Document:

exhibit_10-19.htm

EXHIBIT 10.19

 

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “Agreement”) is dated as of September 16, 2015, by and among Torchlight Energy Resources, Inc., a Nevada corporation (the “Company”), and each purchaser identified as such on the signature pages hereto (each, including its successors and permitted assigns, a “Purchaser” and collectively the “Purchasers”).

 

Recitals

 

A.           The Company and each Purchaser is executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “Commission”) under the Securities Act.

 

B.           The Company has authorized or will authorize the issuance and sale to Purchasers of up to an aggregate 40,000 shares of Series B Convertible Preferred Stock, par value $0.001 (the “Preferred Stock”), having the rights, preferences, privileges and restrictions set forth in the Certificate of Designation to be filed with the State of Nevada upon the Closing (as hereinafter defined) in the form of Exhibit “A” attached to this Agreement (the “Certificate of Designation”), which Preferred Stock will be convertible into shares of the Company’s common stock, par value $0.001 per share (“Common Stock”), in accordance with the terms and conditions set forth therein and the Certificate of Designation (as converted into shares of Common Stock, collectively the “Conversion Shares”).

 

C.           Each Purchaser, severally and not jointly, wishes to purchase and the Company wishes to sell, upon the terms and conditions stated in this Agreement, the aggregate number of shares of Preferred Stock, at a purchase price of $100 per share, set forth opposite such Purchaser’s name on the Schedule of Purchasers attached hereto as Exhibit “B” (the “Schedule of Purchasers”).

 

D.            The Company wishes to issue to each Purchaser, upon the terms and conditions stated in this Agreement, the aggregate number of warrants, in substantially the form attached hereto as Exhibit “C” (the “Warrants”), to purchase shares of Common Stock at an exercise price and other terms as set forth therein (with the shares of Common Stock issued upon exercise of any of the Warrants being collectively referred to herein as the “Warrant Shares”).  The Preferred Stock, the Conversion Shares, the Warrants and the Warrant Shares are collectively referred to herein as the “Securities.”

 

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 the Purchasers hereby agree as follows:

 

ARTICLE 1

 

AUTHORIZATION, SALE AND ISSUANCE OF SECURITIES

 

1.1           Authorization of Securities.

 

At or prior to the Closing, the Company shall have authorized the issuance and sale to the Purchasers of the Securities.

 

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1.2           Sale and Purchase of Preferred Stock; Issuance of Warrants.

 

Subject to the terms and conditions set forth in this Agreement, at the Closing, the Company shall issue and sell to each Purchaser, and each Purchaser shall, severally and not jointly, purchase from the Company, the aggregate number of shares of Preferred Stock, at a purchase price of $100 per share, set forth opposite such Purchaser’s name on the Schedule of Purchasers.   Subject to the terms and conditions set forth in this Agreement, at the Closing, the Company shall issue Warrants to each Purchaser to purchase the aggregate number of initial Warrant Shares set forth opposite such Purchaser’s name on the Schedule of Purchasers.  The Warrants shall have an exercise price equal to $2.37 per initial Warrant Share, subject to adjustment as provided in the Warrants.

 

ARTICLE 2

 

CLOSING

 

2.1           Closing.  The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place upon the date of execution of the Farmout Agreement referenced in Section 2.3(a)(ii) below (the “Closing Date”) at the offices of the Company, 5700 W. Plano Parkway, Suite 3600, Plano, Texas 75903, or at such other time and place as agreed upon by the parties hereto.

 

2.2           Delivery and Execution.  At the Closing, (a) Welsh LeBlanc, LLC (the “Escrow Agent”) will deliver, in immediately available funds, the aggregate Escrow Funds (as defined below) to the Company constituting the aggregate purchase price for the Preferred Stock, (b) the Company shall deliver to each Purchaser one or more stock certificates, subject to the restrictions (and legend) expressly provided for in Section 4.1 hereof, evidencing the number of shares of Preferred Stock such Purchaser is purchasing as is set forth on the Schedule of Purchasers, and (c) the Company shall deliver to each Purchaser one or more Warrants, subject to the restrictions (and legend) expressly provided for in Section 4.1 hereof, evidencing the aggregate number of initial Warrant Shares such Purchaser is entitled to receive as is set forth on the Schedule of Purchasers.  As used in this Agreement, the term “Escrow Funds” shall mean the funds deposited in escrow by the Purchasers with the Escrow Agent.

 

2.3           Conditions to Closing.

 

(a)           The obligations of each Purchaser to acquire the Preferred Stock and the Warrant at the Closing is subject to the following on or prior to the Closing Date:

 

(i)           Certificate of Designation.  The Company shall have filed the Certificate of Designation with the State of Nevada.

 

(ii)           Definitive Farmout Agreement.  The Company’s subsidiary, Hudspeth Oil Corporation (“HOC”), shall have entered into a definitive Farmout Agreement (the “Farmout Agreement”) in connection with the letter of intent that HOC entered into with a third party on September 1, 2015.

 

(iii)           Representations and Warranties.  The representations and warranties made by the Company contained in this Agreement will be true and correct in all material respects as of the Closing Date, except for any such representations and warranties that are qualified by “materiality” or “Material Adverse Effect,” which shall be true and correct in all respects as of the Closing Date.

 

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(iv)           Covenants.  All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to the Closing Date will have been performed or complied with in all material respects.

 

(v)           Delivery of Documents.  The Company shall have delivered the documents required to be delivered by the Company pursuant to Section 2.2 above.

 

(vi)           Corporate Resolution.  The Board of Directors of the Company shall have approved the transactions contemplated herein and authorize the execution, delivery and performance of this Agreement and the documents referred to herein to which it is or is to be a party as of the Closing Date, including but not limited to the issuance and delivery of the Securities.

 

(vii)           No Injunction.  No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by this Agreement.

 

(viii)           No Suspension of Trading in Common Stock.  The Common Stock shall not have been suspended, as of the Closing Date, by the Commission.

 

(ix)           Termination.  This Agreement shall not have been terminated as to such Purchaser in accordance with Section 5.16 herein.

 

(b)           The Company’s obligation to sell and issue the Preferred Stock and the Warrants to a Purchaser at the Closing is subject to the fulfillment of the following on or prior to the Closing Date:

 

(i)           Representations and Warranties.  The representations and warranties made by such Purchaser contained in this Agreement will be true and correct in all material respects as of the Closing Date, except for any such representations and warranties that are qualified by “materiality” or “Material Adverse Effect,” which shall be true and correct in all respects as of the Closing Date.

 

(ii)           Covenants.  All covenants, agreements and conditions contained in this Agreement to be performed by such Purchaser on or prior to the Closing Date will have been performed or complied with in all material respects.

 

(iii)           Delivery of Documents.  Such Purchaser shall have delivered the documents and funds required to be delivered by such Purchaser pursuant to Section 2.2 above.

 

(iv)           Corporate Resolution.  Such Purchaser shall provide, if applicable, corporate resolutions of the Board of Directors which approve the transactions contemplated herein and authorize the execution, delivery and performance of this Agreement and the documents referred to herein to which it is or is to be a party dated as of the Closing Date.

 

(v)           No Injunction.  No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by this Agreement.

 

(vi)           No Suspension of Trading in Common Stock.  The Common Stock shall not have been suspended, as of the Closing Date, by the Commission.

 

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(vii)           Termination.  This Agreement shall not have been terminated by the Company in accordance with Section 5.16 herein.

 

ARTICLE 3

 

REPRESENTATIONS AND WARRANTIES

 

3.1           Representations and Warranties of the Company. The Company hereby represents and warrants to each Purchaser that the following statements are true and correct as of the date hereof and the Closing Date (except for the representations and warranties that speak as of a specific date, which shall be made as of such date):

 

(a)           Subsidiaries. The Company has no direct or indirect subsidiaries other than (i) Torchlight Energy, Inc., a Nevada corporation, (ii) Torchlight Energy Operating, LLC, a Texas limited liability company, and (iii) Hudspeth Oil Corporation, a Texas corporation.  Torchlight Energy, Inc., Torchlight Energy Operating, LLC and Hudspeth Oil Corporation are herein referred to collectively as the “Subsidiaries”.

 

(b)           Organization and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite corporate power and authority to own or lease and use its properties and assets and to carry on its business as currently conducted.  Neither the Company nor any Subsidiary 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 its Subsidiaries 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, would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect (as hereinafter defined), and no Proceeding (as hereinafter defined) has been instituted, is pending, or, to the Company’s Knowledge (as hereinafter defined), has been threatened in writing in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.  “Material Adverse Effect” means any effect on the business, results of operations, prospects, assets or condition (financial or otherwise) of the Company that is material and adverse to the Company as a whole or hinder the performance of its material obligations hereunder or under the Transaction Documents (as defined below).  “Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.  “Company’s Knowledge” or “Knowledge” means with respect to any statement made to the knowledge of the Company, that the statement is based upon the actual knowledge of the officers of the Company who, as of the date hereof, have responsibility for the matter or matters that are the subject of the statement or the knowledge such officer or officers would have acquired after reasonable inquiry.

 

(c)           Authorization; Enforcement; Validity. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement, the schedules and exhibits attached hereto and the Warrants (collectively, the “Transaction Documents”) and otherwise to carry out its obligations hereunder and thereunder.  The Company’s execution and delivery of each of the Transaction Documents to which it is a party and the consummation by it of the transactions contemplated hereby and thereby (including, but not limited to, the sale and delivery of the shares of Preferred Stock and the Warrants, the reservation for issuance and the subsequent issuance of the Conversion Shares upon conversion of the Preferred Stock, and the reservation for issuance and the subsequent issuance of the Warrant Shares upon exercise of the Warrants) have been duly authorized by all necessary corporate action on the part of the Company, and no further corporate action is required by the Company, its Board of Directors or its stockholders in connection therewith other than in connection with the Required Approvals and the filing by the Company of the Certificate of Designation with the State of Nevada.  Each of the Transaction Documents to which it is a party has been (or upon delivery will be) duly executed by the Company and is, or when delivered in accordance with the terms hereof, will constitute the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application, (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.

 

 

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(d)           No Conflicts. The execution, delivery and performance by the Company of the Transaction Documents to which it is a party and the consummation by the Company of the transactions contemplated hereby or thereby (including, but not limited to, the sale and delivery of the shares of Preferred Stock and the Warrants, the reservation for issuance and the subsequent issuance of the Conversion Shares upon conversion of the Preferred Stock and the reservation for issuance and the subsequent issuance of the Warrant Shares upon exercise of the Warrants) do not and will not (i) conflict with or violate any provisions of the Company’s or any Subsidiary’s certificate or articles of incorporation, or bylaws or otherwise result in a violation of the organizational documents of the Company or any Subsidiary, (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 upon any of the properties or assets of the Company or any Subsidiary or give to others any rights of termination, acceleration or cancellation (with or without notice, lapse of time or both) of, any indenture, loan or credit agreement or other material contract or (iii) subject to the Required Approvals (as hereinafter defined), 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 any Subsidiary is subject (including federal and state securities laws and regulations and the rules and regulations, assuming the correctness of the representations and warranties made by each Purchaser herein), or by which any property or asset of the Company or any Subsidiary is bound or affected, except in the case of clause (ii) and clause (iii) such as would not, individually or in the aggregate, have  or  reasonably be expected to result in a Material Adverse Effect.

 

(e)           Consents and Approvals. Neither the Company nor any of its Subsidiaries is 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 (as hereinafter defined) in connection with the execution, delivery and performance by the Company of the Transaction Documents (including, but not limited to, the sale and delivery of the shares of Preferred Stock and the Warrants, the reservation for issuance and the subsequent issuance of the Conversion Shares upon conversion of the Preferred Stock, and the reservation for issuance and the subsequent issuance of the Warrant Shares upon exercise of the Warrants), other than (i) the filing of a Notice of Sale of Securities on Form D with the Commission under Regulation D of the Securities Act, (ii) the filing of any requisite notices and/or applications pursuant to any state securities laws, (iii) the filing of any requisite notices and/or application(s) to the Principal Trading Market (as hereinafter defined) for the issuance and sale of the Securities and the listing of the Conversion Shares and Warrant Shares for trading or quotation, as the case may be, thereon in the time and manner required thereby, and (iv) any filings required in accordance with Form 8-K of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (collectively, the “Required Approvals”).  “Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.   “Principal Trading Market” means the Trading Market (as hereinafter defined) on which the Common Stock is primarily listed on and quoted for trading, which, as of the date of this Agreement and the Closing Date, shall be the NASDAQ Capital Market. “Trading Market” means whichever of the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or the OTC Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.

