EXECUTION VERSION

 

STANDBY EQUITY DISTRIBUTION AGREEMENT

 

THIS STANDBY EQUITY DISTRIBUTION AGREEMENT dated as of July 1, 2014 (this
“Agreement”) is made by and between YA GLOBAL MASTER SPV LTD., a Cayman Islands
exempt limited partnership (the “Investor”), and GLASSESOFF INC., a company
organized under the laws of the State of Nevada (the “Company”).

 

WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to the Investor, from time to
time as provided herein, and the Investor shall purchase from the Company up to
$15,000,000 of the Company’s common stock, $0.001 par value per share (the
“Common Stock”); and

 

WHEREAS, the Common Stock is quoted on the OTCBB under the symbol “GLSO;” and

 

WHEREAS, the offer and sale of the Common Stock issuable hereunder will be made
in reliance upon the provisions of Regulation D (“Regulation D”) promulgated
under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the “Securities Act”), 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 transactions to be made hereunder.

 

NOW, THEREFORE, the parties hereto agree as follows:

 

Article I. Certain Definitions

 

Section 1.01         “Advance” shall mean the portion of the Commitment Amount
requested by the Company in the Advance Notice.

 

Section 1.02         “Advance Date” shall mean the 1st Trading Day after
expiration of the applicable Pricing Period for each Advance.

 

Section 1.03         “Advance Notice” shall mean a written notice in the form of
Exhibit A attached hereto to the Investor executed by an officer of the Company
and setting forth the Advance amount that the Company requests from the
Investor.

 

Section 1.04         “Advance Notice Date” shall mean each date the Company
delivers (in accordance with Section 2.01(c) of this Agreement) to the Investor
an Advance Notice requiring the Investor to advance funds to the Company,
subject to the terms of this Agreement.

 

Section 1.05         “Affiliate” shall have the meaning set forth in Section
3.08.

 

Section 1.06         “Articles of Incorporation” shall have the meaning set
forth in Section 4.03.

 

Section 1.07         “Bylaws” shall have the meaning set forth in Section 4.03.

 

Section 1.08         “Commitment Amount” shall mean the aggregate amount of up
to $15,000,000.

 

 

 

 

 

Section 1.09         “Commitment Fee” shall have the meaning set forth in
Section 13.05.

 

Section 1.10         “Commitment Fee Shares” shall have the meaning set forth in
Section 13.05.

 

Section 1.11         “Company Indemnitees” shall have the meaning set forth in
Section 5.02.

 

Section 1.12         “Commitment Period” shall mean the period commencing on the
Effective Date, and expiring upon the date of termination of this Agreement in
accordance with Section 11.02.

 

Section 1.13         “Common Stock” shall have the meaning set forth in the
recitals of this Agreement.

 

Section 1.14          “Condition Satisfaction Date” shall have the meaning set
forth in Section 7.01.

 

Section 1.15          “Damages” shall mean any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable attorney’s fees
and disbursements and costs and expenses of expert witnesses and investigation);
provided, that “Damages” shall not include any incidental, consequential
(including lost profits), punitive, special, indirect or exemplary damages,
damages for diminution in value, or damages calculated on a multiple of earnings
or similar basis.

 

Section 1.16         “Effective Date” shall mean the date on which the SEC first
declares effective a Registration Statement registering the resale of the
Shares.

 

Section 1.17         “Environmental Laws” shall have the meaning set forth in
Section 4.08.

 

Section 1.18         “Exchange Act” shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.

 

Section 1.19         “Indemnified Liabilities” shall have the meaning set forth
in Section 5.01.

 

Section 1.20         “Investor Indemnitees” shall have the meaning set forth in
Section 5.01.

 

Section 1.21         “Market Price” shall mean the lowest daily VWAP of the
Common Stock during the relevant Pricing Period that is greater than or equal to
the Minimum Acceptable Price.

 

Section 1.22         “Material Adverse Effect” shall mean any condition,
circumstance, or situation that may result in, or would reasonably be expected
to result in (i) a material adverse effect on the legality, validity or
enforceability of this Agreement or the transactions contemplated herein, (ii) a
material adverse effect on the results of operations, assets, business or
condition (financial or otherwise) of the Company and its subsidiaries, taken as
a whole, or (iii) a material adverse effect on the Company’s ability to perform
in any material respect on a timely basis its obligations under this Agreement,
other than, with respect to each of the foregoing (x) any event, matter or
circumstance generally affecting the economy of the United States or Israel, (y)
any national or international political or social condition or event, including
the engagement by the United States or Israel in hostilities, whether or not
pursuant to the declaration of a national emergency or war, or the occurrence of
any military or terrorist attack upon the United States or Israel or any of
their respective territories, possessions, or diplomatic or consular offices, or
upon any military installation of the United States or Israel, and its effect
upon the Company or (z) any change in GAAP (provided that, in the case of the
preceding clauses (x), (y) and (z), to the extent the same does not have a
disproportionate impact on the Company relative to other companies in the same
industry as the Company).

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Section 1.23         “Maximum Advance Amount” shall be the lower of (x) $500,000
and (y) the average of the Daily Value Traded for the five (5) Trading Days
immediately prior to the Advance Notice Date where “Daily Value Traded” is the
product obtained by multiplying the trading volume for such day by the VWAP for
such day.

 

Section 1.24         “Minimum Acceptable Price” or “MAP” shall be 85% of the
VWAP for the Trading Day immediately preceding Advance Notice Date.

 

Section 1.25         “Material Outside Event” shall have the meaning set forth
in Section 6.07.

 

Section 1.26         “Ownership Limitation” shall have the meaning set forth in
Section 2.01(a).

 

Section 1.27         “Person” shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.

 

Section 1.28         “Plan of Distribution” shall have the meaning set forth in
Section 6.01(a).

 

Section 1.29         “Pricing Period” shall mean the five (5) consecutive
Trading Days commencing on the Trading Day immediately following the Advance
Notice Date.

 

Section 1.30         “Principal Market” shall mean the New York Stock Exchange,
the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital
Market, the OTCBB, or the NYSE Euronext, whichever is at the time the principal
trading exchange or market for the Common Stock.

 

Section 1.31         “Purchase Price” shall mean the price per share obtained by
multiplying the Market Price by 98.5%.

 

Section 1.32         “Registrable Securities” shall mean (i) the Shares, and
(ii) any securities issued or issuable with respect to any of the foregoing by
way of exchange, stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities when (a) the
Registration Statement has been declared effective by the SEC and such
Registrable Securities have been disposed of pursuant to the Registration
Statement, (b) such Registrable Securities have been sold under circumstances in
which all of the applicable conditions of Rule 144 (or any similar provision
then in force) under the Securities Act (“Rule 144”) are met, or (c) such
Registrable Securities may be sold without any time, volume or manner
limitations pursuant to Rule 144.

 

Section 1.33         “Registration Limitation” shall have the meaning set forth
in Section 2.01(a)

 

Section 1.34         “Registration Period” shall have the meaning set forth in
Section 6.01(b).

 

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Section 1.35         “Registration Statement” shall mean a registration
statement on Form S-1 or Form S-3 or on such other form promulgated by the SEC
for which the Company then qualifies and which counsel for the Company shall
deem appropriate, and which form shall be available for the registration of the
resale by the Investor of the Registrable Securities under the Securities Act.

 

Section 1.36         “Regulation D” shall have the meaning set forth in the
recitals of this Agreement.

 

Section 1.37         “SEC” shall mean the U.S. Securities and Exchange
Commission.

 

Section 1.38         “SEC Documents” shall have the meaning set forth in Section
4.05.

 

Section 1.39         “Securities Act” shall have the meaning set forth in the
recitals of this Agreement.

 

Section 1.40         “Settlement Document” shall have the meaning set forth in
Section 2.02(a).

 

Section 1.41         “Shares” shall mean the Common Stock to be issued from time
to time hereunder pursuant to Advances and any Commitment Fee Shares.

 

Section 1.42         “Trading Day” shall mean any day during which the Principal
Market shall be open for business.

 

Section 1.43         “VWAP” means, for any Trading Day, the daily volume
weighted average price of the Common Stock for such date on the Principal Market
as reported by Bloomberg L.P. during regular trading hours.

