Exhibit 10.3

 

SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of October 24,
2016, is entered into by and between PETRONE WORLDWIDE, INC., a Nevada
corporation, (the “Company”) and Peak One Opportunity Fund, L.P., a Delaware
limited partnership (the “Buyer”).

 

WITNESSETH:

 

WHEREAS, the Company and the Buyer are executing and delivering this Agreement
in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under Regulation D (“Regulation
D”) as promulgated by the United States Securities and Exchange Commission (the
“SEC”) under the Securities Act of 1933, as amended (the “1933 Act”), and/or
Section 4(2) of the 1933 Act; and

 

WHEREAS, the Buyer wishes to purchase from the Company, and the Company wishes
to sell the Buyer, upon the terms and subject to the conditions of this
Agreement, securities consisting of the Company’s Convertible Debentures due
three years from the respective dates of issuance (the “Debentures”), each of
which are in the form of Exhibit A hereto, which will be convertible into shares
of the Company’s common stock, par value $0.001 per share (the “Common Stock”),
in the aggregate principal amount of up to Three Hundred Eighty Five Thousand
and 00/100 Dollars ($385,000.00), for an aggregate Purchase Price of up to Three
Hundred Forty Six Thousand Five Hundred and 00/100 Dollars ($346,500.00), all
upon the terms and subject to the conditions of this Agreement, the Debentures,
and other related documents;

 

NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1.                  DEFINITIONS; AGREEMENT TO PURCHASE.

 

a.                   Certain Definitions. As used herein, each of the following
terms has the meaning set forth below, unless the context otherwise requires:

 

(i)                 “Affiliate” means, with respect to a specific Person
referred to in the relevant provision, another Person who or which controls or
is controlled by or is under common control with such specified Person.

 

(ii)               “Certificates” means certificates representing the Conversion
Shares issuable hereunder, each duly executed on behalf of the Company and
issued hereunder.

 

(iii)             “Closing Date” means the date on which one of the three (3)
Closings are held, which are the Signing Closing Date, the Second Closing Date
and the Third Closing Date.

 

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(iv)             [Reserved]

 

(v)               “Commitment Fee” shall have the meaning ascribed to such term
in Section 12(a).

 

(vi)             “Common Stock” shall have the meaning ascribed to such term in
the Recitals.

 

(vii)           “Conversion Amount” shall mean the Conversion Amount as defined
in the Debentures, provided, however that for purposes of the foregoing
calculation, the full indebtedness under the Debentures shall be deemed
immediately convertible, notwithstanding the 4.99% limitation on ownership set
forth in the Debentures.

 

(viii)         “Conversion Price” means the Conversion Price as defined in the
Debentures.

 

(ix)             “Conversion Shares” means the shares of Common Stock issuable
upon conversion of the Debentures.

 

(x)               “DWAC Operational” means that the Common Stock is eligible for
clearing through the Depository Trust Company (“DTC”) via the DTC’s Deposit
Withdrawal Agent Commission or “DWAC” system and active and in good standing for
DWAC issuance by the Transfer Agent.

 

(xi)             “Dollars” or “$” means United States Dollars.

 

(xii)           “Exchange Act” means the Securities Exchange Act of 1934, as
amended.

 

(xiii)         “Investments” means Peak One Investments, LLC, the general
partner of the Buyer.

 

(xiv)         “Irrevocable Resolutions” has the meaning set forth in Section
8(i).

 

(xv)           “Market Price of the Common Stock” means (x) the closing bid
price of the Common Stock for the period indicated in the relevant provision
hereof (unless a different relevant period is specified in the relevant
provision), as reported by Bloomberg, LP or, if not so reported, as reported on
the OTCQB, OTCQX or OTC Pink or (y) if the Common Stock is listed on a stock
exchange, the closing price on such exchange, as reported by Bloomberg LP.

 

(xvi)         “Material Adverse Effect” means a material adverse effect on the
business, operations or condition (financial or otherwise) or results of
operation of the Company and its Subsidiaries taken as a whole, in the
reasonable commercial discretion of the Buyer, irrespective of any finding of
fault, magnitude of liability (or lack of financial liability). Without limiting
the generality of the foregoing, the occurrence of any of the following, in the
reasonable commercial discretion of the Buyer, shall be considered a Material
Adverse Effect: (i) any final money, judgment, writ or warrant of attachment, or
similar process (including an arbitral determination) in excess of Fifty
Thousand Dollars ($50,000) shall be entered or filed against the

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Company or any of its Subsidiaries (including, in any event, products liability
claims against the Company or its Subsidiaries), (ii) the suspension or
withdrawal of any governmental authority or permit pertaining to a material
amount of the Company’s or any Subsidiary’s products or services, (iii) the loss
of any material insurance coverage (including, in any case, comprehensive
general liability coverage, products liability coverage or directors and
officers coverage, in each case in effect at the time of execution and delivery
of this Agreement), (iv) an action by a regulatory agency or governmental body
affecting the Common Stock (including, without limitation, (1) the commencement
of any regulatory investigation of which the Company is aware, the suspension of
trading of the Common Stock by the Financial Industry Regulation Authority
(“FINRA”), the SEC, the OTC Bulletin Board (“OTCBB”) or the OTC Markets Group,
Inc., the failure of the Common Stock to be DTC eligible or the placing of the
Common Stock on the DTC “chill list” or (2) the engaging in any market
manipulation or other unlawful or improper trading or other activity by any
Affiliate), (v) the Company’s independent registered accountants shall resign
under circumstances where a disagreement exists between the Company and its
independent registered accountants, (vi) the Company shall fail to timely file
any disclosure document as required by applicable federal or state securities
laws and regulations or by the rules and regulations of any exchange, trading
market or quotation system to which the Company or the Common Stock is subject,
or (vii) the Chief Executive Officer of the Company or any other key full-time
officer or director of the Company, shall, for any reason (including, without
limitation, termination, resignation, retirement, death or disability) cease to
act on behalf of the Company in the same role and to the same extent as his or
her involvement as of the date of execution and delivery of this Agreement.

 

(xvii)       “Person” means any living person or any entity, such as, but not
necessarily limited to, a corporation, partnership or trust.

 

(xviii)     “Purchase Price” means the price that the Buyer pays for the
Debentures at each respective Closing, which are the Signing Purchase Price, the
Second Purchase Price and the Third Closing Price, as the case may be.

 

(xix)         “Registrable Securities” shall mean the Conversion Shares and any
other shares of capital stock or other securities of the Company or any
successor to the Company that are issued upon exchange of Conversion Shares.

 

(xx)           “Registration Statement” shall mean a registration statement on
Form S-1 (or any successor thereto) filed or contemplated to be filed by the
Company with the SEC under the Securities Act.

 

(xxi)         “Restricted Stock” shall mean shares of Common Stock which are not
freely trading shares when issued.

 

(xxii)       “Securities” means the Debentures and the Shares.

 

(xxiii)     “Shares” means the Conversion Shares.

 

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(xxiv)     “Second Closing Date” shall have the meaning ascribed to such term in
Section 6(b).

 

(xxv)       “Second Debenture” means the second of the three (3) Debentures, in
the principal amount of One Hundred Fifty Thousand and 00/100 Dollars
($150,000.00), which is issued by the Company to the Buyer on the Second Closing
Date.

 

(xxvi)     “Second Purchase Price” shall be One Hundred Thirty Five Thousand and
00/100 Dollars ($135,000.00)

 

(xxvii)   “Signing Closing Date” shall have the meaning ascribed to such term in
Section 6(a).

 

(xxviii) “Signing Debenture” means the first of the three (3) Debentures, in the
principal amount of Eighty Five Thousand and 00/100 Dollars ($85,000.00), to be
issued by the Company to the Buyer on the Signing Closing Date.

 

(xxix)     “Signing Purchase Price” shall be Seventy Six Thousand Five Hundred
and 00/100 Dollars ($76,500.00).

 

(xxx)       “Subsidiary” shall have the meaning ascribed to such term in Section
3(b).

