SECURITIES PURCHASE
AGREEMENT
Dated as of September 16, 2014
among
and
THE PURCHASERS LISTED ON EXHIBIT A
TABLE OF CONTENTS
Page
ARTICLE I Purchase and Sale of Common Stock and Warrants ...................................................1
Section 1.1
Purchase and Sale of Common Stock and Warrants....................................1
Section 1.2
Purchase Price and Closing..........................................................................1
Section 1.3
Warrants .......................................................................................................1
Section 1.4 Warrant Shares.............................................................................................2
ARTICLE II Representations and Warranties .................................................................................2
Section 2.1
Representations and Warranties of the Company ........................................2
Section 2.2
Representations and Warranties of the Purchasers ....................................12
ARTICLE III Covenants................................................................................................................14
Section 3.1
Securities Compliance ...............................................................................14
Section 3.2
Registration and Listing .............................................................................14
Section 3.3
Inspection Rights .......................................................................................14
Section 3.4
Compliance with Laws ..............................................................................15
Section 3.5
Keeping of Records and Books of Account...............................................15
Section 3.6
Reporting Requirements ............................................................................15
Section 3.7
Other Agreements ......................................................................................15
Section 3.8
Reservation of Shares ................................................................................15
Section 3.9
Disclosure of Transactions and Other Material Information .....................16
Section 3.10 Delivery of Securities ................................................................................16
Section 3.11 [Intentionally Omitted] ..............................................................................16
Section 3.12 Subsequent Financings...............................................................................16
Section 3.13 Beneficial Ownership Restrictions. ...........................................................18
ARTICLE IV Conditions ...............................................................................................................19
Section 4.1
Conditions Precedent to the Obligation of the Company to
Close and to Sell the Shares and Warrants. ...............................................19
Section 4.2
Conditions Precedent to the Obligation of the Purchasers to
Close and to Purchase the Shares and the Warrants ..................................20
ARTICLE V Transfer Restrictions and Legends...........................................................................21
Section 5.1
Legends. .....................................................................................................21
ARTICLE VI Termination.............................................................................................................23
Section 6.1
Termination by Mutual Consent ................................................................23
Section 6.2
Effect of Termination.................................................................................24
ARTICLE VII Indemnification......................................................................................................24
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Table of Contents
(continued)
Page
Section 7.1
General Indemnity .....................................................................................24
Section 7.2
Indemnification Procedure.........................................................................24
ARTICLE VIII Miscellaneous.......................................................................................................25
Section 8.1
Fees and Expenses. ....................................................................................25
Section 8.2
Specific Enforcement; Consent to Jurisdiction..........................................25
Section 8.3
Entire Agreement; Amendment. ................................................................26
Section 8.4
Notices .......................................................................................................26
Section 8.5
Waivers ......................................................................................................27
Section 8.6
Headings ....................................................................................................27
Section 8.7
Successors and Assigns..............................................................................27
Section 8.8
No Third Party Beneficiaries. ....................................................................27
Section 8.9
Governing Law ..........................................................................................27
Section 8.10 Surviva .......................................................................................................28
Section 8.11 Counterparts ...............................................................................................28
Section 8.12 Publicity .....................................................................................................28
Section 8.13 Severability ................................................................................................28
Section 8.14 Further Assurances.....................................................................................28
Section 8.15 Independent Nature of Purchasers’ Obligations and Rights ......................28
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SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of
September 16, 2014, by and among MediJane Holdings Inc., a Nevada corporation (the
“Company”), and the entities listed on Exhibit A hereto (each, a “Purchaser” and collectively,
the “Purchasers”), for the purchase and sale by the Purchasers of shares of the Company’s
Common Stock, par value $0.001 per share (the “Common Stock”), and warrants to purchase
shares of Common Stock.
The parties hereto agree as follows:
ARTICLE I
Purchase and Sale of Common Stock and Warrants
Section 1.1 Purchase and Sale of Common Stock and Warrants. Upon the
following terms and conditions, the Company shall issue and sell to the Purchasers, and each
Purchaser shall, severally but not jointly, purchase from the Company (i) shares of Common
Stock (the “Shares”), and (ii) warrants to purchase shares of Common Stock equal to 200% of
the number of Shares to be purchased by such Purchaser, in substantially the form attached
hereto as Exhibit B (the “Warrants”), in each case as set forth opposite each such Purchaser’s
name on Exhibit A hereto, at a price per Share and related Warrants of $0.09 for an aggregate
purchase price to the Company from all Purchasers of $600,000.00 (the “Purchase Price”). The
Company and the Purchasers are executing and delivering this Agreement in accordance with
and in reliance upon the exemption from securities registration afforded by Section 4(2) of the
U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder
(the “Securities Act”), including Regulation D (“Regulation D”), and/or upon such other
exemption from the registration requirements of the Securities Act as may be available with
respect to any or all of the investments to be made hereunder.
Section 1.2 Purchase Price and Closing. The Company agrees to issue and sell
to the Purchasers and, in consideration of and in express reliance upon the representations,
warranties, covenants, terms and conditions of this Agreement, the Purchasers, severally but not
jointly, agree to purchase the number of Shares and Warrants set forth opposite their respective
names on Exhibit A. The closing of the purchase and sale of the Shares and Warrants to be
acquired by the Purchasers from the Company under this Agreement shall take place remotely
via the exchange of documents and signatures by telecopier or e-mail (the “Closing”) at 10:00
a.m., Mountain Time (i) on or before September 16, 2014, provided, that all of the conditions
set forth in Article IV hereof and applicable to the Closing shall have been fulfilled or waived in
accordance herewith, or (ii) at such other time and place or on such date as the Purchasers and
the Company may agree upon (the “Closing Date”). The entire Purchase Price shall be paid by
the Purchasers in cash, by wire transfer or in readily available funds.
Section 1.3 Warrants. At the Closing, the Company shall issue to each
Purchaser such number of Warrants to purchase shares of Common Stock as is set forth
opposite such Purchaser’s name on Exhibit A hereto. The Warrants shall be exercisable for five
(5) years from the date of issuance and shall have an initial exercise price equal to $0.20.
Section 1.4
Warrant Shares. The Company has authorized and has reserved
and covenants to continue to reserve, free of preemptive rights and other similar contractual
rights of stockholders, a number of its authorized but unissued shares of Common Stock equal
to the aggregate number of shares of Common Stock necessary to effect the exercise of the
Warrants. Any shares of Common Stock issuable upon exercise of the Warrants (and such
shares when issued) are herein referred to as the “Warrant Shares”. The Shares, the Warrants
and the Warrant Shares are sometimes collectively referred to herein as the “Securities”.
ARTICLE II
Representations and Warranties
Section 2.1
Representations and Warranties of the Company. In order to
induce the Purchasers to enter into this Agreement and to purchase the Shares and the Warrants,
the Company hereby makes the following representations and warranties to the Purchasers:
(a)
Organization, Good Standing and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the State of Nevada
and has the requisite corporate power to own, lease and operate its properties and assets and to
conduct its business as it is now being conducted. The Company does not have any Subsidiaries
(as defined in Section 2.1(g)) or own securities of any kind in any other entity, except as
disclosed in the Commission Documents (as defined in Section 2.1(f)) or as set forth on Schedule
2.1(g) hereto. The Company and each such Subsidiary is duly qualified as a foreign corporation
to do business and is in good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except for any
jurisdiction(s) (alone or in the aggregate) in which the failure to be so qualified will not have a
Material Adverse Effect. For the purposes of this Agreement, “Material Adverse Effect” means
any adverse effect on the business, operations, properties, prospects or financial condition of the
Company or its Subsidiaries and which is material to such entity or other entities controlling or
controlled by such entity or which is likely to materially hinder the performance by the Company
of its material obligations hereunder and under the other Transaction Documents (as defined in
Section 2.1(b) hereof).
(b)
Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and perform this Agreement, the Registration Rights
Agreement, the Warrants and the other agreements and documents contemplated hereby and
thereby and executed by the Company or to which the Company is party (collectively, the
“Transaction Documents”), and to issue and sell the Shares and the Warrants in accordance with
the terms hereof. The execution, delivery and performance of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated thereby have been duly
and validly authorized by all necessary corporate action, and, except as set forth in Schedule
2.1(b), no further consent or authorization of the Company, its Board of Directors or its
stockholders is required. This Agreement has been duly executed and delivered by the Company.
The other Transaction Documents will have been duly executed and delivered by the Company
at the Closing. Each of the Transaction Documents constitutes, or shall constitute when executed
and delivered, a valid and binding obligation of the Company enforceable against the Company
in accordance with its terms, except as such enforceability may be limited by applicable
bankruptcy, reorganization, moratorium, liquidation, conservatorship, receivership or similar
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laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by
other equitable principles of general application.
(c)
Capitalization. The authorized capital stock of the Company and the
shares thereof currently issued and outstanding as of September 8, 2014, are set forth on
Schedule 2.1(c) hereto. All of the outstanding shares of the Company’s Common Stock and any
other security of the Company have been duly and validly authorized. Except as disclosed in the
Commission Documents or as set forth on Schedule 2.1(c) hereto, no shares of Common Stock
or any other security of the Company are entitled to preemptive rights or registration rights and
there are no outstanding options, warrants, scrip, rights to subscribe to, call or commitments of
any character whatsoever relating to, or securities or rights convertible into, any shares of capital
stock of the Company. Furthermore, except as disclosed in the Commission Documents or as set
forth on Schedule 2.1(c) hereto, there are no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional shares of the
capital stock of the Company or options, securities or rights convertible into shares of capital
stock of the Company. Except for customary transfer restrictions contained in agreements
entered into by the Company in order to sell restricted securities or as provided on Schedule
2.1(c) hereto, the Company is not a party to or bound by any agreement or understanding
granting registration or anti-dilution rights to any individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability company, joint stock
company, government (or an agency or political subdivision thereof) or other entity of any kind
(a “Person”) with respect to any of its equity or debt securities. Except as set forth on Schedule
2.1(c), the Company is not a party to, and it has no knowledge of, any agreement or
understanding restricting the voting or transfer of any shares of the capital stock of the Company.
Except as set forth on Schedule 2.1(c) hereto, the offer and sale of all capital stock, convertible
securities, rights, warrants, or options of the Company issued prior to the Closing complied with
all applicable federal and state securities laws, and no holder of such securities has a right of
rescission or claim for damages with respect thereto which could have a Material Adverse Effect.
The Company has furnished or made available to the Purchasers true and correct copies of the
Company’s Articles of Incorporation as in effect on the date hereof (the “Articles”), and the
Company’s Bylaws as in effect on the date hereof (the “Bylaws”).
(d)
Issuance of Securities. The Shares and the Warrants to be issued at the
Closing have been duly authorized by all necessary corporate action and, when paid for or issued
in accordance with the terms hereof, the Shares shall be validly issued and outstanding, fully
paid and nonassessable and free and clear of all liens, encumbrances and rights of refusal of any
kind and the holders shall be entitled to all rights accorded to a holder of Common Stock. When
the Warrant Shares are issued and paid for in accordance with the terms of this Agreement and as
set forth in the Warrants, such shares will be duly authorized by all necessary corporate action
and validly issued and outstanding, fully paid and nonassessable, free and clear of all liens,
encumbrances and rights of refusal of any kind and the holders shall be entitled to all rights
accorded to a holder of Common Stock.
(e)
No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby do not and will not (i) violate any provision of the Articles or
Bylaws or any Subsidiary’s comparable charter documents, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a default) under, or
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give to others any rights of termination, amendment, acceleration or cancellation of, any
agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries’ respective properties or assets are bound, (iii) create or impose a lien,
mortgage, security interest, charge or encumbrance of any nature on any property or asset of the
Company or any of its Subsidiaries under any agreement or any commitment to which the
Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound or by which any of their respective properties or assets are bound, or (iv) result in a
violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations) applicable to the Company or any of
its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is
bound or affected, except, in all cases other than violations pursuant to clauses (i) or (iv) (with
respect to federal and state securities laws) above, for such conflicts, defaults, terminations,
amendments, acceleration, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. The business of the Company and its Subsidiaries is
not being conducted in violation of any laws, ordinances or regulations of any governmental
entity, except for possible violations which singularly or in the aggregate do not and will not
have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is required
under federal, state, foreign or local law, rule or regulation to obtain any consent, authorization
or order of, or make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under the Transaction Documents or
issue and sell the Securities in accordance with the terms hereof or thereof (other than any filings
which may be required to be made by the Company with the Securities and Exchange
Commission (the “Commission”) and/or the OTC Markets Group prior to or subsequent to the
Closing, or state securities administrators prior to or subsequent to the Closing, or any
registration statement which may be filed pursuant hereto or thereto).
(f)
Commission Documents; Financial Statements. The Common Stock is
registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), and, except as disclosed on Schedule 2.1(f) hereto, the Company has
timely filed all reports, schedules, forms, statements and other documents required to be filed by
it with the Commission pursuant to the reporting requirements of the Exchange Act, including
material filed pursuant to Section 13(a) or 15(d) of the Exchange Act (all of the foregoing,
including filings incorporated by reference therein, being referred to herein as the “Commission
Documents”). The Company has delivered or made available (through the SEC XXXXX
website) to the Purchasers true and complete copies of the Commission Documents filed with the
Commission since June 3, 2010. The Company has not provided to the Purchasers any material
non-public information or other information which, according to applicable law, rule or
regulation, should have been disclosed publicly by the Company but which has not been so
disclosed, other than with respect to the transactions contemplated by this Agreement. At the
time of its filing, the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended
May 31, 2014 (the “Form 10-Q”) complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission promulgated thereunder and
other federal, state and local laws, rules and regulations applicable to such documents, and the
Form 10-Q did not contain 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. At the time of its filing, the
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Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2014 (the “Form
10-K”) complied in all material respects with the requirements of the Exchange Act and the rules
and regulations of the Commission promulgated thereunder and other federal, state and local
laws, rules and regulations applicable to such documents, and, at the time of its filing, the Form
10-K did not contain 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. As of their respective dates, the
financial statements of the Company included in the Commission Documents complied as to
form in all material respects with applicable accounting requirements and the published rules and
regulations of the Commission or other applicable rules and regulations with respect thereto.
Such financial statements have been prepared in accordance with generally accepted accounting
principles (“GAAP”) applied on a consistent basis during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the Notes thereto or (ii) in the case of
unaudited interim statements, to the extent they may not include footnotes or may be condensed
or summary statements), and fairly present in all material respects the financial position of the
Company and its Subsidiaries as of the dates thereof and the results of operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g)
Subsidiaries. Schedule 2.1(g) hereto sets forth each Subsidiary of the
Company, showing the jurisdiction of its incorporation or organization and showing the
percentage of each Person’s ownership of the outstanding stock or other interests of such
Subsidiary. For the purposes of this Agreement, “Subsidiary” shall mean any Person of which at
least a majority of the securities or other ownership interest having ordinary voting power
(absolutely or contingently) for the election of directors or other Persons performing similar
functions are at the time owned directly or indirectly by the Company and/or any of its other
Subsidiaries. All of the outstanding shares of capital stock of each Subsidiary have been duly
authorized and validly issued, and are fully paid and nonassessable. There are no outstanding
preemptive, conversion or other rights, options, warrants or agreements granted or issued by or
binding upon any Subsidiary for the purchase or acquisition of any shares of capital stock of any
Subsidiary or any other securities convertible into, exchangeable for or evidencing the rights to
subscribe for any shares of such capital stock. Neither the Company nor any Subsidiary is subject
to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of the capital stock of any Subsidiary or any convertible securities, rights, warrants or
options of the type described in the preceding sentence except as set forth on Schedule 2.1(g)
hereto. Neither the Company nor any Subsidiary is party to, nor has any knowledge of, any
agreement restricting the voting or transfer of any shares of the capital stock of any Subsidiary.
(h)
No Material Adverse Change. Since May 31, 2014, the Company has not
experienced or suffered any Material Adverse Effect, except for operating losses incurred in the
ordinary course of business.
(i)
No Undisclosed Liabilities. Except as disclosed on Schedule 2.1(i) hereto,
neither the Company nor any of its Subsidiaries has any liabilities, obligations, claims or losses
(whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or
otherwise) other than those set forth on the balance sheet included in the Form 10-Q or incurred
in the ordinary course of the Company’s or its Subsidiaries respective businesses since May 31,
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2014, and which, individually or in the aggregate, do not or would not have a Material Adverse
Effect on the Company or its Subsidiaries.
(j)
No Undisclosed Events or Circumstances. Since May 31, 2014, except as
disclosed on Schedule 2.1(j) hereto, no event or circumstance has occurred or exists with respect
to the Company or its Subsidiaries or their respective businesses, properties, prospects,
operations or financial condition, which, under applicable law, rule or regulation, requires public
disclosure or announcement by the Company but which has not been so publicly announced or
disclosed.
(k)
Indebtedness. Schedule 2.1(k) hereto sets forth as of the date hereof all
outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which
the Company or any Subsidiary has commitments. For purposes of this Agreement: (x)
“Indebtedness” of any Person means, without duplication (A) any indebtedness for borrowed
money in excess of $100,000, (B) any obligations issued, undertaken or assumed as the deferred
purchase price of property or services (other than trade payables entered into in the ordinary
course of business) in excess of $100,000, (C) all reimbursement or payment obligations with
respect to letters of credit, surety bonds and other similar instruments, (D) any obligations
evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses, (E) any
indebtedness in excess of $100,000 created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to any property or assets
acquired with the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to repossession or sale of
such property), (F) all monetary obligations under any leasing or similar arrangement which, in
connection with GAAP, consistently applied for the periods covered thereby, is classified as a
capital lease with a present value in excess of $100,000, (G) all indebtedness referred to in
clauses (A) through (F) above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets (including accounts and
contract rights) owned by any Person, even though the Person which owns such assets or
property has not assumed or become liable for the payment of such indebtedness, and (H) all
Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to
in clauses (A) through (G) above; and (y) “Contingent Obligation” means, as to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the primary purpose or
intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto in excess of $100,000 due under
leases required to be capitalized in accordance with GAAP. Except as disclosed on Schedule
2.1(k), neither the Company nor any Subsidiary is in default with respect to any Indebtedness.