 

Article II. Advances

 

Section 2.01         Advances; Mechanics. Subject to the terms and conditions of
this Agreement (including, without limitation, the provisions of Article VII
hereof), the Company, at its sole and exclusive option, may issue and sell to
the Investor, and the Investor shall purchase from the Company, Common Stock on
the following terms:

 

(a)Advance Notice. At any time during the Commitment Period, the Company may
require the Investor to purchase Common Stock by delivering an Advance Notice to
the Investor, subject to the conditions set forth in Section 7.01; provided,
however, that (i) the amount for each Advance as designated by the Company in
the applicable Advance Notice shall not be more than the Maximum Advance Amount,
(ii) the aggregate amount of the Advances pursuant to this Agreement shall not
exceed the Commitment Amount, (iii) in no event shall the number of shares of
Common Stock issuable to the Investor pursuant to an Advance cause the aggregate
number of shares of Common Stock beneficially owned (as calculated pursuant to
Section 13(d) of the Exchange Act) by the Investor and its affiliates to exceed
9.99% of the then outstanding Common Stock (the “Ownership Limitation”) and (iv)
under no circumstances shall the aggregate number of Shares subject to an
Advance Notice cause the number of Shares purchased by the Investor pursuant to
this Agreement to exceed the number of Shares registered for resale under the
Registration Statement(s) filed by the Company in respect of the transactions
contemplated hereby (the “Registration Limitation”). Notwithstanding any other
provision in this Agreement, the Company and the Investor acknowledge and agree
that, because the Investor is irrevocably bound to acquire the shares of Common
Stock that are subject of a valid Advance Notice delivered to the Investor, the
Investor may sell such shares of Common Stock of such Advance Notice prior to
taking possession of such shares.

 

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(b)Minimum Acceptable Price.

 

(i)With respect to each Advance Notice (A) the amount of the Advance set forth
in such Advance Notice shall automatically be reduced by 20% for each Trading
Day during the Pricing Period for which the VWAP of the Common Stock is below
the MAP in effect with respect to such Advance Notice (each such day, an
“Excluded Day”), and (B) for the avoidance of doubt, each Excluded Day shall be
excluded from the Pricing Period for purposes of determining the Market Price.

 

(ii)The number of Shares to be issued and delivered to the Investor at each
Closing (in accordance with Section 2.02) with respect to an Advance Notice with
an Excluded Day shall be determined based on the Advance Notice amount as
reduced pursuant to Section 2.01(b)(i) (the “Adjusted Advance Notice”);
provided, however, that the Adjusted Advance Notice shall be automatically
increased by an amount equal to the number of Shares sold by the Investor on
such Excluded Day (in a total amount for each Excluded Day not to exceed 20% of
the amount of the Advance set forth in the original Advance Notice) at a price
per share equal to the MAP in effect with respect to such Advance Notice
(without any further discount).

 

(c)Date of Delivery of Advance Notice. Advance Notices shall be delivered in
accordance with the instructions set forth on the bottom of Exhibit A. An
Advance Notice shall be deemed delivered on (i) the Trading Day it is received
by the Investor in accordance with the instructions set forth on the bottom of
Exhibit A if such notice is received prior to 5:00 pm Eastern Time, or (ii) the
immediately succeeding Trading Day if it is received by the Investor in
accordance with the instructions set forth on the bottom of Exhibit A after 5:00
pm Eastern Time on a Trading Day or at any time on a day which is not a Trading
Day. No Advance Notice may be deemed delivered on a day that is not a Trading
Day.

 

(d)Ownership Limitation; Commitment Amount. In connection with each Advance
Notice delivered by the Company, any portion of an Advance that would (i) cause
the Investor to exceed the Ownership Limitation or (ii) cause the aggregate
amount of Advances to exceed the Commitment Amount shall automatically be
withdrawn with no further action required by the Company, and such Advance
Notice shall be deemed automatically modified to reduce the aggregate amount of
the requested Advance by an amount equal to such withdrawn portion.

 

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(e)Registration Limitation. In connection with each Advance Notice, any portion
of an Advance that would exceed the Registration Limitation shall automatically
be withdrawn with no further action required by the Company and such Advance
Notice shall be deemed automatically modified to reduce the aggregate amount of
the requested Advance by an amount equal to such withdrawn portion.

 

Section 2.02         Closings. Each Closing shall take place as soon as
practicable after each Advance Date in accordance with the procedures set forth
below. In connection with each Closing, the Company and the Investor shall
fulfill each of its obligations as set forth below:

 

(a)On each Advance Date, the Investor shall deliver to the Company a written
document in the form attached hereto as Exhibit B (each a “Settlement
Document”), setting forth the amount of the Advance (taking into account any
adjustments pursuant to Section 2.01), the Purchase Price, the number of shares
of Common Stock to be purchased by the Investor, and a report by Bloomberg, L.P.
indicating the VWAP for each of the Trading Days during the Pricing Period, in
each case in accordance with the terms and conditions of this Agreement.

 

(b)Promptly after receipt of the Settlement Document with respect to each
Advance (and, in any event, not later than two Trading Days after such receipt),
the Company will, or will cause its transfer agent to, electronically transfer
such number of shares of Common Stock registered in the name of the Investor as
shall equal (x) the amount of the Advance specified in such Advance Notice or
Adjusted Advance Notice, as applicable, divided by (y) the Purchase Price by
crediting the Investor’s account or its designee’s account at the Depository
Trust Company through its Deposit/Withdrawal At Custodian System or by such
other means of delivery as may be mutually agreed upon by the parties hereto
(which in all cases the resale of such shares of Common Stock shall be covered
by an effective Registration Statement) against payment to the Company of the
aggregate Purchase Price in respect of such shares of Common Stock in cash in
immediately available funds to an account designated in writing by the Company.
No fractional shares shall be issued, and any fractional amounts shall be
rounded to the next higher whole number of shares. Any certificates evidencing
Common Stock delivered pursuant hereto shall be free of restrictive legends. To
facilitate the transfer of the Common Stock by the Investor, the Common Stock
will not bear any restrictive legends so long as there is an effective
Registration Statement covering such Common Stock.

 

(c)On or prior to the Advance Date, each of the Company and the Investor shall
deliver to the other all documents, instruments and writings required to be
delivered by either of them pursuant to this Agreement in order to implement and
effect the transactions contemplated herein.

 

Article III. Representations and Warranties of Investor

 

Investor hereby represents and warrants to, and agrees with, the Company that
the following are true and correct as of the date hereof and as of each Advance
Date:

 

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Section 3.01         Organization and Authorization. The Investor is duly
organized, validly existing and in good standing under the laws of the Cayman
Islands and has all requisite power and authority to executed deliver and
perform this Agreement, including all transactions contemplated hereby. The
decision to invest and the execution and delivery of this Agreement by the
Investor, the performance by the Investor of its obligations hereunder and the
consummation by such Investor of the transactions contemplated hereby have been
duly authorized and require no other proceedings on the part of the Investor or
its shareholders. The undersigned has the right, power and authority to execute
and deliver this Agreement and all other instruments on behalf of the Investor.
This Agreement has been duly executed and delivered by the Investor and,
assuming the execution and delivery hereof and acceptance thereof by the
Company, will constitute the legal, valid and binding obligations of the
Investor, enforceable against the Investor in accordance with its terms.

 

Section 3.02         Evaluation of Risks. The Investor has such knowledge and
experience in financial, tax and business matters as to be capable of evaluating
the merits and risks of, and bearing the economic risks entailed by, an
investment in the Company and of protecting its interests in connection with the
transactions contemplated hereby. The Investor acknowledges and agrees that its
investment in the Company involves a high degree of risk, and that the Investor
may lose all or a part of its investment. The Investor has not been provided
with a prospectus, an offering memorandum or any other disclosure document in
connection with its acquisition of the shares of Common Stock under this
Agreement, and the Investor’s decision to acquire such shares of Common Stock
has not been based upon any verbal or written representation made by or on
behalf of the Company, or any officer, employee, agent or representative of the
Company.

 

Section 3.03         No Legal, Investment or Tax Advice from the Company. The
Investor acknowledges that it had the opportunity to review this Agreement and
the transactions contemplated by this Agreement with its own legal counsel and
investment and tax advisors. The Investor is relying solely on such counsel and
advisors and not on any statements or representations of the Company or any of
the Company’s representatives or agents for legal, tax, investment or other
advice with respect to the Investor’s acquisition of shares of Common Stock
hereunder, the transactions contemplated by this Agreement or the laws of any
jurisdiction.

