Document:

ex_116704.htm

Exhibit 10.1

 

AMENDED AND RESTATED COMMITMENT LETTER

 

June 20, 2018

 

Interface, Inc.

2859 Paces Ferry Rd., Suite 2000

Atlanta, Georgia 30339

Attention: Bruce A. Hausmann, Chief Financial Officer

 

	
			Re:

				
			Amended and Restated Syndicated Facility Agreement dated as of August 8, 2017 (as amended prior to the date hereof, the “Existing Facility Agreement”) by and among Interface, Inc., a Georgia corporation (“you” or the “Company”), the Designated Borrowers party thereto, the Guarantors party thereto, the Lenders party thereto and Bank of America, N.A., as Administrative Agent

			

 

Ladies and Gentlemen:

 

Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Existing Facility Agreement.

 

You have advised Bank of America, N.A. (through itself or one of its designated affiliates or branch offices, “Bank of America”), Merrill Lynch, Pierce, Fenner & Smith Incorporated (or any of its designated affiliates, “MLPFS”) and JPMorgan Chase Bank, N.A. (“JPM”) that you intend to acquire (the “Target Acquisition”), directly or indirectly through one or more Wholly Owned Subsidiaries, (x) all of the outstanding capital stock of nora Holding GmbH, a German company (the “Target”), from DealCo Luxembourg II S.à r.l., a Luxembourg company, and nora Management III Beteiligungs GmbH & Co. KG, a German company, as Sellers (referred to herein collectively as the “Seller”), and (y) all existing shareholder loans owing by the Target or one or more of its subsidiaries to Seller (referred to herein as the “Shareholder Loans”), in each case pursuant to Share Purchase and Transfer Agreement dated June 14, 2018 (the “Target Acquisition Agreement”) among (i) Seller, (ii) Interface Europe B.V., as Purchaser (the “Share Purchaser”), and (iii) the Company, as the purchaser of the Shareholder Loans (the “SH Loan Purchaser”; together with the Share Purchaser referred to herein collectively as the “Purchaser”).

 

In connection with the foregoing, you have also advised Bank of America, MLPFS and JPM (collectively, the “Commitment Parties”) that you desire to:

 

	 	
			(a)

				
			finance the payment of the cash consideration for the Target Acquisition (including the purchase of the Shareholder Loans), the repayment of existing bank facility indebtedness of the Target and its subsidiaries and the payment of fees and expenses incurred in connection with the Transactions (defined below) from a Multicurrency Incremental Term Loan incurred under the Amended Facility Agreement (defined below) in the principal amount of $465 million (the “Incremental Term Facility”) which shall be shall be available to the Company in Dollars or Euros, shall bear interest at the same interest rate and interest rate margins applicable to the Term Loan A, shall amortize in equal quarterly principal installments in an amount equal to 1.875% of the initial principal amount of the Incremental Term Facility (for annual amortization of 7.50% of the initial principal amount of the Incremental Term Facility), shall mature on August 8, 2022, shall share ratably in optional and mandatory prepayments with the Term Loan A and shall otherwise be on all the same terms and conditions as the Term Loan A; and 

			

 

 

 

 

	 	(b)	(i)       effect an amendment (the “Proposed Amendment”) to the Existing Facility Agreement (as to be amended by the Proposed Amendment, the “Amended Facility Agreement”) which shall be effective on the Effective Date (defined below) that contains the following modifications to the Existing Facility Agreement: (i) the maximum Consolidated Net Leverage Ratio permitted under Section 8.11(a) shall be increased from 3.75:1.00 to 4.50:1.00 (with step-downs to be mutually agreed by you and the Commitment Parties), (ii) the Target Acquisition will be permitted, including amendments to Section 8.02 of Existing Facility Agreement so as to permit consummation of the Target Acquisition (including transfer of the proceeds of the Incremental Term Facility from the Company to the Purchaser and certain other intercompany transfers in the form of distributions, share repurchases, contributions or intercompany loans required or necessary to accomplish the funding the Target Acquisition), the purchase of the Shareholder Loans by the SH Loan Purchaser (either directly or through the making of an intercompany loan by the Company to the Target) and the existence of the Shareholder Loans on and after Effective Date (and on or after the Effective Date, the transfer of the Shareholder Loans from SH Loan Purchaser to an existing or a newly created Foreign Subsidiary of the Company), (iii) the Incremental Term Facility will be permitted (on the terms and conditions set forth herein including the Limited Conditionality Provision), (iv) Consolidated EBITDA will be amended to provide for additional addbacks regarding (A) advisory and legal fees, financing fees, consulting fees and other transaction related fees and expenses (uncapped) incurred in connection with the Target Acquisition and the Senior Credit Facilities, (B) non-cash amortization expense resulting from the purchase accounting adjustment to the value of the inventory of the Target in connection with the Target Acquisition, and (C) restructuring charges, integration costs, pro forma cost savings and cost synergies in each case in connection with the Target Acquisition and included in the financial model of the Company and its Subsidiaries approved by the Commitment Parties prior to the Effective Date, (v) the Consolidated Net Leverage Ratio will be amended to allow for $100 million in netting of unrestricted and unencumbered cash of the Company and its subsidiaries, (vi) the Multicurrency Swing Line Sublimit, Domestic Swing Line Sublimit, and Letter of Credit Sublimit will be increased to amounts to be mutually agreed upon by you and the Commitment Parties and (vii) Section 8.03 will be amended to permit the funding of the Target and its subsidiaries under a separate bilateral credit facility provided by Bank of America (through itself or one of its designated affiliates or branch offices) and/or another Lender licensed in Germany, in an amount to be mutually agreed upon you and the Commitment Parties; or
	 	 	 
	 	 	(ii)      if the consent of Required Lenders for the Proposed Amendment (the “Required Consent”) is not obtained, enter into replacement credit facilities, which shall refinance in full the revolving credit and term loan facilities under the Existing Facility Agreement, shall be provided on the Effective Date pursuant to the definitive documentation for the Senior Credit Facilities with terms identical in all material respects to the terms of the Existing Facility Agreement and the other Loan Documents as such terms would have been amended by the Proposed Amendment (such replacement credit facilities, the “Backstop Facilities”) and the agency fees and fronting fees under such Backstop Facilities shall be identical to the agency fees and fronting fees under the Existing Facility Agreement;

 

 

 

 

The revolving credit and term loan facilities under the Amended Facility Agreement are referred to herein as the “Amended Credit Facilities”. The Incremental Term Facility and Amended Credit Facilities or the Backstop Facilities, as applicable, are referred to herein collectively as the “Senior Credit Facilities”. The Target Acquisition, the entering into the Proposed Amendment or the Backstop Facilities, as applicable, the documentation and funding of the Incremental Term Facility, the repayment of existing third party bank indebtedness of the Target and its subsidiaries, the purchase of the Shareholder Loans pursuant to the Target Acquisition Agreement, the payment of fees and expenses incurred in connection with the Target Acquisition and the Senior Credit Facilities, and all related transactions, are referred to collectively herein as the “Transaction”. This letter and the exhibits hereto are collectively referred to as the “Commitment Letter”.

 

	1.	Commitments. In connection with the foregoing:
	 	 	 
	 	(a)      Bank of America is pleased to provide its commitment to fund 70% of the principal amount of the Incremental Term Facility and JPM is pleased to provide its commitment to fund 30% of the principal amount of the Incremental Term Facility;
	 	 
	 	(b)     if the Required Consent is not obtained, Bank of America is pleased to provide its commitment to fund 70% of the principal amount of the Backstop Facilities and JPM is pleased to provide its commitment to fund 30% of the principal amount of the Backstop Facilities; provided that if, subsequent to the date of your acceptance of this Commitment Letter and prior to its expiration in accordance with its terms, the Required Consent is obtained, the commitment under this clause (b) shall automatically terminate; and
	 	 
	 	(c)     each of MLPFS and JPM is pleased to advise you of their willingness, as joint lead arranger and joint bookrunner (collectively in such capacities, the “Lead Arrangers”) for the Senior Credit Facilities to (i) use commercially reasonable efforts to solicit the Required Consent and (ii) form a syndicate of financial institutions and institutional investors for the Incremental Term Facility and, if the Required Consent is not obtained, the Backstop Facilities (such financial institutions and institutional investors, together with Bank of America and any existing lenders under the Existing Facility Agreement that consent to the Proposed Amendment, the “Lenders”). It is understood that JPM may perform its responsibilities hereunder through its affiliate, J.P. Morgan Securities LLC.

     

Bank of America will continue to act as sole Administrative Agent for the Senior Credit Facilities. The Senior Credit Facilities will include customary LIBOR transition and ERISA (lender and borrower) provisions. The commitments of Bank of America and JPM hereunder are several and not joint.

 

No additional agents, co-agents, arrangers or bookrunners will be appointed and no other titles will be awarded without the consent of MLPFS. MLPFS shall have “left side” designation and shall appear on the top left of any Information Materials (as defined below) and all other offering or marketing materials in respect of the Senior Credit Facilities and shall perform the duties and exercise the authority customarily performed and exercised by it in such role.

 

As used herein, “syndication” of the Senior Credit Facilities includes the Lead Arrangers using commercially reasonable efforts to arrange the Required Consent.

 

2.     Conditions Precedent. The commitments of Bank of America and JPM hereunder and the undertakings of the Lead Arrangers to provide the services described herein are subject only to the satisfaction of each of the conditions precedent set forth in Exhibit A attached hereto and forming part of this Commitment Letter.

 

 

 

 

Notwithstanding anything in this Commitment Letter, the Fee Letter (as defined below) or the definitive documentation for the Senior Credit Facilities to the contrary, (a) the only representations and warranties the accuracy of which shall be a condition to the funding of the Incremental Term Facility or, to the extent applicable, the funding of the Backstop Facilities, on the Effective Date shall be the Specified Representations (as defined below) and the Target Acquisition Agreement Representations (as defined in Exhibit A), and (b) the terms of the definitive documentation for the Senior Credit Facilities shall be in a form such that they do not impair the availability or funding of the Incremental Term Facility or, to the extent applicable, the funding of the Backstop Facilities, on the Effective Date if the conditions set forth in Exhibit A are satisfied (it being understood that, to the extent any collateral (including the grant or perfection of any security interest) is not or cannot be provided and/or perfected on the Effective Date (other than the grant and perfection of security interests in assets with respect to which a lien may be perfected solely by the filing of a financing statement (other than as a “fixture filing”) under the Uniform Commercial Code (“UCC”), then the provision and perfection of such collateral shall not constitute a condition precedent to the availability and initial funding of the Incremental Term Facility or, to the extent applicable, the funding of the Backstop Facilities, on the Effective Date, but may instead be provided within 90 days after the Effective Date (or, in each case, such later date, as agreed by the Administrative Agent) pursuant to arrangements to be mutually agreed by the Administrative Agent and you. For purposes hereof, “Specified Representations” means the representations and warranties to be made by the Borrowers and the Guarantors in the definitive documentation for the Senior Credit Facilities relating to corporate or other organizational existence of the Borrowers and the Guarantors, organizational power and authority of the Borrowers and the Guarantors to enter into and perform the definitive documentation for the Senior Credit Facilities, due authorization, execution and delivery by the Borrowers and the Guarantors of, and enforceability against the Borrowers and the Guarantors of, the definitive documentation for the Senior Credit Facilities, creation, validity and perfection of first priority (subject to permitted liens) liens under the security documents (subject, without limitation, to the limitations and exceptions set forth in the preceding sentence), no conflicts of the definitive documentation for the Senior Credit Facilities with the organizational documents of Borrowers and the Guarantors or with material laws applicable to the Borrowers or any of the Guarantors, use of proceeds not violating margin regulations and not violating anti-corruption laws, sanctions and the PATRIOT Act, Investment Company Act and solvency as of the Effective Date (after giving effect to the Transactions) of the Borrowers and its subsidiaries on a consolidated basis. This paragraph is referred to herein as the “Limited Conditionality Provision”.

 

3.     Syndication. The Lead Arrangers intend to commence syndication of the Senior Credit Facilities promptly upon your acceptance of this Commitment Letter and the Fee Letter. You agree to actively assist the Lead Arrangers in achieving a syndication of the Senior Credit Facilities that is satisfactory to the Lead Arrangers. Such assistance shall include your (a) providing and causing your advisors to provide (and using your commercially reasonable efforts to cause the Target and its advisors to provide) the Commitment Parties and the other Lenders upon request with all information reasonably deemed necessary by the Commitment Parties to complete syndication, including, but not limited to, information and evaluations prepared by you, the Target and your or its advisors, or on your or its behalf, relating to the transactions contemplated hereby (including the Projections (as hereinafter defined), the “Information”), (b) assisting in the preparation of materials to be used in connection with the syndication of the Senior Credit Facilities (collectively, the “Information Materials”), (c) using your commercially reasonable efforts to ensure that the syndication efforts of the Lead Arrangers benefit materially from your existing banking relationships and (d) otherwise reasonably assisting the Commitment Parties in their syndication efforts, including by making your officers and advisors available (and your using commercially reasonable efforts to make the officers and advisors of the Target available) from time to time to attend and make presentations regarding the business and prospects of the Company and its subsidiaries, the Target and its subsidiaries and the Transactions, as appropriate, at one or more meetings of prospective Lenders. You hereby agree that, following the Effective Date and at our own expense, we may place advertisements in financial and other newspapers and periodicals, and circulate similar promotional materials, in the form of a “tombstone” or otherwise, containing information customarily included in such advertisements and materials, including (i) the name of the Company, (ii) our and our affiliates’ titles and roles in connection with the Senior Credit Facilities, and (iii) the amount, type and closing date of the Senior Credit Facilities. You also authorize each the Lead Arrangers and its affiliates to download copies of the Company’s and its subsidiaries’ logos from its website, use copies thereof in SyndTrak or similar workspaces established by MLPFS in connection with the syndication of the Senior Credit Facilities and use such logos on any confidential information memoranda, presentations and other marketing materials prepared in connection with the syndication of the Senior Credit Facilities.

 

 

 

 

It is understood and agreed that MLPFS will manage and control all aspects of the syndication in consultation with you, including decisions as to the selection of prospective Lenders and any titles offered to proposed Lenders, when commitments will be accepted and the final allocations of the commitments among the Lenders (it being understood that the syndication of the Senior Credit Facilities shall be allocated 70% to reduce the commitment of Bank of America and 30% to reduce the commitment of JPM until a Successful Syndication (as defined in the Fee Letter) has occurred). It is understood that no Lender participating in the Senior Credit Facilities will receive compensation from you in order to obtain its commitment, except on the terms contained herein, in the Summary of Terms and in the Fee Letter. It is also understood and agreed that the amount and distribution of the fees among the Lenders will be at the sole and absolute discretion of MLPFS.

 

Notwithstanding any other provision of this Commitment Letter to the contrary or any syndication, assignment or other transfer of Bank of America’s or JPM’s commitments in respect of the Senior Credit Facilities herein, (a) neither Bank of America nor JPM shall be relieved, released or novated from its obligations hereunder (including its obligation to fund its commitment to the Incremental Term Facility and, to the extent applicable, its commitment to the Backstop Facilities on the Effective Date) as a result of such syndication, assignment or other transfer until after the funding of the Incremental Term Facility and, to the extent applicable, the initial funding of the Backstop Facilities in each case on the Effective Date, (b) no such syndication, assignment or other transfer shall become effective with respect to any portion of Bank of America’s or JPM’s commitments in respect of the Senior Credit Facilities until the funding of the Incremental Term Facility and, to the extent applicable, the initial funding of the Backstop Facilities in each case on the Effective Date and (c) each of Bank of America and JPM shall retain exclusive control over all rights and obligations with respect to its commitments in respect of the Senior Credit Facilities herein, including all rights with respect to consents, waivers, modifications, supplements and amendments, until the Effective Date has occurred.

 

Without limiting your obligations to assist with syndication efforts as set forth herein, it is understood that our commitments with respect to the Incremental Term Facility and, to the extent applicable, the Backstop Facilities are not conditioned upon the syndication of, or receipt of commitments in respect of, the Incremental Term Facility and, to the extent applicable, the Backstop Facilities and in no event shall the commencement or successful completion of syndication of the Incremental Term Facility and, to the extent applicable, the Backstop Facilities, nor the obligation to assist with syndication efforts as set forth herein (including, without limitation, any of your agreements in this paragraph or the following paragraph), constitute a condition to the commitment hereunder to fund the Incremental Term Facility and, to the extent applicable, the Backstop Facilities in each case on the Effective Date.

 

 

 

 

4.     Information Requirements. You represent, warrant and covenant (subject, however, to the best of your knowledge with respect to Information relating to the Target) that (a) all financial projections concerning the Company and its subsidiaries and the Target and its subsidiaries that have been or are hereafter made available to any of the Commitment Parties or the Lenders by you, the Target or any of your or its representatives (or on your or its behalf) (the “Projections”) have been or will be prepared in good faith based upon assumptions believed by you to be reasonable at the time furnished (it being understood that such Projections are as to future events and are not to be viewed as facts, that actual results during the period or periods covered by any such Projections may differ significantly from the projected results and that such differences may be material, that such Projections are subject to significant uncertainties and contingencies many of which are beyond your control, and that no assurance can be given that the projected results will be realized) and (b) all Information, other than Projections, which has been or is hereafter made available to any of the Commitment Parties or the Lenders by you, the Target or any of your or its representatives (or on your or its behalf) in connection with any aspect of the Transactions, as and when furnished, is and will be complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not misleading. You agree to furnish us with further and supplemental information from time to time until the funding of the Incremental Term Facility and, if the Required Consent is not obtained, the initial funding of the Backstop Facilities (the “Effective Date”) and, if requested by MLPFS, for such period thereafter as is necessary to achieve a Successful Syndication (as defined in the Fee Letter) so that such representation and warranty is correct on the Effective Date and on such later date on which a Successful Syndication occurs as if the Information were being furnished, and such representation and warranty were being made, on such date. In issuing this commitment and in arranging and syndicating the Senior Credit Facilities, the Commitment Parties are and will be using and relying on the Information without independent verification thereof.

 

You acknowledge that the Commitment Parties on your behalf will make available Information Materials to the proposed syndicate of Lenders by posting the Information Materials on SyndTrak or another similar electronic system. In connection with the syndication of the Senior Credit Facilities, unless the parties hereto otherwise agree in writing, you shall be under no obligation to provide Information Materials suitable for distribution to any prospective Lender (each, a “Public Lender”) that has personnel who do not wish to receive material non-public information (within the meaning of the United States federal securities laws, “MNPI”) with respect to the Company or its affiliates, the Target and its affiliates or the respective securities of any of the foregoing. You agree, however, that the definitive documentation for the Senior Credit Facilities will contain provisions concerning Information Materials to be provided to Public Lenders and the absence of MNPI therefrom. Prior to distribution of Information Materials to prospective Lenders, you shall provide us with a customary letter authorizing the dissemination thereof. In any event, the Commitment Parties shall not disclose to any prospective Lender any Information Materials which are confidential unless such prospective Lender has agreed (whether by execution and delivery of a confidentiality agreement or by agreement to terms and conditions required to access information via electronic means) to keep such information confidential on terms which are customary in the syndication market for transactions of the nature described herein.

