Document:

EXHIBIT 4.3

 

CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF

SERIES A CONVERTIBLE PREFERRED STOCK 

AND

COMMON STOCK 

OF

 

SEPARATION DEGREES – ONE, INC., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), DOES HEREBY CERTIFY THAT:

 

Pursuant to authority conferred upon the Board of Directors (the “Board”) by the Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”), the provisions of the Delaware General Corporation Law, and to a unanimous written consent effective as of December 19th, 2014, the Board adopted the following resolution providing for the designations, preferences and relative to participating, optional and other rights, and the qualifications, limitations and restrictions, of the Series A Convertible Preferred Stock and Common Stock.

 

WHEREAS, the Certificate of Incorporation provides for two classes of capital stock known as common stock, $0.0001 par value per share (the “Common Stock”), and preferred stock, $0.0001 par value per share (the “Preferred Stock”) and

 

WHEREAS, the Board is authorized by the Certificate of Incorporation to provide for the issuance of the stock of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of stock to be included in such series and to fix the designations, preferences and rights of the stock of each such series and the qualifications, limitations and restrictions thereof.

 

NOW, THEREFORE, BE IT RESOLVED, that the Board deems it advisable to, and hereby does, designate a Series A Convertible Preferred Stock and fixes and determines the preferences, designations and the powers, privileges, rights, qualifications, limitations or restrictions relating to the Series A Convertible Preferred Stock and Common Stock of the Corporation as follows:

 

A. PREFERRED STOCK

 

Fifty Million (50,000,000) shares of the authorized and unissued Preferred Stock of the Corporation are hereby designated “Series A Preferred Stock” with the following rights, preferences, powers, privileges and restrictions, qualifications and limitations. Unless otherwise indicated, references to “sections” or “subsections” in this Part B of this Article Fourth refer to sections and subsections of Part B of this Article Fourth.

 

	 
	
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1.  Dividends.

 

From and after the date of the issuance of any shares of Series A Preferred Stock, dividends at the rate per annum of $0.0025 per share shall accrue on such shares of Series A Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock) (the “Accruing Dividends”). Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative; provided, however, that except as set forth in the following sentence of this Section 1 or in Subsection 2.1 and Section 6, such Accruing Dividends shall be payable only when, as, and if declared by the Board of Directors and the Corporation shall be under no obligation to pay such Accruing Dividends. The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in the Certificate of Incorporation) the holders of the Series A Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series A Preferred Stock in an amount at least equal to the greater of (i) the amount of the aggregate Accruing Dividends then accrued on such share of Series A Preferred Stock and not previously paid and (ii) (A) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Series A Preferred Stock as would equal the product of (1) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (2) the number of shares of Common Stock issuable upon conversion of a share of Series A Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend or (B) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Series A Preferred Stock determined by (1) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (2) multiplying such fraction by an amount equal to the Series A Original Issue Price (as defined below); provided that if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Series A Preferred Stock pursuant to this Section 1 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Series A Preferred Stock dividend. The “Series A Original Issue Price” shall mean $0.0001 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock.

 

2.  Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales.

 

2.1 Preferential Payments to Holders of Series A Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the greater of (i) 4 times the Series A Original Issue Price, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had all shares of Series A Preferred Stock been converted into Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event (the amount payable pursuant to this sentence is hereinafter referred to as the “Series A Liquidation Amount”). If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series A Preferred Stock the full amount to which they shall be entitled under this Subsection 2.1, the holders of shares of Series A Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

 

	 
	
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2.2 Payments to Holders of Common Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, after the payment of all preferential amounts required to be paid to the holders of shares of Series A Preferred Stock, the remaining assets of the Corporation available for distribution to its stockholders shall be distributed among the holders of shares of Common Stock, pro rata based on the number of shares held by each such holder.

 

2.3 Deemed Liquidation Events.

 

2.3.1 Definition. Each of the following events shall be considered a “Deemed Liquidation Event” unless the holders of at least fifty percent (50%) of the outstanding shares of Series A Preferred Stock elect otherwise by written notice sent to the Corporation at least thirty (30) days prior to the effective date of any such event:

 

(a) a merger or consolidation in which

 

	 	 	 	
(i)

	
the Corporation is a constituent party or

	 	 	 	
 

	 
	 	 	 	
(ii)

	
a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation,

 

except any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation; or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or

 

(b) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, or the sale or disposition (whether by merger, consolidation or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation.

 

	 
	
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2.3.2 Effecting a Deemed Liquidation Event.

 

(a) The Corporation shall not have the power to effect a Deemed Liquidation Event referred to in Subsection 2.3.1(a)(i) unless the agreement or plan of merger or consolidation for such transaction (the “Merger Agreement”) provides that the consideration payable to the stockholders of the Corporation shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2.

 

(b) In the event of a Deemed Liquidation Event referred to in Subsection 2.3.1(a)(ii) or 2.3.1(b), if the Corporation does not effect a dissolution of the Corporation under the General Corporation Law within ninety (90) days after such Deemed Liquidation Event, then (i) the Corporation shall send a written notice to each holder of Series A Preferred Stock no later than the ninetieth (90th) day after the Deemed Liquidation Event advising such holders of their right (and the requirements to be met to secure such right) pursuant to the terms of the following clause; (ii) to require the redemption of such shares of Series A Preferred Stock, and (iii) if the holders of at least fifty percent (50%) of the then outstanding shares of Series A Preferred Stock so request in a written instrument delivered to the Corporation not later than one hundred twenty (120) days after such Deemed Liquidation Event, the Corporation shall use the consideration received by the Corporation for such Deemed Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the Board of Directors of the Corporation), together with any other assets of the Corporation available for distribution to its stockholders, all to the extent permitted by Delaware law governing distributions to stockholders (the “Available Proceeds”), on the one hundred fiftieth (150th) day after such Deemed Liquidation Event, to redeem all outstanding shares of Series A Preferred Stock at a price per share equal to the Series A Liquidation Amount. Notwithstanding the foregoing, in the event of a redemption pursuant to the preceding sentence, if the Available Proceeds are not sufficient to redeem all outstanding shares of Series A Preferred Stock, the Corporation shall ratably redeem each holder’s shares of Series A Preferred Stock to the fullest extent of such Available Proceeds, and shall redeem the remaining shares as soon as it may lawfully do so under Delaware law governing distributions to stockholders. The provisions of Section 6 shall apply, with such necessary changes in the details thereof as are necessitated by the context, to the redemption of the Series A Preferred Stock pursuant to this Subsection 2.3.2(b). Prior to the distribution or redemption provided for in this Subsection 2.3.2(b), the Corporation shall not expend or dissipate the consideration received for such Deemed Liquidation Event, except to discharge expenses incurred in connection with such Deemed Liquidation Event or in the ordinary course of business.

 

2.3.3 Amount Deemed Paid or Distributed. The amount deemed paid or distributed to the holders of capital stock of the Corporation upon any such merger, consolidation, sale, transfer, exclusive license, other disposition or redemption shall be the cash or the value of the property, rights or securities paid or distributed to such holders by the Corporation or the acquiring person, firm or other entity. The value of such property, rights or securities shall be determined in good faith by the Board of Directors of the Corporation.

 

2.3.4 Allocation of Escrow and Contingent Consideration. In the event of a Deemed Liquidation Event pursuant to Subsection 2.3.1(a)(i), if any portion of the consideration payable to the stockholders of the Corporation is payable only upon satisfaction of contingencies (the “Additional Consideration”), the Merger Agreement shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, the “Initial Consideration”) shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2 as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event; and (b) any Additional Consideration which becomes payable to the stockholders of the Corporation upon satisfaction of such contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2 after taking into account the previous payment of the Initial Consideration as part of the same transaction. For the purposes of this Subsection 2.3.4, consideration placed into escrow or retained as holdback to be available for satisfaction of indemnification or similar obligations in connection with such Deemed Liquidation Event shall be deemed to be Additional Consideration.

 

	 
	
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3.  Voting.

 

3.1 General. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Series A Preferred Stock shall be entitled to cast the number of votes equal to ten (10) times the number of whole shares of Common Stock into which the shares of Series A Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of the Certificate of Incorporation, holders of Series A Preferred Stock shall vote together with the holders of Common Stock as a single class.

 

3.2 Election of Directors. The holders of record of the shares of Series A Preferred Stock, exclusively and as a separate class, shall be entitled to elect three (3) directors of the Corporation (the “Series A Directors”) and the holders of record of the shares of Common Stock, exclusively and as a separate class, shall be entitled to elect two (2) directors of the Corporation. Any director elected as provided in the preceding sentence may be removed without cause by, and only by, the affirmative vote of the holders of the shares of the class or series of capital stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders. If the holders of shares of Series A Preferred Stock or Common Stock, as the case may be, fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors, voting exclusively and as a separate class, pursuant to the first sentence of this Subsection 3.2, then any directorship not so filled shall remain vacant until such time as the holders of the Series A Preferred Stock or Common Stock, as the case may be, elect a person to fill such directorship by vote or written consent in lieu of a meeting; and no such directorship may be filled by stockholders of the Corporation other than by the stockholders of the Corporation that are entitled to elect a person to fill such directorship, voting exclusively and as a separate class. The holders of record of the shares of Common Stock and of any other class or series of voting stock (including the Series A Preferred Stock), exclusively and voting together as a single class, shall be entitled to elect the balance of the total number of directors of the Corporation. At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the outstanding shares of the class or series entitled to elect such director shall constitute a quorum for the purpose of electing such director. Except as otherwise provided in this Subsection 3.2, a vacancy in any directorship filled by the holders of any class or series shall be filled only by vote or written consent in lieu of a meeting of the holders of such class or series or by any remaining director or directors elected by the holders of such class or series pursuant to this Subsection 3.2.

 

	 
	
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3.3 Series A Preferred Stock Protective Provisions. At any time when shares of Series A Preferred Stock shares are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the holders of at least fifty percent (50%) of the then outstanding shares of Series A Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect.