(l)
Title to Assets. Each of the Company and the Subsidiaries has good and
marketable title to all of its real and personal property, free and clear of any mortgages, pledges,
charges, liens, security interests or other encumbrances of any nature whatsoever, except as
disclosed in the Commission Documents, for those indicated on Schedule 2.1(l) hereto or such
that, individually or in the aggregate, do not have a Material Adverse Effect. All leases to real
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and personal property of the Company and each of its Subsidiaries are valid and subsisting and in
full force and effect.
(m)
Actions Pending. There is no action, suit, claim, investigation, arbitration,
alternate dispute resolution proceeding or other proceeding pending or, to the knowledge of the
Company, threatened against the Company or any Subsidiary which questions the validity of this
Agreement or any of the other Transaction Documents or any of the transactions contemplated
hereby or thereby or any action taken or to be taken pursuant hereto or thereto. Except as set
forth on Schedule 2.1(m) hereto, there is no action, suit, claim, investigation, arbitration,
alternate dispute resolution proceeding or other proceeding pending or, to the knowledge of the
Company, threatened against or involving the Company, any Subsidiary or any of their
respective properties or assets, which individually or in the aggregate, would have a Material
Adverse Effect. There are no outstanding orders, judgments, injunctions, awards or decrees of
any court, arbitrator or governmental or regulatory body against the Company or any Subsidiary
or any officers or directors of the Company or any Subsidiary in their capacities as such, which
individually, or in the aggregate, would have a Material Adverse Effect.
(n)
Compliance with Law. The business of the Company and the Subsidiaries
has been and is presently being conducted in accordance with all applicable federal, state and
local governmental laws, rules, regulations and ordinances, except as set forth in the Commission
Documents or on Schedule 2.1(n) hereto or such that, individually or in the aggregate, the
noncompliance therewith would not have a Material Adverse Effect. The Company and each of
its Subsidiaries have all franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals necessary for the conduct of its business as now being
conducted by it unless the failure to possess such franchises, permits, licenses, consents and
other governmental or regulatory authorizations and approvals, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
(o)
Taxes. Except as set forth on Schedule 2.1(o) hereto, the Company and
each of the Subsidiaries has accurately prepared and filed all federal, state and other tax returns
required by law to be filed by it, has paid or made provisions for the payment of all taxes shown
to be due and all additional assessments, and adequate provisions have been and are reflected in
the financial statements of the Company and the Subsidiaries for all current taxes and other
charges to which the Company or any Subsidiary is subject and which are not currently due and
payable. Except as disclosed on Schedule 2.1(o) hereto, none of the federal income tax returns
of the Company or any Subsidiary have been audited by the Internal Revenue Service. The
Company has no knowledge of any additional assessments, adjustments or contingent tax
liability (whether federal or state) of any nature whatsoever, whether pending or threatened
against the Company or any Subsidiary for any period, nor of any basis for any such assessment,
adjustment or contingency.
(p)
Certain Fees. Except for Xxxxx Capital Solutions, Inc., the Company has
not employed any broker or finder or incurred any liability for any brokerage or investment
banking fees, commissions, finders’ structuring fees, financial advisory fees or other similar fees
in connection with the Transaction Documents.
(q)
Disclosure. To the best of the Company’s knowledge, neither this
Agreement or the Schedules hereto nor any other documents, certificates or instruments
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furnished to the Purchasers by or on behalf of the Company or any Subsidiary in connection with
the transactions contemplated by this Agreement contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements made herein or therein,
in the light of the circumstances under which they were made herein or therein, not misleading.
(r)
Intellectual Property. Except as set forth on Schedule 2.1(r), the Company
and each of the Subsidiaries owns or possesses all the Proprietary Rights owned by it and have
no knowledge that such rights are in conflict with the rights of others. As of the date of this
Agreement, neither the Company nor any of its Subsidiaries has received any written notice that
any Proprietary Rights have been declared unenforceable or otherwise invalid by any court or
governmental agency. As of the date of this Agreement, there is, to the knowledge of the
Company, no material existing infringement, misuse or misappropriation of any Proprietary
Rights by others. From May 31, 2014, to the date of this Agreement, neither the Company nor
any of its Subsidiaries has received any written notice alleging that the operation of the business
of the Company or any of its Subsidiaries infringes in any material respect upon the intellectual
property rights of others. “Proprietary Rights” shall mean patents, trademarks, domain names
(whether or not registered) and any patentable improvements or copyrightable derivative works
thereof, websites and intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations, and all rights with respect to the foregoing.
(s)
Environmental Compliance. Except as disclosed on Schedule 2.1(s)
hereto, the Company and each of its Subsidiaries have obtained all approvals, authorization,
certificates, consents, licenses, orders and permits or other similar authorizations of all
governmental authorities, or from any other Person, that are required under any Environmental
Laws, the absence of which would have a Material Adverse Effect. “Environmental Laws” shall
mean all applicable laws relating to the protection of the environment including, without
limitation, all requirements pertaining to reporting, licensing, permitting, controlling,
investigating or remediating emissions, discharges, releases or threatened releases of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature, into the air, surface water, groundwater or
land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants, contaminants or
toxic substances, material or wastes, whether solid, liquid or gaseous in nature. Except as set
forth on Schedule 2.1(s) hereto, the Company has all necessary governmental approvals required
under all Environmental Laws and used in its business or in the business of any of its
Subsidiaries, except for such instances as would not individually or in the aggregate have a
Material Adverse Effect. The Company and each of its Subsidiaries are also in compliance with
all other limitations, restrictions, conditions, standards, requirements, schedules and timetables
required or imposed under all Environmental Laws. Except for such instances as would not
individually or in the aggregate have a Material Adverse Effect, there are no past or present
events, conditions, circumstances, incidents, actions or omissions relating to or in any way
affecting the Company or its Subsidiaries that violate or may violate any Environmental Law
after the Closing or that may give rise to any Environmental Liabilities, or otherwise form the
basis of any claim, action, demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing, distribution, use,
treatment, storage (including, without limitation, underground storage tanks), disposal, transport
or handling, or the emission, discharge, release or threatened release of any hazardous substance.
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“Environmental Liabilities” means all liabilities of a Person (whether such liabilities are owed by
such Person to governmental authorities, third parties or otherwise) whether currently in
existence or arising hereafter which arise under or relate to any Environmental Law.
(t)
Books and Records; Internal Accounting Controls. The books, records and
documents of the Company and its Subsidiaries accurately reflect in all material respects the
information relating to the business of the Company and the Subsidiaries, the location and
collection of their assets, and the nature of all transactions giving rise to the obligations or
accounts receivable of the Company or any Subsidiary. 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 GAAP
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 actions are taken with
respect to any differences.
(u)
Material Agreements. Except for the Transaction Documents or as set
forth on Schedule 2.1(u) hereto, or those that are included as exhibits to the Commission
Documents, neither the Company nor any Subsidiary is a party to any written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement, a copy of which would be
required to be filed with the Commission (collectively, “Material Agreements”) if the Company
or any Subsidiary were registering securities under the Securities Act. The Company and each of
its Subsidiaries has in all material respects performed all the obligations required to be performed
by them to date under the foregoing agreements, have received no notice of default and, to the
best of the Company’s knowledge, are not in default under any Material Agreement now in
effect, the result of which could cause a Material Adverse Effect. No written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement of the Company or of any
Subsidiary limits or shall limit the payment of dividends on its Common Stock, except as set
forth on Schedule 2.1(u) hereto.
(v)
Transactions with Affiliates. Except as disclosed in the Commission
Documents or as set forth on Schedule 2.1(v) hereto, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts or arrangements or other continuing
transactions between (a) the Company, any Subsidiary or any of their respective customers or
suppliers, on the one hand, and (b) on the other hand, any officer, employee, consultant or
director of the Company, or any of its Subsidiaries, or any Person owning 5% or more of the
capital stock of the Company or any Subsidiary or any member of the immediate family of such
officer, employee, consultant, director or 5% or greater stockholder or any corporation or other
entity controlled by such officer, employee, consultant, director or stockholder.
(w)
Securities Act of 1933. The Company has complied and will comply with
all applicable federal and state securities laws in connection with the offer, issuance and sale of
the Securities hereunder. Neither the Company nor anyone acting on its behalf, directly or
indirectly, has or will sell, offer to sell or solicit offers to buy any of the Securities, or similar
securities to, or solicit offers with respect thereto from, or enter into any preliminary
conversations or negotiations relating thereto with, any Person, or has taken or will take any
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action so as to bring the issuance and sale of any of the Securities under the registration
provisions of the Securities Act and applicable state securities laws. Neither the Company nor
any of its affiliates, nor any Person acting on its or their behalf, has engaged in any form of
general solicitation or general advertising (within the meaning of Regulation D under the
Securities Act) in connection with the offer or sale of any of the Securities.
(x)
Governmental Approvals. Except as set forth on Schedule 2.1(x) hereto,
and except for the filing of any notice prior or subsequent to the Closing that may be required
under applicable state and/or federal securities laws (which if required, shall be filed on a timely
basis), no authorization, consent, approval, license, exemption of, filing or registration with any
court or governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, is or will be necessary for, or in connection with, the execution or delivery
of the Shares and the Warrants, or for the performance by the Company of its obligations under
the Transaction Documents.
(y)
Employees. Neither the Company nor any Subsidiary has any collective
bargaining arrangements or agreements covering any of its employees. Except as set forth in the
Commission Documents or on Schedule 2.1(y) hereto, neither the Company nor any Subsidiary
has any employment contract, agreement regarding proprietary information, non-competition
agreement, non-solicitation agreement, confidentiality agreement, or any other similar contract
or restrictive covenant, relating to the right of any officer, employee or consultant to be
employed or engaged by the Company or such Subsidiary, which contract or agreement is
required to be disclosed in the Commission Documents but which is not so disclosed. Since May
31, 2014, no officer, consultant or key employee of the Company or any Subsidiary whose
termination, either individually or in the aggregate, could have a Material Adverse Effect, has
terminated or, to the knowledge of the Company, has any present intention of terminating his or
her employment or engagement with the Company or any Subsidiary.
(z)
Absence of Certain Developments. Except as set forth in the Commission
Documents or on Schedule 2.1(z) hereto, since May 31, 2014, neither the Company nor any
Subsidiary has:
(i)
issued any stock, bonds or other corporate securities or any rights,
options or warrants with respect thereto other than under the Company’s stock option plans;
(ii)
borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities incurred in the ordinary course of
business which are comparable in nature and amount to the current liabilities incurred in the
ordinary course of business during the comparable portion of its prior fiscal year, as adjusted to
reflect the current nature and volume of the Company’s or such Subsidiary’s business;
(iii)
discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent), other than current liabilities paid in the ordinary
course of business;
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(iv)
declared or made any payment or distribution of cash or other
property to stockholders with respect to its stock, or purchased or redeemed, or made any
agreements so to purchase or redeem, any shares of its capital stock;
(v)
sold, assigned or transferred any other tangible assets, or canceled
any debts or claims, except in the ordinary course of business;
(vi)
sold, assigned or transferred any patent rights, trademarks, trade
names, copyrights, trade secrets or other intangible assets or intellectual property rights, or
disclosed any proprietary confidential information to any Person except in the ordinary course of
business or to the Purchasers or their representatives;
(vii) suffered any substantial losses or waived any rights of material
value, whether or not in the ordinary course of business, or suffered the loss of any material
amount of prospective business;
(viii) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
(ix)
made capital expenditures or commitments therefor that aggregate
in excess of $25,000;
(x)
entered into any other transaction other than in the ordinary course
of business, or entered into any other material transaction, whether or not in the ordinary course
of business;
(xi)
made charitable contributions or pledges in excess of $25,000;
(xii) suffered any material damage, destruction or casualty loss, whether
or not covered by insurance;
(xiii) experienced any material problems with labor or management in
connection with the terms and conditions of their employment;
(xiv) effected any two or more events of the foregoing kind which in the
aggregate would cause a Material Adverse Effect; or
(xv) entered into an agreement, written or otherwise, to take any of the
foregoing actions.
(aa) Use of Proceeds. Except as set forth on Schedule 2.1(aa), the proceeds
from the sale of the Shares and the Warrants will be used by the Company for working capital
purposes and, except as set forth on Schedule 2.1(aa), shall not be used to repay any outstanding
Indebtedness or any loans to any officer, director, affiliate or insider of the Company.
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(bb) Public Utility Holding Company Act and Investment Company Act Status.
The Company is not a “holding company” or a “public utility company” as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended. The Company is not,
and as a result of and immediately upon Closing will not be, an “investment company” or a
company “controlled” by an “investment company”, within the meaning of the Investment
Company Act of 1940, as amended.
(cc) ERISA. No liability to the Pension Benefit Guaranty Corporation has been
incurred with respect to any Plan by the Company or any of its Subsidiaries which is or would
cause a Material Adverse Effect. The execution and delivery of this Agreement and the issue and
sale of the Shares and the Warrants will not involve any transaction which is subject to the
prohibitions of Section 406 of ERISA or in connection with which a tax could be imposed
pursuant to Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”);
provided that, if any Purchaser, or any Person that owns a beneficial interest in any Purchaser, is
an “employee pension benefit plan” (within the meaning of Section 3(2) of ERISA) with respect
to which the Company is a “party in interest” (within the meaning of Section 3(14) of ERISA),
the requirements of Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in
this Section 2.1(cc), the term “Plan” shall mean an “employee pension benefit plan” (as defined
in Section 3 of ERISA) which is or has been established or maintained, or to which contributions
are or have been made, by the Company or any Subsidiary or by any trade or business, whether
or not incorporated, which, together with the Company or any Subsidiary, is under common
control, as described in Section 414(b) or (c) of the Code.
(dd) Delisting Notification. The Company has not received a delisting
notification from the OTC Markets Group that has not been rescinded, and, to its knowledge,
there are no existing facts or circumstances that could give rise to the delisting of the Common
Stock from the OTC Markets Group.
(ee) Xxxxxxxx-Xxxxx Act. The Company is in compliance with any and all
applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are effective as of the date
hereof, and any and all applicable rules and regulations promulgated by the Commission
thereunder that are effective as of the date hereof, except where such noncompliance would not
have, individually or in the aggregate, a Material Adverse Effect.
Section 2.2
Representations and Warranties of the Purchasers. Each of the
Purchasers hereby makes the following representations and warranties to the Company with
respect solely to itself and not with respect to any other Purchaser:
(a)
Organization and Standing of the Purchasers. If such Purchaser is an
entity, such Purchaser is a corporation, limited liability company or partnership duly
incorporated or organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization.
(b)
Authorization and Power. Such Purchaser has the requisite power and
authority to enter into and perform the Transaction Documents and to purchase the Shares and
the Warrants being sold to it hereunder. The execution, delivery and performance of the
Transaction Documents by such Purchaser and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate or partnership action,
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and no further consent or authorization of such Purchaser or its Board of Directors or Board of
Managers, stockholders, or partners, as the case may be, is required. This Agreement has been
duly authorized, executed and delivered by such Purchaser. The other Transaction Documents
constitute, or shall constitute when executed and delivered, valid and binding obligations of such
Purchaser enforceable against such Purchaser in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the
enforcement of, creditor’s rights and remedies or by other equitable principles of general
application.
(c)
Acquisition for Investment. Such Purchaser is purchasing the Shares and
acquiring the Warrants solely for its own account for the purpose of investment and not with a
view to or for sale in connection with the distribution thereof. Such Purchaser does not have a
present intention to sell any of the Securities, nor a present arrangement (whether or not legally
binding) or intention to effect any distribution of any of the Securities to or through any Person;
provided, however, that by making the representations herein and subject to Section 2.2(e)
below, such Purchaser does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to pledge any of the Securities for margin purposes and/or to
dispose of any of the Securities at any time in accordance with federal and state securities laws
applicable to such disposition. Such Purchaser acknowledges that it (i) has such knowledge and
experience in financial and business matters such that such Purchaser is capable of evaluating the
merits and risks of its investment in the Company, (ii) is able to bear the financial risks
associated with an investment in the Securities, and (iii) has been given full access to such
records of the Company and the Subsidiaries and to the officers of the Company and the
Subsidiaries as it has deemed necessary or appropriate to conduct its due diligence investigation.
(d)
Rule 144. Such Purchaser understands that the Securities must be held
indefinitely unless such Securities are registered under the Securities Act or an exemption from
registration is available. Such Purchaser acknowledges that it is familiar with Rule 144 of the
rules and regulations of the Commission, as amended, promulgated pursuant to the Securities
Act (“Rule 144”), and that such Purchaser has been advised that Rule 144 permits resales only
under certain circumstances. Such Purchaser understands that to the extent that Rule 144 is not
available, such Purchaser will be unable to sell any Securities without either registration under
the Securities Act or the existence of another exemption from such registration requirement.
(e)
General. Such Purchaser understands that the Securities are being offered
and sold in reliance on a transactional exemption from the registration requirements of federal
and state securities laws and the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of such Purchaser
set forth herein in order to determine the applicability of such exemptions and the suitability of
such Purchaser to acquire the Securities. Such Purchaser understands that no United States
federal or state agency or any government or governmental agency has passed upon or made any
recommendation or endorsement of the Securities.
(f)
Opportunities for Additional Information. Such Purchaser acknowledges
that such Purchaser has had the opportunity to ask questions of and receive answers from, or
obtain additional information from, the executive officers of the Company concerning the
financial and other affairs of the Company, and to the extent deemed necessary in light of such
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Purchaser’s personal knowledge of the Company’s affairs, such Purchaser has asked such
questions and received answers to the full satisfaction of such Purchaser, and such Purchaser
desires to invest in the Company.