 

 

 

 

5.     Confidentiality. Each of the Commitment Parties and their respective affiliates will use all confidential information provided to them or such affiliates by or on behalf of you hereunder (including, without limitation, the Projections, the information contained in the Information Materials and any other Information provided by you that is not identified or marked clearly by you as “PUBLIC”) solely for the purpose of providing the services which are the subject of this Commitment Letter in connection with the transactions contemplated hereby and shall treat confidentially all such information; provided that nothing herein shall prevent the Commitment Parties from disclosing any such information (a) pursuant to the order of any court or administrative agency or in any pending legal or administrative proceeding, or otherwise as required by applicable law or compulsory legal process (in which case such Commitment Party, to the extent permitted by law, will use commercially reasonable efforts to notify the Company prior to any such disclosure in order to permit the Company to object to or seek a protective order against such disclosure; and, further, to cooperate on a reasonable basis, at the Company’s sole expense, with any such efforts to object to or seek a protective order against such disclosure), (b) upon the request or demand of any regulatory authority having jurisdiction over any of the Commitment Parties or any of their respective affiliates (in which case such Commitment Party, to the extent practicable and not prohibited by applicable law or regulation, agree to inform you promptly thereof (except with respect to any audit or examination conducted by bank accountants or any governmental authority exercising examination or regulatory authority)), (c) to the extent that such information becomes publicly available other than by reason of disclosure by any of the Commitment Parties or any of their respective affiliates in contravention of this paragraph, (d) to the extent that such information is received by any of the Commitment Parties from a third party that is not to its knowledge subject to confidentiality obligations to you, (e) to the extent that such information is independently developed by any of the Commitment Parties without reference to any of the Company’s confidential information, (f) to any of the Commitment Parties respective affiliates and their respective employees, legal counsel, independent auditors and other experts or agents, and solely on a need-to-know basis in connection with the Senior Credit Facilities and the transactions contemplated hereby, and provided such persons and entities are informed of the confidential nature of such information and agree or are otherwise obligated to hold such information in confidence, (g) to prospective Lenders and prospective arrangers, participants or assignees in respect of the Senior Credit Facilities, in each case who agree to be bound by standard confidentiality provisions in accordance with the customary loan market syndication practices for dissemination of such information, (h) for purposes of establishing a “due diligence” defense or (i) in connection with the exercise of any remedies hereunder or under the Fee Letter or any action or proceeding relating to this Commitment Letter or the Fee Letter or the enforcement of rights hereunder or thereunder.

 

6.     Expenses and Indemnification. By executing this Commitment Letter, you agree to reimburse each the Commitment Parties from time to time on demand for all reasonable out-of-pocket fees and expenses (including, but not limited to, (a) the reasonable fees, disbursements and other charges of Moore & Van Allen PLLC, as counsel to MLPFS and the Administrative Agent, and of special and local counsel to the Lenders retained by MLPFS or the Administrative Agent, and (b) reasonable and actual out-of-pocket due diligence expenses) incurred in connection with the Senior Credit Facilities, the syndication thereof, the preparation of the definitive documentation therefor and the other transactions contemplated hereby. You acknowledge that we may receive a benefit, including without limitation, a discount, credit or other accommodation, from any of such counsel based on the fees such counsel may receive on account of their relationship with us including, without limitation, fees paid pursuant hereto.

 

You agree to indemnify and hold harmless each of the Commitment Parties, each Lender and each of their affiliates and their respective officers, directors, employees, agents, advisors and other representatives (each, an “Indemnified Party”) from and against (and will reimburse each Indemnified Party as the same are incurred for) any and all claims, damages, losses, liabilities and reasonable out-of-pocket expenses (including, without limitation, the reasonable and actual fees, disbursements and other charges of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) (a) any matters contemplated by this Commitment Letter or any related transaction or (b) the Senior Credit Facilities or any use made or proposed to be made with the proceeds thereof, except to the extent such claim, damage, loss, liability or expense is found in a final, nonappealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence, willful misconduct or material breach by such Indemnified Party of its obligations under this Commitment Letter. In the case of an investigation, litigation or proceeding to which the indemnity in this paragraph applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by you, your equityholders or creditors or an Indemnified Party, whether or not an Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. You also agree that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to you or your subsidiaries or affiliates or to your or their respective equity holders or creditors arising out of, related to or in connection with any aspect of the transactions contemplated hereby, except to the extent of direct, as opposed to special, indirect, consequential or punitive, damages determined in a final, nonappealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence, willful misconduct or material breach by such Indemnified Party of its obligations under this Commitment Letter. Notwithstanding any other provision of this Commitment Letter, no Indemnified Party shall be liable for any damages arising from the use by others of information or other materials obtained through electronic telecommunications or other information transmission systems, other than for direct or actual damages resulting from the gross negligence, willful misconduct or material breach by such Indemnified Party of its obligations under this Commitment Letter as determined by a final and nonappealable judgment of a court of competent jurisdiction.

 

 

 

 

This Commitment Letter, the fee letter among you and the Commitment Parties of even date herewith (the “Fee Letter”), and the contents hereof and thereof are confidential and, except for disclosure hereof or thereof (i) on a confidential basis to your accountants, attorneys and other professional advisors retained by you in connection with the Senior Credit Facilities, (ii) on a confidential basis to the Seller and its advisors (provided, that, fee percentages and amounts and economic terms of the market flex provisions in the Fee Letter are redacted to the reasonable satisfaction of MLPFS or Administrative Agent, as applicable), (iii) of this Commitment Letter and the existence and contents hereof (but not the Fee Letter or the contents thereof, other than the aggregate fee amount contained in the Fee Letter as part of the Projections, pro forma information, or a generic disclosure of aggregate sources and uses related to fee amounts in connection with the Transactions to the extent such disclosure would be customary or required in offering and marketing materials for the Senior Credit Facilities (and only to the extent aggregated with all other fees and expenses in connection with the Transactions and not presented as an individual line item unless required by applicable law, rule or regulation)) in any syndication or other marketing material in connection with the Senior Credit Facilities, or (iv) in any judicial proceeding in connection with the enforcement of your rights hereunder or under the Fee Letter, may not be disclosed in whole or in part to any person or entity without our prior written consent; provided, however, it is understood and agreed that you may disclose (x) this Commitment Letter but not the Fee Letter after your acceptance of this Commitment Letter and the Fee Letter, in filings with the Securities and Exchange Commission and other applicable regulatory authorities and stock exchanges and (y) the aggregate amount of the fees or other payments in the Fee Letter (provided, that, the fee percentages and amounts (other than aggregate amounts) and economic terms of the market flex provisions in the Fee Letter are redacted to the reasonable satisfaction of MLPFS or Administrative Agent, as applicable) may be disclosed in public filings, included in projections and pro forma information, in disclosure of aggregate sources and uses and similar generic disclosures. The Commitment Parties hereby notify you that pursuant to the requirements of the USA PATRIOT Act, Title III of Pub. L. 107-56 (signed into law October 26, 2001) (the “Act”), each of them is required to obtain, verify and record information that identifies you and each co-borrower and each guarantor under the Senior Credit Facility, which information includes your and their name and address and other information that will allow the Commitment Parties to identify you and each such co-borrower and guarantor in accordance with the Act. As a condition to entering into the Proposed Amendment or the Backstop Facilities, each Borrower must provide all requested KYC/AML information (including, without limitation, Beneficial Ownership Certifications) satisfactory to the Commitment Parties and each Lender.

 

7.     No Fiduciary Duty. You acknowledge that each of the Commitment Parties or their affiliates may be providing financing or other services (including financial advisory services) to parties whose interests may conflict with yours.  Each of the Commitment Parties agrees that it will not furnish confidential information obtained from you to any of its other customers and that it will treat confidential information relating to you and your affiliates with the same degree of care as it treats its own confidential information. Each of the Commitment Parties further advises you that it will not make available to you confidential information that it has obtained or may obtain from any other customer. In connection with the services and transactions contemplated hereby, you agree that each of the Commitment Parties is permitted to access, use and share with any of its bank or non-bank affiliates, agents, advisors (legal or otherwise) or representatives any information concerning you or any of your affiliates that is or may come into the possession of the Commitment Parties or any of such affiliates, in each case subject to the confidentiality provisions contained in this Commitment Letter. You further acknowledge that each of the Commitment Parties is a full service securities or banking firm engaged in securities trading and brokerage activities as well as providing investment banking and other financial services. In the ordinary course of business, any such party may provide investment banking and other financial services to, and/or acquire, hold or sell, for its own accounts and the accounts of other customers, equity, debt and other securities and financial instruments (including bank loans and other obligations) of, you and other companies with which you may have commercial or other relationships. With respect to any securities and/or financial instruments so held by any such party or any of its customers, all rights in respect of such securities and financial instruments, including any voting rights, will be exercised by the holder of the rights, in its sole discretion.

 

 

 

 

In connection with all aspects of each transaction contemplated by this Commitment Letter, you acknowledge and agree that: (a) (i) the arranging and other services described herein regarding the Senior Credit Facilities are arm’s-length commercial transactions between you and your affiliates, on the one hand, and the Commitment Parties, on the other hand, (ii) you have consulted your own legal, accounting, regulatory and tax advisors to the extent you have deemed appropriate, and (iii) you are capable of evaluating, and understand and accept, the terms, risks and conditions of the transactions contemplated hereby; (b) (i) each of the Commitment Parties has been, is, and will be acting solely as a principal and, except as otherwise expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for you, any of your affiliates or any other person or entity and (ii) none of the Commitment Parties has any obligation to you or your affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein or in the definitive documentation for the Senior Credit Facilities; and (c) the Commitment Parties and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from yours and those of your affiliates, and none of the Commitment Parties has any obligation to disclose any of such interests to you or your affiliates. To the fullest extent permitted by law, you hereby waive and release any claims that you may have against any of the Commitment Parties with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated by this Commitment Letter.

 

8.     Survival. The provisions of the immediately preceding six paragraphs shall remain in full force and effect regardless of whether the definitive documentation for the Senior Credit Facilities shall be executed and delivered, and notwithstanding the expiration or mutual termination of this Commitment Letter or any commitment or undertaking of any of the Commitment Parties hereunder; provided that (x) the reimbursement and indemnity provisions set forth in Section 6 of this Commitment Letter shall be superseded on the date of effectiveness of the definitive documentation for the Senior Credit Facilities that includes reimbursement and indemnity provisions and (y) the confidentiality provisions set forth in Section 5 of this Commitment Letter shall terminate on the earlier of (i) the date of effectiveness of the definitive documentation for the Senior Credit Facilities that includes confidentiality provisions applicable to the Commitment Parties (which shall supersede the confidentiality provisions in Section 5 hereof) and (ii) the second anniversary of the date hereof. The provisions of Section 3 and Section 4 hereof shall remain in full force and effect, regardless of whether the definitive documentation for the Senior Credit Facilities shall be executed and delivered, until the earlier of (1) a Successful Syndication (as defined in the Fee Letter) shall have been achieved or (2) the occurrence of the Commitment Expiry Date without a closing of the Senior Credit Facilities having occurred.

 

 

 

 

9.     Miscellaneous. This Commitment Letter and the Fee Letter may be executed in counterparts which, taken together, shall constitute an original. Delivery of an executed counterpart of this Commitment Letter or the Fee Letter by electronic transmission or facsimile shall be effective as delivery of a manually executed counterpart thereof. This Commitment Letter and the Fee Letter shall be governed by, and construed in accordance with, the laws of the State of Georgia; provided that the laws of the Federal Republic of Germany shall govern in determining (a) the interpretation of the definition of Target Material Adverse Change (as defined in Exhibit A) and whether or not a Target Material Adverse Change has occurred, (ii) the accuracy of any Target Acquisition Agreement Representation and whether as a result of any inaccuracy thereof, a condition to your obligations to close under the Target Acquisition Agreement has not been met or you (or any of your affiliates) have the right (without regard to any notice requirement but giving effect to any applicable cure provisions) to terminate your (or any of your affiliates) obligations under the Target Acquisition Agreement and (iii) whether the Target Acquisition has been consummated in accordance with the terms of the Target Acquisition Agreement (in each case without regard to its rules of conflicts of law). Each of you and the Commitment Parties hereby irrevocably waives any and all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Commitment Letter, the Fee Letter, the transactions contemplated hereby and thereby or the actions of any of the Commitment Parties in the negotiation, performance or enforcement hereof.

 

This Commitment Letter and the Fee Letter embody the entire agreement and understanding among the Commitment Parties, you and your affiliates with respect to the Senior Credit Facilities and supersede all prior agreements and understandings relating to the specific matters hereof. No party has been authorized by any of the Commitment Parties to make any oral or written statements that are inconsistent with this Commitment Letter. This Commitment Letter is not assignable by any party hereto without the prior written consent of the other parties hereto and is intended to be solely for the benefit of the parties hereto and the Indemnified Parties; provided, that MLPFS may, without notice to or consent of the Company, assign its rights and obligations under this Commitment Letter and the Fee Letter to any other registered broker-dealer wholly-owned by Bank of America Corporation to which all or substantially all of Bank of America Corporation’s or any of its subsidiaries’ investment banking, commercial lending services or related businesses may be transferred following the date of this Commitment Letter. The terms of this Commitment Letter may be modified only pursuant to a writing signed by each party hereto specifically referencing this Commitment Letter.

 

This Commitment Letter and all commitments and undertakings of each of the Commitment Parties hereunder will expire at 5:00 p.m. (Eastern time) on June [__], 2018 unless you execute this Commitment Letter and the Fee Letter and return them to us prior to that time, whereupon this Commitment Letter and the Fee Letter shall become binding agreements. Thereafter, all commitments and undertakings of each of the Commitment Parties hereunder (except to the extent that any provisions expressly survive termination of this Commitment Letter) will expire on the earliest of (such date referred to herein as the “Commitment Expiry Date”): (a) December 31, 2018 (the “Stated Termination Date”), (b) the closing of the Target Acquisition with or without the use of the Incremental Term Facility, (c) the public announcement of the abandonment of the Target Acquisition by you (or any of your affiliates) and (d) the termination of the Target Acquisition Agreement prior to closing of the Target Acquisition or the termination of your (or any of your affiliates’) obligations under the Target Acquisition Agreement to consummate the Target Acquisition in accordance with the terms thereof. In consideration of the time and resources that each of the Commitment Parties will devote to the Senior Credit Facilities, you agree that, until the Commitment Expiry Date, you will not, without our consent solicit, initiate or permit, or enter into any discussions in respect of, any offering, placement or arrangement of any competing senior credit facility or facilities for the Company and its subsidiaries, except for bonds to be arranged or placed by MLPFS.

 

This Commitment Letter amends and restates in full that certain Commitment Letter dated as of June 14, 2018 between you, Bank of America, and MLPFS.

 

[SIGNATURE PAGES FOLLOW]

 

 

 

 

We are pleased to have the opportunity to work with you in connection with this important financing.

 

	 	Very truly yours,	 
	 	 	 
	
			 

				
			BANK OF AMERICA, N.A.

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			By: 

				
			/s/ Mark Halmrast

				
			 

			
	
			 

				
			Name: Mark Halmrast

				
			 

			
	 	Title: Managing Director	 
	 	 	 
	 	MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
	 	 	 	 
	 	By:	/s/ Mark Halmrast	 
	 	Name: Mark Halmrast	 
	 	Title: Managing Director	 
	 	 	 
	 	JPMORGAN CHASE BANK, N.A.	 
	 	 	 	 
	 	By:	/s/ Blakely Engel	 
	 	Name: Blakely Engel	 
	 	Title: Vice President	 

 

 

Interface, Inc.

AMENDED AND RESTATED COMMITMENT LEtter

 

 

 

	ACCEPTED AND AGREED TO AS OF THE DATE FIRST ABOVE WRITTEN:
	 	 
	
			Interface, Inc., a Georgia corporation

			
	
			 

				
			 

				
			 

			
	
			By: 

				
			/s/ Keith Wright

				
			 

			
	
			Name: Keith Wright

				
			 

			
	Title:   Treasurer	 

 

 

Interface, Inc.

AMENDED AND RESTATED COMMITMENT LEtter

 

 

EXHIBIT A

 

CONDITIONS PRECEDENT

 

Capitalized terms not otherwise defined herein have the same meanings

as specified therefor in the Amended and Restated Commitment Letter (the “Commitment Letter”) to which this Exhibit A is attached and forms part of.

 

The effectiveness of and initial extensions of credit under the Incremental Term Facility and, if the Required Consent is not obtained, the Backstop Facilities will be subject to satisfaction of the following conditions precedent in each case subject to the Limited Conditionality Provision:

 

	
			(i)

				
			Definitive Documentation. The negotiation, execution and delivery of definitive documentation for the Incremental Term Facility and the Proposed Amendment or, if the Required Consent is not obtained, the Backstop Facilities in each case consistent with the Commitment Letter and reasonably satisfactory to the Lead Arrangers, the Borrower and the Administrative Agent; it being understood that (A) the Existing Facility Agreement and related existing Loan Documents shall be used as basis for preparing such definitive documentation, and such documents shall be amended or amended and restated as necessary, consistent with the Commitment Letter and reasonably satisfactory to the Lead Arrangers, the Borrower and the Administrative Agent, and (B) the terms of such definitive documentation shall be such that they do not impair the availability of the Incremental Term Facility and, if applicable, the Backstop Facilities, on the Effective Date if the conditions set forth herein are satisfied.

			

 

	
			(ii)

				
			Specified Representations; Target Acquisition Agreement Representations. The Specified Representations shall be true and correct in all material respects (or, with respect to representations already qualified by concepts of materiality, in all respects) on and as of the Effective Date after giving effect to the Transactions. The Target Acquisition Agreement Representations shall be true and correct on and as of the Effective Date. As used herein and in the Commitment Letter, the term “Target Acquisition Agreement Representations” shall mean such of the representations and warranties made by or on behalf of the Seller with respect to the Target or Target’s subsidiaries in the Target Acquisition Agreement as are material to the interests of the Lenders (in their capacities as such), but only to the extent that the Purchaser (or any of its affiliates) has the right (determined without regard to any notice requirement) to terminate the Purchaser’s (and, if applicable, its affiliates’) obligations (or to refuse to consummate the Target Acquisition) under the Target Acquisition Agreement as a result of a breach of any of such representations and warranties.

			

 

	
			(iii)

				
			No Payment or Bankruptcy Default. No Default shall exist under any of Sections 9.01(a), 9.01(f) and 9.01(g)(i) of the Existing Facility Agreement.

			

 

	
			(iv)

				
			Legal Opinions. The Administrative Agent shall have received customary opinions of counsel to the Loan Parties reasonably acceptable to the Administrative Agent.

			

 

	
			(v)

				
			Organizational Documents; Resolutions; Good Standing Certificates. The Administrative Agent shall have received each of the following with respect to each Loan Party, in each case certified by a secretary or assistant secretary of such Loan Party to be true and correct as of the Effective Date: (i) copies of its articles of incorporation or formation (or equivalent document) certified to be true and complete as of a recent date by the appropriate governmental authority of the state of its incorporation or organization, (ii) copies of its bylaws or operating agreement (or equivalent document), (iii) resolutions and incumbency certificates and (iv) a good standing certificate (or its equivalent) dated as of a recent date by the appropriate governmental authority of the state of its incorporation or organization, in each case, reasonably satisfactory to the Administrative Agent.

			

 

i

 

 

	
			(vi)

				
			Financial Statements. MLPFS shall have received (A) unaudited consolidated balance sheets and related statements of income, changes in equity and cash flows of the Company and its Subsidiaries for each of the fiscal quarters ended at least 45 days before the Effective Date, (B) unaudited consolidated balance sheets and related statements of income, changes in equity and cash flows of the Target and its Subsidiaries for each of the fiscal months ended at least 30 days before the Effective Date since December 31, 2017; and (C) a pro forma consolidated balance sheet and related pro forma consolidated statement of income of the Company and its Subsidiaries as of and for the most recent four fiscal quarter period ended at least 45 days prior to the Effective Date prepared after giving effect to the Transactions as if the Transactions had occurred as of such date (in the case of such balance sheet) or at the beginning of such period (in the case of such statement of income).

			

 

	
			(vii)

				
			Target Acquisition.