 

 

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(f)           Issuance of the Securities. The shares of Preferred Stock have been duly authorized and, when issued and paid for in accordance with the terms of the Transaction Documents, will be duly and validly issued, fully paid and nonassessable and free and clear of all liens suffered or permitted by the Company, other than restrictions on transfer provided for in the Transaction Documents or imposed by applicable securities laws, and shall not be subject to preemptive or similar rights.  The Conversion Shares issuable upon conversion of the Preferred Stock have been duly authorized and, when issued and paid for in accordance with the terms of the Transaction Documents and the Certificate of Designation will be duly and validly issued, fully paid and nonassessable, free and clear of all liens suffered or permitted by the Company, other than restrictions on transfer provided for in the Transaction Documents or imposed by applicable securities laws, and shall not be subject to preemptive or similar rights.  The Warrants have been duly authorized and, when issued and paid for in accordance with the terms of the Transaction Documents, will be duly and validly issued, free and clear of all liens suffered or permitted by the Company, other than restrictions on transfer provided for in the Transaction Documents or imposed by applicable securities laws, and shall not be subject to preemptive or similar rights. The Warrant Shares issuable upon exercise of the Warrants have been duly authorized and, when issued and paid for in accordance with the terms of the Transaction Documents and the Warrants will be duly and validly issued, fully paid and nonassessable, free and clear of all liens suffered or permitted by the Company, other than restrictions on transfer provided for in the Transaction Documents or imposed by applicable securities laws, and shall not be subject to preemptive or similar rights.  Assuming the accuracy of the representations and warranties of the Purchasers in this Agreement, the Securities will be issued in compliance with all applicable federal and state securities laws.  As of the Closing Date, the Company shall have reserved from its duly authorized capital stock the number of shares of Common Stock issuable upon conversion of the Preferred Stock (without taking into account any limitations on the conversion of the Preferred Stock set forth in the Certificate of Designation).  As of the Closing Date, the Company shall have reserved from its duly authorized capital stock the number of shares of Common Stock issuable upon exercise of the Warrants (without taking into account any limitations on the exercise of the Warrants set forth in the Warrants).

 

(g)           Capitalization. The number of shares and type of all authorized, issued and outstanding capital stock, options and other securities of the Company (whether or not presently convertible into or exercisable or exchangeable for shares of capital stock of the Company) has been set forth in the SEC Reports (as hereinafter defined) and has not changed since the date set forth in the most recently filed of the SEC Reports and may change thereafter to reflect stock issuances, convertible debt conversions, stock option exercises and grants and warrant exercises and grants.  Currently the Company has approximately 30,041,473 shares of common stock issued and outstanding.  All of the outstanding shares of the Company’s Common Stock and any other security of the Company have been duly and validly authorized, 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 shares of Common Stock or any other security of the Company are entitled to preemptive rights and no Person (as defined below) 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 or otherwise to subscribe for the Securities.  Furthermore, except as set forth in the Company’s SEC Reports or as provided by the Company to the Purchasers, there are no contracts, commitments, understandings, or arrangements by which the Company is or may become bound to issue additional shares of the capital stock of the Company or options, securities or rights convertible into shares of capital stock of the Company, and 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 as contemplated in the Statement of Designation) 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.   The Company is not a party to, and it has no knowledge of, any agreement or understanding restricting the voting or transfer of any shares of the capital stock of the Company. The offer and sale of all capital stock, convertible securities, rights, or options of the Company issued prior to the Closing complied with all applicable federal and state securities laws, and no holder of such securities has a right of rescission or claim for damages with respect thereto which could have a Material Adverse Effect. As of the date hereof and as of the date of Closing, no dividends that have been declared and have accrued are unpaid.

 

 

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(h)     SEC Reports. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for twelve (12) months preceding and including 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”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension, except where the failure to file on a timely basis would not have or reasonably be expected to result in a Material Adverse Effect (including, for this purpose only, any failure which would prevent any Purchaser from using Rule 144 to resell any Securities).  As of their respective filing dates, or to the extent corrected by any subsequent amendment, the SEC Reports 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.  Each material indenture, loan or credit agreement or other material contract to which the Company or any Subsidiary is a party or to which the property or assets of the Company or any of its Subsidiaries are subject has been filed as an exhibit, or duly incorporated by reference, to the SEC Reports or has been made available to Purchaser. The Company is not, and has not been in the last twelve calendar months, a “shell company” as defined in Section 405 of the Securities Act.

 

(i)           Financial Statements. 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 U.S. generally accepted accounting principles, as applied by the Company (“GAAP”), applied on a consistent basis during the periods involved, 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 taken as a whole 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.

 

(j)           Tax Matters. The Company and each of its Subsidiaries (i) has accurately and timely prepared and filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject or has timely filed extensions for such filings, (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, except those being contested in good faith, with respect to which adequate reserves have been set aside on the books of the Company, and (iii) has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply, except where the failure to so pay or file or set aside provisions for any such tax, assessment, charge or return would not have or reasonably be expected to result in a Material Adverse Effect.

 

 

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(k)           Material Changes. Since the date of the latest financial statements included within the SEC Reports, except as specifically disclosed in any SEC Reports filed with the Commission subsequent to the filing of the SEC Report that includes such financial statements, there have been no events, occurrences or developments that have had or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

 

(l)           Environmental Matters. To the Company’s Knowledge, the Company (i) is not in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, “Environmental Laws”), (ii) does not own or operate any real property contaminated with any substance that is in violation of any Environmental Laws, (iii) is not liable for any off-site disposal or contamination pursuant to any Environmental Laws, and (iv) is not subject to any claim relating to any Environmental Laws; which violation, contamination, liability or claim has had or would have a Material Adverse Effect; and there is no pending or, to the Company’s Knowledge, threatened investigation that might lead to such a claim.

 

(m)           Litigation. There is no Action (as hereinafter defined) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) except as disclosed in the SEC Reports would, if there were an unfavorable decision, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect.  Other than publicly available correspondence between the Commission  and the Company, there has not been, within one year prior to the date hereof, and to the Company’s Knowledge there is not pending or contemplated, any investigation by the Commission involving the Company or any current 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 of its Subsidiaries under the Exchange Act or the Securities Act.  “Action” means any action, suit, inquiry, notice of violation, Proceeding (including any partial Proceeding such as a deposition) or investigation pending or, to the Company’s Knowledge, threatened in writing against the Company, any Subsidiary or any of their respective properties or any officer, director or employee of the Company or any Subsidiary acting in his or her capacity as an officer, director or employee before or by any federal, state, county, local or foreign court, arbitrator, governmental or administrative agency, regulatory authority, stock market, stock exchange or trading facility.

 

(n)           Employment Matters. No material labor dispute exists or, to the Company’s Knowledge, is imminent with respect to any of the employees of the Company.  None of the Company’s or any Subsidiary’s employees is a member of a union that relates to such employee’s relationship with the Company, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and each Subsidiary believes that its relationship with its employees is good.  No executive officer of the Company (as defined in Rule 501(f) of the Securities Act) has notified the Company or any such Subsidiary that such officer intends to leave the Company or any such Subsidiary or otherwise terminate such officer's employment with the Company or any such Subsidiary.  To the Company’s Knowledge, no executive officer, to the Company’s Knowledge, 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, or any other contract or agreement or any restrictive covenant in favor of a third party, and to the Company’s Knowledge, the continued employment of each such executive officer does not subject the Company or any Subsidiary to any liability with respect to any of the foregoing matters.  The Company and its Subsidiaries, to their Knowledge, 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 would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect.

 

 

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(o)           Compliance. Except as disclosed in the SEC Reports, neither the Company nor any of the Subsidiaries (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 of its Subsidiaries under), nor has the Company or any of its Subsidiaries received written notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or other material contract (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body having jurisdiction over the Company or any Subsidiary or its properties or assets, or (iii) is in violation of, or in receipt of written notice that it is in violation of, any statute, rule or regulation of any governmental authority applicable to the Company.

 

(p)           Regulatory Permits. The Company and each of the Subsidiaries possesses all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct its respective business as currently conducted and as described in the SEC Reports, except where the failure to possess such permits, individually or in the aggregate, has not and would not have or reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and (i) neither the Company nor any of its Subsidiaries has received any notice of Proceedings relating to the revocation or modification of any such Material Permits and (ii) the Company has no Knowledge of any facts or circumstances that the Company would reasonably expect to give rise to the revocation or modification of any Material Permits.

 

(q)            Title to Assets. The Company and the Subsidiaries do not own any real property, except for interests in oil or gas properties that may be deemed real property under state law. The Company and the Subsidiaries have good and marketable title to all tangible personal and real property owned by them which is material to the business of the Company and the Subsidiaries, in each case free and clear of all liens except for such liens that do not and would not reasonably be expected to materially affect the value of such property and do not and would not reasonably be expected to materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and except for liens for the payment of federal, state or other taxes for which appropriate reserves have been made in accordance with GAAP and the payment of which is not delinquent or subject to penalties. Any real property and facilities held under lease by the Company and any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made or proposed to be made of such property and buildings by the Company and the Subsidiaries.

 

(r)           Intellectual Property. To the Company’s Knowledge, the Company or its Subsidiaries owns, possesses, licenses or has other rights to use all foreign and domestic patents, patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights, licenses, inventions, trade secrets, technology and other proprietary rights and processes (collectively, the “Intellectual Property”) necessary for the conduct of its businesses as now conducted and which the failure to so own, possess, license or have other rights to use would not have a Material Adverse Effect. Except where any such violations or infringements would not have a Material Adverse Effect, to the Company’s Knowledge (i) the Company’s or its Subsidiaries’ use of any such Intellectual Property in the conduct of its business as presently conducted does not infringe upon the rights of any third parties; (ii) there is no infringement by third parties of any such Intellectual Property; (iii) there is no pending or threatened action challenging the Company’s rights in or to any such Intellectual Property; (iv) there is no pending or threatened action challenging the validity or scope of any such Intellectual Property; and (v) there is no pending or threatened action that the Company infringes or otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of others.

 

 

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(s)           Insurance. The Company and each of the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as the Company believes to be prudent and customary in the businesses and locations in which the Company and the Subsidiaries are engaged. Neither the Company nor any of the Subsidiaries has received any notice of cancellation of any such insurance, nor, to the Company’s Knowledge, will the Company or any Subsidiary be unable to renew their respective 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.

 

(t)           No Directed Selling Efforts or General Solicitation. Neither the Company nor, to its knowledge, any Person acting on its behalf has conducted any “general solicitation” or “general advertising” (as those terms are used in Regulation D) in connection with the offer or sale of any of the Securities.

 

(u)           Listing and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to terminate the registration of Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration.  Except as set forth in the SEC Reports, the Company has not, in the ten (10) months preceding the date hereof, received written notice from any Trading Market on which the Common Stock is listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market.

 

(v)           No Additional Agreements. The Company does not have any agreement or understanding with any Purchaser with respect to the transactions contemplated by the Transaction Documents other than as specified in the Transaction Documents.

 

3.2           Representations and Warranties of the Purchasers. Each Purchaser hereby, severally but not jointly, represents and warrants to the Company as of the date hereof and as of the Closing Date as follows:

 

(a)           Organization; Authority.

 

(i)           Entity. If Purchaser is an entity, such Purchaser is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate, partnership, limited liability company or other similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents to which it is a party and otherwise to carry out its obligations hereunder and thereunder. The execution, delivery and performance by such Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate or, if such Purchaser is not a corporation, such partnership, limited liability company or other applicable like action, on the part of such Purchaser.  Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application or insofar as indemnification and contribution provisions may be limited by applicable law.

 

 

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(ii)           Natural Person.  If Purchaser is a natural person, he or she is of the full age of majority, with full power, capacity and authority to enter into and to consummate the transactions contemplated by the Transaction Documents to which he or she is a party and otherwise to carry out his or her obligations hereunder and thereunder, by and for himself or herself and his or her spouse, if any.  All action on the part of such Purchaser necessary for the authorization, execution, delivery and performance of the transactions contemplated by this Agreement by such Purchaser has been taken.  Each Transaction Document to which he or she is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against him or her in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application or insofar as indemnification and contribution provisions may be limited by applicable law.

 

(b)           No Conflicts. The execution, delivery and performance by such Purchaser of the Transaction Documents to which it is a party and the consummation by such Purchaser of the transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents of such Purchaser, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which such Purchaser is a party or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to such Purchaser, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the ability of such Purchaser to perform its obligations hereunder.

