Exhibit 10.1

SECURITIES PURCHASE AGREEMENT
 
THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”) is made as of the 25th day
of June, 2014 by and between Medican Enterprises, Inc., a Nevada corporation
(the “Company”), and Himmil Investments, Ltd., a British Virgin Islands company
(the “Investor”).
 
WHEREAS, the Company and the Investor are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(a)(2) of the Securities Act of 1933, as amended (the “1933 Act”),
and Rule 506(b) of Regulation D (“Regulation D”) as promulgated by the United
States Securities and Exchange Commission (the “Commission”) under the 1933 Act
(without limiting any other such exemption which may apply to the transactions
contemplated by this Agreement);
 
WHEREAS, the Company has authorized the issuance of (i) a senior convertible
note, in the original principal amount of $1,500,000, in the form attached
hereto as Exhibit A (the “Note”), which Note shall be convertible into shares of
the Company’s common stock, $.001 par value per share (the “Common Stock”), in
accordance with the terms of the Note, and (ii) a warrant to acquire up 297,832
additional shares of Common Stock, in the form attached hereto as Exhibit B (the
“Warrant”);
 
WHEREAS, Investor wishes to purchase, and the Company wishes to sell at the
Closing (as defined below), upon the terms and conditions stated in this
Agreement, (i) the Note (and the Common Stock issuable upon conversion thereof,
collectively, the “Conversion Shares”) and (ii) the Warrant (and the Common
Stock issuable upon exercise thereof, collectively, the “Warrant Shares”).

WHEREAS, the Note, the Conversion Shares, the Warrant and the Warrant Shares are
collectively referred to herein as the “Securities” and the offering
contemplated hereby is referred to herein as the “Offering”;
 
WHEREAS, the parties have agreed that the obligation to repay the Note shall be
an unsecured obligation of the Company; and
 
WHEREAS, at the Closing, the parties hereto shall execute and deliver a
Registration Rights Agreement, in the form attached hereto as Exhibit C (the
“Registration Rights Agreement”), pursuant to which the Company has agreed to
provide certain registration rights with respect to the Registrable Securities
(as defined in the Registration Rights Agreement), under the 1933 Act and the
rules and regulations promulgated thereunder, and applicable state securities
laws.
 
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and in consideration of the premises and the
mutual agreements, representations and warranties, provisions and covenants
contained herein, the parties hereto, intending to be legally bound hereby,
agree as follows:
 
1.           Purchase and Sale of Note and Warrant
 
1.1           Purchase and Sale of Note and Warrant. Subject to the satisfaction
(or, where legally permissible, the waiver) of the conditions set forth in
Section 4.1, the Company
 

 
 

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shall issue and sell to the Investor, and the Investor shall purchase from the
Company on the Closing Date (as defined below), the Note and the Warrant (the
“Closing”).
 
1.2           Form of Payment. On the Closing Date, (i) the Investor shall pay
the Purchase Price (as defined below) (less the amounts withheld pursuant to
Section 12.12) to the Company for the Note and the Warrant to be issued and sold
to the Investor at the Closing, by wire transfer of immediately available funds
in accordance with the Company’s written wire instructions and (ii) immediately
following the Company’s receipt of such amount, the Company shall deliver to the
Investor (x) the Note and (y) the Warrant, in each case, duly executed on behalf
of the Company and registered in the name of the Investor or its designee.
 
2.           Purchase Price. The purchase price for the Note and the Warrant to
be purchased by the Investor (the “Purchase Price”) shall be $1,000,000.  The
Note will be issued with an original issue discount of approximately 33.33%.
 
3.           Closing Date.  The date and time of the Closing (the “Closing
Date”) shall be 10:00 a.m. (New York City time), on the first (1st) Trading Day
(as defined below) (and including the date hereof if a Trading Day) on which the
conditions to the Closing set forth in Section 4.1 below are satisfied or
waived. The Closing shall occur electronically.
 
4.           Closing Conditions; Certain Covenants.
 
4.1           Conditions to the Closing.
 
(a)           Conditions of the Company to the Closing.  The obligation of the
Company to sell and issue the Note and the Warrant to the Investor at the
Closing is subject to the fulfillment, to the Company’s reasonable satisfaction,
prior to or at the Closing, of each of the following conditions:
 
(i)           Representations and Warranties.  The representations and
warranties of the Investor contained in this Agreement (x) that are not
qualified by “materiality” shall have been true and correct in all material
respects when made and shall be true and correct in all material respects as of
the Closing Date with the same force and effect as if made on such dates, except
to the extent such representations and warranties are as of another date, in
which case, such representations and warranties shall be true and correct in all
material respects as of such other date and (y) that are qualified by
“materiality” shall have been true and correct when made and shall be true and
correct as of the Closing Date with the same force and effect as if made on such
dates, except to the extent such representations and warranties are as of
another date, in which case, such representations and warranties shall be true
and correct as of such other date.
 
(ii)           Registration Rights Agreement.  The Investor shall have duly
executed and delivered the Registration Rights Agreement to the Company.
 
(iii)           No Injunction.  No statute, regulation, order, decree, writ,
ruling or injunction shall have been enacted, entered, promulgated, threatened
or endorsed by any court or governmental authority of competent jurisdiction
which prohibits the
 

 
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consummation of or which would materially modify or delay any of the
transactions contemplated by the Transaction Documents.
 
(b)           Conditions to the Investor to the Closing.  The obligation of the
Investor to purchase the Note and the Warrant to be issued to the Investor at
the Closing is subject to the satisfaction, or (where legally permissible) the
waiver by the Investor, on the Closing Date, of each of the following
conditions:
 
(i)           Representations and Warranties. The representations and warranties
of the Company contained in this Agreement (x) that are not qualified by
“materiality” or “Material Adverse Effect” shall have been true and correct in
all material respects when made and shall be true and correct in all material
respects as of the Closing Date with the same force and effect as if made on
such dates, except to the extent such representations and warranties are as of
another date, in which case, such representations and warranties shall be true
and correct in all material respects as of such other date and (y) that are
qualified by “materiality” or “Material Adverse Effect” shall have been true and
correct when made and shall be true and correct as of the Closing Date with the
same force and effect as if made on such dates, except to the extent such
representations and warranties are as of another date, in which case, such
representations and warranties shall be true and correct as of such other date.
 