			

 

	 	
			(A)

				
			The Target Acquisition shall have been, or shall concurrently with the funding of the Incremental Term Facility will be, consummated in accordance with the terms of the Target Acquisition Agreement, without giving effect to any amendment, modification, waiver or consent thereunder that is materially adverse to the interests of the Lenders unless such amendment or modification is approved by MLPFS (such approval not to be unreasonably withheld, delayed or conditioned). For purposes of the foregoing condition, it is hereby understood and agreed that (i) amendments, waivers and other changes to the definition of “Material Adverse Change” (as defined in the Target Acquisition Agreement), and consents and requests given or made pursuant to such definition shall in each case be deemed to be materially adverse to the interests of the Lenders, (ii) any reduction in the purchase price in connection with the Target Acquisition shall not be deemed to be materially adverse to the interests of the Lenders so long as such reduction is allocated to reduce the amount of the Incremental Term Facility, (iii) any reduction in the purchase price in connection with the Target Acquisition shall not be deemed to be materially adverse to the interests of the Lenders so long as such reduction (other than pursuant to any purchase price or similar adjustment provision set forth in the Target Acquisition Agreement) does not decrease the purchase price by more than ten percent (10%) (cumulative for all such reductions) without the prior written consent of MLPFS (not to be unreasonably withheld, conditioned or delayed) and (iv) any increase in the purchase price in connection with the Target Acquisition shall not be deemed to be material and adverse to the interests of the Lenders to the extent that such increase is funded with cash on the balance sheet of the Company or any of its Subsidiaries.

			
	 	 	 
	 	 	(B)     Target Material Adverse Change. No “Material Adverse Change” (as such term is defined in the Target Acquisition Agreement) shall have occurred in the period up to and including the Effective Date. The term “Target Material Adverse Change” as used in the Commitment Letter means a “Material Adverse Change” as such term is defined in the Target Acquisition Agreement.
	 	 	 
	 	 	(C)     Refinancing of Third Party Bank Debt of Target and its Subsidiaries. On the Effective Date (or concurrent with the funding of the Incremental Term Facility) all third party bank indebtedness of the Target and its Subsidiaries under the Target Facility Agreement (as defined below) shall have been repaid, all commitments thereunder shall have been terminated and all liens and security interests securing such indebtedness shall have been released or terminated. As used herein, the term “Target Facility Agreement” means that certain facilities agreement originally dated February 6, 2014, among inter alios the Target, certain affiliates of the Target, Deutsche Bank Luxembourg S.A., as Facility Agent, Deutsche Bank AG Filiale Deutschlandgeschaft, as Security Agent, and the other Finance Parties party thereto, as amended, restated, modified or supplemented from time to time.

 

 

 

 

	
			(viii)

				
			Collateral. The Loan Parties shall enter into such amendments to, or amendments and restatements of, the Collateral Documents as reasonably requested by the Administrative Agent in form and substance reasonably satisfactory to Administrative Agent; it being understood that the terms of such Collateral Documents (i) shall be substantially the same as the existing Collateral Documents relating to the Existing Facility Agreement, and (ii) shall be such that they do not impair the availability of the Incremental Term Facilities and, if applicable, the Backstop Facilities, on the Effective Date if the conditions set forth herein are satisfied.

			

 

	
			(ix)

				
			Solvency Certificate. The Administrative Agent shall have received certification in the form of Annex I hereto from the chief financial officer of the Company as to the solvency of the Company and its Subsidiaries on a consolidated basis as of the Effective Date after giving effect to the Transactions on a pro forma basis.

			

 

	
			(x)

				
			Backstop Facilities. Solely with respect to the Backstop Facilities, concurrently with the funding of the Backstop Facilities, (A) the Existing Facility Agreement shall have been repaid, all commitments thereunder shall have been terminated and all liens and security interests securing the Existing Facility Agreement shall have been released or terminated and (B) if any of the conditions precedent set forth in Section 5.02 of the Existing Facility Agreement are not satisfied on the Effective Date, then the maximum amount of credit extensions under the Backstop Facilities made on the Effective Date shall not exceed the aggregate outstanding amount of the credit extensions under the Existing Facility Agreement immediately prior to the Effective Date.

			

 

	
			(xi)

				
			Marketing Period. The Effective Date shall not occur until the earlier of (i) July 19, 2018, and (ii) the occurrence of a Successful Syndication.

			

 

	
			(xii)

				
			Clear Market. There shall be no offering, placement or arrangement of any debt securities or bank financing by or on behalf of the Company or any of its Subsidiaries other than equipment financing entered into in the ordinary course of business and the Senior Credit Facilities contemplated herein.

			

 

	
			(xiii)

				
			KYC Information. Upon the reasonable request of any Lender made at least ten days prior to the Effective Date, the Borrowers shall have provided to such Lender the documentation and other information so requested in connection with applicable “know your customer” and anti-money-laundering rules and regulations, including the PATRIOT Act, in each case at least five days prior to the Effective Date; provided that, at least five days prior to the Effective Date, if any Borrower qualifies as a “legal entity customer” under 31 C.F.R. § 1010.230, then such Borrower shall deliver a certification regarding beneficial ownership required by 31 C.F.R. § 1010.230, which certification shall be substantially similar in form and substance to the form of Certification Regarding Beneficial Owners of Legal Entity Customers published jointly, in May 2018, by the Loan Syndications and Trading Association and Securities Industry and Financial Markets Association.

			

 

	
			(xiv)

				
			Payment of Fees and Expenses. All fees payable to the Lead Arrangers and the Lenders on or before the Effective Date pursuant to the Fee Letters shall have been paid; and all expenses of the Lead Arrangers and the Administrative Agent required to be reimbursed by the Company pursuant to the Commitment Letter shall have been reimbursed to the extent invoiced in reasonable detail at least one business day in advance of the Effective Date.

			

 

 

 

 

ANNEX I

 

Form of Solvency Certificate

 

[_______________], 201[_]

 

 

 

This Solvency Certificate (this “Certificate”) is furnished to the Administrative Agent and the Lenders pursuant to Section [●] of the [Credit Agreement], dated as of [_________ ____], 2018, among [_______________] (the “Credit Agreement”). Unless otherwise defined herein, capitalized terms used in this Certificate shall have the meanings set forth in the Credit Agreement.

 

I, [______________], the Chief Financial Officer of the Company (after giving effect to the Transactions), in that capacity only and not in my individual capacity, DO HEREBY CERTIFY on behalf of the Company that as of the date hereof, both prior to and after giving effect to the consummation of the Target Acquisition (including the consummation of the Target Acquisition Agreement and the extensions of credit to be made under the Credit Agreement, the making of the Loans and the use of proceeds of such Loans on the date hereof, collectively, the “Transactions”):

 

1.     The sum of the liabilities (including contingent liabilities) of the Company and its subsidiaries, on a consolidated basis, does not exceed the present fair saleable value of the assets of the Company and its subsidiaries, on a consolidated basis.

 

2.     The present fair saleable value of the assets of the Company and its subsidiaries, on a consolidated basis, is greater than the total amount that will be required to pay the probable liabilities (including contingent liabilities) of the Company and its subsidiaries as they become absolute and matured.

 

3.     The capital of the Company and its subsidiaries, on a consolidated basis, is not unreasonably small in relation to their business as conducted on the date hereof.

 

4.     The Company and its subsidiaries, on a consolidated basis, have not, giving effect to the Transactions, incurred debts or other liabilities, including current obligations, beyond their ability to pay such debts or other liabilities as they become due (whether at maturity or otherwise).

 

5.     For purposes of this Certificate, the amount of any contingent liability has been computed as the amount that, in light of all of the facts and circumstances known to the undersigned as of the date hereof, represents the amount that can reasonably be expected to become an actual or matured liability.

 

6.     In reaching the conclusions set forth in this Certificate, the undersigned has (i) reviewed the Credit Agreement and other Loan Documents referred to therein, (ii) reviewed the financial statements (including the pro forma financial statements) referred to in [Section [●] of the Credit Agreement][Exhibit A of the Commitment Letter] (the “Financial Statements”) and (iii) made such other investigations and inquiries as the undersigned has deemed appropriate. The undersigned is familiar with the financial performance and prospects of the Company and its subsidiaries and hereby confirms that the Financial Statements were prepared in good faith and, to the best knowledge of the undersigned, fairly present, in all material respects, the Company’s and its subsidiaries’ consolidated financial condition (including, with respect to the pro forma Financial Statements, the pro forma financial condition giving effect to the Transactions).

 

i

 

 

7.     The undersigned confirms and acknowledges that the Administrative Agent and the Lenders are relying on the truth and accuracy of this Certificate in connection with the Commitments and Loans under the Credit Agreement.

 

IN WITNESS WHEREOF, the Company has caused this certificate to be executed on its behalf by its Chief Financial Officer this day of _____, 2018.

 

Interface, INC.

 

	
			By: 

				
			 

				
			 

			
	
			 

				
			Name:

				
			 

			
	
			 

				
			Title: Chief Financial OfficerBlueprint

 

Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this
“Agreement”)
is dated as of June 20, 2018, by and among New Age Beverages
Corporation, a Washington corporation (the
“Company”),
and the purchasers identified on the signature pages hereto (each,
including its successors and permitted assigns, a
“Purchaser,”
or in the aggregate, the “Purchasers”).

 

WHEREAS,
the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to purchase from the Company, the Notes (as
defined below) as set forth herein;

 

WHEREAS, subject to the terms and conditions set
forth in this Agreement and pursuant to Section 4(a)(2) of the
Securities Act of 1933, as amended (the “Securities
Act”), and/or Rule 506(b)
promulgated thereunder, the Company will sell and issue to the
Purchasers the Notes and the Conversion Shares (as defined below)
without registration;

 

WHEREAS, the Company will sell and issue the
Registered Shares (as defined below) to the Purchasers pursuant to
a shelf registration statement on Form S-3 (Registration No.
333-219341) (the “Registration
Statement”), which
Registration Statement was declared effective on October 16, 2017
by the Commission (as defined below) in accordance with the
Securities Act.

 

NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company
and each Purchaser agree as follows:

 

ARTICLE I.

DEFINITIONS

 

1.1. Definitions.
In addition to the terms defined elsewhere in this Agreement: (a)
capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Transaction Documents (as
defined herein), and (b) the following terms have the meanings set
forth in this Section 1.1:

 

“Action”
shall have the meaning ascribed to such term in Section
3.1(k).

 

“Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.

 

“BHCA”
shall have the meaning ascribed to such term in Section
3.1(oo).

 

“Board of
Directors” means the
board of directors of the Company.

 

“Business
Day” means any day except
any Saturday, any Sunday, or any day on which the Federal Reserve
Bank of New York is closed.

 

”Closing
Date” means the date
hereof.

 

 

 

1

 

 

“Closing”
means closing of the purchase and sale of the Securities pursuant
to Section 2.2.

 

“Code”
shall have the meaning ascribed to such term in Section 3.1
(m).

 

“Commission”
means the United States Securities and Exchange
Commission.

 

“Commitment
Shares” means the shares
of Common Stock to be issued by the Company to the Purchasers
pursuant to Section 2.1(b).

 

“Common
Stock” means the common
stock of the Company, par value $0.001 per share, and any other
class of securities into which such securities may hereafter be
reclassified or changed.

 

“Common Stock
Equivalents” means any
securities of the Company or its Subsidiaries which would entitle
the holder thereof to acquire at any time Common Stock, including,
without limitation, any debt, preferred stock, right, option,
warrant or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.

 

“Conversion”
means any conversion of the any Conversion Amount under the Notes
into shares of Common Stock pursuant to the
Notes.

 

“Conversion
Amount” shall have the
meaning ascribed to such term in the Notes.

 

 

“Conversion
Shares” shall have the
meaning ascribed to such term in the Notes.

 

 

“Disclosure
Schedules” shall have the
meaning ascribed to such term in Section 3.1.

 

 

“Disqualification
Event” shall have the
meaning ascribed to such term in Section
3.1(vv).

 

 

“Environmental
Laws” shall have the
meaning ascribed to such term in Section
3.1(o).

 

 

“ERISA”
shall have the meaning ascribed to such term in Section
3.1(m).

 

“Evaluation
Date” shall have the
meaning ascribed to such term in Section
3.1(w).

 

“Event of
Default” shall have the
meaning ascribed to such term in the Notes.

 

“Exchange
Act” means the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

 

“Exempt
Issuance” shall have the
meaning ascribed to such term in the Notes.

 

“Exit
Shares” means the shares
of Common Stock to be issued by the Company to the Purchasers
pursuant to Section 2.1(c)

 

“FCPA”
means the Foreign Corrupt Practices Act of 1977, as
amended.

 

 

2

 

 

“Federal
Reserve” shall have the
meaning ascribed to such term in Section
3.1(oo).

 

“Financial Public
Investors Relations Agreement” means the Financial Public Relations
Agreement by any between the Company and Liolios Group, Inc.,
datged January 10, 2018.

 

“Fixed Conversion
Price” shall have the
meaning ascribed to such term in the Notes.

 

“Free Writing
Prospectus” shall have
the meaning ascribed to such term in Section
4.15(b).

 

“Fundamental
Transaction” shall have
the meaning ascribed to such term in the Notes.

 

“GAAP”
shall have the meaning ascribed to such term in Section
3.1(i).

 

“Hazardous
Materials” shall have the
meaning ascribed to such term in Section 3.1(o)

 

“Indebtedness”
means (a) any liabilities for borrowed money or amounts owed in
excess of $100,000 (other than trade accounts payable incurred in
the ordinary course of business), (b) all guaranties, endorsements
and other contingent obligations in respect of indebtedness of
others, whether or not the same are or should be reflected in the
Company’s consolidated balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business; and (c) the present value of any lease payments
in excess of $100,000 due under leases required to be capitalized
in accordance with GAAP.

 

“Intellectual Property
Rights” shall have the meaning ascribed to such term
in Section 3.1(s).

 

“Intellectual Property Security
Agreement” means that certain Intellectual Property
Security Agreement, by and between the Company and the Purchasers,
dated as of June 20, 2018, required to be delivered pursuant to
Section 2.3 of this Agreement, in the form attached hereto as
Exhibit
D.

 

“Issuer Covered Person”
shall have the meaning ascribed to
such term in Section 3.1(vv).

 

“Issuer Free Writing
Prospectus” shall have
the meaning ascribed to such term in Section
4.15(b)

 

“Late Fees” shall have the
meaning ascribed to such term in the Notes.

 

“Legend Removal
Date” shall have the
meaning ascribed to such term in Section
4.1(c).

 

“Liabilities”
means all direct or indirect liabilities, Indebtedness and
obligations of any kind of the Company to the Purchaser, howsoever
created, arising or evidenced, whether now existing or hereafter
arising (including those acquired by assignment), absolute or
contingent, due or to become due, primary or secondary, joint or
several, whether existing or arising through discount, overdraft,
purchase, direct loan, participation, operation of law, or
otherwise, including, but not limited to, pursuant to the Note,
this Agreement and/or any of the other Transaction Documents, all
accrued but unpaid interest on the Notes, any letter of credit, any
standby letter of credit, and/or outside attorneys’ and
paralegals’ fees or charges relating to the preparation of
the Transaction Documents and the enforcement of the
Purchaser’s rights, remedies and powers under this Agreement,
the Note and/or the other Transaction
Documents.

 

 

3

 

 

“Liens”
means a lien, charge, pledge, security interest, encumbrance, right
of first refusal, preemptive right or other
restriction.

 

“Make-Whole
Amount” shall have the
meaning ascribed to such term in the Notes.

 

“Mandatory
Redemption” shall have
the meaning ascribed to such term in the Notes.

 

“Mandatory Redemption
Amount” shall have the
meaning ascribed to such term in the Notes.

 

“Material Adverse
Effect” shall have the
meaning assigned to such term in Section
3.1(b).

 

“Material
Permits” shall have the
meaning ascribed to such term in Section
3.1(p).

 

“Maturity
Date” shall have the
meaning ascribed to such term in the Notes.

 

“Maximum
Rate” shall have the
meaning ascribed to such term in Section 5.17.

 

“Money Laundering
Laws” shall have the
meaning ascribed to such term in Section
3.1(tt).

 

“Note”
means the Company’s Senior Secured Convertible Promissory
Note due June 20, 2019 issued by the Company to each Purchaser
hereunder, in the form of Exhibit A
attached hereto.

 

“Notice of
Conversion” shall have
the meaning ascribed to such term in the Notes.

 

“Off-balance Sheet
Arrangement” shall have
the meaning ascribed to such term in Section
3.1(ss).

 

“Permitted Free Writing
Prospectus” shall have
the meaning ascribed to such term in Section
4.15(b).

 

“Person”
means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any
kind.

 

“Principal
Amount” means, as to the
Purchasers, the principal amount of the Note set forth opposite
each such Purchaser’s name in column (2) on the Schedule of
Purchasers attached hereto in United States
Dollars.

 

“Proceeding”
means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or
partial proceeding, such as a deposition), whether commenced or
threatened.

 

“Prospectus”
shall have the meaning ascribed to such term in Section
3.1(c).

 

“Prospectus
Supplement” shall have
the meaning ascribed to such term in Section
3.1(c).

 

 

4

 

 

“Public Information
Failure” shall have the
meaning ascribed to such term in Section
4.3(b).

 

“Public Information
Failure Payments” shall
have the meaning ascribed to such term in Section
4.3(b).

 

“Purchaser
Party” shall have the
meaning ascribed to such term in Section 4.9.

 

“Qualified Subsequent
Financing” shall have the
meaning ascribed to such term in the Notes.

 

“Qualified Subsequent
Financing Net Proceeds”
shall have the meaning ascribed to such term in the
Notes.

 

“Registered
Shares” means the
Commitment Shares and the Exit Shares.

 

“Registration Rights
Agreement” means that
certain Registration Rights Agreement, by and between the Company
and the Purchasers, dated as of June 20, 2018, required to be
delivered pursuant to Section 2.3 of this Agreement, in the form
attached hereto as Exhibit
B.

 

“Required
Approvals” shall have the
meaning ascribed to such term in Section
3.1(e).

 

“Required
Minimum” means, as
of any date, the maximum aggregate number of Conversion Shares
issuable upon Conversion in full of the Note, ignoring any
Conversion limits set forth therein, and assuming that the Fixed
Conversion Price is at all times on and after the date of
determination 100% of the Fixed Conversion Price on the Trading Day
immediately prior to the date of determination.

 

“Rule
144” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as
such rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially
the same effect as such rule.

 

“Rule
424” means Rule 424
promulgated by the Commission pursuant to the Securities Act, as
such rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
rule.

 

“SEC
Reports” shall have the
meaning ascribed to such term in Section
3.1(i).

 

“Securities”
means the Notes, the Conversion Shares and the Registered Shares to
be issued to the Purchasers pursuant to this
Agreement.

 

“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

 

 

5

 

 

“Security Agreement” means
the Security Agreement dated on the date hereof by and among the
Company, the Subsidiaries and the Purchasers, as hereinafter
amended and/or supplemented altogether with all exhibits, schedules
and annexes to such Security Agreement, pursuant to which all
Liabilities of the Company to the Purchasers under the Transaction
Documents are secured by the Collateral (as defined in the Security
Agreement), which security interest in the Collateral shall be
perfected by a UCC-1 Financing Statement to be filed by each
Purchaser with the Secretary of State of the State of Washington,
to the extent perfectable by the filing of a UCC-1 Financing
Statement, or if applicable, a UCC-3 Financing Statement Amendment
and such other documents and instruments related thereto, which
Security Agreement is annexed hereto as Exhibit C.