 

Section 3.04         Investment Purpose. The shares of Common Stock purchased by
the Investor hereunder are being purchased for its own account, for investment
purposes and without any view or intention to distribute such shares in
violation of the Securities Act or any other applicable securities laws. The
Investor agrees not to assign or in any way transfer the Investor’s rights or
obligations under this Agreement or any interest therein and acknowledges that
the Company will not recognize any purported assignment or transfer, except in
accordance with applicable Federal and state securities laws. No other Person
has or will have a direct or indirect beneficial interest in the Common Stock
purchased by the Investor hereunder. The Investor agrees not to sell,
hypothecate or otherwise transfer the Investor’s shares of Common Stock unless
such shares are registered under Federal and applicable state securities laws or
unless, in the opinion of counsel satisfactory to the Company, an exemption from
such registration is available.

 

Section 3.05         Accredited Investor. The Investor is an “Accredited
Investor” as that term is defined in Rule 501(a)(3) of Regulation D.

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Section 3.06         Information. The Investor and its advisors (and its
counsel), if any, have been furnished with all materials relating to the
business, finances and operations of the Company and information it deemed
material to making an informed investment decision. The Investor and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company and its management and has received answers to such questions. Neither
such inquiries nor any other due diligence investigations conducted by such
Investor or its advisors, if any, or its representatives shall modify, amend or
affect the Investor’s right to rely on the Company’s representations and
warranties contained in this Agreement. The Investor understands that its
investment involves a high degree of risk. The Investor has sought such
accounting, legal, tax, investment and other advice as it has considered
necessary to make an informed investment decision with respect to the
transactions contemplated hereby.

 

Section 3.07         No General Solicitation. 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) in connection with the offer or sale of the Common Stock offered
hereby.

 

Section 3.08         Not an Affiliate. The Investor is not an officer, director
or a person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with the Company or any
“affiliate” of the Company (as that term is defined in Rule 405 promulgated
under the Securities Act).

 

Section 3.09         Trading Activities. The Investor’s trading activities with
respect to the Common Stock shall be in compliance with all applicable federal
and state securities laws, rules and regulations and the rules and regulations
of the Principal Market on which the Common Stock is listed or traded. Neither
the Investor nor its affiliates has any open short position in the Common Stock,
nor has the Investor entered into any hedging transaction that establishes a net
short position with respect to the Common Stock, and the Investor agrees that it
shall not, and that it will cause its affiliates not to, engage in any short
sales or hedging transactions with respect to the Common Stock; provided that
the Company acknowledges and agrees that upon receipt of an Advance Notice the
Investor has the right to sell the shares to be issued to the Investor pursuant
to the Advance Notice prior to receiving such shares.

 

Article IV. Representations and Warranties of the Company

 

Except as stated below, on the disclosure schedules attached hereto or in the
SEC Documents, the Company hereby represents and warrants to the Investor that
the following are true and correct as of the date hereof and as of each Advance
Date (other than representations and warranties which address matters only as of
a certain date, which shall be true and correct as written as of such certain
date):

 

Section 4.01         Organization and Qualification. The Company is duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has all requisite corporate power to own its properties and to carry
on its business as now being conducted. Each of the Company and its subsidiaries
is duly qualified to do business and is in good standing (to the extent
applicable) in every jurisdiction in which the nature of the business conducted
by it makes such qualification necessary, except to the extent that the failure
to be so qualified or be in good standing would not have a Material Adverse
Effect.

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Section 4.02         Authorization, Enforcement, Compliance with Other
Instruments. (i) The Company has the requisite corporate power and authority to
enter into and perform this Agreement in accordance with the terms hereof,
(ii) the execution and delivery of this Agreement by the Company and the
consummation by it of the transactions contemplated hereby have been duly
authorized by the Company’s Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
stockholders, (iii) this Agreement has been duly executed and delivered by the
Company, (iv) this Agreement, assuming the execution and delivery thereof and
acceptance by the Investor, constitutes 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 general principles of equity or applicable
bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium,
liquidation or other laws from time to time relating to, or affecting generally,
the enforcement of creditors’ rights and remedies.

 

Section 4.03         Capitalization. The registered share capital of the Company
as of the date hereof consists of 200,000,000 shares of Common Stock, of which
57,554,457 shares are issued and outstanding as of the date hereof, and
20,000,000 shares of preferred stock, par value $0.001 per share, of which no
shares are issued and outstanding as of the date hereof. All of such outstanding
shares have been validly issued and are fully paid and nonassessable. Except as
disclosed in the SEC Documents, none of the shares of Common Stock are subject
to preemptive rights or any other similar rights. Except as disclosed in the SEC
Documents and as may be issued from time to time under the Company’s publicly
disclosed equity compensation plans, as of the date hereof, (i) there are no
outstanding options, warrants, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights convertible into,
any shares of Common Stock or any of its contracts, commitments, understandings
or arrangements by which the Company is or may become bound to issue additional
shares of Common Stock or options, warrants, scrip, rights to subscribe for,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into, any Common Stock, (ii) there are no outstanding debt
securities, (iii) there are no outstanding registration statements and (iv)
there are no agreements or arrangements under which the Company is obligated to
register the sale of any of its securities under the Securities Act. There are
no securities or instruments containing anti-dilution or similar provisions that
will be triggered by this Agreement or the consummation of the transactions
described herein. The Company has furnished or made available to the Investor
true and correct copies of the Company’s Articles of Incorporation, as amended
and restated and as in effect on the date hereof (the “Articles of
Incorporation”), and the Company’s Bylaws, as amended and restated and as in
effect on the date hereof (the “Bylaws”).

 

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Section 4.04         No Conflict. The execution, delivery and, subject to the
satisfaction of the Closing procedures set forth in Section 2.02 hereof,
performance of this Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby will not (i) result in a violation of
the Articles of Incorporation or Bylaws or (ii) conflict with or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, or result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and the rules and regulations of the
Principal Market on which the Common Stock are quoted) applicable to the Company
or any of its subsidiaries or by which any material property or asset of the
Company is bound or affected and which would cause a Material Adverse Effect.
Except as disclosed in the SEC Documents, neither the Company nor its
subsidiaries is in violation of any term of or in default under its Articles of
Incorporation or Bylaws or other applicable organizational documents, or, to the
Company’s knowledge, any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its subsidiaries that would cause a
Material Adverse Effect. To the Company’s knowledge, the business of the Company
and its subsidiaries is not being conducted in violation of any material law,
ordinance or regulation of any governmental entity, except as would not cause a
Material Adverse Effect. Except as specifically contemplated by this Agreement
and as required under the Securities Act and any applicable securities laws, and
as required by the rules of the Principal Market, the Company is not required 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 or contemplated by this
Agreement in accordance with the terms hereof except as such consent,
authorization or order has been obtained as of the date hereof. The Company and
its subsidiaries are not aware of any fact or circumstance which is reasonably
expected to give rise to any of the foregoing.

 

Section 4.05         SEC Documents; Financial Statements. The Company has filed
all reports, schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to Section 15(d) of the Exchange Act for the
two years preceding the date hereof (or such shorter period as the Company was
required by law or regulation to file such material) (all of the foregoing filed
within the two years preceding the date hereof or amended after the date hereof
and all exhibits included therein and financial statements and schedules thereto
and documents incorporated by reference therein, and all registration statements
filed by the Company under the Securities Act being hereinafter referred to as
the “SEC Documents”). The Company has made available to the Investor through the
SEC’s website at http://www.sec.gov, true and complete copies of the SEC
Documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act or the Securities
Act, as applicable, and the rules and regulations of the SEC promulgated
thereunder applicable to the SEC Documents, and none of the SEC Documents, at
the time they were filed with the SEC, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the 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 SEC Documents
filed on and after August 5, 2013 complied as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently applied,
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 exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position of the Company as of the respective dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments).

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Section 4.06         Intellectual Property Rights. The Company and its
subsidiaries own or possess adequate rights or licenses to use all material
trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights necessary to conduct their
respective businesses as now conducted, except as would not cause a Material
Adverse Effect. The Company and its subsidiaries do not have any knowledge of
any infringement by the Company or its subsidiaries of trademark, trade name
rights, patents, patent rights, copyrights, inventions, licenses, service names,
service marks, service mark registrations, or trade secrets, except as would not
cause a Material Adverse Effect. To the knowledge of the Company, there is no
claim, action or proceeding being made or brought against, or to the Company’s
knowledge, being threatened against the Company or its subsidiaries regarding
trademark, trade name, patents, patent rights, invention, copyright, license,
service names, service marks, service mark registrations, trade secret or other
infringement; and, except as would not cause a Material Adverse Effect, the
Company is not aware of any facts or circumstances which might give rise to any
of the foregoing.