(ii)           Performance of the Company.  The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement and the Registration Rights Agreement
to be performed, satisfied or complied with by the Company at or prior to the
Closing Date. The Company shall have delivered to the Investor on the Closing
Date a written certification by an executive officer of the Company to the
foregoing substantially in the form attached hereto as Exhibit D.
 
(iii)           No Suspension of Trading in or Notice of Delisting of Common
Stock.  Trading in the Common Stock shall not have been suspended by the
Commission, the Trading Market or the FINRA (except for any suspension of
trading of less than fourteen (14) days, which suspension shall be terminated
prior to the Closing Notice Date), the Company shall not have received any final
and non-appealable notice that the listing or quotation of the Common Stock on
the Trading Market shall be terminated on a date certain (unless, prior to such
date certain, the Common Stock is listed or quoted on any other Trading Market),
trading in securities generally as reported on the Trading Market shall not have
been suspended or limited, nor shall a banking moratorium have been declared
either by the U.S. or New York State authorities (except for any suspension,
limitation or moratorium which shall be terminated prior to the Closing Notice
Date), there shall not have been imposed any suspension of electronic trading or
settlement services by the Depository Trust Company (“DTC”) with respect to the
Common Stock that is continuing, the Company shall not have received any notice
from DTC to the effect that a suspension of electronic trading or settlement
services by DTC with respect to the Common Stock is being imposed or is
contemplated (unless, prior to such suspension, DTC shall have notified the
Company in writing that DTC has determined not to impose any such suspension).
 

 
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(iv)           Compliance with Laws.  The Company shall have complied with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances in connection with the execution, delivery and performance of this
Agreement and the other Transaction Documents (as defined below) to which it is
a party and the consummation of the transactions contemplated hereby and
thereby, including, without limitation, the Company shall have obtained all
permits and qualifications required by any applicable state securities or “Blue
Sky” laws for the offer and sale of the Securities by the Company to the
Investor).
 
(v)           No Injunction.  No statute, regulation, order, decree, writ,
ruling or injunction shall have been enacted, entered, promulgated, threatened
or endorsed by any court or governmental authority of competent jurisdiction
which prohibits the consummation of or which would materially modify or delay
any of the transactions contemplated by the Transaction Documents.
 
(vi)           No Proceedings or Litigation.  No action, suit or proceeding
before any arbitrator or any court or governmental authority shall have been
commenced or threatened, and no inquiry or investigation by any governmental
authority shall have been commenced or threatened, against the Company or any
Subsidiary, or any of the officers, directors or affiliates of the Company or
any Subsidiary, seeking to restrain, prevent or change the transactions
contemplated by the Transaction Documents, or seeking material damages in
connection with such transactions.
 
(vii)           Listing of Securities.  All of the Conversion Shares and Warrant
Shares that may be issued pursuant to the Note and Warrant, respectively, shall
have been approved for listing or quotation on the Trading Market as of the
Closing Date, in each case, without regard to any limitations on conversion or
exercise set forth in the Note or Warrant, respectively, subject only to notice
of issuance.
 
(viii)           No Material Adverse Effect. No condition, occurrence, state of
facts or event constituting a Material Adverse Effect shall have occurred and be
continuing.
 
(ix)           Opinion of Counsel. On the Closing Date, the Investor shall have
received an opinion from outside counsels to the Company, dated the Closing
Date, in the form mutually agreed to by the parties hereto prior to the date
hereof.
 
(x)           Note and Warrant.  At the Closing, the Company shall have tendered
to the Investor the Note and Warrant.
 
(xi)           Registration Rights Agreement.  The Company shall have duly
executed and delivered the Registration Rights Agreement to the Investor.
 
(xii)           Current Public Information. All reports, schedules,
registrations, forms, statements, information and other documents required to
have been filed by the Company with the Commission pursuant to the reporting
requirements of the 1934 Act, including all material required to have been filed
pursuant to Section 13(a) or 15(d) of the 1934 Act, shall have been filed with
the Commission under the 1934 Act.
 

 
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4.2           Reserved.
 
4.3           Securities Law Disclosure; Publicity.  The Company shall (a) by
9:00 a.m. (New York City time) on the Trading Day immediately following the
Closing Date, issue a press release in form and substance reasonably acceptable
to the Investor disclosing the material terms of the transactions contemplated
hereby (the “Press Release”) and (b) by the fourth Trading Date following the
Closing Date, issue a Current Report on Form 8-K (the “Current Report”)
disclosing the material terms of the transactions contemplated hereby, and
including the Transaction Documents as exhibits thereto, within the time
required by the 1934 Act. From and after the issuance of the Press Release, the
Company represents to the Investor that the Company shall have publicly
disclosed all material, non-public information delivered to the Investor as of
such time by the Company or any of its subsidiaries, or any of their respective
officers, directors, employees or agents in connection with the transactions
contemplated by the Transaction Documents.  The Company shall afford the
Investor and its counsel with a reasonable opportunity to review and comment
upon, shall consult with the Investor and its counsel on the form and substance
of, and shall give due consideration to all such comments from the Investor or
its counsel on, any press release, Commission filing or any other public
disclosure made by or on behalf of the Company relating to the Investor, its
purchases hereunder or any aspect of the Transaction Documents or the
transactions contemplated thereby, prior to the issuance, filing or public
disclosure thereof, and the Company shall not issue, file or publicly disclose
any such information to which the Investor shall object. For the avoidance of
doubt, the Company shall not be required to submit for review any such
disclosure contained in periodic reports filed with the Commission under the
Exchange Act if it shall have previously provided the same disclosure for review
in connection with a previous filing.
 
4.4           Legends.  The Securities may only be disposed of in compliance
with state and federal securities laws.  In connection with any transfer of
Securities other than pursuant to an effective registration statement or Rule
144 (as defined below), to the Company or to an affiliate of the Investor or in
connection with a pledge, the Company may require the transferor thereof to
provide to the Company an opinion of the Company’s counsel, the form and
substance of which opinion shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration of such transferred
Securities under the 1933 Act.  The Investor understands that the certificate or
other instrument representing the Note and the Warrant and the stock
certificates representing the Conversion Shares and the Warrant Shares,
respectively, except as set forth below, shall bear any legends as required by
applicable state securities or “Blue Sky” laws in addition to a restrictive
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of such stock certificates):
 
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE][EXERCISABLE]
HAVE BEEN] [THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN]
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN
 

 
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OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM
REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.
 