 

(xxxi)     “Third Closing Date” shall have the meaning ascribed to such term in
Section 6(c).

 

(xxxii)   “Third Debenture” means the third of the three (3) Debentures, in the
principal amount of One Hundred Fifty Thousand and 00/100 Dollars ($150,000.00),
which is issued by the Company to the Buyer on the Third Closing Date.

 

(xxxiii) “Third Purchase Price” shall be One Hundred Thirty Five Thousand and
00/100 Dollars ($135,000.00).

 

(xxxiv) “Transaction Documents” means, collectively, this Agreement, the
Debentures, the Transfer Agent Instruction Letter, the Irrevocable Resolutions
and the other agreements, documents and instruments contemplated hereby or
thereby.

 

(xxxv)   “Transfer Agent” shall have the meaning ascribed to such term in
Section 4(a).

 

(xxxvi) “Transfer Agent Instruction Letter” shall have the meaning ascribed to
such term in Section 5(a).

 

b.                  Purchase and Sale of Debentures.

 

(i)                 The Buyer agrees to purchase from the Company, and the
Company agrees to sell to the Buyer, the Debentures on the terms and conditions
set forth below in this Agreement and the other Transaction Documents.

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(ii)               Subject to the terms and conditions of this Agreement and the
other Transaction Documents, the Buyer will purchase the Debentures at certain
closings (each, a “Closing”) to be held on certain respective Closing Dates.

 

c.                   [Reserved]

 

(i)                 [Reserved]

 

(ii)               [Reserved]

 

2.      BUYER’S REPRESENTATIONS, WARRANTIES, ETC.

 

The Buyer represents and warrants to, and covenants and agrees with, the Company
as follows:

 

a.       Investment Purpose. Without limiting the Buyer’s right to sell the
Shares pursuant to a Registration Statement, Buyer is purchasing the Debentures,
and will be acquiring the Conversion Shares, for its own account for investment
only and not with a view towards the public sale or distribution thereof and not
with a view to or for sale in connection with any distribution thereof.

 

b.      Accredited Investor Status. Buyer is (i) an “accredited investor” as
that term is defined in Rule 501 of the General Rules and Regulations under the
1933 Act by reason of Rule 501(a)(3), (ii) experienced in making investments of
the kind described in this Agreement and the related documents, (iii) able, by
reason of the business and financial experience of its officers (if an entity)
and professional advisors (who are not affiliated with or compensated in any way
by the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the Securities.

 

c.       Subsequent Offers and Sales. All subsequent offers and sales of the
Securities by the Buyer shall be made pursuant to registration of the Shares
under the 1933 Act or pursuant to an exemption from registration and compliance
with applicable states’ securities laws.

 

d.      Reliance on Exemptions. Buyer understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Buyer’s compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Securities.

 

e.       Information. Buyer and its advisors have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Securities which have been
requested by the Buyer. Buyer and its advisors

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have been afforded the opportunity to ask questions of the Company and have
received complete and satisfactory answers to any such inquiries. Without
limiting the generality of the foregoing, Buyer has also had the opportunity to
obtain and to review the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2015, and Quarterly Reports on Form 10-Q for the fiscal
quarter ended March 31 and June 30, 2016 (collectively, the “SEC Documents”).

 

f.       Investment Risk. Buyer understands that its investment in the
securities constitutes high risk investment, its investment in the Securities
involves a high degree of risk, including the risk of loss of the Buyer’s entire
investment.

 

g.      Governmental Review. Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities.

 

h.      Organization; Authorization. Buyer is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization.
This Agreement and the other Transaction Documents have been duly and validly
authorized, executed and delivered on behalf of the Buyer and create a valid and
binding agreement of the Buyer enforceable in accordance with its terms, subject
as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium and other similar laws affecting the enforcement of
creditors’ rights generally.

 

i.        Residency. The state in which any offer to sell Securities hereunder
was made to or accepted by the Buyer is the state shown as the Buyer’s address
contained herein, and Buyer is a resident of such state only.

 

3.      COMPANY REPRESENTATIONS AND WARRANTIES, ETC. 

 

The Company represents and warrants to the Buyer that:

 

a.       Concerning the Debentures and the Shares. There are no preemptive
rights of any stockholder of the Company to acquire the Debentures or the
Shares.

 

b.      Organization; Subsidiaries; Reporting Company Status. Attached hereto as
Schedule 3(b) is an organizational chart describing all of the Company’s
wholly-owned and majority-owned subsidiaries (the “Subsidiaries”) and other
Affiliates, including the relationships among the Company and such Subsidiaries,
including as to each Subsidiary its jurisdiction of organization and the
percentage of ownership held by the Company, and the parent company of the
Subsidiary, including the percentage of ownership of the Company held by it. The
Company and each Subsidiary is a corporation or other form of businesses entity
duly organized, validly existing and in good standing under the laws its
respective jurisdiction of organization, and each of them has the requisite
corporate or other power to own its properties and to carry on its business as
now being conducted. The Company and each Subsidiary is duly qualified as a
foreign corporation or other entity to do business and is in good standing in
each jurisdiction where the nature of the business conducted or property owned
by it makes such qualification necessary, other than those jurisdictions in
which the failure to so qualify would not have a

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Material Adverse Effect. The Common Stock is listed and traded on the OTC Pink
Market of the OTC Markets Group, Inc. (trading symbol: PFWI). The Company has
received no notice, either oral or written, from FINRA, the SEC, or any other
organization, with respect to the continued eligibility of the Common Stock for
such listing, and the Company has maintained all requirements for the
continuation of such listing. The Company is an operating company in that, among
other things (A) it primarily engages, wholly or substantially, directly or
indirectly through a majority owned Subsidiary or Subsidiaries, in the
production or sale, or the research or development, of a product or service
other than the investment of capital, (B) it is not an individual or sole
proprietorship, (C) it is not an entity with no specific business plan or
purpose and its business plan is not to engage in a merger or acquisition with
an unidentified company or companies or other entity or person, and (D) it
intends to use the proceeds from the sale of the Debentures solely for the
operation of the Company’s business and uses other than personal, family, or
household purposes.

 

c.       Authorized Shares. Schedule 3(c) sets forth all capital stock and
derivative securities of the Company that are authorized for issuance and that
are issued and outstanding. All issued and outstanding shares of Common Stock
have been duly authorized and validly issued and are fully paid and
nonassessable. The Company has sufficient authorized and unissued shares of
Common Stock as may be necessary to effect the issuance of the Shares, assuming
the prior issuance and exercise, exchange or conversion, as the case may be, of
all derivative securities authorized, as indicated in Schedule 3(c). The Shares
have been duly authorized and, when issued upon conversion of, or as interest
on, the Debentures, the Shares will be duly and validly issued, fully paid and
non-assessable and will not subject the holder thereof to personal liability by
reason of being such holder. At all times, the Company shall keep available and
reserved for issuance to the holders of the Debentures shares of Common Stock
duly authorized for issuance against the Debentures.

 

d.      Authorization. This Agreement, the issuance of the Debentures (including
without limitation the incurrence of indebtedness thereunder), the issuance of
the Conversion Shares under the Debentures, and the other transactions
contemplated by the Transaction Documents, have been duly, validly and
irrevocably authorized by the Company, and this Agreement has been duly executed
and delivered by the Company. The Company’s board of directors, in the exercise
of its fiduciary duties, has irrevocably approved the entry into and performance
of the Transaction Documents, including, without limitation the sale of the
Debentures and the issuance of Conversion Shares, based upon a reasonable
inquiry concerning the Company’s financing objectives and financial situation.
Each of the Transaction Documents, when executed and delivered by the Company,
are and will be, valid, legal and binding agreements of the Company, enforceable
in accordance with their respective terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium, and
other similar laws affecting the enforcement of creditors’ rights generally.