 

“Series B Notes” means the
aggregate principal amount of $1,439,008 of secured promissory
notes issued and sold to investors under that certain Secured Loan
Agreement (as amended), dated June 11, 2008, by and among Maverick
Brands, LLC, Sunkist Growers, Inc., as collateral agent, and the
other investors party thereto, and which obligations thereunder
were assumed by the Company pursuant to that certain Security
Agreement, dated March 31, 2017, by and among the Company and
Sunkist Growers, Inc., as collateral agent, for the benefit of the
investors party thereto.

 

“Shell
Company” means an entity
that fits within the definition of “shell company”
under Section 12b-2 of the Exchange Act and Rule
144.

 

“Short
Sales” means all
“short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act.

 

“Subscription
Amount” means, as to the
Purchasers, the aggregate amount to be paid for the Notes and the
Registered Shares purchased hereunder as specified below the
Purchaser’s name on the signature page of this Agreement and
next to the heading “Subscription Amount,” in United
States dollars and in immediately available
funds.

 

“Subsequent
Financing” means
any issuance by the Company or any of its Subsidiaries of Common
Stock or Common Stock Equivalents for cash consideration,
Indebtedness or a combination of units thereof.

 

“Subsidiary”
means any subsidiary of the Company as set forth on
Schedule
3.1(a) and shall, where
applicable, also include any direct or indirect subsidiary of the
Company formed or acquired after the date
hereof.

 

“Trading
Day” means a day on which
the principal Trading Market is open for
trading.

 

“Trading
Market” means any of the
following markets or exchanges on which the Common Stock is listed
or quoted for trading on the date in question: the NYSE American;
The Nasdaq Capital Market; The Nasdaq Global Market; The Nasdaq
Global Select Market; the New York Stock Exchange; OTC Markets or
the OTC Bulletin Board (or any successors to any of the
foregoing).

 

“Transaction
Documents” means this
Agreement, the Notes, the Registration Rights Agreement, the
Security Agreement, the Intellectual Property Security Agreement,
and the Transfer Agent Instruction Letter and all exhibits and
schedules thereto and hereto and any other documents or agreements executed in connection with
the transactions contemplated hereunder.

 

 

6

 

 

“Transfer
Agent” means ClearTrust,
LLC, and any successor transfer agent of the
Company.

 

“Transfer Agent
Instruction Letter” means
the letter from the Company to the Transfer Agent which instructs
the Transfer Agent to issue the Conversion Shares pursuant to the
Transaction Documents, in the form of Exhibit F
attached hereto.

 

“US Bank Credit
Agreement” means that
certain credit agreement between the Company, as borrower, and U.S.
Bank National Association, as lender, dated July 6,
2017.

 

“Variable Rate
Transaction” shall have
the meaning ascribed to such term in Section
4.18.

 

ARTICLE II.

PURCHASE AND SALE

 

2.1. Purchase.
On the Closing Date, upon the terms and subject to the conditions
set forth herein, substantially concurrent with the execution and
delivery of this Agreement by the parties hereto, the Company shall
sell and issue to each Purchaser, and each Purchaser shall
purchase, severally and not jointly, from the
Company:

 

(a) a
Note with a Principal Amount equal to the amount set forth opposite
such Purchaser’s name in column (2) on the Schedule of
Purchasers attached hereto;

 

(b) in
consideration for the Purchaser’s execution and delivery of
this Agreement, a number of Commitment Shares equal to 5% of the
Principal Amount of the Note divided by a price which is 97% of the
VWAP of the Common Stock one (1) Trading Day prior to the Closing
Date, which number is set forth opposite such Purchaser’s
name in column (5) on the Schedule of Purchasers attached hereto;
and

 

(c) in
consideration for the Purchaser’s execution and delivery of
this Agreement, a number of Exit Shares equal to 4% of the
Principal Amount of the Note divided by a price which is 97% of the
VWAP of the Common Stock one (1) Trading Day prior to the Closing
Date, which number is set forth opposite such Purchaser’s
name in column (5) on the Schedule of Purchasers attached
hereto.

 

The purchase of the Notes and Registered Shares will be completed
in a single tranche as provided herein. The Registered Shares shall
be issued pursuant to the Registration Statement.

 

2.2. Closing.
On the Closing Date, upon the terms and subject to the conditions
set forth herein, concurrent with the execution and delivery of
this Agreement by the parties hereto, the Company agrees to sell,
and each Purchaser agrees to purchase, the Subscription Amount of
Notes and Registered Shares as set forth on the signature page
hereto executed by such Purchaser. At the Closing, each Purchaser
shall deliver to the Company, via wire transfer to an account
designated by the Company, immediately available funds equal to
such Purchaser’s Subscription Amount as set forth on the
signature page hereto executed by such Purchaser, and the Company
shall deliver to such Purchaser its Note and Registered Shares as
set forth in Section 2.3(a), and the Company and such Purchaser
shall deliver the other items set forth in Section 2.3 deliverable
at the Closing. Upon satisfaction of the covenants and conditions
set forth in Sections 2.3 and 2.4 for Closing, such Closing shall
occur at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C., or such other location as the parties hereto shall
mutually agree, and may by agreement be undertaken remotely by
electronic exchange of Closing documentation.

 

 

7

 

 

2.3. Deliveries.

 

(a) At
the Closing, the Company shall deliver or cause to be delivered to
each Purchaser the following:

 

(i) this
Agreement duly executed by the Company;

 

(ii) the
Registered Shares;

 

(iii) a
Note with a Principal Amount equal to the amount set forth opposite
such Purchaser’s name in column (2) on the Schedule of
Purchasers attached hereto, registered in the name of each such
Purchaser, which Note shall become convertible upon the
Closing;

 

(iv) the
Registration Rights Agreement, duly executed by the
Company;

 

(v) the
Security Agreement, duly executed by the Company;

 

(vi) the
Intellectual Property Security Agreement, duly executed by the
Company;

 

(vii) RESERVED

 

(viii) the
Transfer Agent Instruction Letter, duly executed by the Company and
the Transfer Agent;

 

(ix) the
opinion of Sichenzia Ross Ference Kesner LLP, the Company’s
counsel, dated as of the Closing Date;

 

(x) a
certificate evidencing the formation and good standing of the
Company and each of its Subsidiaries in each such entity’s
jurisdiction of formation issued by the Secretary of State (or
comparable office) of such jurisdiction of formation as of a date
within ten (10) days of the Closing Date;

 

(xi) a
certificate evidencing the Company’s qualification as a
foreign corporation and good standing issued by the Secretary of
State (or comparable office) of each jurisdiction, if any, in which
the Company conducts business and is required to so qualify, as of
a date within ten (10) days of the Closing Date;

 

(xii) a
certified copy of the Company’s certificate of incorporation,
as certified by the Secretary of State of Washington within two (2)
days of the Closing Date;

 

(xiii) a
certificate executed by the Secretary of the Company and dated as
of the Closing Date, as to (i) the resolutions, as adopted by the
Board of Directors in a form reasonably acceptable to the
Purchasers, approving (A) the entering into and performance of this
Agreement and the other Transaction Documents and the issuance,
offering and sale of the Securities and (B) the performance of the
Company and each of its Subsidiaries of their respective
obligations under the Transaction Documents contemplated therein,
(ii) the Company’s certificate of incorporation and (iii) the
Company’s bylaws, each as in effect at the Closing;
and

 

 

8

 

 

(xiv) such
other documents, instruments or certificates relating to the
transactions contemplated by this Agreement as such Purchaser or
its counsel may reasonably request.

 

(b) At
the Closing, each Purchaser shall deliver or cause to be delivered
to the Company, as applicable, the following:

 

(i) this
Agreement, duly executed by the Purchaser;

 

(ii) the
Purchaser’s Subscription Amount by wire transfer to the
account specified in writing by the Company;

 

(iii) the
Registration Rights Agreement, duly executed by the
Purchaser;

 

(iv) the
Security Agreement, duly executed by the Purchaser;
and

 

(v) the
Intellectual Property Security Agreement, duly executed by the
Purchaser.

 

2.4. Closing
Conditions.

 

(a) The
obligations of the Company hereunder in connection with the Closing
are subject to the following conditions being met:

 

(i) the
accuracy in all material respects as at Closing Date of the
representations and warranties of the Purchasers contained herein
(unless as of a specific date therein in which case they shall be
accurate as of such date);

 

(ii) all
obligations, covenants and agreements of the Purchasers required to
be performed at or prior to the Closing Date shall have been
performed; and

 

(iii) the
delivery by the Purchasers of the items set forth in Section 2.3(b)
of this Agreement.

 

(b) The
respective obligations of each Purchaser hereunder in connection
with the Closing are subject to the following conditions being
met:

 

(i) the
accuracy in all material respects when made as to the Closing Date
of the representations and warranties of the Company contained
herein (unless as of a specific date therein);

 

(ii) all
obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been
performed;

 

 

9

 

 

(iii) the
delivery by the Company of the items set forth in Section 2.3(a) of
this Agreement;

 

(iv) there
is no existing Event of Default and no existing event which, with
the passage of time or the giving of notice, would constitute an
Event of Default;

 

(v) there
is no breach of an obligations, covenants and agreements under the
Transaction Documents and no existing event which, with the passage
of time or the giving of notice, would constitute a breach under
the Transaction Documents;

 

(vi) there
shall have been no Material Adverse Effect with respect to the
Company since the date hereof;

 

(vii) from
the date hereof to the Closing Date, trading in the Common Stock
shall not have been suspended by the Commission or the
Company’s principal Trading Market and, at any time prior to
the Closing Date, trading in securities generally as reported by
Bloomberg L.P. shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades
are reported by such service, or on any Trading Market, nor shall a
banking moratorium have been declared either by the United States
or New York State authorities nor shall there have occurred any
material outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each
case, in the reasonable judgment of the Purchasers, and without
regard to any factors unique to the Purchasers, makes it
impracticable or inadvisable to purchase the Securities at the
Closing;

 

(viii) the
Company does not meet the current public information requirements
under Rule 144 in respect of the Conversion Shares and any other
shares of Common Stock issuable under the Notes;

 

(ix) the
Company fails to file with the Commission any required reports
under Section 13 or 15(d) of the Exchange Act such that it is not
in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if
applicable), including, without limitation, any reports that the
Commission requires the Company to amend and/or re-submit;
and

 

(x) All
consents, approvals, waivers, authorizations, orders, notices,
filings and registrations have been made or obtained by the
Company, including, without limitation, the notice and/or
applications(s) to each Trading market for the issuance and sale of
the Securities and the listing of the Conversion Shares and the
Registered Shares for trading thereon in the time and manner
required thereby and no further consents, approvals, waivers,
authorizations, orders, notices, filings and registrations are
necessary for the consummation of the transactions contemplated by
the Transaction Documents or the performance of the Company’s
obligations thereunder.

 

 

10

 

 

(xi) any
other conditions contained herein or the other Transaction
Documents, including, without limitation those set forth in Section
2.3 herein.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

3.1. Representations
and Warranties of the Company.
Except as set forth in the disclosure schedules attached hereto
(the “Disclosure
Schedules”), which
Disclosure Schedules shall be deemed a part hereof and shall
qualify any representation or otherwise made herein to the extent
of the disclosure contained in the corresponding section of the
Disclosure Schedules, the Company (which for purposes of this
Section 3.1 means the Company and all of its Subsidiaries) hereby
makes the following representations and warranties to each
Purchaser as of the Closing Date:

 

(a) Subsidiaries.
All of the direct and indirect Subsidiaries and parent entities of
the Company are set forth on Schedule 3.1(a)
hereto. The Company owns, directly or
indirectly, all of the capital stock or other equity interests of
each Subsidiary free and clear of any Liens, other than as set
forth on Schedule 3.1(a)
hereto, and all of the issued and
outstanding shares of capital stock or other equity interests of
each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities.

 

(b) Organization
and Qualification. The Company
and each of the Subsidiaries and parent entities of the Company is
an entity duly incorporated or otherwise organized and validly
existing, and the Company and each of the Subsidiaries and such
parent entities is in good standing, under the laws of the
jurisdiction of its incorporation or organization, as applicable,
with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary or parent entity
of the Company is in violation or default of any of the provisions
of its respective certificate or articles of incorporation, bylaws
or other organizational or charter documents. The Company and each
of the Subsidiaries and parent entity of the Company is duly
qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not have
or reasonably be expected to result in: (i) a material adverse
effect on the legality, validity or enforceability of any
Transaction Document; (ii) a material adverse effect on the results
of operations, assets, business, prospects or condition (financial
or otherwise) of the Company, its parent entities and the
Subsidiaries, taken as a whole; or (iii) a material adverse effect
on the Company’s ability to perform in any material respect
on a timely basis its obligations under any Transaction Document
(any of (i), (ii) or (iii), a “Material Adverse
Effect”) and no
Proceeding has been instituted in any such jurisdiction revoking,
limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification.

 

 

11

 

 

(c) Authorization;
Enforcement; Registration Statement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions
contemplated by this Agreement and each of the other Transaction
Documents and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement and each
of the other Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the
Company, the Board of Directors or the Company’s stockholders
in connection herewith or therewith other than in connection with
the Required Approvals and the filing with the Commission of the
prospectus supplement required by the Registration Statement
pursuant to Rule 424(b) under the Securities Act (the
“Prospectus
Supplement”)
supplementing the base prospectus forming part of the Registration
Statement (the “Prospectus”).
This Agreement and each other Transaction Documents to which it is
a party has been (or upon delivery will have been) duly executed by
the Company and, when delivered in accordance with the terms hereof
and thereof, will constitute the valid and binding obligation of
the Company enforceable against the Company in accordance with its
terms, except: (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of
creditors’ rights generally; (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or
other equitable remedies; and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law. The
issuance by the Company of the Registered Shares has been
registered under the Securities Act, the Registered Shares are
being issued pursuant to the Registration Statement and all of the
Registered Shares are freely transferable and freely tradable by
each of the Purchasers without restriction, whether by way of
registration or some exemption therefrom. The Registration
Statement is effective and available for the issuance of the
Registered Shares thereunder and the Company has not received any
notice that the Commission has issued or intends to issue a
stop-order with respect to the Registration Statement or that the
Commission otherwise has suspended or withdrawn the effectiveness
of the Registration Statement, either temporarily or permanently,
or intends or has threatened in writing to do so. The “Plan
of Distribution” section under the Registration Statement
permits the issuance and sale of the Registered Shares hereunder
and as contemplated by the other Transaction
Documents.

 

Upon receipt of the Securities, each of the Purchasers will have
good and marketable title to the Securities. The Registration
Statement and any prospectus included therein, including the
Prospectus and the Prospectus Supplement, complied in all material
respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the Commission
promulgated thereunder and all other applicable laws and
regulations. At the time the Registration Statement and any
amendments thereto became effective, at the date of this Agreement
and at each deemed effective date thereof pursuant to Rule
430B(f)(2) of the Securities Act, the Registration Statement and
any amendments thereto complied and will comply in all material
respects with the requirements of the Securities Act and did not
and will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading. The
Prospectus and any amendments or supplements thereto (including,
without limitation the Prospectus Supplement), at the time the
Prospectus or any amendment or supplement thereto was issued and at
the Closing Date, complied, and will comply, in all material
respects with the requirements of the Securities Act and did not,
and will not, contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. The Company meets all of the
requirements for the use of Form S-3 under the Securities Act for
the offering and sale of the Registered Shares contemplated by this
Agreement and the other Transaction Documents, and the Commission
has not notified the Company of any objection to the use of the
form of the Registration Statement pursuant to Rule 401(g)(1) under
the Securities Act. The Registration Statement meets the
requirements set forth in Rule 415(a) (1)(x) under the Securities
Act. At the earliest time after the filing of the Registration
Statement that the Company or another offering participant made a
bona fide offer (within the meaning of Rule 164(h)(2) under the
Securities Act) relating to any of the Securities, the Company was
not and is not an “Ineligible Issuer” (as defined in
Rule 405 under the Securities Act). The Company (i) has not
distributed any offering material in connection with the offer or
sale of any of the Securities and (ii) until no Purchaser holds any
of the Securities, shall not distribute any offering material in
connection with the offer or sale of any of the Securities to, or
by, any of the Purchasers (if required), in each case, other than
the Registration Statement, the Prospectus or the Prospectus
Supplement.

 

 

 

12

 

 

(d) No
Conflicts. The execution,
delivery and performance by the Company of this Agreement and the
other Transaction Documents to which it is a party, the issuance
and sale of the Securities and the consummation by it of the
transactions contemplated hereby and thereby do not and will not,
except as set forth on Schedule
3.1(d): (i) conflict with or
violate any provision of the Company’s or any
Subsidiary’s certificate or articles of incorporation, bylaws
or other organizational or charter documents; (ii) conflict with,
or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, result in the creation
of any Lien (except Liens in favor of the Purchasers) upon any of
the properties or assets of the Company or any Subsidiary, or give
to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or
by which any property or asset of the Company or any Subsidiary is
bound or affected; or (iii) subject to the Required Approvals,
conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset
of the Company or a Subsidiary is bound or affected; except in the
case of each of clauses (ii) and (iii), such as could not have or
reasonably be expected to result in a Material Adverse
Effect.

 

(e) Filings,
Consents and Approvals. The
Company is not required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing
or registration with, any court or other federal, state, local or
other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the
Transaction Documents, other than: (i) the filings required
pursuant to Sections 4.3 and 4.13 of this Agreement; (ii) the
notice and/or application(s) to each applicable Trading Market for
the issuance and sale of the Securities and the listing of the
Conversion Shares and the Registered Shares for trading thereon in
the time and manner required thereby; and (iii) the filing of Form
D with the Commission and such filings as are required to be made
under applicable state securities laws (collectively, the
“Required
Approvals”).

 

(f) Issuance
of the Securities. The
Securities are duly authorized and, when issued and paid for in
accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on
transfer provided for in the Transaction Documents. The Conversion
Shares and Registered Shares, when issued in accordance with the
terms of the Transaction Documents, will be validly issued, fully
paid and nonassessable, free and clear of all Liens imposed by the
Company other than restrictions on transfer provided for in the
Transaction Documents. The Company has reserved from its duly
authorized capital stock a number of shares of Common Stock for
issuance of the Conversion Shares at least equal to the Required
Minimum on the date hereof or as provided for in Section 4.10
herein.

 

 

 

13

 

 

(g) Capitalization;
Corporate Governance.

 

(i) The
capitalization of the Company is as set forth on
Schedule
3.1(g)(i), which
Schedule
3.1(g)(i) shall also include
(A) the number of shares of Common Stock owned beneficially, and of
record, by Affiliates of the Company as of the date hereof and (B)
the number of authorized and reserved shares of capital stock of
the Company. The Company has not issued capital stock since its
most recently filed periodic report under the Exchange Act except
as set forth on Schedule
3.1(g)(i), except the issuance
of shares of Common Stock to employees pursuant to the
Company’s employee stock purchase plans and except pursuant
to the conversion and/or exercise of Common Stock Equivalents
outstanding as of the date of the most recently filed periodic
report under the Exchange Act except as set forth on
Schedule
3.1(g)(i). No Person has any
right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions
contemplated by the Transaction Documents except as set forth
on Schedule
3.1(g)(i). There are no
outstanding options, warrants, scrip rights to subscribe to, calls
or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable
or exchangeable for, or giving any Person any right to subscribe
for or acquire any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of
Common Stock or Common Stock Equivalents except as set forth
on Schedule
3.1(g)(i). The issuance and
sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other
than the Purchasers) and will not result in a right of any holder
of Company securities to adjust the exercise, conversion, exchange
or reset price under any of such securities except as set forth
on Schedule
3.1(g)(i). All of the
outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws,
and none of such outstanding shares was issued in violation of any
preemptive rights or similar rights to subscribe for or purchase
securities. No further approval or authorization of any
stockholder, the Board of Directors or others is required for the
issuance and sale of the Securities. There are no
stockholders’ agreements, voting agreements or other similar
agreements with respect to the Company’s capital stock to
which the Company is a party or, to the knowledge of the Company,
between or among any of the Company’s
stockholders.