(g)
No General Solicitation. Such Purchaser acknowledges that the Securities
were not offered to such Purchaser by means of any form of general or public solicitation or
general advertising, or publicly disseminated advertisements or sales literature, including (i) any
advertisement, article, notice or other communication published in any newspaper, magazine, or
similar media, or broadcast over television or radio, or (ii) any seminar or meeting to which such
Purchaser was invited by any of the foregoing means of communications.
(h)
Accredited Investor. Such Purchaser is an accredited investor (as defined
in Rule 501 of Regulation D), and such Purchaser has such experience in business and financial
matters that it is capable of evaluating the merits and risks of an investment in the Securities.
Such Purchaser acknowledges that an investment in the Securities is speculative and involves a
high degree of risk.
ARTICLE III
Covenants
The Company covenants with each Purchaser as follows, which covenants are for the
benefit of each Purchaser and their respective permitted assignees.
Section 3.1
Securities Compliance. The Company shall notify the
Commission, in accordance with its rules and regulations, of the transactions contemplated by
any of the Transaction Documents, and shall take all other necessary action and proceedings as
may be required and permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Securities to the Purchasers, or their respective subsequent holders.
Section 3.2
Registration and Listing. The Company will cause its Common
Stock to continue to be registered under Section 12(b) or 12(g) of the Exchange Act, will comply
in all respects with its reporting and filing obligations under the Exchange Act, will comply with
all requirements related to any registration statement filed pursuant to this Agreement, and will
not take any action or file any document (whether or not permitted by the Securities Act or the
rules promulgated thereunder) to terminate or suspend such registration or to terminate or
suspend its reporting and filing obligations under the Exchange Act or Securities Act, except as
permitted herein. The Company shall use its commercially reasonable best efforts to continue the
trading of its Common Stock on one of the OTC Markets Group’s marketplaces or any successor
market.
Section 3.3
Inspection Rights. In the event the Registration Statement (as
defined in the Registration Rights Agreement) is not effective or has been suspended, and subject
to the Purchaser signing a mutually agreeable Non-Disclosure Agreement and agreeing not to
sell any of its securities if it obtains material non-public information, the Company shall, subject
to Section 3.9, permit, during normal business hours and upon reasonable request and reasonable
notice, a Purchaser or any employees, agents or representatives thereof, so long as a Purchaser
shall be obligated hereunder to purchase the Shares or shall beneficially own the Shares, or shall
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own Warrant Shares or the Warrants which, in the aggregate, represent more than two percent
(2%) of the total combined voting power of all voting securities then outstanding, to examine and
make reasonable copies of and extracts from the records and books of account of, and visit and
inspect, during the term of the Warrants, the properties, assets, operations and business of the
Company and any Subsidiary, and to discuss the affairs, finances and accounts of the Company
and any Subsidiary with any of its officers, consultants, directors, and key employees.
Section 3.4
Compliance with Laws. The Company shall comply, and cause
each Subsidiary to comply, with all applicable laws, rules, regulations and orders, the
noncompliance with which could have a Material Adverse Effect.
Section 3.5
Keeping of Records and Books of Account. The Company shall
keep and cause each Subsidiary to keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP consistently applied, reflecting all
financial transactions of the Company and its Subsidiaries, and in which, for each fiscal year, all
proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and
other purposes in connection with its business shall be made.
Section 3.6
Reporting Requirements. The Company, only to the extend not
included in a Commission Document publicly filed and available for public access, shall furnish
two (2) copies of the following to each Purchaser in a timely manner so long as that Purchaser
shall be obligated hereunder to purchase the Shares or shall beneficially own the Shares or
Warrants, or shall own Warrant Shares which, in the aggregate, represent more than one percent
(1%) of the total combined voting power of all voting securities then outstanding:
(a)
Quarterly Reports filed with the Commission on Form 10-Q as soon as
available, and in any event within forty-five (45) days after the end of each of the first three (3)
fiscal quarters of the Company, but in no event prior to the time that such Reports are publicly
filed with the Commission or otherwise made publicly available;
(b)
Annual Reports filed with the Commission on Form 10-K as soon as
available, and in any event within ninety (90) days after the end of each fiscal year of the
Company, but in no event prior to the time that such Reports are publicly filed with the
Commission or otherwise made publicly available; and
(c)
Copies of all notices and information, including without limitation notices
and proxy statements in connection with any meetings, that are provided to holders of shares of
Common Stock, contemporaneously with the delivery of such notices or information to such
holders of Common Stock.
Section 3.7
Other Agreements. The Company shall not enter into any
agreement in which the terms of such agreement would restrict or impair the right or ability of
the Company or any Subsidiary to perform under any Transaction Document.
Section 3.8
Reservation of Shares. So long as the Warrants remain
outstanding, the Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, the maximum number of shares of Common Stock to effect
the exercise of the Warrants.
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Section 3.9
Disclosure of Transactions and Other Material Information. On or
before 8:30 a.m., New York City time, on the Business Day immediately following the Closing
Date, the Company shall file a Current Report on Form 8-K with the Commission describing the
terms of the transactions contemplated by the Transaction Documents and including as exhibits
to such Current Report on Form 8-K this Agreement, a form of the Warrant, and the Registration
Rights Agreement, and the schedules hereto and thereto in the form required by the Exchange
Act (including all attachments, the “8-K Filing”). For purposes of this Agreement, a “Business
Day” means any day except Saturday, Sunday and any day which is a legal holiday or a day on
which banking institutions in the State of Texas generally are authorized or required by law or
other government actions to close. As of the time of the filing of the 8-K Filing with the
Commission, no Purchaser shall 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. The Company shall not, and shall
cause each of its Subsidiaries and its and each of their respective officers, directors, employees
and agents not to, provide any Purchaser with any material, nonpublic information regarding the
Company or any of its Subsidiaries from and after the filing of the 8-K Filing with the Company
without the express written consent of such Purchaser. Subject to the foregoing, neither the
Company nor any Purchaser shall issue any press releases 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 any Purchaser, to make any press release or other public
disclosure with respect to such transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith, and (ii) as is required by applicable law and regulations, including
the applicable rules and regulations of the OTC Markets Group (provided that in the case of
clause (i) above, each Purchaser shall be notified by the Company (although the consent of such
Purchaser shall not be required) in connection with any such press release or other public
disclosure prior to its release).
Section 3.10 Delivery of Securities. At Closing or as soon thereafter as
reasonably possible (but in any event no later than three Business Days immediately following
the Closing Date), the Company shall deliver to each Purchaser certificates representing the
Shares (in such denominations as each Purchaser may request), and the original Warrants
acquired by such Purchaser at the Closing.
Section 3.11 [Intentionally Omitted].
Section 3.12 Subsequent Financings.
(a)
Until the first anniversary of the Closing Date, the Company hereby grants
to each Purchaser (but not its assigns) that (A) still owns Shares purchased hereunder
immediately prior to the issuance of the “New Securities” (as defined in Section 3.12(b)), (B)
purchased Shares on the Closing Date, and (C) was not an officer or director of the Company as
of the Closing Date (any such Purchaser, for such purpose, an “Eligible Purchaser”), a right (the
“Preemptive Right”) to purchase all or any part of such Eligible Purchaser’s pro rata share of any
New Securities that the Company may, from time to time, propose to sell and issue. The pro rata
share for each Eligible Purchaser, for purposes of the Preemptive Right, is the ratio of (x) the
number of shares of Common Stock then held or deemed to be held by such Eligible Purchaser
immediately prior to the issuance of the New Securities (assuming the full exercise of the
Warrants), to (y) the total number of shares of Common Stock of the Company outstanding
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immediately prior to the issuance of the New Securities (after giving effect to the full exercise of
the Warrants).
(b)
For purposes of this Section 3.12, “New Securities” shall mean any
Common Stock, whether or not authorized on the date hereof, and rights, options or warrants to
purchase Common Stock and securities of any type whatsoever that are, or may become,
convertible into Common Stock; provided, however, that “New Securities” does not include the
following:
(i)
shares of capital stock of the Company issuable upon conversion or
exercise of any currently outstanding securities or any Shares, Warrants or New Securities issued
in accordance with this Agreement (including the Warrant Shares);
(ii)
shares or options or warrants for Common Stock granted to
officers, directors and employees of, and consultants to, the Company pursuant to stock option or
purchase plans or other compensatory agreements approved by the Compensation Committee of
the Board of Directors;
(iii)
shares of Common Stock issued in connection with any pro rata
stock split or stock dividend in respect of any series or class of capital stock of the Company or
recapitalization by the Company;
(iv)
shares of capital stock, or options or warrants to purchase capital
stock, issued to a strategic investor in connection with a strategic commercial agreement or
pursuant to joint ventures, partnerships, licensing agreements or other similar arrangements, as
determined by the Board of Directors;
(v)
shares of capital stock, or options or warrants to purchase capital
stock, issued pursuant to a commercial borrowing, secured lending or lease financing transaction
approved by the Board of Directors;
(vi)
shares of capital stock, or options or warrants to purchase capital
stock, issued pursuant to the acquisition of another corporation or entity by the Company by
consolidation, merger, purchase of all or substantially all of the assets, or other reorganization in
which the Company acquires, in a single transaction or series of related transactions, all or
substantially all of the assets of such other corporation or entity or fifty percent (50%) or more of
the voting power of such other corporation or entity or fifty percent (50%) or more of the equity
ownership of such other corporation or entity;
(vii) shares of capital stock issued in an underwritten public securities
offering pursuant to a registration statement filed under the Securities Act;
(viii) shares of capital stock, or options or warrants to purchase capital
stock, issued to current or prospective customers or suppliers of the Company or to its
employees, officers or directors, approved by the Board of Directors as compensation or
accommodation in lieu of other payment, compensation or accommodation to such customer,
supplier, employee, officer or director;
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(ix)
shares of capital stock, or warrants to purchase capital stock, issued
to any Person that provides services to the Company as compensation therefor pursuant to an
agreement approved by the Board of Directors;
(x)
shares of capital stock, or options or warrants to purchase capital
stock, offered in a transaction where purchase of such securities by any Purchaser would cause
such transaction to fail to comply with applicable federal or state securities laws or would cause
an applicable registration or qualification exemption to fail to be available to the Company;
provided, however, that this clause (x) shall apply only to the Purchaser or Purchasers who
would cause any such failure, and not to any of the other Purchasers; and
(xi)
securities issuable upon conversion or exercise of the securities set
forth in paragraphs (i) – (x) above.
In the event that the Company proposes to undertake an issuance of New Securities, it shall give
each Eligible Purchaser written notice (the “Notice”) of its intention, describing the type of New
Securities, the price, and the general terms upon which the Company proposes to issue the same.
Each Eligible Purchaser shall have twenty (20) Business Days after receipt of such notice to
agree to purchase all or any portion of its pro rata share of such New Securities at the price and
upon the terms specified in the notice by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased. In the event that any New Securities
subject to the Preemptive Right are not purchased by the Eligible Purchaser within the twenty
(20) Business Day period specified above, the Company shall have ninety (90) days thereafter to
sell (or enter into an agreement pursuant to which the sale of New Securities that had been
subject to the Preemptive Right shall be closed, if at all, within sixty (60) days from the date of
said agreement) the New Securities with respect to which the rights of the Purchaser were not
exercised at a price and upon terms, including manner of payment, no more favorable to the
purchasers thereof than specified in the Notice. In the event the Company has not sold all offered
New Securities within such ninety (90) day period (or sold and issued New Securities in
accordance with the foregoing within sixty (60) days from the date of such agreement), the
Company shall not thereafter issue or sell any New Securities, without first complying again
with the procedures set forth in this Section 3.12.
Section 3.13 Beneficial Ownership Restrictions.
(a)
Notwithstanding anything to the contrary set forth in this Agreement or
any other Transaction Document (including, without limitation, the Warrant), at no time may a
Purchaser convert a Security if the number of shares of Common Stock to be issued pursuant to
such conversion, when aggregated with all other shares of Common Stock owned by such
Purchaser at such time, would result in such Purchaser beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act, and the rules thereunder) in excess of 4.99%
of the then issued and outstanding shares of Common Stock outstanding at such time; provided,
however, that upon a Purchaser providing the Company with sixty-one (61) days’ notice (the
“Waiver Notice”) that such Purchaser would like to waive this Section 3.13(a) with regard to any
or all shares of Common Stock issuable upon conversion of any Security, this Section 3.13(a)
shall be of no force or effect with regard to those Securities referenced in the Waiver Notice;
provided, further, that any Purchaser may waive this Section 3.13(a) by so indicating on the
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signature page to this Agreement, any such waiver to be effective on and as of the date of this
Agreement.
(b)
Notwithstanding anything to the contrary set forth in this Agreement or
any other Transaction Document (including, without limitation, the Warrant), at no time may a
Purchaser convert a Security if the number of shares of Common Stock to be issued pursuant to
such conversion, when aggregated with all other shares of Common Stock owned by such
Purchaser at such time, would result in such Purchaser beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act, and the rules thereunder) in excess of 9.99%
of the then issued and outstanding shares of Common Stock outstanding at such time; provided,
however, that upon a Purchaser providing the Company with a Waiver Notice that such
Purchaser would like to waive this Section 3.13(b) with regard to any or all shares of Common
Stock issuable upon conversion of a Security, this Section 3.13(b) shall be of no force or effect
with regard to those Securities referenced in the Waiver Notice.
ARTICLE IV
Conditions
Section 4.1
Conditions Precedent to the Obligation of the Company to Close
and to Sell the Shares and Warrants. The obligation hereunder of the Company to close and issue
and sell the Shares and the Warrants to the Purchasers on the Closing Date is subject to the
satisfaction or waiver, at or before the Closing, of the conditions set forth below. These
conditions are for the Company’s sole benefit and may be waived by the Company at any time in
its sole discretion.
(a)
Accuracy of the Purchasers’ Representations and Warranties. The
representations and warranties of each Purchaser 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 are expressly made as of a particular date, which shall be true
and correct in all material respects as of such date.
(b)
Performance by the Purchasers. Each Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the Purchasers at or
prior to the Closing Date.
(c)
No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which prohibits the consummation of any of
the transactions contemplated by this Agreement.
(d)
Delivery of Purchase Price. The Purchase Price for the Shares and the
Warrants shall have been delivered to the Company at the Closing.
(e)
Delivery of Transaction Documents. The Transaction Documents to which
the Purchasers are party shall have been duly executed and delivered by the Purchasers to the
Company.
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Section 4.2
Conditions Precedent to the Obligation of the Purchasers to Close
and to Purchase the Shares and the Warrants. The obligation hereunder of the Purchasers to
purchase the Shares and the Warrants and consummate the transactions contemplated by this
Agreement is subject to the satisfaction or waiver, at or before the Closing, of each of the
conditions set forth below. These conditions are for the Purchasers’ sole benefit and may be
waived by the Purchasers at any time in their sole discretion.
(a)
Accuracy of the Company’s Representations and Warranties. Each of the
representations and warranties of the Company in this Agreement, the Warrants and the
Registration Rights Agreement shall be true and correct in all material respects as of the Closing
Date, except for representations and warranties that speak as of a particular date, which shall be
true and correct in all material respects as of such date.
(b)
Performance by the Company. The Company shall have performed,
satisfied and complied in all respects with all covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the Company at or prior to the
Closing Date.
(c)
No Suspension, Etc. Trading in the Common Stock shall not have been
suspended by the Commission (except for any suspension of trading of limited duration agreed to
by the Company, which suspension shall be terminated prior to the Closing), and, at any time
prior to the Closing Date, trading in securities generally as reported by Bloomberg Financial
Markets (“Bloomberg”) shall not have been suspended or limited, or minimum prices shall not
have been established on securities whose trades are reported by Bloomberg, or quoted by the
OTC Markets Group, nor shall a banking moratorium have been declared either by the United
States or Texas State authorities, nor shall there have occurred any national or international
calamity or crisis of such magnitude in its effect on any financial market which, in each case, in
the reasonable judgment of the Purchasers, makes it impracticable or inadvisable to purchase the
Shares and the Warrants.
(d)
No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which prohibits the consummation of any of
the transactions contemplated by this Agreement.
(e)
No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any governmental authority shall have been commenced, and no investigation by
any governmental authority shall have been threatened, against the Company or any Subsidiary,
or any of the officers, directors or affiliates of the Company or any Subsidiary, seeking to
restrain, prevent or change the transactions contemplated by this Agreement, or seeking damages
in connection with such transactions.
(f)
Opinion of Counsel, Etc. The Purchasers shall have received an opinion of
counsel to the Company, dated the Closing Date, in the form of Exhibit C hereto, and such other
certificates and documents as the Purchasers or their counsel shall reasonably require incident to
the Closing.
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(g)
Warrants. The Company shall have delivered to the Purchasers the
originally executed Warrants (in such denominations as each Purchaser may request) being
acquired by the Purchasers in accordance with Section 3.10.
(h)
Resolutions. The Board of Directors of the Company shall have adopted
resolutions consistent with Section 2.1(b) hereof in a form reasonably acceptable to the
Purchasers (the “Resolutions”).
(i)
Reservation of Shares. As of the Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the purpose of effecting
the issuance of the Shares and the exercise of the Warrants, a number of shares of Common
Stock equal to the number of Warrant Shares issuable upon exercise of the Warrants, assuming
the Warrants were granted on the Closing Date (after giving effect to the Warrants to be issued
on the Closing Date and assuming the Warrants were fully exercisable on such date regardless of
any limitation on the timing or amount of such exercises).
(j)
Secretary’s Certificate. The Company shall have delivered to the
Purchasers a secretary’s certificate, dated as of the Closing Date, as to (i) the Resolutions, (ii) the
Articles and the Bylaws, each as in effect at the Closing, and (iii) the authority and incumbency
of the officers of the Company executing the Transaction Documents and any other documents
required to be executed or delivered in connection therewith.