 

3.3.1 liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any merger or consolidation or any other Deemed Liquidation Event, or consent to any of the foregoing;

  

3.3.2 amend, alter or repeal any provision of the Certificate of Incorporation or Bylaws of the Corporation in a manner that adversely affects the powers, preferences or rights of the Series A Preferred Stock;

 

3.3.3 create, or authorize the creation of, or issue or obligate itself to issue shares of, any additional class or series of capital stock unless the same ranks junior to the Series A Preferred Stock with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends and rights of redemption, or increase the authorized number of shares of Series A Preferred Stock or increase the authorized number of shares of any additional class or series of capital stock unless the same ranks junior to the Series A Preferred Stock with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends and rights of redemption;

 

3.3.4 (i) reclassify, alter or amend any existing security of the Corporation that is pari passu with the Series A Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to the Series A Preferred Stock in respect of any such right, preference, or privilege or (ii) reclassify, alter or amend any existing security of the Corporation that is junior to the Series A Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Series A Preferred Stock in respect of any such right, preference or privilege;

 

3.3.5 purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation other than (i) redemptions of or dividends or distributions on the Series A Preferred Stock as expressly authorized herein, (ii) dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock and (iii) repurchases of stock from former employees, officers, directors, consultants or other persons who performed services for the Corporation or any subsidiary in connection with the cessation of such employment or service at the lower of the original purchase price or the then-current fair market value thereof;

 

	 
	
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3.3.6 create, or hold capital stock in, any subsidiary that is not wholly owned (either directly or through one or more other subsidiaries) by the Corporation, or sell, transfer or otherwise dispose of any capital stock of any direct or indirect subsidiary of the Corporation, or permit any direct or indirect subsidiary to sell, lease, transfer, exclusively license or otherwise dispose (in a single transaction or series of related transactions) of all or substantially all of the assets of such subsidiary; or

 

3.3.7 increase or decrease the authorized number of directors constituting the Board of Directors.

  

4.  Optional Conversion.

 

The holders of the Series A Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

 

4.1 Right to Convert.

 

4.1.1 Conversion Ratio. Each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Series A Original Issue Price by the Series A Conversion Price (as defined below) in effect at the time of conversion. The “Series A Conversion Price” shall initially be equal to $0.00002. Such initial Series A Conversion Price, and the rate at which shares of Series A Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below, but will never be less than a five times (5X) conversion into Common Stock.

 

4.1.2 Termination of Conversion Rights. In the event of a notice of redemption of any shares of Series A Preferred Stock pursuant to Section 6, the Conversion Rights of the shares designated for redemption shall terminate at the close of business on the last full day preceding the date fixed for redemption, unless the redemption price is not fully paid on such redemption date, in which case the Conversion Rights for such shares shall continue until such price is paid in full. In the event of a liquidation, dissolution or winding up of the Corporation or a Deemed Liquidation Event, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of Series A Preferred Stock.

 

4.2 Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Series A Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Series A Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.

 

	 
	
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4.3 Mechanics of Conversion.

 

4.3.1 Notice of Conversion. In order for a holder of Series A Preferred Stock to voluntarily convert shares of Series A Preferred Stock into shares of Common Stock, such holder shall (a) provide written notice with the form of conversion notice attached hereto as Annex A (a “Notice of Conversion”) to the Corporation’s transfer agent at the office of the transfer agent for the Series A Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent) that such holder elects to convert all or any number of such holder’s shares of Series A Preferred Stock and, if applicable, any event on which such conversion is contingent and (b), if such holder’s shares are certificated, surrender the certificate or certificates for such shares of Series A Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Series A Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent). Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the shares of Common Stock to be issued. If required by the Corporation, any certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such notice and, if applicable, certificates (or lost certificate affidavit and agreement) shall be the time of conversion (the “Conversion Time”), and the shares of Common Stock issuable upon conversion of the specified shares shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time (i) issue and deliver to such holder of Series A Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of Series A Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, (ii) pay in cash such amount as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and (iii) pay all declared but unpaid dividends on the shares of Series A Preferred Stock converted.

 

4.3.2 Reservation of Shares. The Corporation shall at all times when the Series A Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Series A Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series A Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Certificate of Incorporation. Before taking any action which would cause an adjustment reducing the Series A Conversion Price below the then par value of the shares of Common Stock issuable upon conversion of the Series A Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and non-assessable shares of Common Stock at such adjusted Series A Conversion Price.

 

	 
	
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4.3.3 Effect of Conversion. All shares of Series A Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor, to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Subsection 4.2 and to receive payment of any dividends declared but unpaid thereon. Any shares of Series A Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Series A Preferred Stock accordingly.

 

4.3.4 No Further Adjustment. Upon any such conversion, no adjustment to the Series A Conversion Price shall be made for any declared but unpaid dividends on the Series A Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.

 

4.3.5 Taxes. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Series A Preferred Stock pursuant to this Section 4. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Series A Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.

 

4.4 Adjustments to Series A Conversion Price for Diluting Issues.

 

4.4.1 Special Definitions. For purposes of this Article Fourth, the following definitions shall apply:

 

(a) “Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

 

(b) “Series A Original Issue Date” shall mean the date on which the first share of Series A Preferred Stock was issued.

 

	 
	
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(c) “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.

  

(d) “Additional Shares of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to Subsection 4.4.3 below, deemed to be issued) by the Corporation after the Series A Original Issue Date, other than (1) the following shares of Common Stock and (2) shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively, “Exempted Securities”):

 

	 	 	 	
(i)

	
shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on Series A Preferred Stock;

	 	 	 	
 

	 
	 	 	 	
(ii)

	
shares of Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Subsection 4.5, 4.6, 4.7 or 4.8;

	 	 	 	
 

	 
	 	 	 	
(iii)

	
shares of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Board of Directors of the Corporation; or

	 	 	 	
 

	 
	 	 	 	
(iv)

	
shares of Common Stock or Convertible Securities actually issued upon the exercise of Options or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided such issuance is pursuant to the terms of such Option or Convertible Security; or

	 	 	 	
 

	 
	 	 	 	
(v)

	
shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors of the Corporation; or

	 	 	 	
 

	 
	 	 	 	
(vi)

	
shares of Common Stock, Options or Convertible Securities issued to suppliers or third party service providers in connection with the provision of goods or services pursuant to transactions approved by the Board of Directors of the Corporation; or

 

	 
	
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(vii)

	
shares of Common Stock, Options or Convertible Securities issued pursuant to the acquisition of another corporation by the Corporation by merger, purchase of substantially all of the assets or other reorganization or to a joint venture agreement, provided that such issuances are approved by the Board of Directors of the Corporation; or

	 	 	 	
 

	 
	 	 	 	
(viii)

	
shares of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board of Directors of the Corporation.

  

4.4.2 No Adjustment of Series A Conversion Price. No adjustment in the Series A Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the holders of at least fifty percent (50%) of the then outstanding shares of Series A Preferred Stock agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock.

 

4.4.3 Deemed Issue of Additional Shares of Common Stock.

 

(a) If the Corporation at any time or from time to time after the Series A Original Issue Date shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date.

 

	 
	
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(b) If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Series A Conversion Price pursuant to the terms of Subsection 4.4.4, are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (2) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Series A Conversion Price computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Series A Conversion Price as would have obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this clause (b) shall have the effect of increasing the Series A Conversion Price to an amount which exceeds the lower of (i) the Series A Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (ii) the Series A Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.

  

(c) If the terms of any Option or Convertible Security (excluding Options or Convertible Securities which are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Series A Conversion Price pursuant to the terms of Subsection 4.4.4 (either because the consideration per share (determined pursuant to Subsection 4.4.5) of the Additional Shares of Common Stock subject thereto was equal to or greater than the Series A Conversion Price then in effect, or because such Option or Convertible Security was issued before the Series A Original Issue Date), are revised after the Series A Original Issue Date as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (2) any decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Subsection 4.4.3(a) shall be deemed to have been issued effective upon such increase or decrease becoming effective.

 

(d) Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) which resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Series A Conversion Price pursuant to the terms of Subsection 4.4.4, the Series A Conversion Price shall be readjusted to such Series A Conversion Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.

 

	 
	
12

	

 

(e) If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Series A Conversion Price provided for in this Subsection 4.4.3 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (b) and (c) of this Subsection 4.4.3). If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to the Series A Conversion Price that would result under the terms of this Subsection 4.4.3 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to the Series A Conversion Price that such issuance or amendment took place at the time such calculation can first be made.

  

4.4.4 Adjustment of Series A Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the Series A Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Subsection 4.4.3), without consideration or for a consideration per share less than the applicable Series A Conversion Price in effect immediately prior to such issue, then the Series A Conversion Price shall be reduced, concurrently with such issue, to the consideration per share received by the Corporation for such issue or deemed issue of the Additional Shares of Common Stock; provided that if such issuance or deemed issuance was without consideration, then the Corporation shall be deemed to have received an aggregate of $.00001 of consideration for all such Additional Shares of Common Stock issued or deemed to be issued.

 

4.4.5 Determination of Consideration. For purposes of this Subsection 4.4, the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows:

 

(a) Cash and Property: Such consideration shall:

 

	 	 	 	
(i)

	
insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;

	 	 	 	
 

	 
	 	 	 	
(ii)

	
insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors of the Corporation; and

	 	 	 	
 

	 
	 	 	 	
(iii)

	
in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board of Directors of the Corporation.

 

	 
	
13

	

 

(b) Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Subsection 4.4.3, relating to Options and Convertible Securities, shall be determined by dividing:

 

	 	 	 	
(i)

	
The total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by

	 	 	 	
 

	 
	 	 	 	
(ii)

	
the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.

 

4.4.6 Multiple Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Series A Conversion Price pursuant to the terms of Subsection 4.4.4, then, upon the final such issuance, the Series A Conversion Price shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).

 

4.5 Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Series A Original Issue Date effect a subdivision of the outstanding Common Stock, the Series A Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Series A Original Issue Date combine the outstanding shares of Common Stock, the Series A Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

	 
	
14

	

 

4.6 Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time or from time to time after the Series A Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the Series A Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Series A Conversion Price then in effect by a fraction:

 

(1) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

  

(2) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.

 

Notwithstanding the foregoing (a) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series A Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series A Conversion Price shall be adjusted pursuant to this subsection as of the time of actual payment of such dividends or distributions; and (b) that no such adjustment shall be made if the holders of Series A Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of Series A Preferred Stock had been converted into Common Stock on the date of such event.

 

4.7 Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Series A Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in other property and the provisions of Section 1 do not apply to such dividend or distribution, then and in each such event provision shall be made so that the holders of the Series A Preferred Stock shall receive upon conversion thereof, in addition to the number of shares of Common Stock receivable thereupon, the kind and amount of securities of the Corporation, cash or other property which they would have been entitled to receive had the Series A Preferred Stock been converted into Common Stock on the date of such event and had they thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this paragraph with respect to the rights of the holders of the Series A Preferred Stock; provided, however, that no such provision shall be made if the holders of Series A Preferred Stock receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as they would have received if all outstanding shares of Series A Preferred Stock had been converted into Common Stock on the date of such event.

