Document:

Filed by Bowne Pure Compliance

 

Exhibit 10.2

SUBSCRIPTION AGREEMENT

A completed and originally executed copy of this Subscription Agreement, including all
applicable schedules hereto, must be delivered by no later than 12:00 p.m. (Eastern Standard time)
on December 14, 2007, unless extended by the Company, to Neutron Enterprises, Inc., at 3500 De
Maisonneuve W., Suite #1650, Montreal, Quebec, H3Z 3C1, Attention: Mr. Mitchell Rosen, Chief
Financial Officer (Fax: (514) 871-8561; e-mail address: mrosen@neutrongroup.com).

TO: NEUTRON ENTERPRISES, INC. (the “Company”)

The undersigned (the “Purchaser”), on its own behalf, and, if it is not purchasing as principal, on
behalf of those for whom the undersigned is contracting hereunder as trustee or agent (each a
"Beneficial Purchaser”), hereby irrevocably subscribes for and agrees to purchase the number of
Units (each a “Unit”) of the Company set out below to be issued at a price of U.S.$0.25 (the
"Purchase Price”) per Unit, for the aggregate consideration set out below, subject to the following
terms and conditions. Each Unit consists of one share of Common Stock of the Company and a warrant
(a “Warrant”) in the form attached as Exhibit A hereto. Each Warrant allows the holder thereof to
purchase one share of Common Stock at a price of U.S.$0.35 per share. This agreement, which for
greater certainty includes and incorporates the attached Annexes, Exhibits and Schedules, as each
may be amended, supplemented, replaced and/or restated from time to time, are collectively referred
to herein as the “Subscription Agreement” or the “Agreement”. The Purchaser on its own behalf, and
if not purchasing as principal, on behalf of those on whose behalf it is contracting hereunder as
trustee or agent, agrees to be bound by the terms and conditions set forth in the attached “Terms
and Conditions of Subscription” including without limitation the representations, warranties,
acknowledgements and covenants set forth in the Annexes, Exhibits and Schedules attached thereto.
The Purchaser further agrees on its own behalf, and if not purchasing as principal, on behalf of
those on whose behalf it is contracting hereunder as trustee or agent, without limitation, that the
Company may rely on the Purchaser’s representations, warranties, acknowledgements and covenants
contained in such documents.

Issue: Units

Price Per Unit: U.S.$0.25

Number of Units Purchased:                                         

Total Subscription Price (number of Units purchased x U.S.$0.25): U.S.$                                        

Number of shares of Common Stock of the Company currently owned or over which control and direction
is exercised (directly and indirectly):                                         

 

 

 

DATED this
 _____ 
day of
 _____ 
, 200
 _____ 
..

	 	 	 	 	 
	Name and Address of Purchaser:	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	 
	(Name of Purchaser — please print)	 	(Purchaser’s Address)
	 
	 	 	 	 
	by:
	 	 	 	 
	 

	 	 
	 	 
	 

	 	Authorized Signature	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	(Telephone Number)
	 
	 	 	 	 
	 	 	 
	(Official Capacity or Title — please print)	 	(Facsimile Number)
	 
	 	 	 	 
	 	 	 
	(Please print name of individual whose signature
appears above if different from the name of the
Purchaser printed above.)	 	(E-mail Address)
	 
	 	 	 	 
	Details of the Beneficial Purchaser (if any, for whom the undersigned is
contracting (the “Beneficial Owner”)):
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	 
	(Name — please print)	 	(Beneficial Purchaser’s Address)
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	 
	(if space is inadequate please attach a
schedule containing the necessary
information)	 	 

 

-2-

 

	 	 	 	 	 
	Registration Instructions
(registration of the certificates
representing the shares of Common
Stock should be made as follows):	 	Delivery Instructions (the
certificates representing the shares
of Common Stock are to be delivered
as follows (if different from the
address of the Purchaser set forth
above)):
	 
	 	 	 	 
	 	 	 
	Name	 	 
	 
	 	 	 	 
	 	 	 
	Account reference, if applicable	 	Account reference, if applicable
	 
	 	 	 	 
	 	 	 
	Address	 	Contact Name
	 
	 	 	 	 
	 	 	 
	 

	 	 	 	Address
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	 
	Telephone Number	 	Telephone Number
	 
	 	 	 	 
	 	 	 
	Facsimile Number	 	Facsimile Number
	 
	 	 	 	 
	 	 	 
	E-mail Address	 	E-mail Address

ACCEPTANCE

The foregoing is acknowledged, accepted and agreed to this                      day of                                         , 200     .

NEUTRON ENTERPRISES, INC.

			
	Per:	 	                                                            
Authorized Signing Officer

 

-3-

 

TERMS AND CONDITIONS OF SUBSCRIPTION

This Subscription Agreement is dated as of the date appearing on the first page hereof
between Neutron Enterprises, Inc. a Nevada corporation (the “Company”), and the Purchaser
identified on the first page hereof and on the signature page hereto;

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act (as defined below) and/or Regulation D promulgated
thereunder and pursuant to the Securities Laws (as defined below), the Company desires to
issue and sell in a private placement transaction up to 16,000,000 Units, subject to
increase by the Company;

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:

ARTICLE I.

DEFINITIONS; THE OFFERING

1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for all
purposes of this Agreement, the following terms have the meanings indicated in this Section
1.1:

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

“Affiliate” means any Person that, directly or indirectly, through one or
more intermediaries, controls or is controlled by or is under common control with a
Person as such terms are used in and construed under Rule 144. With respect to a
Purchaser, any investment fund or managed account that is managed on a discretionary
basis by the same investment manager as such Purchaser will be deemed to be an
Affiliate of such Purchaser.

“Business Day” means any day except Saturday, Sunday and any day which shall
be a federal legal holiday or a day on which banking institutions in the State of New
York are authorized or required by law or other governmental action to close.

“Closing” means the closing of the purchase and sale of the Common Stock
and the Warrants pursuant to Section 2.1, on the date this Agreement is accepted by
the Company, which shall be no later than December 14, 2007; provided that the
Company may extend the Closing for an additional 120 days
in its sole discretion. At the Company’s election, the Company may have multiple
Closings, each of which shall be a Closing hereunder.

 

-4-

 

“Closing Date” means the date of the Closing.

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

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

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

“Disclosure Schedules” means the Disclosure Schedules attached as
Annex I hereto.