 

e.       Non-contravention. The execution and delivery of the Transaction
Documents, the issuance of the Securities and the consummation by the Company of
the other transactions contemplated by this Agreement and the Debentures
(including without limitation the incurrence of indebtedness thereunder) do not
and will not conflict with or result in a breach by the Company of any of the
terms or provisions of, or constitute a default under (i) the articles

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of incorporation or by-laws of the Company, each as currently in effect, (ii)
any indenture, mortgage, deed of trust, or other material agreement or
instrument to which the Company is a party or by which it or any of its
properties or assets are bound, including any listing agreement for the Common
Stock, except as herein set forth or an event which results in the creation of
any lien, charge or encumbrance upon any assets of the Company or the triggering
of any anti-dilution rights, rights of first refusal or first offer on the part
of holders of the Company’s securities, (iii) to its knowledge, any existing
applicable law, rule, or regulation or any applicable decree, judgment, or order
of any court, United States federal or state regulatory body, administrative
agency, or other governmental body having jurisdiction over the Company or any
of its properties or assets, or (iv) the Company’s listing agreement for its
Common Stock (if applicable).

 

f.       Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the entering into and performing this Agreement and the other
Transaction Documents (including without limitation the issuance and sale of the
Securities to the Buyer as contemplated by this Agreement) except such
authorizations, approvals and consents that have been obtained, or such
authorizations, approvals and consents, the failure of which to obtain would not
have a Material Adverse Effect.

 

g.      SEC Filings; Rule 144 Status. None of the SEC Documents contained, at
the time they were filed, any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make the
statements made therein in light of the circumstances under which they were
made, not misleading. The Company timely filed all requisite forms, reports and
exhibits thereto with the SEC as required. The Company is not aware of any event
occurring on or prior to the execution and delivery of this Agreement that would
require the filing of, or with respect to which the Company intends to file, a
Form 8-K after such time. The Company satisfies the requirements of Rule
144(i)(2), and the Company shall continue to satisfy all applicable requirements
of Rule 144 (or any successor thereto) for so long as any Securities are
outstanding and not registered pursuant to an effective registration statement
filed with the SEC.

 

h.      Absence of Certain Changes. Since June 30, 2016, when viewed from the
perspective of the Company and its Subsidiaries taken as a whole, there has been
no material adverse change and no material adverse development in the business,
properties, operations, condition (financial or otherwise), or results of
operations of the Company and its Subsidiaries (including, without limitation, a
change or development which constitutes, or with the passage of time is
reasonably likely to become, a Material Adverse Effect), except as disclosed in
the SEC Documents. Since June 30, 2016, except as provided in the SEC Documents,
the Company has not (i) incurred or become subject to any material liabilities
(absolute or contingent) except liabilities incurred in the ordinary course of
business consistent with past practices; (ii) discharged or satisfied any
material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to stockholders with respect
to its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or

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transferred any other tangible assets, or canceled any debts or claims, except
in the ordinary course of business consistent with past practices; (v) 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
existing business; (vi) made any changes in employee compensation, except in the
ordinary course of business consistent with past practices; or (vii) experienced
any material problems with labor or management in connection with the terms and
conditions of their employment.

 

i.        Full Disclosure. There is no fact known to the Company (other than
general economic conditions known to the public generally or as disclosed in the
SEC Documents) that has not been disclosed in writing to the Buyer that (i)
would reasonably be expected to have a Material Adverse Effect, (ii) would
reasonably be expected to materially and adversely affect the ability of the
Company to perform its obligations pursuant to the Transaction Documents, or
(iii) would reasonably be expected to materially and adversely affect the value
of the rights granted to the Buyer in the Transaction Documents.

 

j.        Absence of Litigation. Except as described in the SEC Documents, there
is no action, suit, proceeding, inquiry or investigation before or by any court,
public board or body pending or, to the knowledge of the Company, threatened
against or affecting the Company, wherein an unfavorable decision, ruling or
finding would have a Material Adverse Effect or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, any of the Transaction Documents. The Company is
not a party to or subject to the provisions of, any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality which
could reasonably be expected to have a Material Adverse Effect.

 

k.      Absence of Liens. The Company’s assets are not encumbered by any liens
or mortgages except as described in the SEC Documents.

 

l.        Absence of Events of Default. No event of default (or its equivalent
term), as defined in the respective agreement, indenture, mortgage, deed of
trust or other instrument, to which the Company is a party, and no event which,
with the giving of notice or the passage of time or both, would become an event
of default (or its equivalent term) (as so defined in such document), has
occurred and is continuing, which would have a Material Adverse Effect.

 

m.    No Undisclosed Liabilities or Events. The Company has no liabilities or
obligations other than those disclosed in the SEC Documents or those incurred in
the ordinary course of the Company’s business since June 30, 2016, and which
individually or in the aggregate, do not or would not have a Material Adverse
Effect. No event or circumstances has occurred or exists with respect to the
Company or its properties, business, condition (financial or otherwise), or
results of operations, which, under applicable law, rule or regulation, requires
public disclosure or announcement prior to the date hereof by the Company but
which has not been so publicly announced or disclosed. There are no proposals
currently under consideration or currently anticipated to be under consideration
by the Board of Directors or the executive officers of the Company which
proposal would (x) change the articles of incorporation, by-laws or any other
charter document of the Company, each as currently in effect, with or without

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shareholder approval, which change would reduce or otherwise adversely affect
the rights and powers of the shareholders of the Common Stock or (y) materially
or substantially change the business, assets or capital of the Company.

 

n.      No Integrated Offering. Neither the Company nor any of its affiliates
nor any Person acting on its or their behalf has, directly or indirectly, at any
time during the six month period immediately prior to the date of this Agreement
made any offer or sales of any security or solicited any offers to buy any
security under circumstances that would eliminate the availability of the
exemption from registration under Rule 506 of Regulation D in connection with
the offer and sale of the Securities as contemplated hereby.

 

o.      Dilution. The number of Shares issuable upon conversion of the
Debentures may increase substantially in certain circumstances, including, but
not necessarily limited to, the circumstance wherein the Market Price of the
Common Stock declines prior to the conversion of the Debentures. The Company’s
executive officers and directors have studied and fully understand the nature of
the securities being sold hereby and recognize that they have a potential
dilutive effect and further that the conversion of the Debentures and/or sale of
the Conversion Shares may have an adverse effect on the Market Price of the
Common Stock. The Board of Directors of the Company has concluded, in its good
faith business judgment that such issuance is in the best interests of the
Company. The Company specifically acknowledges that its obligation to issue the
Conversion Shares upon conversion of the Debentures is binding upon the Company
and enforceable regardless of the dilution such issuance may have on the
ownership %s of other shareholders of the Company.

 

p.      Regulatory Permits. The Company has all such permits, easements,
consents, licenses, franchises and other governmental and regulatory
authorizations from all appropriate federal, state, local or other public
authorities (“Permits”) as are necessary to own and lease its properties and
conduct its businesses in all material respects in the manner described in the
SEC Documents and as currently being conducted. All such Permits are in full
force and effect and the Company has fulfilled and performed all of its material
obligations with respect to such Permits, and no event has occurred that allows,
or after notice or lapse of time would allow, revocation or termination thereof
or will result in any other material impairment of the rights of the holder of
any such Permit, subject in each case to such qualification as may be disclosed
in the SEC Documents. Such Permits contain no restrictions that would materially
impair the ability of the Company to conduct businesses in the manner consistent
with its past practices. The Company has not received notice or otherwise has
knowledge of any proceeding or action relating to the revocation or modification
of any such Permit.

 

q.      Residency. The state in which any offer to sell Securities hereunder was
made or accepted by the Seller is the state shown as the Seller’s address
contained herein, and Seller is a resident of such state only.

 

r.        Hazardous Materials. The Company is in compliance with all applicable
Environmental Laws in all respects except where the failure to comply does not
have and could not reasonably be expected to have a Material Adverse Effect. For
purposes of the foregoing:

 

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“Environmental Laws” means, collectively, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Superfund
Amendments and Reauthorization Act of 1986, the Resource Conservation and
Recovery Act, the Toxic Substances Control Act, as amended, the Clean Air Act,
as amended, the Clean Water Act, as amended, any other “Superfund” or
“Superlien” law or any other applicable federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to, or
imposing liability or standards of conduct concerning, the environment or any
Hazardous Material.

