified by the Buyer. The Company
acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Buyer, by vitiating the intent and
purpose of the transactions contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5 may be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the
provisions of this Section, that the Buyer shall be entitled, in
addition to all other available remedies, to an injunction
restraining any breach and requiring immediate transfer, without
the necessity of showing economic loss and without any bond or
other security being required.
-12-
6. Conditions to the Company’s
Obligation to Sell. The obligation of the Company hereunder
to issue and sell the Note to the Buyer at the Closing is subject
to the satisfaction, at or before the Closing Date, of each of the
following conditions thereto, provided that these conditions are
for the Company’s sole benefit and may be waived by the
Company at any time in its sole discretion:
a. The Buyer shall
have executed this Agreement and delivered the same to the
Company.
b. The Buyer shall
have delivered the Purchase Price in accordance with Section 1(b)
above.
c. The representations
and warranties of the Buyer shall be true and correct in all
material respects as of the date when made and as of the Closing
Date, as though made at that time (except for representations and
warranties that speak as of a specific date), and the Buyer shall
have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Buyer
at or prior to the Closing Date.
d. No litigation,
statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority
over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement.
7. Conditions to The Buyer’s
Obligation to Purchase. The obligation of the Buyer
hereunder to purchase the Note, on the Closing Date, is subject to
the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for the
Buyer’s sole benefit and may be waived by the Buyer at any
time in its sole discretion:
a. The Company shall
have executed this Agreement and delivered the same to the
Buyer.
b. The Company shall
have delivered to the Buyer the duly executed Note in such
denominations as the Buyer shall request and in accordance with
Section 1(b) above.
c. The Irrevocable
Transfer Agent Instructions, in form and substance satisfactory to
the Buyer, shall have been delivered to and acknowledged in writing
by the Company’s Transfer Agent.
d. The representations
and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of Closing Date,
as though made at such time (except for representations and
warranties that speak as of a specific date) and the Company shall
have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date.
e. No litigation,
statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority
over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement.
f. No event shall have
occurred which could reasonably be expected to have a Material
Adverse Effect on the Company including but not limited to a change
in the 1934 Act reporting status of the Company or the failure of
the Company to be timely in its 1934 Act reporting
obligations.
-13-
g. The Company shall
have delivered to the Buyer (i) a certificate evidencing the
formation and good standing of the Company and each of its
Subsidiaries in such entity’s jurisdiction of formation
issued by the Secretary of State (or comparable office) of such
jurisdiction, as of a date within ten (10) days of the Closing Date
and (ii) resolutions adopted by the Company’s Board of
Directors at a duly called meeting or by unanimous written consent
authorizing this Agreement and all other documents, instruments and
transactions contemplated hereby.
8.
Governing Law; Miscellaneous.
a. Governing Law; Venue. This
Agreement shall be governed by and construed in accordance with the
laws of the State of Nevada without regard to principles of
conflicts of laws. Any action brought by either party against the
other concerning the transactions contemplated by this Agreement,
the Note, or any other agreement, certificate, instrument or
document contemplated hereby shall be brought only in the state
courts of Nevada or in the federal courts located in the state of
Nevada. The parties to this Agreement hereby irrevocably waive any
objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non conveniens. The prevailing party shall be entitled
to recover from the other party its reasonable attorney’s
fees and costs. Each party hereby irrevocably waives personal
service of process and consents to process being served in any
suit, action or proceeding in connection with this Agreement, the
Note, or any other agreement, certificate, instrument or document
contemplated hereby or thereby 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.
b. Counterparts. This Agreement
may be executed in one or more counterparts, each of which shall be
deemed an original but all of which shall constitute one and the
same agreement and shall become effective when counterparts have
been signed by each party and delivered to the other party. A
facsimile or .pdf signature shall be considered due execution and
shall be binding upon the signatory thereto with the same force and
effect as if the signature were an original, not a facsimile or
..pdf signature. Delivery of a counterpart signature hereto by
facsimile or email/.pdf transmission shall be deemed validly
delivery thereof.
c. Construction; Headings. This
Agreement shall be deemed to be jointly drafted by the Company and
the Buyer and shall not be construed against any person as the
drafter hereof. The headings of this Agreement are for convenience
of reference only and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. In the event that
any provision of this Agreement, the Note, or any other agreement
or instrument delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any such provision which may prove
invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision of this
Agreement, the Note, or any other agreement, certificate,
instrument or document contemplated hereby or thereby.
e. Entire Agreement; Amendments.
This Agreement, the Note, and the instruments referenced herein
contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set
forth herein or therein, neither the Company nor the Buyer makes
any representation, warranty, covenant or undertaking with respect
to such matters. No provision of this Agreement or any agreement or
instrument contemplated hereby may be waived or amended other than
by an instrument in writing signed by the Buyer.
-14-
f. Notices. All notices, demands,
requests, consents, approvals, and other communications required or
permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in
the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service
with charges prepaid, or (iv) transmitted by hand delivery,
telegram, e-mail or facsimile, addressed as set forth below or to
such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon
hand delivery or delivery by e-mail or facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at
the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be
received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours
where such notice is to be received) or (b) on the second business
day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The addresses for such
communications shall be:
If to
the Company, to:
TEGO
CYBER INC.
0000
Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxx
Xxxxx, Xxxxxx 00000
Attn:
Xxxxxxx Xxxxxxxxx
xxxxxxx.xxxxxxxxx@xxxxxxxxx.xxx
With a
copy by e-mail only to (which copy shall not constitute
notice):
XXXXXXX
+ XXXXXXX
00
Xxxxxxx Xxxxx 000
Xxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn:
Xxxxxxx X. Xxxxxxx
xxxxxxxx@xxxxxxx.xxx
If to
the Buyer:
ANALYTICO SERVICES
CONSEILS INC.
0000
Xxx. X’Xxxxx
Xxxxx-Xxxxxxx,
Xxxxxx
Xxxxxx
X0X 0X0
Attn:
Xxxxxxxx Xxxxxxxxx
xxxxxxxxxxxx@xxxxx.xxx
g. Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the
parties and their successors and assigns. Neither the Company nor
the Buyer shall assign this Agreement or any rights or obligations
hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 2(f), the Buyer
may assign its rights hereunder to any person that purchases
Securities in a private transaction from the Buyer or to any of its
“affiliates,” as that term is defined under the 1934
Act, without the consent of the Company.
h. Third Party Beneficiaries. This
Agreement is intended for the benefit of the parties hereto and
their respective permitted successors and assigns, and is not for
the benefit of, nor may any provision hereof be enforced by, any
other person.
i. Survival. The representations
and warranties of the Company and the agreements and covenants set
forth in this Agreement shall survive the closing hereunder
notwithstanding any due diligence investigation conducted by or on
behalf of the Buyer. The Company agrees to indemnify and hold
harmless the Buyer and all their officers, directors, employees and
agents for loss or damage arising as a result of or related to any
breach or alleged breach by the Company of any of its
representations, warranties and covenants set forth in this
Agreement or any of its covenants and obligations under this
Agreement, including advancement of expenses as they are
incurred.
-15-
j. Publicity. The Company, and the
Buyer shall have the right to review a reasonable period of time
before issuance of any press releases, SEC, Principal Market or
FINRA filings, or any other public statements with respect to the
transactions contemplated hereby; provided, however, that the Company shall
be entitled, without the prior approval of the Buyer, to make any
press release or SEC, Principal Market (or other applicable trading
market) or FINRA filings with respect to such transactions as is
required by applicable law and regulations (although the Buyer
shall be consulted by the Company in connection with any such press
release prior to its release and shall be provided with a copy
thereof and be given an opportunity to comment
thereon).
k. Expense Reimbursement; Further
Assurances. At the Closing to occur as of the Closing Date,
the Company shall pay on behalf of the Buyer or reimburse the Buyer
for its legal fees and expenses incurred in connection with this
Agreement, pursuant to the disbursement authorization signed by the
Company of even date. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions
contemplated hereby.
l. No Strict Construction. The
language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules
of strict construction will be applied against any
party.
m. Indemnification. In
consideration of the Buyer’s execution and delivery of this
Agreement and acquiring the Securities hereunder, and in addition
to all of the Company’s other obligations under this
Agreement or the Note, the Company shall defend, protect, indemnify
and hold harmless the Buyer and its stockholders, partners,
members, officers, directors, employees and direct or indirect
investors and any of the foregoing persons’ agents or other
representatives (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement)
(collectively, the “Indemnitees”) from and against any
and all third party actions, causes of action, suits, claims,
losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys’
fees and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement,
the Note or any other agreement, certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any
covenant, agreement or obligation of the Company contained in this
Agreement, the Note or any other agreement, certificate, instrument
or document contemplated hereby or thereby or (c) any cause of
action, suit or claim brought or made against such Indemnitee by a
third party (including for these purposes a derivative action
brought on behalf of the Company) and arising out of or resulting
from (i) the execution, delivery, performance or enforcement of
this Agreement, the Note or any other agreement, certificate,
instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the
Securities, or (iii) the status of the Buyer or holder of the
Securities as an investor in the Company pursuant to the
transactions contemplated by this Agreement. To the extent that the
foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities
that is permissible under applicable law.
n. Remedies. The Company
acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Buyer by vitiating the intent and
purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its
obligations under this Agreement or the Note will be inadequate and
agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Agreement or the Note, that the
Buyer shall be entitled, in addition to all other available
remedies at law or in equity, and in addition to the penalties
assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Agreement or the Note and
to enforce specifically the terms and provisions hereof, without
the necessity of showing economic loss and without any bond or
other security being required.
-16-
o. Payment Set Aside. To the
extent that the Company makes a payment or payments to the Buyer
hereunder or pursuant to the Note, or the Buyer enforces or
exercises its rights hereunder or thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by
or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other person or entity under
any law (including, without limitation, any bankruptcy law,
foreign, state or federal law, common law or equitable cause of
action), then to the extent of any such restoration the obligation
or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment
had not been made or such enforcement or setoff had not
occurred.
p. Failure or Indulgence Not
Waiver. No failure or delay on the part of the Buyer in the
exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privileges. All
rights and remedies of the Buyer existing hereunder are cumulative
to, and not exclusive of, any rights or remedies otherwise
available.
[SIGNATURE PAGE
FOLLOWS]
-17-
IN
WITNESS WHEREOF, the undersigned Buyer and the Company have caused
this Agreement to be duly executed as of the date first above
written.
TEGO
CYBER INC.
|
By:/s/
Xxxxxxx Xxxxxxxxx
|
|
Name:
XXXXXXX XXXXXXXXX
|
|
Title:
CHIEF EXECUTIVE OFFICER
|
ANALYTICO
SERVICES CONSEILS INC.
|
By:/s/
Xxxxxxxx Xxxxxxxxx
|
|
Name:
XXXXXXXX XXXXXXXXX
Title:
CHIEF EXECUTIVE OFFICER
|
SUBSCRIPTION
AMOUNT:
|
Principal
Amount of Note: $55,245.39
|
|
Actual
Amount of Purchase Price of Note: $50,683.84
|
EXHIBIT
A
FORM
OF NOTE
[attached
hereto]
NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN
OPINION OF COUNSEL (WHICH MAY BE THE LEGAL COUNSEL OPINION (AS
DEFINED IN THE PURCHASE AGREEMENT)), IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II)
UNLESS SOLD PURSUANT TO RULE 144, RULE 144A, REGULATION S, OR OTHER
APPLICABLE EXEMPTION UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
|
Principal
Amount: $55,245.39
|
Issue
Date: April 22, 2021
|
|
Actual
Amount of Purchase Price: $50,683.84
|
|
CONVERTIBLE
PROMISSORY NOTE
FOR VALUE RECEIVED, TEGO CYBER INC., a Nevada corporation
(hereinafter called the “Borrower” or the
“Company”), hereby promises to pay to the order of
ANALYTICO SERVICES CONSEILS
INC., a Quebec corporation, or registered assigns (the
“Holder”), in the form of lawful money of the United
States of America, the principal sum of up to $55,245.39 (the
“Principal Amount”) (subject to adjustment herein),
with a purchase price of $50,683.84 (the
“Consideration”) plus an original issue discount in the
amount of up to $4,561.55 (the “OID”), and to pay
interest on the Principal Amount under this Note at the rate of
eight percent (8%) (the “Interest Rate”) per annum
guaranteed from the date that the amount of Consideration is fully
funded in accordance with the terms of this Note until the same
becomes due and payable, whether at maturity or upon acceleration
or by prepayment or otherwise, as further provided herein. This
Note is issued in exchange for $30,000.00 and for the
Holder’s surrender of the Convertible Note previously issued
by the Marker plus accrued interest. All obligation of Maker to
Holder, as represented in the previously issued Convertible Note
hereto are replace and superseded in their entirety by the terms of
this Note. The Holder shall pay $50,683.84 of the Consideration on
the day of the full execution of the Note and all related
transactional documents related to this Note, and the outstanding
principal amount under this Note shall be $55,245.39 (which
includes the OID). The maturity date for this Note shall be nine
(9) months from the effective date of the Holder’s payment of
the Consideration (“Maturity Date”), and is the date
upon which the principal sum as well as any accrued and unpaid
interest and other fees shall be due and payable. Notwithstanding
any other provision of this Note or any related transaction
documents, Borrower may prepay this Note only pursuant to Section
1.9 hereof.