The Company shall use its reasonable best efforts to cause its transfer agent to
remove the legend set forth above and to issue a certificate without such legend
to the holder of the Securities upon which it is stamped, or to issue to such
holder by electronic delivery at the applicable balance account at DTC, unless
otherwise required by state securities or “blue sky” laws, at such time as (i)
such Securities are registered for resale under the 1933 Act, (ii) in connection
with a sale, assignment or other transfer, such holder provides the Company with
an opinion of counsel, in a form generally acceptable to the Company’s legal
counsel and the Transfer Agent, to the effect that such sale, assignment or
transfer of the Securities may be made without registration under the 1933 Act,
(ii) if the holding period (as determined under Rule 144) for such Securities is
at least six months, but less than one year, such holder provides the Company
and its legal counsel with reasonable assurance in writing that the Securities
are being sold, assigned or transferred pursuant to Rule 144 or Rule 144A or
(iii) if the holding period (as determined under Rule 144) for such Securities
is at least one year, such holder provides the Company and its legal counsel
with reasonable assurance in writing that the Securities can be sold, assigned
or transferred pursuant to Rule 144 or Rule 144A. In furtherance of the
foregoing, the Company agrees that, following the Effective Date or at such time
as such legend is not required pursuant to this Section 4.4, the Company shall,
no later than three Trading Days following the delivery by the Investor to the
Company or the Transfer Agent of a certificate representing Conversion Shares or
Warrant Shares issued with a restrictive legend (such third Trading Day, the
“Legend Removal Date”), either: (A) issue and deliver (or cause to be issued and
delivered) to the Investor a certificate representing such Conversion Shares or
Warrant Shares, as applicable, that is free from all restrictive and other
legends or (B) cause the Transfer Agent to credit the Investor’s or its
designee’s account at DTC through its Deposit/Withdrawal at Custodian (DWAC)
system with a number of shares of Common Stock equal to the number of Conversion
Shares or Warrant Shares, as applicable, represented by the certificate so
delivered by the Investor. If the Company fails on or prior to the Legend
Removal Date to either (i) issue and deliver (or cause to be issued and
delivered) to the Investor a certificate representing the Conversion Shares or
Warrant Shares, as applicable, that is free from all restrictive and other
legends or (ii) cause the Transfer Agent to credit the balance account of the
Investor or its designee at DTC through its Deposit/Withdrawal at Custodian
(DWAC) system with a number of shares of Common Stock equal to the number of the
Conversion Shares or Warrant Shares, as applicable, represented by the
certificate delivered by the Investor pursuant hereto (a “Delivery Failure”),
and if on or after the Legend Removal Date the Investor purchases (in an open
market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Investor of shares of Common Stock that the
Investor anticipated receiving from the Company without any restrictive legend,
then the Company shall, within three Trading Days after the Investor’s request,
pay cash to the Investor in an amount equal to the Investor’s total purchase
price (including brokerage commissions, if any) for the shares of Common Stock
so purchased,
 

 
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at which point the Company’s obligation to deliver a certificate or credit the
Investor’s or its designee’s account at DTC for such shares of Common Stock
shall terminate and such shares shall be cancelled(the “Buy-In Remedy”).  For
the avoidance of doubt, with respect to any given Delivery Failure, the Investor
shall be entitled, at the election of the Investor, to recovery either pursuant
to this Buy-In Remedy or Section 3(c)(ii) of the Note, but not both.
 
4.5           Sales of Stock.
 
(a)           Investor hereby agrees that, for so long as Investor owns any
Notes, such Investor shall not maintain a Net Short Position (as defined below).
 
(b)           For purposes hereof, a "Net Short Position" by a person means a
position whereby such person has executed one or more sales of Common Stock that
is marked as a short sale (but not including any sale marked “short exempt”) and
that is executed at a time when the Investor has no equivalent offsetting long
position in the Common Stock (or is deemed to have a long position hereunder or
otherwise in accordance with Regulation SHO of the 1934 Act). For purposes of
determining whether the Investor has an equivalent offsetting long position in
the Common Stock, all Common Stock (A) that is owned by the Investor, (B) that
may be issued as Interest Shares pursuant to the terms of the Notes issuable to
the Investor on the Closing Date or, after the Closing Date, then held by the
Investor or (C) that would be issuable upon conversion or exercise in full of
all Securities issuable to the Investor on the Closing Date or, after the
Closing Date, then held by the Investor (assuming that such Securities were then
fully convertible or exercisable, notwithstanding any provisions to the
contrary, and giving effect to any conversion or exercise price adjustments that
would take effect given only the passage of time) shall be deemed to be held
long by the Investor.
 
4.6           Reservation of Shares. So long as any Notes or Warrants remain
outstanding, the Company shall take all action necessary to at all times have
authorized, and reserved for the purpose of issuance, no less than the sum of
(i) 100% of the maximum number of shares of Common Stock issuable upon
conversion of all the Notes then outstanding (assuming for purposes hereof, that
the Notes are convertible at the Conversion Price (as defined in the Notes) and
without regard to any limitations on the conversion of the Notes set forth
therein), and (ii) 100% of the maximum number of Interest Shares issuable
pursuant to the terms of the Notes then outstanding from the Closing Date
through the twelve month anniversary of the Closing Date (determined as if
issued on the Trading Day immediately preceding the Closing Date without taking
into account any limitations on the issuance of securities set forth in the
Notes) and (iii) 100% of the maximum number of Warrant Shares issuable upon
exercise of all the Warrants then outstanding (without regard to any limitations
on the exercise of the Warrants set forth therein).
 
5.           Representations and Warranties of the Company.  Except as set forth
in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part
hereof and shall qualify any representation or otherwise made herein to the
extent of the disclosure contained in the corresponding section of the
Disclosure Schedules, the Company hereby makes the following representations and
warranties to the Investor as of the Closing Date:
 

 
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5.1           Organization, Good Standing and Qualification.  The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada.  The Company is duly qualified to transact business and
is in good standing in each jurisdiction in which the failure to so qualify
would have a Material Adverse Effect.
 