(k)
Officer’s Certificate. On the Closing Date, the Company shall have
delivered to the Purchasers a certificate of an executive officer of the Company, dated as of the
Closing Date, confirming the accuracy of the Company’s representations, warranties and
covenants as of the Closing Date and confirming the compliance by the Company with the
conditions precedent set forth in this Section 4.2 as of the Closing Date.
(l)
Fees and Expenses. As of the Closing Date, all fees and expenses required
to be paid by the Company shall have been or authorized to be paid by the Company as of the
Closing Date.
(m)
Registration Rights Agreement. As of the Closing Date, the parties shall
have entered into the Registration Rights Agreement in the Form of Exhibit D attached hereto.
(n)
Lock-Up Agreements. Each officer, director and holder of 10% or more of
the Common Stock shall have executed and delivered to the Purchasers a Lock-Up Agreement in
the form attached hereto as Exhibit E.
(o)
Material Adverse Effect. No Material Adverse Effect shall have occurred.
ARTICLE V
Transfer Restrictions and Legends
Section 5.1
Legends.
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(a)
The Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of Securities other than pursuant to an
effective registration statement, to the Company, to an Affiliate of a Purchaser or in connection
with a pledge permitted by Section 5.1(b), the Company may require the transferor thereof to
provide to the Company an opinion of counsel selected by the transferor, the form and substance
of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer
does not require registration of such transferred Securities under the Securities Act. As a
condition of transfer, any such transferee shall agree in writing to be bound by the terms of this
Agreement and shall have the rights of a Purchaser under this Agreement and the Registration
Rights Agreement.
(b)
The Purchasers agree to the imprinting, so long as is required by this
Section 5.1(b), of a legend on any of the Securities in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY
A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN
WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS
DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT.
The Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security
interest in some or all of the Securities to a financial institution that is an “accredited investor” as
defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of
this Agreement and the Registration Rights Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees or
secured parties. Such a pledge or transfer would not be subject to approval of the Company and
no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in
connection therewith. Further, no notice shall be required of such pledge. At the appropriate
Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a
pledgee or secured party of Securities may reasonably request in connection with a pledge or
transfer of the Securities, including, if the Securities are subject to registration pursuant to the
Registration Rights Agreement, the preparation and filing of any required prospectus supplement
under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act
to appropriately amend the list of Selling Stockholders thereunder, if required.
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(c)
Certificates evidencing the Shares and the Warrant Shares shall not
contain any legend (including the legend set forth in Section 5.1(b)), (i) while a registration
statement (including the Registration Statement) covering the resale of such security is effective
under the Securities Act, or (ii) following any sale of such Shares or Warrant Shares pursuant to
Rule 144, or (iii) if such Shares or Warrant Shares are eligible for sale under Rule 144(b)(1), or
(iv) if such legend is not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the Staff of the Commission). The
Company shall cause its counsel to issue a legal opinion to the Company’s transfer agent
promptly after the Effectiveness Date (as defined in the Registration Rights Agreement) if
required by the Company’s transfer agent to effect the removal of the legend hereunder. If all or
any portion of a Warrant is exercised at a time when there is an effective registration statement to
cover the resale of the Warrant Shares, such Warrant Shares shall be issued free of all legends.
The Company agrees that following the Effectiveness Date or at such time as such legend is no
longer required under this Section 5.1(c), it will, no later than five Business Days following the
delivery by a Purchaser to the Company or the Company’s transfer agent of a certificate
representing Shares or Warrant Shares, as the case may be, issued with a restrictive legend (such
date, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser a
certificate representing such Securities that is free from all restrictive and other legends. The
Company may not make any notation on its records or give instructions to any transfer agent of
the Company that enlarge the restrictions on transfer set forth in this Section 5.1.
(d)
In addition to such Purchaser’s other available remedies, the Company
shall pay to a Purchaser, in cash, as liquidated damages and not as a penalty, for each $1,000 of
Shares and/or Warrant Shares (based on the closing price of the Common Stock on the date such
Securities are submitted to the Company’s transfer agent) subject to Section 5.1(c), $10 per
Business Day (increasing to $20 per Business Day five (5) Business Days after such damages
have begun to accrue) for each Business Day after the Legend Removal Date until such
certificate is delivered in proper form. Nothing herein shall limit such Purchaser’s right to pursue
actual damages for the Company’s failure to deliver certificates representing any Securities as
required by the Transaction Documents, and such Purchaser shall have the right to pursue all
remedies available to it at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief.
(e)
Each Purchaser, severally and not jointly with the other Purchasers, agrees
that the removal of the restrictive legend from certificates representing Securities as set forth in
this Section 5.1 is predicated upon the Company’s reliance that the Purchaser will sell any
Securities pursuant to either the registration requirements of the Securities Act, including any
applicable prospectus delivery requirements, or an exemption therefrom.
ARTICLE VI
Termination
Section 6.1
Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Closing Date by the mutual written consent of the Company
and the Purchasers.
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Section 6.2
Effect of Termination. In the event of termination by the Company
or the Purchasers, written notice thereof shall forthwith be given to the other party and the
transactions contemplated by this Agreement shall be terminated without further action by any
party. If this Agreement is terminated as provided in Section 6.1 herein, this Agreement shall
become void and of no further force and effect, except for Sections 8.1 and 8.2, and Article VII
herein. Nothing in this Section 6.2 shall be deemed to release the Company or any Purchaser
from any liability for any breach under this Agreement, or to impair the rights of the Company or
such Purchaser to compel specific performance by the other party of its obligations under this
Agreement.
ARTICLE VII
Indemnification
Section 7.1
General Indemnity. The Company agrees to indemnify and hold
harmless each Purchaser (and its respective directors, officers, employees, affiliates, agents,
successors and assigns) from and against any and all losses, liabilities, deficiencies, costs,
damages and expenses (including, without limitation, reasonable attorneys’ fees, charges and
disbursements) incurred by each Purchaser or any such Person as a result of any inaccuracy in or
breach of the representations, warranties or covenants made by the Company herein. The
Purchasers severally but not jointly agree to indemnify and hold harmless the Company and its
directors, officers, employees, affiliates, agents, successors and assigns from and against any and
all losses, liabilities, deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorneys’ fees, charges and disbursements) incurred by the Company as result of any
inaccuracy in or breach of the representations, warranties or covenants made by the Purchasers
herein.
Section 7.2
Indemnification Procedure. Any party entitled to indemnification
under this Article VII (an “indemnified party”) will give written notice to the indemnifying party
of any matters giving rise to a claim for indemnification; provided, that the failure of any party
entitled to indemnification hereunder to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Article VII except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In case any action,
proceeding or claim is brought against an indemnified party in respect of which indemnification
is sought hereunder, the indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnified party a conflict of interest between it and the
indemnifying party may exist with respect to such action, proceeding or claim, to assume the
defense thereof with counsel reasonably satisfactory to the indemnified party. In the event that
the indemnifying party advises an indemnified party that it will contest such a claim for
indemnification hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such Person of its election to defend, settle or compromise, at its sole
cost and expense, any action, proceeding or claim (or discontinues its defense at any time after it
commences such defense), then the indemnified party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until the
indemnifying party elects in writing to assume and does so assume the defense of any such
claim, proceeding or action, the indemnified party’s costs and expenses arising out of the
defense, settlement or compromise of any such action, claim or proceeding shall be losses
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subject to indemnification hereunder. The indemnified party shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any such action or claim by
the indemnifying party and shall furnish to the indemnifying party all information reasonably
available to the indemnified party which relates to such action or claim. The indemnifying party
shall keep the indemnified party fully apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. If the indemnifying party elects to defend any such
action or claim, then the indemnified party shall be entitled to participate in such defense with
counsel of its choice at its sole cost and expense. The indemnifying party shall not be liable for
any settlement of any action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VII to the contrary, the indemnifying party shall not,
without the indemnified party’s prior written consent, settle or compromise any claim or consent
to entry of any judgment in respect thereof which imposes any future obligation on the
indemnified party or which does not include, as an unconditional term thereof, the giving by the
claimant or the plaintiff to the indemnified party of a release from all liability in respect of such
claim. The indemnification required by this Article VII shall be made by periodic payments of
the amount thereof during the course of investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred, so long as the indemnified party irrevocably
agrees to refund such moneys if it is ultimately determined by a court of competent jurisdiction
that such party was not entitled to indemnification. The indemnity agreements contained herein
shall be in addition to (a) any cause of action or similar rights of the indemnified party against
the indemnifying party or others, and (b) any liabilities the indemnifying party may be subject to
pursuant to the law.
ARTICLE VIII
Miscellaneous
Section 8.1
Fees and Expenses. Each party shall pay the fees and expenses of
its advisors, counsel, accountants and other experts, if any, and all other expenses, incurred by
such party incident to the negotiation, preparation, execution, delivery and performance of this
Agreement; provided, however, that the Company shall pay a flat $20,000 to YP Holdings, LLC,
the lead Purchaser (“YP”), to reimburse YP for the fees and expenses (including attorneys’ fees
and expenses) incurred by it in connection with its due diligence review of the Company and the
preparation, negotiation, execution, delivery and performance of this Agreement and the other
Transaction Documents and the transactions contemplated thereunder (including YP’s counsel’s
review of the Registration Statement (as contemplated by the Registration Rights Agreement) as
special counsel to Purchasers). The Company hereby authorizes and directs YP to deduct
$20,000 from the Purchase Price to be paid by YP at Closing in payment and satisfaction of such
$20,000 due and payable by the Company. In addition, the Company shall pay all reasonable
fees and expenses incurred by the Purchasers in connection with any amendments, modifications
or waivers of this Agreement or any of the other Transaction Documents or incurred in
connection with the enforcement of this Agreement and any of the other Transaction Documents,
following a breach by the Company of this Agreement or any of the other Transaction
Documents, including, without limitation, all reasonable attorneys’ fees, disbursements and
expenses.
Section 8.2
Specific Enforcement; Consent to Jurisdiction.
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(a)
The Company and the Purchasers acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Agreement or the other
Transaction Documents were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement or the other
Transaction Documents and to enforce specifically the terms and provisions hereof or thereof,
this being in addition to any other remedy to which any of them may be entitled by law or equity.
(b)
The Company and each Purchaser (i) hereby irrevocably submit to the
exclusive jurisdiction of the United States District Court sitting in the Northern District of Texas
and the courts of the State of Texas located in Dallas, Texas, for the purposes of any suit, action
or proceeding arising out of or relating to this Agreement or any of the other Transaction
Documents or the transactions contemplated hereby or thereby, and (ii) hereby waive, and agree
not to assert in any such suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient
forum or that the venue of the suit, action or proceeding is improper. The Company and each
Purchaser consent to process being served in any such suit, action or proceeding by mailing a
copy thereof to such party at the address in effect for notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of process and notice thereof.
Nothing in this Section 8.2 shall affect or limit any right to serve process in any other manner
permitted by law. The Company and the Purchasers hereby agree that the prevailing party in any
suit, action or proceeding arising out of or relating to the Shares, the Warrants or any Transaction
Document shall be entitled to reimbursement for reasonable legal fees from the non-prevailing
party.
Section 8.3
Entire Agreement; Amendment. This Agreement and the
Transaction Documents contain the entire understanding and agreement of the parties with
respect to the matters covered hereby and, except as specifically set forth herein or in the other
Transaction Documents, neither the Company nor any Purchaser make any representation,
warranty, covenant or undertaking with respect to such matters, and they supersede all prior
understandings and agreements with respect to said subject matter, all of which are merged
herein. No provision of this Agreement may be waived or amended other than by a written
instrument signed by the Company and the holders of at least a majority in interest of the then-
outstanding Shares, and no provision hereof may be waived other than by a written instrument
signed by the party against whom enforcement of any such amendment or waiver is sought. No
such amendment shall be effective to the extent that it applies to less than all of the holders of the
Shares then outstanding. No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of the Transaction Documents unless
the same consideration is also offered to all of the parties to the Transaction Documents or
holders of Shares, as the case may be.
Section 8.4
Notices. Any notices required or permitted to be given under this
Agreement (and, unless otherwise expressly provided therein, under any document delivered
pursuant to this Agreement) shall be given in writing and shall be deemed received (a) when
personally delivered to the relevant party at such party’s address as set forth below, (b) if sent by
mail (which must be certified or registered mail, postage prepaid), when received or rejected by
the relevant party at such party’s address indicated below, or (c) if sent by email transmission,
when confirmation of delivery is received by the sending party:
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If to the Company:
0000 Xxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Chief Operating Officer
Email: xxxxxxx.xxxxx@xxxx.xxx
with copies (which copies
shall not constitute notice
to the Company) to:
X.X. Xxxxxx & Associates
Attorneys At Law
0000 Xxxxx Xxxxxxxx Xxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Email: xxxxxx00@xxxxx.xxx
If to any Purchaser:
At the address of such Purchaser set forth on
Exhibit A to this Agreement.
Any party hereto may from time to time change its address for notices by giving at least
ten (10) days written notice of such changed address to the other party hereto.
Section 8.5
Waivers. No waiver by any party of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver
in the future or a waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of any party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
Section 8.6
Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this Agreement for any
other purpose and shall not be deemed to limit or affect any of the provisions hereof.
Section 8.7
Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns. After the Closing, the
assignment by a party to this Agreement of any rights hereunder shall not affect the obligations
of such party under this Agreement. After the Closing, the Purchasers, in compliance with all
applicable securities laws, may assign the Shares, the Warrants and their rights under this
Agreement and the other Transaction Documents and any other rights hereto and thereto without
the consent of the Company.
Section 8.8
No 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 (other than
indemnified parties, as contemplated by Article VII).
Section 8.9
Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Texas, without giving effect to the
choice of law provisions. This Agreement shall not be interpreted or construed with any
presumption against the party causing this Agreement to be drafted.
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Section 8.10 Survival. The representations and warranties of the Company and
the Purchasers contained in Sections 2.1(o) and 2.1(s) shall survive indefinitely and those
contained in Article II, with the exception of Sections 2.1(o) and 2.1(s), shall survive the
execution and delivery hereof and the Closing until the date two (2) years from the Closing Date,
and the agreements and covenants set forth in Articles I, III, V, VII and VIII of this Agreement
shall survive the execution and delivery hereof and the Closing hereunder.
Section 8.11 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same instrument and shall
become effective when counterparts have been signed by each party and delivered to the other
parties hereto, it being understood that all parties need not sign the same counterpart.
Section 8.12 Publicity. The Company agrees that it will not disclose, and will
not include in any public announcement, the names of the Purchasers without the consent of the
Purchasers in accordance with Section 8.3, which consent shall not be unreasonably withheld or
delayed, or unless and until such disclosure is required by law, rule or applicable regulation, and
then only to the extent of such requirement.
Section 8.13 Severability. The provisions of this Agreement are severable and,
in the event that any court of competent jurisdiction shall determine that any one or more of the
provisions or part of the provisions contained in this Agreement shall, for any reason, be held to
be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision or part of a provision of this Agreement and this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of
such provision, had never been contained herein, so that such provisions would be valid, legal
and enforceable to the maximum extent possible.
Section 8.14 Further Assurances. From and after the date of this Agreement,
upon the request of the Purchasers or the Company, the Company and each Purchaser shall
execute and deliver such instruments, documents and other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of
this Agreement, the Warrants and the Registration Rights Agreement.
Section 8.15 Independent Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the
performance of the obligations of any other Purchaser under any Purchaser Transaction
Document. Nothing contained herein or in any other Purchaser Transaction Document, and no
action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group with respect to
such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser
confirms that it has independently participated in the negotiation of the transactions
contemplated hereby with the advice of its own counsel and advisors. Each Purchaser shall be
entitled to independently protect and enforce its rights, including, without limitation, the rights
arising out of this Agreement or out of any other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser (other than YP) hereby agrees and acknowledges that (a) Block &
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Garden, LLP, was retained solely by YP in connection with its due diligence review of the
Company and the preparation, negotiation, execution, delivery and performance of this
Agreement and the other Transaction Documents and the transactions contemplated thereunder,
and in such capacity has provided legal services solely to YP, (b) Block & Garden, LLP, has not
represented, nor will it represent, any Purchaser (other than YP) in connection with the
preparation, negotiation, execution, delivery and performance of this Agreement or the other
Transaction Documents or the transactions contemplated thereunder, and (c) each Purchaser
(other than YP) should, if it wishes counsel with respect to the preparation, negotiation,
execution, delivery and performance of this Agreement or the other Transaction Documents or
the transactions contemplated thereunder, retain its own independent counsel with respect
thereto.
[Remainder of page intentionally left blank. Signature pages to follow.]
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PURCHASERS:
YP HOLDINGS, LLC
By:
Xxxxxxx X. Xxxxxxxxx, Manager
Check box and initial if the foregoing Purchaser wishes to waive
the provisions of Section 3.13(a). ______ (initial here)
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EXHIBIT A
LIST OF PURCHASERS
Names and Addresses
Number of Shares
Number of
Dollar Amount of
of Purchasers
Purchased
Warrants
Investment
Purchased
YP Holdings, LLC
6,666,667
13,333,334
$600,000.00
0000 Xxxxxxx Xxxx
Xxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxx
Email: xxxxxxxxxx@xxxxx.xxx
With a copy to:
Block & Garden, LLP
0000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxx X. Garden, Esq.
Email: xxxxxx@xxxxxx.xxx
A-1
EXHIBIT B
FORM OF WARRANT
B-1
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES
ISSUABLE UPON EXERCISE OF THE SECURITIES EVIDENCED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED EXCEPT UPON
DELIVERY TO THE CORPORATION OF AN OPINION OF COUNSEL
SATISFACTORY IN FORM AND SUBSTANCE TO IT THAT SUCH TRANSFER
WILL NOT VIOLATE THE SECURITIES ACT OF 1933, AS AMENDED
THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.