 

(c)           Investment Intent. Such 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 laws, provided, however, that by making the representations herein, such Purchaser does not agree to hold any of the Securities for any minimum period of time and reserves the right, subject to the provisions of this Agreement, at all times to sell or otherwise dispose of all or any part of such Securities pursuant to an effective registration statement under the Securities Act or under an exemption from such registration and in compliance with applicable federal and state securities laws. Such Purchaser does not presently have any agreement, plan or understanding, directly or indirectly, with any Person to distribute or effect any distribution of any of the Securities (or any securities which are derivatives thereof) to or through any Person; such Purchaser is not a registered broker-dealer under Section 15 of the Exchange Act or an entity engaged in a business that would require it to be so registered as a broker-dealer.

 

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(d)           Purchaser Status. At the time such Purchaser was offered the Securities, it was, and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the Securities Act.

 

(e)           Rule 144.  Such Purchaser understands that the Securities must be held indefinitely unless such Securities are registered under the Securities Act or an exemption from registration is available.  Such Purchaser acknowledges that such Person is familiar with Rule 144 of the rules and regulations of the Commission, as amended, promulgated pursuant to the Securities Act (“Rule 144”), and that such Purchaser has been advised that Rule 144 permits resales only under certain circumstances.  Such Purchaser understands that to the extent that Rule 144 is not available, such Purchaser will be unable to sell any Securities without either registration under the Securities Act or the existence of another exemption from such registration requirement.

 

(f)           General Solicitation. Such Purchaser acknowledges that the Securities were not offered to such Purchaser by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature, including (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media, or broadcast over television or radio, or (ii) any seminar or meeting to which such Purchaser was invited by any of the foregoing means of communications.

 

(g)           Experience of Purchaser. Such 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. Such 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.  Such Purchaser acknowledges that an investment in the Securities is speculative and involves a high degree of risk.

 

(h)           Access to Information. Such Purchaser acknowledges that it has had the opportunity to and has reviewed the SEC Reports and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information about the Company and its respective financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Such Purchaser has sought such accounting, legal and tax advice as it has considered necessary to make an informed decision with respect to its acquisition of the Securities.

 

(i)           Independent Investment Decision. Such Purchaser has independently evaluated the merits of its decision to purchase Securities pursuant to the Transaction Documents. Such Purchaser understands that nothing in this Agreement or any other materials presented by or on behalf of the Company to such Purchaser in connection with the purchase of the Securities constitutes legal, tax or investment advice. Such Purchaser has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Securities.

 

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

 

 

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(k)           No Governmental Review. Such Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

 

(l)           Regulation M. Such Purchaser is aware that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of Common Stock and other activities with respect to the Common Stock by such Purchaser.

 

(m)           Residence. Such Purchaser’s principal executive offices (if such Purchaser is an entity) or principal residence (if such Purchaser is a natural person) are in the jurisdiction set forth immediately below such Purchaser’s name on the applicable signature page attached hereto.

 

(n)           Certain Fees. No Person will have, as a result of the transactions contemplated by this Agreement, any valid right, interest or claim against or upon the Company or such Purchaser for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of such Purchaser.

 

The Company and each Purchaser acknowledge and agree that no party to this Agreement has made or makes any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Article 3 and the Transaction Documents.

 

ARTICLE 4

 

OTHER AGREEMENTS OF THE PARTIES

 

4.1           Transfer Restrictions.

 

(a)           Compliance with Laws. Notwithstanding any other provision of the Transaction Documents, Purchaser covenants that the Securities may be disposed of only pursuant to an effective registration statement under, and in compliance with the requirements of, 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 compliance with any applicable state and federal securities laws.  In connection with any transfer of the Securities other than pursuant to an effective registration statement, the Company may require the Purchaser to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, 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.

 

(b)           Legends. Certificates evidencing the Securities shall bear the following restrictive legend in substantially the following form until such time as they are not required under applicable securities laws:

 

NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION OF THESE SECURITIES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR (B) 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 OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS TRANSFER AGENT OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.

 

 

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The legend set forth in Section 4.1(b) shall be removed and the Company shall issue a certificate (or issue in an uncertificated form) without such legend or any other legend to the holder of the applicable Securities (or shares of Common Stock or other securities issuable upon conversion of the Securities) or, with respect to Common Stock only, to such holder’s broker or agent by electronic delivery at the applicable balance account at the Depository Trust Company, if (i) such Securities (or shares of Common Stock or other securities issuable upon conversion of the Securities) are sold pursuant to an effective registration statement under the Securities Act (provided that the relevant holder agrees to only sell such Securities (or shares of Common Stock or other securities issuable upon conversion of the Securities) during such time that the registration statement is effective and not withdrawn or suspended, and only as permitted by the registration statement) or (ii) such Securities (or shares of Common Stock or other securities issuable upon conversion of the Securities) are sold or transferred pursuant to, and in accordance with all requirements of, Rule 144 (including, if applicable, the volume, manner-of-sale and notice filing provisions of Rule 144).  The Company shall bear all costs incurred by it or a Purchaser (other than legal fees and expenses incurred by such Purchaser) directly relating to the removal of the legend in accordance with this Section, provided that the Company shall not be liable for any transfer taxes relating to the issuance of a new certificate or statement in the name of any Person other than the relevant Purchaser and its affiliates.

(c)           Acknowledgement. Each Purchaser hereunder acknowledges its primary responsibilities under the Securities Act and accordingly will not sell or otherwise transfer the Securities or any interest therein without complying with the requirements of the Securities Act. Only if there is an effective registration statement registering the shares of Common Stock underlying the Securities under the Securities Act or an exemption from registration is available, may a Purchaser hereunder sell the Securities.

 

4.2            Reservation of Common Stock.  The Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance from and after the Closing Date, the number of shares of Common Stock issuable upon conversion of the Preferred Stock issued at the Closing (without taking into account any limitations on conversion of the Preferred Stock set forth in the Certificate of Designation).  The Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance from and after the Closing Date, the number of shares of Common Stock issuable upon exercise of the Warrants issued at the Closing (without taking into account any limitations on exercise of the Warrants set forth in the Warrants).

 

4.3           Indemnification.

 

 

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(a)            Indemnification of Purchasers.  Subject to the provisions of this Section 4.3(a), the Company will indemnify and hold each Purchaser and its shareholders, members, partners, direct and indirect investors, directors, managers, officers, employees, affiliates 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 such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the shareholders, members, partners, direct and indirect investors, directors, managers, officers, employees, affiliates 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) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, penalties, fees, damages, fines, charges, contingencies, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and disbursements and costs of investigation, defending or preparing to defend  that any such Purchaser Party may suffer or incur (irrespective of whether any such Purchaser Party is a party to the Proceeding for which indemnification hereunder is sought) as a result of or relating to (a) any misrepresentation or any breach of any of the representations, warranties, obligations, covenants or agreements made by the Company in this Agreement or in any other Transaction Document, (b) any Proceeding instituted against a Purchaser in any capacity, or any of them or their respective affiliates, with respect to any of the transactions contemplated by the Transaction Documents (unless such Proceeding is based upon a misrepresentation by such Purchaser or a breach of such Purchaser’s representations, warranties, obligations, covenants or agreements under any Transaction Document or any agreements or understandings such Purchaser may have with any such shareholder or any violations by such Purchaser of state or federal securities laws or any conduct by such Purchaser which constitutes fraud, gross negligence or willful misconduct), (c) any Proceeding brought or made against any Purchaser Party by a third party (including for these purposes a derivative Proceeding brought on behalf of the Company or any Subsidiary) and arising out of or relating to any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities.  The indemnity agreements contained herein shall not be an exclusive remedy but shall be in addition to any cause of action or similar right in law or in equity of any Purchaser Party against the Company or others, and any liabilities the Company may be subject to pursuant to law.

 

(b)            Indemnification of Company.  Each Purchaser, severally and not jointly with the other Purchasers, will indemnify and hold harmless the Company, and its officers, directors, controlling persons, agents, advisors, representatives and employees (each, a “Company Party”), from any and losses, liabilities, obligations, claims, contingencies, penalties, fees, damages, fines, charges, contingencies, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and disbursements and costs of investigation, defending or preparing to defend  that any such Company Party may suffer or incur (irrespective of whether any such Company Party is a party to the Proceeding for which indemnification hereunder is sought) as a result of or relating to any misrepresentation or any breach of any of the representations, warranties, obligations, covenants or agreements made by such Purchaser in this Agreement or in any other Transaction Document to which it is a party. The indemnity agreements contained herein shall not be an exclusive remedy but shall be in addition to any cause of action or similar right in law or in equity of the Company against such Purchaser or others and any liabilities such Purchaser may be subject to pursuant to law.

 

 

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(c)            Conduct of Indemnification Proceedings; Contribution.  Promptly after receipt by a Purchaser Party (in accordance with Section 4.3(a)) or a Company Party (in accordance with Section 4.3(b)) of notice of the commencement of any Proceeding thereof made in writing for which the relevant indemnified party may make a claim under Section 4.3(a) or Section 4.3(b) (in such capacity an “indemnified party”), such indemnified party shall deliver to the Company or the relevant Purchaser, as applicable (in such capacity, the “indemnifying party”) a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel retained by the indemnifying party (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties) except as set forth below; provided, however, that such counsel shall be reasonably satisfactory to the indemnified party.  The failure to deliver written notice to the indemnifying party within a reasonable time following the commencement of any such Proceeding, if not otherwise known by the indemnifying party, shall relieve such indemnifying party of any liability to the indemnified party under Section 4.3(a) or Section 4.3(b) to the extent of any material prejudice or forfeiture of substantial rights or defenses resulting therefrom but shall not relieve the indemnifying party of any liability that it may have to any indemnified party otherwise than pursuant to Section 4.3(a) or Section 4.3(b).  All fees and expenses incurred by the indemnified party (including any fees and expenses incurred in connection with investigating or preparing to defend such Proceeding) shall be paid to the indemnified party, as incurred, within thirty (30) days of written notice thereof to the indemnifying party so long as such indemnified party shall have provided the indemnifying party with a written undertaking to reimburse the indemnifying party for all amounts so advanced if it is ultimately determined that the indemnified party is not entitled to indemnification under Section 4.3(a) or Section 4.3(b), as applicable.  Each indemnified party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be the expenses of such indemnified party unless (i) the indemnifying party has agreed to pay such fees and expenses, (ii) the indemnifying party shall have failed to assume the defense of such Proceeding in a timely manner or (iii) an indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or in addition to those available to the indemnifying party (in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such Proceeding on behalf of such indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such Proceeding or separate but substantially similar or related Proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one additional firm of attorneys (together with appropriate local counsel) at any time for all such indemnified parties).  No indemnifying party shall be liable to an indemnified party for any settlement of any Proceeding without the written consent of the indemnifying party, which consent shall not be unreasonably withheld, conditioned or delayed.

 

(d)           If the indemnification required by Section 4.3(a) or Section 4.3(b) from the relevant indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, liabilities, obligations, claims, contingencies, penalties, fees, damages, fines, charges, contingencies, costs or expenses referred to in Section 4.3(a) or Section 4.3(b):

(i)           The indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, liabilities, obligations, claims, contingencies, penalties, fees, damages, fines, charges, contingencies, costs or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, liabilities, obligations, claims, contingencies, damages, penalties, fees, costs and expenses, as well as any other relevant equitable considerations.  The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any action has been committed by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action.  The amount paid or payable by a party as a result of the losses, liabilities, obligations, claims, contingencies, penalties, fees, damages, fines, charges, contingencies, costs and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 4.3(a) and Section 4.3(b), all legal and other fees and expenses reasonably incurred by such party in connection with any Proceeding.

 

 

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(ii)           The parties hereto agree that it would not be just or equitable if contribution pursuant to this Section 4.3(c) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in Section 4.3(c)(i).  No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

4.4           Use of Proceeds.  The Company agrees to use the proceeds from the sale of the Preferred Stock for general corporate purposes.

4.5           Furnishing of Information. In order to enable the Purchasers to sell the Securities under Rule 144, for a period of twelve (12) months from the Closing, the Company shall use its commercially reasonable efforts 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. During such twelve (12) month period, if the Company is not required to file reports pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c) such information as is required for the Purchasers to sell the Securities under Rule 144.

 

4.6           Integration.  The Company shall not, and shall use its commercially reasonable efforts to ensure that no Affiliate of the Company shall, 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 will be integrated with the offer or sale of the Securities.