It is
further acknowledged and agreed that the Principal Amount owed by
Borrower under this Note shall be increased by the amount of all
expenses up to a maximum of $500 incurred by the Holder relating to
the conversion of this Note into shares of Common Stock. All such
expenses shall be deemed added to the Principal Amount hereunder to
the extent such expenses are paid by the Holder.
Interest shall
commence accruing on the date that the Note is fully funded and
shall be computed on the basis of a 365-day year and the actual
number of days elapsed. Any Principal Amount or interest on this
Note which is not paid when due shall bear interest at the rate the
lesser of (a) fifteen percent (15%) per annum from the due date
thereof until the same is paid (“Default Interest”);
(b) or the maximum rate allowed by law.
A-1
All
payments due hereunder (to the extent not converted into shares of
common stock, $0.001 par value per share, of the Borrower (the
“Common Stock”) in accordance with the terms hereof)
shall be made in lawful money of the United States of America. All
payments shall be made at such address as the Holder shall
hereafter give to the Borrower by written notice made in accordance
with the provisions of this Note. Whenever any amount expressed to
be due by the terms of this Note is due on any day which is not a
business day, the same shall instead be due on the next succeeding
day which is a business day and, in the case of any interest
payment date which is not the date on which this Note is paid in
full, the extension of the due date thereof shall not be taken into
account for purposes of determining the amount of interest due on
such date.
Each
capitalized term used herein, and not otherwise defined, shall have
the meaning ascribed thereto in that certain Securities Purchase
Agreement, dated as of the Issue Date, pursuant to which this Note
was originally issued (the “Purchase Agreement”). As
used in this Note, the term “business day” shall mean
any day other than a Saturday, Sunday or a day on which commercial
banks in the city of New York, New York are authorized or required
by law or executive order to remain closed. As used herein, the
term “Trading Day” means any day that shares of Common
Stock are listed for trading or quotation on the Principal Market
(as defined in the Purchase Agreement), any tier of the NASDAQ
Stock Market, the New York Stock Exchange or the NYSE
American.
This
Note is free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive
rights or other similar rights of shareholders of the Borrower and
will not impose personal liability upon the holder
thereof.
The
following terms shall apply to this Note:
ARTICLE
I. CONVERSION RIGHTS
1.1 Conversion Right. The Holder
shall have the right, at any time while there are amounts
outstanding under the Note, to convert all or any portion of the
then outstanding and unpaid Principal Amount and interest
(including any Default Interest) into fully paid and non-assessable
shares of Common Stock, as such Common Stock exists on the Issue
Date, or any shares of capital stock or other securities of the
Borrower into which such Common Stock shall hereafter be changed or
reclassified, at the Conversion Price (as defined below) determined
as provided herein (a “Conversion”); provided, however, that in no event
shall the Holder be entitled to convert any portion of this Note in
excess of that portion of this Note upon conversion of which the
sum of (1) the number of shares of Common Stock beneficially owned
by the Holder and its affiliates (other than shares of Common Stock
which may be deemed beneficially owned through the ownership of the
unconverted portion of this Note or the unexercised or unconverted
portion of any other security of the Borrower subject to a
limitation on conversion or exercise analogous to the limitations
contained herein) and (2) the number of Conversion Shares issuable
upon the conversion of the portion of this Note with respect to
which the determination of this proviso is being made, would result
in beneficial ownership by the Holder and its affiliates of more
than 4.99% of the then outstanding shares of Common Stock. For
purposes of the proviso set forth in the immediately preceding
sentence, beneficial ownership shall be determined in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as
amended (the “1934 Act”), and Regulations 13D-G
thereunder, except as otherwise provided in clause (1) of such
proviso, provided, however,
that the limitations on conversion may be waived (up to 9.99%) by
the Holder upon, at the election of the Holder, not less than 61
days’ prior notice to the Borrower, and the provisions of the
conversion limitation shall continue to apply until such 61st day
(or such later date, as determined by the Holder, as may be
specified in such notice of waiver). The number of Conversion
Shares to be issued upon each conversion of this Note shall be
determined by dividing the Conversion Amount (as defined below) by
the applicable Conversion Price then in effect on the date
specified in the notice of conversion, in the form attached hereto
as Exhibit A (the
“Notice of Conversion”), delivered to the Borrower or
Borrower’s transfer agent by the Holder in accordance with
Section 1.4 below; provided that the Notice of Conversion is
submitted by facsimile or e-mail (or by other means resulting in,
or reasonably expected to result in, notice) to the Borrower or
Borrower’s transfer agent before 11:59 p.m., New York, New
York time on such conversion date (the “Conversion
Date”). The term “Conversion Amount” means, with
respect to any conversion of this Note, the sum of (1) the
Principal Amount of this Note to be converted in such conversion
plus (2) at the
Holder’s option, accrued and unpaid interest, if any, on such
Principal Amount at the Interest Rate to the Conversion Date,
plus (3) at the
Holder’s option, Default Interest, if any, on the amounts
referred to in the immediately preceding clauses (1) and/or
(2).
A-2
1.2
Conversion Price.
(a) Calculation of Conversion
Price. The per share conversion price into which Principal
Amount and interest (including any Default Interest) under this
Note shall be convertible into shares of Common Stock hereunder
(the “Conversion Price”) shall be equal to $0.10 (the
“Fixed Conversion Price”), provided, further, that upon any event
of default (as defined herein) after the Issue Date which remains
uncured for a period of five (5) calendar days, the Conversion
Price shall equal the lower of (i) the Fixed Conversion Price; (ii)
discount to market based upon subsequent financings with other
investors; or (iii) seventy five percent (75%) multiplied by the
lowest closing price of the Common Stock during the twenty (20)
consecutive Trading Day period immediately preceding the date of
the respective conversion (the “Alternate Conversion
Price”); To the extent the Conversion Price is below the par
value per share, the Borrower will take all steps necessary to
solicit the consent of the stockholders to reduce the par value to
the lowest value possible under law, provided however that the
Borrower agrees to honor all conversions submitted pending this
increase. If at any time the Conversion Price as determined
hereunder for any conversion would be less than the par value of
the Common Stock, then at the sole discretion of the Holder, the
Conversion Price hereunder may equal such par value for such
conversion and the Conversion Amount for such conversion may be
increased to include Additional Principal, where “Additional
Principal” means such additional amount to be added to the
Conversion Amount to the extent necessary to cause the number of
conversion shares issuable upon such conversion to equal the same
number of conversion shares as would have been issued had the
Conversion Price not been adjusted by the Holder to the par value
price.
(b) Conversion Price During Major
Announcements. Notwithstanding anything contained in Section
1.2(a) to the contrary, in the event the Borrower (i) makes a
public announcement that it intends to be acquired by, consolidate
or merge with any other corporation or entity (other than a merger
in which the Borrower is the surviving or continuing corporation
and its capital stock is unchanged) or sell or transfer all or
substantially all of the assets of the Borrower or (ii) any person,
group or entity (including the Borrower) publicly announces a
tender offer to purchase fifty percent (50%) or more of the Common
Stock (or any other takeover scheme) (any such transaction referred
to in clause (i) or (ii) being referred to herein as a
“Change in Control” and the date of the announcement
referred to in clause (i) or (ii) is being referred to herein as
the “Announcement Date”), then the Conversion Price
shall, effective upon the Announcement Date and continuing through
the Adjusted Conversion Price Termination Date (as defined below),
be equal to the lower of (x) the Conversion Price and (y) a fifteen
percent (15%) discount to the Acquisition Price (as defined below).
From and after the Adjusted Conversion Price Termination Date, the
Conversion Price shall be determined as set forth in Section
1.2(a). For purposes hereof, “Adjusted Conversion Price
Termination Date” shall mean, with respect to any proposed
Change in Control for which a public announcement as contemplated
by this Section 1.2(b) has been made, the date upon which the
Borrower (in the case of clause (i) above) or the person, group or
entity (in the case of clause (ii) above) consummates or publicly
announces the termination or abandonment of the proposed Change in
Control which caused this Section 1.2(b) to become operative. For
purposes hereof, “Acquisition Price” shall mean a price
per share of Common Stock derived by dividing (x) the total
consideration (in cash, equity, earn- out or similar payments or
otherwise) paid or to be paid to the Borrower or its shareholders
in the Change in Control transaction by (y) the number of
authorized shares of Common Stock outstanding as of the business
day prior to the Announcement Date.
A-3
1.3 Authorized and Reserved Shares.
The Borrower covenants that at all times until the Note is
satisfied in full, the Borrower will reserve from its authorized
and unissued Common Stock a sufficient number of shares, free from
preemptive rights, to provide for the issuance of a number of
Conversion Shares equal to the greater of: (a) 750,000 shares of
Common Stock or (b) the sum of (i) the number of Conversion Shares
issuable upon the full conversion of this Note (assuming no payment
of Principal Amount or interest) as of any issue date (taking into
consideration any adjustments to the Conversion Price pursuant to
Section 2 hereof or otherwise) multiplied by (ii) three (3)
but subject to a maximum reserve of 1,500,000 shares without the
consent of the Company, which shall not be unreasonably withheld
(the “Reserved Amount”). In the event that the Borrower
shall be unable to reserve the entirety of the Reserved Amount (the
“Reserve Amount Failure”), the Borrower shall promptly
take all actions necessary to increase its authorized share capital
to accommodate the Reserved Amount (the “Authorized Share
Increase”), including without limitation, all board of
directors actions and approvals and promptly (but no less than
sixty (60) days following the calling and holding a special meeting
of its shareholders no more than sixty (60) days following the
Reserve Amount Failure to seek approval of the Authorized Share
Increase via the solicitation of proxies. Notwithstanding the
foregoing, in no event shall the Reserved Amount be lower than the
initial Reserved Amount, regardless of any prior conversions. The
Borrower represents that upon issuance, the Conversion Shares will
be duly and validly issued, fully paid and non- assessable. In
addition, if the Borrower shall issue any securities or make any
change to its capital structure which would change the number of
Conversion Shares into which this Note shall be convertible at the
then current Conversion Price, the Borrower shall at the same time
make proper provision so that thereafter there shall be a
sufficient number of shares of Common Stock authorized and
reserved, free from preemptive rights, for conversion of this Note.
The Borrower (i) acknowledges that it has irrevocably instructed
its transfer agent to issue certificates for the Conversion Shares
or instructions to have the Conversion Shares issued as
contemplated by Section 1.4(f) hereof, and (ii) agrees that its
issuance of this Note shall constitute full authority to its
officers and agents who are charged with the duty of executing
stock certificates or cause the Company to electronically issue
shares of Common Stock to execute and issue the necessary
certificates for the Conversion Shares or cause the Conversion
Shares to be issued as contemplated by Section 1.4(f) hereof in
accordance with the terms and conditions of this Note.
If, at
any time the Borrower does not maintain the Reserved Amount it will
be considered an Event of Default under this Note.
1.4
Method of Conversion.
(a) Mechanics of Conversion. This
Note may be converted by the Holder in whole or in part, on any
Trading Day, at any time on or after the 180th calendar day after
the Issue Date, by submitting to the Borrower or Borrower’s
transfer agent a Notice of Conversion (by facsimile, e-mail or
other reasonable means of communication dispatched on the
Conversion Date prior to 11:59 p.m., New York, New York time). Any
Notice of Conversion submitted after 11:59 p.m., New York, New York
time, shall be deemed to have been delivered and received on the
next Trading Day.