 

	 
	
15

	

 

4.8 Adjustment for Merger or Reorganization, etc. Subject to the provisions of Subsection 2.3, if there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Series A Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 4.4, 4.6 or 4.7), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Series A Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of Series A Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation) shall be made in the application of the provisions in this Section 4 with respect to the rights and interests thereafter of the holders of the Series A Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the Series A Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Series A Preferred Stock. For the avoidance of doubt, nothing in this Subsection 4.8 shall be construed as preventing the holders of Series A Preferred Stock from seeking any appraisal rights to which they are otherwise entitled under the DGCL in connection with a merger triggering an adjustment hereunder, nor shall this Subsection 4.8 be deemed conclusive evidence of the fair value of the shares of Series A Preferred Stock in any such appraisal proceeding.

  

4.9 Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Series A Conversion Price pursuant to this Section 4, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than [ten (10)] days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series A Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Series A Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of Series A Preferred Stock (but in any event not later than [ten (10)] days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the Series A Conversion Price then in effect, and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Series A Preferred Stock.

 

	 
	
16

	

 

4.10 Notice of Record Date. In the event:

 

(a) the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Series A Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

 

(b) of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or

 

(c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,

 

then, and in each such case, the Corporation will send or cause to be sent to the holders of the Series A Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Series A Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Series A Preferred Stock and the Common Stock. Such notice shall be sent at least ten (10)]days prior to the record date or effective date for the event specified in such notice.

  

5.  Mandatory Conversion.

 

5.1 Trigger Events. Upon either (a) the closing of the sale of shares of Common Stock to the public at a price of at least $4.50 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock), in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in at least $50,000,000 of proceeds, net of the underwriting discount and commissions, to the Corporation or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of at least fifty percent (50%) of the then outstanding shares of Series A Preferred Stock (the time of such closing or the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the “Mandatory Conversion Time”), then (i) all outstanding shares of Series A Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective conversion rate as calculated pursuant to Subsection 4.1.1. and (ii) such shares may not be reissued by the Corporation.

 

	 
	
17

	

 

5.2 Procedural Requirements. All holders of record of shares of Series A Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Series A Preferred Stock pursuant to this Section 5. Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of Series A Preferred Stock in certificated form shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice. If so required by the Corporation, any certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Series A Preferred Stock converted pursuant to Subsection 5.1, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender any certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of any certificate or certificates of such holders (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Subsection 5.2. As soon as practicable after the Mandatory Conversion Time and, if applicable, the surrender of any certificate or certificates (or lost certificate affidavit and agreement) for Series A Preferred Stock, the Corporation shall (a) issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof and (b) pay cash as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of Series A Preferred Stock converted. Such converted Series A Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Series A Preferred Stock accordingly.

 

	 
	
18

	

 

6.  Redemption.

 

6.1 General. Unless prohibited by Delaware law governing distributions to stockholders, shares of Series A Preferred Stock shall be redeemed by the Corporation at a price equal to (A) the Series A Original Issue Price per share, plus any Accruing Dividends accrued but unpaid thereon, whether or not declared, together with any other dividends declared but unpaid thereon and (B) the Fair Market Value (determined in the manner set forth below) of a single share of Series A Preferred Stock as of the date of the Company’s receipt of the Redemption Request (the “Redemption Price”), in three (3) annual installments commencing not more than sixty (60) days after receipt by the Corporation, from the holders of at least fifty (50%) of the then outstanding shares of Series A Preferred Stock, of written notice requesting redemption of all shares of Series A Preferred Stock (the “Redemption Request”). Upon receipt of a Redemption Request, the Corporation shall apply all of its assets to any such redemption, and to no other corporate purpose, except to the extent prohibited by Delaware law governing distributions to stockholders. For purposes of this Subsection 6.1, the Fair Market Value of a single share of Series A Preferred Stock shall be the value of a single share of Series A Preferred Stock as mutually agreed upon by the Company and the holders of a majority of the shares of Series A Preferred Stock then outstanding, and, in the event that they are unable to reach agreement, by a third-party appraiser agreed to by the Company and the holders of a majority of the shares of Series A Preferred Stock then outstanding. The date of each such installment shall be referred to as a “Redemption Date.” On each Redemption Date, the Corporation shall redeem, on a pro rata basis in accordance with the number of shares of Series A Preferred Stock owned by each holder, that number of outstanding shares of Series A Preferred Stock determined by dividing (i) the total number of shares of Series A Preferred Stock outstanding immediately prior to such Redemption Date by (ii) the number of remaining Redemption Dates (including the Redemption Date to which such calculation applies); provided, however, that Excluded Shares (as such term is defined in Subsection 6.2) shall not be redeemed and shall be excluded from the calculations set forth in this sentence. If on any Redemption Date Delaware law governing distributions to stockholders prevents the Corporation from redeeming all shares of Series A Preferred Stock to be redeemed, the Corporation shall ratably redeem the maximum number of shares that it may redeem consistent with such law, and shall redeem the remaining shares as soon as it may lawfully do so under such law.

 

6.2 Redemption Notice. The Corporation shall send written notice of the mandatory redemption (the “Redemption Notice”) to each holder of record of Series A Preferred Stock not less than forty-five (45) days prior to each Redemption Date. Each Redemption Notice shall state:

 

(a) the number of shares of Series A Preferred Stock held by the holder that the Corporation shall redeem on the Redemption Date specified in the Redemption Notice;

 

(b) the Redemption Date and the Redemption Price;

 

(c) the date upon which the holder’s right to convert such shares terminates (as determined in accordance with Subsection 4.1); and

 

(d) for holders of shares in certificated form, that the holder is to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares of Series A Preferred Stock to be redeemed.

 

	 
	
19

	

 

If the Corporation receives, on or prior to the twentieth (20th) day after the date of delivery of the Redemption Notice to a holder of Series A Preferred Stock, written notice from such holder that such holder elects to be excluded from the redemption provided in this Section 6, then the shares of Series A Preferred Stock registered on the books of the Corporation in the name of such holder at the time of the Corporation’s receipt of such notice shall thereafter be “Excluded Shares.” Excluded Shares shall not be redeemed or redeemable pursuant to this Section 6, whether on such Redemption Date or thereafter.

 

6.3 Surrender of Certificates; Payment. On or before the applicable Redemption Date, each holder of shares of Series A Preferred Stock to be redeemed on such Redemption Date, unless such holder has exercised his, her or its right to convert such shares as provided in Section 4, shall, if a holder of shares in certificated form, surrender the certificate or certificates representing such shares (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof. In the event less than all of the shares of Series A Preferred Stock represented by a certificate are redeemed, a new certificate, instrument, or book entry representing the unredeemed shares of Series A Preferred Stock shall promptly be issued to such holder.

 

6.4 Rights Subsequent to Redemption. If the Redemption Notice shall have been duly given, and if on the applicable Redemption Date the Redemption Price payable upon redemption of the shares of Series A Preferred Stock to be redeemed on such Redemption Date is paid or tendered for payment or deposited with an independent payment agent so as to be available therefor in a timely manner, then notwithstanding that any certificates evidencing any of the shares of Series A Preferred Stock so called for redemption shall not have been surrendered, dividends with respect to such shares of Series A Preferred Stock shall cease to accrue after such Redemption Date and all rights with respect to such shares shall forthwith after the Redemption Date terminate, except only the right of the holders to receive the Redemption Price without interest upon surrender of any such certificate or certificates therefor.

 

7.  Redeemed or Otherwise Acquired Shares. Any shares of Series A Preferred Stock that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Series A Preferred Stock following redemption.

 

8.  Waiver. Any of the rights, powers, preferences and other terms of the Series A Preferred Stock set forth herein may be waived on behalf of all holders of Series A Preferred Stock by the affirmative written consent or vote of the holders of at least fifty (50%) of the shares of Series A Preferred Stock then outstanding.

 

	 
	
20

	

 

9.  Notices. Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of Series A Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission.

  

B.  COMMON STOCK

 

1.  General. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.

 

2.  Voting. The holders of the Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings) provided, however, that, except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to the Certificate of Incorporation that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to the Certificate of Incorporation or pursuant to the General Corporation Law. No person entitled to vote at an election for directors may cumulate votes to which such person is entitled, unless, at the time of such election, the Corporation is subject to Section 2115 of the California Corporations Code. During such time or times that the Corporation is subject to Section 2115(b) of the California Corporations Code, every stockholder entitled to vote at an election for directors may cumulate such stockholder’s votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which such stockholder’s shares are otherwise entitled, or distribute the stockholder’s votes on the same principle among as many candidates as such stockholder desires. No stockholder, however, shall be entitled to so cumulate such stockholder’s votes unless (i) the names of such candidate or candidates have been placed in nomination prior to the voting, and (ii) the stockholder has given notice at the meeting, prior to the voting, of such stockholder’s intention to cumulate such stockholder’s votes. If any stockholder has given proper notice to cumulate votes, all stockholders may cumulate their votes for any candidates who have been properly placed in nomination. Under cumulative voting, the candidates receiving the highest number of votes, up to the number of directors to be elected, are elected. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of one or more series of Preferred Stock that may be required by the terms of the Certificate of Incorporation) the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law.

 

	 
	
21

	

 

IN WITNESS WHEREOF, the undersigned has executed this Certificate of Designations as of this 19th day of December 2014, and affirms that this Certificate of Designations is his act and deed and that the statements contained herein are true under penalties of perjury.

 

 

	SEPARATION DEGREES – ONE, INC.	 
	 	 	 
	By:	/s/ Gannon Giguiere	 
	 	
Gannon Giguiere, President 

	 

 

	 
	
22

	

 

NOTICE OF CONVERSION

 

(To be Executed by the Registered Holder of Series A Preferred Stock and in order to Convert the Series A Preferred Stock)

 

The undersigned hereby irrevocably elects to convert ____________ stock of Series A Preferred Stock (the "Conversion"), represented by stock certificate No(s). ___________ (the "Preferred Stock Certificates"), into stock of common stock ("Common Stock") of Separation Degrees – One, Inc. (the "Corporation") according to the conditions of the Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock (the "Certificate of Designation"), as of the date written below. If securities are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. No fee will be charged to the holder for any conversion, except for transfer taxes, if any.

 

The undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable to the undersigned upon conversion of the Series A Preferred Stock shall be made pursuant to registration of the Common Stock under the Securities Act of 1933, as amended (the "Act"), or pursuant to an exemption from registration under the Act.

 

The undersigned hereby requests that the Corporation issue and deliver to the undersigned physical certificates representing such stock of Common Stock.