5.2           Capitalization.  As of the date hereof, the authorized capital
stock of the Company consists of (i) 100,000,000 shares of Common Stock, of
which, 42,685,852 are issued and outstanding and 915,450 shares are reserved for
issuance pursuant to Convertible Securities (as defined below) (other than the
Notes and the Warrants) and (ii) 5,000,000 shares of preferred stock, of which
none  are issued and outstanding.  A complete capitalization table of the
Company as of the date hereof is attached hereto as Schedule 5.2 (including,
without limitation, all outstanding Convertible Securities).  No shares of
Common Stock are held in treasury.  All of such outstanding shares are duly
authorized and have been, or upon issuance will be, validly issued and are fully
paid and nonassessable.  17,358,920 shares of the Company’s issued and
outstanding Common Stock on the date hereof are as of the date hereof owned by
Persons who are “affiliates” (as defined in Rule 405 of the 1933 Act and
calculated based on the assumption that only officers, directors and holders of
at least 10% of the Company’s issued and outstanding Common Stock are
“affiliates” without conceding that any such Persons are “affiliates” for
purposes of federal securities laws) of the Company or any of its
Subsidiaries.  To the Company’s Knowledge, except as disclosed in the Public
Reports, no Person owns 10% or more of the Company’s issued and outstanding
shares of Common Stock (calculated based on the assumption that all Convertible
Securities (as defined below), whether or not presently exercisable or
convertible, have been fully exercised or converted (as the case may be) taking
account of any limitations on exercise or conversion (including “blockers”)
contained therein without conceding that such identified Person is a 10%
stockholder for purposes of federal securities laws).  (i) None of the Company’s
or any Subsidiary’s capital stock is subject to preemptive rights or any other
similar rights or any Encumbrances suffered or permitted by the Company or any
Subsidiary; (ii) except as disclosed in Schedule Schedule 5.2 (ii), there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of its Subsidiaries; (iii) other than as set forth on Schedule
5.2(iii), there are no outstanding debt securities, notes, credit agreements,
credit facilities or other agreements, documents or instruments evidencing
Indebtedness of the Company or any of its Subsidiaries or by which the Company
or any of its Subsidiaries is or may become bound; (iv) there are no financing
statements securing obligations in any amounts filed in connection with the
Company or any of its Subsidiaries; (v) except as set forth on Schedule 5.2(v),
there are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except pursuant to the Registration Rights Agreement); (vi) there
are no outstanding securities or instruments of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem a security of the
 

 
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Company or any of its Subsidiaries; (vii) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities; (viii) neither the Company nor any Subsidiary has
any stock appreciation rights or “phantom stock” plans or agreements or any
similar plan or agreement; and (ix) neither the Company nor any of its
Subsidiaries have any liabilities or obligations required to be disclosed in the
Public Reports which are not so disclosed in the Public Reports, other than
those incurred in the ordinary course of the Company’s or its Subsidiaries’
respective businesses and which, individually or in the aggregate, do not or
could not reasonably be expected to have a Material Adverse Effect.
 
5.3           Authorization; Enforcement.  All corporate action on the part of
the Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the Note, the Warrant
and the Registration Rights Agreement (the “Transaction Documents”) and the
performance of all obligations of the Company hereunder and thereunder, and the
authorization (or reservation for issuance), sale and issuance of the Note and
the Warrant, and the Common Stock into which the Note and the Warrant are
convertible or exercisable, as applicable, have been taken on or prior to the
date hereof.  Each of the Transaction Documents has been duly executed by the
Company and, when delivered in accordance with the terms hereof and thereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except: (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
 
5.4           Valid Issuance of the Conversion Shares and Warrant Shares;
Reservation of Shares.  Each of the Note and Warrant has been duly authorized
and, when issued and paid for in accordance with this Agreement, will be duly
and validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company other than restrictions on transfer under this Agreement
and under applicable state and federal securities laws.  Upon conversion in
accordance with the Note or exercise in accordance with the Warrant (as the case
may be), the Conversion Shares and the Warrant Shares, respectively, when issued
and delivered in accordance with the terms of this Agreement and the Note or the
Warrant, as applicable, for the consideration expressed herein and therein, will
be duly and validly issued, fully paid and non-assessable, free and clear of all
Liens imposed by the Company, other than restrictions on transfer under this
Agreement and under applicable state and federal securities laws.  The Company
has reserved from its duly authorized capital stock a sufficient number of
shares of Common Stock for issuance of the Conversion Shares as required by
Section 8 of the Note and Warrant Shares as required by Section 1(g) of the
Warrant.
 
5.5           Offering.  Subject to the truth and accuracy of the Investor’s
representations set forth in Section 6 of this Agreement, the offer and issuance
of the Securities as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act of 1933, as amended (the “1933
Act”), and the qualification or registration requirements of state securities
laws or other applicable blue sky laws.  Neither the Company nor any authorized
agent acting on its behalf will take any action hereafter that would cause the
loss of such exemptions.
 

 
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5.6           Public Reports.  The Company is current in its filing obligations
under the 1934 Act, including without limitation as to its filings of Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form
8-K (collectively, the “Public Reports”).  The Public Reports do not contain any
untrue statement of a material fact or omit to state any fact necessary to make
any statement therein not misleading.  The financial statements included within
the Public Reports for the fiscal year ended December 31, 2013 and for each
quarterly period thereafter (the “Financial Statements”) have been prepared in
accordance with generally accepted accounting principles (“GAAP”) applied on a
consistent basis throughout the periods indicated and with each other, except
that unaudited Financial Statements may not contain all footnote required by
generally accepted accounting principles.  The Financial Statements fairly
present, in all material respects, the financial condition and operating results
of the Company as of the dates, and for the periods, indicated therein, subject
in the case of unaudited Financial Statements to normal year-end audit
adjustments.
 
5.7           Compliance With Laws.  The Company has not violated any law or any
governmental regulation or requirement which violation has had or would
reasonably be expected to have a Material Adverse Effect on its business and the
Company has not received written notice of any such violation.
 
5.8           Violations.  The consummation of the transactions contemplated by
the Transaction Documents and all other documents and instruments required to be
delivered in connection therewith will not result in or constitute any of the
following:  (a) a violation of any provision of the articles of incorporation,
bylaws or other governing documents of the Company; (b) a violation of any
provisions of any applicable law or of any writ or decree of any court or
governmental instrumentality; (c) a default or an event that, with notice or
lapse of time or both, would be a default, breach, or violation of a lease,
license, promissory note, conditional sales contract, commitment, indenture,
mortgage, deed of trust, or other agreement, instrument, or arrangement to which
the Company is a party or by which the Company or its property is bound; (d) an
event that would permit any party to terminate any agreement or to accelerate
the maturity of any indebtedness or other obligation of the Company; or (e) the
creation or imposition of any lien, pledge, option, security agreement, equity,
claim, charge, encumbrance or other restriction or limitation on the capital
stock or on any of the properties or assets of the Company.
 