“Exchange Act” means the Securities Exchange Act of 1934 of the United
States, as amended.

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

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

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

“Per Unit Purchase Price” means U.S.$0.25.

“Purchaser” means the purchaser indicated on the first page of this
Subscription Agreement.

 

-5-

 

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

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

“Securities” means the Shares, the Warrants and the Shares issuable upon
exercise of the Warrant.

“Securities Act” means the Securities Act of 1933 of the United States, as
amended.

“Shares” means the shares of Common Stock issued or issuable to each
Purchaser pursuant to this Agreement, including the Shares issuable upon exercise of
the Warrants.

“Subscription Amount” means the amounts set forth below the Purchaser’s
signature block on the signature page hereto, in United States dollars and in
immediately available funds.

“Subsidiary” means a body corporate that:

	 	(a)	 	is controlled by:

	 	(i)	 	the Company;

	 
	 	(ii)	 	the Company and one or more bodies
corporate, each of which is controlled by the Company; or

	 
	 	(iii)	 	two or more bodies corporate, each
of which is controlled by the Company; or

	 	(b)	 	is a Subsidiary of a body corporate that is a
Subsidiary of the Company.

“Trading Day” means (i) a day on which the Common Stock is traded on a
Trading Market, or (ii) if the Common Stock is not listed on a Trading Market, a day
on which the Common Stock is traded on the over-the-counter market, as reported by
the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on the OTC
Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding to its functions of reporting prices); provided,
that in the event that the Common Stock is not
listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall
mean a Business Day.

 

-6-

 

“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the OTC Bulletin
Board, the American Stock Exchange, the New York Stock Exchange, the Nasdaq National
Market or the Nasdaq SmallCap Market.

“Transaction Documents” means this Agreement and any Annex, Exhibit or
Schedule thereto, the Warrants and any other documents or agreements executed in
connection with the transactions contemplated hereunder.

“United States” means the United States of America.

“United States Securities Laws” means, collectively, the applicable
securities laws of the United States and the regulations and rules made and forms
prescribed thereunder, together with all applicable and legally enforceable published
policy statements, blanket orders, rulings and notices of the Commission.

1.2 The Offering, The Company is offering (the “Offering”) up to 16,000,000
Units, for an aggregate purchase price of $4,000,000 (the “Maximum Amount”) unless increased
by the Company in its sole discretion. The Units will be sold on a reasonable “best
efforts” basis pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”), and/or Rule 506 of Regulation D thereunder. The Units are being offered
solely to a limited number of “accredited investors” as that term is defined in Rule 501(a)
of the Securities Act during an offering period (the “Offering Period”) commencing November
19, 2007 and terminating December 14, 2007 unless extended by the Company in its sole
discretion for up to an additional 120-day period (the “Termination Date”). The Offering
may be terminated by the Company at any time in its sole discretion. Unless waived by the
Company, subscriptions for less than $25,000 will not be accepted. Assuming the Company
sells the Maximum Amount, the net proceeds to the Company are estimated to be approximately
$3,900,000, after deducting commissions and offering expenses payable by the Company
estimated at $100,000. The Company intends to use the proceeds for general working capital
and other corporate purposes which may include the acquisition of additional assets or
businesses. The Company is not required to raise any minimum amount of proceeds prior to
executing this Agreement or other Agreements with other Purchasers. Because there is no
minimum amount of subscriptions which the Company must receive before accepting funds in the
Offering, Purchaser will not be assured that the Company will have sufficient funds to
operate its business and will bear the risk that the Company will be unable to secure the
funds necessary to meet its current and anticipated financial obligations.

 

-7-

 

ARTICLE II.

PURCHASE AND SALE

2.1 Closing. At the Closing, the Purchaser shall purchase, and the Company
shall issue and sell, in the aggregate, a number of Units up to 16,000,000 Units. The
Purchaser shall purchase from the Company, and the Company shall issue and sell to
Purchaser, a number of Units equal to such Purchaser’s Subscription Amount divided by the
Per Unit Purchase Price as set forth on the first page of this Agreement. All funds
tendered by Purchaser will be held by the Company pending acceptance or rejection of this
Agreement by the Company and the Closing of the Purchaser’s purchase of the Units. This
Agreement will either be accepted by the Company, in whole or in part, or rejected by the
Company in its sole discretion as promptly as practicable. If this Agreement is accepted
only in part, Purchaser agrees to purchase such smaller number of Units as the Company
determines to sell to Purchaser. If this Agreement is rejected for any reason, including
the termination of the Offering by the Company, this Agreement and all funds tendered
herewith will be promptly returned to Purchaser, without interest or deduction of any kind,
and this Agreement will be void and of no further force or effect.

2.2 Closing Conditions.

The Closing is conditional upon the following :

(a) At the Closing, the Company shall deliver or cause to be delivered to
the Purchaser this Agreement, duly executed by the Company.

(b) Upon execution of this Agreement, Purchaser shall deliver or cause to be
delivered to the Company the following:

(1) this Agreement, duly executed by the Purchaser; and

(2) the Purchaser’s Subscription Amount by wire transfer to the account
of the Company as provided to the Purchaser in writing prior to the
Closing Date.

(c) All representations and warranties of each of the parties herein shall
remain true and correct as of the Closing Date.

(d) As of the Closing Date, there shall have been no Material Adverse Effect
with respect to the Company since the date hereof.

 

-8-

 

(e) From the date hereof to the Closing Date, trading in the Common Stock
shall not have been suspended by the Commission (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the Closing), and, at any time prior
to the Closing Date, trading in securities generally as reported by the
Trading Market shall not have been suspended or limited, or minimum prices
shall not have been established on securities whose trades are reported by the
Trading Market, nor shall a banking moratorium have been declared either by
the United States or New York State authorities.

2.3 Delivery and Payment. Upon execution of this Agreement, the Purchaser shall
(on its own behalf and, if applicable, on behalf of each Beneficial Purchaser) deliver to
the Company at the address set out on the first page of this Subscription Agreement, or at
such other time, date or place as the Company may advise:

(a) a completed and duly signed copy of this Subscription Agreement;

(b) any other documents required by the Securities Laws or as the Company may
request.