 

4.7           Securities Laws Disclosure; Publicity; Confidentiality.  By 9:00 A.M., New York City time, on or prior to the second (2nd) trading day immediately following the date hereof, the Company shall issue a press release (the “Press Release”) disclosing all material terms of the transactions contemplated hereby.  On or before 9:00 A.M., New York City time, on the fourth (4th) trading day immediately following the execution of this Agreement, the Company will file a Current Report on Form 8-K with the Commission describing the terms of the Transaction Documents.  Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are required to be publicly disclosed by the Company as described in this Section 4.7, such Purchaser will maintain the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction).

 

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4.8           Non-Public Information.  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, including this Agreement, or as expressly required by any applicable securities law, the Company covenants and agrees that neither it, nor any other Person acting on its behalf, will provide any Purchaser or its agents or counsel with any information regarding the Company that the Company believes constitutes material non-public information without the express written consent of such Purchaser, unless prior thereto such Purchaser shall have executed a written agreement regarding the confidentiality and use of such information. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.

 

4.9           Form D; Blue Sky.  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 the written request of any Purchaser.  The Company, on or before the Closing Date, shall take such commercially reasonable action as the Company shall determine is necessary in order to obtain an exemption for or to qualify the Securities for sale to the Purchasers under applicable securities or “Blue Sky” laws of the states of the United States (or to obtain an exemption from such qualification) and shall provide evidence of such actions promptly upon the written request of any Purchaser.

 

4.10           Plan of Distribution.  The Preferred Stock will be offered and sold by officers and/or Directors of the Company who will not receive any commission therefore.  In addition, the Preferred Stock may be offered and sold by selected broker-dealers.  The Company will pay any such authorized broker-dealer who effects the sale of Preferred Stock a fee in an amount to be negotiated by the Company and the broker-dealer.

 

  ARTICLE 5

 

MISCELLANEOUS

 

5.1           Fees and Expenses. The Company and the Purchasers shall each pay the fees and expenses of their respective advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party in connection with the negotiation, preparation, execution, delivery and performance of this Agreement, provided however that the Company shall reimburse the lead investor for the lead investor’s legal expenses. The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the sale and issuance of the Securities to the Purchasers.

 

5.2           Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter thereof and supersede all prior agreements, understandings, discussions and representations, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. At or after the Closing, and without further consideration, the Company and the Purchasers will execute and deliver to the other such further documents as may be reasonably requested in order to give practical effect to the intention of the parties under the Transaction Documents.

 

5.3           Notices. Any notices or other communications required or permitted hereunder shall be in writing and deemed sufficiently given if delivered by email at the email address specified in this section or if delivered in person or sent by registered or certified mail (return receipt requested) or nationally recognized overnight delivery service, postage pre-paid, addressed as follows, or to such other address has such party may notify to the other parties in writing:

 

	If to the Company: 	
Torchlight Energy Resources, Inc.

5700 Plano Parkway, Suite 3600

Plano, Texas  75093

 

 

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Telephone No.:   (214) 432-8002

Facsimile No.:    (214) 432-8005

Attention:   John Brda, CEO

Email:  john@torchlightenergy.com

 

	If to such Purchaser:	

To the address set forth under such

Purchaser’s name on its signature page hereof

 

Or such other address as may be designated in writing 

hereafter, in the same manner, by such Person.

A notice or communication will be effective (i) if delivered in person or by overnight courier, on the business day it is delivered; (ii) if sent by registered or certified mail, three (3) business days after dispatch; and (iii) if sent by email, at the email address specified in this section if sent prior to 5:00 p.m., New York City time on the date sent or if later, then on the next day, provided that a copy is sent by a nationally recognized overnight delivery service, next day delivery.

 

5.4           Amendments; Waivers. Neither this Agreement nor any provision hereof may be amended, modified or supplemented unless in writing, executed by all the parties hereto.  Except as otherwise expressly provided herein, no waiver with respect to this Agreement shall be enforceable unless in writing and signed by the party against whom enforcement is sought.  Except as otherwise expressly provided herein, no failure to exercise, delay in exercising, or single or partial exercise of any right, power or remedy by any party, and no course of dealing between or among any of the parties, shall constitute a waiver of, or shall preclude any other or further exercise of, any right, power or remedy.

 

5.5           Construction. 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. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. This Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement or any of the Transaction Documents.

 

5.6           Successors and Assigns. The provisions of this Agreement shall inure to the benefit of and be binding upon the parties and their successors and permitted assigns.  This Agreement, or any rights or obligations hereunder, may not be assigned or delegated by the Company without the prior written consent of each Purchaser.  No Purchaser may assign any right or delegate any obligation hereunder without the written consent of the Company; provided, however, that any Purchaser may assign its rights hereunder in whole or in part to any Person to whom such Purchaser assigns or transfers any Securities in compliance with the Transaction Documents and applicable law, provided such transferee shall agree in writing to be bound, with respect to the transferred Securities, by the terms and conditions of this Agreement that apply to the “Purchasers”.  Any purported assignment or delegation in violation of this Section 5.6 shall be void, in addition to constituting a material breach of this Agreement.

 

5.7           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 each Purchaser Party is an intended third party beneficiary of Section 4.3.

 

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5.8           Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Texas, without regard to the principles of conflicts of law thereof. Each party agrees that all 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, employees or agents) shall be commenced exclusively in the Dallas Courts. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Dallas Courts 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 Proceeding, any claim that it is not personally subject to the jurisdiction of any such Dallas Court, or that such Proceeding has been commenced in an improper or inconvenient forum. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such 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 manner permitted by law.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

5.9           Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Securities for a period of one (1) year from the Closing Date. The agreements and covenants contained herein shall survive the Closing and the delivery of the Securities in accordance with their terms.

 

5.10           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 the 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.

 

5.11           Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor and achieves that same or substantially the same effect or result, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

 

5.12           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, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company and the Transfer Agent of such loss, theft or destruction and the execution by the holder thereof of a customary lost certificate affidavit of that fact and an agreement to indemnify and hold harmless the Company and the Transfer Agent for any losses in connection therewith or, if required by the Transfer Agent, a bond in such form and amount as is required by the Transfer Agent. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities. If a replacement certificate or instrument evidencing any Securities is requested due to a mutilation thereof, the Company may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement.

 

 

Securities Purchase Agreement

  

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5.13           Exhibits Not Attached  Any exhibits not attached hereto on the date of execution of this Agreement shall be deemed to be and shall become a part of this Agreement as if executed on the date hereof upon each of the parties initialing and dating each such exhibit, upon their respective acceptance of its terms, conditions and/or form.

 

5.14            Rescission and Withdrawal Right.  Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever any 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 such Purchaser 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.

 

5.15           Gender.  All personal pronouns used in this Agreement shall include the other genders, whether used in the masculine, feminine or neuter gender and the singular shall include the plural and vice versa, wherever appropriate.

 

5.16           Termination.  This Agreement may be terminated and the sale and purchase of the Preferred Stock and the issuance of the Warrants abandoned at any time prior to the Closing by either the Company or any Purchaser (with respect to itself only) upon written notice to the other, if the Closing has not been consummated on or prior to 5:00 P.M., Central Time, on October 16, 2015, unless extended by written agreement of all parties hereto.  Upon a termination in accordance with this Section 5.16, the Company and the terminating Purchaser(s) shall not have any further obligation or liability (including arising from such termination) to the other, and no Purchaser will have any liability to any other Purchaser under the Transaction Documents as a result therefrom.

 

5.17           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 of the obligations of any other Purchaser under any Transaction Document.  The decision of each Purchaser to purchase Securities pursuant to the Transaction Documents has been made by such Purchaser independently of any other Purchaser and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company or any Subsidiary which may have been made or given by any other Purchaser or by any agent or employee of any other Purchaser, and no Purchaser and any of its agents or employees shall have any liability to any other Purchaser (or any other Person) relating to or arising from any such information, materials, statement or opinions.  Nothing contained herein or in any Transaction Document, and no action taken by any Purchaser pursuant 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 acknowledges that no other Purchaser has acted as agent for such Purchaser in connection with making its investment hereunder and that no Purchaser will be acting as agent of such Purchaser in connection with monitoring its investment in the Securities or enforcing its rights under 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 or has voluntarily declined to seek such counsel.  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 Purchaser.

 

 

Securities Purchase Agreement

  

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5.18           Payment Set Aside.  To the extent that the Company makes a payment or payments to any Purchaser 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.

 

ARTICLE 6

 

REGISTRATION RIGHTS OF PURCHASER

 

If at any time when there is not an effective registration statement covering the resale of the Conversion Shares or the Warrant Shares, the Company shall determine to prepare and file with the Securities and Exchange Commission a registration statement (other than any registration statement filed prior to the Closing Date) relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, the Company shall send to the holder of the Preferred Stock and/or the Warrants written notice of such determination and, if within seven (7) days after receipt of such notice, or within such shorter period of time as may be specified by the Company in such written notice as may be necessary for the Company to comply with its obligations with respect to the timing of the filing of such registration statement, any such holder will so request in writing (which request will specify which Conversion Shares or Warrant Shares are intended to be disposed of by the holder), the Company will cause the registration under the Securities Act of such Conversion Shares or Warrant Shares which the Company has been so requested to register by the holders, to the extent requisite to permit the disposition of such shares to be registered, provided that if at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, and, thereupon, (i) in the case of a determination not to register, shall be relieved of its obligation to register any securities in connection with such registration, and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any securities being registered. The Company shall include in such registration statement all such Conversion Shares or Warrant Shares that such holder requests to be registered; provided, however, that the Company will not be required to register any securities that are eligible for sale pursuant to Rule 144 of the Securities Act.

 

Securities Purchase Agreement

  

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IN WITNESS WHEREOF, the Company hereto has caused this Agreement to be duly executed by its respective authorized signatories as of the date first indicated above.

 

	 	TORCHLIGHT ENERGY RESOURCES, INC.	 
	 	 	 	 
	
 

	
By: 

	/s/ John Brda	 
	 	Name: 	John Brda	 
	 	Title:  	Chief Executive Officer	 
	 	 	 	 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities Purchase Agreement

  

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IN WITNESS WHEREOF, the Purchaser hereto has caused this Agreement to be executed by his/her/its respective authorized signatories as of the date first indicated above.

 

	 	
(If Purchaser is an individual)

Signature: ___________________________________

Printed Name: ________________________________

(If Purchaser is an entity)

Signature:  ___________________________________

Printed Name of Entity:  _________________________

Printed Name of Signatory:  ______________________

Title of Signatory:  _____________________________

_____________________________________________

Street Address

_____________________________________________

City                                State                                Zip

_____________________________________________

Email Address

Amount Invested: $______________________________

Number of shares of Preferred Stock:_________________

 

  

 

 

 

 

 

 

Securities Purchase Agreement

  

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EXHIBITS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities Purchase Agreement

  

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AMENDMENT TO SECURITIES PURCHASE AGREEMENT

 

This agreement dated and effective as of September 23, 2015 (the “Amendment”) is to amend the Securities Purchase Agreement by and among Torchlight Energy Resources, Inc., a Nevada corporation (the “Company”), and each purchaser identified as such on the signature pages thereto (each, including its successors and permitted assigns, a “Purchaser” and collectively the “Purchasers”), including Exhibits attached thereto (the “Purchase Agreement”).

 

RECITALS

 

WHEREAS, the Company and the Purchasers entered into the Purchase Agreement on September 16, 2015 for the issuance and sale of certain securities as set forth in the Purchase Agreement; and

 

WHEREAS, the Company and the Purchasers wish to amend certain terms of the Purchase Agreement; and

 

NOW, THEREFORE, in consideration of the foregoing, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1.           All capitalized terms used herein shall have the meanings assigned to them in the Purchase Agreement unless expressly defined otherwise in this Amendment.

 

2.           Except as otherwise specifically provided herein, all terms and conditions of the Purchase Agreement and Exhibit attached thereto shall apply to the interpretation and enforcement of this Amendment as if explicitly set forth herein.

 

3.           Amendment to Section 5.16 of the Purchase Agreement.

Section 5.16 of the Purchase Agreement is hereby amended in its entirety to read as follows:

“5.16       Termination.  This Agreement may be terminated and the sale and purchase of the Preferred Stock and the issuance of the Warrants abandoned at any time prior to the Closing by any Purchaser (with respect to itself only) upon written notice to the Company, if the Closing has not been consummated on or prior to 5:00 P.M., Central Time, on October 16, 2015, unless extended by written agreement of all parties hereto.  In the event this Agreement is terminated in accordance with this Section 5.16, then any and all funds of the Purchaser held in escrow shall be returned within five days thereafter.  Upon a termination in accordance with this Section 5.16, the Company and the terminating Purchaser(s) shall not have any further obligation or liability (including arising from such termination) to the other, and no Purchaser will have any liability to any other Purchaser under the Transaction Documents as a result therefrom.”