5.9           Consents; Waivers.  No consent, waiver, approval or authority of
any nature, or other formal action, by any Person, firm or corporation, or any
agency, bureau or department of any government or any subdivision thereof, not
already obtained, is required in connection with the execution and delivery of
the Transaction Documents by the Company or the consummation by the Company of
the transactions provided for herein and therein.
 
5.10           Sarbanes-Oxley Act. The Company is in compliance with any and all
applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as
of the date hereof, and any and all applicable rules and regulations promulgated
by the Commission thereunder that are effective as of the date hereof.
 
5.11           Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or
 

 
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affecting the Company, the Common Stock or any of the Company’s officers or
directors in their capacities as such.
 
5.12           Material Changes; Undisclosed Events, Liabilities or
Developments.  Since the date of the latest audited financial statements
included within the Public Reports, except as specifically disclosed in a
subsequent Public Report filed prior to the date hereof: (i) there has been no
event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock and (v) the Company has not
issued any equity securities to any officer, director or affiliate, except
pursuant to existing Company stock option plans. The Company does not have
pending before the Commission any request for confidential treatment of
information.  Except for the issuance of the Securities contemplated by this
Agreement, no event, liability, fact, circumstance, occurrence or development
has occurred or exists or is reasonably expected to occur or exist with respect
to the Company or its Subsidiaries or their respective businesses, properties,
operations, assets or financial condition, that would be required to be
disclosed by the Company under applicable securities laws at the time this
representation is made or deemed made that has not been publicly disclosed at
least one Trading Day prior to the date that this representation is made.
 
5.13           Intellectual Property.  The Company has, or has rights to use,
all patents, patent applications, trademarks, trademark applications, service
marks, trade names, trade secrets, inventions, copyrights, licenses and other
intellectual property rights and similar rights as described in the Public
Reports as necessary or required for use in connection with their respective
businesses and which the failure to so have could have a Material Adverse Effect
(collectively, the “Intellectual Property Rights”).  None of, and the Company
has not received a notice (written or otherwise) that any of, the Intellectual
Property Rights has expired, terminated or been abandoned, or is expected to
expire or terminate or be abandoned, within two (2) years from the date of this
Agreement.  The Company has not received, since the date of the latest audited
financial statements included within the Public Reports, a written notice of a
claim or otherwise has any knowledge that the Intellectual Property Rights
violate or infringe upon the rights of any Person, except as could not have or
reasonably be expected to not have a Material Adverse Effect.  To the knowledge
of the Company, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual
Property Rights.  The Company has taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties,
except where failure to do so could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
 
5.14           Registration Rights.  Other than the Investor or as set forth in
the Public Reports, no Person has any right to cause the Company to effect the
registration under the 1933 Act of any securities of the Company.
 

 
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5.15           Disclosure.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company confirms that neither it nor any other Person acting on its behalf has
provided the Investor or its agents or counsel with any information that it
believes constitutes or might constitute material, non-public information.  The
Company understands and confirms that the Investor will rely on the foregoing
representation in effecting transactions in securities of the Company.  All of
the disclosure furnished by or on behalf of the Company to the Investor
regarding the Company and its Subsidiaries, their respective businesses and the
transactions contemplated hereby, including the Disclosure Schedules to this
Agreement, is true and correct in all material respects and does not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading.   The press releases disseminated by
the Company during the twelve months preceding the date of this Agreement taken
as a whole do not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made and when made, not misleading.  The Company acknowledges and agrees that
the Investor does not make nor has made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically
set forth in Section 6 hereof.
 
5.16           No Integrated Offering. Assuming the accuracy of the Investor’s
representations and warranties set forth in Section 6, neither the Company, nor
any of its affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would cause this
offering of the Securities to be integrated with prior offerings by the Company
for purposes of (i) the 1933 Act which would require the registration of any
such securities under the 1933 Act, or (ii) any applicable shareholder approval
provisions of any Trading Market on which any of the securities of the Company
are listed or designated.
 
5.17           Seniority.  As of the Closing Date, no Indebtedness or other
claim against the Company is senior to the Note in right of payment, whether
with respect to interest or upon liquidation or dissolution, or otherwise, other
than indebtedness secured by purchase money security interests (which is senior
only as to underlying assets covered thereby) and capital lease obligations
(which is senior only as to the property covered thereby).
 
5.18           Bankruptcy Status; Indebtedness.  The Company has no current
intention or expectation to file for reorganization or liquidation under the
bankruptcy or reorganization laws of any jurisdiction within one year from the
Closing Date.  Schedule 5.18 sets forth as of the date hereof all outstanding
secured and unsecured Indebtedness (as defined below) of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments.  For the
purposes of this Agreement, “Indebtedness” means (x) any liabilities for
borrowed money or amounts owed in excess of $100,000 (other than trade accounts
payable incurred in the ordinary course of business), (y) all guaranties,
endorsements and other contingent obligations in respect of indebtedness of
others, whether or not the same are or should be reflected in the Company’s
consolidated balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (z) the present value of
any lease payments in excess of $100,000 due under leases required
 

 
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to be capitalized in accordance with GAAP.  The Company is not in default with
respect to any Indebtedness.
 
5.19           Regulation M Compliance.  The Company has not, and to its
knowledge no one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
any of the Securities, (ii) sold, bid for, purchased, or paid any compensation
for soliciting purchases of, any of the Securities, or (iii) paid or agreed to
pay to any Person any compensation for soliciting another to purchase any other
securities of the Company.
 
5.20           No Disqualification Events. None of the Company, any of its
predecessors, any affiliated issuer, any director, executive officer, other
officer of the Company participating in the offering contemplated hereby, any
beneficial owner of 20% or more of the Company's outstanding voting equity
securities, calculated on the basis of voting power, nor any promoter (as that
term is defined in Rule 405 under the 1933 Act) connected with the Company in
any capacity at the time of sale (each, an “Issuer Covered Person”) is subject
to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to
(viii) under the 1933 Act (a “Disqualification Event”), except for a
Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has
exercised reasonable care to determine whether any Issuer Covered Person is
subject to a Disqualification Event.
 
6.           Representations and Warranties of the Investor.  The Investor
hereby represents, warrants and covenants that:
 
6.1           Authorization.  The Investor has full power and authority to enter
into this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby and has taken all action necessary to authorize
the execution and delivery of this Agreement and the Registration Rights
Agreement, the performance of its obligations hereunder and thereunder and the
consummation of the transactions contemplated hereby and thereby.
 