 

“Hazardous Material” means and includes any hazardous, toxic or dangerous waste,
substance or material, the generation, handling, storage, disposal, treatment or
emission of which is subject to any Environmental Law.

 

s.       Independent Public Accountants. The Company’s auditor, BDO USA, LLP, is
an independent registered public accounting firm with respect to the Company, as
required by the 1933 Act, the Exchange Act and the rules and regulations
promulgated thereunder.

 

t.        Internal Accounting Controls. The Company maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(1) transactions are executed in accordance with management’s general or
specific authorization; (2) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (3) access to
assets is permitted only in accordance with management’s general or specific
authorization; and (4) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

 

s.       Brokers. No Person (other than the Buyer and its principals, employees
and agents) is entitled to receive any consideration from the Company or the
Buyer arising from any finder’s agreement, brokerage agreement or other
agreement to which the Company is a party.

 

4.      CERTAIN COVENANTS AND ACKNOWLEDGMENTS.

 

a.       Transfer Restrictions. The parties acknowledge and agree that (1) the
Debentures have not been registered under the provisions of the 1933 Act and the
Shares have not been registered under the 1933 Act, and may not be transferred
unless (A) subsequently registered thereunder or (B) the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act (“Rule 144”) may be made only in accordance with
the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of
such Securities under circumstances in which the seller, or the Person through
whom the sale is made, may be deemed to be an underwriter, as that term is used
in the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder, (3) at the request of
the Buyer, the Company shall, from time to time, within two (2) business days of
such request, at the sole cost and expense of the Company, either (i) deliver to
its transfer agent and registrar for the Common Stock (the “Transfer Agent”) a
written letter instructing and authorizing the Transfer Agent to process
transfers of the Shares at such time as the Buyer has

 11 

 

held the Securities for the minimum holding period permitted under Rule 144,
subject to the Buyer’s providing to the Transfer Agent certain customary
representations contemporaneously with any requested transfer, or (ii) at the
Buyer’s option or if the Transfer Agent requires further confirmation of the
availability of an exemption from registration, furnish to the Buyer an opinion
of the Company’s counsel in favor of the Buyer (and, at the request of the
Buyer, any agent of the Buyer, including but not limited to the Buyer’s broker
or clearing firm) and the Transfer Agent, reasonably satisfactory in form, scope
and substance to the Buyer and the Transfer Agent, to the effect that a
contemporaneously requested transfer of shares does not require registration
under the 1933 Act, pursuant to the 1933 Act, Rule 144 or other regulations
promulgated under the 1933 Act and (4) neither the Company nor any other Person
is under any obligation to register the Securities (other than pursuant to this
Agreement) under the 1933 Act or to comply with the terms and conditions of any
exemption thereunder.

 

b.      Restrictive Legend. The Buyer acknowledges and agrees that the
Debentures, and, until such time as the Shares have been registered under the
1933 Act as contemplated hereby and sold in accordance with an effective
Registration Statement, certificates and other instruments representing any of
the Securities shall bear a restrictive legend in substantially the following
form (and a stop-transfer order may be placed against transfer of any such
Securities):

 

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

 

c.       Piggy-Back Registration Rights. From and after the Signing Closing Date
and until eighteen (18) months after the Signing Closing Date, if the Company
contemplates making an offering of Common Stock (or other equity securities
convertible into or exchangeable for Common Stock) registered for sale under the
Securities Act or proposes to file a Registration Statement covering any of its
securities, the Company shall at each such time give prompt written notice to
Buyer of its intention to do so and of the registration rights granted under
this Agreement. Upon the written request of Buyer made within thirty (30) days
after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by Buyer and the intended
method of disposition thereof), the Company shall, at its sole cost and expense,
use its best efforts to effect the registration of all Registrable Securities

 12 

 

which the Company has been so requested to register by Buyer, to the extent
requisite to permit the disposition (in accordance with the intended methods of
disposition) of the Registrable Securities by Buyer, by inclusion of such
Registrable Securities in the Registration Statement which covers the securities
which the Company proposes to register; provided, that if the Company is unable
to register the full amount of Registrable Securities in an “at the market
offering” under SEC rules and regulations due to the high percentage of the
Company’s Common Stock the Registrable Securities represents (giving effect to
all other securities being registered in the Registration Statement), then the
Company may reduce, on a pro rata basis, the amount of Registrable Securities
subject to the Registration Statement to a lesser amount which equals the
maximum number of Registrable Securities that the Company is permitted to
register in an “at the market offering”; and provided, further, that if, at any
time after giving written notice of its intention to register any Registrable
Securities and prior to the effective date of the Registration Statement filed
in connection with such registration, the Company shall determine for any reason
either not to register or to delay registration of such Registrable Securities,
the Company may, at its election, give written notice of such determination to
Buyer and, thereupon, (i) in the case of a determination not to register, the
Company shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay the expenses of registration in connection therewith), and (ii) in the case
of a determination to delay registering such Registrable Securities, shall be
permitted to delay registering any Registrable Securities, for the same period
as the delay in registering such other securities. If Buyer shall have
transferred all or part of its Registrable Securities, then for purposes of this
Section, the term “Buyer” shall reference Buyer and/or such transferee(s).

 

d.      Securities Filings. The Company undertakes and agrees to make all
necessary filings (including, without limitation, a Form D) in connection with
the sale of the Securities to the Buyer required under any United States laws
and regulations applicable to the Company (including without limitation state
“blue sky” laws), or by any domestic securities exchange or trading market, and
to provide a copy thereof to the Buyer promptly after such filing.

 

e.       Reporting Status; Public Trading Market; DTC Eligibility. So long as
the Buyer beneficially own any Securities, (i) the Company shall timely file,
prior to or on the date when due, all reports that would be required to be filed
with the SEC pursuant to Section 13 or 15(d) of the Exchange Act if the Company
had securities registered under Section 12(b) or 12(g) of the Exchange Act; (ii)
the Company shall not be operated as, or report, to the SEC or any other Person,
that the Company is a “shell company” or indicate to the contrary to the SEC or
any other Person; (iii) the Company shall take all other action under its
control necessary to ensure the availability of Rule 144 under the 1933 Act for
the sale of Shares by the Buyer at the earliest possible date; and (iv) the
Company shall at all times while any Securities are outstanding maintain its
engagement of an independent registered public accounting firm. Except as
otherwise set forth in Transaction Documents, the Company shall take all action
under its control necessary to obtain and to continue the listing and trading of
its Common Stock (including, without limitation, all Registrable Securities) on
the OTC Markets, Inc. (“OTCM”) on the OTC Pink (“OTCP”), OTCQB (“OTCQB”), or
OTCQX (“OTCQX”), and will comply in all material respects with the Company’s
reporting, filing and other obligations under the by-laws or rules of the
Financial Industry Regulatory Authority (“FINRA”). If, so long as the Buyer

 13 

 

beneficially own any of the Securities, the Company receives any written notice
from the OTCM, FINRA, or the SEC with respect to either any alleged deficiency
in the Company’s compliance with applicable rules and regulations (including
without limitation any comments from the SEC on any of the Company’s documents
filed (or the failure to have made any such filing) under the 1933 Act or the
Exchange Act) (each, a “Regulatory Notice”), then the Company shall promptly,
and in any event within two (2) business days, provide copies of the Regulatory
Notice to the Buyer, and shall promptly, and in any event within five (5)
business days of receipt of the Regulatory Notice (a “Regulatory Response”),
respond in writing to the OTCM, FIRNA and/or SEC (as the case may be), setting
forth the Company’s explanation and/or response to the issues raised in the
Regulatory Notice, with a view towards maintaining and/or regaining full
compliance with the applicable rules and regulations of the OTCM, FIRNA and/or
SEC and maintaining or regaining good standing of the Company with the OTCM,
FINRA and/or SEC, as the case may be, the intent being to ensure that the
Company maintain its reporting company status with the SEC and that its Common
Stock be and remain available for trading on the OTCP, OTCQB, or OTCQX. Further,
at all times while any Securities are outstanding, the Common Stock shall be
DWAC Operational, and the Common Stock shall not be subject to any DTC “chill”
designation or similar restriction on the clearing of the Common Stock through
DTC.