 

Section 4.07         Employee Relations. Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened, in each case
which is reasonably likely to cause a Material Adverse Effect.

 

Section 4.08         Environmental Laws. The Company and its subsidiaries (i)
are in compliance in all material respects with any and all applicable material
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii)
have received all material permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any such permit,
license or approval.

 

Section 4.09         Title. Except as set forth in the SEC Documents or except
as would not cause a Material Adverse Effect, the Company has good and
marketable title to its properties and material assets owned by it, free and
clear of any pledge, lien, security interest, encumbrance, claim or equitable
interest other than such as are not material to the business of the Company. Any
real property and facilities held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases
(except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium, liquidation or other laws from time to time relating to, or
affecting generally, the enforcement of creditors’ rights and remedies) with
such exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company and its
subsidiaries.

 

Section 4.10         Insurance. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
subsidiaries are engaged. The Company has no reason to believe that it will not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not have a Material Adverse
Effect.

- 11 -

 

  

Section 4.11         Regulatory Permits. Except as would not cause a Material
Adverse Effect, the Company and its subsidiaries possess all material
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.

 

Section 4.12         Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management’s general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.

 

Section 4.13         Absence of Litigation. Except as set forth in the SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board, government agency, self-regulatory organization
or body pending against or affecting the Company or any of the Company’s
subsidiaries, wherein an unfavorable decision, ruling or finding would have a
Material Adverse Effect.

 

Section 4.14         Subsidiaries. Except as disclosed in the SEC Documents, the
Company does not presently own or control, directly or indirectly, any interest
in any other corporation, partnership, association or other business entity.

 

Section 4.15         Tax Status. Except as disclosed in the SEC Documents, the
Company and each of its subsidiaries has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject to be filed as of the date hereof and
(unless and only to the extent that the Company and each of its subsidiaries has
set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim.

 

Section 4.16         Certain Transactions. Except as set forth in the SEC
Documents (or as not required to be disclosed pursuant to applicable law) none
of the officers or directors of the Company is presently a party to any
transaction with the Company (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer or
director, or to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any officer or director has a substantial
interest or is an officer, director, trustee or partner.

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Section 4.17         Fees and Rights of First Refusal. The Company is not
obligated to offer the Common Stock offered hereunder on a right of first
refusal basis or otherwise to any third parties including, but not limited to,
current or former stockholders of the Company, underwriters, brokers, agents or
other third parties.

 

Section 4.18         Use of Proceeds. The Company shall use the net proceeds
from this offering for working capital and other general corporate purposes.

 

Section 4.19         Dilution. The Company is aware and acknowledges that
issuance of shares of the Common Stock could cause dilution to existing
stockholders and could significantly increase the outstanding number of shares
of Common Stock.

 

Section 4.20         Acknowledgment Regarding Investor’s Purchase of Shares. The
Company acknowledges and agrees that the Investor is acting solely in the
capacity of an arm’s length investor with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Investor is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder and any advice given by the Investor or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Investor’s purchase of the
Shares hereunder. The Company is aware and acknowledges that it may not be able
to request Advances under this Agreement if the Registration Statement is not
declared effective or if any issuances of Common Stock pursuant to any Advances
would violate any rules of the Principal Market. The Company further is aware
and acknowledges that any fees paid or shares issued pursuant to Section 13.04
hereunder shall be earned on the date hereof and are not refundable or
returnable under any circumstances.

 

Article V. Indemnification

 

The Investor and the Company represent to the other the following with respect
to itself:

 

Section 5.01         Indemnification by the Company. In consideration of the
Investor’s execution and delivery of this Agreement, and in addition to all of
the Company’s other obligations under this Agreement, the Company shall defend,
protect, indemnify and hold harmless the Investor, and all of its officers,
directors, partners, employees and agents (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement) and
each person who controls the Investor within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (collectively, the “Investor
Indemnitees”) from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and reasonable
and documented expenses in connection therewith (irrespective of whether any
such Investor Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys’ fees and disbursements
(the “Indemnified Liabilities”), incurred by the Investor Indemnitees or any of
them as a result of, or arising out of, or relating to (a) any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement for the registration of the Shares as originally filed or in any
amendment thereof, or in any related prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of the Investor specifically for inclusion therein;
(b) any material misrepresentation or breach of any material representation or
material warranty made by the Company in this Agreement or any other
certificate, instrument or document contemplated hereby or thereby; or (c) any
material breach of any material covenant, material agreement or material
obligation of the Company contained in this Agreement or any other certificate,
instrument or document contemplated hereby or thereby. To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities, which is permissible under applicable law.

 

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Section 5.02         Indemnification by the Investor. In consideration of the
Company’s execution and delivery of this Agreement, and in addition to all of
the Investor’s other obligations under this Agreement, the Investor shall
defend, protect, indemnify and hold harmless the Company and all of its
officers, directors, shareholders, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the “Company Indemnitees”) from and against any
and all Indemnified Liabilities incurred by the Company Indemnitees or any of
them as a result of, or arising out of, or relating to (a) any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement for the registration of the Shares as originally filed or in any
amendment thereof, or in any related prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Investor will only be liable for written information relating to the
Investor furnished to the Company by or on behalf of the Investor specifically
for inclusion in the documents referred to in the foregoing indemnity, and will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Investor by or on
behalf of the Company specifically for inclusion therein; (b) any
misrepresentation or breach of any representation or warranty made by the
Investor in this Agreement or any instrument or document contemplated hereby or
thereby executed by the Investor; or (c) any breach of any covenant, agreement
or obligation of the Investor(s) contained in this Agreement or any other
certificate, instrument or document contemplated hereby or thereby executed by
the Investor. To the extent that the foregoing undertaking by the Investor may
be unenforceable for any reason, the Investor shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.

 

- 14 -

 

Section 5.03         Notice of Claim. Promptly after receipt by an Investor
Indemnitee or Company Indemnitee of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving an
Indemnified Liability, such Investor Indemnitee or Company Indemnitee, as
applicable, shall, if a claim for an Indemnified Liability in respect thereof is
to be made against any indemnifying party under this Article V, deliver to the
indemnifying party a written notice of the commencement thereof; but the failure
to so notify the indemnifying party will not relieve it of liability under this
Article V except to the extent the indemnifying party is prejudiced by such
failure. The indemnifying party shall have the right to participate in, and, to
the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually reasonably satisfactory to the indemnifying party and the
Investor Indemnitee or Company Indemnitee, as the case may be; provided,
however, that an Investor Indemnitee or Company Indemnitee shall have the right
to retain its own counsel with the reasonable fees and expenses of not more than
one counsel for such Investor Indemnitee or Company Indemnitee to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Investor
Indemnitee or Company Indemnitee and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Investor Indemnitee or Company Indemnitee and any other party represented by
such counsel in such proceeding. The Investor Indemnitee or Company Indemnitee
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 Investor Indemnitee or Company Indemnitee which relates to such action or
claim. The indemnifying party shall keep the Investor Indemnitee or Company
Indemnitee fully apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent; provided, however, that the indemnifying party shall
not unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the prior written consent of the Investor Indemnitee or Company
Indemnitee, consent to entry of any judgment or enter into any settlement or
other compromise which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Investor Indemnitee or Company
Indemnitee of a release from all liability in respect to such claim or
litigation. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Investor Indemnitee
or Company Indemnitee with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The
indemnification required by this Article V shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received and payment therefor is ude.