 

Date of Conversion:

 

Applicable Conversion Price:

 

Number of Stock of Common Stock to be Issued:

 

 

	
Signature:

	
 

	
 

	
 

	
 

	
 

	
Name:

	
 

	
 

	
 

	
 

	
 

	
Address:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

 

 

23EXHIBIT 10.3

 

ASSET PURCHASE AGREEMENT

 

AMONG

 

SEPARATION DEGREES – ONE, INC. a Delaware Corporation

 

AND

 

GANNON K. GIGUIERE, an Individual

 

DATED: DECEMBER 19, 2014 

 

	 
	
1

	

 

TABLE OF CONTENTS

	
 

		PAGE	
	
BACKGROUND

	 	6	 
	
 

			
 

	
	
ARTICLE I – SALE AND PURCHASE OF ASSETS

	 	 	
6

	 
	
 

			
 

	
	
Section 1.01 Purchased Assets

	 	 	
6

	 
	
Section 1.02 No Assumed Obligations

	 	 	
6

	 
	
Section 1.03 Consideration

	 	 	
7

	 
	
Section 1.04 Reporting of Asset Sale

	 	 	
7

	 
	
Section 1.05 Tax Consequences

	 	 	
7

	 
	
 

			
 

	
	
ARTICLE II – CLOSING; DOCUMENTS OF CONVEYANCE

	 	 	
7

	 
	
 

			
 

	
	
Section 2.01 Closing

	 	 	
7

	 
	
Section 2.02 Actions to be Taken at the Closing

	 	 	
7

	 
	
Section 2.03 Exemption From Registration

	 	 	
8

	 
	
Section 2.04 Pre-Asset Purchase Liabilities Related to the Purchased Assets

	 	 	
8

	 
	
Section 2.05 Transfer of Possession

	 	 	
8

	 
	
 

			
 

	
	
ARTICLE III – REPRESENTATIONS AND WARRANTIES OF BUYERS

	 	 	
8

	 
	
 

			
 

	
	
Section 3.01 Organization, Qualification and Corporate Power

	 	 	
8

	 
	
Section 3.02 Capitalization

	 	 	
9

	 
	
Section 3.03 Financial Statements

	 	 	
9

	 
	
Section 3.04 Undisclosed Liabilities

	 	 	
9

	 
	
Section 3.05 Tax Matters

	 	 	
9

	 
	
Section 3.06 Legal Proceedings

	 	 	
10

	 
	
Section 3.07 Compliance with Laws

	 	 	
10

	 
	
Section 3.08 Authority; Binding Nature of Agreement

	 	 	
10

	 
	
Section 3.09 Non-Contravention

	 	 	
10

	 
	
Section 3.10 Full Disclosure

	 	 	
11

	 
	
Section 3.11 Valid Issuance

	 	 	
11

	 
	
Section 3.12 No Additional Agreements

	 	 	
11

	 
	
Section 3.13 Employee Relations

	 	 	
11

	 

 

	 
	
2

	

 

	
ARTICLE IV – REPRESENTATIONS AND WARRANTIES OF SELLER

	 	 	
11

	 
	
 

			
 

	
	
Section 4.01 Legal Proceedings

	 	 	
11

	 
	
Section 4.02 Assets

	 	 	
11

	 
	
Section 4.03 Compliance with Laws

	 	 	
12

	 
	
Section 4.04 Authority; Binding Nature of Agreement

	 	 	
12

	 
	
Section 4.05 Non-Contravention

	 	 	
12

	 
	
Section 4.06 Intellectual Property

	 	 	
12

	 
	
Section 4.07 Software Licenses

	 	 	
13

	 
	
Section 4.08 Royalties, Commissions, Fees

	 	 	
13

	 
	
Section 4.09 Absence of Certain Changes or Events

	 	 	
13

	 
	
Section 4.10 Full Disclosure

	 	 	
13

	 
	
 

			
 

	
	
ARTICLE V – CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.

	 	 	
14

	 
	
 

			
 

	
	
Section 5.01 Accuracy of Representations

	 	 	
14

	 
	
Section 5.02 Performance of Covenants

	 	 	
14

	 
	
Section 5.03 Consents

	 	 	
14

	 
	
Section 5.04 Release of Liens and Security Interests

	 	 	
14

	 
	
Section 5.05 Agreements and Documents

	 	 	
14

	 
	
Section 5.06 No Legal Proceedings

	 	 	
14

	 
	
Section 5.07 Due Diligence Review

	 	 	
15

	 
	
 

			
 

	
	
ARTICLE VI – CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS

	 	 	
15

	 
	
 

			
 

	
	
Section 6.01 Accuracy of Representations

	 	 	
15

	 
	
Section 6.02 Performance of Covenants

	 	 	
15

	 
	
Section 6.03 Consents, Waivers, Releases

	 	 	
15

	 
	
Section 6.04 Agreements and Documents

	 	 	
15

	 
	
Section 6.05 Due Diligence Review

	 	 	
15

	 
	
Section 6.06 Officers Certificate

	 	 	
15

	 
	
Section 6.07 Material Adverse Effect

	 	 	
16

	 
	
Section 6.08 Employment Agreements

	 	 	
16

	 

 

	 
	
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ARTICLE VII – SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

	 	 	
16

	 
	
 

			
 

	
	
Section 7.01 Survival

	 	 	
16

	 
	
Section 7.02 Sellers’ Agreement to Indemnify

	 	 	
16

	 
	
Section 7.03 Buyers’ Agreement to Indemnify

	 	 	
17

	 
	
Section 7.04 Certain Provisions Applicable to Indemnification Obligations

	 	 	
17

	 
	
Section 7.05 Procedures for Resolution and Payment of Claims for Indemnification

	 	 	
17

	 
	
Section 7.06 Payment of Agreed Claims

	 	 	
18

	 
	
Section 7.07 Remedies Exclusive

	 	 	
18

	 
	
 

			
 

	
	
ARTICLE VIII – COVENANTS; CONDUCT OF THE PARTIES AFTER CLOSING

	 	 	
19

	 
	
 

			
 

	
	
Section 8.01 Cooperation

	 	 	
19

	 
	
Section 8.02 Repayment of Obligations

	 	 	
19

	 
	
 

			
 

	
	
ARTICLE IX – TERMINATION

	 	 	
19

	 
	
 

			
 

	
	
Section 9.01 Termination of Agreement

	 	 	
19

	 
	
Section 9.02 Termination Procedure; Effect of Termination

	 	 	
19

	 
	
 

			
 

	
	
ARTICLE X – MISCELLANEOUS

	 	 	
20

	 
	
 

			
 

	
	
Section 10.01 Further Assurances

	 	 	
20

	 
	
Section 10.02 Fees and Expenses

	 	 	
20

	 
	
Section 10.03 Attorneys' Fees

	 	 	
20

	 
	
Section 10.04 Notices

	 	 	
20

	 
	
Section 10.05 Severability

	 	 	
21

	 
	
Section 10.06 Headings

	 	 	
21

	 
	
Section 10.07 Counterparts

	 	 	
21

	 
	
Section 10.08 Governing Law; Arbitration

	 	 	
21

	 
	
Section 10.09 Successors and Assigns

	 	 	
21

	 
	
Section 10.10 Remedies Cumulative; Specific Performance

	 	 	
22

	 
	
Section 10.11 Waiver

	 	 	
22

	 
	
Section 10.12 Amendments

	 	 	
22

	 
	
Section 10.13 Entire Agreement

	 	 	
22

	 

 

	 
	
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EXHIBITS

 

	
Exhibits

	 	
Description

	 	 	 
	
Exhibit A

	 	
Certain Definitions

	
Exhibit B

	 	
Bill of Sale and Assignment

  

SCHEDULES

 

	
Buyer Schedules

	 	
Description

	 	 	 
	
1.01(a)

	 	
Assets Purchased

 

	 
	
5

	

 

ASSET PURCHASE AGREEMENT

 

This Asset Purchase Agreement (the “Agreement”) is made as of the 19th day of December, 2014, by and among, SEPARATION DEGREES - ONE, INC., a Delaware corporation having a business address at 77 Geary Street, 5th Floor, San Francisco, CA 94108 (hereafter, “SDOI” or “Buyer”) and GANNON K. GIGUIERE, an individual having an address at 2549B Eastbluff Drive, Suite 456, Newport Beach, CA 92660 (hereafter, “Seller”).

 

BACKGROUND

 

WHEREAS, Seller has developed a proprietary software platform, intellectual properties and relationships in the business of e-commerce and online media;

 

WHEREAS, Buyer desires to purchase certain assets, subsidiary companies and relationships from Seller;

 

WHEREAS, Seller desires to sell such assets, relationships and wholly owned companies of Seller under the terms and conditions set forth in this Agreement, and Buyer has agreed to purchase such assets under such terms and conditions; and

 

NOW, THEREFORE, in consideration of the foregoing and of the mutual promises, covenants, representations, warranties, and agreements contained herein, and intending to be legally bound, Seller, and Buyer agree as follows:

 

ARTICLE I – SALE AND PURCHASE OF ASSETS

 

Section 1.01 Purchased Assets. Subject to the terms and conditions of this Agreement, on the Closing Date (as defined in Section 2.01), Seller will sell, assign, transfer and deliver to Buyer, and Buyer will purchase, acquire and take assignment and delivery from Seller (the “Acquisition”), the assets and relationships of Seller listed below (collectively, the “Purchased Assets”). The Purchased Assets will be purchased free and clear of all security interests, liens, restrictions, claims, encumbrances or charges of any kind (“Encumbrances”). The Purchased Assets will include the following items:

 

(a) Purchased Assets. The assets listed on Schedule 1.01(a); and

 

(b) Books and Records. All papers, documents, computerized databases and records of Seller relating to the Purchased Assets including without limitation all software design documents and source code.

 

Section 1.02 No Assumed Obligations. The Buyer shall have no responsibility for any of the Sellers’ obligations related to the Purchased Assets (including leases and liabilities of any type, kind or nature), whether fixed, accrued, contingent or otherwise, and whether arising in contract, in tort, by violation of law, by operation of law, or otherwise, and all such obligations shall remain with the Seller.

 

	 
	
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Section 1.03 Consideration. At the Closing (as defined in Section 2.01), SDOI shall deliver to Seller and/or their assigns an aggregate of Fifty Million (50,000,000) shares of its preferred stock (the “Shares”) as issued and defined in SDOI’s Certificate of Incorporation and further defined in the Certificate of Designations, Preferences and Rights of Series A Convertible Stock and Common Stock of Separation Degrees – One, Inc.

 

Section 1.04 Reporting of Asset Sale. Each party agrees to report the purchase and sale contemplated herein on Internal Revenue Service Form 8594 or such other form as appropriate.

 

Section 1.05 Tax Consequences. For federal income tax purposes, the transactions contemplated hereby are intended to constitute a “reorganization” within the meaning of Section 368 of the Code. The parties to this Agreement hereby adopt this Agreement as a “plan of reorganization” within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations, and each party is intended to be a “party to the reorganization” within the meaning of Section 368 of the Code.