 

f.       Use of Proceeds. The Company shall use the proceeds from the sale of
the Debentures to first pay off the promissory note of the Company held by
FirstFire Global Opportunities Fund, LLC in full, and apply any remaining
proceeds for working capital purposes only subject to customary restrictions.
Absent the prior written approval of a majority of the principal amount of the
Debentures then outstanding, the Company shall not use any portion of the
proceeds of the sale of the Debentures to (i) repay any indebtedness or other
obligation of the Company incurred prior to the date of this Agreement outside
the normal course of business, (ii) pay any dividends or redemption amount on
any of the Company’s equity or equity equivalents, (iii) pay any amounts,
whether on account of debt obligations of the Company or otherwise, except for
compensation, to any officer, director or other related party of the Company or
(iv) pay deferred compensation or any compensation to any of the directors or
officers of the Company in excess of the rate or amount paid or accrued during
the fiscal year ended December, 2015 (as base compensation and excluding any
discretionary amounts), other than modest increases consistent with prior
practice that are approved by the Company’s Board of Directors.

 

g.      Available Shares. Commencing on the date of execution and delivery of
this Agreement, the Company shall have and maintain authorized and reserved for
issuance, free from preemptive rights, that number of shares equal to Five
Hundred percent (500%) of the number of shares of Common Stock (1) issuable
based upon the conversion of the then-outstanding Debentures (including accrued
interest thereon) as may be required to satisfy the conversion rights of the
Buyer pursuant to the terms and conditions of the Debenture Debenture (without
giving effect to the 4.99% limitation on ownership as set forth in the
Debentures), provided, however that for purposes of the foregoing calculation,
the full indebtedness under the Debentures shall be deemed immediately
convertible and (2) issuable to the Buyer on future Closing Dates, based upon
the lowest closing bid price per share of the Common Stock on the date before
the most recent Closing Date (as reported by Bloomberg LP). The Company shall
monitor its compliance with the foregoing requirements on an ongoing basis. If
at any time the

 14 

 

Company does not have available an amount of authorized and non-issued Shares
required to be reserved pursuant to this Section, then the Company shall,
without notice or demand by the Buyer, call within thirty (30) days of such
occurrence and hold within sixty (60) days of such occurrence a special meeting
of shareholders, for the sole purpose of increasing the number of shares
authorized. Management of the Company shall recommend to shareholders to vote in
favor of increasing the number of Common Stock authorized at the meeting.
Members of the Company’s management shall also vote all of their own shares in
favor of increasing the number of Common Stock authorized at the meeting. If the
increase in authorized shares is approved by the stockholders at the meeting,
the Company shall implement the increase in authorized shares within one (1)
business day following approval at such meeting. Alternatively, to the extent
permitted by applicable law, in lieu of calling and holding a meeting as
described above, the Company may, within thirty (30) days of the date when the
Company does not have available an amount of authorized and non-issued Shares
required to be reserved as described above, procure the written consent of
stockholders to increase the number of shares authorized, and provide the
stockholders with notice thereof as may be required under applicable law
(including without limitation Section 14(c) of the Exchange Act and Regulation
14C thereunder). Upon obtaining stockholder approval as aforesaid, the Company
shall cause the appropriate increase in its authorized shares of Common Stock
within one (1) business day (or as soon thereafter as permitted by applicable
law). Company’s failure to comply with these provisions will be an Event of
Default (as defined in the Debentures).

 

h.      Reimbursement. If (i) Buyer and/or Investments becomes a party defendant
in any capacity in any action or proceeding brought by any stockholder of the
Company, in connection with or as a result of the consummation of the
transactions contemplated by the Transaction Documents, or if the Buyer and/or
Investments is impleaded in any such action, proceeding or investigation by any
Person, or (ii) the Buyer and/or Investments, other than by reason of its own
gross negligence, willful misconduct or breach of law (as adjudicated by a court
of law having proper jurisdiction and such adjudication is not subject to
appeal), becomes a party defendant in any capacity in any action or proceeding
brought by the SEC against or involving the Company or in connection with or as
a result of the consummation of the transactions contemplated by the Transaction
Documents, or if the Buyer or Investments is impleaded in any such action,
proceeding or investigation by any Person, then in any such case, the Company
shall promptly reimburse the Buyer and/or Investments for its or their
reasonable legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith. The reimbursement obligations of
the Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions to
any affiliates of the Buyer and/or Investments who are actually named in such
action, proceeding or investigation, and partners, directors, agents, employees
and controlling Persons (if any), as the case may be, of the Buyer, Investments
and any such Affiliate, and shall be binding upon and inure to the benefit of
any successors, assigns, heirs and personal representatives of the Company, the
Buyer, Investments and any such Affiliate and any such Person. Except as
otherwise set forth in the Transaction Documents, the Company also agrees that
neither any Buyer, Investments nor any such Affiliate, partners, directors,
agents, employees or controlling Persons shall have any liability to the Company
or any Person asserting claims on behalf of or in right of the Company in
connection with or as a result of the consummation of the Transaction Documents.

 15 

 

 

i.        The Company shall provide the Transfer Agent, Buyer, or Buyer’s
brokerage and/or clearing firm with all relevant legal opinions and other
documentation requested by the Buyer in connection with the issuance of the
Conversion Shares, or the sale thereof, to confirm the share issuance(s) such
that the Conversion Shares may be deposited with the applicable brokerage and/or
clearing firm.

j.        No Payments to Affiliates or Related Parties.  So long as any of the
Debentures remain outstanding, if the Debentures are in default, the Company
shall not, absent the prior written consent of the holders of all Debentures
then outstanding, make any payments to any of the Company’s or the Subsidiaries’
respective affiliates or related parties, including without limitation payments
or prepayments of principal or interest accrued on any indebtedness or
obligation in favor of affiliates or related parties.  Notwithstanding anything
to the contrary contained herein, the provisions of this Section 4(j) shall not
apply to payments to the Subsidiaries, or other businesses in which affiliates
have an interest, made in the ordinary course of business and consistent with
past practice as disclosed in the SEC Documents.

 

k.      Notice of Material Adverse Effect. The Company shall notify the Buyer
(and any subsequent holder of the Debentures), as soon as practicable and in no
event later than three (3) business days of the Company’s knowledge of any
Material Adverse Effect on the Company. For purposes of the foregoing,
“knowledge” means the earlier of the Company’s actual knowledge or the Company’s
constructive knowledge upon due inquiry.

 

l.        Public Disclosure. Except to the extent required by applicable law,
absent the Buyer’s prior written consent, the Company shall not reference the
name of the Buyer in any press release, securities disclosure, business plan,
marketing or funding proposal.

 

m.    Nature of Transaction; Savings Clause. It is the parties’ express
understanding and agreement that the transactions contemplated by the
Transaction Documents constitute an investment and not a loan. If nonetheless
such transactions are deemed to be a loan (as adjudicated by a court of law
having proper jurisdiction and such adjudication is not subject to appeal), the
Company shall not be obligated or required to pay interest at a rate that could
subject Buyer to either civil or criminal liability as a result of such rate
exceeding the maximum rate that the Buyer is permitted to charge under
applicable law, and the Company’s obligations under the Transaction Documents
shall not be void or voidable on the basis of the Buyer’s lack of any license or
registration as a lender with any governmental authority. It is expressly
understood and agreed by the parties that neither the amounts payable pursuant
to Section 12, any redemption premium, remedy upon an Event of Default (as
defined in the Debentures) or any Acceleration Amount (as defined in the
Debentures), original issue discount nor any investment returns of the Buyer on
the sale of the Debentures or the sale of any Conversion Shares (whether
unrealized or realized) shall be construed as interest. If, by the terms of the
Debentures, any other Transaction Document or any other instrument, Buyer is at
any time required or obligated to pay interest at a rate exceeding such maximum
rate, interest payable under the Debenture and/or such other Transaction
Documents or other instrument shall be computed (or recomputed) at such maximum
rate, and the portion of all prior interest payments (if any) exceeding such
maximum shall be applied to payment of the outstanding principal of the
Debentures.