The Purchaser for and on behalf of itself and each Beneficial Purchaser, if any,
acknowledges and agrees that the documents referred to in this Section 2.3, when executed
and delivered by the Purchaser, will form part of and will be incorporated into this
Subscription Agreement and each shall constitute a representation, warranty or covenant of
the Purchaser and each Beneficial Purchaser, if any, hereunder in favour of the Company. The
Purchaser for and on behalf of itself and each Beneficial Purchaser, if any, consents to the
filing of such documents as may be required to be filed with the Trading Market or the
Securities Commissions in connection with the transactions contemplated hereby. The
Purchaser for and on behalf of itself and each Beneficial Purchaser, if any, acknowledges
and agrees that the irrevocable offer contained in this Subscription Agreement, the Purchase
Price and any other documents delivered in connection herewith will be held by the Company
until such time as the Closing Conditions set out hereinabove are satisfied or have been
duly waived.

2.4 Deliveries by the Company. Within ten Trading Days of the Closing Date, the
Company shall deliver or cause to be delivered to the Purchaser certificates evidencing a
number of Shares equal to the Purchaser’s Subscription Amount divided by the Per Unit
Purchase Price, and certificates evidencing a number of Warrants equal to such Purchaser’s
Subscription Amount divided by the Per Unit Purchase Price, in each case registered in the
name of the Purchaser.

 

-9-

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company. Except as set forth under the
corresponding section of the Disclosure Schedules delivered concurrently herewith, the
Company hereby makes the following representations and warranties as of the date hereof and
as of the Closing Date to the Purchaser:

(a) Organization and Qualification. The Company is an entity duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with the requisite corporate power and authority
to own and use its properties and assets and to carry on its business as currently
conducted. The Company is not in violation of any of the provisions of its articles
of incorporation or bylaws. The Company is duly qualified to conduct business and is
in good standing as a foreign corporation 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 (i) a material adverse effect
on the legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business or financial
condition of the Company, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a
“Material Adverse Effect”).

(b) 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 thereunder.
The execution and delivery of each of the Transaction Documents by the Company and
the consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company and no further action
is required by the Company in connection therewith. Each Transaction Document has
been (or upon delivery will have been) duly executed by the Company and, when
delivered in accordance with the terms hereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of creditors’
rights generally; (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies; and (iii) as limited by
public policy.

 

-10-

 

(c) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated thereby do not and will not (i) conflict with or violate any provision
of the Company’s articles of incorporation or bylaws; (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both would
become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of, any
material agreement, credit facility, debt or other instrument (evidencing a Company
debt or otherwise) to which the Company is a party or by which any material property
or asset of the Company is bound or affected; or (iii) 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 is subject (including
federal and state securities laws and regulations), or by which any material property
or asset of the Company is bound or affected; except in the case of each of clauses
(ii) and (iii), such as would not have or reasonably be expected to result in a
Material Adverse Effect.

(d) Filings, Consents and Approvals. The Company is not required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution, delivery and
performance by the Company of the Transaction Documents, other than (a) the filing by
the Company with the Securities Commissions of a report on Form 45-106F1 prepared and
executed in accordance with NI 45-106, which is required to be made by the Company
within 10 days after the date of the issuance of any Securities to a Canadian
Purchaser together with the requisite filing fees; (b) such as have already been
obtained or such exemptive filings as are required to be made under applicable
securities laws; and (c) such other filings as may be required following the Closing
Date under the Securities Act, the Exchange Act, the Securities Laws or corporate
law.

(e) Issuance of the Securities. The Securities are duly authorized and, when
issued and paid for in accordance with the Transaction Documents, will be duly and
validly issued, fully paid and non-assessable, and free and clear of all Liens
imposed by the Company.

 

-11-

 

(f) Capitalization. Except for the issuance of Securities pursuant to this
Agreement and other similar agreements entered into in connection with the Offering
of which this Agreement is a part and except as set forth below, as of November 19,
2007, the Company is authorized to issue 200,000,000 shares of Common Stock, of which
55,114,749 are issued and outstanding, and 10,000,000 shares of preferred stock none
of which are outstanding. No
Person has any right of first refusal, preemptive right, right of participation, or
any similar right to participate in the transactions contemplated by the Transaction
Documents. Except as a result of the purchase and sale of the Securities, except for
employee stock options under the Company’s stock option plans and except as set forth
below, there are no outstanding options, warrants, script rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities, rights
or obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. The issue and sale of the
Securities will not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchaser) and will not result in a right of
any holder of Company securities to adjust the exercise, conversion, exchange or
reset price under such securities.

As of November 19, 2007, the Company has outstanding or is obligated to issue:

	 	(i)	 	options to purchase 15,720,000 shares
of Common Stock;

	 
	 	(ii)	 	a warrant to Creata Promotions (USA),
Inc. to purchase 250,000 shares of Common Stock;

	 
	 	(iii)	 	100,000 shares of Common Stock
pursuant to a consulting agreement;

	 
	 	(iv)	 	50,000 shares of Common Stock in
exchange for 50,000 Class E Exchangeable Shares in the capital
stock of Neutron Media Inc.; and

	 
	 	(v)	 	at the option of Caledonia Corporate
Management Group Limited (“Caledonia”) one share of Common Stock
for every $2.50 of principal and interest outstanding under the
terms of a secured convertible note payable to Caledonia in the
principal amount of $2,100,000.

 

-12-

 

The Company has agreed to issue to Dresden Capital Inc. (“Dresden”), as partial
consideration for fees payable to it in respect to the transactions contemplated by
this Agreement, a number of warrants equal to five percent (5%) of the total number
of Units subscribed for as contemplated by this
Agreement sold by Dresden (collectively, the “Agent’s Warrants”), on substantially
the same terms as the Warrants.

(g) SEC Reports; Financial Statements. The Company has filed all periodic
reports required to be filed by it under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) of the Exchange Act, for the one year
preceding the date hereof (the foregoing materials, including the exhibits thereto,
being collectively referred to herein as the “SEC Reports” and, together with
the Disclosure Schedules to this Agreement, the “Disclosure Materials”). 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, as applicable, and none of the SEC Reports,
when filed, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in 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 applicable accounting requirements and the rules
and regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with generally
accepted accounting principles applicable in the United States on a consistent basis
during the periods involved (“GAAP”), except as may be otherwise specified in
such financial statements or the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited statements, to
normal, immaterial, year-end audit adjustments.