 

(ii) The
names and titles of each of the Company’s principal officers,
directors and beneficial holders of at least five percent (5%) of
the outstanding shares of each class of the Company’s capital
stock on a fully diluted basis are as set forth on
Schedule
3.1(g)(ii), which
Schedule
3.1(g)(ii) shall also include
each committee of directors as well as the names and titles of each
director currently serving on each such
committee.

 

 

 

14

 

 

(h) Solvency
and Indebtedness. Based on the
consolidated financial condition of the Company as of the Closing
Date, after giving effect to the receipt by the Company of the
proceeds from the sale of the Securities hereunder, (i) the fair
saleable value of the Company’s assets exceeds the amount
that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including
known contingent liabilities) as they mature, (ii) the
Company’s assets do not constitute unreasonably small capital
to carry on its business as now conducted and as proposed to be
conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the
Company, consolidated and projected capital requirements and
capital availability thereof, and (iii) the current cash flow of
the Company, together with the proceeds the Company would receive,
were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all
amounts on or in respect of its liabilities when such amounts are
required to be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in
respect of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for
reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the
Closing Date. Schedule 3.1(h)
sets forth as of the date hereof all
outstanding secured and unsecured Indebtedness of the Company or
any Subsidiary, or for which the Company or any Subsidiary has
commitments. Except as set forth on Schedule
3.1(h), neither the Company nor
any Subsidiary is in default with respect to any
Indebtedness.

 

(i) SEC
Reports; Financial Statements.
The Company has filed all reports, schedules, forms, statements and
other documents required to be filed by the Company under the
Securities Act and the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the two (2) years preceding the date
hereof (the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, being collectively
referred to herein as the “SEC
Reports”). As of their
respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act,
as applicable, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Company has never
been an issuer subject to Rule 144(i) under the Securities Act. The
financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements
or the notes thereto and except that unaudited financial statements
may not contain all footnotes required by GAAP, and fairly present
in all material respects the financial position of the Company and
its consolidated Subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.

 

 

 

15

 

 

(j) Material
Changes; Undisclosed Events, Liabilities or
Developments. Since the date of
the latest audited financial statements included within the SEC
Reports, except as set forth in Schedule
3.1(g), Schedule
3.1(j), and Schedule
3.1(n): (i) there has been no
event, occurrence or development that has had or that could
reasonably be expected to result in a Material Adverse Effect; (ii)
the Company has not incurred any liabilities or obligations
(contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent
with past practice and (B) liabilities not required to be reflected
in the Company’s financial statements pursuant to GAAP or
disclosed in filings made with the Commission; (iii) the Company
has not altered its method of accounting; (iv) the Company has not
declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock;
(v) the Company has not sold, assigned or transferred any other
tangible assets or Intellectual Property Rights, or canceled any
debts or claims, except in the ordinary course of business, (vi)
the Company has not suffered any substantial loss contingencies or
waived any rights of material value, whether or not in the ordinary
course of business, or suffered the loss of any material amount of
prospective business, (vii) the Company has not entered into any
acquisition or financing transactions, whether or not in the
ordinary course of business, other than with respect to the
Transaction Documents and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, no event,
liability, fact, circumstance, occurrence or development has
occurred or exists or is reasonably expected to occur or exist with
respect to the Company or its Subsidiaries or their respective
businesses, properties, operations, assets or financial condition,
that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made
or deemed made that has not been publicly disclosed at least one
(1) Trading Day prior to the date that this representation is
made.

 

(k) Litigation.
There is no action, suit, inquiry, notice of violation, proceeding
or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any
of their respective properties except as set forth in
Schedule
3.1(k), or against or affecting
the Company’s current or former officers or directors in
their capacity as such, before or by any court, arbitrator,
governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an
“Action”)
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision,
have or reasonably be expected to result in a Material Adverse
Effect, and neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any
Action involving a claim of violation of or liability under federal
or state securities laws or a claim of breach of fiduciary duty.
There has not been, and to the knowledge of the Company, there is
not pending or contemplated, any investigation by the Commission
involving the Company or any current or former director or officer
of the Company that is likely to lead to action that can reasonably
be expected to result in a Material Adverse Effect. There has not
been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the
Company. The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement
filed by the Company or any Subsidiary under the Exchange Act or
the Securities Act.

 

 

 

16

 

 

(l) Labor
Relations. No labor dispute
exists or, to the knowledge of the Company, is imminent with
respect to any of the employees of the Company, which could
reasonably be expected to result in a Material Adverse Effect. None
of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s
relationship with the Company or such Subsidiary, and neither the
Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. To the
knowledge of the Company, no executive officer of the Company or
any Subsidiary, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition
agreement, and the continued employment of each such executive
officer does not subject the Company or any of its Subsidiaries to
any liability with respect to any of the foregoing matters. The
Company and its Subsidiaries are in compliance with all U.S.
federal, state, local and foreign laws and regulations relating to
employment and employment practices, terms and conditions of
employment and wages and hours, except where the failure to be in
compliance could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.

 

(m) ERISA.
To the knowledge of the Company, (i)
each material employee benefit plan, within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”)
that is maintained, administered or contributed to by the Company
or any of its Affiliates for employees or former employees of the
Company and the Subsidiaries has been maintained in material
compliance with its terms and the requirements of any applicable
statutes, orders, rules and regulations, including but not limited
to ERISA and the Internal Revenue Code of 1986, as amended (the
“Code”);
(ii) no prohibited transaction, within the meaning of Section 406
of ERISA or Section 4975 of the Code, has occurred which would
result in a material liability to the Company with respect to any
such plan excluding transactions effected pursuant to a statutory
or administrative exemption; and (iii) for each such plan that is
subject to the funding rules of Section 412 of the Code or Section
302 of ERISA, no “accumulated funding deficiency” as
defined in Section 412 of the Code has been incurred, whether or
not waived, and the fair market value of the assets of each such
plan (excluding for these purposes accrued but unpaid
contributions) equals or exceeds the present value of all benefits
accrued under such plan determined using reasonable actuarial
assumptions, other than, in the case of (i), (ii) and (iii) above,
as would not have a Material Adverse Effect.

 

(n) Compliance.
Except as set forth in Schedule
3.1(n), neither the Company nor
any Subsidiary: (i) is in default under or in violation of (and no
event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or
any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it
is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it
or any of its properties is bound (whether or not such default or
violation has been waived); (ii) is in violation of any judgment,
decree or order of any court, arbitrator or other governmental
authority; or (iii) is or has been in violation of any statute,
rule, ordinance or regulation of any governmental authority,
including without limitation all foreign, federal, state and local
laws relating to taxes, environmental protection, occupational
health and safety, product quality and safety and employment and
labor matters, except for violations in the case of each clause
(i), (ii) and (iii) that would not individually or in the aggregate
reasonably be expected to result in a Material Adverse
Effect.

 

 

 

17

 

 

(o) Environmental
Laws. The Company and the
Subsidiaries (i) are in compliance with all federal, state, local
and foreign laws relating to pollution or protection of human
health or the environment (including ambient air, surface water,
groundwater, land surface or subsurface strata), including laws
relating to emissions, discharges, releases or threatened releases
of chemicals, pollutants, contaminants, or toxic or hazardous
substances or wastes (collectively, “Hazardous Materials”)
into the environment, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands, or demand letters,
injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations, issued, entered, promulgated
or approved thereunder (“Environmental
Laws”); (ii) have
received all permits licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective
businesses; and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where in each
clause (i), (ii) and (iii), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect.

 

(p) Regulatory
Permits. The Company and the
Subsidiaries possess all certificates, authorizations and permits
issued by the appropriate federal, state, local or foreign
regulatory authorities necessary to conduct their respective
businesses as described in the SEC Reports, except where the
failure to possess such permits could not reasonably be expected to
result in a Material Adverse Effect (“Material
Permits”), and neither
the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any
Material Permit.

 

(q) Title
to Assets. The Company and the
Subsidiaries have good and marketable title in fee simple to all
real property owned by them and good and marketable title in all
personal property owned by them that is material to the business of
the Company and the Subsidiaries, in each case free and clear of
all Liens, except as set forth in Schedule 3.1(q)
and except for (i) Liens as do not
materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries and (ii) Liens for the
payment of federal, state or other taxes, for which appropriate
reserves have been made therefor in accordance with GAAP and the
payment of which is neither delinquent nor subject to penalties.
Any real property and facilities held under lease by the Company
and the Subsidiaries are held by them under valid, subsisting and
enforceable leases with which the Company and the Subsidiaries are
in compliance.

 

(r) Material
Agreements. Except for the
Transaction Documents (with respect to clause (i) only) or as set
forth on Schedule 3.1(r)
hereto, or as would not be reasonably
likely to have a Material Adverse Effect, (i) the Company and each
of its Subsidiaries have performed all obligations required to be
performed by them to date under any written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement,
filed or required to be filed with the Commission (the
“Material
Agreements”), (ii)
neither the Company nor any of its Subsidiaries has received any
notice of default under any Material Agreement and, (iii) to the
best of the Company’s knowledge, neither the Company nor any
of its Subsidiaries is in default under any Material Agreement now
in effect.

 

 

 

18

 

 

(s) Intellectual
Property. Except as set forth
on Schedule
3.1(s), the Company and its
Subsidiaries (i) have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks,
trade names, trade secrets, inventions, copyrights, licenses and
other intellectual property rights and similar rights as necessary
or required for use in connection with their respective businesses
as presently conducted and which the failure to so have could have
a Material Adverse Effect (collectively, the
“Intellectual Property
Rights”); (ii) have not
received a notice (written or otherwise) that any of the
Intellectual Property Rights has expired, terminated or been
abandoned, or is expected to expire or terminate or be abandoned,
within two (2) years from the date of this Agreement; and (iii)
have not received, since the date of the latest audited financial
statements included within the SEC Reports, a written notice of a
claim or otherwise has any knowledge that the Intellectual Property
Rights violate or infringe upon the rights of any Person, except as
could not have or could not reasonably be expected to have a
Material Adverse Effect. To the knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no
existing infringement by another Person of any of the Intellectual
Property Rights except as disclosed in Schedule
3.1(s). The Company and its
Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their intellectual
properties, except where failure to do so could not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

 

(t) Insurance.
The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses
in which the Company and the Subsidiaries are engaged, including,
but not limited to, directors and officers insurance coverage at
least equal to the aggregate Subscription Amount. Neither the
Company nor any Subsidiary has any reason to believe that it will
not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business without a
significant increase in cost. Schedule 3.1(t) sets forth as of the
date hereof, the Company’s director and officer insurance
coverage and limits.

 

(u) Transactions
with Affiliates and Employees.
Except as disclosed in Schedule
3.1(u), none of the officers or
directors of the Company or any Subsidiary and, to the knowledge of
the Company, none of the employees of the Company or any Subsidiary
is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for
rental of real or personal property to or from providing for the
borrowing of money from or lending of money to, or otherwise
requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any entity in which
any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee, stockholder, member
or partner, in each case in excess of $120,000 other than for: (i)
payment of salary or consulting fees for services rendered; (ii)
reimbursement for expenses incurred on behalf of the Company; and
(iii) other employee benefits.

 

(v) Payments
of Cash. Except as disclosed
on Schedule
3.1(v), since January 1, 2017,
neither the Company, its directors or officers, or any Affiliates
or agents of the Company, have withdrawn or paid cash to any vendor
in an aggregate amount that exceeds Five Thousand Dollars ($5,000)
for any purpose.

 

 

 

19

 

 

(w) Sarbanes-Oxley;
Internal Accounting Controls.
The Company and the Subsidiaries are in compliance with any and all
applicable requirements of the Sarbanes-Oxley Act of 2002 that are
effective as of the date hereof, and any and all applicable rules
and regulations promulgated by the Commission thereunder that are
effective as of the date hereof and as of the Closing Date. The
Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance
that: (i) transactions are executed in accordance with
management’s general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain asset
accountability; (iii) access to assets is permitted only in
accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The
Company and the Subsidiaries have established and maintain
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries
and designed such disclosure controls and procedures to ensure that
information required to be disclosed by the Company in the reports
it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the
Commission’s rules and forms. The Company’s certifying
officers have evaluated the effectiveness of the disclosure
controls and procedures of the Company and the Subsidiaries as of
the end of the period covered by the most recently filed periodic
report under the Exchange Act (such date, the
“Evaluation
Date”). The Company
presented in its most recently filed periodic report under the
Exchange Act the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on
their evaluations as of the Evaluation Date. Since the Evaluation
Date, there have been no changes in the internal control over
financial reporting (as such term is defined in the Exchange Act)
that have materially affected, or is reasonably likely to
materially affect, the internal control over financial reporting of
the Company and its Subsidiaries. Except as set forth on
Schedule
3.1(w), the Company and the
independent registered public accounting firms identified on
Schedule
3.1(hh), have not identified
any material weaknesses in the Company’s system of internal
accounting controls over financial reporting.

 

(x) Certain
Fees. Except as set forth
on Schedule
3.1(x), no brokerage or
finder’s fees or commissions are or will be payable by the
Company or any Subsidiaries to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by the
Transaction Documents. The Purchaser shall have no obligation with
respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions
contemplated by the Transaction Documents.

 

(y) Private
Placement. Assuming the
accuracy of each Purchaser’s representations and warranties
set forth in Section 3.2, no registration under the Securities Act
is required for the offer and sale of the Securities by the Company
to the Purchasers as contemplated hereby. The issuance and sale of
the Securities hereunder does not contravene the rules and
regulations of the Trading Market, provided that its approval
thereof is obtained prior to the issuance of the Conversion Shares
and the Registered Shares.

 

(z) Investment
Company. The Company is not,
and is not an Affiliate of, and immediately after receipt of
payment for the Securities, will not be or be an Affiliate of, an
“investment company” within the meaning of the
Investment Company Act of 1940, as amended. The Company shall
conduct its business in a manner so that it will not become an
“investment company” subject to registration under the
Investment Company Act of 1940, as amended.

 

 

 

20

 

 

(aa) Registration
Rights. Except as set forth
on Schedule
3.1(aa) and pursuant to this
Agreement, no Person has any right to cause the Company to effect
the registration under the Securities Act of any securities of the
Company or any Subsidiaries.

 

(bb) Listing
and Maintenance Requirements; Trading Market
Regulation. The Common Stock is
registered pursuant to Section 12(b) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge
is likely to have the effect of, terminating the registration of
the Common Stock under the Exchange Act nor has the Company
received any notification that the Commission is contemplating
terminating such registration. Except as disclosed in the SEC
reports, the Company has not, in the twelve (12) months preceding
the date hereof, received notice from any Trading Market on which
the Common Stock is or has been listed or quoted to the effect that
the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no
reason to believe that it will not in the foreseeable future
continue to be, in compliance with all such listing and maintenance
requirements.

 

(cc) Application
of Takeover Protections. The
Company and the Board of Directors have taken all necessary action,
if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s Articles of
Incorporation (or similar charter documents), as amended, or the
laws of its state of incorporation that is or could become
applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights
under the Transaction Documents, including without limitation as a
result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.

 

(dd) Disclosure.
Except with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, the Company
confirms that neither it nor any other Person acting on its behalf
has provided the Purchasers or their respective agents or counsel
with any information that it believes constitutes or might
constitute material, non-public information. The Company
understands and confirms that the Purchasers will rely on the
foregoing representation in effecting transactions in securities of
the Company. All of the disclosure furnished by or on behalf of the
Company to the Purchasers regarding the Company and its
Subsidiaries, their respective businesses and the transactions
contemplated hereby, including the Disclosure Schedules to this
Agreement, is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading. The
press releases disseminated by the Company during the twelve months
preceding the date of this Agreement taken as a whole do not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under
which they were made and when made, not misleading. The Company
acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in
Section 3.2 hereof.

 

 

 

21

 

 

(ee) No
Integrated Offering. Assuming
the accuracy of each Purchaser’s representations and
warranties set forth in Section 3.2, neither the Company, nor any
of its Affiliates, nor any Person acting on its or their behalf
has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Securities to
be integrated with prior offerings by the Company for purposes of
(i) the Securities Act which would require the registration of any
such securities under the Securities Act, or (ii) any applicable
shareholder approval provisions of any Trading Market on which any
of the securities of the Company are listed or
designated.

 

(ff) No
General Solicitation. Neither
the Company nor any person acting on behalf of the Company has
offered or sold any of the Securities by any form of general
solicitation or general advertising. The Company has offered the
Securities for sale only to the Purchasers and certain other
“accredited investors” within the meaning of Rule 501
under the Securities Act.

 

(gg) Foreign
Corrupt Practices. Neither the
Company nor any Subsidiary, nor to the knowledge of the Company or
any Subsidiary, any agent or other person acting on behalf of the
Company or any Subsidiary, has: (i) directly or indirectly, used
any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political
activity; (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic
political parties or campaigns from corporate funds; (iii) failed
to disclose fully any contribution made by the Company or any
Subsidiary (or made by any person acting on its behalf of which the
Company is aware) which is in violation of law; or (iv) violated in
any material respect any provision of FCPA.

 

(hh) Independent
Registered Public Accounting Firms. The Company’s accounting firms are set
forth on Schedule
3.1(hh). To the knowledge and
belief of the Company, such accounting firms are independent
registered public accounting firms as required by the Exchange Act.
To the Company’s knowledge, its accounting firms are not in
violation of the auditor independence requirements of the
Sarbanes-Oxley Act of 2002 with respect to the
Company.

 

(ii) No
Disagreements with Accountants and Lawyers. There are no disagreements of any kind presently
existing, or reasonably anticipated by the Company to arise,
between the Company and the accountants and lawyers formerly or
presently employed by the Company and the Company is current with
respect to any fees owed to its accountants and lawyers which could
affect the Company’s ability to perform any of its
obligations under any of the Transaction
Documents.

 

(jj) Acknowledgment
Regarding Purchaser’s Purchase of
Securities. The Company
acknowledges and agrees that the Purchasers are each acting solely
in the capacity of an arm’s length purchaser with respect to
the Transaction Documents and the transactions contemplated
thereby. The Company further acknowledges that the Purchasers are
not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated thereby and any advice given by
the Purchasers or any of their respective representatives or agents
in connection with the Transaction Documents and the transactions
contemplated thereby is merely incidental to the Purchasers’
purchase of the Securities. The Company further represents to the
Purchasers that the Company’s decision to enter into this
Agreement and the other Transaction Documents has been based solely
on the independent evaluation of the transactions contemplated
hereby by the Company and its representatives.

 

 

 

22

 

 

(kk) Regulation
M Compliance. The Company has
not, and to its knowledge no one acting on its behalf has, (i)
taken, directly or indirectly, any action designed to cause or to
result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of
the Securities, (ii) sold, bid for, purchased, or paid any
compensation for soliciting purchases of, any of the Securities, or
(iii) paid or agreed to pay to any Person any compensation for
soliciting another to purchase any other securities of the Company,
other than, in the case of clauses (ii) and (iii), compensation
paid to the Company’s placement agent in connection with the
placement of the Securities.

 

(ll) Stock
Option Plans. Each stock option
granted by the Company under the Company’s stock option plan
was granted (i) in accordance with the terms of the Company’s
stock option plan and (ii) with an exercise price at least equal to
the fair market value of the Common Stock on the date such stock
option would be considered granted under GAAP and applicable law.
No stock option granted under the Company’s stock option plan
has been backdated. The Company has not knowingly granted, and
there is no and has been no Company policy or practice to knowingly
grant, stock options prior to, or otherwise knowingly coordinate
the grant of stock options with, the release or other public
announcement of material information regarding the Company or its
Subsidiaries or their respective financial results or
prospects.