6.2           No Public Sale or Distribution. The Investor is (i) acquiring the
Note and the Warrant, and (ii) upon conversion of the Note will acquire the
Conversion Shares and (iii) upon exercise of the Warrant will acquire the
Warrant Shares for its own account, not as a nominee or agent, and not with a
view towards, or for resale in connection with, the public sale or distribution
of any part thereof, except pursuant to sales registered or exempted under the
1933 Act. The Investor is acquiring the Securities hereunder in the ordinary
course of its business. The Investor does not presently have any contract,
agreement, undertaking, arrangement or understanding, directly or indirectly,
with any Person to sell, transfer, pledge, assign or otherwise distribute any of
the Securities.
 
6.3           Accredited Investor Status; Investment Experience. The Investor is
an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.
The Investor can bear the economic risk of its investment in the Securities, and
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of an investment in the Securities.
 

 
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6.4           Reliance on Exemptions.  The Investor understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
the Investor’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Investor set forth herein in order to
determine the availability of such exemptions and the eligibility of the
Investor to acquire the Securities.
 
6.5           Information. The Investor and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by the Investor. The Investor and its advisors, if
any, have been afforded the opportunity to ask questions of the Company. Neither
such inquiries nor any other due diligence investigations conducted by the
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 herein. The Investor understands that its investment in the
Securities involves a high degree of risk. The Investor has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities.
The Investor is relying solely on its own accounting, legal and tax advisors,
and not on any statements of the Company or any of its agents or
representatives, for such accounting, legal and tax advice with respect to its
acquisition of the Securities and the transactions contemplated by this
Agreement.
 
6.6           No Governmental Review. The Investor understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
 
6.7           Validity; Enforcement; No Conflicts. This Agreement and each
Transaction Document to which the Investor is a party have been duly and validly
authorized, executed and delivered on behalf of the Investor and shall
constitute the legal, valid and binding obligations of the Investor enforceable
against the Investor in accordance with their respective terms, except as such
enforceability may be limited by general principles of equity or to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies. The execution, delivery and performance by the
Investor of this Agreement and each Transaction Document to which the Investor
is a party and the consummation by the Investor of the transactions contemplated
hereby and thereby will not (i) result in a violation of the organizational
documents of the Investor 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 Investor is
a party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities or “Blue Sky” laws)
applicable to the Investor, except in the case of clause (ii) above, for such
conflicts, defaults or rights which would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the ability of the
Investor to perform its obligations hereunder.
 

 
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6.8           Organization and Standing. The Investor is a company duly
organized, validly existing and in good standing under the laws of the British
Virgin Islands.
 
6.9           No Disqualification Events. None of the Investor, any of its
predecessors, any affiliates of the Investor, any director, executive officer,
other officer of the Investor, (each, an “Investor Covered Person” and,
together, “Investor Covered Persons”) is subject to any of the "Bad Actor"
disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities
Act (an “Investor Disqualification Event”), except for a Investor
Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Investor has
exercised reasonable care to determine whether any Investor Covered Person is
subject to a Disqualification Event. The Investor has complied, to the extent
applicable, with its disclosure obligations under Rule 506(e).
 
6.10           Brokers or Finders.  The Investor represents and warrants, to the
best of its knowledge, that no finder, broker, agent, financial advisor or other
intermediary, nor any purchaser representative or any broker-dealer acting as a
broker, is entitled to any compensation in connection with the transactions
contemplated by this Agreement or the transactions contemplated hereby.
 
6.11           Ability to Perform.  There are no actions, suits, proceedings or
investigations pending against Investor or Investor’s assets before any court or
governmental agency (nor is there any threat thereof) which would impair in any
way Investor’s ability to enter into and fully perform its commitments and
obligations under this Agreement or the transactions contemplated hereby.
 
7.           Use of Proceeds. The Investor acknowledges that the Company will
use the proceeds received from the purchase of the Note and Warrant for, among
other things, (i) costs and expenses relating to the sale of the Note and
Warrant to the Investor and (ii) general working capital purposes.
 
8.           Rule 144 Availability; Public Information.  At all times during the
period commencing on the six (6) month anniversary of the Closing Date and
ending at such time that all of the Securities can be sold without the
requirement to be in compliance with Rule 144(c)(1) under the 1933 Act and
otherwise without restriction or limitation pursuant to Rule 144 under the 1933
Act, the Company shall use its reasonable best efforts to ensure the
availability of Rule 144 under the 1933 Act to the Investor with regard to the
Conversion Shares and the Warrant Shares (assuming a cashless exercise of the
Warrant), including compliance with Rule 144(c)(1) under the 1933 Act.  If, (i)
at any time during the period commencing from the six (6) month anniversary of
the Closing Date and ending on the first anniversary of the Closing Date, the
Company shall fail for any reason to satisfy the current public information
requirement under Rule 144(c) under the 1933 Act (a “Public Information
Failure”), or (ii) the Company shall fail to take such action as is reasonably
requested by the Investor to enable the Investor to sell the Conversion Shares
and the Warrant Shares (assuming a cashless exercise of the Warrant) pursuant to
Rule 144 under the 1933 Act (including, without limitation, delivering all such
legal opinions, consents, certificates, resolutions and instructions to the
Company’s transfer agent as may be reasonably requested from time to time by the
Investor and otherwise fully cooperate with Investor and Investor’s broker to
effect such sale of securities pursuant to Rule 144 under the 1933 Act) (a
“Process Failure”), then, in either case, in addition to the Investor’s other
available remedies, the Company shall pay to a Investor, in cash, as liquidated
damages and not
 

 
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as a penalty, by reason of any such delay in or reduction of its ability to sell
the Securities, an amount in cash equal to two percent (2.0%) of the aggregate
Purchase Price of the Investor’s Securities on the day of a Public Information
Failure or Process Failure, as applicable, and on every thirtieth (30th) day
(pro rated for periods totaling less than thirty days) thereafter until (a) in
the case of a Process Failure, the date such Process Failure is cured, or (b) in
the case of a Public Information Failure, the earlier of (1) the date such
Public Information Failure is cured and (b) such time that such public
information is no longer required for the Investor to transfer the Conversion
Shares or the Warrant Shares (assuming a cashless exercise of the Warrant)
pursuant to Rule 144 under the 1933 Act.  The payments to which the Investor
shall be entitled pursuant to this Section 8 are referred to herein as “Rule
144 Failure Payments.”  Rule 144 Failure Payments shall be paid on the earlier
of (i) the last day of the calendar month during which such Rule 144 Failure
Payments are incurred and (ii) the third (3rd) Trading Day after the event or
failure giving rise to the Rule 144 Failure Payments is cured.
 