(h) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as disclosed in the SEC Reports,
or in Schedule 3.1 (h): (i) there has been no event, occurrence or development that
has had or that could reasonably be expected to result in a Material Adverse Effect;
(ii) the Company has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission; (iii) the Company has not altered its
method of accounting; (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased, redeemed or
made any agreements to purchase or redeem any shares of its capital stock; and (v)
the Company has
not issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans disclosed in Section 3(f) or as
disclosed in the SEC Reports. The Company does not have pending before the Commission
any requests for confidential treatment of information.

 

-13-

 

(i) Litigation. Except as disclosed in the SEC Reports, there is no action,
suit, inquiry, notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened in writing against the Company, or any of its
properties before or by any court, arbitrator, governmental or administrative agency
or regulatory authority (federal, state, county, local or foreign) (collectively, an
“Action”) which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities; or (ii) could,
if there were an unfavorable decision, have or reasonably be expected to result in a
Material Adverse Effect. The Company is not, and has not 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. The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company or
any Subsidiary under the Exchange Act or the Securities Act.

(j) Labour Relations. No material labour 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.

(k) Compliance. Except as disclosed in the SEC Reports, the Company is not
(i) in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by the
Company), and the Company has not received notice of a claim that it is in default
under or that it is in violation of, any indenture, loan or credit agreement or any
other material agreement or instrument to which it is a party or by which it or any
of its properties is bound (whether or not such default or violation has been
waived); (ii) in violation of any order of any court, arbitrator or governmental
body; or (iii) 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 the case of clauses (i), (ii) and (iii) as
would not have or reasonably be expected to result in a Material Adverse Effect.

 

-14-

 

(l) Certain Fees. 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 this Agreement, other than a fee payable to Dresden
equal to five percent (5%) of the gross proceeds from the subscription for Units
contemplated by this Agreement sold by Dresden plus the Agent’s Warrants. The
Purchaser shall have no obligation with respect to any fees or with respect to any
claims made by or on behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated by this
Agreement.

(m) Private Placement. Assuming the accuracy of the Purchaser’s
representations and warranties set forth in Section 3.2, no registration under the
Securities Act is required for the offer and sale of the Securities by the Company to
the Purchaser as contemplated hereby. The issuance and sale of the Securities
hereunder does not contravene the rules and regulations of the Trading Market.

(n) Investment Company. The Company is not, and is not an Affiliate of, an
“investment company” within the meaning of the Investment Company Act of 1940, as
amended.

(o) Listing and Maintenance Requirements. The Company has not, in the 12
months preceding the date hereof, received notice from any Trading Market on which
the Common Stock is or has been listed or quoted to the effect that the Company is
not in compliance with the listing or maintenance requirements of such Trading
Market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.

The Purchaser acknowledges and agrees that the Company does not make or has not made
any representations or warranties with respect to the transactions contemplated hereby other
than those specifically set forth in this Section 3.1.

3.2 Representations and Warranties of the Purchaser. Each Purchaser hereby
represents and warrants as of the date hereof and as of the Closing Date to the Company as
follows:

(a) Organization; Authority. The Purchaser is legally competent natural
person or an entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, with full right, corporate or
partnership power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to
carry out its obligations thereunder. The execution, delivery and performance by the
Purchaser of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate or similar action on the part of the Purchaser.
Each Transaction Document to which it is a party has been duly executed by the
Purchaser, and, when delivered by the Purchaser in accordance with the terms hereof,
will constitute the valid and legally binding obligation of the Purchaser,
enforceable against it in accordance with its terms.

 

-15-

 

(b) Investment Intent. The Purchaser understands that (i) the Securities are
“restricted securities” and have not been registered under the Securities Act or any
applicable state or other securities law; and (ii) the Purchaser has not received a
prospectus, an offering memorandum, sales or advertising literature or similar
document in connection with the purchase of the Securities, and the Purchaser has not
requested, nor does the Purchaser need to receive, any such document. The Purchaser
is acquiring the Securities as principal for its own account for investment purposes
only and not with a view to or for distributing or reselling such Securities or any
part thereof, has no present intention of distributing any of such Securities and has
no arrangement or understanding with any other persons regarding the distribution of
such Securities. The Purchaser is acquiring the Securities hereunder in the ordinary
course of its business. The Purchaser does not have any agreement or understanding,
directly or indirectly, with any Person to distribute any of the Securities. The
Purchaser understands and acknowledges that the Securities are subject to certain
resale restrictions under applicable securities laws. The Purchaser also acknowledges
that it has been advised to consult its own legal advisers with respect to applicable
resale restrictions and that it is solely responsible for complying with such
restrictions (and that the Company is not in any manner responsible for ensuring
compliance by the Purchaser with such restrictions).

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

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

 

-16-

 

(e) Compliance with the Securities Laws. The Purchaser agrees to comply with
the requirements of Regulation M of the Exchange Act, if applicable, with respect to
the sale of the Shares by the Purchaser. The Purchaser hereby confirms its
understanding that it may not cover short sales made prior to the date hereof, nor
may it pledge, hypothecate, lend or otherwise facilitate short sales of Company
Shares. The Purchaser acknowledges that it does not intend to cover short positions
made by it before the Effective Date with Shares purchased by it hereunder.

(f) No Government Review. The Purchaser understands that neither the
Commission nor any securities commission or other governmental authority of any
state, country or other jurisdiction has approved the issuance of the Securities or
passed upon or endorsed the merits of the Securities, this Agreement or the Warrant,
or confirmed the accuracy of, determined the adequacy of, or reviewed this Agreement
or the Warrant.

(g) Restrictions on Transfer. The Purchaser understands that the Securities
are “restricted securities” as such term is defined in Rule 144 under the Securities
Act and have not been registered under the Securities Act or registered or qualified
under any state securities law, and may not be, directly or indirectly, sold,
transferred, offered for sale, pledged, hypothecated or otherwise disposed of without
registration under the Securities Act and registration or qualification under
applicable state securities laws or the availability of an exemption therefrom.

(h) Access to Information. The Purchaser acknowledges that it has had access
to and has reviewed all documents and records relating to the Company that it has
deemed necessary in order to make an informed investment decision with respect to an
investment in the Securities, including, but not limited to, the SEC Reports; that it
has had the opportunity to ask representatives of the Company certain questions and
request certain additional information regarding the terms and conditions of such
investment and the finances, operations, business and prospects of the Company and
has had any and all such questions and requests answered to its satisfaction; and
that it understands the risks and other considerations relating to such investment.

