Document:

ex10-3.htm

Intelimax Media Inc.

SUBSCRIPTION AGREEMENT

(THE “AGREEMENT”)

The undersigned subscriber (the “Subscriber”) hereby subscribes for and agrees to purchase _______________________ units at US$0.20 per unit (the “Units”) with each Unit consisting of one share of our common stock and one common stock purchase warrant (the “Warrants”, described in Schedule “D” attached hereto) for aggregate proceeds of US$__________ (the “Funds”), all on the terms and subject to the conditions set forth in Schedule “A” attached hereto.

 

	
EXECUTION BY SUBSCRIBER

	
 

_________________________________

Tax ID or social insurance number

	
 

__________________________________

Name of Subscriber

	
 

 

 

 

________________________________

Signature of Individual Subscriber or

Authorized Signatory of Subscriber

(if Subscriber is not an individual)

 

 

____________________________________________                                                                    

Number and type of securities of the Company already

directly and indirectly held by the Subscriber

 

	
 

__________________________________

Address of Subscriber

 

 

 

_______________________________________________

Name of Contact Person, if Subscriber not an individual

 

__________________________________________

Telephone Number of Subscriber or Contact Person

 

__________________________________________

Facsimile Number of Subscriber or Contact Person

 

 

Executed by the Subscriber this __________ day of _________________, 2011.

 

Please complete the following section if you require the certificate(s) representing the Units to appear in the name of an intermediary, such as your broker, or require the certificate(s) delivered to an address other than that shown above.

 

	
REGISTRATION INSTRUCTIONS

	
DELIVERY INSTRUCTIONS

	
 

________________________________________

Name to appear on certificate(s)

	
 

_________________________________________

Name and account reference, if applicable

	
 

________________________________________

Account reference, if applicable

	
 

_________________________________________

Contact Person

	
 

________________________________________

Address of Intermediary

 

________________________________________

 

	
 

_________________________________________

Address for Delivery

 

_________________________________________

 

 

 

ACCEPTED by the Company this __________ day of ________________, 2011.

 

 

Per:                                           

_____________________________________

Michael Young, Director

 

  

1

  

 

Schedule “A”

 

In consideration of the covenants and agreements herein, and the payment of one dollar made by each party to the other, the receipt and sufficiency of which is acknowledged by each party, the parties agree as follows:

 

Delivery of Documents and Funds

 

The Subscriber hereby delivers to the Company:

 

	
1. 

	
a completed and executed copy of this Agreement;

 

	
2. 

	
for all Subscribers: a completed and executed Investor Exemptions Questionnaire attached as Schedule “B” and in the case of a subscription for the Units by Subscriber acting as trustee or agent for a principal, the Subscriber shall provide the Company an Accredited Investor Questionnaire in the form set forth in Schedule “B” for each trust, beneficial owner and/or principal for which the Subscriber is acting as trustee or agent;

 

	
3. 

	
if the Subscriber is a U.S. Person, additionally: a completed and executed Accredited Investor Questionnaire attached as Schedule “C” and in the case of a subscription for the Units by Subscriber acting as trustee or agent for a principal, the Subscriber shall provide the Company an Accredited Investor Questionnaire in the form set forth in Schedule “C” for each trust, beneficial owner and/or principal for which the Subscriber is acting as trustee or agent; and

 

	
4. 

	
a certified check or bank draft for the Funds made payable to “Intelimax Media Inc.”

 

Closing

 

The closing of the transactions contemplated by this Agreement (the “Closing”) will take place as subscriptions are received by the Company.

 

At Closing, the Company will deliver to the Subscriber the certificates representing the Units and an agreement representing the Warrants purchased by the Subscriber registered in the name of the Subscriber or as directed on the cover page of this Agreement.

 

Subscriber’s Representations, Warranties, Covenants, Acknowledgements and Agreements

 

	
5. 

	
The Subscriber represents and warrants to the Company, and acknowledges that the Company is relying on these representations and warranties to, among other things, ensure that it is complying with all of the applicable securities legislation, that:

 

	
(a)  

	
the Subscriber is purchasing as principal and is either :

 

	
(i)  

	
not a U.S. person and is not acquiring the Units for the account or benefit of any U.S. person; OR

 

	
(ii)  

	
a U.S. person who is purchasing the Units in a transaction that does not require registration under the U.S. Securities Act.

 

	
(b)  

	
if the Subscriber is a resident of an “International Jurisdiction” (which means a jurisdiction other than British Columbia), then:

 

	
(i)  

	
the Subscriber is knowledgeable of, or has been independently advised as to, the applicable securities legislation of the International Jurisdiction which would apply to this subscription, if there are any;

 

	
(ii)  

	
the Subscriber is purchasing the Units pursuant to exemptions under the securities legislation of that International Jurisdiction or, if such is not applicable, the Subscriber is permitted to purchase the Units under the applicable securities legislation of the International Jurisdiction without the need to rely on exemptions; and

 

	
(iii)  

	
the applicable securities legislation does not require the Company to make any filings or seek any approvals of any kind whatsoever from any regulatory authority of any kind whatsoever in the International Jurisdiction; and

 

the Subscriber will, if requested by the Company, deliver to the Company a certificate or opinion of local counsel from the International Jurisdiction which will confirm the matters referred to in subparagraphs (ii) and (iii) above to the satisfaction of the Company, acting reasonably;

 

  

2

  

 

	
(c)  

	
if the Subscriber is a U.S. Person (as defined under Regulation S promulgated under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), which definition includes an individual resident in the United States and an estate or trust of which any executor or administrator or trustee, respectively, is a U.S. Person), then:

 

	
(i)  

	
the Subscriber understands that the Units have not been and will not be registered under the U.S. Securities Act or any applicable state securities laws, and that the sale contemplated hereby is being made in reliance on an exemption from registration pursuant to Section 4(6) of the U.S. Securities Act to accredited investors (as that term is defined in Rule 501(a) of Regulation D under the U.S. Securities Act, (an “Accredited Investor”)) or Section 4(2); AND

 

	
(ii)  

	
the Subscriber agrees that if it decides to offer, sell or otherwise transfer any of the Units, it will not offer, sell or otherwise transfer any of such Units directly or indirectly, unless:

 

	
(A)  

	
the Company’s securities are publicly traded on a national securities exchange, the Nasdaq Stock Market or the OTC Bulletin Board; or

 

	
(B)  

	
the Company consents, in its sole discretion, in writing to such transfer and the transfer is made outside the United States in a transaction meeting the requirements of Rule 904 of Regulation S under the U.S. Securities Act (“Regulation S”) (or such successor rule or regulation then in effect), if applicable, and in compliance with applicable state securities laws and it has prior to such sale furnished to the Company an opinion of counsel, in a form reasonably satisfactory to the Company regarding compliance with Rule 904 and any applicable state securities laws; or the transfer is made pursuant to an exemption from the registration requirements under the U.S. Securities Act provided by Rule 144A or 144 thereunder, if available, and in accordance with any applicable state securities laws and it has prior to such sale furnished to the Company an opinion of counsel, in a form reasonably satisfactory to the Company regarding compliance with Rule 144A or 144, as applicable, and any applicable state securities laws; AND

 

	
(iii)  

	
the Subscriber understands and acknowledges that upon the issuance thereof, and until such time as the same is no longer required under applicable requirements of the U.S. Securities Act or applicable state securities laws, the certificates representing the Units shall bear, the following legends:

 

If the Subscriber is a Canadian resident:

 

“THE SECURITIES REPRESENTED HEREBY HAVE BEEN OFFERED IN AN OFFSHORE TRANSACTION TO A PERSON WHO IS NOT A U.S. PERSON (AS DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”).

 

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.  IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT.  “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.”

 

and

 

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS FOUR MONTHS AND A DAY AFTER THE LATER OF (i) THE PURCHASE OF THESE SECURITIES AND (ii) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.”

 

If the Subscriber is a U.S. resident:

 

“NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.  IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT.  “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.”

 

and if the Units are being sold outside of the United States in accordance with Rule 904 of Regulation S, the legend Regulations S legend may be removed by providing a declaration to the Company’s registrar and transfer agent in such form as the Company may prescribe, including an opinion of counsel that such sale complies with the requirements of the U.S. Securities Act;

 

  

3

  

 

	
(d)  

	
the Subscriber acknowledges that:

 

	
(i)  

	
no securities commission or similar regulatory authority has reviewed or passed on the merits of the Units;

 

	
(ii)  

	
there is no government or other insurance covering the Units;

 

	
(iii)  

	
there are risks associated with the purchase of the Units;

 

	
(iv)  

	
there are restrictions on the Subscriber’s ability to resell the Units and it is the responsibility of the Subscriber to find out what those restrictions are and to comply with them before selling the Units;

 

	
(v)  

	
the Subscriber is restricted from using certain of the civil remedies available under the applicable securities legislation;

 

	
(vi)  

	
the Subscriber may not receive information that might otherwise be required to be provided to the Subscriber under the applicable securities legislation if the exemptions were not being used;

 

	
(vii)  

	
the Company is relieved from certain obligations that would otherwise apply under the applicable securities legislation if the exemptions were not being used; and

 

	
(viii)  

	
the Company is relying  on exemptions in applicable securities laws from the requirements to provide the Subscriber with a prospectus and to sell the Units through a person registered to sell securities and the Subscriber understands that the exemptions release the Company from the requirements to provide the Subscriber with a prospectus and to sell Stock through a person registered to sell securities under the Securities Act (British Columbia) and, as a consequence of acquiring Stock pursuant to those exemptions, certain protections, rights and remedies provided by the Securities Act (British Columbia), including statutory rights of rescission or damages, will not be available to the Subscriber;

 

	
  

	
(e)

	
the Subscriber is subscribing for the Units as principal for its own account and not for the benefit of any other person (within the meaning of applicable securities laws) and not with a view to resale or distribution of all or any of the Units or, if it is not subscribing as principal, it acknowledges that the Company may be required by law to disclose to certain regulatory authorities the identity of each beneficial Subscriber for the Units for whom it is acting;

 

	
  

	
(f)

	
in the case of a subscription for the Units by the Subscriber acting as trustee or agent (including, for greater certainty, a portfolio manager or comparable adviser) for another person or entity, the Subscriber is duly authorized to execute and deliver this Subscription Agreement and all other necessary documentation in connection with such subscription on behalf of each such beneficial person, each of whom is subscribing for its own account, not for the benefit of any other person and not with a view to the resale or distribution of the Units and this Agreement has been duly authorized, executed and delivered by or on behalf of and constitutes a legal, valid and binding agreement of, such principal, and the Subscriber acknowledges that the Company may be required by law to disclose the identity of each beneficial Subscriber for whom the Subscriber is acting;

 

	
  

	
(g)

	
the offer and sale of these Units was not accomplished by an advertisement or other general solicitation (and the Subscriber has not attended any seminar or meeting whose attendees have been invited by general solicitation or general advertisement) and the Subscriber was not induced to purchase the Units as a result of any advertisement or general solicitation made by the Company; and