Warrant for the Purchase of Shares of Common Stock,
par value $0.001 per Share
No. W-[●]
[●] Shares
THIS CERTIFIES that, for value received, [●], whose address is [●] (the “Holder”), is
entitled to subscribe for and purchase from MediJane Holdings Inc., a Nevada corporation (the
“Company”), upon the terms and conditions set forth herein, [●] shares of the Company’s
Common Stock, par value $0.001 per share (“Common Stock”), at a price of $0.20 per share
(the “Exercise Price”). As used herein the term “this Warrant” shall mean and include this
Warrant and any Common Stock or Warrants hereafter issued as a consequence of the exercise
or transfer of this Warrant in whole or in part.
The number of shares of Common Stock issuable upon exercise of the Warrants (the
“Warrant Shares”) and the Exercise Price may be adjusted from time to time as hereinafter set
forth. The Warrant Shares are entitled to the benefits, and subject to the obligations, set forth in
the Registration Rights Agreement among the Company, the Holder and certain other parties
dated concurrently herewith (the “Registration Rights Agreement”).
1.
Exercise Price and Exercise Period. This Warrant may be exercised at any time
or from time to time during the period commencing at 10:00 a.m. Mountain Time on September
[●], 2014, and ending at 5:00 p.m. Mountain Time on September [●], 2019 (the “Exercise
Period”).
2.
Procedure for Exercise; Effect of Exercise.
(a)
Cash Exercise. This Warrant may be exercised, in whole or in part, by the Holder
during normal business hours on any business day during the Exercise Period by (i) the
presentation and surrender of this Warrant to the Company at its principal office along with a
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duly executed Notice of Exercise (in the form attached to this Agreement) specifying the
number of Warrant Shares to be purchased, and (ii) delivery of payment to the Company of the
Exercise Price for the number of Warrant Shares specified in the Notice of Exercise by cash,
wire transfer of immediately available funds to a bank account specified by the Company, or by
certified or bank cashier’s check.
(b)
Cashless Exercise. This Warrant may also be exercised by the Holder through a
cashless exercise, as described in this Section 2(b). In such case, this Warrant may be exercised,
in whole or in part, by the Holder during normal business hours on any business day during the
Exercise Period by the presentation and surrender of this Warrant to the Company at its
principal office along with a duly executed Notice of Exercise specifying the number of
Warrant Shares to be applied to such exercise. The number of shares of Common Stock to be
issues upon exercise of this Warrant pursuant to this Section 2(b) shall equal the value of this
Warrant (or the portion thereof being canceled) computed as of the date of delivery of this
Warrant to the Company using the following formula:
X =
Y(A-B)
A
Where:
X = the number of shares of Common Stock to be issued to Holder under this
Section 2(b);
Y = the number of Warrant Shares identified in the Notice of Exercise as being
applied to the subject exercise;
A = the Current Market Price on such date; and
B = the Exercise Price on such date
For purposes of this Section 2(b), Current Market Price shall have the definition provided in
Section 6(g).
The Company acknowledges and agrees that this Warrant was issued on the date set
forth at the end of this Warrant. Consequently, the Company acknowledges and agrees that, if
the Holder conducts a cashless exercise pursuant to this Section 2(b), the period during which
the Holder held this Warrant may, for purposes of Rule 144 promulgated under the Securities
Act of 1933, as amended (the “Securities Act”), be “tacked” to the period during which the
Holder holds the Warrant Shares received upon such cashless exercise.
Notwithstanding the foregoing, the Holder may conduct a cashless exercise pursuant to
this Section 2(b) only after the six (6) month anniversary of the initial issuance date of this
Warrant, and then only in the event that a registration statement covering the resale of the
Warrant Shares is not then effective at the time that the Holder wishes to conduct such cashless
exercise.
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(c)
Effect of Exercise. Upon receipt by the Company of this Warrant and a Notice
of Exercise, together with proper payment of the Exercise Price, as provided in this Section 2,
the Company agrees that such Warrant Shares shall be deemed to be issued to the Holder as the
record holder of such Warrant Shares as of the close of business on the date on which this
Warrant has been surrendered and payment has been made for such Warrant Shares in
accordance with this Agreement and the Holder shall be deemed to be the holder of record of
the Warrant Shares, notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such Warrant Shares shall not then be actually delivered
to the Holder. A stock certificate or certificates for the Warrant Shares specified in the Notice of
Exercise shall be delivered to the Holder as promptly as practicable, and in any event within
seven (7) business days, thereafter. The stock certificate(s) so delivered shall be in any such
denominations as may be reasonably specified by the Holder in the Notice of Exercise. If this
Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase
the balance of the Warrant Shares subject to purchase hereunder.
3.
Registration of Warrants; Transfer of Warrants. Any Warrants issued upon the
transfer or exercise in part of this Warrant shall be numbered and shall be registered in a
Warrant Register as they are issued. The Company shall be entitled to treat the registered holder
of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall
not be bound to recognize any equitable or other claim to or interest in such Warrant on the part
of any other person, and shall not be liable for any registration or transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless
made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in
requesting such registration or transfer, or with the knowledge of such facts that its participation
therein amounts to bad faith. This Warrant shall be transferable only on the books of the
Company upon delivery thereof duly endorsed by the Holder or by its duly authorized attorney
or representative, or accompanied by proper evidence of succession, assignment, or authority to
transfer. In all cases of transfer by an attorney, executor, administrator, guardian, or other legal
representative, duly authenticated evidence of his or its authority shall be produced. Upon any
registration of transfer, the Company shall deliver a new Warrant or Warrants to the person
entitled thereto. This Warrant may be exchanged, at the option of the Holder thereof, for another
Warrant, or other Warrants of different denominations, of like tenor and representing in the
aggregate the right to purchase a like number of Warrant Shares, upon surrender to the
Company or its duly authorized agent.
4.
Restrictions on Transfer. (a) The Holder, as of the date of issuance hereof,
represents to the Company that such Holder is acquiring the Warrants for its own account for
investment purposes and not with a view to the distribution thereof or of the Warrant Shares.
Notwithstanding any provisions contained in this Warrant to the contrary, this Warrant and the
related Warrant Shares shall not be transferable except pursuant to the proviso contained in the
following sentence or upon the conditions specified in this Section 4, which conditions are
intended, among other things, to insure compliance with the provisions of the Securities Act and
applicable state law in respect of the transfer of this Warrant or such Warrant Shares. The
3
Holder by acceptance of this Warrant agrees that the Holder will not transfer this Warrant or the
related Warrant Shares prior to delivery to the Company of an opinion of the Holder’s counsel
(as such opinion and such counsel are described in Section 4(b) hereof) or until registration of
such Warrant Shares under the Securities Act has become effective or after a sale of such
Warrant or Warrant Shares has been consummated pursuant to Rule 144 or Rule 144A under
the Securities Act; provided, however, that the Holder may freely transfer this Warrant or such
Warrant Shares (without delivery to the Company of an opinion of counsel) (i) to one of its
nominees, affiliates or a nominee thereof, (ii) to a pension or profit-sharing fund established and
maintained for its employees or for the employees of any affiliate, (iii) from a nominee to any
of the aforementioned persons as beneficial owner of this Warrant or such Warrant Shares, or
(iv) to a qualified institutional buyer, so long as such transfer is effected in compliance with
Rule 144A under the Securities Act.
(b)
The Holder, by its acceptance hereof, agrees that prior to any transfer of this
Warrant or of the related Warrant Shares (other than as permitted by Section 4(a) hereof or
pursuant to a registration under the Securities Act), the Holder will give written notice to the
Company of its intention to effect such transfer, together with an opinion of such counsel for the
Holder as shall be reasonably acceptable to the Company, to the effect that the proposed transfer
of this Warrant and/or such Warrant Shares may be effected without registration under the
Securities Act. Upon delivery of such notice and opinion to the Company, the Holder shall be
entitled to transfer this Warrant and/or such Warrant Shares in accordance with the intended
method of disposition specified in the notice to the Company.
(c)
Each stock certificate representing Warrant Shares issued upon exercise or
exchange of this Warrant shall bear the following legend unless the opinion of counsel referred
to in Section 4(b) states such legend is not required:
“THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE TRANSFERRED EXCEPT UPON DELIVERY TO THE
CORPORATION OF AN OPINION OF COUNSEL SATISFACTORY IN FORM AND
SUBSTANCE TO IT THAT SUCH TRANSFER WILL NOT VIOLATE THE
SECURITIES ACT OF 1933, AS AMENDED.”
The Holder understands that the Company may place, and may instruct any transfer agent or
depository for the Warrant Shares to place, a stop transfer notation in the securities records in
respect of the Warrant Shares.
5.
Reservation of Shares. The Company shall at all times during the Exercise
Period reserve and keep available out of its authorized and unissued Common Stock, solely for
the purpose of providing for the exercise of the rights to purchase all Warrant Shares granted
pursuant to the Warrants, such number of shares of Common Stock as shall, from time to time,
be sufficient therefor. The Company covenants that all shares of Common Stock issuable upon
exercise of this Warrant, upon receipt by the Company of the full Exercise Price therefor, and
4
all shares of Common Stock issuable upon conversion of this Warrant, shall be validly issued,
fully paid, non-assessable, and free of preemptive rights.
6.
Exercise Price Adjustments. The Exercise Price shall be subject to adjustment
from time to time as follows:
(a)
(i)
In the event that the Company shall (A) pay a dividend or make a
distribution to all its stockholders, in shares of Common Stock, on any class of capital stock of
the Company or any subsidiary which is not directly or indirectly wholly owned by the
Company, (B) split or subdivide its outstanding Common Stock into a greater number of shares,
or (C) combine its outstanding Common Stock into a smaller number of shares, then in each
such case the Exercise Price in effect immediately prior thereto shall be adjusted so that the
Holder of a Warrant thereafter surrendered for Exercise shall be entitled to receive the number
of shares of Common Stock that such Holder would have owned or have been entitled to
receive after the occurrence of any of the events described above had such Warrant been
exercised immediately prior to the occurrence of such event. An adjustment made pursuant to
this Section 6(a)(i) shall become effective immediately after the close of business on the record
date in the case of a dividend or distribution (except as provided in Section 6(e) below) and
shall become effective immediately after the close of business on the effective date in the case
of such subdivision, split or combination, as the case may be. Any shares of Common Stock
issuable in payment of a dividend shall be deemed to have been issued immediately prior to the
close of business on the record date for such dividend for purposes of calculating the number of
outstanding shares of Common Stock under clause (ii) below.
(ii)
In the event that the Company shall commit to issue or distribute New
Securities (as defined in the Securities Purchase Agreement, of even date herewith, among the
Company, the Holder and certain other Purchasers named therein), in any such case at a price
per share less than the Current Market Price per share on the earliest of (A) the date the
Company shall enter into a firm contract for such issuance or distribution, (B) the record date
for the determination of stockholders entitled to receive any such New Securities, if applicable,
or (C) the date of actual issuance or distribution of any such New Securities (provided that the
issuance of Common Stock upon the exercise of New Securities that are rights, warrants,
options or convertible or exchangeable securities (“New Derivative Securities”) will not cause
an adjustment in the Exercise Price if no such adjustment would have been required at the time
such New Derivative Security was issued), then the Exercise Price in effect immediately prior
to such earliest date shall be adjusted so that the Exercise Price shall equal the price determined
by multiplying the Exercise Price in effect immediately prior to such earliest date by the
fraction:
(x) whose numerator shall be (I) the number of shares of Common Stock outstanding
on such date plus (II) the number of shares of Common Stock which the aggregate
offering price of the total number of New Securities so offered would have
purchased at such Current Market Price (such amount, with respect to any New
Derivative Securities, determined by multiplying the total number of shares of
5
Common Stock subject thereto by the exercise price of such New Derivative
Securities, and dividing the product so obtained by such Current Market Price), and
(y) whose denominator shall be (I) the number of shares of Common Stock
outstanding on such date plus (II) the number of additional shares of Common Stock
to be issued or distributed or receivable upon exercise of any such New Derivative
Security.
Such adjustment shall be made successively whenever any such New Securities are issued. In
determining whether any New Derivative Securities entitle the holders to subscribe for or
purchase shares of Common Stock at less than such Current Market Price, and in determining
the aggregate offering price of shares of Common Stock so issued, there shall be taken into
account any consideration received by the Company for such Common Stock or New Derivative
Securities, the value of such consideration, if other than cash, to be determined by the Board of
Directors, whose determination shall be conclusive and described in a certificate filed with the
records of corporate proceedings of the Company. If any New Derivative Security to purchase
or acquire Common Stock, the issuance of which resulted in an adjustment in the Exercise Price
pursuant to this subsection (ii) shall expire and shall not have been exercised, the Exercise Price
shall immediately upon such expiration be recomputed to the Exercise Price which would have
been in effect had the adjustment of the Exercise Price made upon the issuance of such New
Derivative Security been made on the basis of offering for subscription, purchase or issuance, as
the case may be, only of that number of shares of Common Stock actually purchased or issued
upon the actual exercise of such New Derivative Security.
(iii) No adjustment in the Exercise Price shall be required unless the
adjustment would require an increase or decrease of at least 1% in the Exercise Price then in
effect; provided, however, that any adjustments that by reason of this Section 6(a) are not
required to be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 6(a) shall be made to the nearest cent or nearest
1/100th of a share.
(iv)
The Company from time to time may reduce the Exercise Price by any
amount for any period of time in the discretion of the Board of Directors. A voluntary reduction
of the Exercise Price does not change or adjust the Exercise Price otherwise in effect for
purposes of this Section 6(a).
(v)
In the event that, at any time as a result of an adjustment made pursuant
to Sections 6(a)(i) through 6(a)(iii) above, the Holder of any Warrant thereafter surrendered for
exercise shall become entitled to receive any shares of the Company other than shares of the
Common Stock, thereafter the number of such other shares so receivable upon exercise of any
such Warrant shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Common Stock contained
in Sections 6(a)(i) through 6(a)(iv) above, and the other provisions of this Section 6(a) with
respect to the Common Stock shall apply on like terms to any such other shares.
6
(b)
In case of any reclassification of the Common Stock (other than in a transaction
to which Section 6(a)(i) applies), any consolidation of the Company with, or merger of the
Company into, any other entity, any merger of another entity into the Company (other than a
merger that does not result in any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock of the Company), any sale or transfer of all or
substantially all of the assets of the Company or any compulsory share exchange, pursuant to
which share exchange the Common Stock is converted into other securities, cash or other
property, then lawful provision shall be made as part of the terms of such transaction whereby
the Holder of a Warrant then outstanding shall have the right thereafter, during the period such
Warrant shall be exercisable, to exercise such Warrant only for the kind and amount of
securities, cash and other property receivable upon the reclassification, consolidation, merger,
sale, transfer or share exchange by a holder of the number of shares of Common Stock of the
Company into which a Warrant might have been able to exercise for immediately prior to the
reclassification, consolidation, merger, sale, transfer or share exchange assuming that such
holder of Common Stock failed to exercise rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon consummation of such transaction subject to
adjustment as provided in Section 6(a) above following the date of consummation of such
transaction. The provisions of this Section 6(b) shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share exchanges.
(c)
If:
(i)
the Company shall take any action which would require an
adjustment in the Exercise Price pursuant to Section 6(a); or
(ii)
the Company shall authorize the granting to the holders of its
Common Stock generally of rights, warrants or options to
subscribe for or purchase any shares of any class or any other
rights, warrants or options; or
(iii)
there shall be any reclassification or change of the Common
Stock (other than a subdivision or combination of its
outstanding Common Stock or a change in par value) or any
consolidation, merger or statutory share exchange to which the
Company is a party and for which approval of any stockholders
of the Company is required, or the sale or transfer of all or
substantially all of the assets of the Company; or
(iv)
there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then, in each such case, the Company shall cause to be filed with the transfer agent for the
Warrants and shall cause to be mailed to each Holder at such Holder’s address as shown on the
7
books of the transfer agent for the Warrants, as promptly as possible, but at least 30 days prior
to the applicable date hereinafter specified, a notice stating (A) the date on which a record is to
be taken for the purpose of such dividend, distribution or granting of rights, warrants or options,
or, if a record is not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distribution or rights, warrants or options are to be determined, or
(B) the date on which such reclassification, change, consolidation, merger, statutory share
exchange, sale, transfer, dissolution, liquidation or winding-up is expected to become effective
or occur, and the date as of which it is expected that holders of Common Stock of record shall
be entitled to exchange their shares of Common Stock for securities or other property
deliverable upon such reclassification, change, consolidation, merger, statutory share exchange,
sale, transfer, dissolution, liquidation or winding up. Failure to give such notice or any defect
therein shall not affect the legality or validity of the proceedings described in this Section 6(c).
(d)
Whenever the Exercise Price is adjusted as herein provided, the Company shall
promptly file with the transfer agent for the Warrants a certificate of an officer of the Company
setting forth the Exercise Price after the adjustment and setting forth a brief statement of the
facts requiring such adjustment and a computation thereof. The Company shall promptly cause
a notice of the adjusted Exercise Price to be mailed to each Holder.
(e)
In any case in which Section 6(a) provides that an adjustment shall become
effective immediately after a record date for an event and the date fixed for such adjustment
pursuant to Section 6(a) occurs after such record date but before the occurrence of such event,
the Company may defer until the actual occurrence of such event (i) issuing to the Holder of any
Warrants exercised after such record date and before the occurrence of such event the additional
shares of Common Stock issuable upon such conversion by reason of the adjustment required
by such event over and above the Common Stock issuable upon such exercise before giving
effect to such adjustment, and (ii) paying to such holder any amount in cash in lieu of any
fraction pursuant to Section 6(i).