(i) Certain Investment Risks. Purchaser understands that purchasing Units in
the Offering will subject Purchaser to certain risks, including, but not limited to,
each of the following:

(A) The offering price of the Units offered hereby has been determined
solely by the Company and does not necessarily bear any relationship to the
value of the Company’s assets, current or potential
earnings of the Company, or any other recognized criteria used for
measuring value and, therefore, there can be no assurance that the offering
price of the Units is representative of the actual value of the Units.

 

-17-

 

(B) In order to capitalize the Company, execute its business plan, and
for other corporate purposes, the Company has issued, and expects to issue
additional shares of Common Stock, securities exercisable or convertible into
 shares of Common Stock, or debt. Such securities have been and may be issued
for a purchase price consisting of cash, services or other consideration that
may be materially different than the purchase price of the Units. The
issuance of any such securities may result in substantial dilution to the
relative ownership interests of the Company’s existing shareholders and
substantial reduction in net book value per share. Additional equity
securities may have rights, preferences and privileges senior to those of the
holders of Common Stock, and any debt financing may involve restrictive
covenants that may limit the Company’s operating flexibility.

(C) There is no minimum amount required to be raised in this Offering
and, therefore, the Company may not generate enough net proceeds from this
Offering to execute its business plan and satisfy its working capital
requirements.

(j) Reliance on Representations. The Purchaser understands that the
Securities are being offered and sold to it in reliance on specific exemptions from
the registration requirements of the federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and such Purchaser’s
compliance with, the representations, warranties, agreements, acknowledgments and
understandings of such Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of such Purchaser to acquire the
Securities. The Purchaser represents and warrants to the Company that any
information that the Purchaser has heretofore furnished or furnishes herewith to the
Company is complete and accurate, and further represents and warrants that it will
notify and supply corrective information to the Company immediately upon the
occurrence of any change therein occurring prior to the Company’s issuance of the
Securities. Within five (5) days after receipt of a request from the Company, the
Purchaser will provide such information and deliver such documents as may reasonably
be necessary to comply with any and all laws and regulations to which the Company is
subject.

(k) Purchaser Status. At the time the Purchaser was offered the Securities,
it was, and at the date hereof it is, an “accredited investor” as defined in Rule
501(a) under the Securities Act, and shall be an “accredited investor” as of the date
of any exercise of the Warrants. The Purchaser is not required to be registered as a
broker dealer under Section 15 of the Exchange Act.

 

-18-

 

(l) Broker. Other than as contemplated by this Subscription Agreement, 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, and if any
person establishes a claim that any fee or other compensation is payable in
connection with this subscription for the Purchaser’s Securities, the Purchaser
covenants to indemnify and hold harmless the Company with respect thereto and with
respect to all costs reasonably incurred in the defence thereof.

(m) Residence. If Purchaser is an entity, the address of its principal
place of business is as set forth on the signature page hereto, and if Purchaser is
an individual, the address of its principal residence is as set forth on the
signature page hereto.

(n) Restrictions on Transfer. Purchaser understands that the Securities are
“restricted securities” as such term is defined in Rule 144 under the Securities Act
and have not been registered under the Securities Act or registered or qualified
under any state securities law, and may not be, directly or indirectly, sold,
transferred, offered for sale, pledged, hypothecated or otherwise disposed of without
registration under the Securities Act and registration or qualification under
applicable state securities laws or the availability of an exemption therefrom. In
any case where such an exemption is relied upon by Purchaser from the registration
requirements of the Securities Act and the registration or qualification requirements
of such state securities laws, Purchaser shall furnish the Company with an opinion of
counsel stating that the proposed sale or other disposition of such securities may be
effected without registration under the Securities Act and will not result in any
violation of any applicable state securities laws relating to the registration or
qualification of securities for sale, such counsel and opinion to be satisfactory to
the Company.

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

4.1 Transfer Restrictions.

(a) The Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than (i)
pursuant to an effective registration statement; or (ii) to the Company, the
Company may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does not
require registration of such transferred Securities under the Securities Act. As a
condition of transfer, any such transferee shall agree in writing to be bound by the
terms of this Agreement and shall have the rights of a Purchaser under this
Agreement.

 

-19-

 

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

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION
OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY.

4.2 Furnishing of Information. As long as the Purchaser owns Securities, the Company
covenants to timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after the date
hereof pursuant to the Exchange Act. As long as the Purchaser owns Securities, if the
Company is not required to file reports pursuant to the Exchange Act, it will prepare and
furnish to the Purchaser and make available in accordance with Rule 144(c) such information
as is required for the Purchaser to sell the Securities under Rule 144. The Company further
covenants that it will take such further action as any holder of Securities may reasonably
request, all to the extent required from time to time, to enable such Person to sell such
Securities without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144.

4.3 Integration. The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities in a manner that
would require the registration under the Securities Act of the sale of the Securities to the
Purchaser or that would be integrated with the offer or sale of the Securities for purposes
of the rules and regulations of any Trading Market.

 

-20-

 

4.4 Use of Proceeds. The Company shall use the net proceeds from the sale of the
Securities hereunder for (i) general working capital purposes, (ii) to finance acquisitions,
and (iii) to finance software development and marketing.

4.5 Indemnification of Purchaser. The Company will indemnify and hold each Purchaser
and its directors, officers, shareholders, partners, employees and agents (each, a
“Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts paid in
settlements, court costs and reasonable attorneys’ fees and costs of investigation, that any
such Purchaser Party may suffer or incur as a result of or relating to any
misrepresentation, breach or inaccuracy of any of the representations, warranties, covenants
or agreements made by the Company in this Agreement or in the other Transaction Documents.
The Company will reimburse the Purchaser for its reasonable legal and other expenses
(including the cost of any investigation, preparation and travel in connection therewith)
incurred in connection therewith, as such expenses are incurred.

4.6 Indemnification of Company. Purchaser agrees to indemnify, defend and hold
harmless the Company and its respective affiliates and agents from and against any and all
demands, claims, actions or causes of action, judgments, assessments, losses, liabilities,
damages or penalties and reasonable attorneys’ fees and related disbursements incurred by
the Company that arise out of or result from a breach of any representations or warranties
made by Purchaser herein, and Purchaser agrees that in the event of any breach of any
representations or warranties made by Purchaser herein, the Company may, at its option,
forthwith rescind the sale of the Units to Purchaser.