 16 

 

 

5.      TRANSFER AGENT INSTRUCTIONS.

 

a.       Transfer Agent Instruction Letter. On or before the Signing Closing
Date, the Company shall irrevocably instruct its Transfer Agent in writing using
the letter substantially in the form of Exhibit B annexed hereto, with only such
modifications as the Buyer agrees to, executed by the Company, the Buyer and the
Transfer Agent (the “Transfer Agent Instruction Letter”), to (i) reserve that
number of shares of Common Stock as is required under Section 4(g) hereof, and
(ii) issue Common Stock from time to time upon conversion of the Debentures in
such amounts as specified from time to time by the Buyer to the Transfer Agent
in a Notice of Conversion, in such denominations to be specified by the Buyer in
connection with each conversion of the Debentures. The Transfer Agent shall not
be restricted from issuing shares from only the allotment reserved hereunder for
the Conversion Amount (as defined in the Debentures), but instead may, to the
extent necessary to satisfy the amount of shares issuable upon conversion, issue
shares above and beyond the amount reserved on account of the Conversion Amount,
without any additional instructions or authorization from the Company, and the
Company shall not provide the Transfer Agent with any instructions or
documentation contrary to the foregoing. As of the date of this Agreement, the
Transfer Agent is OTC Stock Transfer, Inc.. The Company shall at all times while
any Debentures are outstanding engage a Transfer Agent which is a party to the
Transfer Agent Instruction Letter. If for any reason the Company’s Transfer
Agent is not a signatory of the Transfer Agent Instruction Letter while any
Debentures are outstanding and held by the Buyer, then such Transfer Agent shall
nonetheless be deemed bound by the Transfer Agent Instruction Letter, and the
Company shall neither (i) permit the Transfer Agent to disclaim, disregard or
refuse to abide by the Transfer Agent’s obligations, terms and agreements set
forth in the Transfer Agent Instruction Letter, nor (ii) issue any instructions
to the Transfer Agent contrary to the obligations, terms and agreements set
forth in the Transfer Agent Instruction Letter . The Company shall not terminate
the Transfer Agent or otherwise change Transfer Agents without at least fifteen
(15) days prior written notice to the Buyer and with the Buyer’s prior written
consent to such change, which the Buyer may grant or withhold in its sole
discretion. The Company shall continuously monitor its compliance with the share
reservation requirements and, if and to the extent necessary to increase the
number of reserved shares to remain and be at least Five Hundred percent (500%)
of the Conversion Amount to account for any decrease in the Market Price of the
Common Stock, the Company shall immediately (and in any event within two (2)
business days) notify the Transfer Agent in writing of the reservation of such
additional shares, provided that in the event that the number of shares reserved
for conversion of the Debentures is less than Five Hundred percent (500%) of the
Conversion Amount, the Buyer may also directly instruct the Transfer Agent to
increase the reserved shares as necessary to satisfy the minimum reserved share
requirement, and the Transfer Agent shall act accordingly, provided, further,
that the Company shall within two (2) business days provide any written
confirmation, assent or documentation thereof as the Transfer Agent may request
to act upon a share increase instruction delivered by the Buyer. The Company
shall provide the Buyer with a copy of all written instructions to the Company’s
Transfer Agent with respect to the reservation of shares simultaneously with the
issuance of such instructions to the Transfer Agent. The Company covenants that
no instruction other than such instructions referred to in this Section 5 and
stop transfer instructions to give effect to Section 4(a) hereof prior to
registration and sale of the Conversion Shares under the 1933 Act will be given
by the Company

 17 

 

to the Transfer Agent and that the Conversion Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and applicable law. If the Buyer provides the Company
and/or the Transfer Agent with an opinion of counsel reasonably satisfactory to
the Company that registration of a resale by the Buyer of any of the Securities
in accordance with clause (1)(B) of Section 4(a) of this Agreement is not
required under the 1933 Act, the Company shall (except as provided in clause (2)
of Section 4(a) of this Agreement) permit the de-legending or transfer of the
Securities and, in the case of the Conversion Shares, instruct the Company’s
Transfer Agent to issue one or more certificates for Common Stock without legend
in such name and in such denominations as specified by the Buyer.

b.      Conversion. (i) The Company shall permit the Buyer to exercise the right
to convert the Debentures by faxing, emailing or delivering overnight an
executed and completed Notice of Conversion to the Company or the Transfer
Agent. If so requested by the Buyer or the Transfer Agent, the Company shall
within one (1) business day respond with its endorsement so as to confirm the
outstanding principal amount of any Debenture submitted for conversion or shall
reconcile any difference with the Buyer promptly after receiving such Notice of
Conversion.

 

(ii)               The term “Conversion Date” means, with respect to any
conversion elected by the holder of the Debentures, the date specified in the
Notice of Conversion, provided the copy of the Notice of Conversion is given
either via mail or facsimile to or otherwise delivered to the Transfer Agent
and/or the Company in accordance with the provisions hereof so that it is
received by the Transfer Agent and/or the Company on or before such specified
date.

 

(iii)             The Company shall deliver (or will cause the Transfer Agent to
deliver) the Conversion Shares issuable upon conversion as follows: (1) if the
Company is then DWAC Operational, via DWAC, (2) if the Common Stock is then
eligible for the Depository Trust Company’s Direct Registration System (“DRS”),
if so requested by the Buyer, or (3) if the Company is not then DWAC Operational
or the Common Stock is not then eligible for DRS, in certificated form, to the
Buyer at the address specified in the Notice of Conversion (which may be the
Buyer’s address for notices as contemplated by Section 10 hereof or a different
address) via express courier, in each case within two (2) business days (the
“Delivery Date”) after (A) the business day on which the Company or the Transfer
Agent has received the Notice of Conversion (by facsimile, email or other
delivery) or (B) the date on which payment of interest and principal on the
Debentures, which the Company has elected to pay by the issuance of Common
Stock, as contemplated by the Debentures, was due, as the case may be.

 

c.       Failure to Timely Issue Conversion Shares or De-Legended Shares. The
Company’s failure to issue and deliver Conversion Shares to the Buyer (either by
DWAC, DRS or in certificated form, as required by Section 5(b)) on or before the
Delivery Date shall be considered an Event of Default, which shall entitle the
Buyer to certain remedies set forth in the Debentures and provided by applicable
law. Similarly, the Company’s failure to issue and deliver Common Stock in
unrestricted form without a restrictive legend when required under the
Transaction Documents shall entitle the Buyer to damages for the diminution in
value (if any) of the relevant shares between the date delivery was due versus
the date ultimately delivered in unrestricted form. The Company acknowledges
that its failure to timely honor a Notice of

 18 

 

Conversion (or the occurrence of any other Event of Default) shall cause
definable financial hardship on the Buyer(s) and that the remedies set forth
herein and in the Debentures are reasonable and appropriate.

 

d.      Duties of Company; Authorization. The Company shall inform the Transfer
Agent of the reservation of shares contemplated by Section 4(g) and this Section
5, and shall keep current in its payment obligations to the Transfer Agent such
that the Transfer Agent will continue to process share transfers and the initial
issuance of shares of Common Stock upon the conversion of Debentures. The
Company hereby authorizes and agrees to authorize the Transfer Agent to
correspond and otherwise communicate with the Buyer or their representatives in
connection with the foregoing and other matters related to the Common Stock.
Further, the Company hereby authorizes the Buyer or its representative to
provide instructions to the Transfer Agent that are consistent with the
foregoing and instructs the Transfer Agent to honor any such instructions.
Should the Company fail for any reason to keep current in its payment
obligations to the Transfer Agent, the Buyer and/or Investments may pay such
amounts as are necessary to compensate the Transfer Agent for performing its
duties with respect to share reservation, issuance of Conversion Shares and/or
de-legending certificates representing Restricted Stock, and all amounts so paid
shall be promptly reimbursed by the Company. If not so reimbursed within thirty
(30) days, such amounts shall, at the option of the Buyer and without prior
notice to or consent of the Company, be added to the principal amount due under
the Debenture(s) held by the Buyer, whereupon interest will begin to accrue on
such amounts at the rate specified in the Debentures.