(f)
In case the Company shall take any action affecting the Common Stock, other
than actions described in this Section 6, which in the opinion of the Board of Directors would
materially adversely affect the exercise right of the Holders, the Exercise Price may be adjusted,
to the extent permitted by law, in such manner, if any, and at such time, as the Board of
Directors may determine to be equitable in the circumstances; provided, however, that in no
event shall the Board of Directors be required to take any such action.
(g)
For the purpose of any computation under Section 2(b) or this Section 6, the
“Current Market Price” per share of Common Stock on any day shall mean: (i) if the principal
trading market for such securities is a national or regional securities exchange, the closing price
on such exchange on such day; or (ii) if sales prices for shares of Common Stock are reported
by the NASDAQ National Market System (or a similar system then in use), the last reported
sales price (regular way) so reported on such day; or (iii) if neither (i) nor (ii) above are
applicable, and if bid and ask prices for shares of Common Stock are reported in the over-the-
counter market by NASDAQ (or, if not so reported, by the National Quotation Bureau), the
8
average of the high bid and low ask prices so reported on such day. Notwithstanding the
foregoing, if there is no reported closing price, last reported sales price, or bid and ask prices, as
the case may be, for the day in question, then the Current Market Price shall be determined as of
the latest date prior to such day for which such closing price, last reported sales price, or bid and
ask prices, as the case may be, are available, unless such securities have not been traded on an
exchange or in the over-the-counter market for 30 or more days immediately prior to the day in
question, in which case the Current Market Price shall be determined in good faith by, and
reflected in a formal resolution of, the Board of Directors of the Company.
(h)
Upon each adjustment of the Exercise Price, this Warrant shall thereafter
evidence the right to purchase, at the adjusted Exercise Price, that number of shares (calculated
to the nearest thousandth) obtained by dividing (i) the product obtained by multiplying the
number of shares purchasable upon exercise of this Warrant prior to adjustment of the number
of shares by the Exercise Price in effect prior to adjustment of the Exercise Price, by (ii) the
Exercise Price in effect after such adjustment of the Exercise Price.
(i)
The Company shall not be required to issue fractions of shares of Common
Stock or other capital stock of the Company upon the exercise of this Warrant. If any fraction
of a share would be issuable on the exercise of this Warrant (or specified portions thereof), the
Company shall purchase such fraction for an amount in cash equal to the same fraction of the
Current Market Price of such share of Common Stock on the date of exercise of this Warrant.
7.
Transfer Taxes. The issuance of any shares or other securities upon the exercise
of this Warrant, and the delivery of certificates or other instruments representing such shares or
other securities, shall be made without charge to the Holder for any tax or other charge in
respect of such issuance. The Company shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issue and delivery of any certificate in
a name other than that of the Holder and the Company shall not be required to issue or deliver
any such certificate unless and until the person or persons requesting the issue thereof shall have
paid to the Company the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
8.
Loss or Mutilation of Warrant. Upon receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction, or mutilation of any Warrant (and upon surrender
of any Warrant if mutilated), and upon reimbursement of the Company’s reasonable incidental
expenses, the Company shall execute and deliver to the Holder thereof a new Warrant of like
date, tenor, and denomination.
9.
No Rights as a Stockholder. The Holder of any Warrant shall not have, solely on
account of such status, any rights of a stockholder of the Company, either at law or in equity, or
to any notice of meetings of stockholders or of any other proceedings of the Company, except as
provided in this Warrant.
9
10.
Governing Law. This Warrant shall be construed in accordance with the laws of
the State of Texas applicable to contracts made and performed within such State, without regard
to principles of conflicts of law.
Dated: September [●], 2014
By:
Xxxxxx Xxxx,
President & Chief Executive Officer
10
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the attached Warrant.)
FOR VALUE RECEIVED,
hereby sells,
assigns, and transfers unto __________________ a Warrant to purchase __________ shares of
Common Stock, par value $0.001 per share, of MediJane Holdings Inc., a Nevada corporation
(the “Company”), together with all right, title, and interest therein, and does hereby irrevocably
constitute and appoint
attorney to transfer such Warrant
on the books of the Company, with full power of substitution.
Dated:
By:
Signature
The signature on the foregoing Assignment must correspond to the name as written upon
the face of this Warrant in every particular, without alteration or enlargement or any change
whatsoever.
To:
0000 Xxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Attention: President
NOTICE OF EXERCISE
The undersigned hereby exercises his or its rights to purchase _______ Warrant Shares
covered by the within Warrant and tenders payment herewith in the amount of $_________ by
[tendering cash or delivering a certified check or bank cashier’s check, payable to the order of
the Company] [surrendering ______ shares of Common Stock received upon exercise of the
attached Warrant, which shares have a Current Market Price equal to such payment] in
accordance with the terms thereof, and requests that certificates for such securities be issued in
the name of, and delivered to:
_______________________________________
_______________________________________
_______________________________________
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares covered by the within
Warrant, that a new Warrant for the balance of the Warrant Shares covered by the within
Warrant be registered in the name of, and delivered to, the undersigned at the address stated
below.
Dated:
By:
Print Name
Signature
Address:
EXHIBIT C
FORM OF OPINION
1.
The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Nevada and has the requisite corporate power to own,
lease and operate its properties and assets, and to carry on its business as presently conducted.
The Company is duly qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the failure to so qualify would have a Material Adverse Effect.
2.
The Company has the requisite corporate power and authority to enter into and
perform its obligations under the Transaction Documents and to issue the Shares, the Warrants,
and the Warrant Shares. The execution, delivery and performance of each of the Transaction
Documents by the Company and the consummation by it of the transactions contemplated
thereby have been duly and validly authorized by all necessary corporate action and no further
consent or authorization of the Company or its Board of Directors is required. Each of the
Transaction Documents have been duly executed and delivered, and the Shares and the Warrants
have been duly executed, issued and delivered by the Company and each of the Transaction
Documents constitutes a legal, valid and binding obligation of the Company enforceable against
the Company in accordance with its respective terms. Neither the Shares nor the Warrant Shares
are subject to any preemptive rights under the Articles or the Bylaws.
3.
The Shares have been duly authorized and, when delivered against payment in
full as provided in the Purchase Agreement, will be validly issued, fully paid and nonassessable.
The Warrant Shares have been duly authorized and reserved for issuance, and, when delivered
upon exercise or against payment in full as provided in the Warrants, will be validly issued, fully
paid and nonassessable.
4.
The execution, delivery and performance of and compliance with the terms of the
Transaction Documents and the issuance of the Shares, the Warrants and the Warrant Shares do
not (a) violate any provision of the Articles or Bylaws, (b) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of, any material
agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or
obligation to which the Company is a party and which is known to us, (c) create or impose a lien,
charge or encumbrance on any property of the Company under any agreement or any
commitment known to us to which the Company is a party or by which the Company is bound or
by which any of its respective properties or assets are bound, or (d) result in a violation of any
Federal, state, local or foreign statute, rule, regulation, order, judgment, injunction or decree
(including Federal and state securities laws and regulations) applicable to the Company or by
which any property or asset of the Company is bound or affected, except, in all cases other than
violations pursuant to clauses (a) and (d) above, for such conflicts, default, terminations,
amendments, acceleration, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect.
C-1
5.
No consent, approval or authorization of or designation, declaration or filing with
any governmental authority on the part of the Company is required under Federal, state or local
law, rule or regulation in connection with the valid execution, delivery and performance of the
Transaction Documents, or the offer, sale or issuance of the Shares, the Warrants and the
Warrant Shares, other than filings as may be required by applicable Federal and state securities
laws and regulations, the FINRA rules and regulations or as required by the OTC Markets
Group.
6.
To our knowledge, there is no action, suit, claim, investigation or proceeding
pending or threatened against the Company which questions the validity of the Agreement or the
transactions contemplated thereby or any action taken or to be taken pursuant thereto. To our
knowledge, other than as set forth in the Schedules or the Commission Documents, there is no
action, suit, claim, investigation or proceeding pending, or threatened, against or involving the
Company or any of its properties or assets and which, if adversely determined, is reasonably
likely to result in a Material Adverse Effect. To our knowledge, there are no outstanding orders,
judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory
body against the Company or any officers or directors of the Company in their capacities as
such.
7.
The offer, issuance and sale of the Shares and the Warrants to the Purchasers, and
the offer, issuance and sale of the Warrant Shares to the Purchasers pursuant to the Warrants, are
exempt from the registration requirements of the Securities Act of 1933, as amended.
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EXHIBIT D
FORM OF REGISTRATION RIGHTS AGREEMENT
D-1
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this “Agreement”) is made and entered into
as of September 16, 2014, by and among MediJane Holdings Inc., a Nevada corporation (the
“Company”), and the persons and entities listed on Exhibit A hereto (each, a “Purchaser” and,
collectively, the “Purchasers”).
WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”), the Company has
agreed to issue and sell shares of its Common Stock and Warrants to purchase shares of its
Common Stock to the Purchasers; and
WHEREAS, to induce the Purchasers to execute and deliver the Purchase
Agreement and to purchase the Shares and the Warrants, the Company has agreed to provide
certain registration rights under the Securities Act of 1933, as amended, with respect to the
Shares, the Warrants and the Warrant Shares (each as respectively defined in the Purchase
Agreement).
NOW, THEREFORE, in consideration of the representations, warranties and
agreements contained herein and other good and valuable consideration, the receipt and legal
adequacy of which are hereby acknowledged by the parties, the Company and the Purchasers
hereby agree as follows:
1.
Definitions.
Capitalized terms used but not otherwise defined herein shall have the meanings
given such terms in the Purchase Agreement. As used in this Agreement, the following terms
shall have the following meanings:
“Affiliate” means, with respect to any Person, any other Person that directly or
indirectly controls or is controlled by or under common control with such Person. For the
purposes of this definition, “control,” when used with respect to any Person, means the
possession, direct or indirect, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms “affiliated,” “controlling” and “controlled” have meanings correlative to
the foregoing.
“Blackout Period” shall have the meaning set forth in Section 3(m).
“Board” shall have the meaning set forth in Section 3(m).
“Business Day” means any day except Saturday, Sunday and any day which is a
legal holiday or a day on which banking institutions in the State of Texas generally are
authorized or required by law or other government actions to close.
“Commission” means the Securities and Exchange Commission.
“Common Shares” shall have the meaning set forth in the definition of
“Registrable Securities.”
“Common Stock” means the Company’s Common Stock, $0.001 par value.
“Effectiveness Date” means with respect to the Registration Statement the earlier
of (i) the 90th day following the Closing Date, before which the Company will use its
commercially reasonable best efforts to cause the Registration Statement to become effective,
and (ii) the date which is within five (5) Business Days after the date on which the Commission
informs the Company in writing (a) that the Commission will not review the Registration
Statement, or (b) that the Company may request the acceleration of the effectiveness of the
Registration Statement.
“Effectiveness Period” shall have the meaning set forth in Section 2.
“Event” shall have the meaning set forth in Section 8(d).
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Holder” means, collectively, each holder from time to time of Registrable
Securities including, without limitation, each Purchaser and its assignees. To the extent this
Agreement refers to an election, consent, waiver, request or approval of or by the Holder, such
reference shall mean an election, consent, waiver, request or approval by the holders of a
majority in interest of the then-outstanding Registrable Securities (on an as exercised basis).
“Indemnified Party” shall have the meaning set forth in Section 6(c).
“Indemnifying Party” shall have the meaning set forth in Section 6(c).
“Liquidated Damages” shall have the meaning set forth in Section 8(d).
“Losses” shall have the meaning set forth in Section 6(a).
“OTC” shall mean the OTC Markets Group.
“Person” means an individual or a corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint stock company,
government (or an agency or political subdivision thereof) or other entity of any kind.
“Proceeding” means an action, claim, suit, investigation or proceeding (including,
without limitation, an investigation or partial proceeding, such as a deposition), whether
commenced or threatened.
“Prospectus” means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information previously omitted
from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the Registrable Securities
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covered by the Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated by reference in
such Prospectus.
“Registrable Securities” means (i) the shares of Common Stock issued or issuable
pursuant to the Purchase Agreement, and upon any stock split, stock dividend, recapitalization or
similar event with respect to such shares of Common Stock and any other securities issued in
exchange of or replacement of such shares of Common Stock (collectively, the “Common
Shares”); until in the case of any of the Common Shares (a) a Registration Statement covering
such Common Share has been declared effective by the Commission and continues to be
effective during the Effectiveness Period, or (b) such Common Share is sold in compliance with
Rule 144, after which time such Common Share shall not be a Registrable Security; (ii) the
Warrants issued or issuable pursuant to the Purchase Agreement until in the case of any of the
Warrants (a) a Registration Statement covering such Warrant has been declared effective by the
Commission and continues to be effective during the Effectiveness Period, (b) such Warrant is
sold in compliance with Rule 144, after which time such Warrant shall not be a Registrable
Security, or (c) such Warrant is fully exercised for shares of Common Stock, after which time
such Warrant shall not be a Registrable Security; and (iii) the shares of Common Stock issued
and issuable pursuant to the exercise of the Warrants, and upon any stock split, stock dividend,
recapitalization or similar event with respect to such shares of Common Stock and any other
securities issued in exchange of or replacement of such shares of Common Stock (collectively,
the “Warrant Shares”); until in the case of any of the Warrant Shares (a) a Registration Statement
covering such Warrant Share has been declared effective by the Commission and continues to be
effective during the Effectiveness Period, or (b) such Warrant Share is sold in compliance with
Rule 144, after which time such Warrant Share shall not be a Registrable Security.
“Registration Statement” means the registration statement, including the
Prospectus, amendments and supplements to such registration statement or Prospectus, including
pre- and post-effective amendments, all exhibits thereto, and all material incorporated by
reference in such registration statement, for the Shares, the Warrants and the Warrant Shares
required to be filed by the Company with the Commission pursuant to this Agreement.
“Required Filing Date” means the 45th day immediately following the Closing
Date.
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as such Rule.
“Rule 158” means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as such Rule.
“Rule 415” means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as such Rule.
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“Securities Act” means the Securities Act of 1933, as amended.
“Special Counsel” means an attorney selected by and acting as special counsel to
Holder.
“Warrant Shares” shall have the meaning set forth in the definition of
“Registrable Securities.”
2.
Registration. On or prior to the Required Filing Date, the Company shall prepare
and file with the Commission a Registration Statement covering the resale of the Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule 415. The
Registration Statement shall be on Form S-1 and shall contain (except if otherwise directed by
the Purchasers) the “Plan of Distribution” attached hereto as Exhibit B. The Company shall (i)
not permit any securities other than the Registrable Securities to be included in the Registration
Statement, (ii) use its commercially reasonable best efforts to cause the Registration Statement to
be declared effective under the Securities Act (including filing with the Commission a request
for acceleration of effectiveness within five (5) Business Days of the date that the Company is
notified (orally or in writing, whichever is earlier) by the Commission that the Registration
Statement will not be “reviewed,” or not be subject to further review) as soon as possible after
the filing thereof, but in any event prior to the Effectiveness Date, and (iii) keep such
Registration Statement continuously effective under the Securities Act for a period of two years
from the Effectiveness Date (the “Effectiveness Period”).
3.
Registration Procedures; Company’s Obligations.
In connection with the registration of the Registrable Securities, the Company
shall:
(a)
Prepare and file with the Commission on or prior to the Required Filing
Date, a Registration Statement on Form S-1 in accordance with the method or methods of
distribution thereof as specified by the Holder (except if otherwise directed by the Holder), and
use its commercially reasonable best efforts to cause the Registration Statement to become
effective and remain effective as provided herein; provided, however, that not less than three (3)
Business Days prior to the filing of the Registration Statement or any related Prospectus or any
amendment or supplement thereto (including any document that would be incorporated therein
by reference), the Company shall (i) furnish to the Holder and any Special Counsel, copies of all
such documents proposed to be filed, which documents (other than those incorporated by
reference) will be subject to the timely review of and comment by such Special Counsel, and (ii)
at the request of the Holder cause its officers and directors, counsel and independent certified
public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of
such Special Counsel, to conduct a reasonable investigation within the meaning of the Securities
Act. The Company shall not file the Registration Statement or any such Prospectus or any
amendments or supplements thereto to which the Holder or any Special Counsel shall reasonably
object in writing within three (3) Business Days of their receipt thereof.
(b)
(i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement as may be necessary to keep the
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Registration Statement continuously effective as to the applicable Registrable Securities for the
Effectiveness Period in order to register for resale under the Securities Act all of the Registrable
Securities; (ii) cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424 (or
any similar provisions then in force) promulgated under the Securities Act; (iii) respond
promptly to any comments received from the Commission with respect to the Registration
Statement or any amendment thereto and promptly provide the Holder true and complete copies
of all correspondence from and to the Commission relating to the Registration Statement; and
(iv) comply in all material respects with the provisions of the Securities Act and the Exchange
Act with respect to the disposition of all Registrable Securities covered by the Registration
Statement during the applicable period in accordance with the intended methods of disposition
by the Holder set forth in the Registration Statement as so amended or in such Prospectus as so
supplemented.
(c)
Notify the Holder of Registrable Securities to be sold and any Special
Counsel promptly (and, in the case of (i)(A) below, not less than three (3) Business Days prior to
such filing and, in the case of (i)(C) below, no later than the first Business Day following the
date on which the Registration Statement becomes effective) and (if requested by any such
Person) confirm such notice in writing no later than three (3) Business Days following the day
(i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed, (B) when the Commission notifies the Company
whether there will be a “review” of such Registration Statement and whenever the Commission
comments in writing on such Registration Statement, and (C) with respect to the Registration
Statement or any post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority for amendments
or supplements to the Registration Statement or Prospectus or for additional information; (iii) of
the issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the initiation of any
Proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect
to the suspension of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) of the occurrence of any event that makes any statement made in the
Registration Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that requires any revisions to
the Registration Statement, Prospectus or other documents so that, in the case of the Registration
Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were made, not
misleading.