4.7 Prohibition of Short Sales. Prior to the termination of this Offering, each
Purchaser shall not effect any “short sale” of the Company’s common stock. Each Purchaser
acknowledges and agrees that, in the event of an actual or threatened breach of any of the
provisions of this Agreement by such party, the harm to the others will be immediate,
substantial and irreparable and the monetary damages will be inadequate. Accordingly, each
Purchaser agrees that, in such event, the others will be entitled to equitable relief,
including an injunction and an order of specific performance, in addition to any and all
other remedies at law or in equity.

4.8 Confidentiality. Purchaser acknowledges and agrees that:

(a) All of the information contained in the Transaction Documents is of a confidential
nature and may be regarded as material non-public information under Regulation FD of the
Securities Act.

 

-21-

 

(b) The Transaction Documents have been furnished to Purchaser by the Company for the
sole purpose of enabling Purchaser to consider and evaluate an investment in the Company,
and will be kept confidential by Purchaser and not used for any other purpose.

(c) The existence of the Transaction Documents and the information contained therein
shall not, without the prior written consent of the Company, be disclosed by Purchaser to
any person or entity, other than Purchaser’s personal financial and legal advisors for the
sole purpose of evaluating an investment in the Company, and Purchaser will not, directly or
indirectly, disclose or permit Purchaser’s personal financial and legal advisors to
disclose, any of such information without the prior written consent of the Company.

(d) Purchaser shall make its representatives aware of the terms of this Section 4.8 and
to be responsible for any breach of this Agreement by such representatives.

(e) Purchaser shall not, without the prior written consent of the Company, directly or
indirectly, make any statements, public announcements or release to trade publications or
the press with respect to the subject matter of the Transaction Documents .

(f) If Purchaser decides to not pursue further investigation of the Company or to not
participate in the Offering, Purchaser will promptly return this Agreement and any
accompanying documentation to the Company.

4.9 Non-Public Information. Purchaser acknowledges that information concerning the
matters that are the subject matter of the Transaction Documents constitutes material
non-public information under United States federal securities laws, and that United States
federal securities laws prohibit any person who has received material non-public information
relating to the Company from purchasing or selling securities of the Company, or from
communicating such information to any person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell securities of the Company.
Accordingly, until such time as any such non-public information has been adequately
disseminated to the public, Purchaser shall not purchase or sell any securities of the
Company, or communicate such information to any other person.

ARTICLE V.

MISCELLANEOUS

5.1 Fees and Expenses. Except as otherwise set forth in this Agreement, each party
shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company shall pay
all stamp and other taxes and duties levied in connection with the sale of the Securities.

 

-22-

 

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

5.3 Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number specified on the signature pages attached
hereto prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day
after the date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number on the signature pages attached hereto on a day that is not a
Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading
Day following the date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required to be
given. The address for such notices and communications shall be as set forth on the
signature pages attached hereto.

5.4 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the Company and the
Purchaser or, in the case of a waiver, by the party against whom enforcement of any such
waiver is sought. 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 either party to exercise any right
hereunder in any manner impair the exercise of any such right.

5.5 Construction. The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict construction will be applied
against any party.

5.6 Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns.

 

-23-

 

5.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.

5.8 Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of the Transaction Documents shall be governed by and construed and
enforced in accordance with the internal laws of the State of Nevada, without regard to the
principles of conflicts of law thereof. If any party shall commence an action or proceeding
to enforce any provisions of a Transaction Document, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its attorney’s fees and
other costs and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.

5.9 Survival. The representations, warranties, agreements and covenants contained
herein shall survive the Closing and delivery of the Units.

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

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

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

 

-24-

 

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

5.14 Currency. Save as otherwise set forth herein, all amounts expressed in dollars
or “$” shall refer to the lawful currency of the United States in immediately available
funds.

5.15 Language. The parties have requested that this document and all related
documents be drafted in the English language only. Les parties ont demandé que ce document
et tous documents y afférent soient rédigés en anglais seulement.

(Signature Page Follows)

 

-25-

 

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.

	 	 	 
	Address for Notice:

	 	Rory Olson

Chief Executive Officer

Neutron Enterprises, Inc.

3500 de Maisonneuve West

Suite 1650

Montreal, Quebec H3Z 3C1

Canada
	 
	 	 
	 

	 	Tel: (514) 871-2222
	 
	 	 
	With copy to (which shall not
constitute notice):

	 	Neutron Enterprises Inc.

c/o Francine Wiseman

Corporate Secretary

5 Place Ville Marie

Suite 1203

Montreal, Quebec

H3B 2G2
	 
	 	 
	 

	 	Tel: (514) 875-2100

Fax: (514) 875-8237

E-mail: fwiseman@spiegelsohmer.com

[SIGNATURE PAGE CONTINUES]

 

-26-

 

(PURCHASER’S SIGNATURE PAGE)

[                                                                                ]

By:                                                            

Name:

Title:

Address:

Subscription Amount: U.S.$

[                                                                                ]

 

-27-

 

ANNEX I

DISCLOSURE SCHEDULE 3.1

 

 

 

EXHIBIT A

WARRANTFiled by Bowne Pure Compliance

 

Exhibit 10.3

WARRANT NO.: 2007 UNIT [                    ]

WARRANT TO PURCHASE COMMON STOCK

OF NEUTRON ENTERPRISES, INC.

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. THE SECURITIES REPRESENTED
HEREBY HAVE BEEN TAKEN BY THE REGISTERED OWNER FOR INVESTMENT PURPOSES ONLY, AND NOT WITH A VIEW TO
RESALE OR DISTRIBUTION THEREOF, AND MAY NOT BE SOLD, TRANSFERRED OR DISPOSED OF WITHOUT AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH TRANSFER OR DISPOSITION DOES NOT VIOLATE THE
SECURITIES ACT OF 1933, AS AMENDED, THE RULES AND REGULATIONS THEREUNDER OR OTHER APPLICABLE
SECURITIES LAWS.

This WARRANT (“Warrant”) confirms that, FOR VALUE RECEIVED, 
 _____ 
(“Holder”) is
entitled to purchase, subject to the terms and conditions hereof, from NEUTRON ENTERPRISES, INC., a
Nevada corporation (the “Company”), 
 _____ 
shares of common stock, $.001 par value per share,
of the Company (the “Common Stock”), at any time during the period commencing at 9:00 a.m., Eastern
Standard Time on the
 _____ 
, 2007 (the “Commencement Date”) and, subject to Section 9
hereof, ending at 5:00 p.m. Eastern Standard Time on the
 _____ 
, 2009 (the “Termination
Date”), at an exercise price (the “Exercise Price”) of $0.35 per share of Common Stock. The number
of shares of Common Stock purchasable upon exercise of this Warrant and the Exercise Price per
share shall be subject to adjustment from time to time upon the occurrence of certain events as set
forth herein.