 

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Section 5.04         Contribution. In the event that the indemnity provided in
Section 5.01 or Section 5.02 is unavailable to or insufficient to hold harmless
an indemnified party for any reason, the Company and the Investor severally
agree to contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending the same) (collectively “Losses”) to which the
Company or the Investor may be subject in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and by the
Investor on the other from transactions contemplated by this Agreement. If the
allocation provided by the immediately preceding sentence is unavailable for any
reason, the Company and the Investor severally shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company on the one hand and of the Investor on the
other in connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations. Benefits received
by the Company shall be deemed to be equal to the total proceeds from the
offering (net of all discounts and commissions but before deducting expenses)
received by it, and benefits received by the Investor shall be deemed to be
equal to the total discounts received by the Investor. Relative fault shall be
determined by reference to, among other things, whether any untrue or any
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information provided by the Company on the
one hand or the Investor on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Company and the Investor agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of the
equitable considerations referred to above. The aggregate amount of losses,
liabilities, claims, damages and expenses incurred by an indemnified party and
referred to above in this Article V shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue or alleged untrue statement or
omission or alleged omission. Notwithstanding the provisions of this Section
5.04, the Investor shall not be required to contribute any amount in excess of
the amount by which the Purchase Price for Shares actually purchased pursuant to
this Agreement exceeds the amount of any damages which the Investor has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. 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. For purposes of this Article V, each person who
controls the Investor within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act and each director, officer, employee and agent of
the Investor shall have the same rights to contribution as the Investor, and
each person who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, each officer of the Company
who shall have signed the Registration Statement and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to the applicable terms and conditions of this Section 5.04.

 

Section 5.05         Remedies. The remedies provided for in this Article V are
not exclusive and shall not limit any right or remedies which may otherwise be
available to any indemnified person at law or in equity. The obligations of the
parties to indemnify or make contribution under this Article V shall survive
expiration or termination of this Agreement for a period of three years.

 

Section 5.06         LIMITATION OF LIABILITY. NOTWITHSTANDING THE FOREGOING, NO
PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTY FOR INDIRECT, INCIDENTAL
OR CONSEQUENTIAL DAMAGES.

 

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Article VI.
Covenants of the Company

 

Section 6.01         Registration Statement.

 

(a)Filing of a Registration Statement. The Company shall prepare and file with
the SEC a Registration Statement, or multiple Registration Statements for the
resale by the Investor of the Registrable Securities. The Company in its sole
discretion may chose when to file such Registration Statements; provided,
however, that the Company shall not have the ability to request any Advances
until the effectiveness of a Registration Statement. Each Registration Statement
shall contain the “Plan of Distribution” section in substantially the form
attached hereto as Exhibit D.

 

(b)Maintaining a Registration Statement. The Company shall maintain the
effectiveness of any Registration Statement that has been declared effective at
all times during the shorter of (i) Commitment Period and (ii) the period during
which any Registrable Securities remain outstanding (the “Registration Period”).
Each Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any 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 light of the circumstances in which
they were made, not misleading.

 

(c)Filing Procedures. Not less than three business days prior to the filing of a
Registration Statement and not less than one business day prior to the filing of
any related amendments and supplements to all Registration Statements (except
for any amendments or supplements caused by the filing of any annual reports on
Form 10-K, quarterly reports on Form 10-Q or current reports on Form 8-K), the
Company shall furnish to the Investor copies of all such documents proposed to
be filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the reasonable and prompt review
of the Investor. The Investor shall furnish comments on a Registration Statement
and any related amendment and supplement to a Registration Statement to the
Company within 24 hours of the receipt thereof. If the Investor fails to provide
comments to the Company within such 24-hour period, then the Registration
Statement, related amendment or related supplement, as applicable, shall be
deemed accepted by the Investor in the form originally delivered by the Company
to the Investor.

 

(d)Delivery of Final Documents. The Company shall furnish to the Investor
without charge, (i) at least one copy of each Registration Statement as declared
effective by the SEC and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference, all
exhibits and each preliminary prospectus, (ii) at the request of the Investor,
ten (10) copies of the final prospectus included in such Registration Statement
and all amendments and supplements thereto (or such other number of copies as
the Investor may reasonably request) and (iii) such other documents as the
Investor may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities owned by the Investor pursuant to a
Registration Statement.

 

- 17 -

 

(e)Amendments and Other Filings. The Company shall (i) prepare and file with the
SEC such amendments (including post-effective amendments) and supplements to a
Registration Statement and the related prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the Securities Act, as may be necessary to keep such
Registration Statement effective at all times during the Registration Period,
and prepare and file with the SEC such additional Registration Statements 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 (subject to the terms of this Agreement), and
as so supplemented or amended to be filed pursuant to Rule 424; and (iii)
provide the Investor copies of all correspondence from and to the SEC relating
to a Registration Statement (provided that the Company may excise any
information contained therein which would constitute material non-public
information. In the case of amendments and supplements to a Registration
Statement which are required to be filed pursuant to this Agreement (including
pursuant to this Section 6.01(e) ) by reason of the Company’s filing a report on
Form 10-K, or Form 8-K or any analogous report under the Exchange Act, the
Company shall incorporate such report by reference into the Registration
Statement, if applicable, or shall file such amendments or supplements with the
SEC either on the day on which the Exchange Act report is filed which created
the requirement for the Company to amend or supplement the Registration
Statement, if feasible, or otherwise promptly thereafter.

 

(f)Blue-Sky. The Company shall use its commercially reasonable efforts to, if
applicable, (i) register and qualify the Registrable Securities covered by a
Registration Statement under such other securities or “blue sky” laws of such
jurisdictions in the United States as the Investor reasonably requests,
(ii) prepare and file in those jurisdictions, such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (w) make any change to its Articles of
Incorporation or Bylaws, (x) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section 6.01(f), (y)
subject itself to general taxation in any such jurisdiction, or (z) file a
general consent to service of process in any such jurisdiction. The Company
shall promptly notify the Investor of the receipt by the Company of any
notification with respect to the suspension of the registration or qualification
of any of the Registrable Securities for sale under the securities or “blue sky”
laws of any jurisdiction in the United States or its receipt of actual notice of
the initiation or threat of any proceeding for such purpose.

 

Section 6.02         Listing of Common Stock. The Company shall use its
commercially reasonable efforts to maintain the Common Stock’s authorization for
quotation on the Principal Market and shall notify the Investor promptly if the
Common Stock shall cease to be authorized for quotation on the Principal Market.

 

Section 6.03         Opinion of Counsel. The Company shall deliver to the
Investor an opinion from counsel to the Company in the form attached hereto as
Exhibit C prior to the first Advance Notice.

 

Section 6.04         Exchange Act Registration. The Company will file in a
timely manner all reports and other documents required of it as a reporting
company under the Exchange Act and will not take any action or file any document
(whether or not permitted by Exchange Act or the rules thereunder) to terminate
or suspend its reporting and filing obligations under the Exchange Act.

 

- 18 -

 

 

Section 6.05         Transfer Agent Instructions. Upon effectiveness of the
Registration Statement the Company shall deliver instructions and a legal
opinion to its transfer agent to issue Common Stock to the Investor free of
restrictive legends on or before each Advance Date.

 

Section 6.06         Corporate Existence. The Company will take all steps
necessary to preserve and continue the corporate existence of the Company during
the Commitment Period.

 

Section 6.07         Notice of Certain Events Affecting Registration; Suspension
of Right to Make an Advance. The Company will immediately notify the Investor,
and confirm in writing, upon its becoming aware of the occurrence of any of the
following events in respect of a Registration Statement or related prospectus
relating to an offering of Registrable Securities: (i) receipt of any request
for additional information by the SEC or any other Federal or state governmental
authority during the period of effectiveness of the Registration Statement for
amendments or supplements to the Registration Statement or related prospectus;
(ii) the issuance by the SEC or any other Federal governmental authority of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt 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 written threat of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in the
Registration Statement or related prospectus of any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of the Registration Statement, 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 not misleading, and that in the case of the related prospectus, 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, or of the necessity to amend the Registration Statement or
supplement a related prospectus to comply with the Securities Act or any other
law; and (v) the Company’s reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate (other than, in the
case of this clause (v), for routine post-effective amendments required in order
to maintain the effectiveness of a Registration Statement filed on Form S-1);
and the Company will promptly make available to the Investor any such supplement
or amendment to the related prospectus. The Company shall not deliver to the
Investor any Advance Notice, and the Investor shall not sell any Shares pursuant
to a Registration Statement, during the continuation of any of the foregoing
events (each of the events described in the immediately preceding clauses (i)
through (v), inclusive, a “Material Outside Event”).

 

Section 6.08         Consolidation; Merger. If an Advance Notice has been
delivered to the Investor, then the Company shall not effect any merger or
consolidation of the Company with or into, or a transfer of all or substantially
all the assets of the Company to another entity before the transaction
contemplated in such Advance Notice has been closed in accordance with Section
2.02 hereof.