(b) Surrender of Note Upon
Conversion. Notwithstanding anything to the contrary set
forth herein, upon conversion of this Note in accordance with the
terms hereof, the Holder shall not be required to physically
surrender this Note to the Borrower unless the entire unpaid
Principal Amount is so converted. The Holder and the Borrower shall
maintain records showing the Principal Amount so converted and the
dates of such conversions or shall use such other method,
reasonably satisfactory to the Holder and the Borrower, so as not
to require physical surrender of this Note upon each such
conversion. In the event of any dispute or discrepancy, such
records of the Borrower shall, prima facie, be controlling and
determinative in the absence of manifest error. Notwithstanding the
foregoing, if any portion of this Note is converted as aforesaid,
the Holder may not transfer this Note unless the Holder first
physically surrenders this Note to the Borrower, whereupon the
Borrower will forthwith issue and deliver upon the order of the
Holder a new Note of like tenor, registered as the Holder (upon
payment by the Holder of any applicable transfer taxes) may
request, representing in the aggregate the remaining unpaid
Principal Amount of this Note. The Holder and any assignee, by
acceptance of this Note, acknowledge and agree that, by reason of
the provisions of this paragraph, following conversion of a portion
of this Note, the unpaid and unconverted Principal Amount of this
Note represented by this Note may be less than the amount stated on
the face hereof.
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(c) Payment of Taxes. The Borrower
shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of
shares of Common Stock or other securities or property on
conversion of this Note in a name other than that of the Holder (or
in street name), and the Borrower shall not be required to issue or
deliver any such shares or other securities or property unless and
until the person or persons (other than the Holder or the custodian
in whose street name such shares are to be held for the
Holder’s account) requesting the issuance thereof shall have
paid to the Borrower the amount of any such tax or shall have
established to the satisfaction of the Borrower that such tax has
been paid.
(d) Delivery of Common Stock Upon
Conversion. Upon receipt by the Borrower from the Holder of
a facsimile transmission or e-mail (or other reasonable means of
communication) of a Notice of Conversion meeting the requirements
for conversion as provided in this Section 1.4, the Borrower shall
issue and deliver or cause to be issued and delivered to or upon
the order of the Holder certificates for the Conversion Shares (or
cause the electronic delivery of the Conversion Shares as
contemplated by Section 1.4(f) hereof) within three (3) Trading
Days after such receipt (the “Deadline”) (and, solely
in the case of conversion of the entire unpaid Principal Amount and
interest (including any Default Interest) under this Note,
surrender of this Note). If the Company shall fail for any reason
or for no reason to issue to the Holder on or prior to the Deadline
a certificate for the number of Conversion Shares or to which the
Holder is entitled hereunder and register such Conversion Shares on
the Company’s share register or to credit the Holder’s
balance account with DTC (as defined below) for such number of
Conversion Shares to which the Holder is entitled upon the
Holder’s conversion of this Note (a “Conversion
Failure”), then, in addition to all other remedies available
to the Holder, (i) the Company shall pay in cash to the Holder on
each day after the Deadline and during such Conversion Failure an
amount equal to one-half percent (0.5%) of the product of (A) the
sum of the number of Conversion Shares not issued to the Holder on
or prior to the Deadline and to which the Holder is entitled and
(B) the closing sale price of the Common Stock on the Trading Day
immediately preceding the last possible date which the Company
could have issued such Conversion Shares to the Holder without
violating this Section 1.4(d); and (ii) the Holder, upon written
notice to the Company, may void its Notice of Conversion with
respect to, and retain or have returned, as the case may be, any
portion of this Note that has not been converted pursuant to such
Notice of Conversion; provided that the voiding of an Notice of
Conversion shall not affect the Company’s obligations to make
any payments which have accrued prior to the date of such notice.
In addition to the foregoing, if on or prior to the Deadline the
Company shall fail to issue and deliver a certificate to the Holder
and register such Conversion Shares on the Company’s share
register or credit the Holder’s balance account with DTC for
the number of Conversion Shares to which the Holder is entitled
upon the Holder’s exercise hereunder or pursuant to the
Company’s obligation pursuant to clause (ii) below, and if on
or after such Trading Day the Holder purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of shares of Common Stock
issuable upon such exercise that the Holder anticipated receiving
from the Company, then the Company shall, within two (2) Trading
Days after the Holder’s request and in the Holder’s
discretion, either (i) pay cash to the Holder in an amount equal to
the Holder’s total purchase price (including brokerage
commissions and other reasonable and customary out-of-pocket
expenses, if any) for the shares of Common Stock so purchased (the
“Buy-In Price”), at which point the Company’s
obligation to deliver such certificate (and to issue such
Conversion Shares) or credit such Holder’s balance account
with DTC for such Conversion Shares shall terminate, or (ii)
promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Conversion Shares or
credit such Holder’s balance account with DTC and pay cash to
the Holder in an amount equal to the excess (if any) of the Buy-In
Price over the product of (A) such number of shares of Common
Stock, times (B) the closing sales price of the Common Stock on the
date of exercise. Nothing shall limit the Holder’s right to
pursue any other remedies available to it hereunder, at law or in
equity, including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the
Company’s failure to timely deliver certificates representing
the Conversion Shares (or to electronically deliver such Conversion
Shares) upon the conversion of this Note as required pursuant to
the terms hereof.
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(e) Obligation of Borrower to Deliver
Common Stock. At the time that the Holder submits the Notice
of Conversion to the Borrower or Borrower’s transfer agent,
the Holder shall be deemed to be the holder of record of the
Conversion Shares issuable upon such conversion, the outstanding
Principal Amount and the amount of accrued and unpaid interest
(including any Default Interest) under this Note shall be reduced
to reflect such conversion, and, unless the Borrower defaults on
its obligations under this Article I, all rights with respect to
the portion of this Note being so converted shall forthwith
terminate except the right to receive the Common Stock or other
securities, cash or other assets, as herein provided, on such
conversion. If the Holder shall have given a Notice of Conversion
as provided herein, the Borrower’s obligation to issue and
deliver the certificates for the Conversion Shares (or cause the
electronic delivery of the Conversion Shares as contemplated by
Section 1.4(f) hereof) shall be absolute and unconditional,
irrespective of the absence of any action by the Holder to enforce
the same, any waiver or consent with respect to any provision
thereof, the recovery of any judgment against any person or any
action to enforce the same, any failure or delay in the enforcement
of any other obligation of the Borrower to the holder of record, or
any setoff, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by the Holder of any obligation to the
Borrower, and irrespective of any other circumstance which might
otherwise limit such obligation of the Borrower to the Holder in
connection with such conversion. The Conversion Date specified in
the Notice of Conversion shall be the Conversion Date so long as
the Notice of Conversion is sent to the Borrower or
Borrower’s transfer agent before 11:59 p.m., New York, New
York time, on such date.
(f) Delivery of Conversion Shares by
Electronic Transfer. In lieu of delivering physical
certificates representing the Conversion Shares issuable upon
conversion hereof, provided the Borrower is participating in the
Depository Trust Company (“DTC”) Fast Automated
Securities Transfer or Deposit/Withdrawal at Custodian programs,
upon request of the Holder and its compliance with the provisions
contained in Section 1.1 and in this Section 1.4, the Borrower
shall use its reasonable best efforts to cause its transfer agent
to electronically transmit the Conversion Shares issuable upon
conversion hereof to the Holder by crediting the account of
Holder’s Prime Broker with DTC through its Deposit Withdrawal
Agent Commission system.
1.5 Concerning the Shares. The
Conversion Shares issuable upon conversion of this Note may not be
sold or transferred unless (i) such shares are sold pursuant to an
effective registration statement under the 1933 Act or (ii) the
Borrower or its transfer agent shall have been furnished with an
opinion of counsel (which opinion shall be the Legal Counsel
Opinion (as defined in the Purchase Agreement)) to the effect that
the shares to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration or (iii) such
shares are sold or transferred pursuant to Rule 144, Rule 144A,
Regulation S, or other applicable exemption, or (iv) such shares
are transferred to an “affiliate” (as defined in Rule
144) of the Borrower who agrees to sell or otherwise transfer the
shares only in accordance with this Section 1.5 and who is an
Accredited Investor (as defined in the Purchase Agreement). Except
as otherwise provided in the Purchase Agreement (and subject to the
removal provisions set forth below), until such time as the
Conversion Shares have been registered under the 1933 Act or
otherwise may be sold pursuant to Rule 144, Rule 144A, Regulation
S, or other applicable exemption without any restriction as to the
number of securities as of a particular date that can then be
immediately sold, each certificate for the Conversion Shares that
has not been so included in an effective registration statement or
that has not been sold pursuant to an effective registration
statement or an exemption that permits removal of the legend, shall
bear a legend substantially in the following form, as
appropriate:
“NEITHER THE
ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A)
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL
(WHICH MAY BE THE LEGAL COUNSEL OPINION (AS DEFINED IN THE PURCHASE
AGREEMENT)), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE
144, RULE 144A, REGULATION S, OR OTHER APPLICABLE EXEMPTION UNDER
SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.”
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The
legend set forth above shall be removed and the Company shall issue
to the Holder a certificate for the applicable Conversion Shares
without such legend upon which it is stamped or (as requested by
the Holder) issue the applicable Conversion Shares by electronic
delivery by crediting the account of such holder’s broker
with DTC, if, unless otherwise required by applicable state
securities laws: (a) such Conversion Shares are registered for sale
under an effective registration statement filed under the 1933 Act
or otherwise may be sold pursuant to Rule 144, Rule 144A,
Regulation S, or other applicable exemption without any restriction
as to the number of securities as of a particular date that can
then be immediately sold, or (b) the Company or the Holder provides
the Legal Counsel Opinion (as contemplated by and in accordance
with Section 4(m) of the Purchase Agreement) to the effect that a
public sale or transfer of such Conversion Shares may be made
without registration under the 1933 Act, which opinion shall be
accepted by the Company so that the sale or transfer is effected.
The Company shall be responsible for the fees of its transfer agent
and all DTC fees associated with any such issuance. The Holder
agrees to sell all Conversion Shares, including those represented
by a certificate(s) from which the legend has been removed, in
compliance with applicable prospectus delivery requirements, if
any. In the event that the Company does not accept the opinion of
counsel provided by the Holder with respect to the transfer of
Conversion Shares pursuant to an exemption from registration, such
as Rule 144, Rule 144A or Regulation S, at the Deadline,
notwithstanding that the conditions of Rule 144, Rule 144A,
Regulation S, or other applicable exemption, as applicable, have
been met, it will be considered an Event of Default under this
Note.
1.6
Effect of Certain Events.
(a) Effect of Merger, Consolidation,
Etc. At the option of the Holder, the sale, conveyance or
disposition of all or substantially all of the assets of the
Borrower, or the consolidation, merger or other business
combination of the Borrower with or into any other Person (as
defined below) or Persons when the Borrower is not the survivor
shall either: (i) be deemed to be an Event of Default pursuant to
which the Borrower shall be required to pay to the Holder upon the
consummation of and as a condition to such transaction an amount
equal to the Default Amount (defined in Section 3.24) or (ii) be
treated pursuant to Section 1.6(b) hereof. “Person”
shall mean any individual, corporation, limited liability company,
partnership, association, trust or other entity or
organization.
(b) Adjustment Due to Merger,
Consolidation, Etc. If, at any time when this Note is issued
and outstanding and prior to conversion of all of this Note, there
shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a
result of which shares of Common Stock of the Borrower shall be
changed into the same or a different number of shares of another
class or classes of stock or securities of the Borrower or another
entity, or in case of any sale or conveyance of all or
substantially all of the assets of the Borrower other than in
connection with a plan of complete liquidation of the Borrower,
then the Holder of this Note shall thereafter have the right to
receive upon conversion of this Note, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore issuable upon conversion, such
stock, securities or assets which the Holder would have been
entitled to receive in such transaction had this Note been
converted in full immediately prior to such transaction at the
Exercise Price without adjustment for any reason, including but not
limited to default (without regard to any limitations on conversion
set forth herein). The Borrower shall not effectuate any
transaction described in this Section 1.6(b) unless (a) it first
gives, to the extent practicable, at least thirty (30) days prior
written notice (but in any event at least fifteen (15) days prior
written notice) of the record date of the special meeting of
shareholders to approve, or if there is no such record date, the
consummation of, such merger, consolidation, exchange of shares,
recapitalization, reorganization or other similar event or sale of
assets (during which time the Holder shall be entitled to convert
this Note) and (b) the resulting successor or acquiring entity (if
not the Borrower) assumes by written instrument the obligations of
this Section 1.6(b). The above provisions shall similarly apply to
successive consolidations, mergers, sales, transfers or share
exchanges.
A-7
(c) Adjustment Due to Distribution.
If the Borrower shall declare or make any distribution of its
assets (or rights to acquire its assets) to holders of Common Stock
as a dividend, stock repurchase, by way of return of capital or
otherwise (including any dividend or distribution to the
Borrower’s shareholders in cash or shares (or rights to
acquire shares) of capital stock of a subsidiary (i.e., a
spin-off)) (a “Distribution”), then the Holder of this
Note shall be entitled, upon any conversion of this Note after the
date of record for determining shareholders entitled to such
Distribution, to receive the amount of such assets which would have
been payable to the Holder with respect to the shares of Common
Stock issuable upon such conversion had such Holder been the holder
of such shares of Common Stock on the record date for the
determination of shareholders entitled to such
Distribution.