 

e.       Effect of Bankruptcy. The Buyer shall be entitled to exercise its
conversion privilege with respect to the Debentures notwithstanding the
commencement of any case under 11 U.S.C. §101 et seq. (the “Bankruptcy Code”).
In the event the Company is a debtor under the Bankruptcy Code, the Company
hereby waives, to the fullest extent permitted, any rights to relief it may have
under 11 U.S.C. §362 in respect of the Buyer’s conversion privilege. The Company
hereby waives, to the fullest extent permitted, any rights to relief it may have
under 11 U.S.C. §362 in respect of the conversion of the Debentures. The Company
agrees, without cost or expense to the Buyer, to take or to consent to any and
all action necessary to effectuate relief under 11 U.S.C. §362.

 

6.      CLOSINGS.

 

a.       Signing Closing. Promptly upon the execution and delivery of this
Agreement, the Signing Debenture, and all conditions in Sections 7 and 8 herein
are met (the “Signing Closing Date”), (A) the Company shall deliver to the Buyer
the following: (i) the Signing Debenture; (ii) the Transfer Agent Instruction
Letter; (iii) duly executed counterparts of the Transaction Documents; and (iv)
an officer’s certificate of the Company confirming the accuracy of the Company’s
representations and warranties contained herein, and (B) the Buyer shall deliver
to the Company the following: (i) the Signing Purchase Price and (ii) duly
executed counterparts of the Transaction Documents (as applicable). The Company
shall immediately pay the fees due under Section 12 of this Agreement upon
receipt of the Signing Purchase Price if Buyer does not withhold such amounts
from the Signing Purchase Price pursuant to Section 12.

 

 19 

 

b.      Second Closing. At any time sixty one (61) to ninety (90) days following
the Signing Closing Date, subject to the mutual agreement of the Buyer and the
Company, for the “Second Closing Date” and subject to satisfaction of the
conditions set forth in Sections 7 and 8, (A) the Company shall deliver to the
Buyer the following: (i) the Second Debenture; (ii) an amendment to the Transfer
Agent Instruction Letter instructing the Transfer Agent to reserve that number
of shares of Common Stock as is required under Section 4(g) hereof, if
necessary; and (iii) an officer’s certificate of the Company confirming, as of
the Second Closing Date, the accuracy of the Company’s representations and
warranties contained herein and updating Schedules 3(b), 3(c) and 3(k) as of the
Second Closing Date, and (B) the Buyer shall deliver to the Company the Second
Purchase Price.

 

c.       Third Closing. At any time sixty one (61) to ninety (90) days following
the Second Closing Date, subject to the mutual agreement of the Buyer and the
Company, for the “Third Closing Date” and subject to satisfaction of the
conditions set forth in Sections 7 and 8, (A) the Company shall deliver to the
Buyer the following: (i) the Third Debenture; (ii) an amendment to the Transfer
Agent Instruction Letter instructing the Transfer Agent to reserve that number
of shares of Common Stock as is required under Section 4(g) hereof, if
necessary; and (iii) an officer’s certificate of the Company confirming, as of
the Third Closing Date, the accuracy of the Company’s representations and
warranties contained herein and updating Schedules 3(b), 3(c) and 3(k) as of the
Third Closing Date, and (B) the Buyer shall deliver to the Company the Third
Purchase Price.

 

d.      Location and Time of Closings. Each Closing shall be deemed to occur on
the related Closing Date at the office of the Buyer’s counsel and shall take
place no later than 5:00 P.M., New York time, on such day or such other time as
is mutually agreed upon by the Company and the Buyer.

 

7.      CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

 

The Company’s obligation to sell the Debentures to the Buyer pursuant to this
Agreement on each Closing Date is conditioned upon:

 

a.       Purchase Price. Delivery to the Company of good funds as payment in
full of the respective Purchase Price for the Debentures at each Closing in
accordance with this Agreement;

 

b.      Representations and Warranties; Covenants. The accuracy on the Closing
Date of the representations and warranties of the Buyer contained in this
Agreement, each as if made on such date, and the performance by the Buyer on or
before such date of all covenants and agreements of the Buyer required to be
performed on or before such date; and

 

c.       Laws and Regulations; Consents and Approvals. There shall not be in
effect any law, rule or regulation prohibiting or restricting the transactions
contemplated hereby, or requiring any consent or approval which shall not have
been obtained.

 

 20 

 

8.      CONDITIONS TO THE BUYER’S OBLIGATION TO PURCHASE.

 

The Buyer’s obligation to purchase the Debentures at each Closing is conditioned
upon:

 

a.       Transaction Documents. The execution and delivery of this Agreement by
the Company;

 

b.      Debenture(s). Delivery by the Company to the Buyer of the Debentures to
be purchased in accordance with this Agreement;

 

c.       Section 4(2) Exemption. The Debentures and the Conversion Shares shall
be exempt from registration under the Securities Act of 1933 (as amended),
pursuant to Section 4(2) thereof;

 

d.      DWAC Status. The Common Stock shall be DWAC Operational;

e.       Representations and Warranties; Covenants. The accuracy in all material
respects on the Closing Date of the representations and warranties of the
Company contained in this Agreement, each as if made on such date, and the
performance by the Company on or before such date of all covenants and
agreements of the Company required to be performed on or before such date;

 

f.       Good-faith Opinion. It should be Buyer’s reasonable belief that (i) no
Event of Default under the terms of any outstanding indebtedness of the Company
shall have occurred or would likely occur with the passage of time and (ii) no
material adverse change in the financial condition or business operations of the
Company shall have occurred;

 

g.      Legal Proceedings. There shall be no litigation, criminal or civil,
regulatory impairment or other legal and/or administrative proceedings
challenging or seeking to limit the Company’s ability to issue the Securities or
the Common Stock;

 

h.      [Reserved];

 

i.        Corporate Resolutions. Delivery by the Company to the Buyer a copy of
resolutions of the Company’s board of directors, approving and authorizing the
execution, delivery and performance of the Transaction Documents and the
transactions contemplated thereby in the form attached hereto as Exhibit C (the
“Irrevocable Resolutions”);

 

j.        Officer’s Certificate. Delivery by the Company to the Buyer of a
certificate of the Chief Executive Officer of the Company in the form attached
hereto as Exhibit D;

 

k.      Search Results. Delivery by the Company to the Buyer of copies of UCC
search reports, issued by the Secretary of State of the state of incorporation
of the Company and each Subsidiary, dated such a date as is reasonably
acceptable to Buyer, listing all effective financing statements which name the
Company or Subsidiary (as applicable), under its present name and any previous
names, as debtor, together with copies of such financing statements;

 21 

 

l.        Certificate of Good Standing. Delivery by the Company to the Buyer of
a copy of a certificate of good standing with respect to the Company, issued by
the Secretary of State of the state of incorporation of the Company, dated such
a date as is reasonably acceptable to Buyer, evidencing the good standing
thereof;

 

m.    Laws and Regulations; Consents and Approvals. There shall not be in effect
any law, rule or regulation prohibiting or restricting the transactions
contemplated hereby, or requiring any consent or approval which shall not have
been obtained; and

 

n.      Adverse Changes. From and after the date hereof to and including each
Closing Date, (i) the trading of the Common Stock shall not have been suspended
by the SEC, FINRA, or any other governmental or self-regulatory organization,
and trading in securities generally on OTCM shall not have been suspended or
limited, nor shall minimum prices been established for securities traded on the
OTCM; (ii) there shall not have occurred any outbreak or escalation of
hostilities involving the United States or any material adverse change in any
financial market that in either case in the reasonable judgment of the Buyer
makes it impracticable or inadvisable to purchase the Debentures.