 

(mm) Office
of Foreign Assets Control.
Neither the Company nor any Subsidiary nor, to the Company’s
knowledge, any director, officer, agent, employee or Affiliate of
the Company or any Subsidiary is currently subject to any U.S.
sanctions administered by the Office of Foreign Assets Control of
the U.S. Treasury Department.

 

(nn) U.S.
Real Property Holding Corporation. The Company is not and has never been a U.S.
real property holding corporation within the meaning of Section 897
of the Code and the Company shall so certify upon Purchasers’
request.

 

(oo) Bank
Holding Company Act. Neither
the Company nor any of its Subsidiaries or Affiliates is subject to
the Bank Holding Company Act of 1956, as amended (the
“BHCA”)
and to regulation by the Board of Governors of the Federal Reserve
System (the “Federal
Reserve”). Neither the
Company nor any of its Subsidiaries or Affiliates owns or controls,
directly or indirectly, five percent (5%) or more of the
outstanding shares of any class of voting securities or twenty-five
percent (25%) or more of the total equity of a bank or any entity
that is subject to the BHCA and to regulation by the Federal
Reserve. Neither the Company nor any of its Subsidiaries or
Affiliates exercises a controlling influence over the management or
policies of a bank or any entity that is subject to the BHCA and to
regulation by the Federal Reserve.

 

(pp) Promotional
Stock Activities. Neither the
Company, its officers, its directors, nor any Affiliates or agents
of the Company have engaged in any stock promotional activity that
could give rise to a complaint, inquiry, or trading suspension by
the Commission alleging (i) a violation of the anti-fraud
provisions of the federal securities laws, (ii) violations of the
anti-touting provisions, (iii) improper “gun-jumping; or (iv)
promotion without proper disclosure of
compensation.

 

 

23

 

 

(qq) Tax
Status. Except as set forth
in Schedule
3.1(qq) and except for matters
that would not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect, the
Company (i) has made or filed all United States federal, state and
local income and all foreign income and franchise tax returns,
reports and declarations required by any jurisdiction to which it
is subject, (ii) has paid all taxes and other governmental
assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations and
(iii) has set aside on its books provision reasonably adequate for
the payment of all material taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There
are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.

 

(rr) Seniority.
As of the Closing Date, and following the repayment of the
Company’s obligations under U.S. Bank Credit Agreement to
occur contemporaneously with the Closing, no Indebtedness or other
claim against the Company is senior to the Notes in right of
payment, whether with respect to interest or upon liquidation or
dissolution, or otherwise, other than indebtedness secured by
purchase money security interests (which is senior only as to
underlying assets covered thereby) and capital lease obligations
(which is senior only as to the property covered
thereby).

 

(ss) No
“Off-balance Sheet Arrangements”. Except as set forth in Schedule
3.1(ss), neither the Company
nor any of its Affiliates is involved in any “Off-balance
Sheet Arrangements”. For purposes hereof an
“Off-balance Sheet
Arrangement” means any
transaction or contract to which an entity unconsolidated with the
Company or any of its Affiliates is a party and under which either
the Company or any such Affiliate has: (i) any obligation under a
guarantee contract pursuant to which the Company or any of its
Affiliates could be required to make payments to the guaranteed
party, including any standby letter of credit, market value
guarantee, performance guarantee, indemnification agreement,
keep-well or other support agreement; (ii) any retained or
contingent interest in assets transferred to such unconsolidated
entity that serves as credit, liquidity or market risk support to
the entity in respect of such assets; (iii) any variable interest
held in such unconsolidated entity where such entity provides
financing, liquidity, market risk or credit risk support to, or
engages in leasing, hedging or research and development services
with the Company of any of its Affiliates; and (iv) any liability
or obligation of the same nature as those described in clauses (i)
through (iii) of this sentence even if of a different name (whether
absolute, accrued, contingent or otherwise) that would not be
required to be reflected in the Company or any of its
Affiliates’ financial statements.

 

(tt) Money
Laundering. The operations of
the Company and its Subsidiaries are and have been conducted at all
times in compliance with applicable financial record-keeping and
reporting requirements of the Currency and Foreign Transactions
Reporting Act of 1970, as amended, applicable money laundering
statutes and applicable rules and regulations thereunder
(collectively, the “Money Laundering
Laws”), and no action,
suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any
Subsidiary with respect to the Money Laundering Laws is pending or,
to the knowledge of the Company or any Subsidiary,
threatened.

 

 

24

 

 

(uu) Subsidiary
Rights. The Company has the
unrestricted right to vote, and (subject to limitations imposed by
applicable law) to receive dividends and distributions on, all
capital securities of each of its Subsidiaries as owned by the
Company or any Subsidiary.

 

(vv) No
Disqualification Events. With
respect to the Securities to be offered and sold hereunder in
reliance on Rule 506 under the Securities Act, none of the Company,
any of its predecessors, any affiliated issuer, any director,
executive officer, other officer of the Company participating in
the offering hereunder, any beneficial owner of 20% or more of the
Company’s outstanding voting equity securities, calculated on
the basis of voting power, nor any promoter (as that term is
defined in Rule 405 under the Securities Act) connected with the
Company in any capacity at the time of sale (each, an
“Issuer Covered
Person” and, together,
“Issuer Covered
Persons”) is subject to
any of the “Bad Actor” disqualifications described in
Rule 506(d)(1)(i) to (viii) under the Securities Act (a
“Disqualification
Event”), except for a
Disqualification Event covered by Rule 506(d)(2) or (d)(3). The
Company has exercised reasonable care to determine whether any
Issuer Covered Person is subject to a Disqualification Event. The
Company has complied, to the extent applicable, with its disclosure
obligations under Rule 506(e), and has furnished to the Purchasers
a copy of any disclosures provided thereunder. The Company is not
aware of any person (other than any Issuer Covered Person) that has
been or will be paid (directly or indirectly) remuneration for
solicitation of purchasers in connection with the sale of any
Securities. The Company will notify the Purchasers in writing,
prior to the Closing Date of (i) any Disqualification Event
relating to any Issuer Covered Person and (ii) any event that
would, with the passage of time, become a Disqualification Event
relating to any Issuer Covered Person.

 

(ww) Shell
Company Status. The Company has
never been, and is not presently, an issuer identified as a Shell
Company.

 

(xx) Investor
Relations. Except as set forth
in Schedule
3.1(xx), the Company is not
currently a party, nor does it intend to become a party, to any
agreement pursuant to which the Company will receive investor
relations services. All such agreements have been disclosed by the
Company in its SEC Reports.

 

(yy) Reporting
Requirements and Form S-3 Eligibility. The Company is subject to and in compliance in
all material respects with the reporting requirements of Section 13
or Section 15(d), as applicable, of the Exchange Act. At the time
the Registration Statement was or will be declared effective, the
Company met or will meet the then applicable requirements for the
use of Form S-3 under the Securities Act, including, but not
limited to, General Instructions I.A.3, I.B.1, or I.B.6 of Form
S-3, if applicable. Except as set forth in Schedule
3.1(yy), the Company is
currently eligible to use Form S-3 pursuant to General Instructions
I.A.3, I.B.1, or I.B.6 of Form S-3, as applicable. The Company has
availability on its effective shelf registration statement (No.
333-219341) under General Instruction I.B.1 or I.B.6 of Form S-3,
as applicable.

 

(zz) Full
Disclosure. No representation
or warranty by the Company in this Agreement and no statement
contained in the Disclosure Schedules to this Agreement or any
certificate or other document furnished or to be furnished to the
Purchasers pursuant to this Agreement contains any untrue statement
of a material fact, or omits to state a material fact necessary to
make the statements contained therein, in light of the
circumstances in which they are made, not
misleading.

 

 

 

25

 

 

(aa) Common
Stock Issuances for Services.
Except as set forth on Schedule 3.1(bbb), the Company has not
issued during the first fiscal quarter of 2018 any shares of Common
Stock to Lolios Group, Inc. under the Financial Public Investor
Relations Agreement. Any shares of Common Stock due in future
periods under the Financial Public Investor Relations Agreement
shall be reported in the Company’s next required periodic
report on Form 10-K or Form 10-Q under the Exchange
Act.

 

3.2. Representations
and Warranties of the Purchaser. Each Purchaser, for itself and for no other
Purchaser, hereby represents and warrants as of the date hereof and
as of the Closing Date to the Company as follows (unless as of a
specific date therein in which case they shall be accurate as of
such date):

 

(a) Organization;
Authority. The Purchaser is
either an individual or an entity duly incorporated or formed,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation with full right,
corporate, partnership, limited liability company or similar power
and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution and
delivery of the Transaction Documents and performance by the
Purchaser of the transactions contemplated by the Transaction
Documents have been duly authorized by all necessary corporate,
partnership, limited liability company or similar action, as
applicable, on the part of the Purchaser. Each Transaction Document
to which it is a party has been duly executed by the Purchaser, and
when delivered by the Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of
the Purchaser, enforceable against it in accordance with its terms,
except: (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of
creditors’ rights generally; (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or
other equitable remedies; and (iii) insofar as indemnification and
contribution provisions may be limited by applicable
law.

 

(b) Own
Account. The Purchaser
understands that the Securities are “restricted
securities” and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the
Securities as principal for its own account and not with a view to
or for distributing or reselling such Securities or any part
thereof in violation of the Securities Act or any applicable state
securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any
applicable state securities law and has no direct or indirect
arrangement or understandings with any other persons to distribute
or regarding the distribution of such Securities in violation of
the Securities Act or any applicable state securities law (this
representation and warranty not limiting the Purchaser’s
right to sell the Securities in compliance with applicable federal
and state securities laws). The Purchaser is acquiring the
Securities hereunder in the ordinary course of its business. The
Purchaser understands and agrees that the Securities will bear a
legend substantially similar to the legend set forth in Section
4.1(b).

 

(c) Purchaser
Status. At the time the
Purchaser was offered the Securities, it was, and as of the date
hereof it is, and on each date on which it converts the Notes, it
will be an “accredited investor” as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
Act.

 

 

 

26

 

 

(d) Experience
of the Purchaser. The
Purchaser, either alone or together with its representatives, has
such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. The Purchaser is
able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such
investment.

 

(e) General
Solicitation. The Purchaser is
not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities
published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

 

(f) Certain
Transactions and Confidentiality. Other than consummating the transactions
contemplated hereunder, the Purchaser has not directly or
indirectly, nor has any Person acting on behalf of or pursuant to
any understanding with the Purchaser, executed any purchases or
sales, including Short Sales, of the securities of the Company
during the period commencing as of the time that the Purchaser
first received a term sheet (written or oral) from the Company or
any other Person representing the Company setting forth the
material terms of the transactions contemplated hereunder and
ending immediately prior to the execution hereof. Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed
investment vehicle whereby separate portfolio managers manage
separate portions of the Purchaser’s assets and the portfolio
managers have no direct knowledge of the investment decisions made
by the portfolio managers managing other portions of the
Purchaser’s assets, the representation set forth above shall
only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the
Securities covered by this Agreement. Other than to other Persons
party to this Agreement, the Purchaser has maintained the
confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this
transaction). The Company acknowledges and agrees that the
representations contained in Section 3.2 shall not modify, amend or
affect the Purchaser’s right to rely on the Company’s
representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or
delivered in connection with this Agreement or the consummation of
the transaction contemplated hereby.

 

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1. Transfer
Restrictions.

 

(a) The
Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration
statement or Rule 144, to the Company or to an Affiliate of a
Purchaser or in connection with a pledge as contemplated in Section
4.1(b), the Company may require the transferor thereof to provide
to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, at the Company’s sole
expense in the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred
Securities under the Securities Act. As a condition of transfer,
any such transferee shall agree in writing to be bound by the terms
of this Agreement and shall have the rights and obligations of a
Purchaser under this Agreement.

 

 

 

27

 

 

(b) The
Purchasers agree to the imprinting, so long as is required by this
Section 4.1, of a legend on any of the Securities in the following
form:

 

[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS
SECURITY IS CONVERTIBLE] HAS NOT [HAVE] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY [AND THE SECURITIES
ISSUABLE UPON CONVERSION OF THIS SECURITY] MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN
“ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER
THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
SECURITIES.

 

The Company acknowledges and agrees that the Purchasers may from
time to time pledge, pursuant to a bona fide margin agreement with
a registered broker-dealer, or grant a security interest in some or
all of the Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under
the Securities Act and who agrees to be bound by the provisions of
this Agreement and, if required under the terms of such
arrangement, the Purchasers may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or
transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the Company’s
expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Securities may
reasonably request in connection with a pledge or transfer of the
Securities.

 

 

 

28

 

 

(c) Certificates
evidencing Conversion Shares shall not contain any legend
(including the legend set forth in Section 4.1(b) hereof) (i) while
a registration statement covering the resale of any such Conversion
Shares is effective under the Securities Act, (ii) following any
sale of such Conversion Shares pursuant to Rule 144 (assuming the
transferor is not an Affiliate of the Company), (iii) if such
Conversion Shares are eligible to be sold, assigned or transferred
under Rule 144 (provided that a Purchaser provides the Company with
reasonable assurances that such Conversion Shares are eligible for
sale, assignment or transfer under Rule 144 which shall not include
an opinion of counsel), (iv) in connection with a sale, assignment
or other transfer (other than under Rule 144), provided that such
Purchaser provides the Company with an opinion of counsel to such
Purchaser, in a generally acceptable form, to the effect that such
sale, assignment or transfer of the Conversion Shares may be made
without registration under the applicable requirements of the
Securities Act or (v) if such legend is not required under
applicable requirements of the Securities Act (including, without
limitation, controlling judicial interpretations and pronouncements
issued by the Commission).  The
Company shall upon request of a Purchaser and at the
Company’s sole expense cause its counsel to issue a legal
opinion reasonably satisfactory to the Company to the Transfer
Agent promptly after any of the events described in (i)-(iii) or
(v) in the preceding sentence if required by the Transfer Agent to
effect the removal of the legend hereunder (with a copy to the
applicable Purchaser and its broker). The Company agrees that
following such time as such legend is no longer required under this
Section 4.1(c), it will, within two Trading Days following the
delivery by a Purchaser to the Company or the Transfer Agent of a
certificate representing Conversion Shares issued with a
restrictive legend (such Trading Day, the
“Legend
Removal Date”), instruct
the Transfer Agent to deliver or cause to be delivered to such
Purchaser a certificate representing such shares of Common Stock
that is free from all restrictive and other legends. The Company
may not make any notation on its records or give instructions to
the Transfer Agent that enlarge the restrictions on transfer set
forth in this Section 4.1 or Section 4.19. Certificates for the
Conversion Shares and Registered Shares that are subject to legend
removal hereunder shall be transmitted by the Transfer Agent to a
Purchaser by crediting the account of a Purchaser’s prime
broker with the Depository Trust Company System as directed by such
Purchaser.

 

(d) In
addition to the Purchasers’ other available remedies, the
Company shall pay to a Purchaser, in cash, as partial liquidated
damages and not as a penalty, $500 per Trading Day for each Trading
Day after the Legend Removal Date until such certificate is
delivered without a legend. Nothing herein shall limit the
Purchasers’ right to pursue actual damages for the
Company’s failure to deliver certificates representing any
Securities as required by the Transaction Documents, and a
Purchaser shall have the right to pursue all remedies available to
it at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief.

 

4.2. Acknowledgment
of Dilution. The Company
acknowledges that the issuance of the Securities may result in
dilution of the outstanding shares of Common Stock, which dilution
may be substantial under certain market conditions. The Company
further acknowledges that its obligations under the Transaction
Documents, including, without limitation, its obligation to issue
the Conversion Shares and Registered Shares pursuant to the
Transaction Documents, are unconditional and absolute and not
subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the
Company may have against the Purchasers and regardless of the
dilutive effect that such issuance may have on the ownership of the
other stockholders of the Company.

 

 

 

29

 

 

4.3. Furnishing
of Information; Public Information.

 

(a) For
as long as the Note, or portions thereof, are outstanding, the
Company covenants to maintain the registration of the Common Stock
under Section 12(b) or 12(g) of the Exchange Act and to timely file
(or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act even if
the Company is not then subject to the reporting requirements of
the Exchange Act.

 

(b) At
any time during the period commencing from the six (6)-month
anniversary of the date hereof and ending at such time that all of
the Securities have been sold or may be sold without the
requirement for the Company to be in compliance with Rule 144(c)(1)
and otherwise without restriction or limitation pursuant to Rule
144, if the Company shall fail for any reason to satisfy the
current public information requirement under Rule 144(c) (a
“Public Information
Failure”) then, in
addition to the Purchasers’ other available remedies, the
Company shall pay to a Purchaser, in cash, as partial liquidated
damages and not as a penalty, by reason of any such delay in or
reduction of its ability to sell the Securities, an amount in cash
equal to two percent (2.0%) of the aggregate Subscription Amount of
such Purchaser’s Securities on the day of a Public
Information Failure and on every thirtieth (30th)
day (pro-rated for periods totaling less than thirty days)
thereafter until the earlier of (a) the date such Public
Information Failure is cured and (b) such time that such public
information is no longer required for the Purchaser to transfer the
Conversion Shares or Registered Shares pursuant to Rule 144. The
payments to which a Purchaser shall be entitled pursuant to this
Section 4.3(b) are referred to herein as “Public Information
Failure Payments”. Public
Information Failure Payments shall be paid on the earlier of (i)
the last day of the calendar month during which such Public
Information Failure Payments are incurred and (ii) the third
(3rd)
Business Day after the event or failure giving rise to the Public
Information Failure Payments is cured. In the event the Company
fails to make Public Information Failure Payments in a timely
manner, such Public Information Failure Payments shall bear
interest at the rate of one-and-a-half percent (1.5%) per month
(prorated for partial months) until paid in full. Nothing herein
shall limit the Purchasers’ right to pursue actual damages
for the Public Information Failure, and the Purchasers shall have
the right to pursue all remedies available to them at law or in
equity including, without limitation, a decree of specific
performance and/or injunctive relief.

 

4.4. Integration.
The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities
or that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading
Market such that it would require shareholder approval prior to the
closing of such other transaction unless shareholder approval is
obtained before the closing of such subsequent
transaction.

 

4.5. Conversion
Procedures. The form of Notice
of Conversion included in any Note sets forth the totality of the
procedures required of the Purchasers in order to convert such
Note. Without limiting the preceding sentences, no ink-original
Notice of Conversion shall be required, nor shall any medallion
guarantee (or other type of guarantee or notarization) of any
Notice of Conversion form be required in order to convert the
Notes. No additional legal opinion, Notice of Conversion or other
information or instructions shall be required of the Purchasers to
convert such Note. The Company shall honor conversions of any Note,
and shall deliver Conversion Shares, in accordance with the terms,
conditions and time periods set forth in the Transaction
Documents.

 

 

 

30

 

 

4.6. Shareholder
Rights Plan. No claim will be
made or enforced by the Company or, with the consent of the
Company, any other Person, that any Purchaser is an
“acquiring person” or such similar term under any
control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter adopted by
the Company, or that any Purchaser could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving
Securities under the Transaction Documents or under any other
agreement between the Company and the
Purchasers.

 

4.7. Material
Non-Public Information. Except
as set forth in Schedule 4.7
and except with respect to the
material terms and conditions of the transactions contemplated by
the Transaction Documents, the Company covenants and agrees that
neither it, nor any of its subsidiaries, nor any other Person
acting on its behalf, will provide the Purchasers or their
respective agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior
thereto such information is disclosed to the public, or the
Purchasers shall have entered into a written agreement with the
Company regarding the confidentiality and use of such information.
The Company understands and confirms that the Purchasers shall be
relying on the foregoing covenant in effecting transactions in
securities of the Company.