 

ARTICLE II – CLOSING; DOCUMENTS OF CONVEYANCE

 

Section 2.01 Closing. Subject to the satisfaction of the conditions set forth in Articles V and VI, the purchase and sale contemplated hereby shall be consummated at a closing (referred to herein as the “Closing”) to be held at the offices of SDOI, on or before January 2, 2015 (the “Closing Date”). The purchase and sale shall be deemed effective for all purposes as of the close of business on the Closing Date (the “Effective Time”).

 

Section 2.02 Actions to be Taken at the Closing. At or contemporaneously with the Closing, the Parties shall take or will have taken the following actions and shall deliver or shall have delivered the following documents:

 

(a) Seller shall execute and deliver to Buyer a Bill of Sale and Assignment Agreement substantially in the form attached hereto as Exhibit B (the “Bill of Sale”), together with such other instruments of conveyance and evidence of the transfer of title to the Purchased Assets from Seller.

 

(b) SDOI shall have caused to be delivered to Seller certificates representing the Shares, free and clear of all Encumbrances in exchange for the Purchased Assets of which have been valued at two hundred and fifty thousand dollars ($250,000).

 

(c) Gannon Giguiere shall enter into Employment Agreements with SDOI, effective at Closing, on terms mutually satisfactory to SDOI and Messer. Giguiere. Among other things, such employment agreements shall provide for Mr. Giguiere to serve as the Chairman and CEO and President and Secretary of SDOI.

 

(d) Buyer and Seller shall each deliver to the other (to the extent applicable), all other Transaction Documents, including consents, releases, waivers and approvals (including, without limitation, resolutions and incumbency certificates of the directors and officers of each, and necessary minutes or resolutions of the stockholders of each) required for each party to enter into this Agreement and consummate the transactions described herein and referred to in Articles V and VI.

 

	 
	
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All instruments of conveyance shall be free of all Encumbrances, except as otherwise set forth herein, and shall be in form and content reasonably acceptable to counsels for the Buyer and the Seller.

 

Section 2.03 Exemption From Registration. Buyer and Seller intend that the Shares of SDOI preferred stock to be issued pursuant to Section 1.04 hereof, in each case in connection with the Acquisition shall be issued in a transaction exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), by reason of Section 4(2) of the Securities Act.

 

Section 2.04 Pre-Asset Purchase Liabilities Related to the Purchased Assets. All operating expenses and liabilities relating to the ownership and operation of the Purchased Assets attributable to the period ending at the Effective Time shall be paid by the Seller as they become due.

 

Section 2.05 Transfer of Possession. Simultaneously with the Effective Time, Seller shall give the Buyer full possession and enjoyment of the Purchased Assets.

 

ARTICLE III – REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer represents and warrants to Seller that the statements contained in this Article III are true and correct, except as set forth in the disclosure schedule which may be provided by Buyer to Seller on the date hereof and accepted in writing by Seller (the “Buyer Disclosure Schedule”). The Buyer Disclosure Schedule, if any, shall be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Article III; and to the extent that it is clear from the context thereof that such disclosure also applies to any other numbered paragraph contained in this Article III, the disclosures in any numbered paragraph of the Buyer Disclosure Schedule shall qualify such other corresponding numbered paragraph in this Article III. For purposes of this Article III, the phrase “to the knowledge of Buyer” or any phrase of similar import shall be deemed to refer to the actual knowledge of any officer or director of Buyer, without independent investigation.

 

Section 3.01 Organization, Qualification and Corporate Power. SDOI is a corporation duly organized, validly existing and in corporate and tax good standing under the laws of the State of Delaware. Buyer is duly qualified to conduct business and is in corporate and tax good standing under the laws of each jurisdiction in which the nature of its businesses or the ownership or leasing of its properties requires such qualification, except where the failure to be so qualified or in good standing, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect. Buyer has all requisite corporate power and authority to carry on the businesses in which it is engaged and to own and use the properties owned and used by it. Buyer has furnished or made available to Seller complete and accurate copies of its certificate of incorporation and bylaws. Buyer is not in default under or in violation of any provision of its certificate of incorporation, as amended to date, or its bylaws, as amended to date.

 

	 
	
8

	

 

Section 3.02 Capitalization. The capitalization of SDOI consists of 500,000,000 authorized shares of common stock, $0.0001 par value per share, and 500,000,000 authorized shares of preferred stock, $0.0001 par value per share, of which at Closing, 84,500,000 shares of common stock will be issued and outstanding. SDOI’s common stock is presently not registered under Section 12(g) of the Exchange Act of 1934, as amended. All of the outstanding shares of SDOI's common stock have been duly authorized and validly issued, and are fully paid and non-assessable, and none of such shares is subject to any repurchase option or restriction on transfer. All of such shares have been issued in compliance with applicable securities laws. There is no: (i) outstanding subscription, option, call, warrant or right (whether or not currently exercisable) to acquire or otherwise relating to, any shares of the capital stock or other securities of SDOI; (ii) outstanding security, instrument or obligation that is or may become convertible into or exchangeable for any shares of the capital stock or other securities of SDOI; (iii) contract under which SDOI is or may become obligated to sell or otherwise issue any shares of its capital stock or any other securities; or (iv) condition or circumstance that may give rise to or provide a basis for the assertion of a claim by any Person to the effect that such Person is entitled to acquire or receive any shares of capital stock or other securities of SDOI. The Shares to be issued at the Closing, when issued and delivered in accordance with the terms hereof, shall be duly and validly issued, fully paid and nonassessable and free of all Encumbrances and preemptive rights and will be issued in compliance with applicable federal and state securities laws.

 

Section 3.03 Financial Statements. SDOI has delivered to or made available to Seller the following financial statements and notes (collectively, the “SDOI Financial Statements”): the balance sheet, income statement, and statement of cash flows of SDOI as of December 1, 2014. The SDOI Financial Statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods covered thereby, are accurate and complete in all material respects and present fairly the financial position of SDOI as of the dates thereof and the results of operations and cash flows of SDOI for the periods covered thereby. There has been no material adverse change in SDOI's financial condition, business or properties since the date of the most recent SDOI Financial Statements. SDOI is not liable for or subject to any material liabilities, except for those liabilities reflected on the SDOI Financial Statements and not heretofore paid or discharged and those liabilities arising in the ordinary course of business consistent with past practice under any contract, commitment or agreement.

 

Section 3.04 Undisclosed Liabilities. Buyer has no liability (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated and whether due or to become due), except for (a) liabilities shown on the balance sheet contained in the most recent SDOI Financial Statements, (b) liabilities which have arisen since the date of the balance sheet contained in the most recent SDOI Financial Statements in the ordinary course of business which do not exceed $50,000 in the aggregate and (c) contractual and other liabilities incurred in the ordinary course of business which are not required by GAAP to be reflected on a balance sheet.

 

Section 3.05 Tax Matters. All Tax Returns required to be filed by or on behalf of SDOI with any Governmental Body with respect to any transaction occurring or any taxable period ending on or before the Closing Date (the “Buyer Returns”) (i) have been or will be filed when due, and (ii) have been, or will be when filed, accurately and completely prepared in compliance with all applicable Legal Requirements.

 

	 
	
9

	

 

Section 3.06 Legal Proceedings. There is no pending Legal Proceeding, and, to the best of the knowledge of Buyer, no Person has threatened to commence any Legal Proceeding: (i) that involves Buyer, or any of the assets owned or used by Buyer and which, if decided against Buyer, would have a Material Adverse Effect on the financial condition, business or properties of Buyer; or (ii) that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with any of the transactions contemplated by this Agreement.

 

Section 3.07 Compliance with Laws. To the best knowledge of Buyer, they have at all times conducted their business in compliance with all applicable laws, regulations, ordinances and other requirements of all Governmental Bodies (including applicable federal, state and local laws, rules and regulations respecting occupational safety and health standards). Buyer has not received any notice, advice, claim or complaint from any employee or Governmental Body that Buyer has not conducted, or are not presently conducting, its business and operations in accordance with all applicable laws and other requirements of Governmental Bodies.

 

Section 3.08 Authority; Binding Nature of Agreement. Buyer has the absolute and unrestricted right, power and authority to enter into and to perform its obligations under the Transaction Documents; the execution, delivery and performance by Buyer of the Transaction Documents have been duly authorized by all necessary action on the part of Buyer and their board of directors; and the approval of Buyer shareholders is not required. The Transaction Documents constitute the legal, valid and binding obligation of Buyer, enforceable against them in accordance with its terms, subject to (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies. At the Closing, Buyer will deliver to Seller such evidence of the authorization of its execution, delivery, and performance of the Transaction Documents as Seller may reasonably request.

 

Section 3.09 Non-Contravention. Neither (i) the execution delivery or performance of the Transaction Documents, nor (ii) the consummation of any of the transactions contemplated by this Agreement, will directly or indirectly (with or without notice or lapse of time):

 

(a) contravene, conflict with or result in a violation of (i) the provisions of the respective articles of incorporation or bylaws of Buyer, or (ii) any resolution adopted by the shareholders or board of directors of Buyer;

 

(b) contravene, conflict with or result in a violation of, or give any Governmental Body or any Person the right to challenge any of the transactions contemplated by this Agreement or to exercise any remedy or obtain any relief under, any Legal Requirement or any order, writ, injunction, judgment, or decree to which Buyer, or any of the assets owned or used by them, is subject; or

 

(c) contravene, conflict with or result in a violation of, or breach of, or result in a default under, any provision of any Contract to which Buyer are a party, or give any Person the right to (i) declare a default or exercise any remedy under any such Contract, (ii) accelerate the maturity or performance of any such Contract, (iii) cancel, terminate or modify any such Contract.

 

	 
	
10

	

 

Section 3.10 Full Disclosure. The Transaction Documents delivered by Buyer to Seller in connection with the transactions contemplated herein, do not (i) contain any representation, warranty or information that is false or misleading with respect to any material fact, or (ii) omit to state any material fact necessary in order to make the representations, warranties and information contained and to be contained herein and therein not false or misleading.

 

Section 3.11 Valid Issuance. The Shares will, when issued in accordance with the provisions of this Agreement, be validly issued, fully paid and nonassessable. SDOI intends to issue and deliver the Shares in reliance on exemptions from registration and qualification under various federal and state securities laws.

 

Section 3.12 No Additional Agreements. Buyer does not have any understanding with Seller with respect to the transactions contemplated by this Agreement other than as specified in this Agreement, and the other Transaction Documents.

 

Section 3.13 Employee Relations. Buyer is not party to any collective bargaining agreement or employs any member of a union. Buyer believes that their relations with their employees are good. Buyer is in compliance with all federal, state, local, and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance would not result in a Material Adverse Effect.