The Company shall promptly furnish to the Special Counsel, without charge, (i)
any correspondence from the Commission or the Commission’s staff to the Company or its
representatives relating to any Registration Statement, and (ii) promptly after the same is
prepared and filed with the Commission, a copy of any written response to the correspondence
received from the Commission.
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(d)
Use its commercially reasonable best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of, (i) any order suspending the effectiveness of the Registration
Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of
the Registrable Securities for sale in any U.S. jurisdiction, at the earliest practicable moment.
(e)
If requested by the Holder, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment to the Registration Statement such information as the
Company reasonably agrees should be included therein, and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment.
(f)
Furnish to the Holder and any Special Counsel, without charge, at least
one conformed copy of each Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or deemed to be incorporated
therein by reference, and all exhibits to the extent requested by such Person (including those
previously furnished or incorporated by reference) promptly after the filing of such documents
with the Commission.
(g)
Promptly deliver to the Holder and any Special Counsel, without charge,
as many copies of the Registration Statement, Prospectus or Prospectuses (including each form
of prospectus) and each amendment or supplement thereto as such Persons may reasonably
request; and the Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by the selling Holder in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or supplement thereto.
(h)
Prior to any public offering of Registrable Securities, use its commercially
reasonable best efforts to register or qualify or cooperate with the selling Holder and any Special
Counsel in connection with the registration or qualification (or exemption from such registration
or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky
laws of such jurisdictions within the United States as the Holder reasonably requests in writing,
to keep each such registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things necessary or advisable to enable
the disposition in such jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, however, that the Company shall not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to take any action that would
subject it to general service of process in any such jurisdiction where it is not then so subject or
subject the Company to any tax in any such jurisdiction where it is not then so subject.
(i)
Cooperate with the Holder to facilitate the timely preparation and delivery
of certificates representing Registrable Securities to be sold pursuant to a Registration Statement
and to enable such Registrable Securities to be in such denominations and registered in such
names as the Holder may request at least two (2) Business Days prior to any sale of Registrable
Securities.
(j)
Upon the occurrence of any event contemplated by Section 3(c)(v),
promptly prepare a supplement or amendment, including a post-effective amendment, to the
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Registration Statement or a supplement to the related Prospectus or any document incorporated
or deemed to be incorporated therein by reference, and file any other required document so that,
as thereafter delivered, neither the Registration Statement nor such Prospectus will contain an
untrue statement of a material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under which they were
made, not misleading.
(k)
Use its commercially reasonable best efforts to cause all Registrable
Securities relating to such Registration Statement to be quoted by OTC and any other securities
exchange, quotation system, market or over-the-counter bulletin board, if any, on which the same
securities issued by the Company are then listed as and when required pursuant to the Purchase
Agreement.
(l)
Comply in all material respects with all applicable rules and regulations of
the Commission and make generally available to its security holders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 not later than forty-
five (45) days after the end of any twelve (12) month period (or ninety (90) days after the end of
any twelve (12) month period if such period is a fiscal year) commencing on the first day of the
first fiscal quarter of the Company after the effective date of the Registration Statement, which
statement shall conform to the requirements of Rule 158.
(m)
If (i) there is material non-public information regarding the Company
which the Company’s Board of Directors (the “Board”) reasonably determines not to be in the
Company’s best interest to disclose and which the Company is not otherwise required to
disclose, or (ii) there is a significant business opportunity (including, but not limited to, the
acquisition or disposition of assets (other than in the ordinary course of business) or any merger,
consolidation, tender offer or other similar transaction) available to the Company which the
Board reasonably determines not to be in the Company’s best interest to disclose and which the
Company would be required to disclose under the Registration Statement, then the Company
may suspend effectiveness of a Registration Statement and suspend the sale of Registrable
Securities under a Registration Statement one (1) time every three (3) months or three (3) times
in any twelve month period, provided that the Company may not suspend its obligation for more
than thirty (30) days in the aggregate in any twelve month period if suspension is for any of the
reasons listed above or sixty (60) days in the aggregate in any twelve month period for any other
reason (each, a “Blackout Period”); provided, however, that no such suspension shall be
permitted for more than twenty (20) consecutive days, arising out of the same set of facts,
circumstances or transactions.
(n)
Within two (2) Business Days after the Registration Statement which
includes the Registrable Securities is ordered effective by the Commission, the Company shall
deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such
Registrable Securities (with copies to the Holder whose Registrable Securities are included in
such Registration Statement) confirmation that the Registration Statement has been declared
effective by the Commission in the form attached hereto as Exhibit C.
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4.
Registration Procedures; Holder’s Obligations
In connection with the registration of the Registrable Securities, the Holder shall:
(a)
If the Registration Statement refers to the Holder by name or otherwise as
the holder of any securities of the Company, have the right to require (if such reference to the
Holder by name or otherwise is not required by the Securities Act or any similar federal statute
then in force) the deletion of the reference to the Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such reference ceases to be
required.
(b)
(i) not sell any Registrable Securities under the Registration Statement
until it has received copies of the Prospectus as then amended or supplemented as contemplated
in Section 3(g) and notice from the Company that such Registration Statement and any post-
effective amendments thereto have become effective as contemplated by Section 3(c), (ii)
comply with the prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration Statement, and (iii)
furnish to the Company information regarding such Holder and the distribution of such
Registrable Securities as is required by law to be disclosed in the Registration Statement, and the
Company may exclude from such registration the Registrable Securities of the Holder if it fails
to furnish such information within a reasonable time prior to the filing of each Registration
Statement, supplemented Prospectus and/or amended Registration Statement.
(c)
upon receipt of a notice from the Company of the occurrence of any event
of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(m), forthwith discontinue
disposition of such Registrable Securities under the Registration Statement until the Holder’s
receipt of the copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(j), or until it is advised in writing by the Company that the use of the
applicable Prospectus may be resumed, and, in either case, has received copies of any additional
or supplemental filings that are incorporated or deemed to be incorporated by reference in such
Prospectus or Registration Statement.
5.
Registration Expenses
All reasonable fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company whether or not the
Registration Statement is filed or becomes effective and whether or not any Registrable
Securities are sold pursuant to the Registration Statement. The fees and expenses referred to in
the foregoing sentence shall include, without limitation, the following: (i) all registration and
filing fees (including, without limitation, fees and expenses (A) with respect to filings required to
be made with OTC and each securities exchange or other market on which Registrable Securities
are required hereunder to be listed, (B) with respect to filings required to be made with the
Commission, and (C) in compliance with state securities or Blue Sky laws); (ii) printing
expenses (including, without limitation, expenses of printing certificates for Registrable
Securities and of printing prospectuses if the printing of prospectuses is requested by the holders
of a majority of the Registrable Securities included in the Registration Statement); (iii)
messenger, telephone and delivery expenses; (iv) fees and disbursements of counsel for the
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Company; and (v) fees and expenses of all other Persons retained by the Company in connection
with the consummation of the transactions contemplated by this Agreement, including, without
limitation, the Company’s independent public accountants (including the expenses of any
comfort letters or costs associated with the delivery by independent public accountants of a
comfort letter or comfort letters). In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of any annual audit,
and the fees and expenses incurred in connection with the listing of the Registrable Securities on
any securities exchange as required hereunder. The Company shall not be responsible for the
payment of any commissions or other expenses incurred by the Holder in connection with their
sales of Registrable Securities or for the fees of any Special Counsel.
6.
Indemnification
(a)
Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Purchaser, its permitted
assignees, officers, directors, managers, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to perform under a
margin call of Common Stock), investment advisors and employees, each Person who controls
any such Purchaser or permitted assignee (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and the officers, directors, managers, agents and employees
of each such controlling Person, and the respective successors, assigns, estate and personal
representatives of each of the foregoing, to the fullest extent permitted by applicable law, from
and against any and all claims, losses, damages, liabilities, penalties, judgments, costs (including,
without limitation, costs of investigation) and expenses (including, without limitation, reasonable
attorneys’ fees and expenses) (collectively, “Losses”), as incurred, arising out of or relating to
any untrue or alleged untrue statement of a material fact contained in the Registration Statement,
any Prospectus, as supplemented or amended, if applicable, or arising out of or relating to any
omission or alleged omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto,
in the light of the circumstances under which they were made) not misleading, except (i) to the
extent, but only to the extent, that such untrue statements or omissions are based solely upon
information regarding the Holder furnished in writing to the Company by the Holder expressly
for use therein, which information was reviewed and expressly approved by the Holder or
Special Counsel expressly for use in the Registration Statement, such Prospectus or such form of
Prospectus or in any amendment or supplement thereto, or (ii) as a result of the failure of the
Holder to deliver a Prospectus, as amended or supplemented, to a purchaser in connection with
an offer or sale. The Company shall notify the Holder promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the transactions
contemplated by this Agreement. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of an Indemnified Party (as defined in Section 6(c)
hereof) and shall survive the transfer of the Registrable Securities by the Holder.
(b)
Indemnification by Purchaser. Each Purchaser and its permitted assignees
shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning of Section
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15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents
or employees of such controlling Persons, and the respective successors, assigns, estate and
personal representatives of each of the foregoing, to the fullest extent permitted by applicable
law, from and against any and all Losses, as incurred, arising out of or relating to any untrue or
alleged untrue statement of a material fact contained in the Registration Statement, any
Prospectus, as supplemented or amended, if applicable, or arising out of or relating to any
omission or alleged omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto,
in the light of the circumstances under which they were made) not misleading, to the extent, but
only to the extent, that (i) such untrue statement or omission is contained in or omitted from any
information so furnished in writing by the Holder or the Special Counsel to the Company
specifically for inclusion in the Registration Statement or such Prospectus, and (ii) such
information was reasonably relied upon by the Company for use in the Registration Statement,
such Prospectus or such form of prospectus or, to the extent that such information relates to the
Holder or the Holder’s proposed method of distribution of Registrable Securities, was reviewed
and expressly approved in writing by the Holder expressly for use in the Registration Statement,
such Prospectus or such form of Prospectus Supplement. Notwithstanding anything to the
contrary contained herein, the Holder shall be liable under this Section 6(b) for only that amount
as does not exceed the net proceeds to the Holder as a result of the sale of Registrable Securities
pursuant to such Registration Statement.
(c)
Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity pursuant to Section 6(a) or 6(b)
hereunder (an “Indemnified Party”), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the “Indemnifying Party) in writing, and the Indemnifying
Party shall assume the defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified Party to give such
notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this
Agreement, except (and only) to the extent that it shall be finally determined by a court of
competent jurisdiction (which determination is not subject to appeal or further review) that such
failure shall have materially and adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party
has agreed in writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (iii) the named parties to any
such Proceeding (including any impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a
conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying
Party in writing that it elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the defense thereof and such
counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be
liable for any settlement of any such Proceeding effected without its written consent, which
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consent shall not be unreasonably withheld, conditioned or delayed. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, which consent shall not
unreasonably be withheld, conditioned or delayed, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes
an unconditional release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
All reasonable fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or preparing to defend
such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, within ten (10) Business Days of written notice thereof to the Indemnifying
Party (regardless of whether it is ultimately determined that an Indemnified Party is not entitled
to indemnification hereunder; provided, that the Indemnifying Party may require such
Indemnified Party to undertake to reimburse all such fees and expenses to the extent it is finally
judicially determined that such Indemnified Party is not entitled to indemnification hereunder or
pursuant to applicable law).
(d)
Contribution. If a claim for indemnification under Section 6(a) or 6(b) is
unavailable to an Indemnified Party because of a failure or refusal of a governmental authority to
enforce such indemnification in accordance with its terms (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in
such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been taken or made by, or
relates to information supplied by, such Indemnifying Party or Indemnified Party, and the
parties’ relative intent, knowledge, access to information and opportunity to correct or prevent
such action, statement or omission. The amount paid or payable by a party as a result of any
Losses shall be deemed to include, subject to the limitations set forth in Section 6(c), any
reasonable attorneys’ or other reasonable fees or expenses incurred by such party in connection
with any Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for under Section 6(a) or 6(b) was available to such
party in accordance with its terms. Notwithstanding anything to the contrary contained herein,
the Holder shall be liable or required to contribute under this Section 6(d) for only that amount as
does not exceed the net proceeds to the Holder as a result of the sale of Registrable Securities
pursuant to the Registration Statement.
The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 6(d) were determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable considerations referred to in the
immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
-11-
The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.
7.
Rule 144.
As long as the Holder owns Registrable Securities, the Company covenants to
timely file (or obtain extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to Section 13(a) or
15(d) of the Exchange Act and to promptly furnish the Holder with true and complete copies of
all such filings. As long as the Holder owns Registrable Securities, if the Company is not
required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare
and furnish to the Holder and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and substance substantially similar
to those that would otherwise be required to be included in reports required by Section 13(a) or
15(d) of the Exchange Act, as well as any other information required thereby, in the time period
that such filings would have been required to have been made under the Exchange Act. The
Company further covenants that it will take such further action as the Holder may reasonably
request, all to the extent required from time to time to enable the Holder to sell Warrants,
Common Shares and Warrant Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 promulgated under the Securities Act,
including providing any legal opinions of counsel to the Company referred to in the Purchase
Agreement. Upon the request of any Holder, the Company shall deliver to such Holder a written
certification of a duly authorized officer as to whether it has complied with such requirements.
8.
Miscellaneous.
(a)
Remedies. The remedies provided in this Agreement and the Purchase
Agreement are cumulative and not exclusive of any remedies provided by law. In the event of a
breach by the Company or by the Holder of any of their obligations under this Agreement, the
Holder or the Company, as the case may be, in addition to being entitled to exercise all rights
granted by law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and the Holder agree that
monetary damages would not provide adequate compensation for any losses incurred by reason
of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the
event of any action for specific performance in respect of such breach, it shall waive the defense
that a remedy at law would be adequate.
(b)
No Inconsistent Agreements. Neither the Company nor any of its
Affiliates has as of the date hereof entered into, nor shall the Company or any of its Affiliates, on
or after the date of this Agreement, enter into, any agreement with respect to its securities that is
inconsistent with the rights granted to the Holder in this Agreement or otherwise conflicts with
the provisions hereof. Without limiting the generality of the foregoing, without the written
consent of the Holder, the Company shall not grant to any Person the right to request the
Company to register any securities of the Company under the Securities Act if the rights so
granted are inconsistent with the rights granted to the Holder set forth herein, or otherwise
prevent the Company with complying with all of its obligations hereunder.
-12-
(c)
No Piggyback on Registrations. Neither the Company nor any of its
security holders (other than the Holder in such capacity pursuant hereto) may include securities
of the Company in the Registration Statement.
(d)
Failure to File Registration Statement and Other Events. The Company
and the Holder agree that the Holder will suffer damages if the Registration Statement is not filed
on or prior to the Required Filing Date or is not declared effective by the Commission on or prior
to the Effectiveness Date and maintained in the manner contemplated herein during the
Effectiveness Period or if certain other events occur. The Company and the Holder further agree
that it would not be feasible to ascertain the extent of such damages with precision. Accordingly,
if (i) the Registration Statement is not filed on or prior to the Required Filing Date, or is not
declared effective by the Commission on or prior to the Effectiveness Date, or (ii) the Company
fails to file with the Commission a request for acceleration within five (5) Business Days of the
date that the Company is notified (orally or in writing, whichever is earlier) by the Commission
that a Registration Statement will not be “reviewed,” or not subject to further review, or (iii) the
Registration Statement is filed with and declared effective by the Commission but thereafter
ceases to be effective or available as to all Registrable Securities at any time during the
Effectiveness Period, without being succeeded within a reasonable period by a subsequent
Registration Statement filed with and declared effective by the Commission, or (iv) the Company
suspends the use of the Prospectus forming a part of such Registration Statement for more than
thirty (30) days in any period of 365 consecutive days if the Company suspends in reliance on its
ability to do so due to the existence of a development that, in the good faith discretion of the
Board, makes it appropriate to so suspend or which renders the Company unable to comply with
the Commission requirements, or the Company suspends the use of the Prospectus forming a part
of such Registration Statement for more than sixty (60) days in any period of 365 consecutive
days for any other reason, or (v) during the Effectiveness Period, trading in the Warrants or
Common Stock shall be suspended for any reason for more than three (3) Business Days in the
aggregate, or (vi) the Company breaches in a material respect any covenant or other material
term or condition in the Transaction Documents (other than a representation or warranty
contained therein) or any other agreement, document, certificate or other instrument delivered in
connection with the transactions contemplated hereby and thereby, and such breach continues for
a period of thirty (30) days after written notice thereof to the Company, or (vii) the Company has
breached Section 3(n) of this Agreement (any such failure or breach being referred to as an
“Event”), the Company shall pay as liquidated damages for such failure or breach and not as a
penalty (the “Liquidated Damages”) to the Holder an amount equal to three percent (3%) of the
purchase price of the Common Stock paid by the Holder pursuant to the Purchase Agreement for
the first thirty (30) day period, and two percent (2%) of such purchase price for each subsequent
thirty (30) day period, pro-rated for any period less than thirty (30) days, following the Event
until the applicable Event has been cured. Payments to be made pursuant to this Section 8(d)
shall be due and payable immediately upon demand in cash. The parties agree that the Liquidated
Damages represent a reasonable estimate on the part of the parties, as of the date of this
Agreement, of the amount of damages that may be incurred by the Holder if the Registration
Statement is not filed on or prior to the Required Filing Date or has not been declared effective
by the Commission on or prior to the Effectiveness Date and maintained in the manner
contemplated herein during the Effectiveness Period or if any other Event as described herein has
occurred.
-13-
(e)
Consent to Jurisdiction. The Company and each Purchaser (i) hereby
irrevocably submit to the jurisdiction of the United States District Court for the Northern District
of Texas and the courts of the State of Texas located in Dallas County for the purposes of any
suit, action or proceeding arising out of or relating to this Agreement or the Purchase Agreement,
and (ii) hereby waive, and agree not to assert in any such suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding
is brought in an inconvenient forum or that the venue of the suit, action or proceeding is
improper. The Company and each Purchaser consent to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address in effect for notices to
it under this Agreement and agrees that such service shall constitute good and sufficient service
of process and notice thereof. Nothing in this Section 8(e) shall affect or limit any right to serve
process in any other manner permitted by law.