 

	
  

	
(h)

	
if the Subscriber is a corporation, the Subscriber is a valid and subsisting corporation and was not organized for the purpose of acquiring the Units, has the necessary corporate capacity and authority to execute and deliver this Agreement and to observe and perform its covenants and obligations hereunder and has taken all necessary corporate action in respect thereof, or, if the Subscriber is an individual, a partnership, syndicate, trust or other form of unincorporated organization, the Subscriber has the necessary legal capacity and authority to execute and deliver this Agreement and to observe and perform its covenants and obligations hereunder and has obtained all necessary approvals in respect thereof, and, in either case, upon the Company executing and delivering this Agreement, this Agreement will constitute a legal, valid and binding contract of the Subscriber enforceable against the Subscriber in accordance with its terms and neither the agreement resulting from such acceptance nor the completion of the transactions contemplated hereby conflicts with, or will conflict with, or results, or will result, in a breach or violation of any law applicable to the Subscriber, any constating documents of the Subscriber or any agreement to which the Subscriber is a party or by which the Subscriber is bound;

 

  

4

  

 

	
6. 

	
this subscription is given for valuable consideration and may not be withdrawn or revoked by the Subscriber;

 

	
7. 

	
the Company may for any reason, at any time before acceptance of this Agreement, terminate the offering of Units and, upon termination, the Company will return the Funds to the Subscriber without interest or deduction;

 

	
8. 

	
the Units will be subject to the following resale or transfer restrictions:

 

	
(a)  

	
the Units will be subject to resale restrictions under applicable securities legislation including resale restrictions under the Securities Act (British Columbia) which include a hold period of at least four months;

 

	
(b)  

	
the Subscriber will not be able to resell, assign or otherwise dispose of the Units unless they are subsequently distributed under a prospectus, registration statement or in compliance with all applicable resale restrictions;

 

	
(c)  

	
the Company may be required to legend the certificates representing the Units regarding these and any other restrictions on resale; and

 

	
(d)  

	
while the Company has agreed use its commercially reasonably efforts to include the Units in a registration statement covering the resale of same pursuant to “piggy-back” registration rights, the Company is under no obligation to file a registration statement, or register the resale of the Units under a prospectus or registration statement, or assist the Subscriber in complying with any exemption from the prospectus or registration statement requirements or resale restrictions set out under applicable securities legislation; provided, however, that in connection with any underwritten public offering by the Company, during the period of duration (not to exceed 180 days) specified by the Company and an underwriter of common stock of the Company following the effective date of a registration statement of the Company with respect to such offering, the Subscriber will not, to the extent requested by the Company and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase, pledge, or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any of the Units of the Company held by the Subscriber at any time during such period except common stock included in such registration.  If requested by such underwriter, the Subscriber agrees to execute a lock-up agreement in such form as the underwriter may reasonably propose.

 

	
9. 

	
the Subscriber will not resell, assign or otherwise dispose of the Units other than in accordance with all applicable securities legislation and the requirements of any exchange or over-the-counter market upon which any securities of the Company are then listed;

 

	
10. 

	
the Subscriber’s investment in the Units is speculative and involves a high degree of risk, substantial financing for the Company may be required in the future, and there is no assurance that any such additional financing can be obtained;

 

	
11. 

	
the Subscriber is able to bear the economic risks of an investment in the Units, including, without limiting the generality of the foregoing, the risk of losing part or all of the Funds, and the inability to sell, convert, exchange or transfer the Units at a price which would enable the Subscriber to recoup his, her or its investment in the Units;

 

	
12. 

	
other than any persons to whom the Company has agreed to pay a brokerage or finder’s fee, there is no person acting or purporting to act in connection with the transactions contemplated herein who is entitled to any brokerage or finder’s fee.  If any person establishes a claim that any fee or other compensation is payable in connection with this subscription for the Units, the Subscriber covenants to indemnify and hold harmless the Company with respect thereto and with respect to all costs reasonably incurred in the defence thereof;

 

	
13. 

	
the Subscriber, and each beneficial person for whom it is contracting hereunder, have been advised to consult their own legal advisors with respect to trading in the Units and with respect to the resale restrictions imposed by the securities laws of the state in which the Subscriber resides, the U.S. Securities Act and the rules and regulations thereunder, and any other applicable securities laws, and acknowledges that no representation has been made respecting the applicable hold periods or other resale restrictions applicable to such securities which restrict the ability of the Subscriber (or others for whom it is contracting hereunder) to resell such securities, that the Subscriber (or others for whom it is contracting hereunder) is solely responsible to find out what these restrictions are and the Subscriber is solely responsible (and the Company is not in any way responsible) for compliance with applicable resale restrictions and the Subscriber is aware that it (or beneficial persons for whom it is contracting hereunder) may not be able to resell such securities except in accordance with limited exemptions under the securities laws (including the U.S. Securities Act) and other applicable securities laws;

 

 

5

 

 

	
14. 

	
the Subscriber will execute, deliver, file and otherwise assist the Company in filing, any report, undertaking or document with respect to the purchase, sale, conversion or exchange of the Units as required by counsel for the Company;

 

	
15. 

	
the Subscriber hereby authorizes the Company to correct any minor errors in, or complete any minor information missing from, any document which has been executed by the Subscriber and delivered to the Company with respect to this Subscription;

 

	
16. 

	
if, for any reason, the offering of Units is terminated or the Subscriber’s subscription is rejected, the Subscriber will have no claims against the Company, its directors and officers, shareholders, agents, advisors, and affiliates and shall have no interest in the Company or in any property or assets of the Company;

 

	
17. 

	
Subscriber acknowledges that there are risks associated with the purchase of and investment in the Units and the Subscriber, and each beneficial person for whom it is contracting hereunder, is knowledgeable, sophisticated and experienced in business and financial matters and is capable of evaluating the merits and risks of an investment in the Units, fully understands the restrictions on resale of the Units and is able to bear the economic risk of an investment in the Units;

 

	
18. 

	
the Subscriber is familiar with the aims and objectives of the Company and the proposed use of the proceeds received by the Company from the sale of the Units and is aware of the risk and other characteristics of an investment in the Units;

 

	
19. 

	
in evaluating the merits and risks of an investment in the Units, the Subscriber has relied solely upon the advice of his, her or its legal, tax and investment advisors and not any oral or written statement made by, or on behalf of, the Company or its advisors;

 

	
20. 

	
THE SUBSCRIBER IS RESPONSIBLE FOR OBTAINING HIS, HER OR ITS OWN LEGAL, INVESTMENT AND TAX ADVICE;

 

	
21. 

	
the Company may pay a commission or fee in respect of the sale of the Units;

 

	
22. 

	
the Subscriber and each beneficial person for whom it is acting is a resident in the jurisdiction set out on the face page of this Agreement.  Such address was not created and is not used solely for the purpose of acquiring the Units and the Subscriber and any beneficial person was solicited to purchase in such jurisdiction and is acquiring the Units for its own account or for the account of another Accredited Investor (as defined in Rule 501(a) of Regulation D under the U.S. Securities Act) over which the Subscriber exercises sole investment discretion, and as to which the Subscriber has the authority to make the statements set forth in this Agreement, in each case not with a view to, or for offer or sale in connection with, any resale, distribution or other disposition of the Units in any transaction that would be in violation of the U.S. Securities Act or applicable state securities laws; and

 

	
23. 

	
The Subscriber, if an individual, is at least 18 years of age.  If Subscriber is an association or entity, each individual member of the association or entity is at least 18 years of age.  If Subscriber is acquiring the Units for the account of another person, such person, if an individual is at least 18 years of age, or if such person is an association or entity, each individual member of the association or entity is over 18 years of age.

 

 

6

 

 

Reliance Upon Representations, Warranties, Covenants, Acknowledgements and Agreements

 

The Subscriber acknowledges that the representations, warranties, covenants, acknowledgements and agreements contained in this Agreement are made with the intent that they may be relied upon by the Company, and the Subscriber hereby agrees to indemnify the Company, its officers, directors, employees and agents against all losses, claims, costs, expenses and damages or liabilities which they may suffer or incur caused or arising from their reliance thereon.  The Subscriber covenants that the foregoing representations, warranties, covenants, acknowledgements and agreements will be true at the time of execution of this Agreement and at the date of issuance of the Units and agrees that they shall survive the purchase by the Subscriber of the Units.

 

The Company represents and warrants that:

 

	
(a)  

	
the Company is a valid and subsisting corporation duly incorporated and in good standing under the laws of the jurisdiction in which it is incorporated;

 

	
(b)  

	
the Company is duly registered and licensed to carry on business in the jurisdictions in which it carries on business or owns property where required under the laws of those jurisdictions;

 

	
(c)  

	
the Company will reserve or set aside sufficient shares in its treasury to issue the Shares and any shares of common stock resulting from exercising the Warrants;

 

	
(d)  

	
the issue and sale of the Shares by the Company does not and will not conflict with, and does not and will not result in a breach of, any of the terms of the Company’s incorporating documents or any agreement or instrument to which the Company is a party; and

 

	
(e)  

	
this Agreement has been or will be by the Closing, duly authorized by all necessary corporate action on the part of the Company, and the Company has full corporate power and authority to undertake the offering.

 

Indemnity

 

The Subscriber agrees to indemnify and hold harmless the Company and its directors, officers, employees, agents, advisers and shareholders from and against any and all loss, liability, claim, damage and expense whatsoever including, but not limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against any litigation, administrative proceeding or investigation commenced or threatened or any claim whatsoever arising out of or based upon any representation or warranty of the Subscriber contained herein or in any document furnished by the Subscriber to the Company in connection herewith being untrue in any material respect or any breach or failure by the Subscriber to comply with any covenant or agreement made by the Subscriber herein or in any document furnished by the Subscriber to the Company in connection herewith.

 

Offering

 

This offering of securities forms part of a larger offering of similar securities being made by the Company.  The offering is not subject to any minimum subscription level and the Subscriber acknowledges that he, she or it may be the only subscriber to the offering.

 

Costs

 

The Subscriber acknowledges and agrees that all costs and expenses incurred by the Subscriber, including any fees and disbursements of any advisor retained by the Subscriber relating to the purchase of the Units, shall be borne by the Subscriber.

 

Survival

 

The representations, warranties, covenants, acknowledgements and agreements contained in this Agreement shall survive the Closing and will continue in full force and effect and be binding upon the Subscriber notwithstanding any subsequent disposition by the Subscriber of the Units.

 

Enurement

 

This Agreement will enure to the benefit of and be binding upon the Subscriber and the Company and their respective heirs, administrators, representatives, successors and permitted assigns.

 

Assignment

 

This Agreement is not transferable or assignable.

 

Counterparts

 

This Agreement may be executed in as many counterparts as may be necessary and by facsimile, each of such counterparts so executed will be deemed to be an original and such counterparts together will constitute one and the same instrument.