 

9.      GOVERNING LAW; MISCELLANEOUS.

 

a.       MANDATORY FORUM SELECTION. Any dispute arising under, relating to, or
in connection with the Agreement or related to any matter which is the subject
of or incidental to the Agreement (whether or not such claim is based upon
breach of contract or tort) shall be subject to the exclusive jurisdiction and
venue of the state and/or federal courts located in MIAMI-DADE County, Florida. 
This provision is intended to be a “mandatory” forum selection clause and
governed by and interpreted consistentLY with Florida law.

 

b.      Governing Law. Except in the case of the Mandatory Forum Selection
clause above, this Agreement shall be delivered and accepted in and shall be
deemed to be contracts made under and governed by the internal laws of the State
of Nevada, and for all purposes shall be construed in accordance with the laws
of the State of Nevada, without giving effect to the choice of law provisions.
To the extent determined by the applicable court described above, the Company
shall reimburse the Buyer for any reasonable legal fees and disbursements
incurred by the Buyer in enforcement of or protection of any of its rights under
any of the Transaction Documents.

 

c.       Waivers. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.

 

d.      Successors and Assigns. This Agreement shall inure to the benefit of and
be binding upon the successors and assigns of each of the parties hereto.

 

 22 

 

e.       Construction. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.

 

f.       Facsimiles; E-mails. A facsimile or email transmission of this signed
Agreement or a Notice of Conversion under the Debentures shall be legal and
binding on all parties hereto. Such electronic signatures shall be the
equivalent of original signatures.

 

g.      Counterparts. This Agreement may be signed in one or more counterparts,
each of which shall be deemed an original.

 

h.      Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.

 

i.        Enforceability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.

 

j.        Amendment. This Agreement may be amended only by the written consent
of a majority in interest of the holders of the Debentures and an instrument in
writing signed by the Company.

 

k.      Entire Agreement. This Agreement, together with the other Transaction
Documents, supersedes all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof.

 

l.        No Strict Construction. This Agreement shall be construed as if both
Parties had equal say in its drafting, and thus shall not be construed against
the drafter.

 

m.    Further Assurances. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

 

10.  NOTICES. 

 

Any notice required or permitted hereunder shall be given in writing (unless
otherwise specified herein) and shall be deemed effectively given on the
earliest of:

 

a.       the date delivered, if delivered by personal delivery as against
written receipt therefor or by confirmed facsimile or email transmission,

 

b.      the third (3rd) business day after deposit, postage prepaid, in the
United States Postal Service by registered or certified mail, or

 

 23 

 

c.       the first (1st) business day after deposit with a recognized courier
service (e.g. FedEx, UPS, DHL, US Postal Service) for delivery by next-day
express courier, with delivery costs and fees prepaid,

 

in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days’ advance written notice similarly given to each of the other
parties hereto):

 

COMPANY:    

Petrone Worldwide, Inc.

2200 N. Commerce Parkway

Weston, FL 33326

Attention: Victor Petrone, Chief Executive Officer

Facsimile: ___________________

Email: vpetrone@petroneworldwide.com

 

 

 

With copies to (which shall not constitute notice):

 

Legal & Compliance, LLC

330 Clematis Street, Suite 217

West Palm Beach, FL 33401

Attention: Laura Anthony, Esq.

Email: LAnthony@LegalandCompliance.com

 

BUYER:

Peak One Opportunity Fund, L.P.

____________________

____________________

Attention: ____________________

Email: ____________________

 

 

With copies to (which shall not constitute notice):

 

 

Legal & Compliance, LLC

330 Clematis Street, Suite 217

West Palm Beach, FL 33401

Attention: Laura Anthony, Esq.

Email: LAnthony@LegalandCompliance.com

 

11.  SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company’s representations
and warranties herein shall survive for so long as any Debentures are
outstanding, and shall inure to the benefit of the Buyer, its successors and
assigns.

 

12.  FEES; EXPENSES.

 

a.       Commitment Fee. The Company shall pay to Investments a non-accountable
fee (the “Commitment Fee”) of Two Thousand Five Hundred and 00/100 Dollars
($2,500.00) on the Signing Closing Date (with respect to the Signing Debenture),
One Thousand and 00/100

 24 

 

Dollars ($1,000.00) on the Second Closing Date (with respect to the Second
Debenture), as well as One Thousand and 00/100 Dollars ($1,000.00) on the Third
Closing Date (with respect to the Third Debenture), for Investments’ expenses
and analysis performed in connection with the analysis of the Company and the
propriety of the Buyer’s making the contemplated investment. The Commitment Fee
shall be paid on the respective closing dates if Buyer does not withhold such
amounts from the respective purchase price pursuant to Section 12(c).

 

b.      Legal Fees. The Company shall pay the legal fees of the Buyer’s counsel
(the “Legal Fees”) in the amount of Four Thousand and 00/100 Dollars ($4,000.00)
on the Signing Closing Date (with respect to the Signing Debenture), One
Thousand and 00/100 Dollars ($1,000.00) on the Second Closing Date (with respect
to the Second Debenture), as well as One Thousand and 00/100 Dollars ($1,000.00)
on the Third Closing Date (with respect to the Third Debenture). The foregoing
legal fees shall be paid on the respective closing dates if Buyer does not
withhold such amounts from the respective purchase price pursuant to Section
12(c). The Company further agrees to pay in full the reasonable legal fees of
the Buyer’s counsel incurred after the Signing Closing Date incurred in
connection with the Transaction Documents (including addressing any purported
breach(es) or default(s) by the Company, enforcement of the Company’s
obligations or the exercise of the Buyer’s remedies thereunder).

 

c.       Disbursements. In furtherance of the foregoing, the Company hereby
authorizes the Buyer to deduct the cash portion of the Commitment Fee and the
Legal Fees from the respective purchase price and transmit same to the
respective payee.

 

[Signature Page Follows]

 25 

 

IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer and the
Company as of the date first set forth above.

 

 

COMPANY:

 

 

PETRONE WORLDWIDE, INC.

 

 

 

  By:   /s/ Victor Petrone  

Name: Victor Petrone

Title: Chief Executive Officer

         

BUYER:

 

 

PEAK ONE OPPORTUNITY FUND, L.P.

 

 

By: Peak One Investments, LLC,

General Partner

 

 

 By: /s/ Jason Goldstein

Name: Jason Goldstein

Title: Managing Member

           

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Securities Purchase Agreement]

 26 

 

SCHEDULE 3(b)

 

 

COMPANY ORGANIZATION CHART

 

Subsidiary / Affiliate

Name and Relationship

Jurisdiction of Incorporation Percentage of Ownership Petrone Food Works, Inc.
Nevada 100%                                                                    
         

 

  

 

 

 

 

SCHEDULE 3(c)

 

 

COMPANY CAPITALIZATION TABLE

COMMON STOCK AND COMMON STOCK EQUIVALENTS

ISSUED, OUTSTANDING AND RESERVED

 

DESCRIPTION AMOUNT Authorized Common Stock    Authorized Capital Stock
910,000,000 Authorized Common Stock 900,000,000 Issued Common Stock 22,899,897
Outstanding Common Stock 22,899,897 Treasury Stock 877,100,103 Authorized, but
unissued 877,100,103     Authorized Preferred Stock 10,000,000 Issued Preferred
Stock 1,000,000     Reserved for Equity Incentive Plans 0 Reserved for
Convertible Debt 5,000,000 Reserved for Options and Warrants 0 Reserved for
Other Purposes 0     TOTAL COMMON STOCK AND COMMON STOCK EQUIVALENTS OUTSTANDING
         72,899,897

 

 

 

  

 

 

EXHIBITS      Exhibit AFORM OF DEBENTURE  Exhibit BFORM OF TRANSFER AGENT
INSTRUCTION LETTER  Exhibit CFORM OF RESOLUTIONS OF THE BOARD OF DIRECTORS
 Exhibit DFORM OF OFFICER’S CERTIFICATE