 

4.8. Use
of Proceeds. The Company shall
use the net proceeds as set forth in Schedule 4.8.

 

4.9. Indemnification
of Purchasers. Subject to the
provisions of this Section 4.9, the Company will indemnify and hold
the Purchasers and their respective directors, officers, managers,
shareholders, members, partners, employees and agents (and any
other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any
other title), each Person who controls any Purchaser (within the
meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and each of the respective directors, officers,
managers, shareholders, agents, members, partners or employees (and
any other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any
other title) of such controlling persons (each, a
“Purchaser
Party”) harmless from any
and all losses, liabilities, obligations, claims, contingencies,
damages, costs and expenses, including all judgments, amounts paid
in settlements, court costs and reasonable attorneys’ fees
and costs of investigation that any Purchaser Party may suffer or
incur as a result of or relating to (a) any breach of any of the
representations, warranties, covenants or agreements made by the
Company in this Agreement or in the other Transaction Documents;
(b) any action instituted against a Purchaser Party in any
capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such
Purchaser Party, with respect to any of the transactions
contemplated by the Transaction Documents (unless such action is
based upon a breach of such Purchaser Party’s
representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser Party
may have with any such stockholder or any violations by such
Purchaser Party of state or federal securities laws or any conduct
by the Purchaser Party which constitutes fraud, gross negligence,
willful misconduct or malfeasance); or (c) any breach of any of the
representations, warranties, covenants or agreements made by the
Company in, or the failure by the Company to obtain any consent,
waiver, approval or authorization required by, that certain
registration rights agreement identified on Schedule
3.1(aa), in connection with the
transactions contemplated by the Transaction Documents. If any
action shall be brought against any Purchaser Party in respect of
which indemnity may be sought pursuant to this Agreement, such
Purchaser Party shall promptly notify the Company in writing, and
the Company shall have the right to assume the defense thereof with
counsel of its own choosing reasonably acceptable to the Purchaser
Party. Any Purchaser Party shall have the right to employ separate
counsel in any such action and participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense
of such Purchaser Party except to the extent that (i) the
employment thereof has been specifically authorized by the Company
in writing, (ii) the Company has failed after a reasonable period
of time to assume such defense and to employ counsel or (iii) in
such action there is, in the reasonable opinion of counsel, a
material conflict on any material issue between the position of the
Company and the position of the Purchaser Party, in which case the
Company shall be responsible for the reasonable fees and expenses
of no more than one such separate counsel. The Company will not be
liable to any Purchaser Party under this Agreement (x) for any
settlement by a Purchaser Party effected without the
Company’s prior written consent, which shall not be
unreasonably withheld or delayed; or (y) to the extent, but only to
the extent that a loss, claim, damage or liability is attributable
to any Purchaser Party’s breach of any of the
representations, warranties, covenants or agreements made by such
Purchaser Party in this Agreement or in the other Transaction
Documents. The indemnification required by this Section 4.9 shall
be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are
received or are incurred. The indemnification contained herein
shall be in addition to any cause of action or similar right of any
Purchaser Party against the Company or others and any liabilities
the Company may be subject to pursuant to law.

 

 

 

31

 

 

 

4.10. Reservation
and Listing of Securities.

 

(a) The
Company shall maintain a reserve from its duly authorized shares of
Common Stock for issuance pursuant to the Transaction Documents in
amount equal to 300% of the Required Minimum.

 

(b) If,
on any date, the number of authorized but unissued (and otherwise
unreserved) shares of Common Stock is less than 300% of the
Required Minimum on such date, then the Board of Directors shall
use commercially reasonable efforts to amend the Company’s
certificate or articles of incorporation to increase the number of
authorized but unissued shares of Common Stock to at least 300% of
the Required Minimum at such time, as soon as possible and in any
event not later than the seventy-fifth (75th)
day after such date; provided that the Company will not be required
at any time to authorize a number of shares of Common Stock greater
than the maximum remaining number of shares of Common Stock that
could possibly be issued after such time pursuant to the
Transaction Documents.

 

(c) The
Company shall, if applicable: (i) in the time and manner required
by the principal Trading Market, prepare and file with such Trading
Market an additional shares listing application covering a number
of shares of Common Stock at least equal to the Required Minimum on
the date of such application; (ii) take all steps necessary to
cause such shares of Common Stock to be approved for listing or
quotation on such Trading Market as soon as possible thereafter;
(iii) provide to the Purchasers evidence of such listing or
quotation; and (iv) maintain the listing or quotation of such
Common Stock on any date at least equal to the Required Minimum on
such date on such Trading Market or another Trading Market. The
Company agrees to maintain the eligibility of the Common Stock for
electronic transfer through the Depository Trust Company or another
established clearing corporation, including, without limitation, by
timely payment of fees to the Depository Trust Company or such
other established clearing corporation in connection with such
electronic transfer.

 

4.11. Certain
Transactions. The Purchaser
covenants and agrees that neither it, nor any Affiliate acting on
its behalf or pursuant to any understanding with it will execute
any Short Sales of the Common Stock or hedging transaction, which
establishes a net short position with respect to the
Company’s Common Stock) during the period commencing with the
execution of this Agreement and ending on the earlier of the
Maturity Date of the Notes or the full repayment or conversion of
the Notes; provided that this provision shall not prohibit any
sales made where a corresponding Notice of Conversion is tendered
to the Company and the shares received upon such conversion are
used to close out such sale; provided, further that this provision
shall not operate to restrict a Purchaser’s trading under any
prior securities purchase agreement containing contractual rights
that explicitly protects such trading in respect of the previously
issued securities.

 

 

 

32

 

 

4.12. Securities
Laws Disclosure; Publicity. The
Company shall (a) as soon as reasonably practicable following the
execution hereof, issue a press release disclosing the material
terms of the transactions contemplated hereby, and (b) by 9:00 a.m.
(New York City time) on the Trading Day immediately following the
date hereof file a Current Report on Form 8-K, including the
Transaction Documents as exhibits thereto, with the Commission.
From and after the issuance of such press release, the Company
represents to the Purchasers that it shall have publicly disclosed
all material, non-public information delivered to any of the
Purchaser by the Company or any of its Subsidiaries, or any of
their respective officers, directors, employees or agents in
connection with the transactions contemplated by the Transaction
Documents. The Company and the Purchasers shall consult with each
other in issuing any other public disclosure with respect to the
transactions contemplated hereby, and neither the Company nor the
Purchasers shall issue any such public disclosure nor otherwise
make any such public statement without the prior consent of the
Company, with respect to any press release of the Purchasers, or
without the prior consent of the Purchasers (which consent shall
not be unreasonably withheld, delayed or conditioned), with respect
to any press release of the Company, except if such disclosure is
required by law or rules of the principal Trading Market, in which
case the disclosing party shall promptly provide the other party
with prior notice of such public statement or communication.
Notwithstanding the foregoing, the Company shall not publicly
disclose the names of the Purchasers, or include the names of the
Purchasers in any filing with the Commission or any regulatory
agency or Trading Market, without the prior written consent of each
Purchaser (which consent may be withheld, delayed or conditioned in
the sole discretion of such Purchaser), except: (a) as required by
federal securities law in connection with any registration
statement contemplated by this Agreement and (b) to the extent such
disclosure is required by law or Trading Market regulations, in
which case the Company shall provide the Purchasers with prior
notice of such disclosure permitted under this clause
(b).

 

4.13. Form
D; Blue Sky Filings. The
Company agrees to timely file a Form D with respect to the
Securities as required under Regulation D and to provide a copy
thereof, promptly upon request of any Purchaser. In addition, the
Company shall take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to
qualify the Securities for, sale to the Purchasers at the Closing
under applicable securities or “Blue Sky” laws of the
states of the United States, and shall provide evidence of such
actions promptly upon request of any Purchaser.

 

4.14. Maintenance
of Registration Statement. The
Company shall use its best efforts to maintain the effectiveness of
the Registration Statement for the issuance thereunder of the
Registered Shares. The Company shall promptly amend the
Registration Statement on such other form as may be necessary to
maintain the effectiveness of the Registration Statement for this
purpose. If at any time following the date hereof the Registration
Statement is not effective or is not otherwise available for the
issuance of the Registered Shares or any prospectus contained
therein is not available for use, the Company shall immediately
notify the Purchasers in writing that the Registration Statement is
not then effective or a prospectus contained therein is not
available for use and thereafter shall promptly notify such holders
when the Registration Statement is effective again and available
for the issuance of the Registered Shares or such prospectus is
again available for use.

 

 

 

33

 

 

4.15. Amendments
to the Registration Statement; Prospectus Supplements; Free Writing
Prospectuses.

 

(a) Except
as provided in this Agreement and other than periodic reports
required to be filed pursuant to the Exchange Act, the Company
shall not file with the Commission any amendment to the
Registration Statement that relates to the Purchasers, this
Agreement or the other Transaction Documents or the transactions
contemplated hereby or thereby or file with the Commission any
Prospectus Supplement that relates to the Purchasers, this
Agreement or the other Transaction Documents or the transactions
contemplated hereby or thereby with respect to which (a) the
Purchasers shall not previously have been advised, (b) the Company
shall not have given due consideration to any comments thereon
received from the Purchasers or their counsel, or (c) the
Purchasers shall reasonably object after being so advised, unless
the Company reasonably has determined that it is necessary to amend
the Registration Statement or make any supplement to the Prospectus
to comply with the Securities Act or any other applicable law or
regulation, in which case the Company shall promptly (but in no
event later than twenty-four (24) hours) so inform the Purchasers,
the Purchasers shall be provided with a reasonable opportunity to
review and comment upon any disclosure relating to the Purchasers
and the Company shall expeditiously furnish to the Purchasers an
electronic copy thereof. In addition, for so long as, in the
reasonable opinion of counsel for the Purchasers, the Prospectus
(or in lieu thereof, the notice referred to in Rule 173(a) under
the Securities Act) is required to be delivered in connection with
any acquisition or sale of the Conversion Shares or Registered
Shares by the Purchasers, the Company shall not file any Prospectus
Supplement with respect to such securities without delivering or
making available a copy of such Prospectus Supplement, together
with the Prospectus, to the Purchasers promptly.

 

(b) The
Company has not made, and agrees that unless it obtains the prior
written consent of the Purchasers (which consent shall not be
unreasonably withheld, delayed or conditioned in the sole
discretion of such Purchasers) it will not make, an offer relating
to the Securities that would constitute an “issuer free
writing prospectus” as defined in Rule 433 promulgated under
the Securities Act (an “Issuer Free Writing
Prospectus”) or that
would otherwise constitute a “free writing prospectus”
as defined in Rule 405 promulgated under the Securities Act (a
“Free Writing
Prospectus”) required to
be filed by the Company or the Purchasers with the Commission or
retained by the Company or the Purchasers under Rule 433 under the
Securities Act. The Purchasers have not made, and agree that unless
they obtains the prior written consent of the Company they will not
make, an offer relating to the Securities that would constitute a
Free Writing Prospectus required to be filed by the Company with
the Commission or retained by the Company under Rule 433 under the
Securities Act. Any such Issuer Free Writing Prospectus or other
Free Writing Prospectus consented to by the Purchasers or the
Company is referred to in this Agreement as a
“Permitted Free Writing
Prospectus”. The Company
agrees that (x) it has treated and will treat, as the case may be,
each Permitted Free Writing Prospectus as an Issuer Free Writing
Prospectus and (y) it has complied and will comply, as the case may
be, with the requirements of Rules 164 and 433 under the Securities
Act applicable to any Permitted Free Writing Prospectus, including
in respect of timely filing with the Commission, legending and
record keeping.

 

 

 

34

 

 

4.16. Prospectus
Delivery. Immediately prior to
execution of this Agreement, the Company shall have delivered to
the Purchasers, and as soon as practicable after execution of this
Agreement the Company shall file, a Prospectus Supplement with
respect to the Registered Shares to be issued on the Closing Date,
as required under, and in conformity with, the Securities Act,
including Rule 424(b) thereunder. The Company shall provide the
Purchasers a reasonable opportunity to comment on a draft of each
Prospectus Supplement and any Issuer Free Writing Prospectus, shall
give due consideration to all such comments and, subject to the
provisions of Section 4.15(b) hereof, shall deliver or make
available to the Purchasers, without charge, an electronic copy of
each form of Prospectus Supplement, together with the Prospectus,
and any Permitted Free Writing Prospectus on the Closing Date. The
Company consents to the use of the Prospectus (and of any
Prospectus Supplements thereto) in accordance with the provisions
of the Securities Act and with the securities or “blue
sky” laws of the jurisdictions in which the Registered Shares
may be sold by the Purchasers, in connection with the offering and
sale of the Registered Shares and for such period of time
thereafter as the Prospectus (or in lieu thereof, the notice
referred to in Rule 173(a) under the Securities Act) is required by
the Securities Act to be delivered in connection with sales of the
Registered Shares. If during such period of time any event shall
occur that in the judgment of the Company and its counsel is
required to be set forth in the Registration Statement or the
Prospectus or any Permitted Free Writing Prospectus or should be
set forth therein in order to make the statements made therein (in
the case of the Prospectus, in light of the circumstances under
which they were made) not misleading, or if it is necessary to
amend the Registration Statement or supplement or amend the
Prospectus or any Permitted Free Writing Prospectus to comply with
the Securities Act or any other applicable law or regulation, the
Company shall forthwith prepare and, subject to Section 4.15(b)
above, file with the Commission an appropriate amendment to the
Registration Statement or Prospectus Supplement to the Prospectus
(or supplement to the Permitted Free Writing Prospectus) and shall
expeditiously furnish or make available to the Purchasers an
electronic copy thereof.

 

4.17. Stop
Orders. The Company shall
advise the Purchasers promptly (but in no event later than
twenty-four (24) hours) and shall confirm such advice in writing:
(i) of the Company’s receipt of notice of any request by the
Commission for amendment of or a supplement to the Registration
Statement, the Prospectus, any Permitted Free Writing Prospectus or
for any additional information; (ii) of the Company’s receipt
of notice of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or
prohibiting or suspending the use of the Prospectus or any
Prospectus Supplement, or of the suspension of qualification of the
Registered Shares or the Conversion Shares for offering or sale in
any jurisdiction, or the initiation or contemplated initiation of
any proceeding for such purpose; (iii) of the Company becoming
aware of the happening of any event, which makes any statement of a
material fact made in the Registration Statement, the Prospectus or
any Permitted Free Writing Prospectus untrue or which requires the
making of any additions to or changes to the statements then made
in the Registration Statement, the Prospectus or any Permitted Free
Writing Prospectus in order to state a material fact required by
the Securities Act to be stated therein or necessary in order to
make the statements then made therein (in the case of the
Prospectus, in light of the circumstances under which they were
made) not misleading, or of the necessity to amend the Registration
Statement or supplement the Prospectus or any Permitted Free
Writing Prospectus to comply with the Securities Act or any other
law or (iv) if at any time following the date hereof the
Registration Statement is not effective or is not otherwise
available for the issuance of the Registered Shares or any
Prospectus contained therein is not available for use for any other
reason. The Company shall not be required to disclose to the
Purchasers the substance or specific reasons of any of the events
set forth in clauses (i) through (iv) of the immediately preceding
sentence, but rather, shall only be required to disclose that the
event has occurred. Thereafter, the Company shall promptly notify
such holders when the Registration Statement, the Prospectus, any
Permitted Free Writing Prospectus and/or any amendment or
supplement thereto, as applicable, is effective and available for
the issuance of the Registered Shares. If at any time the
Commission shall issue any stop order suspending the effectiveness
of the Registration Statement or prohibiting or suspending the use
of the Prospectus or any Prospectus Supplement, the Company shall
use its reasonable best efforts to obtain the withdrawal of such
order at the earliest possible time.

 

 

 

35

 

 

4.18. Subsequent
Equity Sales; Variable Rate Transactions; Other.

 

(a) So
long as the Notes remain outstanding, neither the Company nor any
Subsidiary shall, directly or indirectly, issue, enter into any
agreement to issue or publicly announce the issuance or proposed
issuance of any shares of Common Stock or Common Stock Equivalents
(or a combination of units thereof), or recommend to its
stockholders the approval or adoption thereof by such stockholders,
without the prior written consent of the Purchasers (which consent
may be withheld, delayed or conditioned in the sole discretion of
such Purchasers). The restrictions contained in this Section 4.18
shall not apply to (i) an Exempt Issuance or (ii) a Qualified
Subsequent Financing, provided that all Qualified Subsequent
Financing Net Proceeds from such Qualified Subsequent Financing are
utilized solely to effect a Mandatory Redemption of the Notes in
accordance with Sections 7(c) and 7(d) of the Notes, until all of
the Notes are so redeemed in full in accordance with their terms,
including, without limitation, payment in full of the Mandatory
Redemption Amount to the holders of the Notes, and are no longer
outstanding.

 

(b) So
long as the Notes remain outstanding or any of the Purchasers hold
any Securities, the Company shall not, directly or indirectly,
amend, modify, waive or alter any terms or conditions of any Common
Stock Equivalents outstanding as of the date of the Purchase
Agreement to decrease the exercise, conversion and/or exchange
price, as applicable, thereunder or otherwise increase the
aggregate number of shares of Common Stock issuable in connection
therewith (other than in connection with stock splits or
combinations).

 

(c) So
long as the Notes remain outstanding or any of the Purchasers hold
any Securities, the Company and each of its Subsidiaries shall be
prohibited from effecting or entering into (or publicly announcing
or recommending to its stockholders the approval or adoption
thereof by such stockholders) any agreement, plan, arrangement or
transaction to effect, directly or indirectly, any issuance by the
Company or any of its Subsidiaries of Common Stock or Common Stock
Equivalents (or a combination of units thereof) involving a
Variable Rate Transaction, without the prior written consent of the
Purchasers (which consent may be withheld, delayed or conditioned
in the sole discretion of such Purchasers).
“Variable Rate
Transaction” means a
transaction in which the Company (i) issues or sells any debt or
equity securities that are convertible into, exchangeable or
exercisable for, or include the right to receive, additional shares
of Common Stock either (A) at a conversion price, exercise price or
exchange rate or other price that is based upon, and/or varies
with, the trading prices of or quotations for the shares of Common
Stock at any time after the initial issuance of such debt or equity
securities or (B) with a conversion, exercise or exchange price
that is subject to being reset at some future date after the
initial issuance of such debt or equity security or upon the
occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common
Stock or (ii) enters into, or effects a transaction under, any
agreement, including, but not limited to, an equity line of credit,
an at-the-market offering (as defined in SEC Rule 415) or a
similarly structured transaction, whereby the Company may issue
securities at a future determined price. Notwithstanding the
foregoing, the restrictions contained in this Section 4.18(c) shall
not apply to (i) an Exempt Issuance or (ii) a Qualified Subsequent
Financing, provided that all Qualified Subsequent Financing Net
Proceeds from such Qualified Subsequent Financing are utilized
solely to effect a Mandatory Redemption of the Notes in accordance
with Sections 7(c) and 7(d) of the Notes, until all of the Notes
are so redeemed in full in accordance with their terms, including,
without limitation, payment in full of the Mandatory Redemption
Amount to the holders of the Notes, and are no longer
outstanding.

 

 

 

36

 

 

(d) So
long as the Notes remain outstanding or and of the Purchasers hold
any Securities, neither the Company nor any Subsidiary shall,
directly or indirectly, effect or enter into (or publicly announce
or recommend to its stockholders the approval or adoption thereof
by such stockholders) any agreement, plan, arrangement or
transaction structured in accordance with, based upon, or related
or pursuant to Section 3(a)(9) or Section 3(a)(l0) of the
Securities Act, without the prior written consent of the Purchasers
(which consent may be withheld, delayed or conditioned in the sole
discretion of the such Purchasers).