  

7

  

 

  Schedule “B”

 

 

	
 

	
INVESTOR EXEMPTIONS QUESTIONNAIRE

 

The purpose of this Questionnaire is to assure the Company that the Subscriber will meet certain requirements for the registration and prospectus exemptions provided for under National Instrument 45-106 (“NI 45-106”) in respect to the issuance of the Units pursuant to the Agreement.  The Company will rely on the information contained in this Questionnaire for the purposes of such determination.

The undersigned Subscriber covenants, represents and warrants to the Company that:

	
  

	
1.

	
they are (check one or more of the following boxes):

	
(a)

	
a director, executive officer, employee or control person of the Company or an affiliate of the Company

	  o
	
(b)

	
a spouse, parent, grandparent, brother, sister or child of a director, executive officer or control person of the Company or an affiliate of the Company

	  o
	
(c)

	
a parent, grandparent, brother, sister or child of the spouse of a director, executive officer or control person of the Company or an affiliate of the Company

	  o
	
(d)

	
a close personal friend of a director, executive officer or control person of the Company or an affiliate of the Company

	  o
	
(e)

	
a close business associate of a director, executive officer or control person of the Company or an affiliate of the Company

	  o
	
(f)

	
a founder of the Company or a spouse, parent, grandparent, brother, sister, child, close personal friend or close business associate of a founder of the Company

	  o
	
(g)

	
a parent, grandparent, brother, sister or child of the spouse of a founder of the Company

	  o
	
(h)

	
a company, partnership or other entity which a majority of the voting securities are beneficially owned by, or a majority of the directors are, persons or companies as described in paragraphs (a) to (g) above

	  o
	
(i)

	
purchasing the Units as principal with an aggregate value of more than CDN$150,000

	  o
	
(j)

	
an accredited investor

	  o

	
2.

	
if the Subscriber has checked one or more of boxes b, c, d, e, f, g or h in section 1 above, the director(s), executive officer(s), control person(s) or founder(s) of the Company with whom the Subscriber has the relationship is:

 

	  
	  
	  

(Instructions to Subscriber:  fill in the name of each director, executive officer, founder and control person which you have the above-mentioned relationship with.  If you have checked box h, also indicate which of a to g describes the securityholders or directors which qualify you as box h and provide the names of those individuals.  Please attach a separate page if necessary).

	
3.

	
If the Subscriber has ticked box j in section 1 above, the Subscriber acknowledges and agrees that the Company shall not consider the Subscriber’s request for the Units for acceptance unless the undersigned provides to the Company:

 

	
(i)   

	
the information required in sections 4 and 5; and

	
(ii)    

	
such other supporting documentation that the Company or its legal counsel may request to establish the Subscriber’s qualification as an Accredited Investor;

	
4.

	
the Subscriber has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the Transaction and the Subscriber is able to bear the economic risk of loss arising from such Transaction;

	
5. 

	
the Subscriber satisfies one or more of the categories of “accredited investor” (as that term is defined in NI 45-106) indicated below (please check the appropriate box):

	
  o

	
an individual who, either alone or with a spouse, beneficially owns, directly or indirectly, financial assets (as defined in NI 45-106) having an aggregate realizable value that, before taxes, but net of any related liabilities, exceeds CDN$1,000,000;

	
  o

	
an individual whose net income before taxes exceeded CDN$200,000 in each of the two most recent calendar years or whose net income before taxes combined with that of a spouse exceeded CDN$300,000 in each of those years and who, in either case, reasonably expects to exceed that net income level in the current calendar year;

	
  o

	
an individual who, either alone or with a spouse, has net assets of at least CDN$5,000,000;

	
  o

	
an entity, other than an individual or investment fund, that has net assets of at least CDN$5,000,000 as shown on its most recently prepared financial statements;

	
  o

	
an entity registered under the securities legislation of a jurisdiction of Canada as an advisor or dealer, other than a person registered solely as a limited market dealer under one or both of the Securities Act (B.C.) or any entity organized in a foreign jurisdiction that is analogous to any such person or entity; or

	
  o

	
an entity in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons or companies that are accredited investors.

The Subscriber acknowledges and agrees that the Subscriber may be required by the Company to provide such additional documentation as may be reasonably required by the Company and its legal counsel in determining the Subscriber’s eligibility to acquire the Units under relevant securities legislation.

IN WITNESS WHEREOF, the undersigned has executed this Investor Exemptions Questionnaire

 

 

____________________________________  Date:_____________________, 2011

Signature

____________________________________

Print Name

____________________________________

Title (if applicable)

  

8

  

 

Schedule “C”

 

ACCREDITED INVESTOR QUESTIONNAIRE

 

The undersigned satisfies one or more of the categories of "Accredited Investors", as defined by Regulation D promulgated under the “U.S. Securities Act, as indicated below:  (Please initial in the space provide those categories, if any, of an "Accredited Investor" which the undersigned satisfies.)

 

	
o Category 1  

	
An organization described in Section 501(c)(3) of the United States Internal Revenue Code, a corporation, a Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the Units, with total assets in excess of US $5,000,000.

	
o Category 2  

	
A natural person whose individual net worth, or joint net worth with that person's spouse, on the date of purchase exceeds US $1,000,000.

	
o Category 3  

	
3 A natural person who had an individual income in excess of US $200,000 in each of the two most recent years or joint income with that person's spouse in excess of US $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.

	
o Category 4  

	
A "bank" as defined under Section (3)(a)(2) of the 1933 Act or savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act acting in its individual or fiduciary capacity; a broker dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934 (United States); an insurance company as defined in Section 2(13) of the 1933 Act; an investment company registered under the Investment Company Act of 1940 (United States) or a business development company as defined in Section 2(a)(48) of such Act; a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958 (United States); a plan with total assets in excess of $5,000,000 established and maintained by a state, a political subdivision thereof, or an agency or instrumentality of a state or a political subdivision thereof, for the benefit of its employees; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 (United States) whose investment decisions are made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000, or, if a self-directed plan, whose investment decisions are made solely by persons that are accredited investors.

	
o Category 5  

	
A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940 (United States).

	
o Category 6

	
A director or executive officer of the Company.

	
o Category 7  

	
A trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Units, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the 1933 Act.

 

	
o Category 8  

	
An entity in which all of the equity owners satisfy the requirements of one or more of the foregoing categories.

Note that the Subscriber claiming to satisfy one of the above categories of Accredited Investor may be required to supply the Company with a balance sheet, prior years' federal income tax returns or other appropriate documentation to verify and substantiate the Subscriber's status as an Accredited Investor.

 

If the Subscriber is an entity which initialled Category 8 in reliance upon the Accredited Investor categories above, state the name, address, total personal income from all sources for the previous calendar year, and the net worth (exclusive of home, home furnishings and personal automobiles) for each equity owner of the said entity:

 

IN WITNESS WHEREOF, I have executed this Accredited Investor Questionnaire.

 

 

 

Date:______________________________ , 2011

_______________________________________

Signature

_______________________________________

Print Name

 

_______________________________________

Title (if applicable)

 

  

9

  

 

Schedule “D”

 

WARRANT CERTIFICATE

 

WARRANTS TO PURCHASE SHARES OF COMMON STOCK OF INTELIMAX MEDIA INC.

 

	
Certificate No._________________________

	
 _________________________ Warrants

 

This Warrant Certificate certifies that the Subscriber is the owner of the Warrants (subject to adjustment as provided herein), each of which represents the right to subscribe for and purchase from the Company one share of the common stock, par value $0.00001 per share, of the Company (the common stock, including any stock into which it may be changed, reclassified or converted, is herein referred to as the “common stock”) at the purchase price (the “Exercise Price”) of US$0.30 per share (subject to adjustment as provided herein). This Warrant Certificate represents only Warrants issued pursuant to the Agreement, between the Company and the Subscriber.

 

THESE WARRANTS AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ARE SUBJECT TO CERTAIN RESTRICTIONS, CONTAINED IN PARAGRAPH 6 HEREOF, WITH RESPECT TO THEIR TRANSFER.

 

The Warrants represented by this Warrant Certificate are subject to the following provisions, terms and conditions:

 

1.      EXERCISE OF WARRANTS

 

Exercise of Warrants. The Warrants may be exercised by the Subscriber, in whole or in part (but not as to a fractional share of common stock), by surrender of this Warrant Certificate at the principal office of the Company with the appropriate form attached hereto as Exhibit A duly exercised, at any time within the period beginning on the acceptance of this Subscription Agreement and expiring two (2) years thereafter (the “Exercise Period”) and by payment to the Company by certified check or bank draft of the purchase price for such shares. The Company agrees that the shares of common stock so purchased shall be and are deemed to be issued to the Subscriber as the record owner of such shares of common stock as of the close of business on the date on which the Warrant Certificate shall have been surrendered and payment made for such shares of common stock. Certificates representing the shares of common stock so purchased shall be delivered to the Subscriber promptly and in no event later than ten (10) days after the Warrants shall have been so exercised, and, unless the Warrants have expired, a new Warrant Certificate representing the number of Warrants represented by the surrendered Warrant Certificate, if any, that shall not have been exercised shall also be delivered to the Subscriber within such time.

 

2.       ADJUSTMENTS

 

Adjustments. The Exercise Price and the number of shares of common stock issuable upon exercise of each Warrant shall be subject to adjustment from time to time as follows:

 

Stock Dividends; Stock Splits; Reverse Stock Splits; Reclassifications. In case the Company shall (i) subdivide its outstanding shares of common stock, (ii) combine its outstanding shares of common stock into a smaller number of shares of any class of common stock or (iii) issue any shares of its capital stock in a reclassification of the common stock (including any such reclassification in connection with a merger, consolidation or other business combination in which the Company is the continuing corporation) (any one of which actions is herein referred to as an “Adjustment Event”), the number of shares of common stock purchasable upon exercise of each of the Warrants immediately prior to the record date for such Adjustment Event shall be adjusted so that the Subscriber shall thereafter be entitled to receive the number of shares of common stock or other securities of the Company (such other securities thereafter enjoying the rights of shares of common stock under this Warrant Certificate) that such Subscriber would have owned or have been entitled to receive after the happening of such Adjustment Event, had such Warrants been exercised immediately prior to the happening of such Adjustment Event or any record date with respect thereto. An adjustment made pursuant to this Section 2A shall become effective immediately after the effective date of such Adjustment Event retroactive to the record date, if any, for such Adjustment Event.

 

Adjustment of Exercise Price. Whenever the number of shares of common stock purchasable upon the exercise of each of the Warrants is adjusted pursuant to Section 2A, the Exercise Price for each share of common stock payable upon exercise of each of the Warrants shall be adjusted by multiplying such Exercise Price immediately prior to such adjustment by a fraction, the numerator of which shall be the number of shares of common stock purchasable upon the exercise of each of the Warrants immediately prior to such adjustment, and the denominator of which shall be the number of shares of common stock so purchasable immediately thereafter.