 

ARTICLE IV – REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller represents and warrant to Buyer that the statements contained in this Article IV are true and correct, except as set forth in the disclosure schedule, which may be provided by Seller to Buyer on the date hereof and accepted in writing by Buyer (the “Seller Disclosure Schedule”). The Seller Disclosure Schedule, if any, shall be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Article IV; and to the extent that it is clear from the context thereof that such disclosure also applies to any other numbered paragraph contained in this Article IV, the disclosures in any numbered paragraph of the Seller Disclosure Schedule shall qualify such other corresponding numbered paragraph in this Article IV. For purposes of this Article IV, the phrase “to the knowledge of Seller” or any phrase of similar import shall be deemed to refer to the actual knowledge of Seller, without independent investigation.

 

Section 4.01 Legal Proceedings. There is no pending Legal Proceeding, and, to the best of the knowledge of Seller, no Person has threatened to commence any Legal Proceeding: (i) that involves Seller or any of the Purchased Assets; or (ii) that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with any of the transactions contemplated by this Agreement.

 

Section 4.02 Assets. Seller has, and will have at the Closing, good, valid and marketable title to all of the Purchased Assets, free and clear of any liens. Seller has not sold, transferred, assigned or conveyed any of its right, title and interest, or granted or entered into any option to purchase or acquire any of its right, title or interest, in and to any of the Purchased Assets. No third party has any option or right to acquire any of the Purchased Assets.

 

	 
	
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Section 4.03 Compliance with Laws. To the best knowledge of Seller, Seller has at all times conducted their business, if any, related to the Purchased Assets in compliance with all applicable laws, regulations, ordinances and other requirements of all Governmental Bodies (including applicable federal, state and local laws, rules and regulations respecting occupational safety and health standards). Seller has not received any notice, advice, claim or complaint from any employee or Governmental Body that Seller has not conducted, or are not presently conducting, their business and operations, if any, related to the Purchased Assets in accordance with all applicable laws and other requirements of Governmental Bodies.

 

Section 4.04 Authority; Binding Nature of Agreement. Seller has the absolute and unrestricted right, power and authority to enter into and to perform their obligations under the Transaction Documents; and the execution, delivery and performance by Seller of the Transaction Documents has been duly authorized by all necessary action on the part of Seller. The Transaction Documents constitute the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject to (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies. At the Closing, Seller will deliver to Buyer such evidence of the authorization of Sellers’ execution, delivery, and performance of the Transaction Documents as Buyer may reasonably request.

 

Section 4.05 Non-Contravention. Neither (i) the execution, delivery or performance of this Agreement or any of the other Transaction Documents, nor (ii) the consummation of any of the transactions contemplated by this Agreement, will directly or indirectly (with or without notice or lapse of time):

 

(a) contravene, conflict with or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the transactions contemplated by this Agreement or to exercise any remedy or obtain any relief under, any Legal Requirement or any order, writ, injunction, judgment or decree to which Sellers, or any of the Purchased Assets are subject; or

 

(b) contravene, conflict with or result in a violation or breach of, or result in a default under, any provision of any contract to which Seller or the Purchased Assets are subject, or give any Person the right to (i) declare a default or exercise any remedy under any such contract, (ii) accelerate the maturity or performance of any such contract, or (iii) cancel, terminate or modify any such contract.

 

Section 4.06 Intellectual Property.

 

(a) Seller has the valid and exclusive right to use all Intellectual Property(as defined below) related to the Purchased Assets. No other Person (other than licensors of software that is generally commercially available), has any rights to any of the Intellectual Property related to the Purchased Assets, and, to Sellers’ knowledge, no Person or Entity is infringing, violating or misappropriating any of the Intellectual Property that Seller has an exclusive right to use. For purposes of this Agreement, “Intellectual Property” means, among other things, all (i) patents and patent applications, (ii) copyrights, and registrations therefor, (iii) computer software, data and documentation, (iv) trade secrets and confidential business information, whether patentable or unpatentable and whether or not reduced to practice, know-how, manufacturing and production processes and techniques, research and development information, copyrightable works, financial, marketing and business data, pricing and cost information, business and marketing plans and information, (v) trademarks, service marks, logos, trade names, domain names, and registrations and applications therefor, and (vii) any other proprietary rights relating to any of the foregoing.

 

	 
	
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(b) To Sellers’ best knowledge, none of the activities conducted by Seller with respect to the Purchased Assets infringes, violates or constitutes a misappropriation of (or in the past infringed, violated or constituted a misappropriation of) any Intellectual Property of any other Person or Entity. Seller has not received any written complaint, claim or notice alleging any such infringement, violation or misappropriation of any Intellectual Property of any other Person or Entity, and to the knowledge of Seller there is no basis for such claims.

 

(c) Seller has no agreements with any Person or Entity pursuant to which Seller may obtain rights to Intellectual Property material to the Purchased Assets that is owned by a Person or Entity other than Seller. Seller is not obligated to pay any royalties or other compensation to any third party in respect of their ownership, use or license of any of the Purchased Assets.

 

(d) Seller has taken commercially reasonable precautions (i) to protect their rights in the Purchased Assets and (ii) to maintain the confidentiality of their trade secrets and know-how. To Sellers’ knowledge, or under circumstances, which would not have a Material Adverse Effect, there have been no acts or omissions by Seller or their agents, the result of which would be to materially compromise the rights of Seller to apply for or enforce appropriate legal protection of the Purchased Assets.

 

Section 4.07 Software Licenses. Seller has all necessary licenses to use all material third-party software used in connection with the Purchased Assets, and to Sellers’ knowledge, Sellers’ use of third-party software does not infringe the rights of any Person or Entity.

 

Section 4.08 Royalties, Commissions, Fees. As of the Closing Date, there shall be no Entity or Person due or owed any continuing interest, including any royalty, commission fee or other payment related to the Purchased Assets.

 

Section 4.09 Absence of Certain Changes or Events. Except as would not have a Material Adverse Effect, from the duties of this Agreement through the Closing, there will not be:

 

(a) any damage, destruction or loss relating to the Purchased Assets, whether or not covered by insurance, that would have a Material Adverse Effect; or

 

(b) any mortgage, pledge, transfer of a security interest in, or lien, created by Seller, with respect to any of the Purchased Assets, except liens for taxes not yet due or payable and liens that arise in the ordinary course of business and do not materially impair Sellers’ ownership or use of such property or assets;

 

Section 4.10 Full Disclosure. The Transaction Documents delivered by Seller to Buyer in connection with the transactions contemplated herein, do not (i) contain any representation, warranty or information that is false or misleading with respect to any material fact, or (ii) omit to state any material fact necessary in order to make the representations, warranties and information contained and to be contained herein and therein not false or misleading. Buyer has completed their due diligence investigation of Seller.

 

	 
	
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ARTICLE V – CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER

 

The obligations of Buyer to consummate the transactions contemplated by this Agreement are subject to the satisfaction, at or prior to the Closing, of each of the following conditions:

 

Section 5.01 Accuracy of Representations. Each of the representations and warranties made by Seller in this Agreement and in each of the other Transaction Documents delivered to Buyer in connection with the transactions contemplated by this Agreement shall have been accurate in all respects as of the Closing Date.

 

Section 5.02 Performance of Covenants. Each covenant or obligation that Seller is required to comply with or to perform at or prior to the Closing shall have been complied with and performed in all respects.

 

Section 5.03 Consents. All necessary board, stockholder, and third party consents, waivers and releases required to be obtained in connection with the transactions contemplated by this Agreement shall have been obtained (and copies thereof shall have been provided to Buyer) and shall be in full force and effect.

 

Section 5.04 Release of Liens and Security Interests.

 

(a) All liens and security interests on the Purchased Assets, if any, held by all Seller secured parties (the “Secured Parties”) shall be released and all related discharge of lien notices and forms shall be filed and recorded in the appropriate government offices in accordance with the requirements of the Uniform Commercial Code and copies of such notices and forms shall have been provided to Buyer.

 

(b) All Secured Parties, if any, shall, in writing, release the Buyer from any and all liability or obligation to them relating to any debts of Seller owed to the Secured Parties with respect to the Purchased Assets or otherwise.

 

Section 5.05 Agreements and Documents. Buyer shall have received a certificate executed by Seller containing the representation and warranty of Seller that each of the representations and warranties set forth in Article IV is accurate in all material respects as of the Closing Date and that the conditions set forth in Article V have been duly satisfied.

 

Section 5.06 No Legal Proceedings. No Legal Proceeding shall be pending wherein an unfavorable judgment, order, decree, stipulation or injunction would (i) prevent consummation of any of the transactions contemplated by this Agreement, or (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, and no such judgment, order, decree, stipulation or injunction shall be in effect.

 

	 
	
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Section 5.07 Due Diligence Review. Buyer shall have reviewed and approved all materials in the possession and control of Seller, which are germane to the decision of Buyer to proceed with the Asset Purchase. Buyer and their advisors shall have had a reasonable opportunity to perform the searches and other due diligence reasonable and customary in a transaction of a similar nature to the Acquisition and both Buyer and their advisors shall have been satisfied with the results of such due diligence.

 

ARTICLE VI – CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER

 

The obligations of Seller to consummate the transactions contemplated by this Agreement are subject to the satisfaction, at or prior to the Closing, of the following conditions:

 

Section 6.01 Accuracy of Representations. Each of the representations and warranties made by Buyer in this Agreement and in each of the other Transaction Documents delivered to Seller in connection with the transactions contemplated by this Agreement shall have been accurate in all respects as of the Closing Date.

 

Section 6.02 Performance of Covenants. All of the covenants and obligations that Buyer are required to comply with or to perform at or prior to the Closing shall have been complied with and performed in all respects.

 

Section 6.03 Consents, Waivers, Releases. All consents, waivers and releases required to be obtained in connection with the transactions contemplated by this Agreement shall have been obtained and shall be in full force and effect.

 

Section 6.04 Agreements and Documents. Seller shall have received a certificate executed by Buyer, and containing the representation and warranty that each of the representations and warranties set forth in Articles III are accurate in all material respects as of the Closing Date and that the conditions set forth in Article VI have been duly satisfied.

 

Section 6.05 Due Diligence Review. Seller shall have reviewed and approved all materials in the possession and control of Buyer, which are germane to the decision of Seller to proceed with the Acquisition, including a reasonable opportunity to review the SDOI Financial Statements. Seller and their advisors shall have had a reasonable opportunity to perform the searches and other due diligence reasonable and customary in a transaction of a similar nature to the Acquisition, and both Seller and their advisors shall have been satisfied with the results of such due diligence and the content of the SDOI Financial Statements.

 

Section 6.06 Officers Certificate. Seller shall have received (i) a certified copy of Buyers' articles of incorporation, (ii) a copy of Buyers’ bylaws, and (iii) a copy of the resolutions of the board of directors, authorizing the execution of this Agreement and the consummation of the transactions contemplated hereby, each certified by an officer of the Buyer.