4.           Amendment to Article 6 of the Purchase Agreement.

 

Amendment to Securities Purchase Agreement

  

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Article 6 of the Purchase Agreement is hereby amended in its entirety to read as follows:

 

“6.1           Registration of Securities.  The Company shall prepare and file or cause to be prepared and filed with the Commission, as soon as practicable but in any event by the date (the “Filing Deadline Date”) thirty (30) calendar days after the Closing Date, a registration statement for an offering to be made on a delayed or continuous basis pursuant to Rule 415 under the Securities Act (a “Shelf Registration Statement”) registering the resale from time to time by the holder thereof (a “Holder”) of all of the Conversion Shares and the Warrant Shares (the “Registrable Securities”) (the “Initial Shelf Registration Statement”).  The Initial Shelf Registration Statement shall be on Form S-3 or another appropriate form permitting registration of such Registrable Securities for resale by the Holder of the Registrable Securities in accordance with the methods of distribution elected by such holder and set forth in the Initial Shelf Registration Statement.   The Company shall use its reasonable best efforts to cause the Initial Shelf Registration Statement to be declared effective under the Securities Act as promptly as is practicable but in any event by the date that is ninety (90) calendar days after filing of the Initial Shelf Registration Statement.  Except as otherwise provided herein, the Company shall use its reasonable best efforts to keep the Initial Shelf Registration Statement (or any Subsequent Shelf Registration Statement (as defined below)) continuously effective under the Securities Act until the expiration of the Effectiveness Period.  At the time the Initial Shelf Registration Statement is declared effective, each Holder that provided notice to the Company on or prior to the date ten (10) Business Days prior to such time of filing of the Initial Shelf Registration Statement shall be named as a selling securityholder in the Initial Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of Registrable Securities in accordance with applicable law.  “Effectiveness Period” means the period commencing on the date the Initial Shelf Registration Statement is declared effective under the Securities Act and ending on the date that all Registrable Securities have (a) been sold or (b) are freely tradable under Rule 144 (without volume restrictions).

 

6.2           Subsequent Registration Statement.   If the Initial Shelf Registration Statement or any Subsequent Shelf Registration Statement ceases to be effective for any reason at any time during the Effectiveness Period, the Company shall use its reasonable best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within thirty (30) days of such cessation of effectiveness amend the Shelf Registration Statement in a manner reasonably expected to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional Shelf Registration Statement (a “Subsequent Shelf Registration Statement”) covering all of the securities that as of the date of such filing are Registrable Securities.”

5.           Amendment to Certificate of Designation, Exhibit “A” of the Purchase Agreement.

Section 1(a) of the Certificate of Designation is hereby amended to change the Conversion Price from $2.12 to $2.03, whereby all reference to the Conversion Price throughout the Certificate of Designation will refer to $2.03.  Additionally, the Certificate of Designation is hereby amended to correct a typographical error so that the subsection “Mechanics of Conversion” under Section 1 should be labeled as “(b)” with each subsequent subsection under Section 1 labeled sequentially thereafter.  The version of the Certificate of Designation filed with the Secretary of State of Nevada shall reflect these amendments herein without reference to the original version.

Amendment to Securities Purchase Agreement

  

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6.           Amendment to Warrant, Exhibit “C” of the Purchase Agreement.

The introductory paragraph of the Warrant is hereby amended to change the initial Exercise Price of $2.37 to $2.23.  Further, the Warrant is hereby amended to insert the following Section (p), after Section (o) “Governing Law” and before then Section (p) “Registration Rights of Holder” as follows:

“(p)           LIMITATION ON EXERCISE.  The Company shall not effect the exercise of this Warrant, and the Holder shall not have the right to exercise this Warrant, to the extent that after giving effect to such exercise, such Person (together with such Person’s affiliates) would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise unless the Holder provides the Company with 61 days’ prior notice of his desire to exercise this Warrant notwithstanding the fact that after giving effect to such exercise the Holder (together with his affiliates) would beneficially own in excess of the Maximum Percentage immediately after giving effect to such exercise.  For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by such Person and its affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (i) exercise of the remaining, unexercised portion of this Warrant beneficially owned by such Person and its affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially owned by such Person and its affiliates (including, without limitation, any convertible notes or convertible preferred stock or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein.  Except as set forth in the preceding sentence, for purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  For purposes of this Warrant, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in the most recent of (1) the Company’s most recent Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing with the Securities and Exchange Commission, as the case may be, (2) a more recent public announcement by the Company or (3) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding.  For any reason at any time, upon the written or oral request of the Holder, the Company shall within two (2) Business Days confirm to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder and its affiliates since the date as of which such number of outstanding shares of Common Stock was reported.  By written notice to the Company, the Holder may from time to time increase or decrease the Maximum Percentage to any other percentage not in excess of 4.99% specified in such notice; provided that (i) any such increase will not be effective until the sixty-first (61st) day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply only to the Holder.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation.”

 

 

Amendment to Securities Purchase Agreement

  

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Section (p) “Registration Rights of Holder” shall be relabeled as Section “(q).”

7.           This Amendment shall be of no force and effect until receipt and execution of this Amendment by the Company and each of the Purchasers.  This Amendment 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 the 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.

 

8.           Except as expressly amended hereby, the Purchase Agreement including all Exhibits thereto remains in full force and effect.  Any references to the Purchase Agreement shall refer to the Purchase Agreement as amended hereby.

 

[signature page follows]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amendment to Securities Purchase Agreement

  

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IN WITNESS WHEREOF, the Company hereto has caused this Amendment to be duly executed by its respective authorized signatories as of the date first indicated above.

 

 

 

	 	TORCHLIGHT ENERGY RESOURCES, INC.	 
	 	 	 	 
	
 

	
By: 

	/s/ John Brda	 
	 	Name: 	John Brda	 
	 	Title:	Chief Executive Officer	 
	 	 	 	 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amendment to Securities Purchase Agreement

  

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IN WITNESS WHEREOF, the Purchaser hereto has caused this Amendment to be executed by his/her/its respective authorized signatories as of the date first indicated above.

 

	 	
(If Purchaser is an individual)

Signature: ____________________________________

Printed Name: _________________________________

(If Purchaser is an entity)

Signature:  ____________________________________

Printed Name of Entity:  __________________________

Printed Name of Signatory:  _______________________

Title of Signatory:  ______________________________

_____________________________________________

Street Address

_____________________________________________

City                                State                                Zip

_____________________________________________

Email Address

Amount Invested: $______________________________

Number of shares of Preferred Stock:_________________

 

  

 

 

 

Amendment to Securities Purchase Agreement

 

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 Exhibit 10.1 

EMPLOYMENT AGREEMENT 

This Employment Agreement (this “Agreement”) is made and entered into as of November 12, 2015 (the
“Effective Date”), by and between Connecture, Inc., a Delaware corporation (the “Company”), and Jeffery Surges, an individual (the “Executive”). Together the Company and
the Executive are referred to herein as the “Parties.” 
  

	 	1.	EMPLOYMENT TERMS AND DUTIES 

 1.1 Employment. The Company
hereby agrees to employ Executive, and Executive hereby agrees to accept employment by the Company, upon the terms and conditions set forth in this Agreement. 

1.2 Duties. Executive shall serve as President of the Company from the Effective Date through November 17, 2015,
at which point Executive shall assume the title and serve as Chief Executive Officer and shall report directly to the Company’s Board of Directors (“Board”). Executive shall have the authority, and perform
faithfully and diligently the duties customarily associated with his title and office together with such additional duties as may from time to time be assigned by the Board. Subject to the provisions of Section 1.8 below, during the term
of Executive’s employment hereunder, Executive shall devote his full working time and his best efforts to the performance of his duties and the furtherance of the interests of the Company and shall not be otherwise employed. 

1.3 Term. Subject to the provisions of Section 1.5 below, the term of employment of Executive
under this Agreement shall commence on the Effective Date and shall continue until terminated by either party (the “Employment Term”). Upon termination of this Agreement, this Agreement shall expire and have no further
effect, except as otherwise provided in Section 4.3 below. 
 1.4 Compensation and Benefits. 

1.4.1 Base Salary. In consideration of the services rendered to the Company hereunder by Executive and
Executive’s covenants hereunder and in the Company’s Employment Covenants Agreement, during the Employment Term, the Company shall pay Executive a salary at the semi-monthly rate of $18,750.00 ($450,000.00 annualized) (the “Base
Salary”), less statutory and other authorized deductions and withholdings, payable in accordance with the Company’s regular payroll practices. 

1.4.2 Bonus Plan. Executive may be entitled to participate in the Company’s employee bonus plans as may be
authorized by the Board from time to time (any bonus paid pursuant to such plans, the “Bonus”). For fiscal year 2016 and subsequent fiscal years, Executive’s annual aggregate target Bonus shall be equal to at least 50%
of Executive’s then current Base Salary based on the targets and goals established by the compensation committee of the Board (the “Compensation Committee”) or the Board on an annual basis. The Bonus shall be less
statutory and other authorized deductions and withholdings and payable at the time when other management bonuses are paid, but generally no later than March 15th of the year following the
year in which the Bonus is earned. Executive shall not be entitled to a Bonus for fiscal 2015. Except as otherwise provided herein, Executive must be an employee at the time that a Bonus is paid to be eligible to receive a Bonus. 

1.4.3 Benefits Package; Business Expenses; Accommodations. As an employee of the Company, Executive will be eligible
to enroll in the Company’s benefit programs as they are established from time to time. Upon receipt from Executive of supporting receipts to the extent required by applicable income tax regulations and the Company’s reimbursement policies,
the Company shall reimburse Executive for out-of-pocket business expenses reasonably incurred by Executive in connection with his employment hereunder. In addition, without cost to Executive, the Company shall provide Executive with a furnished
apartment or other accommodation in proximity to its corporate headquarters in Brookfield, Wisconsin for so long as Executive is employed with the Company, the Company’s headquarters remain in Brookfield, Wisconsin and Executive does not
maintain a permanent residence in or in close proximity to Brookfield, Wisconsin. Executive shall also be entitled to hire an administrative assistant of his choosing subject to compliance with the Company’s hiring policies. 

1.4.4 Equity. Subject to the approval of the Compensation Committee or the Board, upon commencement of Executive’s
employment, Executive will be granted stock options (“Options”) to purchase 

  
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100,000 shares of the Company’s Common Stock (the “2015 Options”) and restricted stock units (“RSUs”) representing 225,000 shares of the
Company’s Common Stock (the “2015 RSUs”). The Options shall be nonqualified stock options and shall have an exercise price equal to the closing market price of a share of the Company’s Common Stock on the Nasdaq
Global Market on the grant date, which date shall be the Effective Date. The Options shall vest: (i) as to 35,000 shares over a three (3) year period as follows: (a) the first one-third (1/3) of such shares shall vest on the one
(1) year anniversary of the Effective Date, and (b) the remaining shares shall vest in equal monthly installments over the following twenty four (24) months thereafter and (ii) as to 65,000 shares based upon achievement of
performance metrics related to the market price of the Company’s Common Stock on the Nasdaq Global Market, or such other stock exchange constituting the primary market on which such shares are then traded (the
“Exchange”), that shall be determined by the Compensation Committee or the Board at the time of grant (the “Performance Vesting Schedule”). The 2015 RSUs shall vest over a three (3) year period as
follows: (a) the first one-third (1/3) of such shares shall vest on the one (1) year anniversary of the Effective Date, and (b) the remaining shares shall vest in equal monthly installments over the following twenty four
(24) months thereafter. On or about January 1, 2016, Executive will be granted RSUs representing 355,000 shares of the Company’s common stock (the “2016 RSUs”). The 2016 RSUs shall vest according to the same
Performance Vesting Schedule applicable to the portion of the 2015 Options subject to performance-based vesting. The 2015 Options, 2015 RSUs and 2016 RSUs are expected to constitute the sole equity incentive granted to Executive during his first
three years of employment. The grant of the Options and the RSUs will each be made in accordance with the Company’s 2014 Equity Incentive Plan (the “Plan”) and standard related documents. Vesting of the Options and the
RSUs will be subject in each case to Executive’s continuous employment with the Company on such dates, except as otherwise set forth herein. Upon a Change in Control (as defined in the Plan) that does not involve a termination described in
Section 1.6.3, all unvested shares subject to any outstanding equity grants issued to Executive for which the vesting is time based shall accelerate and vest in full. In addition, to the extent that the price per share of the
Company’s Common Stock as of the closing of such Change in Control transaction meets or exceeds a stock price threshold in the Performance Vesting Schedule, such threshold shall be deemed to have been achieved notwithstanding any durational
requirements for the market price of the Company’s Common Stock otherwise contained in the Performance Vesting Schedule. 