 

Statement on Warrant Certificates. The form of this Warrant Certificate need not be changed because of any change in the Exercise Price or in the number of kind of shares purchasable upon the exercise of a Warrant and any Warrant Exercise Price and the same number and kind of shares as are stated in this Warrant Certificate. However, the Company may at the time in its sole discretion make any change in the form of the Warrant Certificate that it may deem appropriate and that does not affect the substance thereof and any Warrant Certificate thereafter issued, whether in exchange or substitution for any outstanding Warrant Certificate or otherwise, may be in the form so changed.

 

  

10

  

 

3.      RESERVATION AND AUTHORIZATION OF COMMON STOCK

 

The Company covenants and agrees (A) that all shares of common stock which may be issued upon the exercise of the Warrants represented by this Warrant Certificate will, upon issuance, be validly issued, fully paid and non-assessable and free of all insurance or transfer taxes, liens and charges with respect to the issue thereof, (b) that during the Exercise Period, the Company will at all times have authorized, and reserved for the purpose of issue or transfer upon exercise of the Warrants evidenced by this Warrant Certificate, sufficient shares of common stock to provide for the exercise of the Warrants represented by this Warrant Certificate, and (c) that the Company will take all such action as may be necessary to ensure that the shares of common stock issuable upon the exercise of the Warrants may be so issued without violation of any applicable law or regulation, or any requirements of any domestic securities exchange upon which any capital stock of the Company may be listed, provided, however, that nothing contained herein shall impose upon the Company any obligation to register the warrants evidenced by this Warrant Certificate or such common stock under applicable securities laws except as provided in the Subscription Agreement. In the event that any securities of the Company other than the common stock are issuable upon exercise of the Warrants, the Company will take or refrain from taking any action referred to in clauses (A) through (c) of this Section 3 as though such clauses applied, mutatis mutandis to such other securities then issuable upon the exercise of the Warrants.

 

4.      NO VOTING RIGHTS

 

This Warrant Certificate shall not entitle the Subscriber hereof to any voting rights or other rights as a stockholder of the Company.

 

5.      TRANSFER OF WARRANTS OR COMMON STOCK

 

The Subscriber agrees to be bound by the provisions contained in the Agreement with respect to the limitations, including limitations imposed for Securities Act compliance, on the transfer of the Warrants and the shares of common stock issuable upon exercise of the Warrants.

 

6.      RESTRICTIONS

 

(a) No Registration.  The Subscriber acknowledges and understands that the Warrants have not been registered under the U.S. Securities Act or any other securities laws, are not qualified for resale in the U.S., and that the Warrants must be held indefinitely unless subsequently registered under the U.S. Securities Act or an exemption from such registration is available.  The Company has agreed to register the shares underlying the Warrants for resale in the United States.

(b) Restrictions on Transfer.  The Issuer shall refuse to register any transfer of the Warrants or the shares of common stock not made in accordance with the provisions of Regulation S of the U.S. Securities Act, pursuant to registration under the U.S. Securities Act or pursuant to an available exemption from registration.

(c) Legend.  The Subscriber acknowledges and understands that the certificates representing the Warrants or the shares of common stock will be stamped with the following legends (or substantially equivalent language) restricting transfer in the following manner:

 

If the Subscriber is a Canadian resident:

 

“THE SECURITIES REPRESENTED HEREBY HAVE BEEN OFFERED IN AN OFFSHORE TRANSACTION TO A PERSON WHO IS NOT A U.S. PERSON (AS DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”).

 

NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.  IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT.  “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.”

 

and

 

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS FOUR MONTHS AND A DAY AFTER THE LATER OF (i) THE PURCHASE OF THESE SECURITIES AND (ii) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.”

 

If the Subscriber is a U.S. resident:

 

“NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.  IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT.  “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.”

 

and if the Shares are being sold outside of the United States in accordance with Rule 904 of Regulation S, the legend Regulations S legend may be removed by providing a declaration to the Company’s registrar and transfer agent in such form as the Company may prescribe, including an opinion of counsel that such sale complies with the requirements of the U.S. Securities Act;

 

  

11

  

 

7.      CLOSING OF BOOKS

 

The Company will at no time close its transfer books against the transfer of any Warrants or of any shares of common stock or other securities issuable upon the exercise of any Warrants in any manner which interferes with the timely exercise of the Warrants.

 

8.      WARRANTS EXCHANGEABLE, LOSS, THEFT

 

This Warrant Certificate is exchangeable, upon the surrender hereof of any Subscriber at the office or agency of the Company referred to in Section 1, for new Warrant, each such new Warrants to represent the right to subscribe and purchase such number of shares of common stock as shall be designated by said Subscriber hereof at the time of such surrender. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation, or upon surrender or cancellation of this Warrant Certificate, the Company will issue to the Subscriber a new Warrant Certificate of like tenor, in lieu of this Warrant Certificate, representing the right to subscribe for and purchase the number of shares of common stock which may be subscribed for and purchased hereunder.

 

9.      MERGERS, CONSOLIDATIONS, ETC.

 

If the Company shall merge or consolidate with another corporation, the Subscriber thereafter has the right, upon exercise hereof and payment of the Exercise Price, to receive solely the kind and amount of shares of stock, other securities, property or cash or any combination thereof receivable by a Subscriber of the number of shares of common stock for which this Warrants might have been exercised immediately prior to such merger or consolidation (assuming, if applicable, that the holder of such common stock failed to exercise its rights of election, if any, as to the kind or amount of shares of stock, other securities, property or cash or combination thereof receivable upon such merger or consolidation).

 

In case of any reclassification or change of the shares of common stock issuable upon exercise of these Warrants (other than elimination or par value, a change in par value, or from par value to no par value, or as the result of a subdivision or combination of shares (which is provided for elsewhere herein), but including any reclassification of the shares of Common stock into two or more classes or series of shares) or in case of any merger or consolidation of another corporation into the Company in which the Company is the surviving corporation and in which there is a reclassification or change of the shares of common stock (other than a change in par value, or from par value to no par value, or as a result of a subdivision or combination (which is provided for elsewhere herein), but including any reclassification of the shares of common stock underlying the Warrants, shall thereafter have the right, upon exercise hereof and payment of the Exercise Price, to receive solely the kind and amount of shares of stock (including, if applicable, common stock), other securities, property or cash or any combination thereof receivable upon such reclassification, change, merger or consolidation by a holder of the number of shares of common stock for which these Warrants might have been exercised immediately prior to such reclassification, change, merger or consolidation (assuming, if applicable, that the holder of such common stock failed to exercise its rights of election, if any, as to the kind or amount of shares of stock, other securities, property or cash or combination thereof receivable upon such reclassification, change, merger or consolidation).

 

10.      RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANTS

 

The rights and obligations of the Company, of the Subscriber, and of the holders of shares of common stock or other securities issued upon exercise of the Warrants, contained in Sections 5 and 7 of this Warrant Certificate shall survive the exercise of the Warrants.

 

 

INTELIMAX MEDIA INC.

__________________________________

Michael Young, Director

 

12isrex101.htm

Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

 

This Securities Purchase Agreement (this “Agreement”) is dated as of February __, 2011, between International Surf Resorts, Inc., a Nevada corporation (the “Company”), and each of the Purchasers identified on the signature pages hereto (including their respective successors and assigns, each, a “Purchaser,” and collectively, the “Purchasers”).

 

WHEREAS, within one hundred twenty (120) days from the Closing Date (as defined below) of the transactions contemplated by this Agreement, the Company will consummate a transaction pursuant to which it shall acquire one or more businesses or companies approved by Purchasers in accordance with the terms hereof (the “Target Transaction”);

 

WHEREAS, immediately after or simultaneously with the Target Transaction, the Company shall use its best efforts to close a private placement of its common stock, par value $0.001 per share (the “Common Stock”), or other securities (the “PIPE Securities”) yielding gross proceeds to the Company of at least eight million Dollars ($8,000,000) (the “PIPE Offering,” and the price at which such PIPE Securities are sold is referred to herein as the “PIPE Share Price”);

 

WHEREAS, in anticipation of the Target Transaction, and subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), the Company desires to issue and sell to each Purchaser, and each Purchaser desires, severally and not jointly, to purchase from the Company, (i) a convertible promissory note, in the form attached hereto as Exhibit A (the “Note”), which Note shall be convertible, at Purchaser’s sole option, into the PIPE Securities at a price per share or unit, as the case may be, equal to 80% of the PIPE Share Price, in accordance with the terms of the Note, and (ii) a warrant, in the form attached hereto as Exhibit B (the “Warrant,” and, with the Note and the securities into which each are convertible or exercisable, as applicable, the “Securities”), to purchase PIPE Securities in an amount equal to the Warrant Coverage (as defined below) on the terms described therein, in the respective amounts set forth next to the name of each Purchaser on its signature page hereto (as to each Purchaser, the “Purchase Price”), subject to raising a minimum of two million Dollars ($2,000,000) (the “Loan Amount”);

 

WHEREAS, there shall be certain registration rights as to the Securities pursuant to the terms of a registration rights Agreement in the form attached hereto as Exhibit C (the “Registration Rights Agreement”);

 

WHEREAS, the Loan Amount is intended to be used by the Company to satisfy its obligations under this Agreement and make unsubordinated, payable on demand loans to one or more Targets (as defined below) on terms and conditions acceptable to Broadband Capital Management LLC (“Broadband”), and such other use of proceeds as are approved in writing by Broadband (collectively, the “Use of Proceeds”).  The entities set forth on Schedule 1 hereto and Use of Proceeds shall be deemed approved by Broadband, as such list may be amended from time to time upon the mutual consent of the Company and Broadband (the “Targets”);

 

WHEREAS, in order to implement the intended Use of Proceeds, the Loan Amount shall be deposited by each Purchaser directly into an escrow account (the “Escrow Account”) established at Continental Stock Transfer and Trust Company (the “Escrow Agent”), such Loan Amount to be held and released in accordance with the terms of an escrow agreement in the form attached hereto as Exhibit D (the “Escrow Agreement”);

 

WHEREAS, the Note shall be secured by a first perfected security interest in all of the tangible and intangible assets of the Company and all of its subsidiaries, whether now existing and listed on Schedule 3.1(a) or hereafter acquired or created by the Company (the “Subsidiaries”), whether such assets are now owned or hereafter created or acquired by the Company and/or its Subsidiaries, including, without limitation, the Loan Amount deposited in the Escrow Account, the securities pledged pursuant to the terms of the Principal Stockholder and Pledge Agreement (as defined below) and any loans to Targets (the “Assets”), all in accordance with the terms of a security and pledge agreement in the form attached hereto as Exhibit E (the “Security and Pledge Agreement”);

 

WHEREAS, each of the stockholders of the Company listed on Schedule 2 hereto (the “Principal Stockholders”) shall enter into a Principal Stockholder and Pledge Agreement, in the form attached hereto as Exhibit F (the “Principal Stockholder and Pledge Agreement”), pursuant to which each Principal Stockholders shall, jointly and severally, pledge to Purchasers their securities in the Company as security for the obligations of the Company under the Note, which securities pledge shall be effectuated through delivery to Broadband (as Collateral Agent for Purchasers) one or more stock certificates, together with fully executed stock power with medallion guarantee affixed thereto, or shall be subject to a standard securities account control agreement of such Principal Stockholder’s broker (the “Control Agreement,” and with this Agreement, the Note, the Warrant, the Registration Rights Agreement, the Escrow Agreement, the Security and Pledge Agreement, the Principal Stockholder and Pledge Agreement and any exhibits and schedules thereto, the “Transaction Documents”); and

 

WHEREAS, each Purchaser desires to appoint Broadband as collateral agent under the Transaction Documents.