(d) Pending Legislation. As
of the Issue Date hereof, proposed legislation exists, namely
proposed amendments to Rule 144(d)(3)(ii) proposed on December 22,
2020 in SEC Release 2020-336, that would fundamentally change the
economic terms of this Note. In the event the rule becomes law and
becomes effective while any amounts are outstanding under this
Note, Section 1.2 hereof shall be automatically amended to contain
only a fixed conversion price of $0.10 per share. In the event that
the Borrower is in default of any of the provisions of the Note or
other Transaction Documents, and the Company has not cured said
default within five (5) calendar days, the fixed conversion price
shall be reduced to $0.05 per share (the “Default Fixed
Price”) in addition to any other principal adjustments,
default interest, or other remedies available to it under law. In
the event the final rule, or any other combination of final rules,
make this provision inoperable, invalid, or otherwise have an
effect that changes the economics of the transactions contemplated
hereby, the pertinent clause or mechanic of operation shall be
stricken and only the fixed price provision shall
remain.
(e) Dilutive Issuance. If the
Borrower, at any time within 60 days of the Issue Date, issues,
sells or grants (or has issued, sold or granted as of the Issue
Date, as the case may be) any option to purchase, or sells or
grants any right to reprice, or otherwise disposes of, or issues
(or has sold or issued, as the case may be, or announces any sale,
grant or any option to purchase or other disposition), securities
convertible into, exercisable for, or otherwise entitle any person
or entity the right to acquire, shares of Common Stock (including,
without limitation, upon conversion of this Note, and any
convertible notes or warrants outstanding as of or within 60 days
of the Issue Date), in each or any case at an effective price per
share that is lower than the then Conversion Price (such lower
price, the “Base Conversion Price” and such issuances,
collectively, a “Dilutive Issuance”) (it being agreed
that if the holder of the Common Stock or other securities so
issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or
exchange prices or otherwise, or due to warrants, options or rights
per share which are issued in connection with such issuance, be
entitled to receive shares of Common Stock at an effective price
per share that is 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, at the option of the Holder, to a price equal the
Base Conversion Price. If the Company enters into a Variable Rate
Transaction within 60 days of the Issue Date, despite the
prohibition set forth in the Purchase Agreement, the Company shall
be deemed to have issued Common Stock or Common Stock Equivalents
at the lowest possible price per share at which such securities
could be issued in connection with such Variable Rate Transaction.
Such adjustment shall be made whenever such Common Stock or other
securities are issued. Notwithstanding the foregoing, no adjustment
will be made under this Section 1.6(e) in respect of an Exempt
Issuance or issuance made more than 60 days from the Issue Date. In
the event of an issuance of securities involving multiple tranches
or closings, any adjustment pursuant to this Section 1.6(e) shall
be calculated as if all such securities were issued at the initial
closing.
An
“Exempt Issuance” shall mean the issuance of (a) shares
of Common Stock or other securities to officers or directors of the
Company pursuant to any stock or option or similar equity incentive
plan duly adopted for such purpose, by a majority of the
non-employee members of the Company’s Board of Directors or a
majority of the members of a committee of non-employee directors
established for such purpose in a manner which is consistent with
the Company’s prior business practices; (b) securities issued
pursuant to a merger, consolidation, acquisition or similar
business combination approved by a majority of the disinterested
directors of the Company, provided that any such issuance shall
only be to a Person (or to the equity holders of a Person) which
is, itself or through its subsidiaries, an operating company or an
owner of an asset in a business synergistic with the business of
the Company and shall provide to the Company additional benefits in
addition to the investment of funds, but shall not include a
transaction in which the Company is issuing securities primarily
for the purpose of raising capital or to an entity whose primary
business is investing in securities; (c) securities issued pursuant
to any equipment loan or leasing arrangement, real property leasing
arrangement or debt financing from a bank or similar financial
institution approved by a majority of the disinterested directors
of the Company; (d) securities issued under the Form 1-A or S-1
filed and declared effective by the Securities and Exchange
Commission as of the date hereof; (e) existing convertible debt and
equity lines of credit in existence on the date hereof, (f) private
placements of Common Stock by the Company; and/or (g) securities
issued with respect to which the Holder waives its rights in
writing under this Section 1.6(e).
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(f) Notice of Adjustments. Upon the
occurrence of each adjustment or readjustment of the Conversion
Price as a result of the events described in this Section 1.6, the
Borrower, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to the Holder a certificate
setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The
Borrower shall, upon the written request at any time of the Holder,
furnish to such Holder a like certificate setting forth (i) such
adjustment or readjustment, (ii) the Conversion Price at the time
in effect and (iii) the number of shares of Common Stock and the
amount, if any, of other securities or property which at the time
would be received upon conversion of the Note.
1.7 Adjustments to Conversion
Price. At any time after the Issue Date, (i) if at any time
the Borrower does not maintain or replenish the Reserved Amount (as
defined herein) within three (3) business days of the request of
the Holder; (ii) if, once obtained as required under the
Transaction Documents, the Borrower fails to maintain the listing
of the Common Stock on at least one of the OTC Markets or an
equivalent replacement exchange, the Nasdaq National Market, the
Nasdaq Small Cap Market, the New York Stock Exchange, or the NYSE
MKT; (iii) if the Borrower fails to comply with the reporting
requirements of the Exchange Act; the reporting requirements
necessary to satisfy the availability of Rule 144 to the Holder or
its assigns, including but not limited to the timely fulfillment of
its filing requirements as a fully- reporting issuer registered
with the SEC,; (iv) if the Borrower effectuates a reverse split of
its Common Stock without twenty (20) days prior written notice to
the Holder; (v) if, once listed, subsequently OTC Markets changes
the Borrower’s designation to ‘No Information’
(Stop Sign), ‘Caveat Emptor’ (Skull and Crossbones), or
‘OTC’, ‘Other OTC’ or ‘Grey
Market’ (Exclamation Xxxx Sign) and does not cure such status
within 10 business days; (vi) the restatement of any financial
statements filed by the Borrower with the SEC for any date or
period from two (2) years prior to the Issue Date of this Note and
until this Note is no longer outstanding, if the result of such
restatement would, by comparison to the un-restated financial
statement, have constituted a material adverse effect on the rights
of the Holder with respect to this Note or the Purchase Agreement;
(vii) once it begins trading on any of the trading markets or
exchanges listed hereafter, any cessation of trading of the Common
Stock on at least one of the OTC Markets or an equivalent
replacement exchange, the Nasdaq National Market, the Nasdaq Small
Cap Market, the New York Stock Exchange, or the NYSE MKT, and such
cessation of trading shall continue for a period of five
consecutive (5) Trading Days; and/or (viii) if Borrow is trading,
the Borrower loses the “bid” price for its Common Stock
($0.0001 on the “Ask” with zero market makers on the
“Bid” per Level 2); and/or (ix) if the Holder is
notified in writing by the Company or the Company’s transfer
agent that the Company does not have the necessary amount of
authorized and issuable shares of Common Stock available to satisfy
the issuance of Shares pursuant to a Conversion Notice, then in
addition to all other remedies under this Note, the Holder shall be
entitled to increase, by two percent (2%) for each occurrence,
cumulative or otherwise, the discount to the Conversion Price shall
apply for all future conversions under the Note until such time as
the respective Default has been cured for fifteen (15) calendar
days.
1.8 Status as Shareholder. Upon
submission of a Notice of Conversion by a Holder, (i) the
Conversion Shares covered thereby (other than the Conversion
Shares, if any, which cannot be issued because their issuance would
exceed such Holder’s allocated portion of the Reserved Amount
or Maximum Share Amount) shall be deemed converted into shares of
Common Stock, and (ii) the Holder’s rights as a Holder of
such converted portion of this Note shall cease and terminate,
excepting only the right to receive certificates for such shares of
Common Stock and to any remedies provided herein or otherwise
available at law or in equity to such Holder because of a failure
by the Borrower to comply with the terms of this Note.
Notwithstanding the foregoing, if a Holder has not received
certificates for all shares of Common Stock prior to the tenth
(10th) business day after the expiration of the Deadline with
respect to a conversion of any portion of this Note for any reason,
then (unless the Holder otherwise elects to retain its status as a
holder of Common Stock by so notifying the Borrower) the Holder
shall regain the rights of a Holder of this Note with respect to
such unconverted portions of this Note and the Borrower shall, as
soon as practicable, return such unconverted Note to the Holder or,
if the Note has not been surrendered, adjust its records to reflect
that such portion of this Note has not been converted. In all
cases, the Holder shall retain all of its rights and remedies for
the Borrower’s failure to convert this Note.
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1.9 Prepayment. Notwithstanding anything to the contrary contained
in this Note, subject to the terms of this Section, at any time
during the period beginning on the Issue Date and ending on the
date which is one hundred eighty (180) calendar days following the
Issue Date (“Prepayment Termination Date”), Borrower
shall have the right, exercisable on not less than five (5) Trading
Days prior written notice to the Holder of this Note, to prepay up
to the outstanding balance on this Note (principal and accrued
interest), in full, in accordance with this Section. Any notice of
prepayment hereunder (an “Optional Prepayment Notice”)
shall be delivered to the Holder of the Note at its registered
addresses and shall state: (1) that the Borrower is exercising its
right to prepay the Note, and (2) the date of prepayment which
shall be not more than fifteen (15) Trading Days from the date of
the Optional Prepayment Notice; and (3) the amount (in dollars)
that the Borrower is paying. Notwithstanding Holder’s receipt
of the Optional Prepayment Notice the Holder may convert, or
continue to convert the Note in whole or in part until the Optional
Prepayment Amount (as defined herein) is paid to the Holder. On the
date fixed for prepayment (the “Optional Prepayment
Date”), the Borrower shall make payment of the Optional
Prepayment Amount (as defined below) to or upon the order of the
Holder as specified by the Holder in writing to the Borrower at
least one (1) business day prior to the Optional Prepayment
Date. If the Borrower exercises its right to prepay the Note,
the Borrower shall make payment to the Holder of an amount in cash
(the “Optional Prepayment Amount”) equal to the
Prepayment Factor (as defined below), multiplied by the sum of: (w)
the then outstanding principal amount of this
Note plus (x)
accrued and unpaid interest on the unpaid principal amount of this
Note to the Optional Prepayment Date plus (y)
Default Interest, if any, on the amounts referred to in clauses (w)
and (x) plus (z)
any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g)
hereof. If the Borrower delivers an Optional Prepayment
Notice and fails to pay the Optional Prepayment Amount due to the
Holder of the Note within two (2) business days following the
Optional Prepayment Date, the Borrower shall forever forfeit its
right to prepay the Note pursuant to this Section. After the
Prepayment Termination Date, the Borrower shall have no right to
prepay this Note. For purposes hereof, the “Prepayment
Factor” shall equal: one hundred five percent (105%) if the
Optional Prepayment Date occurs during one (1) through sixty (60)
calendar days following the Issue Date; one hundred twenty percent
(120%) if the Optional Prepayment Date occurs sixty-one (61)
through one hundred twenty (120) calendar days following the Issue
Date; one hundred thirty percent (130%) if the Optional Prepayment
Date occurs one hundred twenty-one (121) through one hundred eighty
(180) calendar days following the Issue Date. Borrower shall not
have any prepayment rights after one hundred eighty (180) calendar
days following the Issue Date.
ARTICLE
II. RANKING AND CERTAIN COVENANTS
2.1 Ranking and Security. The
obligations of the Borrower under this Note shall rank subordinate
with respect to any and all Indebtedness incurred as of or
following the Issue Date.
2.2 Removed and
reserved.
2.3 Removed
and reserved.
2.4 Restriction on Stock Repurchases and
Debt Repayments. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not without the
Holder’s written consent redeem, repurchase or otherwise
acquire (whether for cash or in exchange for property or other
securities or otherwise) in any one transaction or series of
related transactions any shares of capital stock of the Borrower or
any warrants, rights or options to purchase or acquire any such
shares.
2.5 Sale of Assets. So long as the
Borrower shall have any obligation under this Note, the Borrower
shall not, without the Holder’s written consent, sell, lease
or otherwise dispose of any significant portion of its assets
outside the ordinary course of business. Any consent to the
disposition of any assets may be conditioned on a specified use of
the proceeds of disposition, but otherwise such consent shall not
be unreasonably withheld, conditioned, or delayed.