1.5 Termination. Executive’s employment and this Agreement (except as otherwise provided hereunder) shall
terminate upon the occurrence of any of the following, at the time set forth therefor (the time of any such termination being the “Termination Date”): 

1.5.1 Death or Disability. Immediately upon the death of Executive or a determination by the Company that Executive
has ceased to be able to perform the essential functions of his duties, with or without reasonable accommodation, for a period of not less than one hundred eighty (180) days, due to a mental or physical illness or incapacity, unless otherwise
required by law (“Disability”) (termination pursuant to this Section 1.5.1 being referred to herein as termination for “Death or Disability”); or 

1.5.2 Voluntary Termination. Thirty (30) days following Executive’s written notice to the Company of
termination of employment without Good Reason (as defined in Section 1.5.5); provided, however, that the Company may waive all or a portion of the thirty (30) days’ notice and accelerate the
effective date of such termination (and the Termination Date) (termination pursuant to this Section 1.5.2 being referred to herein as “Voluntary” termination); or 

1.5.3 Termination For Cause. Immediately following notice of termination for Cause given by the Company. For purposes
of this Agreement, “Cause” shall mean (i) Executive’s theft, dishonesty, willful misconduct, breach of fiduciary duty for personal profit, or falsification of any Company documents or records;
(ii) Executive’s material failure to abide by the Company’s code of conduct or other policies (including, without limitation, policies relating to confidentiality and reasonable workplace conduct), which failure, to the extent such
failure can be cured, is not cured within a reasonable period of time after written notice to Executive; (iii) Executive’s unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or corporate
opportunity of the Company (including, without limitation, Executive’s improper use or disclosure of the Company’s confidential or proprietary information); (iv) any intentional act by Executive which has a material detrimental effect
on the Company’s reputation or business; (v) Executive’s repeated failure to perform any reasonable assigned duties after written notice from a Participating Company of, and a reasonable opportunity to cure, such failure;
(vi) any material breach by Executive of any employment, service, non-disclosure, non-

  
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competition, non-solicitation or other similar agreement between Executive and the Company, which breach is not cured pursuant to the terms of such agreement; or (vii) Executive’s
conviction (including any plea of guilty or nolo contendere) of any criminal act involving fraud, dishonesty, misappropriation or moral turpitude, or which impairs Executive’s ability to perform his duties with the Company. 

1.5.4 Termination Without Cause. Notwithstanding any other provisions contained herein, including, but not limited
to Section 1.3 above, fifteen (15) days following notice of termination without Cause given by the Company (termination pursuant to this Section 1.5.4 being referred to herein as termination
“Without Cause”). 
 1.5.5 Resignation for Good Reason. Immediately upon Executive’s
resignation for Good Reason as defined and in accordance with the procedures set forth in this Section 1.5.5. For purposes of this Agreement, “Good Reason” shall occur if (i) the Company, without
Executive’s written consent, (a) materially reduces Executive’s then current authority, duties or responsibilities or adversely changes Executive’s job title, (b) materially reduces Executive’s then current base salary,
unless substantially all other executive management employees’ base salary is similarly or proportionately reduced, provided that if all other executive management employees’ base salary is similarly or proportionately reduced, a reduction
of Executive’s base salary by more than 20% shall be deemed Good Reason, (c) materially changes the geographic location at which Executive must perform services for the Company, (d) materially breaches this Agreement or any other
agreement between Executive and the Company and (e) fails to make the initial Option and 2015 RSU grants provided for herein on the Effective Date or the grant of the 2016 RSUs on or about January 1, 2016, and in accordance with the
performance metrics and other terms and conditions agreed to by the Parties; and (ii)(1) Executive provides written notice to the Company of any such action within sixty (60) days of the date on which such action first occurs and provides
the Company with thirty (30) days to remedy such action (the “Cure Period”); (2) the Company fails to remedy such action within the Cure Period, and (3) Executive resigns within ten (10) days of the
expiration of the Cure Period. 
 1.5.6 Other Remedies. Termination pursuant to
this Section 1.5 shall be in addition to and without prejudice to any other right or remedy to which the Parties may be entitled at law, in equity, or under this Agreement. 

1.6 Severance and Termination. 

1.6.1 Voluntary Termination, Termination for Cause, Termination for Death or Disability. In the case of a termination of
Executive’s employment hereunder for Death or Disability in accordance with Section 1.5.1 above, or Executive’s Voluntary termination of employment hereunder in accordance
with Section 1.5.2 above, or a termination of Executive’s employment hereunder for Cause in accordance with Section 1.5.3 above, (i) Executive shall not be entitled to receive payment of, and the
Company shall have no obligation to pay, any severance or similar compensation attributable to such termination, other than Base Salary earned but unpaid, vested benefits under any employee benefit plan, and any unreimbursed expenses pursuant
to Section 1.4.3 hereof incurred by Executive as of the Termination Date, and (ii) the Company’s other obligations under this Agreement shall immediately cease. 

1.6.2 Termination Without Cause or Resignation for Good Reason – Not In Connection with A Change in Control. Subject
to the provisions set forth in this Agreement, in the case of a termination of Executive’s employment hereunder Without Cause in accordance with Section 1.5.4 above or a resignation for Good Reason in accordance
with Section 1.5.5 above, the Company shall pay Executive the following severance package (“Severance Package”): (i) an amount equivalent to twelve (12) months of Executive’s then Base
Salary, subject to the tax withholding specified in Section 1.4.1 above, payable as set forth herein (the “Severance Payment”); (ii) to the extent Executive participates in any medical, prescription
drug, dental, vision and any other “group health plan” of the Company immediately prior to Executive’s Termination Date, and provided that Executive timely elects COBRA continuation coverage, the Company shall pay the full cost of
Executive’s COBRA continuation coverage for Executive (and for Executive’s spouse and dependents to the extent participating in such plans immediately prior to the Termination Date) pursuant to Section 4980B of the Internal Revenue
Code of 1986, as amended, and Part 6 of Title 1 of the Employee Retirement Income Security Act of 1986, as amended, for a period of up to twelve (12) months from the Termination Date, or when Executive becomes eligible for comparable coverage
through a subsequent employer, provided that Executive agrees to notify the Company as soon as he accepts subsequent employment (the “COBRA Continuation”); (iii) Base Salary earned but unpaid, vested benefits under any
employee 

  
 3 

 
benefit plan, any unreimbursed expenses pursuant to Section 1.4.3 hereof incurred by Executive as of the Termination Date and any earned but unpaid Bonus for the fiscal year
prior to the Termination Date, subject to the tax withholding specified in Section 1.4.2 above (collectively, the “Accrued Benefits”); and (iv) if the Termination Date is after June 30th, Executive’s target Bonus for such year, pro-rated for the period of time during such year in which Executive remained with the Company, subject to the tax withholding specified
in Section 1.4.2 above (the “Target Bonus”). The Company’s obligation to provide Executive with the Severance Payment, COBRA Continuation, and Target Bonus is contingent upon Executive’s
execution of a general release of claims satisfactory to the Company, with such release becoming effective on or before thirty (30) days following Executive’s Termination Date (“Severance Condition”). Payment of the
Severance Payment and COBRA Continuation, if any, will commence on the first payday following the thirtieth (30th) day after Executive’s Termination Date and continue over a twelve month
period in equal installments, with payments made on the Company’s regular paydays. Payment of the Target Bonus shall occur in full on the first payday following the thirtieth (30th) day
after Executive’s Termination Date. Such release will not affect Executive’s continuing obligations to the Company under the Employment Covenants Agreement (as defined below). The Company’s obligation to pay and Executive’s right
to receive the Severance Package set forth herein (other than Accrued Benefits) shall cease in the event of Executive’s material breach of any of his obligations under this Agreement or the Employment Covenants Agreement after the Termination
Date. Payment of the Accrued Benefits shall be made in full on the first payroll date after Executive’s Termination Date in any event. 

1.6.3 Termination Without Cause or Resignation for Good Reason – In Connection with a Change in Control. Subject
to the provisions set forth in this Agreement, in the case of a termination of Executive’s employment hereunder Without Cause in accordance with Section 1.5.4 above or the resignation of Executive’s employment
hereunder for Good Reason in accordance with Section 1.5.5 above, in each case, within twelve (12) months after a Change in Control (as defined in the Plan), the Company shall provide the following severance package
(“CIC Severance Package”): (i) the Severance Payment; (ii) the COBRA Continuation; (iii) the Accrued Benefits; and (iv) one-hundred percent (100%) of any unvested shares subject to any outstanding
equity awards issued to Executive shall accelerate and vest in full as of the Termination Date. The Company’s obligation to provide Executive with the CIC Severance Package (other than Accrued Benefits) is contingent upon Executive’s
execution of a general release of claims satisfactory to the Company, with such release becoming effective on or before thirty (30) days following Executive’s Termination Date. Payment of the Severance Payment and COBRA Continuation, if
any, will commence on the first payday following the thirtieth (30th) day after Executive’s Termination Date and continue over a twelve month period in equal installments, with payments
made on the Company’s regular paydays. Such release will not affect Executive’s continuing obligations to the Company under the Employment Covenants Agreement (as defined below). The Company’s obligation to pay and Executive’s
right to receive the CIC Severance Package set forth herein (other than Accrued Benefits) shall cease in the event of Executive’s material breach of any of his obligations under this Agreement or the Employment Covenants Agreement after the
Termination Date. Payment of the Accrued Benefits shall be made in full on the first payroll date after Executive’s Termination Date in any event. 

1.6.4 Continuation of Equity Rights Upon Termination. Notwithstanding any termination of this Agreement, nothing
herein shall diminish Executive’s rights and benefits with respect to previously granted equity or equity-related rights in accordance with the terms of the Plan and any related grant agreements. 

1.7 Application of Section 409A. 

1.7.1 All references in this Agreement, however phrased, to the termination of Executive shall mean, and be deemed to occur where there has
been, a “separation from service” within the meaning of the Section 409A Regulations under the Internal Revenue Code with respect to payment of amounts that are deemed deferred compensation subject to the Section 409A
Regulations. Furthermore, to the extent that Executive is a “specified employee” within the meaning of the Section 409A Regulations as of the date of Executive’s separation from service, no amount that constitutes a deferral of
compensation which is payable on account of Executive’s separation from service shall be paid to Executive before the date (the “Delayed Payment Date”) which is first day of the seventh month after the date of
Executive’s separation from service or, if earlier, the date of Executive’s death following such separation from service, and all such amounts that would, but for this sentence, become payable prior to the Delayed Payment Date will be
accumulated and paid on the Delayed Payment Date. 

  
 4 

 1.7.2 The Company intends that income provided to Executive pursuant to this Agreement will not
be subject to taxation under Section 409A of the Internal Revenue Code. The provisions of this Agreement shall be interpreted and construed in favor of satisfying any applicable requirements of Section 409A of the Code. However, the
Company does not guarantee any particular tax effect for income provided to Executive pursuant to this Agreement. In any event, except for the Company’s responsibility to withhold applicable income and employment taxes from compensation paid or
provided to Executive, the Company shall not be responsible for the payment of any applicable taxes on compensation paid or provided to Executive pursuant to this Agreement. 

1.7.3 Notwithstanding anything herein to the contrary, the reimbursement of expenses or in-kind benefits provided pursuant to this Agreement
shall be subject to the following conditions: (1) the expenses eligible for reimbursement or in-kind benefits in one taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits in any other taxable year;
(2) the reimbursement of eligible expenses or in-kind benefits shall be made the earliest of (i) the date called for under the Company’s applicable policies, (ii) the time provided by this Agreement, and (iii) the end of the
year after the year in which such expense was incurred; and (3) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit. 