 

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 Purchaser agree as follows:

 

  

1

  

1. Purchase and Sale of the Securities.

 

(a) Closing.  On the Closing Date (as defined below), upon the terms and subject to the conditions set forth herein:

 

(i) the Company hereby agrees to sell to each Purchaser, and the Purchaser hereby agrees to purchase from the Company, (i) a Note and (ii) a Warrant, in consideration of the Purchase Price set forth on such Purchaser’s signature page hereto. For purposes of this Agreement, “Closing Date” means the date on which all of the Transaction Documents (as defined herein) have been executed and delivered by the parties thereto, and all conditions precedent to (i) Purchasers’ obligations to pay the Purchase Price and (ii) the Company’s obligation to deliver the Securities, in each case, have been satisfied or waived.

 

(ii) Each Purchaser shall deliver the Purchase Price, via wire transfer of immediately available funds, to the Escrow Agent, using the following wire instructions and to the following account:

 

[ESCROW ACCOUNT INFORMATION

 

AND WIRE TRANSFER INSTRUCTIONS

 

TO BE INSERTED]

 

and the Company shall deliver to each Purchaser the Transaction Documents and evidence of filing of UCC Financing Statements with the State of Nevada in the form attached hereto as Exhibit G (“UCC Financing Statements”). The Company and each Purchaser shall each deliver to the other items set forth in Section 1(b) deliverable at the closing (the “Closing”). Upon waiver or satisfaction of the covenants and conditions set forth in Sections 1(b) and 1(c), the Closing shall occur at such location within the United States as the parties shall mutually agree.

 

(b) Deliverables.

 

(i) On or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:

 

	
A.  

	
this Agreement, duly executed by the Company;

 

	
B.  

	
a Note, duly executed by the Company, in the Purchase Price set forth on such Purchaser’s signature page;

 

	
C.  

	
a Warrant, duly executed by the Company, to purchase a number of PIPE Securities equal to (x) the Warrant Coverage (as defined below) multiplied by (y) the Purchase Price of such Purchaser, (z) divided by the PIPE Share Price, and exercisable for five (5) years from the Closing Date at an exercise price per share equal to 120% of the PIPE Share Price. “Warrant Coverage” means (a) 50% of such Purchaser’s Purchase Price, if the PIPE Offering closes on or prior to 120 days after the Closing Date, (b) 75% such Purchaser’s Purchase Price, if the PIPE Offering closes after 120 days but before 150 days, after the Closing Date, and (c) 100% of such Purchaser’s Purchase Price, if the PIPE Offering closes after 150 days after the Closing Date;

 

	
D.  

	
the Registration Rights Agreement, duly executed by the Company;

 

	
E.  

	
the Escrow Agreement, duly executed by the Company and the Escrow Agent;

 

	
F.  

	
the Security and Pledge Agreement, duly executed by the Company;

 

	
G.  

	
the original stock certificates representing all securities of the Subsidiaries;

 

	
H.  

	
the Principal Stockholder Pledge Agreement, duly executed by each of the Principal Stockholders;

 

	
I.  

	
the Control Agreement from each Principal Stockholder, duly executed by all parties thereto;

 

	
J.  

	
evidence of filing of the UCC Financing Statements in a form reasonably satisfactory to Purchasers’ counsel;

 

	
K.  

	
an engagement letter with Broadband, duly executed by the Company, pursuant to which the Company agrees to engage Broadband as the placement agent for and/or underwriter of the PIPE Offering on terms mutually agreeable to both parties (the “Engagement Letter”);

 

  

2

  

	
L.  

	
evidence of payment by the Company of all legal and due diligence expenses of Broadband the Purchasers, including, without limitation, fees and expenses of legal counsel, investigative and other consultants and travel, such evidence to be in a form reasonably satisfactory to Purchaser’s counsel;

 

	
M.  

	
a certificate of the Company’s Secretary, dated the Closing Date and in a form reasonably satisfactory to Purchasers’ counsel, certifying the truth and correctness of each of the following documents, copies of which shall be attached to such certificate:  (i) the certificate of incorporation and bylaws of the Company, each as in effect on the Closing Date; (ii) resolutions of the Company’s board of directors authorizing, among other things, the Company’s entry into the Transaction Documents, the delivery of the Securities and the granting of the security interest in favor of the Purchaser; and (iii) resolutions of the Company’s stockholders authorizing, among other things, the Company’s entry into the Transaction Documents, the delivery of the Securities and the granting of the security interest in favor of the Purchaser;

 

	
N.  

	
a certificate of the Company’s President, dated the Closing Date and in a form reasonably satisfactory to Purchasers’ counsel, certifying the matters set forth in Sections 1(c)(ii)(B) and (C); and

 

	
O.  

	
the legal opinion of the Company’s counsel, dated the Closing Date, in the form attached hereto as Exhibit H.

 

(ii) On or prior to the Closing Date, each Purchaser, severally and not jointly, shall deliver or cause to be delivered to the Company the following:

 

	
A.  

	
this Agreement, duly executed by such Purchaser;

 

	
B.  

	
the Escrow Agreement, duly executed by Broadband;

 

	
C.  

	
the Security and Pledge Agreement, duly executed by Broadband;

 

	
D.  

	
the Purchase Price by wire transfer to the Escrow Account; and

 

	
E.  

	
the Registration Rights Agreement, duly executed by such Purchaser.

 

(c) Closing Conditions.

 

(i) The obligations of the Company hereunder in connection with the Closing are subject to the waiver or satisfaction of the following conditions:

 

	
A.  

	
the accuracy in all material respects on the Closing Date of the representations and warranties of Purchaser contained herein;

 

	
B.  

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

 

	
C.  

	
the delivery by Purchaser of the items set forth in Section 1(b)(ii) of this Agreement.

 

(ii) The obligations of Purchaser hereunder in connection with the Closing are subject to the waiver or satisfaction of the following conditions:

 

	
A.  

	
Completion of due diligence to Purchasers’ sole satisfaction;

 

	
B.  

	
the accuracy in all material respects (except that any representation and warranty that is qualified as to “materiality” or “Material Adverse Effect” shall be true and correct in all respects) when made and on the Closing Date of the representations and warranties of the Company contained herein (except for those which by their terms specifically refer to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects, save for any representation and warranty that is qualified as to “materiality” or “Material Adverse Effect,” which shall be true and correct in all respects, as of such earlier date);

 

	
C.  

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

 

	
D.  

	
the delivery by the Company of the items set forth in Section 1(b)(i) of this Agreement.

 

  

3

  

2. Security; Principal Stockholders’ Pledge.

 

(a) In accordance with the terms and the conditions of the Security and Pledge Agreement, the Company agrees to secure the repayment of the Loan Amount, all accrued and unpaid interest (as defined below) thereon and all other payments due thereunder, as well as all of the Company’s obligations thereunder, by creating a UCC secured pledge of the Assets for the benefit of all Purchasers and Broadband, as collateral agent for the Purchasers, and by executing the Security and Pledge Agreement and any exhibits thereto (the “UCC Pledge”). From time to time, Purchaser may demand, and the Company shall execute, such additional documents as may be reasonably necessary to maintain the UCC Pledge.

 

(b) The Company shall cause each of the Principal Stockholders to execute and deliver a Pledge Agreement and a Control Agreement, pursuant to which the Principal Stockholders shall guarantee all of the Company’s obligations under the Notes and secure such guarantee by pledging their respective securities in the Company, all as more fully set forth in such Principal Stockholder Pledge Agreements.

 

3. Representations and Warranties of the Company. The Company represents and warrants to each Purchaser as follows:

 

(a) Subsidiaries. The Company’s Subsidiaries as of the date hereof are listed on Schedule 3.1(a).  Except as set forth on Schedule 3.1(a) , the Company owns, directly or indirectly, 100% of each Subsidiary and such ownership interest is free and clear of any liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued, fully paid and non-assessable and free of preemptive and similar rights to purchase securities. Neither the Company nor the Subsidiaries are subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of the capital stock of any Subsidiary or any convertible securities, rights, warrants or options of the type described in the preceding sentence. Neither the Company nor any Subsidiary is party to, nor has any knowledge of, any agreement restricting the voting or transfer of any shares of the capital stock of any Subsidiary.

 

(b) Organization and Qualification. Each of the Company and each Subsidiary is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, and has the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted and contemplated to be conducted. Each of the Company and each Subsidiary 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 have or reasonably be expected to result in a material adverse effect on the business, condition (financial or otherwise), operations, prospects or property of the Company or a Subsidiary, taken as a whole (“Material Adverse Effect”), and no proceeding has been initiated in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

(c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the board of directors or the Company’s stockholders in connection therewith, other than in connection with the Required Approvals (as defined herein). Each Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except: (i) as may be limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

 

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

 

       (e) Filings, Consents and Approvals. Neither the Company nor any Subsidiary 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 in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than the filing of Form D with the Securities and Exchange Commission (the “Commission”) and such filings as are required to be made under applicable state securities laws (the “Required Approvals”).

 

(f) Issuance of the Securities. Each of the Note and the Warrant are duly authorized and, when issued and paid for in accordance with the terms of the applicable Transaction Documents, will be duly and validly issued, fully paid and non-assessable, and free and clear of all liens other than restrictions on transfer provided for in the Transaction Documents.  The shares of Common Stock issuable upon conversion of the Note have been duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and non-assessable, free and clear of all Liens other than restrictions on transfer provided for in the Transaction Documents.  The shares of Common Stock issuable upon exercise of the Warrant have been duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and non-assessable, free and clear of all liens other than restrictions on transfer provided for in the Transaction Documents. The Company has reserved from its duly authorized capital stock such number of securities for issuance of upon conversion or exercise of the Note and Warrant, as applicable, as well as any securities issuable in the PIPE Offering.

 

  

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        (g) Capitalization; Additional Issuances. All of the issued and outstanding securities of the Company as of the date hereof are as set forth in Schedule 3.1(g). Except as set forth in Schedule 3.1(g), as of the date hereof, there are no outstanding agreements or preemptive or similar rights affecting the Common Stock and no outstanding rights, warrants or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance of, the Common Stock.

 

(h) Litigation. There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the UCC Pledge or the issuance of the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company.