 

	 
	
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Section 6.07 Material Adverse Effect. Since the date of this Agreement, no event, occurrence, fact, condition, change, development or effect shall have occurred that, individually or in the aggregate, has constituted or resulted in, or could reasonably be expected to have a Material Adverse effect on Buyer and the financial condition or results of operations of the Buyer taken as a whole.

  

Section 6.08 Employment Agreements. SDOI shall have entered into employment agreements with Gannon Giguiere, effective as of the Closing.

  

ARTICLE VII – SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

 

Section 7.01 Survival. The right to bring claims or assert causes of action for breach of any covenants, agreements, representations and warranties of the parties contained in this Agreement or in any certificate or other writing delivered pursuant hereto or in connection herewith shall survive for a period of one year following the Closing Date, provided, however, that (i) the covenants and agreements which by their terms do not contemplate performance after the Closing shall terminate as of the Closing; and (ii) the covenants and agreements which by their terms contemplate performance after the Closing shall survive until the date specified in this Agreement or the Transaction Documents as the termination date for such covenants and agreements, or if no such date is specified, then such covenants and agreements shall survive until the expiration of any statute of limitations.

 

Section 7.02 Sellers’ Agreement to Indemnify. Subject to the terms, conditions and limitations of this Agreement, Seller agrees to indemnify, defend and hold harmless Buyer, their officers, employees, directors, and agents from and against all Damages to which Buyer become subject as a result of, arising out of, or based on any of the following:

 

(a) a breach of any representation or warranty made by any Seller pursuant to this Agreement in Article IV;

 

(b) a breach of any covenant contained in or made by Seller pursuant to this Agreement in Article VIII;

 

(c) liabilities, obligations, or claims related to the Purchased Assets arising out of facts, conditions or circumstances occurring prior to the Closing Date; and

 

(d) any claim or liability for brokerage commissions or finder’s fees incurred by reason of any action taken by Seller.

 

Such Damages relating to subsections (a) through (d) are hereinafter collectively referred to as the “Buyers’ Indemnified Losses”.

 

	 
	
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Section 7.03 Buyers’ Agreement to Indemnify. Subject to the terms, conditions and limitations of this Agreement, Buyer agree to indemnify, defend and hold harmless Seller and their agents, from and against all Damages to which Seller becomes subject as a result of, arising out of, or based in any of the following:

 

(a) a breach of any representation or warranty made by Buyer pursuant to this Agreement in Article III;

 

(b) a breach of any covenant contained in or made by Buyer pursuant to this Agreement in Article VIII;

 

(c) liabilities, obligations or claims relating to the Purchased Assets arising out of facts, conditions or circumstances occurring after the Closing Date;

 

(d) any claim or liability for brokerage commissions or finder’s fees incurred by reason of any action taken by Buyer.

 

Such Damages relating to subsections (a) through (d) are hereinafter collectively referred to as the “Sellers’ Indemnified Losses”.

 

Section 7.04 Certain Provisions Applicable to Indemnification Obligations. No party shall be liable under this Article for any Damages resulting from or relating to any inaccuracy in or breach of any representation or warranty in this Agreement if the party seeking indemnification for such Damages had knowledge of such breach before Closing.

 

Section 7.05 Procedures for Resolution and Payment of Claims for Indemnification.

 

(a) If a party entitled to be indemnified under this Article (the “Indemnitee”) shall incur any Damages or determines that it is likely to incur any Damages, and believes that it is entitled to be indemnified against such Damages by the other party hereunder (the “Indemnitor”), such Indemnitee shall give prompt notice to the Indemnitor of the assertion of any claim, or the commencement of any action, suit or proceeding, in respect of which indemnity may be sought hereunder and will give the Indemnitor such information with respect thereto as the Indemnitor may reasonably request (“Indemnitee’s Certificate”), but failure to give such notice shall relieve the Indemnitor of any liability hereunder only to the extent that the Indemnitor has suffered actual prejudice thereby.

 

(b) In case the Indemnitor shall object to the indemnification of an Indemnitee in respect of any claim or claims specified in any Indemnitee’s Certificate, the Indemnitor shall within thirty (30) days after receipt by the Indemnitor of such Indemnitee’s Certificate deliver to the Indemnitee a written notice to such effect and the Indemnitor and the Indemnitee shall, within the thirty (30) day period beginning on the date of receipt by the Indemnitee of such written objection, attempt in good faith to agree upon the rights of the respective parties with respect to each of such claims to which the Indemnitor shall have so objected. If the Indemnitee and the Indemnitor shall succeed in reaching agreement on their respective rights with respect to any of such claims, the Indemnitee and the Indemnitor shall promptly prepare and sign a memorandum setting forth such agreement. In the event the Indemnitee and the Indemnitor do not succeed in reaching agreement on their respective rights with respect to any such claims (“Disputed Claims”), the Disputed Claims will be resolved in accordance with Section 10.09 herein.

 

	 
	
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(c) Claims for Damages specified in any Indemnitee’s Certificate to which an Indemnitor shall not object in writing and claims for Damages resolved in accordance with Section 7.04(b) and Section 10.09 are hereinafter referred to, collectively, as “Agreed Claims.”

 

(d) Promptly after the assertion by any third party of any claim against any Indemnitee that, in the reasonable judgment of such Indemnitee, will result in the incurrence by such Indemnitee of Damages for which such Indemnitee would be entitled to indemnification pursuant to this Agreement, such Indemnitee shall deliver to the Indemnitor a written notice describing in reasonable detail such claim and such Indemnitor may, at its option, assume the defense of the Indemnitee against such claim (including the employment of counsel, who shall be reasonably satisfactory to such Indemnitee, and the payment of expenses). Failure to receive notice from Indemnitee shall not amend any rights, obligations or limitations set forth in this Article. Any Indemnitee shall have the right to employ separate counsel in any such action or claim and to participate in the defense thereof, but the Indemnitor shall not be responsible for the fees and expenses of such counsel unless (i) the Indemnitor shall have failed, within a reasonable time after having been notified by the Indemnitee of the existence of such claim as provided in the preceding sentence, to assume the defense of such claim, (ii) the employment of such counsel has been specifically authorized by the Indemnitor, or (iii) the named parties to any such action (including any impleaded parties) include both such Indemnitee and Indemnitor and such Indemnitee shall have furnished Indemnitor an opinion of counsel to the effect that there may be one or more legal defenses available to Indemnitee which are different from or additional to those available to Indemnitor, in which event Indemnitor shall only be responsible for the fees and expenses of one separate firm of attorneys for all Indemnitees. If the Indemnitor, within a reasonable time after notice of any such third party claim, fails in good faith to defend the Indemnitee against such claim, the Indemnitee shall have the right to undertake the defense, compromise or settlement of such claim on behalf of and for the account and risk of the Indemnitor, subject always to the right of the Indemnitor to assume the defense of such claim at any time prior to settlement, compromise or final determination thereof. No Indemnitor shall be liable to indemnify any Indemnitee for any settlement or compromise of any such action or claim effected without the consent of the Indemnitor which shall not be unreasonably withheld or delayed; but if settled with the written consent of the Indemnitor, or if there be a final judgment for the plaintiff or claimant in any such action, the Indemnitor shall indemnify and hold harmless each Indemnitee from and against any loss or liability by reason of such settlement or judgment (but only to the extent provided in this Article).

 

Section 7.06 Payment of Agreed Claims. Upon the occurrence of any event or existence of any condition which result in a claim for indemnification under this Article, such party shall initiate a claim under Section 7.04 of this Agreement.

 

Section 7.07 Remedies Exclusive. The remedies provided in this Article shall be the sole and exclusive remedies of the Seller and Buyer, respectively, after the Closing for monetary damages in connection with the transactions contemplated by this Agreement including, without limitation, any breach or non-performance of any representation, warranty, covenant or agreement contained herein. Buyer or Seller may not commence any suit, action or proceeding against the other with respect to the subject matter of this Agreement, whether in contract, tort or otherwise, except to enforce the express rights under this Article.

 

	 
	
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ARTICLE VIII – COVENANTS; CONDUCT OF THE PARTIES AFTER CLOSING

 

Section 8.01 Cooperation. Buyer and Seller will cooperate upon and after the Closing Date in effecting the orderly transfer of the Purchased Assets to Buyer. Without limiting the generality of the foregoing, Seller, at the request of Buyer and without additional consideration, will execute and deliver from time to time such further instruments of assignment, conveyance and transfer, will sign any documents necessary or useful to ensure that all of the right, title and interest in and to the Purchased Assets vests in Buyer, and will take such other actions as may reasonably be required to convey and deliver to Buyer more effective title to the Purchased Assets, or to confirm and perfect Buyers’ title thereto, as contemplated by this Agreement.

 

Section 8.02 Repayment of Obligations. Seller agree to pay all pre-Closing liabilities and obligations related to the Purchased Assets by either: (a) paying such liabilities and obligations in full as they come due, (b) entering into arrangements acceptable to the obligees of such liabilities and obligations for the repayment of such liabilities and obligations.

 

ARTICLE IX – TERMINATION

 

Section 9.01 Termination of Agreement. This Agreement may be terminated:

 

(a) prior to the Closing by mutual agreement of the parties; or

 

(b) prior to the Closing by Buyer if any of the conditions provided for in Article V of this Agreement have not been met at the Closing and have not been waived in writing by Buyer prior to such date; or

 

(c) prior to the Closing by Seller if any of the conditions provided for in Article VI of this Agreement have not been met at the Closing and have not been waived in writing by Seller prior to such date; or

 

(d) by either party after July 1, 2015 if the Closing has not occurred on or prior to such date, provided that the party giving notice of termination is not responsible for the failure to close on or prior to such date.

 

Section 9.02 Termination Procedure; Effect of Termination.

 

(a) In the event of termination by Seller or Buyer, or by the mutual agreement of Seller and Buyer, pursuant to Section 9.01 of this Agreement, written notice thereof shall forthwith be given to the other party and the transactions contemplated by this Agreement shall be terminated, without further action or liability by either party or parties to the other (except for liability of any party for the willful breach of this Agreement).

 

(b) If the transactions contemplated by this Agreement are terminated as provided herein, Seller and Buyer shall return all documents, work papers and other material of any other party relating to the transactions contemplated hereby, whether so obtained before or after the execution of this Agreement, to the party furnishing the same; and such termination shall not in any way limit or restrict the rights and remedies of any party hereto against any other party which has breached any of the agreements or other provisions of this Agreement prior to termination of this Agreement.

 

(c) In the event this Agreement is terminated, each party will keep confidential any information (unless such information is public information or is otherwise required by law to be disclosed) obtained from the other party in connection with the transactions contemplated hereby and will not use, develop or disclose any such information in any manner whatsoever based on information provided by the other for a period of two (2) years.