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2.6 Advances and Loans; Affiliate
Transactions. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not, without the
Holder’s written consent, lend money, give credit, make
advances to or enter into any transaction with any person, firm,
joint venture or corporation, including, without limitation,
officers, directors, employees, subsidiaries and affiliates of the
Borrower, except loans, credits or advances (a) in existence or
committed on the Issue Date and which the Borrower has informed
Holder in writing prior to the Issue Date, (b) in regard to
transactions with unaffiliated third parties, made in the ordinary
course of business or (c) in regard to transactions with
unaffiliated third parties, not in excess of $500,000. So long as
the Borrower shall have any obligation under this Note, the
Borrower shall not, without the Holder’s written consent,
repay any affiliate (as defined in Rule 144) of the Borrower in
connection with any indebtedness or accrued amounts owed to any
such party outside the ordinary course of business, which
specifically excludes reasonable salaries of executive
officers.
2.7 Section 3(a)(9) or 3(a)(10)
Transaction. So long as this Note is outstanding, the
Borrower shall not enter into any transaction or arrangement
structured in accordance with, based upon, or related or pursuant
to, in whole or in part, either Section 3(a)(9) of the Securities
Act (a “3(a)(9) Transaction”) or Section 3(a)(l0) of
the Securities Act (a “3(a)(l0) Transaction”). In the
event that the Borrower does enter into, or makes any issuance of
Common Stock related to a 3(a)(9) Transaction or a 3(a)(l0)
Transaction while this note is outstanding, a liquidated damages
charge of 5% of the outstanding principal balance of this Note, but
not less than Five Thousand Dollars ($5,000), will be assessed and
will become immediately due and payable to the Holder at its
election in the form of a cash payment or added to the balance of
this Note (under Holder's and Borrower's expectation that this
amount will tack back to the Issue Date).
2.8 Preservation of Business and
Existence, etc. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not, without the
Holder’s written consent, (a) change the nature of its
business in a material respect; or (b) sell, divest, change the
structure of any material assets other than in the ordinary course
of business;. In addition, so long as the Borrower shall have any
obligation under this Note, the Borrower shall maintain and
preserve, and cause each of its Subsidiaries to maintain and
preserve, its existence, rights and privileges, and become or
remain, and cause each of its Subsidiaries (other than dormant
Subsidiaries that have no or minimum assets) to become or remain,
duly qualified and in good standing in each jurisdiction in which
the character of the properties owned or leased by it or in which
the transaction of its business makes such qualification
necessary.
2.9 Non-circumvention. The Company
hereby covenants and agrees that the Company will not, by amendment
of its Certificate or Articles of Incorporation or Bylaws, or
through any reorganization, transfer of assets, consolidation,
merger, scheme of arrangement, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of this Note, and
will at all times in good faith carry out all the provisions of
this Note and take all action as may be required to protect the
rights of the Holder.
2.10
Lost,
Stolen or Mutilated Note. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note, and, in the case of loss,
theft or destruction, of any indemnification undertaking by the
Holder to the Company in customary form and, in the case of
mutilation, upon surrender and cancellation of this Note, the
Company shall execute and deliver to the Holder a new
Note.
ARTICLE
III. EVENTS OF DEFAULT
It
shall be considered an event of default if any of the following
events listed in this Article III (each, an “Event of
Default”) shall occur:
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3.1
Conversion and the
Shares. The Borrower (i) fails to issue Conversion Shares to
the Holder (or announces or threatens in writing that it will not
honor its obligation to do so) upon exercise by the Holder of the
conversion rights of the Holder in accordance with the terms of
this Note, (ii) fails to transfer or cause its transfer agent to
transfer (issue) (electronically or in certificated form) any
certificate for the Conversion Shares issuable to the Holder upon
conversion of or otherwise pursuant to this Note as and when
required by this Note, (iii) reserve the Reserved Amount at all
times, or (iii) the Borrower directs its transfer agent not to
transfer or delays, impairs, and/or hinders its transfer agent in
transferring (or issuing) (electronically or in certificated form)
any certificate for the Conversion Shares issuable to the Holder
upon conversion of or otherwise pursuant to this Note as and when
required by this Note, or fails to remove (or directs its transfer
agent not to remove or impairs, delays, and/or hinders its transfer
agent from removing) any restrictive legend (or to withdraw any
stop transfer instructions in respect thereof) on any certificate
for any Conversion Shares issued to the Holder upon conversion of
or otherwise pursuant to this Note as and when required by this
Note (or makes any written announcement, statement or threat that
it does not intend to honor the obligations described in this
paragraph) and any such failure shall continue uncured (or any
written announcement, statement or threat not to honor its
obligations shall not be rescinded in writing) for five (5) Trading
Days after the Holder shall have delivered a Notice of Conversion.
It is an obligation of the Borrower to remain current in its
obligations to its transfer agent. It shall be an Event of Default
of this Note, if a conversion of this Note is delayed, hindered or
frustrated due to a balance owed by the Borrower to its transfer
agent. If at the option of the Holder, the Holder advances any
funds to the Borrower’s transfer agent in order to process a
conversion, such advanced funds shall be paid by the Borrower to
the Holder within forty-eight (48) hours of a demand from the
Holder.
3.2 Breach of Agreements and
Covenants. The Borrower breaches any material agreement,
covenant or other material term or condition contained in the
Purchase Agreement, this Note, the Irrevocable Transfer Agent
Instructions or in any agreement, statement or certificate given in
writing pursuant hereto or in connection herewith or therewith,
which is not cured within five (5) days of notice that Company is
in breach thereof.
3.3 Breach of Representations and
Warranties. Any material representation or warranty of the
Borrower made in the Purchase Agreement, this Note, the Irrevocable
Transfer Agent Instructions or in any agreement, statement or
certificate given in writing pursuant hereto or in connection
herewith or therewith shall be false or misleading in any material
respect when made and the breach of which has (or with the passage
of time will have) a material adverse effect on the rights of the
Holder with respect to this Note or the Purchase
Agreement.
3.4 Receiver or Trustee. The
Borrower or any subsidiary of the Borrower shall make an assignment
for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial
part of its property or business, or such a receiver or trustee
shall otherwise be appointed.
3.5 Judgments. Any money judgment,
writ or similar process shall be entered or filed against the
Borrower or any subsidiary of the Borrower or any of its property
or other assets for more than $160,000, and shall remain unvacated,
unbonded or unstayed for a period of twenty (20) days unless
otherwise consented to by the Holder, which consent will not be
unreasonably withheld.
3.6 Bankruptcy. Bankruptcy,
insolvency, reorganization or liquidation proceedings or other
proceedings, voluntary or involuntary, for relief under any
bankruptcy law or any law for the relief of debtors shall be
instituted by or against the Borrower or any subsidiary of the
Borrower.
3.7 Delisting of Common Stock. Once
the Borrower obtains a listing, the Borrower should subsequently
fail to maintain the listing of the Common Stock on at least one of
the Over the Counter Bulletin Board, the OTCQB Market, any level of
the OTC Markets, or any level of the Nasdaq Stock Market or the New
York Stock Exchange (including the NYSE American).
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3.8 Failure to Comply with the 1934
Act. Borrow shall remain current its quarterly, annual and
current reports with the Securities and Exchange Commission and
shall become subject to the 1934 Act within 180 days. At any time
after 180 days following the Issue Date, the Borrower shall fail to
comply with the reporting requirements of the 1934 Act and/or the
Borrower shall cease to be subject to the reporting requirements of
the 1934 Act. It shall be an Event of Default under this Section
3.9 if the Borrower shall file any Notification of Late Filing on
Form 12b-25 with the SEC.
3.9 Liquidation. Any dissolution,
liquidation, or winding up of Borrower or any substantial portion
of its business.
3.10 Cessation of Operations. Any
cessation of operations by Borrower or Borrower admits it is
otherwise generally unable to pay its debts as such debts become
due, provided, however, that any disclosure of the Borrower’s
ability to continue as a “going concern” shall not be
an admission that the Borrower cannot pay its debts as they become
due.
3.11 Maintenance of Assets. The
failure by Borrower to maintain any material intellectual property
rights, personal, real property or other assets which are necessary
to conduct its business (whether now or in the
future).
3.12 Financial Statement
Restatement. The restatement of any financial statements
filed by the Borrower with the SEC for any date or period from two
years prior to the Issue Date of this Note and until this Note is
no longer outstanding, if the result of such restatement would, by
comparison to the unrestated financial statement, have constituted
a material adverse effect on the rights of the Holder with respect
to this Note or the Purchase Agreement.
3.13
Reverse Splits. The
Borrower effectuates a reverse split of its Common Stock without
twenty (20) days prior written notice to the Holder.
3.14
Replacement of Transfer
Agent. In the event that the Borrower proposes to replace
its transfer agent, the Borrower fails to provide, prior to the
effective date of such replacement, a fully executed Irrevocable
Transfer Agent Instructions in a form as initially delivered
pursuant to the Purchase Agreement (including but not limited to
the provision to irrevocably reserve shares of Common Stock in the
Reserved Amount) signed by the successor transfer agent to Borrower
and the Borrower.
3.15 DTC “Chill”. The
DTC places a “chill” (i.e. a restriction placed by DTC
on one or more of DTC’s services, such as limiting a DTC
participant’s ability to make a deposit or withdrawal of the
security at DTC) on any of the Borrower’s
securities.
3.16 Illegality. Any court of
competent jurisdiction issues an order declaring this Note, the
Purchase Agreement or any provision hereunder or thereunder to be
illegal.
3.17
DWAC Eligibility.
In addition to the Event of Default in Section 3.16, the Borrower
shall use its best efforts to become eligible for trading through
the DTC’s Fast Automated Securities Transfer or
Deposit/Withdrawal at Custodian programs within 180 days of the
Issue Date.
3.18 Variable
Rate Transactions; Dilutive Issuances. Borrower shall
request the consent of Lender, which consent shall not be
unreasonably withheld, if at any time within 60 days of the Issue
Date, the Borrower (i) issues shares of Common Stock (or
convertible securities or Purchase Rights) pursuant to an equity
line of credit of the Company or otherwise in connection with a
Variable Rate Transaction (entered into in the future) except for
existing lines of credit or Variable Rate Transactions existing as
of the date hereof, (ii) adjusts downward the “floor
price” at which shares of Common Stock (or convertible
securities or Purchase Rights) may be issued under an equity line
of credit or otherwise in connection with a Variable Rate
Transaction (r entered into in the future) except for existing
lines of credit or Variable Rate Transactions existing as of the
date hereof, or (iii) a Dilutive Issuance is triggered as provided
in this Note.
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3.19 Bid
Price. Once the Borrower obtains a listing, the Borrower
shall subsequently lose the “bid” price for its Common
Stock ($0.0001 on the “Ask” with zero market makers on
the “Bid” per Level 2) and/or a market (including the
OTC Pink, OTCQB or an equivalent replacement marketplace or
exchange).
3.20 Inside
Information. Any attempt by the Borrower or its officers,
directors, and/or affiliates to intentionally transmit, convey,
disclose, or any actual transmittal, conveyance, or disclosure by
the Borrower or its officers, directors, and/or affiliates of,
material non-public information concerning the Borrower, to the
Holder or its successors and assigns, which is not immediately
cured by Borrower’s filing of a Form 8-K pursuant to
Regulation FD on that same date
3.21 Unavailability
of Rule 144. If, at any time on or after the date which is
nine (9) months after the Issue Date, except due to the
Holder’s actions or inactions, the Holder is unable to (i)
obtain a standard “144 legal opinion letter” from an
attorney reasonably acceptable to the Holder, the Holder’s
brokerage firm (and respective clearing firm), and the
Borrower’s transfer agent in order to facilitate the
Holder’s conversion of any portion of the Note into free
trading shares of the Borrower’s Common Stock pursuant to
Rule 144, and/or (ii) thereupon deposit such shares into the
Holder’s brokerage account.
3.22 Delisting
or Suspension of Trading of Common Stock. If, at any time on
or after the Borrower obtains a listing, the Borrower’s
Common Stock (i) is suspended from trading, (ii) halted from
trading, and/or (iii) fails to be quoted or listed (as applicable)
within one hundred and eighty (180) days of Issue Date on any level
of the OTC Markets, any tier of the NASDAQ Stock Market, the New
York Stock Exchange, or the NYSE American.