 

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

 

(j) SEC Reports; Financial Statements.  The Company has filed all reports required to be filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months preceding the date hereof (or such shorter period as the Company was required by law to file such reports) (the foregoing materials being collectively referred to herein as the “SEC Reports”) on a timely basis or has timely filed a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension.  As of their respective dates, 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, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  The financial statements of the Company included in the SEC Reports comply in all material respects with 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. GAAP, except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by U.S. GAAP, and fairly present in all material respects the financial position of the Company 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.

 

(k) Private Placement. Assuming the accuracy of Purchaser’s representations and warranties set forth herein, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to Purchaser as contemplated hereby.

 

(l) No General Solicitation. Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Securities by any form of general solicitation or general advertising. The Company has offered the Securities for sale only to Purchaser.

 

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

 

(n) Labor Relations. No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or any Subsidiary’s employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any Subsidiary is a party to a collective bargaining agreement, and the Company and each Subsidiary believe that their relationships with their employees are good. No executive officer, to the knowledge of the Company, 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 any third party, and 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 each Subsidiary are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(o) Benefit Plans.  All Benefit Plans (as defined below) of the Company currently in effect are listed on Schedule 3(o), and copies of all documentation relating to such Benefit Plans (including all plan documents, written descriptions of plans, actuarial reports and governmental filings and determinations with respect to such Benefit Plans) have been delivered or made available to each Investor.  None of the Benefit Plans is a “Defined Benefit Plan” that would be subject to Part 3 of Title 1 of the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder (“ERISA”), Section 412 of the Internal Revenue Code of 1986, as amended, or Title IV of ERISA.  None of the Benefit Plans is a “multiemployer plan” (as such term is defined in Section 3(37) of ERISA) or a “single employer under multiple controlled groups” as described in Section 4063 of ERISA, and neither the Company nor any Affiliate has ever contributed to or had an obligation to contribute, or incurred any liability in respect of a contribution to any multiemployer plan.  Each Benefit Plan has been operated in compliance with its terms in all respects, and each Benefit Plan complies, in all respects, with all provisions of applicable Law except as would not have a Material Adverse Effect.  “Benefit Plans” means any Plan ever maintained, established or to which contributions have at any time been made by the Company or any of its Affiliates existing at the Closing Date or prior thereto, to which the Company contributes or has contributed, or under which any consultant, employee, former consultant, former employee or director or former director of the Company or any beneficiary thereof is covered, has ever been covered, is or has ever been eligible for coverage or has any benefit rights.

 

(p) Compliance. Neither the Company nor any Subsidiary: (i) is in violation of any order of any court, arbitrator or governmental body or (ii) is or has been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.

 

  

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(q) Environmental Matters.  The Company has complied with and is in compliance with all federal, state, local and foreign statutes (civil and criminal), laws, ordinances, regulations, rules, permits, approvals, judgments, orders and decrees applicable to it or any of its properties, Leased Real Properties, assets, operations and businesses relating to environmental protection, and health and safety (collectively “Environmental Laws”) including, without limitation, Environmental Laws relating to air, surface water and groundwater, land and the generation, storage, use, handling, transportation, treatment, release, threatened release, remediation, exposure to or disposal of Hazardous Wastes, Hazardous Materials and Hazardous Substances (as such terms are defined in any applicable Environmental Law), as well as oil, petroleum, petroleum products, asbestos or any substance containing asbestos, and polychlorinated biphenyls (collectively “Hazardous Materials”), (ii)  the Company has obtained and fully complied with and is currently in full compliance with all environmental permits and other environmental approvals necessary for the conduct of its business and the operation of its properties, and has reported to the appropriate governmental or regulatory authorities, to the extent required by all Environmental Laws, all past and present sites owned and operated by the Company where Hazardous Materials have been treated, stored, disposed of or otherwise handled, (iii) to the knowledge of the Company, there is not nor has there been any condition, event, circumstance, practice, activity, incident which could reasonably be expected to give rise to any common law liability or liability pursuant to any Environmental Laws or otherwise form the basis of any claim, demand or litigation against the Company; (iv) there are no claims, demand, suits, judicial or administrative actions, governmental investigators or legal proceedings pending or, to the knowledge of the Company, threatened against the Company relating in any way to any Environmental laws, nor has the Company received notice of any violation of, or any claim alleging liability under, any Environmental Laws, (v) there have been no releases or threats of releases (as these terms are defined in Environmental Laws) of any Hazardous Materials at, from, in or on any property previously or currently owned or operated by the Company, except as permitted by Environmental Laws, and (vi) there is no on-site or off-site location to which the Company has transported or disposed of Hazardous Materials or arranged for the transportation of Hazardous Materials which is the subject of any federal, state, local or foreign enforcement action or any other investigation which could reasonably be expected to lead to any claim against the Company for any clean-up cost, remedial work, damage to natural resources, property damage or personal injury, including, but not limited to, any claim under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Resource Conservation and Recovery Act, the Hazardous Materials Transportation Act or comparable state or local statutes or regulations, except as would not have a Material Adverse Effect.

 

(r) Title to Assets. The Company and each Subsidiary have good and marketable title in all personal property owned by them that is material to the business of the Company and each Subsidiary, in each case, free and clear of all liens, except for liens that do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and each Subsidiary and liens for the payment of federal, state, foreign or other taxes, the payment of which is neither delinquent nor subject to penalties (“Permitted Liens”). Any real property and facilities held under lease by the Company and each Subsidiary are held by them under valid, subsisting and enforceable leases with which the Company and each Subsidiary are in compliance.  Neither the Company nor any Subsidiary owns any real property.

 

(s) Intellectual Property. The Company and each Subsidiary own all right, title and interest in, or possesses adequate and enforceable rights to use, all patents, patent applications, trademarks, trade names, service marks, copyrights, rights, licenses, franchises, trade secrets, confidential information, processes, formulations, software and source and object codes necessary for the conduct of their businesses, which are listed on Schedule 3(s) (collectively, the “Intangibles”). Neither the Company nor any Subsidiary has infringed upon the rights of others with respect to the Intangibles and neither the Company nor any Subsidiary have received notice that they have or may have infringed or are infringing upon the rights of others with respect to the Intangibles, or any notice of conflict with the asserted rights of others with respect to the Intangibles that could, individually or in the aggregate, or could reasonably be expected to have, have a Material Adverse Effect.

 

(t) Insurance. The Company and each Subsidiary are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and each Subsidiary are engaged. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.

 

(u) Transactions With Affiliates and Employees. None of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company, is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess of $20,000, other than for: (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred in the ordinary course of business on behalf of the Company and (iii) other employee benefits, including stock option agreements, under any stock option plan of the Company.

 

(v) Certain Fees. Except for fees and expenses to be paid to Purchaser in connection with the Engagement Letter, no brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other person with respect to the transactions contemplated by the Transaction Documents. Purchaser shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.

 

(w) Investment Company.  The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

(x) Tax Returns. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and each Subsidiary have filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been asserted or threatened against the Company or any Subsidiary.

 

(y) Foreign Corrupt Practices. None of the Company, any Subsidiary or, to the knowledge of the Company, any agent or other person acting on behalf of the Company or any Subsidiary, has: (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is in violation of law or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

 

  

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

 

(aa) Indebtedness. Neither the Company nor any Subsidiary is in default with respect to, or liable under (x) any liabilities for borrowed money or amounts owed in excess of $25,000 (other than trade accounts payable incurred in the ordinary course of business), or (y) any guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business.

 

(bb) Internal Controls.  The Company is in compliance with the provisions of the Sarbanes-Oxley Act of 2002 currently applicable to the Company.  The Cmpany and each Subsidiary maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with U.S. GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company has established disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that material information relating to the Company, including the Subsidiaries, is made known to the certifying officers by others within those entities, particularly during the period in which the Company’s most recently filed periodic report under the Exchange Act, as the case may be, is being prepared.  The Company's certifying officers have evaluated the effectiveness of the Company's controls and procedures as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such date, the "Evaluation Date").  The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been no significant changes in the Company's internal controls (as such term is defined in Item 308 of Regulation S-K) or, to the Company's knowledge, in other factors that could significantly affect the Company's internal controls.  The Company maintains and will continue to maintain a standard system of accounting established and administered in accordance with U.S. GAAP and the applicable requirements of the Exchange Act.

 

(cc) OFAC. None of the Company, any Subsidiary or, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not, directly or indirectly, use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other person, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

 

(dd) Full Disclosure. All of the disclosure furnished by or on behalf of the Company to Purchaser regarding the Company, its business and the transactions contemplated hereby is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

 

4. Representations and Warranties of Purchaser. Each Purchaser, severally and not jointly, represents and warrants to the Company, only with respect to itself, as follows:

 

(a) Purchaser is an “accredited investor” as defined by Rule 501 under the Securities Act. Purchaser is capable of evaluating the merits and risks of its investment in the Securities and has the ability and capacity to protect its interests.

 

(b) Purchaser understands that the Securities have not been registered. Purchaser understands that the Securities will not be registered under the Securities Act in reliance upon an exemption in reliance on Section 4(2) of the Securities Act.

 

(c) Purchaser acknowledges that Purchaser has such knowledge and experience in financial and business matters that Purchaser is capable of evaluating the merits and risks of an investment in the Securities and of making an informed investment decision with respect thereto.

 

(d) Purchaser is purchasing the Securities for investment purposes and not with a view to distribution or resale, nor with the intention of selling, transferring or otherwise disposing of all or any part thereof for any particular price, or at any particular time, or upon the happening of any particular event or circumstance, except selling, transferring, or disposing the Securities in compliance with all applicable provisions of the Securities Act, the rules and regulations promulgated by the Commission thereunder, and applicable state securities laws; and that an investment in the Securities is not a liquid investment.

 

(e) Purchaser has all requisite legal and other power and authority to execute and deliver this Agreement and to carry out and perform its obligations under the terms of this Agreement. This Agreement constitutes a valid and legally binding obligation of Purchaser, enforceable in accordance with its terms, except: (i) as may be limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

 

(f) There are no actions, suits, proceedings or investigations pending against Purchaser or Purchaser’s assets before any court or governmental agency (nor, to Purchaser’s knowledge, is there any threat thereof) which would impair in any way Purchaser’s ability to enter into and fully perform Purchaser’s commitments and obligations under this Agreement or the transactions contemplated hereby.

 

(g) The execution, delivery and performance of and compliance with this Agreement and the issuance of the Securities to Purchaser will not result in any violation of, or conflict with, or constitute a default under, any of Purchaser’s articles of incorporation or by-laws, or equivalent limited liability company, trust or partnership documents, if applicable, or any agreement to which Purchaser is a party or by which it is bound, nor result in the creation of any mortgage, pledge, lien, encumbrance or charge against any of the assets or properties of Purchaser or the Securities purchased by Purchaser.

 

  

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(h) Purchaser is aware that the Securities will be (unless registered by the Company), when issued, “restricted securities” as that term is defined in Rule 144 of the general rules and regulations under the Securities Act, and may not be offered, sold or transferred except pursuant to an effective registration statement or an exemption from registration under the Securities Act.