(f)
Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the same shall be in
writing and signed by the Company and the Purchasers.
(g)
Notices. Any notices required or permitted to be given under this
Agreement (and, unless otherwise expressly provided therein, under any document delivered
pursuant to this Agreement) shall be given in writing and shall be deemed received (i) when
personally delivered to the relevant party at such party’s address as set forth below, (ii) if sent by
mail (which must be certified or registered mail, postage prepaid), when received or rejected by
the relevant party at such party’s address indicated below, or (iii) if sent by email transmission,
when confirmation of delivery is received by the sending party.
(i)
if to the Company:
0000 Xxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Chief Operating Officer
Email: xxxxxxx.xxxxx@xxxx.xxx
with a copy to:
X.X. Xxxxxx & Associates
Attorneys At Law
0000 Xxxxx Xxxxxxxx Xxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Email: xxxxxx00@xxxxx.xxx
-14-
(ii)
if to any Purchaser:
At the address of such Purchaser set forth on Exhibit A to this
Agreement.
or to such other address or addresses or facsimile number or numbers as any such party may
most recently have designated in writing to the other parties hereto by such notice.
(h)
Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns and shall inure to the
benefit of the Holder and its successors and assigns. The Company may not assign this
Agreement or any of its respective rights or obligations hereunder without the prior written
consent of the Purchasers. Each Purchaser may assign its rights hereunder in the manner and to
the Persons as permitted under the Purchase Agreement.
(i)
Assignment of Registration Rights. The rights of the Holder hereunder,
including the right to have the Company register for resale Registrable Securities in accordance
with the terms of this Agreement, shall be assignable by each Holder to any transferee of the
Holder of all or a portion of the shares of Registrable Securities if: (i) the Holder agrees in
writing with the transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (ii) the Company is,
within a reasonable time after such transfer or assignment, furnished with written notice of (A)
the name and address of such transferee or assignee, and (B) the securities with respect to which
such registration rights are being transferred or assigned; (iii) following such transfer or
assignment the further disposition of such securities by the transferee or assignees is restricted
under the Securities Act and applicable state securities laws; (iv) at or before the time the
Company receives the written notice contemplated by clause (ii) of this Section, the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions of this
Agreement; and (v) such transfer shall have been made in accordance with the applicable
requirements of the Purchase Agreement and shall be for no less than 10% of the Registrable
Securities. In addition, the Holder shall have the right to assign its rights hereunder to any other
Person with the prior written consent of the Company, which consent shall not be unreasonably
withheld, conditioned or delayed. The rights to assignment shall apply to the Holder (and to
subsequent) successors and assigns. In the event of an assignment pursuant to this Section 8(i),
the Purchaser shall pay all incremental costs and expenses incurred by the Company in
connection with filing a Registration Statement (or an amendment to the Registration Statement)
to register the shares of Registrable Securities assigned to any assignee or transferee of the
Purchaser.
(j)
Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original, and all of which
taken together shall constitute one and the same Agreement. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with the same force
and effect as if such facsimile signature were the original thereof.
-15-
(k)
Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to principles of conflicts of law
thereof. This Agreement shall not be interpreted or construed with any presumption against the
party causing this Agreement to be drafted.
(l)
Cumulative Remedies. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
(m)
Termination. This Agreement shall terminate on the date on which all
remaining Registrable Securities may be sold without restriction pursuant to Rule 144 of the
Securities Act.
(n)
Severability. If any term, provision, covenant or restriction of this
Agreement is held to be invalid, illegal, void or unenforceable in any respect, the remainder of
the terms, provisions, covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use
their reasonable efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of the parties that they would
have executed the remaining terms, provisions, covenants and restrictions without including any
of such that may be hereafter declared invalid, illegal, void or unenforceable.
(o)
Headings. The headings herein are for convenience only, do not constitute
a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
[Remainder of page intentionally left blank. Signature pages to follow.]
-16-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized persons as of the date first indicated above.
By:
Name: Xxxxxx Xxxx
Title: President & Chief Executive Officer
[Signatures of Purchasers to follow on next pages.]
PURCHASERS:
YP HOLDINGS, LLC
By:
Xxxxxxx X. Xxxxxxxxx, Manager
EXHIBIT A
PURCHASERS
YP Holdings, LLC
0000 Xxxxxxx Xxxx
Xxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxx
Email: xxxxxxxxxx@xxxxx.xxx
With a copy to:
Block & Garden, LLP
0000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxx X. Garden, Esq.
Email: xxxxxx@xxxxxx.xxx
A-1
EXHIBIT B
PLAN OF DISTRIBUTION
We are registering the shares of common stock and the warrants on behalf of the selling
stockholders. The common stock and the warrants may be sold in one or more transactions at
fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing
market prices, at varying prices determined at the time of sale, or at negotiated prices. These
sales may be effected at various times in one or more of the following transactions, or in other
kinds of transactions:
transactions on the OTC Markets Group or on any national securities exchange or U.S.
inter-dealer system of a registered national securities association on which the common
stock and the warrants may be listed or quoted at the time of sale;
in the over-the-counter market;
in private transactions and transactions otherwise than on these exchanges or systems or
in the over-the-counter market;
in connection with short sales of the shares;
by pledge to secure or in payment of debt and other obligations;
through the writing of options, whether the options are listed on an options exchange or
otherwise;
in connection with the writing of non-traded and exchange-traded call options, in hedge
transactions and in settlement of other transactions in standardized or over-the-counter
options; or
through a combination of any of the above transactions.
The selling stockholders and their successors, including their transferees, pledgees or
donees or their successors, may sell the common stock and the warrants directly to purchasers or
through underwriters, broker-dealers or agents, who may receive compensation in the form of
discounts, concessions or commissions from the selling stockholders or the purchasers. These
discounts, concessions or commissions as to any particular underwriter, broker-dealer or agent
may be in excess of those customary in the types of transactions involved.
In addition, any securities covered by this prospectus which qualify for sale pursuant to
Rule 144 of the Securities Act may be sold under Rule 144 rather than pursuant to this
prospectus.
The selling stockholders may from time to time pledge or grant a security interest in
some or all of the shares of common stock and warrants owned by them and, if they default in
the performance of their secured obligations, the pledgees or secured parties may offer and sell
B-1
the shares of common stock from time to time under this prospectus after we have filed an
amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the
Securities Act amending the list of selling stockholders to include the pledgee, transferee or other
successors in interest as selling stockholders under this prospectus.
The selling stockholders also may transfer the shares of common stock and warrants in
other circumstances, in which case the transferees, pledgees or other successors in interest will
be the selling beneficial owners for purposes of this prospectus and may sell the shares of
common stock and warrants from time to time under this prospectus after we have filed an
amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the
Securities Act amending the list of selling stockholders to include the pledgee, transferee or other
successors in interest as selling stockholders under this prospectus.
The selling stockholders and any broker-dealers or agents that are involved in selling the
shares of common stock and warrants may be deemed to be “underwriters” within the meaning
of the Securities Act in connection with such sales. In such event, any commissions received by
such broker-dealers or agents and any profit on the resale of the shares of common stock or
warrants purchased by them may be deemed to be underwriting commissions or discounts under
the Securities Act.
We entered into a registration rights agreement for the benefit of the selling stockholders
to register the common stock and the warrants under applicable federal and state securities laws.
The registration rights agreement provides for cross-indemnification of the selling stockholders
and us and our respective directors, officers and controlling persons against specific liabilities in
connection with the offer and sale of the common stock and the warrants, including liabilities
under the Securities Act. We will pay substantially all of the expenses incurred by the selling
stockholders incident to the registration of the common stock and the warrants.
The selling stockholders have advised us that they have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding the sale of
their shares of common stock or warrants, nor is there an underwriter or coordinating broker
acting in connection with a proposed sale of shares of common stock or warrants by any selling
stockholder. If we are notified by any selling stockholder that any material arrangement has
been entered into with a broker-dealer for the sale of shares of common stock or warrants, if
required, we will file a supplement to this prospectus. If the selling stockholders use this
prospectus for any sale of the shares of common stock or warrants, they will be subject to the
prospectus delivery requirements of the Securities Act.
The anti-manipulation rules of Regulation M under the Securities Exchange Act may
apply to sales of our common stock and activities of the selling stockholders.
B-2
EXHIBIT C
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[Name and address of Transfer Agent]
_________________
_________________
_________________
Attn: ____________
Re:
Ladies and Gentlemen:
We are counsel to MediJane Holdings Inc., a Nevada corporation (the “Company”), and
have represented the Company in connection with that certain Securities Purchase Agreement (the
“Purchase Agreement”), dated as of September [●], 2014, by and among the Company and the
purchasers (the “Purchasers” and the “Holders”) named therein pursuant to which the Company
issued to the Purchasers shares (the “Shares”) of its Common Stock, $0.001 par value. Pursuant to
the Purchase Agreement, the Company has also entered into a Registration Rights Agreement with
the Purchasers (the “Registration Rights Agreement”), dated as of September [●], 2014, pursuant
to which the Company agreed, among other things, to register the Registrable Securities (as defined
in the Registration Rights Agreement), including the Shares, under the Securities Act of 1933, as
amended (the “1933 Act”). In connection with the Company’s obligations under the Registration
Rights Agreement, on [●], 2014, the Company filed a Registration Statement on Form S-3 (File No.
[●]) (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”)
relating to the resale of the Registrable Securities which names the Holders as selling stockholders
thereunder.
In connection with the foregoing, we advise you that a member of the SEC’s staff has
advised us by telephone that the SEC has entered an order declaring the Registration Statement
effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF
EFFECTIVENESS] and we have no knowledge, after telephonic inquiry of a member of the SEC’s
staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and, accordingly, the Registrable Securities
are available for resale under the 1933 Act in the manner specified in, and pursuant to the terms of,
the Registration Statement.
Very truly yours,
By:
cc:
[PURCHASERS]
C-1
EXHIBIT E
FORM OF LOCK-UP AGREEMENT
E-1
LOCK-UP AGREEMENT1
Lock-Up Agreement (this “Agreement”) is entered into as of September [●], 2014, by
and between MediJane Holdings Inc., a Nevada corporation (the “Company”), and the
shareholder of the Company named on the signature page hereof (the “Shareholder”).
RECITALS:
A.
The Company and certain purchasers (the “Purchasers”), have entered into a
Securities Purchase Agreement dated as of September [●], 2014 (the “Purchase Agreement”),
pursuant to which the Purchasers have agreed to purchase, and the Company has agreed to sell,
shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), and
warrants to purchase shares of Common Stock.
B.
Shareholder is a shareholder of the Company and owns and/or controls shares of
Common Stock (the “Shares”).
C.
As a condition to the Purchasers entering into the Purchase Agreement,
Shareholder has agreed to the lock-up set forth in Section 1 hereof.
D.
Capitalized terms used in this Agreement but not otherwise defined herein shall
have the meanings ascribed to such terms in the Purchase Agreement.
AGREEMENTS:
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1.
Lock-Up. Shareholder hereby agrees that, except as set forth in Section 2 below,
from the date hereof until the 90th day following the date that the Registration Statement is
declared effective by the Commission (the “Lock-up Period”), without the prior written consent
of the Company and the Purchasers, he will not offer, pledge, sell, contract to sell, grant any
options for the sale of or otherwise transfer, distribute or dispose of, directly or indirectly
(collectively “Dispose of”), any Shares (the “Lock-up”). On and after the 1st day following the
last day of the Lock-up Period, no Shares shall be subject to the Lock-up.
2.
Permitted Dispositions. The following dispositions of Shares shall not be subject
to the Lock-up set forth in Section 1:
(a)
Shareholder may Dispose of Shares to his spouse, siblings, parents or any
natural or adopted children or other descendants or to any personal trust in which any
such family member or Shareholder retains the entire beneficial interest;
1 To be executed by each of Xxxxxx Xxxx, Xxxxx Xxxxx, Caduceus Industries LLC, and Phoenix Bio
Pharmaceuticals Corporation.
1
(b)
Shareholder may Dispose of Shares on his death to Shareholder’s estate,
executor, administrator or personal representative or to Shareholder’s beneficiaries
pursuant to a devise or bequest or by laws of descent and distribution;
(c)
Shareholder may Dispose of Shares as a gift or other transfer without
consideration; and
(d)
Shareholder may make a bona fide pledge of Shares to a lender;
provided, however, that in the case of any transfer of Shares pursuant to clauses (a), (c), and (d),
the transferor shall, at the request of the Company, provide evidence (which may include,
without limitation, an opinion of counsel satisfactory in form, scope and substance to the
Company in its sole discretion as the issuer thereof) satisfactory to the Company that the transfer
is exempt from the registration requirements of the Securities Act of 1933, as amended.
In the event Shareholder Disposes of Shares described in this Section 2, such Shares shall
remain subject to this Agreement and, as a condition of the validity of such disposition, the
transferee shall be required to execute and deliver a counterpart of this Agreement. Thereafter,
such transferee shall be deemed to be the Shareholder for purposes of this Agreement.
3.
Miscellaneous.
(a)
Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from the provisions
hereof may not be given other than as initially agreed upon in writing by the Company,
Shareholder and the Purchasers.
(b)
Successors and Assigns. Shareholder shall not assign any rights or benefits
under this Agreement without the prior written consent of the Company and the Purchasers.
(c)
Counterparts. This Agreement may be executed in a number of identical
counterparts and it shall not be necessary for the Company and Shareholder to execute each of
such counterparts, but when each has executed and delivered one or more of such counterparts,
the several parts, when taken together, shall be deemed to constitute one and the same
instrument, enforceable against each in accordance with its terms. In making proof of this
Agreement, it shall not be necessary to produce or account for more than one such counterpart
executed by the party against whom enforcement of this Agreement is sought.
(d)
Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(e)
Governing Law; Venue. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OR CHOICE OF LAW. The
2
Company and Shareholder (i) hereby irrevocably submit to the non-exclusive jurisdiction of the
United States District Court sitting in the Northern District of Texas and the courts of the State of
Texas located in Dallas County for the purposes of any suit, action or proceeding arising out of
or relating to this Agreement, and (ii) hereby waive, and agree not to assert in any such suit,
action or proceeding, any claim that he or it is not personally subject to the jurisdiction of such
court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper.
(f)
Severability. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws effective during the term of this
Agreement, such provision shall be fully severable; this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this
Agreement; and the remaining provisions of this Agreement shall remain in full force and effect
and shall not be affected by the illegal, invalid or unenforceable provision or by its severance
from this Agreement. Furthermore, in lieu of each such illegal, invalid or unenforceable
provision, there shall be added automatically as a part of this Agreement a provision as similar in
terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid
and enforceable.
(g)
Entire Agreement. This Agreement is intended by the Company and the
Shareholder as a final expression of their agreement and is intended to be a complete and
exclusive statement of their agreement and understanding in respect of the subject matter
contained herein. This Agreement supersedes all prior agreements and understandings between
the Company and the Shareholder with respect to such subject matter.
(h)
Third Party Beneficiaries. This Agreement is intended for the benefit of
the Company, Shareholder and the Purchasers and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other
person or entity. The Company and Shareholder each specifically acknowledge and agree that
each Purchaser is a third party beneficiary of this Agreement.
[Remainder of page intentionally left blank. Signature pages to follow.]
3
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written.
By:
Xxxxxx Xxxx, President & CEO
“SHAREHOLDER”:
Name:
By:
(signature)
Title of signatory:
(if not an individual)
4
Schedule 2.1(b)
Further Consent or Authorization by Board of Directors or Shareholders
None
Schedule 2.1(c)
Currently Issued and Outstanding Shares
There are 84,640,300 common shares issued and outstanding as of September 8, 2014.
Schedule 2.1(f)
Timely Filing of Reports
Not Applicable
Schedule 2.1(g)
Subsidiaries
Medi Holdings Inc.
Medi Sales (CA) Inc.
Schedule 2.1(i)
Undisclosed Liabilities
None
Schedule 2.1(j)
Undisclosed Events or Circumstances
None
Schedule 2.1(k)
Indebtedness/Default of Indebtedness
None
Schedule 2.1(l)
Titles to Assets
Not applicable
Schedule 2.1(m)
Actions Pending
A former employee, Xxxxxxxx Xxxxxx, is disputing her employment termination. Total
maximum exposure is approximately $20,000. However, the Company believes this will be
resolved for not more than $10,000.
Schedule 2.1(n)
Compliance with Law
The production and sale of cannabis is only legal under state law. The Company is a
publicly traded company in the cannabis space. While there is a shift in regulations and laws,
growing public support and less perceived risk in general, Federal regulation and laws prohibit
the production and sale of cannabis.
Schedule 2.1(o)
Taxes
Not applicable
Schedule 2.1(r)
Intellectual Property
No exceptions
Schedule 2.1(s)
Environmental Compliance
No exceptions
Schedule 2.1(u)
Material Agreements
No exceptions
Schedule 2.1(v)
Transactions with Affiliates
No exceptions
Schedule 2.1(x)
Governmental Approvals
Not applicable
Schedule 2.1(y)
Employees
See Schedule 2.1(m)
Schedule 2.1(z)
Absence of Certain Developments
None
Schedule 2.1(aa)
Use of Proceeds
Payroll
$60,000
Inventory
$100,000
Packaging & Fulfillment
$8,000
Rent – Facilities CO/CA
$8,000
Legal, Accounting, Audit
$37,500
Marketing
$10,000
Consultant
$10,000
Compliance
$20,000
Security/Distribution Fee
$10,000
Travel Expenses
$5,000
Convertible Takeout
$187,500
Aged Payables
$76,000
Miscellaneous
$20,000
Commissions
$48,000
Total
$600,000