 

	 
	
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ARTICLE X – MISCELLANEOUS

 

Section 10.01 Further Assurances. Each party hereto shall execute and cause to be delivered to each other party hereto such instruments and other documents, and shall take such other actions, as such other party may reasonably request (prior to, at, or after the Closing) for the purpose of carrying out or evidencing any of the transactions contemplated by this Agreement.

 

Section 10.02 Fees and Expenses. All fees, costs and expenses (including legal fees and accounting fees) that have been incurred or that are incurred in the future by any party in connection with the transactions contemplated by this Agreement, including all fees, costs and expenses incurred by such party in connection with or by virtue of (a) any investigation and review conducted by such party of the other party's business (and the furnishing of information in connection with such investigation and review), (b) the negotiation, preparation and review of this Agreement and all agreements, certificates, opinions and other instruments and documents delivered or to be delivered in connection with the transactions contemplated by this Agreement, (c) the preparation and submission of any filing or notice required to be made or given in connection with any of the transactions contemplated by this Agreement, and the obtaining of any Consent required to be obtained in connection with any of such transactions, and (d) the consummation of the transactions contemplated hereby shall be paid: (i) by Buyer, if incurred by Buyer; and (ii) by Seller, if incurred by Seller.

 

Section 10.03 Attorneys' Fees. If any action or proceeding relating to this Agreement or the enforcement of any provision of this Agreement is brought against any party hereto, the prevailing party shall be entitled to recover reasonable attorneys' fees, costs and disbursements (in addition to any other relief to which the prevailing party may be entitled).

 

Section 10.04 Notices. Any notice or other communication required or permitted to be delivered to any party under this Agreement shall be in writing and shall be deemed properly delivered, given and received when delivered (by hand, by registered mail, by courier or express delivery service or by facsimile) to the address or facsimile telephone number set forth beneath the name of such party below (or to such other address or facsimile telephone number as such party shall have specified in a written notice given to the other party hereto):

 

if to Buyer:

 

Separation Degrees - One, Inc.

77 Geary Street, 5th Floor

San Francisco, CA 94108 

Attention: Mike Rountree

 

	 
	
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if to Seller:

 

Gannon K. Giguiere

2549B Eastbluff Drive, Suite 456 

Newport Beach, CA 92660

 

Section 10.05 Severability. In the event that any provision of this Agreement, or the application of any such provision to any Person, Entity or set of circumstances, shall be determined to be invalid, unlawful, void or unenforceable to any extent, the remainder of this Agreement, and the application of such provision to Persons, Entities or circumstances other than those as to which it is determined to be invalid, unlawful, void or unenforceable, shall not be impaired or otherwise affected and shall continue to be valid and enforceable to the fullest extent permitted by law.

 

Section 10.06 Headings. The Section headings contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.

 

Section 10.07 Counterparts. This Agreement may be executed in several counterparts, each of which shall constitute an original and all of which, when taken together, shall constitute one agreement.

 

Section 10.08 Governing Law; Arbitration.

 

(a) This Agreement shall be construed in accordance with, and governed in all respects by, the internal laws of the State of California (without giving effect to principles of conflicts of laws).

 

(b) Buyer, on the one hand, and Seller, on the other, shall promptly submit any dispute, claim or controversy arising out of or relating to this Agreement and the other Transaction Documents (including, without limitation, with respect to the meaning, effect, validity, termination, interpretation, performance or enforcement of this Agreement or such Transaction Document) or any alleged breach (including any action in tort, contract, equity or otherwise) to binding arbitration before one arbitrator. The parties agree that, except as otherwise provided herein respecting temporary or preliminary injunctive relief, binding arbitration shall be the sole means of resolving any dispute, claim or controversy arising out of or relating to this Agreement or any Transaction Document (including, without limitation, with respect to the meaning, effect, validity, termination, interpretation, performance or enforcement of this Agreement or such Transaction Document) or any alleged breach (including any claim in tort, contract, equity or otherwise). Such arbitration shall be conducted by the American Arbitration Association under the Arbitration Rules then in effect, and shall take place in California.

 

Section 10.09 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. This Agreement may not be assigned by any party.

 

	 
	
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Section 10.10 Remedies Cumulative; Specific Performance. The rights and remedies of the parties hereto shall be cumulative (and not alternative). The parties to this Agreement agree that, in the event of any breach or threatened breach by any party to this Agreement of any covenant, obligation or other provision set forth in this Agreement for the benefit of any other party to this Agreement, such other party shall be entitled (in addition to any other remedy that may be available to it) to (a) a decree or order of specific performance or mandamus to enforce the observance and performance of such covenant, obligation or other provision, and (b) an injunction restraining such breach or threatened breach.

  

Section 10.11 Waiver.

 

(a) No failure on the part of any party to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of any party in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy.

 

(b) No party shall be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such party; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.

 

Section 10.12 Amendments. This Agreement may not be amended, modified, altered or supplemented other than by means of a written instrument duly executed and delivered on behalf of all of the parties hereto.

 

Section 10.13 Entire Agreement. This Agreement and the attached Exhibits and Schedules set forth the entire understanding of the parties hereto relating to the subject matter hereof and thereof and supersedes all prior agreements and understandings among or between any of the parties relating to the subject matter hereof.

 

[Remainder of Page Left Blank.]

 

	 
	
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The parties hereto have caused this Agreement to be executed and delivered as of the date first above written.

 

	 	BUYER	 
		 	 	
	 	
SEPARATION DEGREES - ONE, INC.

	 
		 	 	
		By:	/s/ Michael D. Rountree	 
	 	Name:  	Michael D. Rountree	 
	 	Title:  	Chief Financial Officer	 
	 	 	 	 
		SELLER	
		 	 	
		
GANNON K. GIGUIERE

	
		 	 	
		
By: 

	/s/ Gannon K. Giguiere	

 

	 
	
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EXHIBIT A

 

CERTAIN DEFINITIONS

 

For purposes of the Agreement (including this Exhibit A):

 

CONSENT. “Consent” shall mean any approval, consent, ratification, permission, waiver or authorization (including from a Governmental Body).

 

DAMAGES “Damages” shall mean all demands, claims, actions or causes of action, assessments, judgments, fines, losses, damages, liabilities, costs and expenses, including, without limitation, interest, penalties, punitive and exemplary damages, costs of investigation, clean-up and remediation and reasonable attorneys’ fees and reasonable expenses.

 

ENTITY. “Entity” shall mean any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization or entity.

 

GOVERNMENTAL BODY. “Governmental Body” shall mean any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States, any foreign country or any domestic or foreign state, county, city, local or other political subdivision.

 

LEGAL PROCEEDING. “Legal Proceeding” shall mean any action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court or other Governmental Body or any arbitrator or arbitration panel.

 

LEGAL REQUIREMENT. “Legal Requirement” shall mean any federal, state, local, municipal, foreign or other law, statute, constitute, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Body.

 

	 
	
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MATERIAL ADVERSE EFFECT. A violation or other matter will be deemed to have a “Material Adverse Effect” on a Person if such violation or other matter (considered together with all other matters that would constitute exceptions to the representations and warranties set forth in the Agreement or in any Closing Certificate but for the presence of “Material Adverse Effect” or other materiality qualifications, or any similar qualifications, in such representations and warranties) would have a material adverse effect on such Person's business, condition, assets, liabilities, operations, financial performance or prospects.

 

PERSON. “Person” shall mean any individual, Entity or Governmental Body.

  

TAX. “Tax” shall mean any tax (including any income tax, franchise tax, capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including any customs duty), deficiency or fee, and any related charge or amount (including any fine, penalty or interest), imposed, assessed or collected by or under the authority of any Governmental Body.

 

TAX RETURN. “Tax Return” shall mean any return (including any information return), report, statement, declaration, estimate, schedule, notice, notification, form, election, certificate or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement relating to any Tax.

 

TRANSACTION DOCUMENTS. “Transaction Documents” shall mean this Agreement and each document, instrument and agreement executed and delivered in respect of the transactions contemplated hereby.

 

	 
	
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EXHIBIT B

 

BILL OF SALE AND ASSIGNMENT

 

KNOW ALL MEN BY THESE PRESENTS THAT, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned, GANNON K. GUIERE, an Individual (“Seller”), does hereby sell, assign, convey, transfer and deliver to SEPARATION DEGREES – ONE, INC., a Delaware corporation (“Buyer”), all of Sellers’ worldwide rights, title and interest in and to the Purchased Assets, as defined in the Asset Purchase Agreement (the “Agreement”) by and among Seller and Buyer, dated December 19th, 2014 which is incorporated herein by reference.

 

Seller hereby warrants to Buyer, their successors and assigns, that Seller is the rightful owner of the Purchased Assets conveyed; that Seller is conveying to Buyer good and merchantable title to all of the Purchased Assets conveyed, free and clear of all liabilities, obligations, claims, and encumbrances of any kind or nature; and that Seller (and Sellers’ successors and assigns) will warrant and defend this sale against the claims and demands of all persons whomsoever.

 

Seller hereby covenants and agrees that he will, at the request of Buyer and without further consideration, execute and deliver, such other instruments of sale, transfer, conveyance and assignment, and take such other action as may be reasonably necessary to vest in Buyer, its successors and assigns, good and merchantable title to the Purchased Assets conveyed, free and clear of all liabilities, obligations, claims, and encumbrances of any kind or nature and to put Buyers in control and possession thereof.

 

Seller does hereby irrevocably constitute Buyer, their successors and assigns, as Sellers’ true and lawful attorney-in-fact, with full power of substitution, in Sellers’ or Buyers’ name, to claim, demand, collect and receive the Purchased Assets conveyed.

 

This instrument is being delivered in connection with the Agreement and is subject to, and is entitled to the benefits in respect of, the Agreement.

 

This instrument shall be binding upon Seller and their successors and assigns, and shall inure to the benefit of Buyers and their successors and assigns.

 

Dated this 19th day of December 2014.

	 	 	 
	 	 	GANNON K. GIGUIERE	 
		 	 	
			﻿/s/ Gannon K. Giguiere 	 

 

	 
	
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SCHEDULE 1.01(a)

 

ASSETS PURCHASED

 

(1) a Social e-Commerce software platform, highly customized for the direct online sales and analytical needs of our customers, and (2) a product on-boarding, price management and analytical software platform that enables our customers to manage product listings, inventory availability, pricing optimization, search terms, data analytics and other critical functions, all through a single interface.

 

Multiple consulting relationships of Gannon Giguiere spanning e-commerce development, search engine optimization, online media planning and buying, product placement for commission based selling.

 

 

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