3.23 Rights
and Remedies Upon an Event of Default. Upon the occurrence
and during the continuation of any Event of Default specified in
this Article III which remains uncured for five (5) days after
written notice from Holder provided to Borrower, this Note shall
become immediately due and payable and the Borrower shall pay to
the Holder, in full satisfaction of its obligations hereunder, an
amount (the “Default Amount”) equal to the Principal
Amount then outstanding plus accrued interest (including any
Default Interest) through the date of full repayment multiplied by
one hundred twenty-five percent (125%). Holder may, in its sole
discretion, determine to accept payment part in Common Stock and
part in cash. For purposes of payments in Common Stock, the
conversion formula set forth in Section 1.2 shall apply. Upon an
uncured Event of Default, all amounts payable hereunder shall
immediately become due and payable, all without demand, presentment
or notice, all of which hereby are expressly waived by the
Borrower, together with all costs, including, without limitation,
legal fees and expenses, of collection, and the Holder shall be
entitled to exercise all other rights and remedies available at law
or in equity, including, without limitation.
3.24 Stock
Symbol and Listing. Within one hundred and eighty (180) days
of the Issue Date hereof, Borrower shall have obtained a trading
symbol and be able to have its common stock trade on OTC Pink,
OTCQB or higher tier exchange.
ARTICLE
IV. MISCELLANEOUS
4.1 Failure or Indulgence Not
Waiver. No failure or delay on the part of the Holder in the
exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privileges. All
rights and remedies of the Holder existing hereunder are cumulative
to, and not exclusive of, any rights or remedies otherwise
available.
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4.2 Notices. All notices, demands,
requests, consents, approvals, and other communications required or
permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in
the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service
with charges prepaid, or (iv) transmitted by hand delivery,
telegram, e-mail or facsimile, addressed as set forth below or to
such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon
hand delivery or delivery by e-mail or facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at
the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be
received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours
where such notice is to be received) or (b) on the second business
day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The addresses for such
communications shall be:
If to
the Borrower, to:
TEGO
CYBER INC.
0000
Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxx
Xxxxx, Xxxxxx 00000
Attention: Xxxxxxx
Xxxxxxxxx
e-mail:
xxxxxxx.xxxxxxxxx@xxxxxxxxx.xxx
With a
copy by e-mail only to (which copy shall not constitute
notice):
XXXXXXX
+ XXXXXXX
00
Xxxxxxx Xxxx, Xxxxx 000
Xxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx
X. Xxxxxxx, Esq.
e-mail:
xxxxxxxx@xxxxxxx.xxx
If to
the Holder:
ANALYTICO SERVICES
CONSEILS INC.
0000
Xxx X’Xxxxx
Xxxxx-Xxxxxxx,
Xxxxxx X0X 0X0
Attention: Xxxxxxxx
Xxxxxxxxx
xxxxxxxxxxxx@xxxxx.xxx
4.3 Amendments. This Note and any
provision hereof may only be amended by an instrument in writing
signed by the Borrower and the Holder. The term “Note”
and all reference thereto, as used throughout this instrument,
shall mean this instrument as originally executed, or if later
amended or supplemented, then as so amended or
supplemented.
4.4 Assignability. This Note shall
be binding upon the Borrower and its successors and assigns, and
shall inure to be the benefit of the Holder and its successors and
assigns. Neither the Borrower nor the Holder shall assign this Note
or any rights or obligations hereunder without the prior written
consent of the other. Notwithstanding the foregoing, the Holder may
assign its rights hereunder to any “accredited
investor” (as defined in Rule 501(a) of the 0000 Xxx) in a
private transaction from the Holder or to any of its
“affiliates”, as that term is defined under the 1934
Act, without the consent of the Borrower. Notwithstanding anything
in this Note to the contrary, this Note may be pledged as
collateral in connection with a bona fide margin account or other
lending arrangement. The Holder and any assignee, by acceptance of
this Note, acknowledge and agree that following conversion of a
portion of this Note, the unpaid and unconverted principal amount
of this Note represented by this Note may be less than the amount
stated on the face hereof.
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4.5 Cost of Collection. If default
is made in the payment of this Note, the Borrower shall pay the
Holder hereof costs of collection, including reasonable
attorneys’ fees.
4.6 Governing Law; Venue; Attorney’s
Fees. This Note shall be governed by and construed in
accordance with the laws of the State of Nevada without regard to
principles of conflicts of laws. Any action brought by either party
against the other concerning the transactions contemplated by this
Note or any other agreement, certificate, instrument or document
contemplated hereby shall be brought only in the state courts
located in the state of Nevada or federal courts located in the
state of Nevada. The Borrower hereby irrevocably waives any
objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non conveniens. Each party hereby irrevocably
waives personal service of process and consents to process being
served in any suit, action or proceeding in connection with this
Note or any other agreement, certificate, instrument or document
contemplated hereby or thereby 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 Note 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. The prevailing
party in any action or dispute brought in connection with this the
Note or any other agreement, certificate, instrument or document
contemplated hereby or thereby shall be entitled to recover from
the other party its reasonable attorney’s fees and
costs.
4.7 Removed
and Reserved.
4.8 Purchase Agreement. The Company
and the Holder shall be bound by the applicable terms of the
Purchase Agreement and the documents entered into in connection
herewith and therewith.
4.9 Notice of Corporate Events.
Except as otherwise provided below, the Holder of this Note shall
have no rights as a Holder of Common Stock unless and only to the
extent that it converts this Note into Common Stock. The Borrower
shall provide the Holder with prior notification of any meeting of
the Borrower’s shareholders (and copies of proxy materials
and other information sent to shareholders). In the event of any
taking by the Borrower of a record of its shareholders for the
purpose of determining shareholders who are entitled to receive
payment of any dividend or other distribution, any right to
subscribe for, purchase or otherwise acquire (including by way of
merger, consolidation, reclassification or recapitalization) any
share of any class or any other securities or property, or to
receive any other right, or for the purpose of determining
shareholders who are entitled to vote in connection with any Change
in Control or any proposed liquidation, dissolution or winding up
of the Borrower, the Borrower shall mail a notice to the Holder, at
least twenty (20) days prior to the record date specified therein
(or thirty (30) days prior to the consummation of the transaction
or event, whichever is earlier), of the date on which any such
record is to be taken for the purpose of such dividend,
distribution, right or other event, and a brief statement regarding
the amount and character of such dividend, distribution, right or
other event to the extent known at such time. The Borrower shall
make a public announcement of any event requiring notification to
the Holder hereunder substantially simultaneously with the
notification to the Holder in accordance with the terms of this
Section 4.9.
4.10 Remedies.
The Borrower acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder, by vitiating
the intent and purpose of the transaction contemplated hereby.
Accordingly, the Borrower acknowledges that the remedy at law for a
breach of its obligations under this Note will be inadequate and
agrees, in the event of a breach or threatened breach by the
Borrower of the provisions of this Note, that the Holder shall be
entitled, in addition to all other available remedies at law or in
equity, and in addition to the penalties assessable herein, to an
injunction or injunctions restraining, preventing or curing any
breach of this Note and to enforce specifically the terms and
provisions thereof, without the necessity of showing economic loss
and without any bond or other security being required.
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4.11 Construction;
Headings. This Note shall be deemed to be jointly drafted by
the Company and all the Holder and shall not be construed against
any person as the drafter hereof. The headings of this Note are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Note.
4.12 Usury.
To the extent it may lawfully do so, the Company hereby agrees not
to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or
advantage of, usury laws wherever enacted, now or at any time
hereafter in force, in connection with any action or proceeding
that may be brought by the Holder in order to enforce any right or
remedy under this Note. Notwithstanding any provision to the
contrary contained in this Note, it is expressly agreed and
provided that the total liability of the Company under this Note
for payments which under the applicable law are in the nature of
interest shall not exceed the maximum lawful rate authorized under
applicable law (the “Maximum Rate”), and, without
limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other
sums which under the applicable law in the nature of interest that
the Company may be obligated to pay under this Note exceed such
Maximum Rate. It is agreed that if the maximum contract rate of
interest allowed by applicable law and applicable to this Note is
increased or decreased by statute or any official governmental
action subsequent to the Issue Date, the new maximum contract rate
of interest allowed by law will be the Maximum Rate applicable to
this Note from the effective date thereof forward, unless such
application is precluded by applicable law. If under any
circumstances whatsoever, interest in excess of the Maximum Rate is
paid by the Company to the Holder with respect to indebtedness
evidenced by this the Note, such excess shall be applied by the
Holder to the unpaid principal balance of any such indebtedness or
be refunded to the Company, the manner of handling such excess to
be at the Holder’s election.
4.13 Severability.
In the event that any provision of this Note is invalid or
unenforceable under any applicable statute or rule of law
(including any judicial ruling), then such provision shall be
deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of
any other provision of this Note.
4.14 Terms
of Future Financings. So long as this Note is outstanding,
upon any issuance by the Borrower or any of its subsidiaries of any
new security, with any term that the Holder reasonably believes is
more favorable to the holder of such security or with a term in
favor of the holder of such security that the Holder reasonably
believes was not similarly provided to the Holder in this Note,
then (i) the Borrower shall notify the Holder of such additional or
more favorable term within five (5) business day of the issuance
and/or amendment (as applicable) of the respective security, and
(ii) such term, at Holder’s option, shall become a part of
the transaction documents with the Holder (regardless of whether
the Borrower complied with the notification provision of this
Section 4.14). The types of terms contained in another security
that may be more favorable to the holder of such security include,
but are not limited to, terms addressing conversion discounts,
prepayment rate, conversion lookback periods, interest rates, and
original issue discounts. If Holder elects to have the term become
a part of the transaction documents with the Holder, then the
Borrower shall immediately deliver acknowledgment of such
adjustment in form and substance reasonably satisfactory to the
Holder (the “Acknowledgment”) within one (1) business
day of Borrower’s receipt of request from Holder (the
“Adjustment Deadline”), provided that Borrower’s
failure to timely provide the Acknowledgement shall not affect the
automatic amendments contemplated hereby. For avoidance of any
doubt, the foregoing of this Section 4.14 shall not apply to any
financings by the Company made under its existing Regulation A and
S-1 offerings. Nor shall this section apply to any adjustments made
to any of the Borrower’s securities issued prior to the date
hereof.
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4.15 Dispute
Resolution. In the case of a dispute as to the determination
of the Conversion Price, Conversion Amount, any prepayment amount
or Default Amount, Issue, Closing or Maturity Date, the closing bid
price, or fair market value (as the case may be) or the arithmetic
calculation of the Conversion Price or the applicable prepayment
amount(s) (as the case may be), the Borrower or the Holder shall
submit the disputed determinations or arithmetic calculations via
facsimile (i) within one (1) Trading Day after receipt of the
applicable notice giving rise to such dispute to the Borrower or
the Holder or (ii) if no notice gave rise to such dispute, at any
time after the Holder learned of the circumstances giving rise to
such dispute. If the Holder and the Borrower are unable to agree
upon such determination or calculation within five (5) Trading Days
of such disputed determination or arithmetic calculation (as the
case may be) being submitted to the Borrower or the Holder, then
the Borrower shall, within three (3) Trading Day, submit (a) the
disputed determination of the Conversion Price, the closing bid
price, the or fair market value (as the case may be) to an
independent, reputable investment bank selected by the Borrower and
approved by the Holder or (b) the disputed arithmetic calculation
of the Conversion Price, Conversion Amount, any prepayment amount
or Default Amount, to an independent, outside accountant selected
by the Holder that is reasonably acceptable to the Borrower. The
Borrower shall cause at its expense the investment bank or the
accountant to perform the determinations or calculations and notify
the Borrower and the Holder of the results no later than one (1)
Trading Day from the time it receives such disputed determinations
or calculations. Such investment bank’s or accountant’s
determination or calculation shall be binding upon all parties
absent demonstrable error.
[SIGNATURE PAGE
FOLLOWS]
A-18
IN WITNESS WHEREOF, Borrower has caused
this Note to be signed in its name by its duly authorized officer
on April 15, 2021.
TEGO
CYBER INC.
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By:/s/
Xxxxxxx Xxxxxxxxx
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Name:
XXXXXXX XXXXXXXXX
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Title:
CHIEF EXECUTIVE OFFICER
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A-19
EXHIBIT
A -- NOTICE OF CONVERSION
The
undersigned hereby elects to convert $ _______________ principal
amount of the Note (defined below) into that number of shares of
Common Stock to be issued pursuant to the conversion of the Note
(“Common Stock”) as set forth below, of TEGO CYBER INC., a Nevada corporation
(the “Borrower”), according to the conditions of the
Convertible Promissory Note of the Borrower dated as of December
23, 2020 (the “Note”), as of the date written below. No
fee will be charged to the Holder for any conversion, except for
transfer taxes, if any.