The shares of Common Stock or any other shares or other units of stock or other securities or
property, or any combination thereof, then receivable upon exercise of this Warrant, as adjusted
from time to time, are sometimes referred to hereinafter as “Exercise Shares.” The exercise price
per share as from time to time in effect is referred to hereinafter as the “Exercise Price.”

1. Exercise of Warrant; Issuance of Exercise Shares.

(a) Exercise of Warrant. Subject to the terms hereof, the purchase rights represented
by this Warrant are exercisable by the Holder in whole or in part, at any time, or from time to
time, by the surrender of this Warrant and the Notice of Exercise annexed hereto duly completed and
executed on behalf of the Holder, at the office of the Company (or such other office or agency of
the Company as it may designate by notice in writing to the Holder at the address of the Holder
appearing on the books of the Company) accompanied by payment of the Exercise Price in full in cash
or by bank or certified check for the Exercise Shares with respect to which this Warrant is
exercised.

 

 

 

In the event that this Warrant shall be duly exercised in part prior to the Termination Date,
the Company shall issue a new Warrant of like tenor evidencing the rights of the Holder thereof to
purchase the balance of the Exercise Shares purchasable under the Warrant so surrendered that shall
not have been purchased.

(b) Issuance of Exercise Shares: Delivery of Warrant Certificate. The Company shall,
within five (5) business days or as soon thereafter as is practicable of the exercise of this
Warrant, issue in the name of and cause to be delivered to the Holder one or more certificates
representing the Exercise Shares to which the Holder shall be entitled upon such exercise under the
terms hereof. Such certificate or certificates shall be deemed to have been issued and the Holder
shall be deemed to have become the record holder of the Exercise Shares as of the date of the
proper exercise of this Warrant.

(c) Exercise Shares Fully Paid and Non-Assessable. The Company agrees and covenants
that all Exercise Shares issuable upon the due exercise of the Warrant represented by this Warrant
certificate (“Warrant Certificate”) shall, upon issuance and payment therefor in accordance with
the terms hereof, be duly authorized, validly issued, fully paid and non-assessable and free and
clear of all taxes (other than taxes which, pursuant to Section 2 hereof, the Company shall not be
obligated to pay) or liens, charges, and security interests created by the Company with respect to
the issuance thereof.

(d) Reservation of Exercise Shares. The Company covenants that during the term that
this Warrant is exercisable, the Company will reserve from its authorized and unissued Common Stock
a sufficient number of shares to provide for the issuance of the Exercise Shares upon the exercise
of this Warrant, and from time to time will take all steps necessary to amend its articles of
incorporation to provide sufficient reserves of shares of Common Stock issuable upon the exercise
of this Warrant.

(e) Fractional Shares. The Company shall not be required to issue fractional shares
of capital stock upon the exercise of this Warrant or to deliver Warrant Certificates that evidence
fractional shares of capital stock. In the event that any fraction of an Exercise Share would,
except for the provisions of this subsection (e), be issuable upon the exercise of this Warrant,
the Company shall pay to the Holder exercising this Warrant an amount in cash equal to such
fraction multiplied by the Current Market Value of the Exercise Share on the last business day
prior to the date on which this Warrant is exercised.

For purposes hereof, the “Current Market Value means on any particular date (i) the last
closing bid price per share of the Common Stock on such date on the OTC Bulletin Board or the
registered national stock exchange on which the Common Stock is then listed, or if there is no such
price on such date, then the closing bid price on such exchange or quotation system on the date
nearest preceding such date, or (ii) if the Common Stock is not listed then on the OTC Bulletin
Board or a registered national stock exchange, the last closing bid price for a share of Common
Stock in the over-the-counter market, as reported by the OTC Bulletin Board or in the National
Quotation Bureau Inc. (or similar organization or agency succeeding to its functions of reporting
prices) at the close of business on such date, or (iii) if the Common Stock is not then reported by
the OTC Bulletin Board or the National Quotation Bureau Inc. (or similar organization or agency
succeeding to its functions of reporting prices), then the average of the “Pink Sheet” quotes for the five (5) Trading Days preceding such date of determination, or
(iv) if no such quotes or closing bid prices are available, as determined in any reasonable manner
as may be prescribed by the Board of Directors of the Company.

 

2

 

For the purposes hereof, Trading Day means (1) a day on which the Common Stock is traded on
the OTC Bulletin Board or registered national stock exchange, or (2) if the Common Stock is not
traded on the OTC Bulletin Board or a registered national stock exchange, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Inc.
(or any similar organization or agency succeeding its functions of reporting prices);
provided, however, that in the event that the Common Stock is not listed or quoted
as set forth in (1) or (2) hereof, then Trading Day shall mean any day except Saturday, Sunday and
any day which shall be a legal holiday or a day on which banking institutions in the State of New
York are authorized or required by law or other government action to close.

2. Payment of Taxes. The Company will pay all documentary stamp taxes, if any,
attributable to the initial issuance of Exercise Shares upon the exercise of this Warrant;
provided, however, that the Company shall not be required to pay any tax or taxes
that may be payable in respect of any transfer involved in the issue of any Warrant Certificates or
any certificates for Exercise Shares in a name other than that of the Holder of this Warrant
Certificate surrendered upon the exercise of this Warrant, and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid. Except as specifically provided in this
Section 2, Holder shall be responsible for the payment of all other taxes incurred in connection
with the receipt, transfer or sale of the Warrant or the Exercise Shares.

3. Mutilated or Missing Warrant Certificates. In case this Warrant shall be mutilated,
lost, stolen or destroyed, the Company may in its discretion issue, in exchange and substitution
for and upon cancellation of the mutilated Warrant, or in lieu of and in substitution for the
Warrant lost, stolen or destroyed, a new Warrant of like tenor and in the same aggregate
denomination, but only (i) in the case of loss, theft or destruction, upon receipt of evidence
satisfactory to the Company of such loss, theft or destruction of such Warrant and indemnity or
bond, if requested, also satisfactory to it and (ii) in the case of mutilation, upon surrender of
the mutilated Warrant. Applicants for such substitute Warrants shall also comply with such other
reasonable regulations and pay such other reasonable charges as the Company or its counsel may
prescribe.