 

(i) Purchaser understands that the Securities shall bear the following legend or one substantially similar thereto, which Purchaser has read and understands:

NEITHER THIS SECURITY NOR ANY SECURITY INTO WHICH IT MAY BE CONVERTED HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY SECURITY INTO WHICH IT MAY BE CONVERTED MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF AT ANY TIME IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM REGISTRATION.

 

(j) Any sales, transfers, or other dispositions of the Securities by Purchaser, if any, will be made in compliance with the Securities Act and all applicable rules and regulations promulgated thereunder.

 

(k) Purchaser further represents that the address of Purchaser set forth on the signature page is its principal place of business; that Purchaser is purchasing the Securities for Purchaser’s own account and not, in whole or in part, for the account of any other person; and that Purchaser has not formed any entity, and is not an entity formed, for the purpose of purchasing the Securities.

 

(l) Purchaser represents and warrants that, except for the Engagement Letter, no finder, broker, agent, financial advisor or other intermediary, nor any purchaser representative or any broker-dealer acting as a broker, is entitled to any compensation in connection with the transactions contemplated by this Agreement.

5. Other Agreements.

 

(a) Certain Covenants of the Company.  Until such time as the Loan Amount or any accrued fees or interest remain unpaid or outstanding, the Company shall comply and operate in accordance with all of the following covenants and agreements:

 

(i) Payment of Obligations.  The Company will timely pay and discharge all of its material obligations and liabilities, including, without limitation, tax liabilities, except where the same may be contested in good faith by appropriate proceedings.

(ii) Conduct of Business and Maintenance.  The Company will continue to engage in business of the same general type as now conducted by it and to preserve, renew and keep in full force and effect, its corporate existence and its assets, rights, privileges and franchises to the extent necessary or desirable in the normal conduct of business or to preserve the Collateral.  The Company shall conduct its business in a manner so that it will not become subject to the Investment Company Act of 1940, as amended.

(iii) Compliance with Laws.  The Company will comply in all material respects with all applicable laws, ordinances, rules, regulations, decisions, orders and requirements of governmental authorities.

(iv) Use of Proceeds.  None of the Loan Amount shall be used for any purpose other than the Use of Proceeds.

 

(v) Notice of Legal Matters.  The Company shall notify Purchaser promptly after the Company shall obtain knowledge of any written notice of any legal or arbitral proceedings, and of all proceedings by or before any governmental authority, and each material development in respect of such legal or other proceeding affecting the Company, except proceedings which, if adversely determined, would not reasonably be likely to have a Material Adverse Effect.

 

(vi) Books and Records; Inspection and Audit Rights.  The Company will keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities.  The Company will permit any representatives designated by Purchaser, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its business, assets, affairs, finances, prospects, and condition with its officers and independent accountants, all at such reasonable times during normal business hours and as often as reasonably requested.  Promptly upon Purchaser’s written request therefor, the Company shall deliver to Purchaser such documents and other evidence of the existence, good standing, foreign qualification and financial condition of the Company as Purchaser shall request from time to time.

(vii) Target Transactions, etc.  Other than with respect to a Target Transaction, the Company shall not (i) merge or consolidate with or into any person, (ii) sell, assign, lease, license or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to any person, or (iii) issue or sell securities of the Company (whether in one transaction or in a series of transactions) such that the shareholders of the Company as of the date of this Agreement hold or will hold less than a majority of the outstanding (on a fully-diluted basis) equity securities or voting power of the Company (“Change of Control”).

(viii)  Indebtedness and Liens.   The Company shall not create or suffer to exist any debt or liens other than (i) debt incurred by the Company in the ordinary course of business, not to exceed $20,000 in the aggregate, (ii) debt which is subordinated in the right of payment to amounts payable to Purchaser pursuant to this Agreement on terms reasonably satisfactory to Purchaser; and (iii) Permitted Liens.

  

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(ix) Investments, Loans, Acquisitions and Hedge Agreements.  The Company shall not:  (i) purchase or acquire or make any investment in any other person, (ii) purchase or acquire all or substantially all of the assets of any person or any division of any person;  (iii) make any loan, advance or extension of credit to, or contribution to the capital of, any other person other than reimbursement of reasonable, bona fide and properly documented business expenses incurred on behalf of the Company; (iv) sell, whether at face value or at a discount, any account receivable of the Company; or  (v) make any commitment or acquire any option or enter into any other arrangements for the purpose of making any of the foregoing investments, loans or acquisitions.

 

(x) Restricted Payments.  The Company shall not declare, order, pay or make any dividend or distribution of assets or payment of cash, or both, directly or indirectly to any person.

 

(xi) Transactions with Affiliates.  The Company shall not enter into any transaction, including, without limitation, the purchase, sale, or exchange of property or the rendering of any service, with any Affiliate, except in the ordinary course of and pursuant to the reasonable requirements of the Company's business and upon fair and reasonable terms no less favorable to the Company than it would obtain in a comparable arm's-length transaction with a person not an Affiliate.  “Affiliate” means, as applied to any person, (a) any other person directly or indirectly controlling, controlled by or under common control with, that person, (b) any other person that owns or controls (i) 10% or more of any class of equity securities of that person or any of its Affiliates or (ii) 10% or more of any class of equity securities (including any equity securities issuable upon the exercise of any option or convertible security) of that person or any of its Affiliates, or (c) any director, partner, officer, manager, agent, employee or relative of such person.  For the purposes of this definition, “control” (including with correlative meanings, the terms “controlling,” “controlled by,” and “under common control with”), as applied to any person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that person, whether through ownership of voting securities or by contract or otherwise.

 

(b) Notice of Other Material Events.  Until such time as the Loan Amount or any accrued fees or interest remain unpaid or outstanding, the Company shall provide notice of the following:

 

(i) The Company shall furnish to Purchaser prompt (but in no event more than two (2) business days after the relevant occurrence) written notice of the occurrence of any Event of Default or any other event or circumstance that results in, or could reasonably be expected to result in, a Material Adverse Effect.

 

(ii) The Company shall furnish to Purchaser written notice of the following not less than thirty (30) days prior to the occurrence thereof:  (A) any change of the Company’s corporate name or of any trade name used to identify it in the conduct of its business or in the ownership of its properties, (B) any change of the state in which the Company is organized or conducts business, (C) any change of the Company’s principal place of business, or (D) any change of the Company’s identity or corporate structure.

(iii) Each notice delivered under this Section shall be accompanied by a statement of the Company setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

 

(c) Further Assurances.  At any time or from time to time after the execution hereof, the Company will promptly execute, deliver, verify, acknowledge, record and/or file any and all further documents and instruments (including financing statements and continuation statements), and promptly take any and all such other and further actions, as Purchaser may request in order to evidence or more fully effectuate the transactions and security arrangements contemplated hereby and to otherwise carry out the terms hereof.

 

(d) Reservation of Shares. The Company shall at all times reserve and keep available out of its authorized and unissued capital stock, solely for the purpose of providing for the exercise of the conversion rights provided for under the Note and Warrant, such number of shares of Common Stock and other securities as may be issued in the PIPE Offering, as shall, from time to time, be sufficient for issuance upon conversion of such Note and Warrant in full.

(e) Right of First Offer. Subject to the terms and conditions of this Section 5(e) and applicable securities laws, and for a period starting from the Closing Date and ending twelve months from the closing date of the PIPE Offering, if the Company proposes to offer or sell any New Securities (as defined below), the Company shall first offer all of such New Securities to each Purchaser on the basis of its prorata portion of the Loan Amount (as to each Purchaser, the “Pro Rata Portion”).  Each such Purchaser shall be entitled to apportion the right of first offer hereby granted to it among itself and its Affiliates in such proportions as it deems appropriate.

 

(i) The Company shall give notice (the “Offer Notice”) to each Purchaser, stating (A) its bona fide intention to offer such New Securities, (B) the number of such New Securities to be offered, and (C) the price and terms, if any, upon which it proposes to offer such New Securities.

 

(ii) By notification to the Company within twenty (20) days after the Offer Notice is given, Purchaser may elect to purchase or otherwise acquire, at the price and on the terms specified in the Offer Notice up to its Pro Rata Portion of such New Securities, at Purchaser’s election. The closing of any sale pursuant to this Section shall occur within the later of thirty (30) days of the date that the Offer Notice is given and the date of initial sale of New Securities pursuant to Section 5(e)(iii).

 

(iii) At the expiration of such twenty (20) day period, the Company shall promptly notify each Purchaser that elects to purchase or acquire all the shares available to it (each, a “Fully Exercising Purchaser”) of any other Purchaser’s failure to do likewise.  During the ten (10) day period commencing after the Company has given such notice, each Fully Exercising Purchaser may, by giving notice to the Company, elect to purchase or acquire, in addition to the number of shares specified above, the balance of such New Securities for which Purchasers were entitled to subscribe but that were not subscribed for by the Purchasers.  If there is more than one Fully Exercising Purchaser, then each such Fully Exercising Purchaser is entitled to purchase up to its Pro Rata Portion of the remaining number of New Securities. The closing of any sale pursuant to this Section 5(e)(iii) shall occur within the later of ninety (90) days of the date that the Offer Notice is given and the date of initial sale of New Securities pursuant to Section 5(e)(ii).

 

  

9

  

(iv) If all New Securities referred to in the Offer Notice are not elected to be purchased or acquired as provided in Section 5(e)(iii), the Company may, during the ninety (90) day period following the expiration of the periods provided in Section 5(e)(iii), offer and sell the remaining unsubscribed portion of such New Securities to any person or persons at a price not less than, and upon terms no more favorable to the offeree than, those specified in the Offer Notice.  If the Company does not enter into an agreement for the sale of the New Securities within such period, or if such agreement is not consummated within thirty (30) days of the execution thereof, the right provided hereunder shall be deemed to be revived and such New Securities shall not be offered unless first reoffered to Purchaser in accordance with this Section 5(e).

 

(v) “New Securities” includes all securities, whether debt or equity, offered by the Company or any Subsidiary, but shall not include (A) shares of Common Stock, options or convertible securities issued by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock; (B) shares of Common Stock or options issued to employees or directors of, or consultants or advisors to, the Company or any Subsidiary pursuant to a plan, agreement or arrangement approved by the board of directors of the Company; or (C) shares of Common Stock or convertible securities actually issued upon the exercise of options or shares of Common Stock actually issued upon the conversion or exchange of convertible securities, in each case provided such issuance is pursuant to the terms of such option or convertible security.