Box
Checked as to applicable instructions:
|
☐
|
The
Borrower shall electronically transmit the Common Stock issuable
pursuant to this Notice of Conversion to the account of the
undersigned or its nominee with DTC through its Deposit Withdrawal
Agent Commission system (“DWAC Transfer”).
|
|
|
Name of
DTC Prime Broker:
|
|
|
Account
Number:
|
|
☐
|
The
undersigned hereby requests that the Borrower issue a certificate
or certificates for the number of shares of Common Stock set forth
below (which numbers are based on the Holder’s calculation
attached hereto) in the name(s) specified immediately below or, if
additional space is necessary, on an attachment
hereto:
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|
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ANALYTICO
SERVICES CONSEILS INC.
______________________________________
______________________________________
______________________________________
______________________________________
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Date of
Conversion:
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Applicable
Conversion Price: $
|
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Costs
Incurred by the Undersigned to Convert the Note into Shares of
Common Stock:
|
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Number
of Shares of Common Stock to be Issued Pursuant to Conversion of
the Note:
|
|
Amount
of Principal Balance Due remaining Under the Note after this
conversion:
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By:
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Name:
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Title:
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Date:
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A-20
EXHIBIT
B
FORM
OF WARRANT
[attached
hereto]
NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS
EXERCISABLE HAVE 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 EXERCISE OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON
STOCK PURCHASE WARRANT TEGO CYBER INC.
|
Warrant
Shares: 506,838
|
Issuance
Date: April 22, 2021
|
THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that,
for value received, ANALYTICO
SERVICES CONSEILS INC., a Quebec corporation, or its
registered assigns (the “Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date
hereof (the “Initial
Exercise Date”) and on or prior to the close of
business on the second anniversary of the Issuance Date (the
“Termination
Date”) but not thereafter, to subscribe for and
purchase from TEGO CYBER
INC., a Nevada corporation (the “Company”), up to 506,838
shares (as subject to adjustment hereunder, the “Warrant Shares”) of
Common Stock. The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in
Section 2(b).
Section 1. Definitions. Capitalized terms
used and not otherwise defined herein shall have the meanings set
forth in that certain Securities Purchase Agreement (the
“Purchase
Agreement”), dated April 22, 2021, among the Company
and the Holder and the note issued to the Holder contemporaneously
with this Warrant (the “Note”). This Warrant is
subject to cancellation as set forth in the Purchase
Agreement.
Section 2. Exercise.
a) Exercise of the
purchase rights represented by this Warrant may be made, in whole
or in part, at any time or times on or after the Initial Exercise
Date and on or before the
B-1
Termination Date by
delivery to the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered
Holder at the address of the Holder appearing on the books of the
Company) of a duly executed facsimile copy of the Notice of
Exercise Form annexed hereto. Within three (3) Trading Days
following the date of exercise as aforesaid, the Holder shall
deliver the aggregate Exercise Price for the shares specified in
the applicable Notice of Exercise by wire transfer or
cashier’s check drawn on a United States bank unless the
cashless exercise procedure specified in Section 2(c) below is
specified in the applicable Notice of Exercise. Notwithstanding
anything herein to the contrary (although the Holder may surrender
the Warrant to, and receive a replacement Warrant from, the
Company), the Holder shall not be required to physically surrender
this Warrant to the Company until the Holder has purchased all of
the Warrant Shares available hereunder and the Warrant has been
exercised in full, in which case, the Holder shall surrender this
Warrant to the Company for cancellation within three (3) Trading
Days of the date the final Notice of Exercise is delivered to the
Company. Partial exercises of this Warrant resulting in purchases
of a portion of the total number of Warrant Shares available
hereunder shall have the effect of lowering the outstanding number
of Warrant Shares purchasable hereunder in an amount equal to the
applicable number of Warrant Shares purchased. The Holder and the
Company shall maintain records showing the number of Warrant Shares
purchased and the date of such purchases. The Company shall deliver
any objection to any Notice of Exercise Form within three (3)
Trading Days of delivery of such notice. The Holder and any assignee, by acceptance of
this Warrant, acknowledge and agree that, by reason of the
provisions of this paragraph, following the purchase of a portion
of the Warrant Shares hereunder, the number of Warrant Shares
available for purchase hereunder at any given time may be less than
the amount stated on the face hereof.
b) Exercise Price. The exercise
price per share of the Common Stock under this Warrant shall be
$0.25, subject to adjustment as described herein
(“Exercise
Price”).
c) Cashless Exercise. In the event
that there is no effective registration statement registering the
Warrant Shares, or no current prospectus available for the resale
of the Warrant Shares by the Holder, then this Warrant may also be
exercised at the Holder’s election, in whole or in part, at
such time by means of a “cashless exercise” in which
the Holder shall be entitled to receive a number of Warrant Shares
equal to the quotient obtained by dividing [(A-B) (X)] by (A),
where:
(A) =
the 30 day VWAP on the Trading Day immediately preceding the date
on which Holder elects to exercise this Warrant by means of a
“cashless exercise,” as set forth in the applicable
Notice of Exercise;
(B) =
the Exercise Price of this Warrant, as adjusted hereunder;
and
(X) =
the number of Warrant Shares that would be issuable upon exercise
of this Warrant in accordance with the terms of this Warrant if
such exercise were by means of a cash exercise rather than a
cashless exercise.
Any
exercise of this Warrant shall be subject to a maximum aggregate
issuance cap of 1,500,000 Common Stock Shares (“Maximum
Aggregate”). In no event and under no circumstance regardless
of any breach, default, dilution protection, price adjustments, or
other provision set forth herein or any other ancillary agreement
between Holder and Company shall this Warrant result in the
issuance of any common stock shares in excess of the Maximum
Aggregate.
B-2
d)
Mechanics of
Exercise.
i. Delivery of Certificates Upon
Exercise. Certificates for shares purchased hereunder shall
be transmitted by the Transfer Agent to the Holder by crediting the
account of the Holder’s prime broker with The Depository
Trust Company through its Deposit or Withdrawal at Custodian system
(“DWAC”) if the Company is
then a participant in such system and either (A) there is an
effective registration statement permitting the issuance of the
Warrant Shares to or resale of the Warrant Shares by the Holder or
(B) this Warrant is being exercised via cashless exercise and Rule
144 is available, and otherwise by physical delivery to the address
specified by the Holder in the Notice of Exercise by the date that
is five (5) Trading Days after the latest of (A) the delivery to
the Company of the Notice of Exercise, (B) surrender of this
Warrant (if required) and (C) payment of the aggregate Exercise
Price as set forth above (including by cashless exercise, if
permitted) (such date, the “Warrant Share Delivery
Date”). The Warrant Shares shall be deemed to have
been issued, and Holder or any other person so designated to be
named therein shall be deemed to have become a holder of record of
such shares for all purposes, as of the date the Warrant has been
exercised, with payment to the Company of the Exercise Price (or by
cashless exercise, if permitted) and all taxes required to be paid
by the Holder, if any, pursuant to Section 2(d)(vi) prior to the
issuance of such shares, having been paid. The Company understands
that a delay in the delivery of the Warrant Shares after the
Warrant Share Delivery Date could result in economic loss to the
Holder. As compensation to the Holder for such loss, the Company
agrees to pay (as liquidated damages and not as a penalty) to the
Holder for late issuance of Warrant Shares upon exercise of this
Warrant the proportionate amount of $100 per Trading Day. The
Company shall pay any payments incurred under this Section in
immediately available funds upon demand. Furthermore, in addition
to any other remedies which may be available to the Holder, in the
event that the Company fails for any reason to effect delivery of
the Warrant Shares by the Warrant Share Delivery Date, the Holder
may revoke all or part of the relevant Warrant exercise by delivery
of a notice to such effect to the Company, whereupon the Company
and the Holder shall each be restored to their respective positions
immediately prior to the exercise of the relevant portion of this
Warrant, except that the liquidated damages described above shall
be payable through the date notice of revocation or rescission is
given to the Company.
ii. Delivery of New Warrants Upon
Exercise. If this Warrant shall have been exercised in part,
the Company shall, at the request of a Holder and upon surrender of
this Warrant certificate, at the time of delivery of the
certificate or certificates representing Warrant Shares, deliver to
the Holder a new Warrant evidencing the rights of the Holder to
purchase the unpurchased Warrant Shares called for by this Warrant,
which new Warrant shall in all other respects be identical with
this Warrant.
iii. Rescission
Rights. If the Company fails to cause the Transfer Agent to
transmit to the Holder a certificate or the certificates
representing the Warrant Shares pursuant to Section 2(d)(i) by the
Warrant Share Delivery Date, then the Holder will have the right,
at any time prior to issuance of such Warrant Shares, to rescind
such exercise.
iv. Compensation for Buy-In on Failure to
Timely Deliver Certificates Upon Exercise. In addition to
any other rights available to the Holder, if the Company fails to
cause the Transfer Agent to transmit to the Holder a certificate or
the certificates representing the Warrant Shares pursuant to an
exercise on or before the Warrant Share Delivery Date, and if after
such date the Holder
B-3
is
required by its broker to purchase (in an open market transaction
or otherwise) or the Holder’s brokerage firm otherwise
purchases, shares of Common Stock to deliver in satisfaction of a
sale by the Holder of the Warrant Shares which the Holder
anticipated receiving upon such exercise (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder the amount, if any, by
which (x) the Holder’s total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (1) the
number of Warrant Shares that the Company was required to deliver
to the Holder in connection with the exercise at issue times (2)
the price at which the sell order giving rise to such purchase
obligation was executed, and (B) at the option of the Holder,
either reinstate the portion of the Warrant and equivalent number
of Warrant Shares for which such exercise was not honored (in which
case such exercise shall be deemed rescinded) or deliver to the
Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000.00
to cover a Buy- In with respect to an attempted exercise of shares
of Common Stock with an aggregate sale price giving rise to such
purchase obligation of $10,000.00, under clause (A) of the
immediately preceding sentence the Company shall be required to pay
the Holder $1,000.00. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of
the Buy-In and, upon request of the Company, evidence of the amount
of such loss. Nothing herein shall limit a Holder’s right to
pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the
Company’s failure to timely deliver certificates representing
shares of Common Stock upon exercise of the Warrant as required
pursuant to the terms hereof.
v. No Fractional Shares or Scrip.
No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. As to any fraction of
a share which the Holder would otherwise be entitled to purchase
upon such exercise, the Company shall, at its election, either pay
a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up
to the next whole share.
vi. Charges, Taxes and Expenses.
Issuance of certificates for Warrant Shares shall be made without
charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate,
all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued in the name of the Holder or in
such name or names as may be directed by the Holder; provided, however, that in the event
certificates for Warrant Shares are to be issued in a name other
than the name of the Holder, this Warrant when surrendered for
exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the Holder and the Company may require, as
a condition thereto, the payment of a sum sufficient to reimburse
it for any transfer tax incidental thereto. The Company shall pay
all Transfer Agent fees required for same-day processing of any
Notice of Exercise.
vii. Closing
of Books. The Company will not close its stockholder books
or records in any manner which prevents the timely exercise of this
Warrant, pursuant to the terms hereof.
e) Holder’s Exercise
Limitations. From and after the date that the Conversion
Shares are of a class of equity of the borrower registered under
Section 12(g) of the Exchange Act or the Company is subject to the
reporting requirements of Section 13 or Section 15(d) of the
Exchange Act, the Company shall not effect any exercise of this
Warrant, and a Holder shall not have the right to exercise any
portion of this Warrant, pursuant to Section 2 or otherwise, to the
extent that after giving
B-4
effect to such
issuance after exercise as set forth on the applicable Notice of
Exercise, the Holder (together with the Holder’s Affiliates,
and any other Persons acting as a group together with the Holder or
any of the Holder’s Affiliates), would beneficially own in
excess of the Beneficial Ownership Limitation (as defined below).
For purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by the Holder and its Affiliates
shall include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which such determination
is being made, but shall exclude the number of shares of Common
Stock which would be issuable upon (i) exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by the
Holder or any of its Affiliates and (ii) exercise or conversion of
the unexercised or nonconverted portion of any other securities of
the Company (including, without limitation, any other Common Stock
Equivalents) subject to a limitation on conversion or exercise
analogous to the limitation contained herein beneficially owned by
the Holder or any of its Affiliates. Except as set forth in the
preceding sentence, for purposes of this Section 2(e), beneficial
ownership shall be calculated in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated
thereunder, it being acknowledged by the Holder that the Company is
not representing to the Holder that such calculation is in
compliance with Section 13(d) of the Exchange Act and the Holder is
solely responsible for any schedules required to be filed in
accordance therewith. To the extent that the limitation contained
in this Section 2(e) applies, the determination of whether this
Warrant is exercisable (in relation to other securities owned by
the Holder together with any Affiliates) and of which portion of
this Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed
to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder
together with any Affiliates) and of which portion of this Warrant
is exercisable, in each case subject to the Beneficial Ownership
Limitation, and the Company shall have no obligation to verify or
confirm the accuracy of such determination. In addition, a
determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder. For purposes of
this Section 2(e), in determining the number of outstanding shares
of Common Stock, a Holder may rely on the number of outstanding
shares of Common Stock as reflected in (A) the Company’s most
recent periodic or annual report filed with the Commission, as the
case may be, (B) a more recent public announcement by the Company
or (C) a more recent written notice by the Company or the Transfer
Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of a Holder, the
Company shall within two Trading Days confirm orally and in writing
to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Company, including this
Warrant, by the Holder or its Affiliates since the date as of which
such number of outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation” shall be 4.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant. The Holder may decrease the Beneficial
Ownership Limitation at any time and the Holder, upon not less than
sixty-one (61) days’ prior
notice to the Company, may increase the Beneficial Ownership
Limitation provisions of this Section 2(e), provided that the
Beneficial Ownership Limitation in no event exceeds 9.99% of the
number of shares of the Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock upon
exercise of this Warrant held by the Holder and the provisions of
this Section 2(e) shall continue to apply. Any such increase will
not be effective until the 61st day after such notice is delivered
to the Company. The provisions of this paragraph shall be construed
and implemented in a manner otherwise than in strict conformity
with the terms of this Section 2(e) to correct this paragraph (or
any portion hereof) which may be defective or inconsistent with the
intended
B-5
Beneficial
Ownership Limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such
limitation. The limitations contained in this paragraph shall apply
to a successor holder of this Warrant.
f) Piggyback Registration Rights.
If at any time while this Warrant is outstanding, the Company
determines to file a registration statement under the 1933 Act to
register the offer and sale, by the Company, of Common Stock (other
than (i) on Form S-4 or Form S-8 under the 1933 Act or any
successor forms thereto, (ii) an at-the-market offering, or (iii) a
registration of securities solely relating to an offering and sale
to employees or directors of the Company pursuant to any employee
stock plan or other employee benefit plan arrangement), the Company
shall, as soon as reasonably practicable, give written notice to
the Holder of its intention to so register the common stock
underlying the warrants and, upon the written request, given within
five (5) business days after delivery of any such notice by the
Company, of the Holder to include in such registration the Warrant
Shares (which request shall specify the number of warrant shares to
be included in such registration), the Company shall cause all such
shares to be included in such registration statement.
Section
3.
Certain
Adjustments.
a) Stock Dividends and Splits. If
the Company, at any time while this Warrant is outstanding: (i)
pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or
equity equivalent securities payable in shares of Common Stock
(which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Company upon exercise of this Warrant or
pursuant to any of the other Transaction Documents), (ii)
subdivides outstanding shares of Common Stock into a larger number
of shares, (iii) combines (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares,
or (iv) issues by reclassification of shares of the Common Stock
any shares of capital stock of the Company, then in each case the
Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding immediately before such event
and of which the denominator shall be the number of shares of
Common Stock outstanding immediately after such event, and the
number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted such that the aggregate Exercise Price of
this Warrant shall remain unchanged. Any adjustment made pursuant
to this Section 3(a) 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.
b) Adjustment Upon Issuance of Certain
Securities. If and whenever on or after the date hereof, so
long as any amounts remains outstanding under the Note, the Company
issues or sells, or in accordance with this Section 3 is deemed to
have issued or sold, any warrant with a warrant exercise price (the
“New Issuance
Price”) less than a price equal to the Exercise Price
in effect immediately prior to such issue or sale or deemed
issuance or sale (such Exercise Price then in effect is referred to
as the “Applicable
Price”) (the foregoing a “Dilutive Issuance”), then
immediately after such Dilutive Issuance, the Exercise Price then
in effect shall be reduced to the New Issuance Price. This
adjustment shall not apply to any price adjustments of securities
existing prior to the date hereof, nor to any securities offered by
the Company under its existing Regulation A or S-1 registration
statement. For all purposes of the foregoing (including, without
limitation, determining the adjusted
B-6
Exercise Price and
consideration per share under this Section 3(b)), the following
shall be applicable.
c)
Voluntary Reduction. The
Company may unilaterally reduce the Exercise Price
at any
time.
d) Calculations. All calculations
under this Section 3 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 3, 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 treasury shares, if
any) issued and outstanding.
e)
Notice to Holder.
i. Adjustment to Exercise Price.
Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly mail to the Holder a
notice setting forth the Exercise Price after such adjustment and
any resulting adjustment to the number of Warrant Shares and
setting forth a brief statement of the facts requiring such
adjustment.
ii. Notice to Allow Exercise by
Holder. If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the
Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the
granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class
or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, or (E)
the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the
Company, then, in each case, to the extent that such information
constitutes material non-public information (as determined in good
faith by the Company) the Company shall follow the procedure
described the Securities Purchase Agreement and shall deliver to
the Holder at its last address as it shall appear upon the Warrant
Register of the Company, at least twenty (20) calendar days prior
to the applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in such
notice. To the extent that any notice provided hereunder
constitutes, or contains, material, non-public information
regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K. The Holder shall remain entitled to
exercise this Warrant during the period commencing on the date of
such notice to the effective date of the event triggering such
notice except as may otherwise be expressly set forth
herein.
B-7
Section
4.
Transfer of
Warrant.
a) Transferability. Subject to
compliance with any applicable securities laws and the provisions
of the Purchase Agreement, this Warrant and all rights hereunder
(including, without limitation, any registration rights) are
transferable, in whole or in part, upon surrender of this Warrant
at the principal office of the Company or its designated agent,
together with a written assignment of this Warrant substantially in
the form attached hereto duly executed by the Holder or its agent
or attorney and funds sufficient to pay any transfer taxes payable
upon the making of such transfer. Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees, as
applicable, and in the denomination or denominations specified in
such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be cancelled. The Warrant, if
properly assigned in accordance herewith, may be exercised by a new
holder for the purchase of Warrant Shares without having a new
Warrant issued.
b) New Warrants. Subject to
compliance with all applicable securities laws, this Warrant may be
divided or combined with other Warrants upon presentation hereof at
the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to
be issued, signed by the Holder or its agent or attorney. Subject
to compliance with Section 4(a), as to any transfer which may be
involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such
notice. All Warrants issued on transfers or exchanges shall be
dated the initial issuance date of this Warrant and shall be
identical with this Warrant except as to the number of Warrant
Shares issuable pursuant thereto.
c) Warrant Register. The Company
shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
Section
5.
Miscellaneous.
a) No Rights as Stockholder Until
Exercise. This Warrant does not entitle the Holder to any
voting rights, dividends or other rights as a stockholder of the
Company prior to the exercise hereof as set forth in Section
2(d)(i).
b) Loss, Theft, Destruction or Mutilation
of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably
satisfactory to it (which shall not include the posting of any
bond), and upon surrender and cancellation of such Warrant or stock
certificate, if mutilated, the Company will make and deliver a new
Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock
certificate
c)
Saturdays, Sundays, Holidays,
etc. If the last or appointed day for the taking
of
B-8
any
action or the expiration of any right required or granted herein
shall not be a Trading Day, then, such action may be taken or such
right may be exercised on the next succeeding Trading
Day.
d) Authorized Shares. The Company
covenants that, during the period the Warrant is outstanding, it
will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of the
Warrant Shares upon the exercise of any purchase rights under this
Warrant. The Company further covenants that its issuance of this
Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute
and issue the necessary certificates for the Warrant Shares upon
the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure
that such Warrant Shares may be issued as provided herein without
violation of any applicable law or regulation, or of any
requirements of the Trading Market upon which the Common Stock may
be listed. The Company covenants that all Warrant Shares which may
be issued upon the exercise of the purchase rights represented by
this Warrant will, upon exercise of the purchase rights represented
by this Warrant and payment for such Warrant Shares in accordance
herewith, be duly authorized, validly issued, fully paid and
non-assessable and free from all taxes, liens and charges created
by the Company in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such
issue). Except and to the extent as waived or consented to by the
Holder, the Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through
any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant. Before taking any action which would result in
an adjustment in the number of Warrant Shares for which this
Warrant is exercisable or in the Exercise Price, the Company shall
obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or
bodies having jurisdiction thereof.
e) Jurisdiction. All questions
concerning governing law, jurisdiction, venue and the construction,
validity, enforcement and interpretation of this Warrant shall be
determined in accordance with the provisions of the Purchase
Agreement.
f) Restrictions. The Holder
acknowledges that the Warrant Shares acquired upon the exercise of
this Warrant, if not registered, or unless exercised in a cashless
exercise when Rule 144 is available, and the Holder does not
utilize cashless exercise, will have restrictions upon resale
imposed by state and federal securities laws.
g) Non-waiver and Expenses. No
course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such
right or otherwise prejudice the Holder’s rights, powers or
remedies. Without limiting any other provision of this
Warrant
B-9
or the
Purchase Agreement, if the Company willfully and knowingly fails to
comply with any provision of this Warrant, which results in any
material damages to the Holder, the Company shall pay to the Holder
such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by the Holder in
collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies
hereunder.
h) Notices. Any notice, request or
other document required or permitted to be given or delivered to
the Holder by the Company shall be delivered in accordance with the
notice provisions of the Purchase Agreement.
i) Limitation of Liability. No
provision hereof, in the absence of any affirmative action by the
Holder to exercise this Warrant to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the purchase price of
any Common Stock or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the
Company.
j) Remedies. The Holder, in
addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
performance of its rights under this Warrant.
k) Successors and Assigns. Subject
to applicable securities laws, this Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors and permitted assigns of the Company
and the successors and permitted assigns of Holder. The provisions
of this Warrant are intended to be for the benefit of any Holder
from time to time of this Warrant and shall be enforceable by the
Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be
modified or amended or the provisions hereof waived with the
written consent of the Company and the Holders of not less than a
majority of the outstanding Warrants issued pursuant to the
Purchase Agreement.
m) Severability. Wherever
possible, each provision of this Warrant shall be interpreted in
such manner as to be effective and valid under applicable law, but
if any provision of this Warrant shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this
Warrant.
n) Headings. The headings used in
this Warrant are for the convenience of reference only and shall
not, for any purpose, be deemed a part of this
Warrant.
********************
(Signature Page Follows)
B-10
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above
indicated.
TEGO
CYBER INC.
By:
/s/ Xxxxxxx
Xxxxxxxxx
Name:
XXXXXXX XXXXXXXX
Title:
CHIEF EXECUTIVE OFFICER
B-11
NOTICE
OF EXERCISE
TO:
TEGO CYBER
INC.:
(1)
The
undersigned hereby elects to purchase _____________Warrant Shares
of the Company pursuant to the terms of the attached Warrant (only
if exercised in full), and tenders herewith payment of the exercise
price in full, together with all applicable transfer taxes, if
any.
(2)
Payment shall take
the form of (check applicable box): [ ] in lawful money of the
United
States;
[]
[if
permitted] the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection
2(c), to exercise this Warrant with respect to the maximum number
of Warrant Shares purchasable pursuant to the cashless exercise
procedure set forth in subsection 2(c); or
[]
by cancelling $
___________of the amount due on the Note issued by the Company to
the undersigned.
(3) Please issue a
certificate or certificates representing said Warrant Shares in the
name of the undersigned or in such other name as is specified
below:
(4) After giving effect
to this Notice of Exercise, the undersigned will not have exceeded
the Beneficial Ownership Limitation.
_________________________________
The
Warrant Shares shall be delivered to the following DWAC Account
Number or by physical delivery of a certificate
to:
_________________________________
_________________________________
_________________________________
[SIGNATURE OF
HOLDER FOLLOWS]
B-12
Name of
Investing Entity:
Signature of Authorized Signatory of Investing
Entity:
Name:
Title:
Date:
B-13
ASSIGNMENT
FORM
(To
assign the foregoing warrant, execute this form and supply required
information. Do not use this form to exercise the
warrant.)
TEGO
CYBER INC.
FOR
VALUE RECEIVED, [________________] all of or [________________]
shares of the foregoing Warrant and all rights evidenced thereby
are hereby assigned to
________________________________________
whose address
is
______________________________________________________________________________
.
Dated:_________________________________________________________________________
,
________
Holder’s
Signature:
_____________________________________
Holder’s
Address:
_____________________________________
_____________________________________
NOTE:
The signature to this Assignment Form must correspond with the name
as it appears on the face of the Warrant, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a
bank or trust company. Officers of corporations and those acting in
a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant.
B-14