9.           Indemnification. In consideration of the Investor’s execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company’s other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless the
Investor and each holder of any Securities and all of their stockholders,
partners, members, officers, directors, employees and direct or indirect
investors and any of the foregoing Persons’ agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the “Indemnitees”)
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company or any Subsidiary in any of the Transaction Documents, (b) any breach of
any covenant, agreement or obligation of the Company or any Subsidiary contained
in any of the Transaction Documents or (c) any cause of action, suit or claim
brought or made against such Indemnitee by a third party (including for these
purposes a derivative action brought on behalf of the Company or any Subsidiary)
and arising out of or resulting from (i) the execution, delivery, performance or
enforcement of any of the Transaction Documents, (ii) any transaction financed
or to be financed in whole or in part, directly or indirectly, with the proceeds
of the issuance of the Securities, or (iii) the status of the Investor or holder
of the Securities as an investor in the Company pursuant to the transactions
contemplated by the Transaction Documents. 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. Except as
otherwise set forth herein, the mechanics and procedures with respect to the
rights and obligations under this Section 9 shall be the same as those set forth
in Section 6 of the Registration Rights Agreement. Notwithstanding anything to
the contrary in this Section 9, the Company shall not be obligated to pay an
Indemnitee any sums otherwise due under this Section 9 if the Company has
already paid the Indemnitee such sums for the same Indemnified Liabilities under
Section 6 of the Registration Rights Agreement.
 
10.           Reserved.
 

 
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11.           Reserved.
 
12.           Miscellaneous
 
12.1           Successors and Assigns.  Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of the Securities).  Nothing in this Agreement, express or implied,
is intended to confer upon any party, other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
 
12.2           Governing Law; Jurisdiction; Jury Trial. All questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York  or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of New York . The Company
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in New York County, New York , for the adjudication of
any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper.  Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT
OR ANY TRANSACTION CONTEMPLATED HEREBY.
 
12.3           Titles and Subtitles.  The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
 
12.4           Notices.  All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given:  (a) upon personal delivery to
the party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next Trading
Day, (c) five (5) Trading Days after having been sent by registered or certified
mail, return receipt requested, postage prepaid, or (d) one (1) day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt.  All communications shall be
sent to (a) in the case of the Company, to Medican Enterprises, Inc., 5955
Edmond Street, Suite 102, Las Vegas Nevada 89118, Telephone Number: (800)
416-8802, Fax: (702) 825-2660 , Attention: President, with a copy (which shall
not constitute notice) to Ellenoff Grossman & Schole LLP, 1350 Avenue of the
Americas, New York, New York 10105, Telephone Number: (212) 370-1300, Fax: (212)
370-7889 , Attention:
 

 
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Lawrence A. Rosenbloom, Esq. or (b) in the case of the Investor, to Himmil
Investments, Ltd., Rodus Building, 4th Floor, Road Town, Tortola, British Virgin
Islands, Telephone Number: (284) 494-8086, Fax: (284) 494-9474,
Attention:  Arthur C. Price, Director, with a copy (which shall not constitute
notice) to Jolie Kahn, Esq, 2 Liberty Place, 50 South 16th Street, Suite 3401,
Philadelphia, PA 19102, Telephone Number: (215) 253-6645, Fax: (866) 705-3071.
 
12.5           Finder’s Fees.  Each party represents that it neither is nor will
be obligated for any finders’ fee or commission in connection with this
transaction.  The Company shall indemnify and hold harmless each Investor from
any liability for any commission or compensation in the nature of a finders’ fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
 
12.6           Amendments and Waivers.  No provision of this Agreement may be
amended other than by a written instrument signed by both parties hereto. No
provision of this Agreement may be waived other than in a written instrument
signed by the party against whom enforcement of such waiver is sought. No
failure or delay in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercises thereof
or of any other right, power or privilege.
 
12.7           Severability.  If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
 
12.8           Entire Agreement.  This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or therein.
 
12.9           Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.  Signatures to this
Agreement transmitted by facsimile, by electronic mail in “portable document
format” (“.pdf”), or by any other electronic means which preserves the original
graphic and pictorial appearance of the Agreement, shall have the same effect as
physical delivery of the paper document bearing the original signature.
 
12.10           Interpretation.  Unless the context of this Agreement clearly
requires otherwise, (a) references to the plural include the singular, the
singular the plural, the part the whole, (b) references to any gender include
all genders, (c) “including” has the inclusive meaning frequently identified
with the phrase “but not limited to” and (d) references to “hereunder” or
“herein” relate to this Agreement.
 
12.11           Remedies.  In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Investor
and the Company will be entitled to specific performance under the Transaction
Documents.  The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
contained in the Transaction Documents and hereby agree to waive and not to
assert in any action for specific performance of any such obligation the defense
that a remedy at law would be adequate.
 
12.12           Fees and Expenses.  Each party shall bear its own fees and
expenses related to the transactions contemplated by the Transaction Documents;
provided, however, that $40,000 heretofore paid by the Company to the Investor)
shall be withheld by the Investor from the Purchase Price at the Closing as a
non-accountable and non-refundable document preparation fee (the “Document
Preparation Fee”) in connection with the preparation, negotiation, execution and
delivery of the Transaction Documents and business and legal due diligence of
the Company, and shall be paid directly to the Investor’s counsel on the Closing
Date by wire transfer of immediately available funds.  For the avoidance of
doubt, the Document Preparation Fee (and any portion thereof) shall be
non-refundable when paid. The Company shall pay all transfer agent fees
(including, without limitation, any fees required for same-day processing of any
instruction letter delivered by the Company, delivery of any legal opinion, and
any conversion or exercise notice delivered by a Investor), stamp taxes and
other taxes and duties levied in connection with the delivery of any Securities
to the Investor.
 