 

Section 6.09         Issuance of the Company’s Common Stock. The sale of the
Common Stock hereunder shall be made in accordance with the provisions and
requirements of Regulation D and any applicable state securities law.

 

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Section 6.10         Market Activities.         The Company will not, directly
or indirectly, take any action designed to cause or result in, or that
constitutes or might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company under Regulation M of
the Exchange Act.

 

Section 6.11         Opinion of Counsel Concerning Resales. Provided that the
Investor’s resale of Common Stock received pursuant to this Agreement may be
freely sold by the Investor either pursuant to an effective Registration
Statement, in accordance with Rule 144, or otherwise, the Company shall obtain
for the Investor, at the Company’s expense, any and all opinions of counsel
which may be required by the Company’s transfer agent to issue such shares free
of restrictive legends, or to remove legends from such shares.

 

Section 6.12         Expenses. The Company, whether or not the transactions
contemplated hereunder are consummated or this Agreement is terminated, will pay
all expenses incident to the performance of its obligations hereunder, including
but not limited to (i) the preparation, printing and filing of the Registration
Statement and each amendment and supplement thereto, of each prospectus and of
each amendment and supplement thereto; (ii) the preparation, issuance and
delivery of any Shares issued pursuant to this Agreement, (iii) all fees and
disbursements of the Company’s counsel, accountants and other advisors, (iv) the
qualification of the Shares under securities laws in accordance with the
provisions of this Agreement, including filing fees in connection therewith, (v)
the printing and delivery of copies of any prospectus and any amendments or
supplements thereto, (vi) the fees and expenses incurred in connection with the
listing or qualification of the Shares for trading on the Principal Market, or
(vii) filing fees of the SEC and the Principal Market.

 

Section 6.13         Sales. Without the written consent of the Investor, the
Company will not, directly or indirectly, offer to sell, sell, contract to sell,
grant any option to sell or otherwise dispose of any Common Stock (other than
the Shares offered pursuant to the provisions of this Agreement and securities
that may be issued by the Company under its publicly-disclosed equity
compensation plnas) or securities convertible into or exchangeable for Common
Stock, warrants or any rights to purchase or acquire, Common Stock during the
period beginning on the fifth (5th) Trading Day immediately prior to an Advance
Notice Date and ending on the fifth (5th) Trading Day immediately following the
corresponding Advance Date.

 

Section 6.14         Current Report. Promptly after the date hereof (and prior
to the Company delivering an Advance Notice to the Investor hereunder), the
Company shall file with the SEC a current report on Form 8-K or such other
appropriate form as determined by counsel to the Company, relating to the
transactions contemplated by this Agreement and shall provide the Investor with
a reasonable opportunity to review such report prior to its filing.

 

Section 6.15         Black-out Periods. Notwithstanding any other provision of
this Agreement, the Company shall not deliver an Advance Notice during any
Company black-out periods or during any other period in which the Company is, or
could be deemed to be, in possession of material non-public information.

 

- 20 -

 

 

Article VII.
Conditions for Advance and Conditions to Closing

 

Section 7.01         Conditions Precedent to the Right of the Company to Deliver
an Advance Notice. The right of the Company to deliver an Advance Notice and the
obligations of the Investor hereunder with respect to an Advance is subject to
the satisfaction by the Company, on each Advance Notice Date and Advance Date (a
“Condition Satisfaction Date”), of each of the following conditions:

 

(a)Accuracy of the Company’s Representations and Warranties. The representations
and warranties of the Company shall be true and correct in all material
respects.

 

(b)Registration of the Common Stock with the SEC. There is an effective
Registration Statement pursuant to which the Investor is permitted to utilize
the prospectus thereunder to resell all of the Common Stock issuable pursuant to
such Advance Notice. The Company shall have filed with the SEC all reports,
notices and other documents required under the Exchange Act and applicable SEC
regulations during the twelve-month period immediately preceding the applicable
Condition Satisfaction ate.

 

(c)Authority. The Company shall have obtained all permits and qualifications
required by any applicable state for the offer and sale of the Common Stock, or
shall have the availability of exemptions therefrom. The sale and issuance of
the Common Stock shall be legally permitted by all laws and regulations to which
the Company is subject.

 

(d)No Material Outside Event. No Material Outside Event shall have occurred and
be continuing.

 

(e)Performance by the Company. The Company 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
Company at or prior to each Condition Satisfaction Date.

 

(f)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 that prohibits or
directly and adversely affects any of the transactions contemplated by this
Agreement, and no proceeding shall have been commenced that may have a Material
Adverse Effect.

 

(g)No Suspension of Trading in or Delisting of Common Stock. The Common Stock is
quoted on a Principal Market and all of the shares issuable pursuant to such
Advance Notice will be listed or quoted for trading on such Principal Market and
the Company believes, in good faith, that trading of the Common Stock on a
Principal Market will continue uninterrupted for the foreseeable future. The
issuance of Common Stock with respect to the applicable Advance Notice will not
violate the shareholder approval requirements of the Principal Market. The
Company shall not have received any written notice threatening the continued
quotation of the Common Stock on the Principal Market.

 

- 21 -

 

 

 

(h)Maximum Advance Amount. The amount of an Advance requested by the Company
shall not exceed the Maximum Advance Amount.

 

(i)Authorized. There shall be a sufficient number of authorized but unissued and
otherwise unreserved Common Stock for the issuance of all of the shares issuable
pursuant to such Advance Notice.

 

(j)Executed Advance Notice. The Investor shall have received the Advance Notice
executed by an officer of the Company and the representations contained in such
Advance Notice shall be true and correct as of the applicable Condition
Satisfaction Date.

 

(k)Consecutive Advance Notices. Except with respect to the first Advance Notice,
the Company shall have delivered all Shares relating to all prior Advances.

 

Article VIII.
Non-Disclosure of Non-Public Information

 

The Company covenants and agrees that it shall refrain from disclosing, and
shall cause its officers, directors, employees and agents to refrain from
disclosing, any material non-public information (as determined under the
Securities Act, the Exchange Act or the rules and regulations of the SEC) to the
Investor without also disseminating such information to the public, unless prior
to disclosure of such information, the Company identifies such information as
being material non-public information and provides the Investor with the
opportunity to accept or refuse to accept such material non-public information
for review.

 

Article IX.
Non Exclusive Agreement

 

Notwithstanding anything contained herein, this Agreement and the rights awarded
to the Investor hereunder are non-exclusive, and, subject to the provisions in
Section 6.13, the Company may, at any time throughout the term of this Agreement
and thereafter, issue and allot, or undertake to issue and allot, any shares
and/or securities and/or convertible notes, bonds, debentures, options to
acquire shares or other securities and/or other facilities which may be
converted into or replaced by Common Stock or other securities of the Company,
and to extend, renew and/or recycle any bonds and/or debentures, and/or grant
any rights with respect to its existing and/or future share capital.

 

Article X.
Choice of Law/Jurisdiction

 

This Agreement shall be governed by and interpreted in accordance with the laws
of the State of New York without regard to the principles of conflict of laws.
The parties further agree that any action between them shall be heard in New
York County, New York, and expressly consent to the jurisdiction and venue of
the Supreme Court of New York, sitting in New York County, New York and the
United States District Court of the Southern District of New York, sitting in
New York, New York, for the adjudication of any civil action asserted pursuant
to this paragraph.

 

- 22 -

 

 

Article XI. Assignment; Termination

 

Section 11.01         Assignment. Neither this Agreement nor any rights of the
parties hereto may be assigned to any other Person.

 

Section 11.02         Termination.

 

(a)Unless earlier terminated as provided hereunder, this Agreement shall
terminate automatically on the earliest of (i)  the first day of the month next
following the 36-month anniversary of the date hereof, or (ii) the date on which
the Investor shall have made payment of Advances pursuant to this Agreement in
the aggregate amount of the Commitment Amount.

 

(b)The Company may terminate this Agreement effective upon ten (10) Trading
Days’ prior written notice to the Investor; provided that (i) there are no
outstanding Advance Notices, the shares of Common Stock under which have yet to
be issued, and (ii) the Company has paid all amounts owed to the Investor
pursuant to this Agreement. This Agreement may be terminated at any time by the
mutual written consent of the parties, effective as of the date of such mutual
written consent unless otherwise provided in such written consent. In the event
of any termination of this Agreement by the Company hereunder, so long as the
Investor owns any Common Stock issued hereunder that would be Registrable
Securities but for such termination, the Company shall not suspend or withdraw
the Registration Statement or otherwise cause the Registration Statement to
become ineffective, or voluntarily delist the Common Stock from the Principal
Market.