1.7.4 For purposes of Section 409A of the Code, the right to a series of installment payments under this Agreement shall be treated as a
right to a series of separate payments. 
 1.8 No Conflict of Interest. In addition to the restrictions set forth in the
Employment Covenants Agreement, during Executive’s employment with the Company, Executive shall not engage in any work, paid or unpaid, that creates an actual conflict of interest with Company. Such work shall include, but is not
limited to, directly or indirectly competing with the Company in any way, or acting as an officer, director, executive, consultant, greater than 10% stockholder, volunteer, lender, or agent of any business enterprise of the same nature as, or which
is in direct competition with, the business in which the Company is now engaged or in which the Company becomes engaged during Executive’s employment with the Company, as may be determined by the Board in its sole discretion. If the Board
believes such a conflict exists during the term of this Agreement, the Board may ask Executive to choose to discontinue the other work or resign employment with the Company, which resignation shall not constitute Good Reason. In addition,
Executive agrees not to refer any client or potential client of the Company to competitors of the Company, without obtaining the Company’s prior written consent, during Executive’s employment. Notwithstanding the foregoing, Executive may:
(i) engage in community, charitable, and educational activities; (ii) manage his personal investments (except to the extent that such investments would create a conflict of interest with the Company); (iii) serve as the non-executive
chairman of the board of directors of Strategic Health Services for a period of three (3) months from the date of the Effective Date; and (iv) with the prior consent of the Board, serve on the board of directors of one (1) additional
company, provided that such activities do not conflict or interfere with the performance of Executive’s obligations under this Agreement or conflict with the interests of the Company. Beginning three (3) months after the Effective Date, if
Executive desires to remain on the board of directors of Strategic Health Services, such directorship shall constitute Executive’s one permitted outside directorship. In the event of Executive’s actual or threatened breach of this
Section 1.8 or the Employment Covenants Agreement, the Company, in addition to all other rights, shall be entitled to an injunction restraining Executive from breaching this Agreement or the Employment Covenants Agreement. Furthermore,
the period of time during which Executive is subject to these restrictions shall be extended for that amount of time he is in breach of this Section 1.8 or the Employment Covenants Agreement. 

 

	 	2.	EMPLOYMENT COVENANTS AGREEMENT 

 As of the Effective Date, Executive shall become
a party to the Employment Covenants Agreement, a copy of which is attached hereto as Exhibit A and incorporated herein by this reference (the “Employment Covenants Agreement”). The Employment Covenants
Agreement survives the execution and termination of this Agreement and/or the termination of Executive’s employment with the Company. 
  

	 	3.	REPRESENTATIONS AND WARRANTIES BY EXECUTIVE 

 Executive represents and warrants
to the Company that (i) this Agreement is valid and binding upon and enforceable against him in accordance with its terms, (ii) Executive is not bound by or subject to any contractual or other obligation that would be violated by his
execution or performance of this Agreement, including, but not 

  
 5 

 
limited to, any non-competition agreement presently in effect, and (iii) Executive is not subject to any pending or, to Executive’s knowledge, threatened claim, action, judgment, order,
or investigation that could adversely affect his ability to perform his obligations under this Agreement or the business reputation of the Company. Executive has not entered into, and agrees that he will not enter into, any agreement either written
or oral in conflict herewith. 
  

	 	4.	MISCELLANEOUS 

 4.1 Notices. All notices, requests, and
other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally against written receipt or mailed (postage prepaid by certified or registered mail, return receipt requested) or by overnight
courier to the parties at the following addresses: 
 If to Executive, to the last known home address that Executive has on file with the
Company. 
 If to the Company, to: 

Connecture, Inc. 

18500 West Corporate Drive, Suite 250 

Brookfield, WI 53045 

Attn: Chief Financial Officer 

All such notices, requests and other communications will (i) if delivered personally to the address as provided in this Section 4.1, be
deemed given upon delivery, and (ii) if delivered by mail or overnight courier in the manner described above to the address as provided in this Section 4.1, be deemed given upon receipt. Any party from time to time may change
its address or other information for the purpose of notices to that party by giving written notice specifying such change to the other parties hereto. 

4.2 Entire Agreement. This Agreement, and the attached exhibits, supersede all prior discussions and agreements among
the parties with respect to the subject matter hereof, and contain the sole and entire agreement between the parties hereto with respect thereto. 

4.3 Survival. The respective rights and obligations of the parties that require performance following expiration or
termination of this Agreement, including but not limited to Sections 1.6.2, 1.6.3, 1.7, 2, and 4, shall survive the expiration or termination of this Agreement, the Employment Term and/or
Executive’s employment with the Company. 
 4.4 Waiver. Any term or condition of this Agreement may be waived
at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition. No waiver by any party hereto
of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement
or by law or otherwise afforded, will be cumulative and not alternative. 
 4.5 Amendment. This Agreement may be
amended, supplemented, or modified only by a written instrument duly executed by or on behalf of each party hereto. 
 4.6 No
Third Party Beneficiary. The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and the Company’s successors and assigns, and it is not the intention of the parties to confer third-party
beneficiary rights upon any other person; provided, however, that in the event of Executive’s death or incapacity, all rights and benefits to which Executive would otherwise be entitled shall be paid or provided to his heirs and/or executor or
representative as applicable and in accordance with law. 
 4.7 No Assignment; Binding Effect. This Agreement shall
inure to the benefit of any successors or assigns of the Company. Executive shall not be entitled to assign his obligations under this Agreement. 

4.8 Headings. The headings used in this Agreement have been inserted for convenience of reference only and do not
define or limit the provisions hereof. 
 4.9 Severability. The Company and Executive intend all provisions of this
Agreement to be enforced to the fullest extent permitted by law. Accordingly, if a court of competent jurisdiction determines that the scope and/or 

  
 6 

 
operation of any provision of this Agreement is too broad to be enforced as written, the Company and Executive intend that the court should reform such provision to such narrower scope and/or
operation as it determines to be enforceable. If, however, any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future law, and not subject to reformation, then (i) such provision shall be fully
severable, (ii) this Agreement shall be construed and enforced as if such provision was never a part of this Agreement, and (iii) the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by
illegal, invalid, or unenforceable provisions or by their severance. 
 4.10 Governing Law. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF WISCONSIN APPLICABLE TO CONTRACTS EXECUTED AND PERFORMED IN SUCH STATE WITHOUT GIVING EFFECT TO CONFLICTS OF LAWS PRINCIPLES. 

4.11 Arbitration. In the event of any dispute or claim relating to or arising out of Executive’s employment
relationship with the Company, this Agreement, or the termination of Executive’s employment with the Company for any reason, Executive and the Company agree that all disputes shall be fully resolved by confidential, binding arbitration
conducted by a single neutral arbitrator in Brookfield, Wisconsin through the American Arbitration Association (“AAA”) pursuant to the AAA’s Employment Arbitration Rules then in effect, which are available online at the
AAA’s website at www.adr.org or by requesting a copy from the Human Resources Department. The arbitrator shall permit adequate discovery and is empowered to award all remedies otherwise available in a court of competent jurisdiction and
any judgment rendered by the arbitrator may be entered by any court of competent jurisdiction. The arbitrator shall issue an award in writing and state the essential findings and conclusions on which the award is based. To the fullest
extent permitted by applicable law, by signing this Agreement, Executive and the Company both waive the right to have any disputes or claims tried before a judge or jury (other than a claim for injunctive relief); provided, however, that the Company
shall have the right to seek injunctive relief from the courts if Executive breaches the Employment Covenants Agreement or Section 1.8 of this Agreement. The mutual promise by the Company and Executive to arbitrate any and all
disputes between them (other than the Company’s right to seek injunctive relief), rather than litigate them before the courts or other bodies, provides the consideration for this agreement to arbitrate. 

4.12 Indemnification. Executive will be covered under the Company’s insurance policies (including reasonable and
customary directors and officers (“D&O”) insurance) and, subject to applicable law, will be provided indemnification to the maximum extent permitted by the Company’s bylaws, certificate of incorporation and standard form of
indemnification agreement for officers and directors (which the Parties shall sign on the Effective Date), with such insurance coverage and indemnification to be in accordance with the Company’s standard practices for senior executive officers
and directors but on terms no less favorable than provided to any other Company senior executive officer or director. Notwithstanding anything to the contrary herein or in the indemnification agreement between the Parties, if the company has D&O
or other insurance that covers the Executive for a matter and any such insurance has a panel counsel requirement for such matter, then Executive will use such panel counsel or other counsel approved by the insurer, unless there is an actual or
potential conflict of interest posed by representation by such counsel, or unless and to the extent the Company waives such requirement in writing and which, if requested by Executive, shall not be unreasonably withheld by the Company. 

4.14 Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an
original, but all of which together will constitute one and the same instrument. 

[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT 
FOLLOWS] 

  
 7 

 IN WITNESS WHEREOF, the parties hereto have caused this Employment Agreement to be
executed as of the date first written above. 
  

			
	“COMPANY”
	
	CONNECTURE, INC.
		
	By:	 	 /s/ David A. Jones, Jr.

	Name:	 	David A. Jones, Jr.
	Title:	 	Chairman of the Board of Directors
	
	“EXECUTIVE”
	
	JEFFERY SURGES
	
	 /s/ Jeffery Surges

 Signature Page to Employment Agreement 

 EXHIBIT A 

EMPLOYMENT COVENANTS AGREEMENT 

 EMPLOYMENT COVENANTS AGREEMENT 

This EMPLOYMENT COVENANTS AGREEMENT (the “Agreement”) is made this 12th day of November, 2015 (the “Effective
Date”), between Connecture, Inc. (the “Company”) and Jeffery A. Surges (“You” or “Your”)(collectively, the “Parties”).1 

 

 For and in consideration of the Company’s agreement to employ or continue to employ You, You agree to the
following terms: 
 1. Acknowledgments. You acknowledge and agree that: 
  

	 	(a)	Your position is a position of trust and responsibility with access to Confidential Information, Trade Secrets, and information concerning employees and customers of the Company; 

 

	 	(b)	the Trade Secrets and Confidential Information, and the relationship between the Company and each of its Employees and Customers, are valuable assets of the Company which may not be used for any purpose other than the
Company’s Business; 

  

	 	(c)	the names of Customers are considered Confidential Information of the Business which constitutes valuable, special, and unique property of the Company; 

 

	 	(d)	Customer lists and Customer information which have been compiled by the Company represents a material investment of the Company’s time and money; 

 

	 	(e)	the Company will invest its time and money in the development of Your skills in the Business; and 

  

	 	(f)	the restrictions contained in this Agreement, including, but not limited to, the restrictive covenants set forth in Sections 2 – 5 below, are reasonable and necessary to protect the legitimate business interests of
the Company, and they will not impair or infringe upon Your right to work or earn a living when Your employment with the Company ends. 

 2.
Trade Secrets and Confidential Information. 
  

	 	(a)	You represent and warrant that: 

  

	 	(i)	You are not subject to any legal or contractual duty or agreement that would 

 

			
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
	  
	 	

 

	 	
prevent or prohibit You from performing Your duties for the Company or complying with this Agreement, and 

  

	 	(ii)	You are not in breach of any legal or contractual duty or agreement, including any agreement concerning trade secrets or confidential information, owned by any other person or entity. 

 

	 	(b)	You will not: 

  

	 	(i)	use, disclose, or reverse engineer the Trade Secrets or the Confidential Information for any purpose other than the Company’s Business, except as authorized in writing by the Company; 

 

	 	(ii)	during Your employment with the Company, use, disclose, or reverse engineer (a) any confidential information or trade secrets of any former employer or third party, or (b) any works of authorship developed in
whole or in part by You during any former employment or for any other party, unless authorized in writing by the former employer or third party; or 

  

	 	(iii)	upon the termination of Your employment for any reason, (a) retain Trade Secrets or Confidential Information, including any copies existing in any form (including electronic form) which are in Your possession or
control, or (b) destroy, delete, or alter the Trade Secrets or Confidential Information without the Company’s prior written consent. 

  

	 	(c)	The obligations under this Agreement shall: 

  

	 	(i)	with regard to the Trade Secrets, remain in effect as long as the information constitutes a trade secret under applicable law; and 

  

	 	(ii)	with regard to the Confidential Information, remain in effect during the Restricted Period.

 

  
  

	1 	Unless otherwise indicated, all capitalized terms used in this Agreement are defined in the “Definitions” Section of Attachment A. Attachment A is incorporated by reference and is included in the definition of
“Agreement.” 

	 	(d)	The confidentiality, property, and proprietary rights protections available in this Agreement are in addition to, and not exclusive of, any and all other rights to which the Company is entitled under federal and state
law, including, but not limited to, rights provided under copyright laws, trade secret and confidential information laws, and laws concerning fiduciary duties. 