 
 
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12.13           No Variable Rate Transactions; No Frustration.  For so long as
the Note remains outstanding, neither the Company nor any of its affiliates or
Subsidiaries, nor any of its or their respective officers, employees, directors,
agents or other representatives, will, without the prior written consent of the
Investor (which consent may be withheld, delayed or conditioned in the
Investor’s sole discretion), effect, enter into, announce or recommend to its
stockholders any agreement, plan, arrangement or transaction that would or would
reasonably be expected to constitute or involve a Variable Rate Transaction.  So
long as the Investor or its affiliates hold any Securities, neither the Company
nor any of its affiliates or Subsidiaries, nor any of its or their respective
officers, employees, directors, agents or other representatives, will, without
the prior written consent of the Investor (which consent may be withheld,
delayed or conditioned in the Investor’s sole discretion), effect, enter into,
announce or recommend to its stockholders any agreement, plan, arrangement or
transaction that would or would reasonably be expected to restrict, delay,
conflict with or impair the ability or right of the Company to timely perform
its obligations under this Agreement, the Note or the Warrant, including,
without limitation, the obligation of the Company to timely deliver shares of
Common Stock to the Investor or its affiliates in accordance with this
Agreement, the Note or the Warrant.
 
12.14           No Integration.  None of the Company, any of its affiliates (as
defined in Rule 501(b) under the 1933 Act), or any person acting on behalf of
the Company or such affiliate will sell, offer for sale, or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in the 1933
Act) which will be integrated with the sale of the Securities in a manner which
would require the registration of the Securities under the 1933 Act or require
stockholder approval under the rules and regulations of the Trading Market and
the Company will take all action that is appropriate or necessary to assure that
its offerings of other securities will not be integrated for purposes of the
1933 Act or the rules and regulations of the Trading Market, with the issuance
of Securities contemplated hereby.
 
12.15           Volume Restriction.  The Investor shall not sell Conversion
Shares on any Trading Day in an amount, in the aggregate, exceeding (x) if no
Market Liquidity Event has occurred on such Trading Day, 10% or (y) if a Market
Liquidity Event has occurred on such Trading Day, 50%, in each case, of the
composite aggregate dollar trading volume of the Common Stock as reported on
Bloomberg, L.P. for such Trading Day.
 
13.           Additional Defined Terms.  In addition to the terms defined
elsewhere in this Agreement, the Note or the Warrant the following terms have
the meanings set forth in this Section 13:
 
 
 
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13.1           “1934 Act” means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
 
13.2           “Approved Stock Plan” shall have the meaning as set forth in
Section Error! Reference source not found. above.
 
13.3           “Commission” means the United States Securities and Exchange
Commission.
 
13.4           “Convertible Securities” shall have the meaning as set forth in
Section Error! Reference source not found. above.
 
13.5           “Effective Date” means the date that the Initial Registration
Statement (as defined in the Registration Rights Agreement) filed pursuant to
the Registration Rights Agreement has been declared effective by the Commission.
 
13.6           “Excluded Securities” shall have the meaning as set forth in
Section Error! Reference source not found. above.
 
13.7           “Liens” means a lien, charge pledge, security interest,
encumbrance, right of first refusal, preemptive right or other restriction.
 
13.8           “Market Liquidity Event” means, as of any given Trading Day, such
time as the composite aggregate dollar trading volume of the Common Stock as
reported on Bloomberg, L.P. for such given Trading Day exceeds 12,000 shares of
Common Stock (as adjusted for stock splits, stock dividends, recapitalizations
and similar events).
 
13.9           “Material Adverse Effect” means (i) a material adverse effect on
the legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
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 any Transaction Document.
 
13.10            “Person” means any individual, partnership, firm, corporation,
limited liability company, association, trust, unincorporated organization or
other entity, as well as any syndicate or group that would be deemed to be a
person under Section 13(d)(3) of the Exchange Act. For all purposes of this
Agreement, violations of the restrictions set forth in this Section 11 by any
Subsidiary or affiliate of the Company, or any officer, employee, director,
agent or other representative of the Company or any of its Subsidiaries or
affiliates shall be deemed a direct breach of this Section 11 by the Company.
 
13.11           “Registrable Securities” shall have the meaning set forth in the
Registration Rights Agreement.
 
13.12           “Short Sales” shall mean “short sales” as defined in Rule 200
promulgated under Regulation SHO under the 1934 Act.
 
 
 
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13.13           Subsidiary” shall mean any corporation or other entity of which
at least a majority of the securities or other ownership interest having
ordinary voting power for the election of directors or other persons performing
similar functions are at the time owned directly or indirectly by the Company
and/or any of its other Subsidiaries.
 
13.14           “Trading Day” means any day on which the Common Stock is traded
on the Trading Market, provided that “Trading Day” shall not include any day on
which the Common Stock is scheduled to trade on the Trading Market for less than
4.5 hours or any day that the Common Stock is suspended from trading during the
final hour of trading on the Trading Market (or if the Trading Market does not
designate in advance the closing time of trading on the Trading Market, then
during the hour ending at 4:00:00 p.m., New York City time) unless such day is
otherwise designated as a Trading Day in writing by the Investor.
 
13.15           “Trading Market” means any of the following markets or exchanges
on which the Common Stock is listed or quoted for trading on the date in
question: the OTC Bulletin Board, The NASDAQ Global Market, The NASDAQ Global
Select Market, The NASDAQ Capital Market, the New York Stock Exchange, NYSE
Arca, the NYSE MKT, or the OTCQX Marketplace or the OTCQB Marketplace operated
by OTC Markets Group Inc. (or any successor to any of the foregoing).
 
13.16           “Variable Rate Transaction” means a transaction in which the
Company or any Subsidiary (i) issues or sells any convertible securities either
(A) at a conversion, exercise or exchange rate or other price that is based upon
and/or varies with the trading prices of or quotations for the shares of Common
Stock at any time after the initial issuance of such convertible securities, or
(B) with a conversion, exercise or exchange price that is subject to being reset
at some future date after the initial issuance of such Convertible Securities or
upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock,
including, without limitation, pursuant to any “weighted average” or
“full-ratchet” anti-dilution provision, or (ii) enters into any agreement
(including, without limitation, an equity line of credit or an “at-the-market”
offering) whereby the Company or any Subsidiary may sell securities at a future
determined price.
 
[SIGNATURES ON THE FOLLOWING PAGE]
 

 
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the date provided above.
 

THE COMPANY

MEDICAN ENTERPRISES, INC.

By:   __________________________________                                                                        
 Name:
 Title:

 
 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the date provided above.
 

THE INVESTOR:

HIMMIL INVESTMENTS, LTD.
 
By: __________________________________
Name: Arthur C. Price
Title:  Director

 
 

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