 

(c)Nothing in this Section 11.02 shall be deemed to release the Company or the
Investor from any liability for any breach under this Agreement, or to impair
the rights of the Company and the Investor to compel specific performance by the
other party of its obligations under this Agreement. The indemnification
provisions contained in Article V shall survive termination hereunder.

 

Article XII. Notices

 

Any notices, consents, waivers, or other communications required or permitted to
be given under the terms of this Agreement must be in writing and will be deemed
to have been delivered (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by e-mail if sent on a business day, or, if not sent on a
business day, on the immediately following business day, provided a copy is
mailed by U.S. certified mail, return receipt requested or overnight carrier;
(iii) seven (7) days after being sent by U.S. or Israeli certified mail, return
receipt requested, or (iv) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications, except for Advance Notices which shall be delivered in
accordance with Section 2.01(c) hereof, shall be:

- 23 -

 

 

If to the Company, to: GlassesOff Inc.   5 Jabotinski Street POB 126   Ramat Gan
5252006, Israel   Telephone: (855) 393-7243   Email: nimrod.madar@glassesoff.com

 

With a copy to (which shall not

Constitute notice or delivery of process) to:

    Greenberg Traurig, P.A.   333 S.E. 2nd Avenue   Suite 4400   Miami, FL 3313
  Attention: Robert L. Grossman       Telephone (305) 579-0756   Email:
grossmanb@gtlaw.com     If to the Investor(s): YA Global Master SPV Ltd.   1012
Springfield Avenue   Mountainside, NJ 07092   Attention: Mark Angelo    
Portfolio Manager   Telephone: (201) 985-8300   Email:
mangelo@yorkvilleadvisors.com     With a Copy (which shall not   Constitute
notice or delivery of process) to:     David Gonzalez, Esq.   1012 Springfield
Avenue   Mountainside, NJ 07092   Telephone: (201) 985-8300   Email:
legal@yorkvilleadvisors.com

 

Either party may change its information contained in this Article XII by
delivering notice to the other party as set forth herein.

 

Article XIII. Miscellaneous

 

Section 13.01         Counterparts; Electronic Signatures. This Agreement may be
executed in two or more identical counterparts, all of which shall be considered
one and the same agreement and shall become effective when counterparts have
been signed by each party and delivered to the other party. Facsimile or other
electronically scanned and delivered signatures, including by e-mail attachment,
shall be deemed originals for all purposes of this Agreement.

 

- 24 -

 

 

Section 13.02         Entire Agreement; Amendments. This Agreement supersedes
all other prior oral or written agreements between the Investor, the Company,
their respective affiliates and persons acting on their behalf with respect to
the matters discussed herein, and this Agreement, and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement; provided, however, that this
Agreement may not be amended subsequent to the effectiveness of a Registration
Statement.

 

Section 13.03         Reporting Entity for the Common Stock. The reporting
entity relied upon for the determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this Agreement
shall be Bloomberg, L.P. or any successor thereto. The written mutual consent of
the Investor and the Company shall be required to employ any other reporting
entity.

 

Section 13.04         Structuring and Due Diligence Fee. Each of the parties
shall pay its own fees and expenses (including the fees of any attorneys,
accountants, appraisers or others engaged by such party) in connection with this
Agreement and the transactions contemplated hereby, except that the Company
shall pay to the Investor (or its designee) a structuring and due diligence fee
of $3,000 on or before the date hereof.

 

Section 13.05         Commitment Fee. The Company shall pay to YA Global II SPV
LLC (“YA II SPV”), as designee of the Investor, a commitment fee in an aggregate
amount equal to $450,000 (the “Commitment Fee”), of which (i) $150,000 shall be
paid within three (3) Trading Days of the date hereof, (ii) $150,000 shall be
paid within (3) Trading Days of the date that the Company first receives
Advances hereunder in cumulative amount exceeding $3,000,000 and (iii) $150,000
shall be paid within (3) Trading Days of the date that the Company first
receives Advances hereunder in cumulative amount exceeding $6,000,000. The
Company shall pay each portion of the Commitment Fee either in cash, or by
issuing to YA II SPV shares of Common Stock (such shares, the “Commitment Fee
Shares”), or a combination of cash and Commitment Shares, in each case at the
Company’s sole election and in its sole discretion. The number of Commitment Fee
Shares to be issued by the Company to YA II SPV shall be equal to the amount of
the Commitment Fee the Company chooses to pay in Commitment Fee Shares divided
by (y) the average of the VWAPs for the 5 consecutive Trading Days immediately
prior to the date hereof with respect to the first tranche of the Commitment
Fee, and (z) the average of the VWAPs for the five (5) consecutive Trading Days
immediately prior to the date on which the applicable portion of the Commitment
Fee becomes due. YA II SPV hereby represents and warrants to the Company that it
is an “Accredited Investor” as that term is defined in Rule 501(a)(3) of
Regulation D.

 

- 25 -

 

Section 13.06         Brokerage. Each of the parties hereto represents that it
has had no dealings in connection with this transaction with any finder or
broker who will demand payment of any fee or commission from the other party.
The Company on the one hand, and the Investor, on the other hand, agree to
indemnify the other against and hold the other harmless from any and all
liabilities to any person claiming brokerage commissions or finder’s fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.

 

Section 13.07         No Sales or Transfers Absent Registration or Applicable
Exemption. The Investor represents and warrants to the Company that it will not
sell or otherwise transfer any Shares unless (i) a Registration Statement shall
have been declared effective by the SEC and shall continue to be effective at
the time of any such sale or transfer or (ii) there is an applicable exemption
from registration under the Securities Act with respect to each such sale or
transfer.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

- 26 -

 

  

IN WITNESS WHEREOF, the parties hereto have caused this Standby Equity
Distribution Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.

 

  COMPANY:   GlassesOff Inc.         By: /s/ Nimrod Madar   Name: Nimrod Madar  
Title: President and Chief Executive Officer

 

  INVESTOR:   YA Global Master SPV Ltd.         By: Yorkville Advisors Global,
LP   Its: Investment Manager

 

    By: Yorkville Advisors Global, LLC     Its: General Partner             By:
/s/ Ed Schinik     Name: Ed Schinik     Title: Chief Financial Officer

 

(solely for purposes of Section 13.05)       YA Global II SPV LLC         By:
/s/ Ed Schinik   Name: Ed Schinik   Title: Chief Financial Officer  

 

 

- 27 -

 

 

EXHIBIT A
ADVANCE NOTICE

 

GLASSESOFF INC.

 

Dated: _________________

 

The undersigned, _______________________ hereby certifies, with respect to the
sale of Common Stock of GlassesOff Inc. (the “Company”) issuable in connection
with this Advance Notice, delivered pursuant to that certain Standby Equity
Distribution Agreement, dated as of July 1, 2014 (the “Agreement”), as follows:

 

1.          The undersigned is the duly elected ______________ of the Company.

 

2.          There are no fundamental changes to the information set forth in the
Registration Statement which would require the Company to file a post effective
amendment to the Registration Statement.

 

3.          The Company has performed in all material respects all covenants and
agreements to be performed by the Company and has complied in all material
respects with all obligations and conditions contained in the Agreement on or
prior to the Advance Notice Date, and shall continue to perform in all material
respects all covenants and agreements to be performed by the Company through the
applicable Advance Date. All conditions to the delivery of this Advance Notice
are satisfied as of the date hereof.

 

4.          The undersigned hereby represents, warrants and covenants that it
has made all filings (“SEC Filings”) required to be made by it pursuant to
applicable securities laws (including, without limitation, all filings required
under the Securities Exchange Act of 1934). All SEC Filings have been reviewed
and approved for release by the Company’s attorneys and, if containing financial
information, the Company’s independent certified public accountants. None of the
SEC Filings contained, as of their respective dates of filing, 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.

 

5.          The Advance requested is _____________________.

 

6.          The Minimum Acceptable Price with respect to this Advance Notice is
_________.

 

7.          9.99% of the outstanding Common Stock of the Company as of the date
hereof is ___________.