3. Non-Disclosure of Customer Information. During the Restricted Period, You will not divulge or make accessible to any person or entity (i) the
names of Customers, or (ii) any information contained in Customer’s accounts. 
 4. Non-Solicitation of Customers. During the Restricted
Period, You will not, directly or indirectly, solicit any Customer of the Company for the purpose of selling or providing any products or services competitive with the Business. The restrictions set forth in this Section 4 apply only to
Customers with whom You had Contact. Nothing in this Section 4 shall be construed to prohibit You from soliciting any Customer of the Company for the purpose of selling or providing any products or services competitive with the Business:
(i) to a Customer that explicitly severed its business relationship with the Company; or (ii) which product line or service line the Company no longer offers. 

5. Non-Recruit of Employees. During the Restricted Period, You will not, directly or indirectly, solicit, recruit, or induce any Employee to
(i) terminate his or her employment relationship with the Company, or (ii) work for any other person or entity engaged in the Business. 
 6.
Work Product. Your employment duties may include inventing in areas directly or indirectly related to the Business of the Company or to a line of business that the Company may reasonably be interested in pursuing. All Work Product shall
constitute work made for hire. If (i) any of the Work Product may not be considered work made for hire, or (ii) ownership of all right, title, and interest in and to the Work Product will not vest exclusively in the Company, then, without
further consideration, You assign all presently-existing Work Product to the Company, and agree to assign, and automatically assign, all future Work Product to the Company. 

The Company will have the right to obtain and hold in its own name copyrights, patents, design registrations and continuations thereof, proprietary database
rights, trademarks, rights of publicity, and any other protection available in the Work Product. At the Company’s request, You agree to perform, during or after Your employment with the Company, any acts to transfer, perfect and defend the
Company’s ownership of the Work Product, including, but not limited to: (i) executing all documents (including a formal assignment to the Company) for filing an application 

 

			
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
	  
	 	

 

 
or registration for protection of the Work Product (an “Application”), (ii) explaining the nature of the Work Product to persons designated by the Company, (iii) reviewing
Applications and other related papers, or (iv) providing any other assistance reasonably required for the orderly prosecution of Applications. 
 You
agree to provide the Company with a written description of any Work Product in which You are involved (solely or jointly with others) and the circumstances surrounding the creation of such Work Product. 

7. License. During Your employment and after Your employment with the Company ends, You grant to the Company an irrevocable, nonexclusive, worldwide,
royalty-free license to: (i) make, use, sell, copy, perform, display, distribute, or otherwise utilize copies of the Licensed Materials, (ii) prepare, use and distribute derivative works based upon the Licensed Materials, and
(iii) authorize others to do the same. You shall notify the Company in writing of any Licensed Materials You deliver to the Company. 
 8.
Release. During Your employment, You consent to the Company’s use of Your image, likeness, voice, or other characteristics in the Company’s products or services. You release the Company from any cause of action which You have or may
have arising out of the use, distribution, adaptation, reproduction, broadcast, or exhibition of such characteristics. 
 9. Post-Employment
Disclosure. During the Restricted Period, You shall provide a copy of this Agreement to persons and/or entities for whom You work or consult as an owner, partner, joint venturer, employee or independent contractor. 

10. Injunctive Relief. If You breach any portion of this Agreement, You agree that: 

 

	 	(a)	the Company would suffer irreparable harm; 

  

	 	(b)	it would be difficult to determine damages, and money damages alone would be an inadequate remedy for the injuries suffered by the Company; and 

 

	 	(c)	if the Company seeks injunctive relief to enforce this Agreement, You will waive and will not (i) assert any defense that the Company has an adequate remedy at law with respect to the breach, (ii) require that
the Company submit proof of the economic value of any Trade Secret or Confidential Information, or (iii) require the Company to post a bond or any other security.

 

  
 -2- 

 Nothing contained in this Agreement shall limit the Company’s right to any other remedies at law or in
equity. 
 11. Independent Enforcement. The covenants set forth in Sections 2 – 5 of this Agreement shall be construed as agreements independent
of (i) any other agreements, or (ii) any other provision in this Agreement, and the existence of any claim or cause of action by You against the Company, whether predicated on this Agreement or otherwise, regardless of who was at fault and
regardless of any claims that either You or the Company may have against the other, shall not constitute a defense to the enforcement by the Company of the covenants set forth in Sections 2 – 5 of this Agreement. The Company shall not be barred
from enforcing the restrictive covenants set forth in Sections 2 – 5 of this Agreement by reason of any breach of (i) any other part of this Agreement, or (ii) any other agreement with You. 

12. At-will Employment. This Agreement does not create a contract of employment or a contract for benefits. Your employment relationship with the
Company is at-will. This means that at either Your option or the Company’s option, Your employment may be terminated at any time, with or without cause or notice. 

13. Attorneys’ Fees. In the event of litigation relating to this Agreement, You or the Company shall, if either is the prevailing party, be
entitled to recover attorneys’ fees and costs of litigation in addition to all other remedies available at law or in equity from the non-prevailing party. 

14. Waiver. The Company’s failure to enforce any provision of this Agreement shall not act as a waiver of that or any other provision. The
Company’s waiver of any breach of this Agreement shall not act as a waiver of any other breach. 
 15. Severability. The provisions of this
Agreement are severable. If any provision is determined to be invalid, illegal, or unenforceable, in whole or in part, the remaining provisions and any partially enforceable provisions shall remain in full force and effect. 

16. Governing Law. The laws of the State of Wisconsin shall govern this Agreement. If Wisconsin’s conflict of law rules would apply another
state’s laws, the Parties agree that Wisconsin law shall still govern. 
 17. No Strict Construction. If there is a dispute about the language
of this Agreement, the fact that one Party drafted the Agreement shall not be used in its interpretation. 
 18. Entire Agreement. This Agreement,
including Attachment A which is incorporated by reference, constitutes the entire agreement between the Parties 

 

			
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
		 	
	  
	 	

 

 
concerning the subject matter of this Agreement. This Agreement supersedes any prior communications, agreements or understandings, whether oral or written, between the Parties relating to the
subject matter of this Agreement. 
 19. Amendments. This Agreement may not be amended or modified except in writing signed by both Parties. 

20. Successors and Assigns. This Agreement shall be assignable to, and shall inure to the benefit of, the Company’s successors and assigns,
including, without limitation, successors through merger, name change, consolidation, or sale of a majority of the Company’s stock or assets, and shall be binding upon You. You shall not have the right to assign Your rights or obligations under
this Agreement. The covenants contained in this Agreement shall survive cessation of Your employment with the Company, regardless of who causes the cessation or the reason for the cessation. 

21. Consent to Jurisdiction and Venue. You agree that any claim arising out of or relating to this Agreement shall be brought in a state or federal
court of competent jurisdiction in Wisconsin. You consent to the personal jurisdiction of the state and/or federal courts located in Wisconsin. You waive (a) any objection to jurisdiction or venue, or (b) any defense claiming lack of
jurisdiction or improper venue, in any action brought in such courts. 
 22. Return of Company Property/Materials. Upon the termination of Your
employment for any reason or upon the Company’s request at any time, You shall immediately return to the Company all of the Company’s property, including, but not limited to, keys, passcards, credit cards, confidential or proprietary lists
(including, but not limited to, customer, supplier, licensor, and client lists), rolodexes, tapes, laptop computer, software, computer files, marketing and sales materials, and any other property, record, document, or piece of equipment belonging to
the Company. You will not (i) retain any copies of the Company’s property, including any copies existing in electronic form, which are in Your possession or control, or (ii) destroy, delete, or alter any Company property, including,
but not limited to, any files stored on a laptop computer, without the Company’s prior written consent. The obligations contained in this Section shall also apply to any property which belongs to a third party, including, but not limited to,
(i) any entity which is affiliated or related to the Company, or (ii) the Company’s customers, licensors, or suppliers. 
 23.
Execution. This Agreement may be executed in one or more counterparts, including, but not limited to, facsimiles. Each counterpart shall for all purposes be deemed to be an original, and each counterpart shall constitute this Agreement.

 

  
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 24. Affirmation. You acknowledge that You have carefully read this Agreement, You know and understand its
terms 

 

			
	 	  	
	 	  	
	 	  	

 

 
and conditions, and You have had the opportunity to ask the Company any questions You may have had prior to signing this Agreement.

 

 IN WITNESS WHEREOF, the Parties have signed this Agreement as of the Effective Date. 

 

							
	Connecture, Inc. 	 		 	 /s/ Jeffery A. Surges

		 		 		 	Employee Signature
		 		 		 	
	By:	 	          /s/ James P. Purko
	 		 	 Jeffery A. Surges

							
	Name:	 	     James P. Purko
	 		 	Print Name of Employee

							
	Title:	 	      Chief Financial Officer
	 		 	

							
	Address:	 	 18500 West Corporate Drive, Suite 250
	 		 	
	 	 	Brookfield, Wisconsin 53045	 		 	
	 	 	 	 		 	

  
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 ATTACHMENT A 

DEFINITIONS 
  

	A.	“Business” shall mean the business of: (i) developing, marketing, selling, and implementing computer software (the “Software”) which enables insurers, third party administrators, and other
insurance industry enterprises to automate insurance processes and exchange information through internet-based applications; and (ii) providing (a) maintenance, (b) hosting, and (c) customer and support services, related to the
Software. 

  

	B.	“Confidential Information” means (a) information of the Company, to the extent not considered a Trade Secret under applicable law, that (i) relates to the Business of the Company, (ii) possesses
an element of value to the Company, (iii) is not generally known to the Company’s competitors, and (iv) would damage the Company if disclosed, and (b) information of any third party provided to the Company which the Company is
obligated to treat as confidential (the “Third Party”), including, but not limited to, information provided to the Company by its licensors, suppliers, or Customers. Confidential Information includes, but is not limited to, (i) future
business plans, (ii) the composition, description, schematic or design of products, future products or equipment of the Company or any Third Party, (iii) communication systems, audio systems, system designs and related documentation,
(iv) advertising or marketing plans, (v) information regarding independent contractors, Employees, clients, licensors, suppliers, Customers, or any Third Party, including, but not limited to, Customer lists compiled by the Company, and
Customer information compiled by the Company, and (vi) information concerning the Company’s or the Third Parties’ financial structure and methods and procedures of operation. Confidential Information shall not include any information
that (i) is or becomes generally available to the public other than as a result of an unauthorized disclosure, (ii) has been independently developed and disclosed by others without violating this Agreement or the legal rights of any party,
or (iii) otherwise enters the public domain through lawful means. 

  

	C.	“Contact” means any interaction between You and a Customer which (i) takes place in an effort to establish, maintain, and/or further a business relationship on behalf of the Company, and (ii) occurs
during the last year of Your employment with the Company (or during Your employment if employed less than a year). 

  

	D.	“Customer” means any person or entity to whom the Company has (i) sold its products or services, or (ii) solicited to sell its products or services. 

 

	E.	“Employee” means any person who (i) is employed by the Company at the time Your employment with the Company ends, (ii) was employed by the Company during the last year of Your employment with the
Company (or during Your employment if employed less than a year), or (iii) is employed by the Company during the Restricted Period. 

  

	F.	“Licensed Materials” means any materials that You utilize for the benefit of the Company, or deliver to the Company or the Company’s customers, which (i) do not constitute Work Product, (ii) are
created by You or of which You are otherwise in lawful possession, and (iii) You may lawfully utilize for the benefit of, or distribute to, the Company or the Company’s customers. 

 

	G.	“Restricted Period” means the time period during Your employment with the Company, and for eighteen (18) months after Your employment with the Company ends. 

 

	H.	“Trade Secrets” means information of the Company, and its licensors, suppliers, clients, and Customers, without regard to form, including, but not limited to, technical or nontechnical data, a formula, a
pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, a list of actual Customers, clients, licensors, or suppliers, or a list of potential customers, clients,
licensors, or suppliers which is not commonly known by or available to the public and which information (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by,
other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. 

 

	I.	 “Work Product” means (a) any data, databases, materials, documentation, computer programs, inventions (whether or not patentable),
designs, and/or works of authorship, including but not limited to, discoveries, ideas, concepts, properties, formulas, compositions, methods, programs, procedures, systems, techniques, products, improvements,

  
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innovations, writings, pictures, audio, video, images of You, and artistic works, and (b) any subject matter protected under patent, copyright, proprietary database, trademark, trade secret,
rights of publicity, confidential information, or other property rights, including all worldwide rights therein, that is or was conceived, created or developed in whole or in part by You while employed by the Company and that either (i) is
created within the scope of Your employment, (ii) is based on, results from, or is suggested by any work performed within the scope of Your employment and is directly or indirectly related to the Business of the Company or a line of business
that the Company may reasonably be interested in pursuing, (iii) has been or will be paid for by the Company, or (iv) was created or improved in whole or in part by using the Company’s time, resources, data, facilities, or equipment.

  
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