 

(e) So
long as the Notes remain outstanding or any of the Purchasers hold
any Securities, the Company and each of its Subsidiaries shall be
prohibited from, directly or indirectly, effecting or entering into
(or publicly announcing or recommending to its stockholders the
approval or adoption thereof by such stockholders) any agreement,
plan, arrangement or transaction, including, without limitation,
any Subsequent Financing, that would or would reasonably be
expected to restrict, delay, conflict with or impair the ability or
right of the Company to timely perform its obligations under this
Agreement or the Notes, including, without limitation, the
obligation of the Company to timely (i) deliver shares of Common
Stock to any holder of the Notes (or a designee thereof, if
applicable) in accordance with this Agreement or the Notes and/or
(ii) repay in cash all outstanding principal amount of the Notes,
plus accrued but unpaid interest thereon, Make-Whole Amount, Late
Fees, liquidated damages and other amounts outstanding under the
Notes at maturity or at any other times when payments are required
to be made in cash pursuant to the terms of the Notes.

 

(f) The
Purchasers shall be entitled to obtain injunctive relief against
the Company to preclude any such issuance in this Section 4.18
(without the need for the posting of any bond or similar item,
which the Company hereby expressly and irrevocably waives the
requirement for), which remedy shall be in addition to any right to
collect damages.

 

4.19. Resale
Restrictions. For so long any
Purchaser owns any Notes, no Purchaser shall sell an amount of Exit
Shares on any Trading Day in excess of the greater of (i) such
number of Exit Shares that would result in gross proceeds to such
Purchaser in excess of fifty thousand dollars ($50,000) or (ii)
five percent (5%) of the trading volume of the Common Stock on such
Trading Day.

 

4.20. No
Frustration. So long as any of
the Purchasers or any of their respective Affiliates holds any
Securities, neither the Company nor any of its Affiliates or
Subsidiaries, nor any of its or their respective officers,
employees, directors, agents or other representatives, will,
without the prior written consent of the Purchasers (which consent
may be withheld, delayed or conditioned in the sole discretion of
such Purchasers), effect, enter into, announce or recommend to its
stockholders any agreement, plan, arrangement or transaction (or
issue, amend or waive any security), or effect any Subsequent
Financing, that would or would reasonably be expected to restrict,
delay, conflict with or impair the ability or right of the Company
to timely perform its obligations under this Agreement or the
Notes, including, without limitation, the obligation of the Company
to timely (i) deliver shares of Common Stock to any Purchaser (or a
designee thereof, if applicable) in accordance with this Agreement
or the Notes and/or (ii) repay in cash all outstanding principal
and other amounts outstanding under the Notes at maturity or at any
other times when payments are required to be made in cash pursuant
to the terms of the Notes.

 

 

 

37

 

 

4.21. Restriction
on Redemption and Cash Dividend. Except as expressly set forth in the Notes, so
long as any Notes remain outstanding, the Company shall not,
directly or indirectly, redeem, or declare or pay any cash dividend
or distribution on, any securities of the Company or any of its
Subsidiaries without the prior written consent of the Purchasers
(which consent may be withheld, delayed or conditioned in the sole
discretion of such Purchasers).

 

4.22. Stock
Splits. Until the Notes are no
longer outstanding, the Company shall not effect any stock
combination, reverse stock split or other similar transaction (or
make any public announcement or disclosure with respect to any of
the foregoing), without the prior written consent of the Purchasers
(which consent may be withheld, delayed or conditioned in the sole
discretion of such Purchasers).

 

4.23. Corporate
Existence. So long as any Notes
remain outstanding, the Company shall not, directly or indirectly,
effect, enter into, be a party to, announce or recommend to its
stockholders any Fundamental Transaction, unless (i) the Purchasers
shall have provided their prior written consent thereto (which
consent may be withheld, delayed or conditioned in the sole
discretion of such Purchasers) and (ii) the Company complies in all
respects with the applicable provisions governing Fundamental
Transactions set forth in the Notes.

 

4.24. Listing.
The Company shall take all actions necessary to cause all of the
Conversion Shares that may be issued pursuant to the Notes (without
regard to any limitations on conversion set forth in the Notes set
forth therein), to be approved for listing on The Nasdaq Capital
Market as of the Closing Date, subject only to official notice of
issuance, and shall maintain such listing of all Conversion Shares
from time to time issuable under the terms of the Notes on The
Nasdaq Capital Market or another Trading Market. So long as any of
the Securities remain outstanding, the Company shall maintain the
Common Stock’s listing on The Nasdaq Capital Market or
another Trading Market, and neither the Company nor any of its
Subsidiaries shall take any action which could be reasonably
expected to result in the delisting or suspension of the Common
Stock on The Nasdaq Capital Market or other Trading Market. The
Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section
4.24.

 

4.25. Outstanding
Notes. The Company agrees that
any and all of the issued and outstanding Series B Notes will be
(i) fully converted by the holders thereof into shares of Common
Stock that are issued and outstanding on or prior to the fifteenth
(15th)
Trading Day immediately following the Closing Date or (ii) redeemed
in full for cash (all of which has been paid by the Company) and
surrendered to the Company for cancellation and cancelled by the
Company on or prior to the fifteenth (15th)
Trading Day immediately following the Closing Date. No amount of
principal, interest, late fees or any other amounts outstanding and
under the Series B Notes shall remain outstanding or otherwise
payable by the Company under the Series B Notes or otherwise after
the fifteenth (15th)
Trading Day immediately following the Closing. All of such Series B
Notes will be surrendered to the Company for cancelation or will be
automatically canceled under the terms thereof and will have ceased
to exist, and neither the Company nor any of its Subsidiaries or
Affiliates will have any liabilities or obligations under or with
respect to any of such Series B Notes (including any obligation to
issue any additional shares of Common Stock or Common Stock
Equivalents thereunder or in respect thereof).

 

 

 

38

 

 

ARTICLE V.

MISCELLANEOUS

 

5.1. Termination.
This Agreement may be terminated by each Purchaser, as to such
Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other
Purchasers, by written notice to the other parties, if the Closing
has not been consummated on or before June 31, 2018; provided,
however, that such termination will not affect the right of any
party to sue for any breach by any other party (or
parties).

 

5.2. Fees
and Expenses. The Company has
agreed to bear all fees, disbursements, and expenses in connection
with the transactions contemplated herein, including, without
limitation, the Company’s legal and accounting fees and
disbursements, the costs incident to the preparation, printing and
distribution of any registration statement, filing fees, UCC fees,
and costs associated with the Intellectual Property Security
Agreement. In addition, the Company will reimburse the Purchasers
for their reasonable out-of-pocket expenses, including legal fees
and disbursements of their counsel in connection with the purchase
and sale of the Securities contemplated hereby; provided that such
reimbursement obligation shall not exceed $25,000. The Company
shall pay all Transfer Agent fees (including, without limitation,
any fees required for same-day processing of any instruction letter
delivered by the Company and any conversion or exercise notice
delivered by a Purchaser), stamp taxes and other taxes and duties
levied in connection with the delivery of any Securities to the
Purchasers.

 

5.3. Entire
Agreement. The Transaction
Documents, together with the exhibits and schedules thereto,
contain the entire understanding of the parties hereto with respect
to the subject matter hereof and thereof and supersede all prior
agreements and understandings, oral or written, with respect to
such matters, which the parties hereto acknowledge have been merged
into such documents, exhibits and schedules.

 

5.4. Notices.
Any and all notices or other communications or deliveries to be
provided by the Purchasers hereunder, including, without
limitation, any Notice of Conversion, shall be in writing and
delivered personally, by email or facsimile, or sent by a
nationally recognized overnight courier service, addressed to the
Company at 1700 E. 68th
Avenue, Denver, Colorado 80229, or
such other address, facsimile number, or email address as the
Company may specify for such purposes by notice to the Purchasers
delivered in accordance with this Section 5.4, with a copy in
writing and delivered personally, by email or facsimile, or sent by
a nationally recognized overnight courier service, addressed to
Sichenzia, Ross, Ference & Kesner, Attn: Gregory Sichenzia,
1185 Avenue of the Americas, 37th
Floor, New York, New York 10036. Any
and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered
personally, by email or facsimile, or sent by a nationally
recognized overnight courier service addressed to each Purchaser at
the email address, facsimile number, or address of the Purchaser
appearing on the books of the Company, or if no such email address,
facsimile number, or address appears on the books of the Company,
at the principal place of business of such Purchaser. Any notice or
other communication or deliveries hereunder shall be deemed given
and effective on the earliest (i) the date of transmission, if such
notice or communication is delivered via facsimile or email at the
facsimile number or email address set forth on the signature pages
attached hereto prior to 12:00 p.m. (New York City time) on any
date, (ii) the next Trading Day after the date of transmission, if
such notice or communication is delivered via facsimile or email at
the facsimile number or email address set forth on the signature
pages attached hereto on a day that is not a Trading Day or later
than 12:00 p.m. (New York City time) on any Trading Day, (iii) the
second Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service or (iv) upon actual
receipt by the party to whom such notice is required to be
given.

 

 

 

39

 

 

5.5. Amendments;
Waivers. No provision of this
Agreement may be waived, modified, supplemented or amended except
in a written instrument signed, in the case of an amendment, by the
Company and Purchasers holding at least 67% in interest of the
Notes then outstanding or, in the case of a waiver, by the party
against whom enforcement of any such waived provision is sought;
provided, however, that if any amendment, modification or waiver
disproportionately and adversely impacts a Purchaser (or group of
Purchasers), the consent of such disproportionately impacted
Purchaser (or group of Purchasers) shall also be required (which
consent may be withheld, delayed or conditioned in the sole
discretion of such Purchasers). No waiver of any default with
respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future
or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right. Any proposed amendment or
waiver that disproportionately, materially and adversely affects
the rights and obligations of any Purchaser relative to the
comparable rights and obligations of the other Purchasers shall
require the prior written consent of such adversely affected
Purchaser (which consent may be withheld, delayed or conditioned in
the sole discretion of such Purchasers). Any amendment effected in
accordance with accordance with this Section 5.5 shall be binding
upon each Purchaser and holder of Securities and the
Company.

 

5.6. Headings.
The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

 

5.7. Successors
and Assigns. This Agreement
shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign
this Agreement or any rights or obligations hereunder without the
prior written consent of the Purchasers (other than by merger)
(which consent may be withheld, delayed or conditioned in the sole
discretion of such Purchasers). Each Purchaser may assign any or
all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided that such
transferee agrees in writing to be bound, with respect to the
transferred Securities, by the provisions of the Transaction
Documents that apply to a
“Purchaser.”

 

5.8. No
Third-Party Beneficiaries. This
Agreement is intended for the benefit of the parties hereto and
their respective successors and permitted assigns and is not for
the benefit of, nor may any provision hereof be enforced by, any
other Person, except as otherwise set forth in Section
4.9.

 

5.9. Governing
Law. All questions concerning
the construction, validity, enforcement and interpretation of the
Transaction Documents shall be governed by and construed and
enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof.
Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions
contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, partners, members,
employees or agents) shall be commenced exclusively in the state
and federal courts sitting in the City of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, Borough
of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any
of the Transaction Documents), and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is improper or is an
inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any other
manner permitted by law. If either party shall commence an action,
suit or proceeding to enforce any provisions of the Transaction
Documents, then, in addition to the obligations of the Company
under Section 4.9, the prevailing party in such action, suit or
proceeding shall be reimbursed by the other party for its
reasonable attorneys’ fees and other costs and expenses
incurred with the investigation, preparation and prosecution of
such action or proceeding.

 

 

 

40

 

 

5.10. Survival.
The representations and warranties contained herein shall survive
the Closing and the delivery of the Securities.

 

5.11. Execution.
This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been
signed by each party and delivered to each other party, it being
understood that the parties need not sign the same counterpart. In
the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file,
such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed)
with the same force and effect as if such facsimile or
“.pdf” signature page were an original
thereof.

 

5.12. Severability.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their
commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.

 

5.13. Rescission
and Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without
limiting any similar provisions of) any of the other Transaction
Documents, whenever a Purchaser exercises a right, election, demand
or option under a Transaction Document and the Company does not
timely perform its related obligations within the periods therein
provided, then the Purchasers may rescind or withdraw, in its sole
discretion from time to time upon written notice to the Company,
any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights; provided, however, that
in the case of a rescission of a conversion of any Note, the
Purchasers shall be required to return any shares of Common Stock
subject to any such rescinded conversion notice concurrently with
the return to the Purchasers of the aggregate conversion price paid
to the Company for such shares.

 

5.14. Replacement
of Securities. If any
certificate or instrument evidencing any Securities is mutilated,
lost, stolen or destroyed, the Company shall issue or cause to be
issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft
or destruction. The applicant for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party
costs (including customary indemnity) associated with the issuance
of such replacement Securities.

 

5.15. Remedies.
In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, the
Purchasers and the Company will be entitled to specific performance
under the Transaction Documents. The parties agree that monetary
damages may not be adequate compensation for any loss incurred by
reason of any breach of obligations contained in the Transaction
Documents and hereby agree to waive and not to assert in any action
for specific performance of any such obligation the defense that a
remedy at law would be adequate.

 

 

 

41

 

 

5.16. Payment
Set Aside. To the extent that
the Company makes a payment or payments to the Purchasers pursuant
to any Transaction Document or a Purchaser enforces or exercises
its rights thereunder, and such payment or payments or the proceeds
of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.

 

5.17. Usury.
To the extent it may lawfully do so, the Company hereby agrees not
to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or
advantage of, usury laws wherever enacted, now or at any time
hereafter in force, in connection with any claim, action or
proceeding that may be brought by a Purchaser in order to enforce
any right or remedy under any Transaction Document. Notwithstanding
any provision to the contrary contained in any Transaction
Document, it is expressly agreed and provided that the total
liability of the Company under the Transaction Documents for
payments in the nature of interest shall not exceed the maximum
lawful rate authorized under applicable law (the
“Maximum
Rate”), and, without
limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other
sums in the nature of interest that the Company may be obligated to
pay under the Transaction Documents exceed such Maximum Rate. It is
agreed that if the maximum contract rate of interest allowed by law
and applicable to the Transaction Documents is increased or
decreased by statute or any official governmental action subsequent
to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the
Transaction Documents from the effective date thereof forward,
unless such application is precluded by applicable law. If under
any circumstances whatsoever, interest in excess of the Maximum
Rate is paid by the Company to a Purchaser with respect to
indebtedness evidenced by the Transaction Documents, such excess
shall be applied by such Purchaser to the unpaid principal balance
of any such indebtedness or be refunded to the Company, the manner
of handling such excess to be at such Purchaser’s
election.

 

5.18. Liquidated
Damages. The Company’s
obligations to pay any partial liquidated damages or other amounts
owing under the Transaction Documents is a continuing obligation of
the Company and shall not terminate until all unpaid partial
liquidated damages and other amounts have been paid notwithstanding
the fact that the instrument or security pursuant to which such
partial liquidated damages or other amounts are due and payable
shall have been canceled.

 

5.19. Saturdays,
Sundays, Holidays, etc. If the
last or appointed day for the taking of any action or the
expiration of any right required or granted herein shall not be a
Business Day, then such action may be taken or such right may be
exercised on the next succeeding Business Day.

 

5.20. Construction.
The parties agree that each of them and/or their respective counsel
have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the
Transaction Documents or any amendments thereto. In addition, each
and every reference to share prices and shares of Common Stock in
any Transaction Document shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and
other similar transactions of the Common Stock that occur after the
date of this Agreement.

 

 

 

42

 

 

5.21. Independent
Nature of Purchasers’ Obligations and
Rights. The obligations of each
Purchaser under any Transaction Document are several and not joint
with the obligations of any other Purchaser, and no Purchaser shall
be responsible in any way for the performance or non-performance of
the obligations of any other Purchaser under any Transaction
Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Purchaser pursuant hereof or
thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Purchasers are in any way
acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents. Each
Purchaser shall be entitled to independently protect and enforce
its rights, including, without limitation, the rights arising out
of this Agreement or out of the other Transaction Documents, and it
shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose. Each Purchaser
has been represented by its own separate legal counsel in its
review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, each Purchaser and its respective
counsel have chosen to communicate with the Company through
Sichenzia Ross Ference Kesner LLP. The Company has elected to
provide all Purchasers with the same terms and Transaction
Documents for the convenience of the Company and not because it was
required or requested to do so by any of the
Purchasers.

 

5.22. WAIVER
OF JURY TRIAL. IN ANY ACTION,
SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY
AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND
INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW,
HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY
WAIVES FOREVER TRIAL BY JURY.

 

[Signature Pages Follow]

 

 

43

 

 

IN
WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.

 

	
 NEW AGE BEVERAGES
CORPORATION

	
 Address for
Notice:

	
 

	
 

	
 By: /s/
Brent Willis

	
 1700 E. 68th
Avenue

	
 Name: Brent Willis

	
 Denver,
CO 80229

	
 Title: Chief Executive Officer

	
 Attention:
Brent Willis

	
 

	
 E-Mail:
brentwillis@newagebev.com

	
 

	
 

	
 With
a copy to (which shall not constitute notice):

	
 

	
 SICHENZIA ROSS FERENCE KESNER
LLP

	
 1185
Avenue of the Americas

	
 

	
 New
York, NY 10036

	
 

	
 Attention:
Gregory Sichenzia, Esq.

	
 

	
 e-mail:
gsichenzia@srfkllp.com

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

 

44

 

 

 

[PURCHASER SIGNATURE PAGES TO NEW AGE BEVERAGES
CORPORATION

SECURITIES PURCHASE AGREEMENT]

 

IN WITNESS WHEREOF, the undersigned has caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.

 

	
 Name of Purchaser:

	
 Dominion Capital
LLC

	
 

	
 

	
 Signature
of Authorized Signatory of 
Purchaser: 

	
 

	
 

	
 

	
 Name
of Authorized Signatory:

	
 

	
 

	
 

	
 Title
of Authorized Signatory:

	
 

	
 

	
 

	
 Email
Address of Authorized Signatory:

	
 

	
 

	
 

	
 Facsimile
Number of Authorized Signatory:

	
 

	
 

	
 

	
 Address for Notice to
Purchaser:

	
 341 West
38th
Street,
Suite 800

	
  

	
 New
York, NY 10018

	
  

	
 

	
 Subscription Amount:

	
 $4,750,000

	
  

	
 

	
 EIN
Number:

	
 

	
  

	
 

 

 

 

45

 

SCHEDULE OF PURCHASERS

 

	

(1)

Purchaser

	
 

(2)

Principal Amount of Note

 

	
 

(3)

Subscription Amount

 

	
 

(4)

Commitment Shares

 

	
 

(5)

Exit Shares

 

	
 

	
 
 

 

	
 
 

 

	
 
 

 

	
 
 

 

	
Dominion Capital
LLC

	
 $4,750,000 

	
 $4,750,000 

	
  125,661 

	
  105,529 

 

 

 

 

46

 

 

EXHIBIT A

 

Form of Senior Secured Convertible Promissory Note

 

 

 

 

 

 

47

 

 

 

EXHIBIT B

 

Form of Registration Rights Agreement

 

 

 

 

 

 

48

 

 

 

EXHIBIT C

 

Form of Security Agreement

 

 

 

 

 

49

 

 

 

EXHIBIT D

 

Form of Intellectual Property Security Agreement

 

 

 

 

 

 

50

 

 

 

EXHIBIT E

 

Form of Transfer Agent Instruction Letter

 

 

 

 

 

 

 

 

51

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