 

The undersigned has executed this Advance Notice as of the date firs set forth
above.

 

  GLASSESOFF INC.         By:  

 

Please deliver this Advance Notice by email with a follow up phone call to:

Email: Trading@yorkvilleadvisors.com

Attention: Trading Department and Compliance Officer

Confirmation Telephone Number: (201) 985-8300.

 

 

 

 

EXHIBIT B

 

FORM OF SETTLEMENT DOCUMENT

VIA EMAIL

 

GlassesOff Inc.

Attn:  

Email:

 

   Below please find the settlement information with respect to the Advance
Notice dated:              1.  (a) Amount of Advance Notice:  $              
(b) Amount of Advance Notice (after taking into account any adjustments pursuant
to Section 2.01):  $             2.  Market Price:  $             3.  Purchase
Price (Market Price X  98.5%) per share:  $            4.  Number of Shares due
to Investor:     

 

Please issue the number of Shares due to the Investor to the account of the
Investor as follows:

 

Investor’s DTC participant #:

ACCOUNT NAME:

ACCOUNT NUMBER:

ADDRESS:

CITY:

COUNTRY:

Contact person:

Number and/or email:

 

  Sincerely,       YA GLOBAL MASTER SPV, LTD.

 

Approved By GlassesOff Inc.:

 

    Name:  

 

 

 

 

EXHIBIT C

 

FORM OF OPINION

  

1.          The Company is a corporation validly existing and in good standing
under the laws of the State of Nevada, with corporate power and authority to
own, lease and operate its properties and to conduct its business as described
in the Company’s public filings, including reports filed or furnished by the
Company under the Securities Exchange Act of 1934, as amended, (the “Exchange
Act”), and the rules and regulations of the Commission thereunder (the “Public
Filings”) and to enter into and perform its obligations under the Standby Equity
Distribution Agreement.

 

2.          The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Standby Equity Distribution Agreement
and to issue the shares of Common Stock in accordance with its terms. The
execution and delivery of the Standby Equity Distribution Agreement by the
Company and the consummation by it of the transactions contemplated thereby have
been duly authorized by all necessary corporate action, and no further consent
or authorization of the Company or its Board of Directors or stockholders is
required. The Standby Equity Distribution Agreement has been duly executed and
delivered.

 

3.          The shares of Common Stock issuable under the Standby Equity
Distribution Agreement are duly authorized and, upon issuance in accordance with
the terms of the Standby Equity Distribution Agreement against payment therefore
in accordance with the terms thereof, will be duly and validly issued, fully
paid and nonassessable, free of any liens, encumbrances and preemptive or
similar rights, in each case arising under the Company’s Articles of
Incorporation or By-laws or, to my knowledge, in any agreement filed by the
Company as an exhibit to the Company’s Public Filings (other than inchoate liens
existing as a result of statute and restrictions on transfer arising under
applicable securities laws).

 

4.          The execution, delivery and performance of the Standby Equity
Distribution Agreement by the Company and the consummation by the Company of the
transactions contemplated thereby (other than performance by the Company of its
obligations under the indemnification sections of such agreements, which are not
subject to this opinion) will not (i) result in a violation of the Company’s
Articles of Incorporation or Bylaws; (ii) conflict with, or constitute a default
(or an event that 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 agreement or indenture filed by the Company as an exhibit
to the Company's Public Filings; or (iii) to my knowledge, result in a violation
of any federal or Nevada law, rule or regulation, order, judgment or decree
applicable to the Company or by which any property or asset of the Company is
bound or affected.

 

5.          To my knowledge and other then as set forth in the Public Filings,
there are no legal or governmental proceedings pending to which the Company is a
party or of which any property or assets of the Company is subject which is
required to be disclosed in any Public Filings.

 

 

 

 

EXHIBIT D

 

PLAN OF DISTRIBUTION

 

The Selling Stockholder and any of its pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their Common
Stock on the OTCBB or any other stock exchange, market or trading facility on
which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The Selling Stockholder may use any one or more of
the following methods when selling shares:

 

·ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;

 

·block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;

 

·purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;

 

·an exchange distribution in accordance with the rules of the applicable
exchange;

 

·privately negotiated transactions;

 

·broker-dealers may agree with the Selling Stockholder to sell a specified
number of such shares at a stipulated price per share;

 

·through the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;

 

·a combination of any such methods of sale; or

 

·any other method permitted pursuant to applicable law.

 

The Selling Stockholder may also sell shares under Rule 144 under the Securities
Act of 1933, as amended (the “Securities Act”), if available, rather than under
this prospectus.

 

The Selling Stockholder is an “underwriter” within the meaning of Section
2(a)(11) of the Securities Act.

 

Broker-dealers engaged by the Selling Stockholder may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholder (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated, but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction not in excess of a customary brokerage commission
in compliance with NASDR Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with NASDR IM-2440.

 

 

 

 

In connection with the sale of the Common Stock or interests therein, the
Selling Stockholder may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
Common Stock in the course of hedging the positions they assume. The Selling
Stockholder may also enter into option or other transactions with broker-dealers
or other financial institutions or the creation of one or more derivative
securities which require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).

 

The Selling Stockholder is an, and any broker-dealers or agents that are
involved in selling the shares 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 purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. The Selling Stockholder has
informed the Company that it does not have any written or oral agreement or
understanding, directly or indirectly, with any person to distribute the Common
Stock. In no event shall any broker-dealer receive fees, commissions and markups
which, in the aggregate, would exceed eight percent (8%).

 

Because the Selling Stockholder is an “underwriter” within the meaning of the
Securities Act, it is subject to the prospectus delivery requirements of the
Securities Act including Rule 172 thereunder. In addition, any securities
covered by this prospectus which qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than under this prospectus.
There is no underwriter (other than the Selling Stockholder) or coordinating
broker acting in connection with the proposed sale of the resale shares by the
Selling Stockholder.

 

We have agreed to keep this prospectus effective until the earlier of (i) the
date on which the shares may be resold by the Selling Stockholders without
registration and without regard to any volume limitations by reason of Rule 144
under the Securities Act or any other rule of similar effect or (ii) all of the
shares have been sold pursuant to this prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be
sold only through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states, the resale
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

 

Expenses, Indemnification

 

We will not receive any of the proceeds from the sale of the Common Stock sold
by the Selling Stockholder and will bear all expenses related to the
registration of this offering, but will not pay for any commissions, fees or
discounts, if any, relating to the sale of the Common Stock sold by the Selling
Stockholder. We have agreed to indemnify the Selling Stockholder against certain
losses, claims, damages and liabilities, including liabilities under the
Securities Act.

 

 

 

 

Supplements

 

In the event of a material change in the plan of distribution disclosed in this
prospectus, the Selling Stockholder will not be able to effect transactions in
the shares pursuant to this prospectus until such time as a post-effective
amendment to the registration statement is filed with, and declared effective
by, the SEC.

 

Regulation M

 

We have informed the Selling Stockholder that it is required to comply with
Regulation M promulgated under the Securities Exchange Act of 1934 with respect
to any purchase or sale of our Common Stock. In general, Rule 102 under
Regulation M prohibits any person connected with a distribution of our Common
Stock from directly or indirectly bidding for, or purchasing for any account in
which it has a beneficial interest, any of the shares or any right to purchase
the shares, for a period of one business day before and after completion of its
participation in the distribution.

 

During any distribution period, Regulation M prohibits the Selling Stockholder
and any other persons engaged in the distribution from engaging in any
stabilizing bid or purchasing our Common Stock except for the purpose of
preventing or retarding a decline in the open market price of the Common Stock.
None of these persons may affect any stabilizing transaction to facilitate any
offering at the market.

 

We have also advised the Selling Stockholders that they should be aware that the
anti-manipulation provisions of Regulation M under the Exchange Act will apply
to purchases and sales of Common Stock by the Selling Stockholder, and that
there are restrictions on market-making activities by persons engaged in the
distribution of the shares. Under Regulation M, the Selling Stockholder or its
agents may not bid for, purchase, or attempt to induce any person to bid for or
purchase, shares of our Common Stock while the Selling Stockholder is
distributing shares covered by this prospectus. Regulation M may prohibit the
Selling Stockholder from covering short sales by purchasing shares while the
distribution is taking place, despite any contractual rights to do so under the
Agreement. We have advised the Selling Stockholders that they should consult
with their own legal counsel to ensure compliance with Regulation M.