 

6. Events of Default.

 

(a) Each of the following events, individually, shall constitute an “Event of Default:”

 

(i) the Company shall fail to pay any Loan Amount when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;

 

(ii) the Company shall fail to pay any accrued but unpaid interest when and as the same shall become due and payable;

 

(iii) the Company shall fail to pay any fee or any other amount payable under any of the Transaction Documents, when and as the same shall become due and payable;

 

(iv) any representation or warranty made by or on behalf of the Company in or in connection with any Transaction Document, or in any report, certificate or other document furnished pursuant to or in connection with any Transaction Document, shall prove to have been incorrect in any material respect when made or deemed made or shall be breached;

 

(v) the Company shall fail to observe or perform any covenant, condition or agreement contained in any Transaction Document (other than those specified in clause (i), (ii), (iii), or (iv) of this Section 6 and such failure shall continue unremedied for a period of ten (10) days after notice thereof from Purchaser to the Company;

 

(vi) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Company or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for ninety (90) days or an order or decree approving or ordering any of the foregoing shall be entered;

 

(vii) the Company shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (vi) of this Section 6, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;

 

(viii) the Company shall be unable, admit in writing its inability, or fail generally, to pay its debts as they become due;

 

(ix) one or more final judgments for the payment of money in an aggregate amount in excess of $25,000 shall be rendered against the Company and the same shall remain undischarged for a period of twenty (20) consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Company to enforce any such judgment;

 

(x) any default by the Company under, or the occurrence of any event of default as defined in, any other indebtedness owed by the Company;

 

(xi) any event causing or resulting in the UCC Pledge not to be a first priority perfected lien on the Assets;

 

(xii) any event, transaction, action or omission of or involving the Company shall occur which Purchaser reasonably believes will result in a Material Adverse Effect;

 

(xiii) any of this Agreement or the Note shall cease to be, or shall be asserted by the Company or other obligor thereunder not to be, in full force and effect; or

 

(xiv) a Change of Control shall occur, other than a Target Transaction

  

10

  

(b) Remedies.  Notwithstanding anything to the contrary in any Transaction Document, upon the occurrence of an Event of Default, and in every such event (other than an event with respect to the Company described in clauses (vi), (vii) or (viii) of Section 6, at any time during the continuance of such event, Purchaser may, at its sole election, by notice to the Company, declare the Loan Amount then outstanding to be due and payable in whole (or in part, in which case any Loan Amount not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the outstanding Loan Amount so declared to be due and payable, together with all fees and other payment obligations of the Company accrued but unpaid under the Transaction Documents, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company, and in case of any event with respect to the Company described in clauses (vi), (vii) or (viii) of Section 6, the Loan Amount then outstanding, together with all fees and other payment obligations of the Company accrued but unpaid under the Transaction Documents, shall automatically become due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby waived by the Company.

 

7. Indemnification by the Company.  The Company shall indemnify each of Purchaser and its officers, directors, shareholders, members, partners, employees, agents and Affiliates in respect of, and hold each of them harmless from and against, any and all Losses (as defined below, and whether or not involving any person not a party to this Agreement) suffered, incurred or sustained by any of them or to which any of them becomes subject resulting from, arising out of or relating to (a) any material misrepresentation on the part of the Company, (b) a breach by the Company of any of the representations and warranties contained herein, or (c) any non-fulfillment of or failure to perform any covenant or agreement on the part of the Company contained in this Agreement or in any of the Transaction Documents (including any certificates delivered in connection herewith or therewith).  If and to the extent that the indemnification hereunder is finally determined by a court of competent jurisdiction to be unenforceable, the Company shall make the maximum contribution to the payment and satisfaction of the indemnified Losses as shall be permissible under applicable laws.  “Losses” means any and all damages, fines, fees, taxes, penalties, deficiencies, diminution in value of investment, losses and expenses, including interest, reasonable expenses of investigation, court costs, reasonable fees and expenses of attorneys, accountants and other experts or other expenses of litigation or other proceedings or of any claim, default or assessment (including, without limitation, fees and expenses of attorneys, incurred in connection with (i) the investigation or defense of any claim made by a person not a party hereto and (ii) asserting or disputing any rights under this Agreement against any party hereto or otherwise).

 

8. Appointment of Collateral Agent; Indemnification of Collateral Agent.

 

(a) Appointment of Collateral Agent.  Each Purchaser hereby appoints, authorizes and empowers Broadband to act as the collateral agent and as representative, attorney-in-fact and agent, with full power of substitution, to act in the name, place and stead of each of Purchaser, to take all actions necessary or appropriate in its judgment for the accomplishment of the terms of any of the  Purchase Document, and to act on behalf of each Purchaser and to do or refrain from doing all such further acts and things, to make all decisions and determinations, and to execute, deliver and receive all such documents, as it shall deem necessary or appropriate in conjunction with any of the transactions contemplated by the Transaction Documents.  This appointment may be terminated, and such termination shall be effective, upon the earlier of Broadband’s resignation as collateral agent and the written consent of the holders of a majority-in-interest of the Notes.

 

(b) Limitation of Liability; Indemnification.  In addition to any and all protections and rights that may be granted hereunder to Broadband as collateral agent, to the maximum extent permissible by law, Broadband will incur no liability with respect to any action or inaction taken or failed to be taken in connection with its services as the collateral agent, except its own willful misconduct or gross negligence.  In all questions arising under any of the Loan Documents, Broadband may rely on the advice of counsel of its choosing, and Broadband will not be liable to any party to any of the Loan Documents or any other person or party for anything done, omitted or suffered in good faith by it in its capacity as the collateral agent based on such advice.  Each of the Purchasers (a) agrees, jointly and severally, to indemnify, defend and save harmless Broadband from and against any and all loss, liability or expense (including the reasonable fees and expenses of outside counsel and experts and their staffs and all expense of document location, duplication and shipment) arising out of or in connection with Broadband’s execution and performance of its duties as collateral agent under any of the Loan Documents (a “Collateral Agent Expense”), except to the extent that such Collateral Agent Expense is finally adjudicated to have been primarily caused by the gross negligence or willful misconduct of Broadband, in its capacity as collateral agent, and (b) acknowledges and agrees that the foregoing indemnities shall survive Broadband’s resignation as the collateral agent or the termination of any of the Transaction Documents.  In no event shall Broadband, in its capacity as the collateral agent, be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if Broadband has been advised of the likelihood of such loss or damage and regardless of the form of action.

 

9. Miscellaneous.

 

(a) The Company agrees not to transfer or assign this Agreement or any of the Company’s rights or obligations herein and Purchaser agrees that the transfer or assignment of the Securities acquired pursuant hereto shall be made only in accordance with all applicable laws.

 

(b) This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. The Transaction Documents constitute the entire agreement between the parties hereto with respect to the subject matter hereof and may be amended or waived only by a written instrument signed by all parties.

 

  

11

  

(c) Any notice or other document required or permitted to be given or delivered to the parties hereto shall be in writing and sent: (i) by fax, if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail, with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with charges prepaid), to the following addresses:

 

(i) If to the Company, at:

International Surf Resorts, Inc.

1097 Country Coach Drive, Suite 705

Henderson, Nevada 89002

Attention of CEO

Tel:  (888) 689-0930

Fax:  (949) 706-1475

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

Sichenzia Ross Friedman Ference LLP

61 Broadway, 32nd Floor

New York, New York 10006

Attention of Harvey Kesner, Esq.

Tel:  (212) 930-9700

Fax:  (212) 930-9725

 

(ii) If to a Purchaser, to the address set forth on its signature page hereto.

With copies (which shall not constitute notice) to:

Broadband Capital Management LLC

712 Fifth Avenue, 22nd floor

New York N.Y. 10019

Attention of Philip Wagenheim

Tel: (212) 277-5300

Fax: (212) 702-9830

and:

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

The Chrysler Center

666 Third Avenue

New York, NY 10017

Attention of Kenneth R. Koch, Esq.

Tel:  (212) 935-3000

Fax:  (212 983-3115

 

  

12

  

(d) No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed by all parties hereto. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

 

(e) This Agreement shall be enforced, governed and construed in all respects in accordance with the laws of the State of New York, as such laws are applied by the New York courts to contracts solely performed within its borders, except with respect to the conflicts of law provisions thereof.

 

 

(f) Any legal suit, action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby shall be instituted exclusively in New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York. The parties hereto hereby: (i) waive any objection which they may now have or hereafter have to the venue of any such suit, action or proceeding, and (ii) irrevocably consent to the jurisdiction of the New York Supreme Court, County of New York, and the United States District Court for the Southern District of New York in any such suit, action or proceeding. The parties further agree to accept and acknowledge service of any and all process which may be served in any such suit, action or proceeding in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

(g) If any provision of this Agreement is held to be invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed modified to conform with such statute or rule of law. Any provision hereof that may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provisions hereof.

 

(h) The Company understands and agrees that money damages may not be a sufficient remedy for any breach of this Agreement by the Company, and that Purchaser shall be entitled to equitable relief, including an injunction and specific performance, as a remedy for any such breach, without the necessity of establishing irreparable harm or posting a bond therefor. Such remedies shall not be deemed to be the exclusive remedies for a breach by the Company of this Agreement, but shall be in addition to all other remedies available at law or equity to Purchaser.

 

(i) All pronouns and any variations thereof used herein shall be deemed to refer to the masculine, feminine, singular or plural, as identity of the person or persons may require.

 

(j) This Agreement may be executed in counterparts and by facsimile, each of which shall be deemed an original, but all of which, taken together, shall constitute one and the same instrument.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

  

13

  

Company Signature Page

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

 

 

INTERNATIONAL SURF RESORTS, INC.

 

By:                                                                  

      Name:

      Title:

 

  

14

  

 

Purchaser Signature Page

 

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

 

 

 

 

[PURCHASER]

 

By:                                                                  

      Name:

      Title:

 

 

Purchase Price: ________________________

 

 

Address for Notice:

 

______________________________________

______________________________________

Attention of: ____________________________

Telephone: _____________________________

Facsimile:_______________________________

  

15

  

Broadband Signature Page

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

 

 

BROADBAND CAPITAL MANAGEMENT LLC

 

 

By:                                                                  

      Name:

      Title:

 

 

(but only with respect to its appointment as collateral agent pursuant to Section 8 hereof)

 

 

 

  

16

  

Schedule 1

LIST OF TARGETS

BioZone Holdings LLC

BioZone Laboratories, Inc.

EquaChem LLC

Equalon Pharma LLC

580 Garcia Properties LLC

BetaZone Laboratories, LLC

  

17

  

Schedule 2

LIST OF PRINCIPAL STOCKHOLDERS

  

18

  

Exhibit A

FORM OF CONVERTIBLE PROMISSORY NOTE

  

19

  

Exhibit B

 

FORM OF WARRANT

  

20

  

Exhibit C

 

FORM OF REGISTRATION RIGHTS AGREEMENT

  

21

  

Exhibit D

 

FORM OF ESCROW AGREEMENT

 

  

22

  

Exhibit E

 

FORM OF SECURITY AND PLEDGE AGREEMENT

  

23

  

Exhibit F

FORM OF PRINCIPAL STOCKHOLDER AND PLEDGE AGREEMENT

  

24

  

Exhibit G

FORM OF UCC FINANCING STATEMENTS

  

25

  

Exhibit H

FORM OF LEGAL OPINION OF THE COMPANY’S COUNSEL

 

26

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