4. Rights of Holder. The Holder shall not, by virtue of anything contained in this Warrant
or otherwise, be entitled to any right whatsoever, either at law or in equity, of a stockholder of
the Company, including without limitation, the right to receive dividends or to vote or to consent
or to receive notice as a shareholder in respect of the meetings of shareholders or the election of
directors of the Company or any other matter.

 

3

 

5. Registration of Transfers and Exchanges. The Warrant shall be transferable, subject to
the provisions of Section 7 hereof, upon the books of the Company, if any, to be maintained by it
for that purpose, upon surrender of this Warrant Certificate to the Company at its principal office
accompanied (if so required by the Company) by a written instrument or instruments of transfer
in form satisfactory to the Company and duly executed by the Holder thereof or by the duly
appointed legal representative thereof or by a duly authorized attorney and upon payment of any
necessary transfer tax or other governmental charge imposed upon such transfer. In all cases of
transfer by an attorney, the original letter of attorney, duly approved, or an official copy
thereof, duly certified, shall be deposited and remain with the Company. In case of transfer by
executors, administrators, guardians or other legal representatives, duly authenticated evidence of
their authority shall be produced, and may be required to be deposited and remain with the Company
in its discretion. Upon any such registration of transfer, a new Warrant shall be issued to the
transferee named in such instrument of transfer, and the surrendered Warrant shall be canceled by
the Company. This Warrant may be exchanged, at the option of the Holder thereof and without
charge, when surrendered to the Company at its principal office, or at the office of its transfer
agent, if any, for another Warrant of like tenor and representing in the aggregate the right to
purchase from the Company a like number and kind of Exercise Shares as the Warrant surrendered for
exchange or transfer, and the Warrant so surrendered shall be canceled by the Company or transfer
agent, as the case may be.

6. Adjustment of Exercise Shares and Exercise Price. The Exercise Price and the number and
kind of Exercise Shares purchasable upon the exercise of this Warrant shall be subject to
adjustment from time to time upon the happening of certain events as hereinafter provided. The
Exercise Price in effect at any time and the number and kind of securities purchasable upon
exercise of each Warrant shall be subject to adjustment as follows:

(a) In case of any consolidation or merger of the Company with another corporation (other than
a merger with another corporation in which the Company is the surviving corporation and which does
not result in any reclassification or change — other than a change in par value, or from par value
to no par value, or from no par value to par value, or as a result of a subdivision or combination
— of outstanding Common Stock issuable upon such exercise), the rights of the Holder of this
Warrant shall be adjusted in the manner described below:

(i) In the event that the Company is the surviving corporation or is merged into a wholly
owned subsidiary for the purpose of incorporating the Company in a different jurisdiction, this
Warrant shall, without payment of additional consideration therefor, be deemed modified so as to
provide that the Holder of this Warrant, upon the exercise thereof, shall procure, in lieu of each
share of Common Stock theretofore issuable upon such exercise, the kind and amount of shares of
stock, other securities, money and property receivable upon such reclassification, change,
consolidation or merger by the holder of each share of Common Stock, had exercise of this Warrant
occurred immediately prior to such reclassification, change, consolidation or merger. This Warrant
(as adjusted) shall be deemed to provide for further adjustments that shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Section 6. The provisions of this
clause (i) shall similarly apply to successive reclassifications, changes, consolidations and
mergers.

(ii) In the event that the Company is not the surviving corporation (except in the case of a
merger of the Company into a wholly owned subsidiary for the purpose of incorporating the Company
in a different jurisdiction), Holder shall be given at least fifteen (15) days prior written notice
of such transaction and shall be permitted to exercise this Warrant, to the extent it is
exercisable as of the date of such notice, during this fifteen (15) day period. Upon expiration of such fifteen (15) day period, this Warrant and all of Holder’s rights hereunder
shall terminate.

 

4

 

(b) If the Company, at any time while this Warrant, or any portion thereof, remains
outstanding and unexpired, by reclassification of securities or otherwise, shall change any of the
securities as to which purchase rights under this Warrant exist into the same or a different number
of securities of any other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the result of such change
with respect to the securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise Price therefor shall be
appropriately adjusted, all subject to further adjustment as provided in this Section 6.

(c) In case the Company shall (i) pay a dividend or make a distribution on its shares of
Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding Common Stock
into a greater number of shares, or (iii) combine or reclassify its outstanding Common Stock into a
smaller number of shares, the Exercise Price in effect at the time of the record date for such
dividend or distribution or of the effective date of such subdivision, combination or
reclassification, shall be proportionally adjusted so that the Holder of this Warrant exercised
after such date shall be entitled to receive the aggregate number and kind of shares that, if this
Warrant had been exercised by such Holder immediately prior to such date, he would have owned upon
such exercise and been entitled to receive upon such dividend, subdivision, combination or
reclassification. For example, if the Company declares a 2 for 1 stock dividend or stock split and
the Exercise Price immediately prior to such event was $0.50 per share, the adjusted Exercise Price
immediately after such event would be $0.25 per share. Such adjustment shall be made successively
whenever any event listed above shall occur. Whenever the Exercise Price payable upon exercise of
each Warrant is adjusted pursuant to this subsection (c), the number of Exercise Shares purchasable
upon exercise of this Warrant shall simultaneously be adjusted by multiplying the number of
Exercise Shares initially issuable upon exercise of this Warrant by the Exercise Price in effect on
the date hereof and dividing the product so obtained by the Exercise Price, as adjusted.

(d) In the event that at any time, as a result of an adjustment made pursuant to subsection
(a), (b) or (c) above, the Holder of this Warrant thereafter shall become entitled to receive any
Exercise Shares of the Company, other than Common Stock, thereafter the number of such other shares
so receivable upon exercise of this Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in subsections (a), (b) or (c) above.

(e) Irrespective of any adjustments in the Exercise Price or the number or kind of Exercise
Shares purchasable upon exercise of this Warrant, Warrants theretofore or thereafter issued may
continue to express the same price and number and kind of shares as are stated in the similar
Warrants initially issuable pursuant to this Warrant.

(f) Whenever the Exercise Price shall be adjusted as required by the provisions of the
foregoing Section 6, the Company shall forthwith file in the custody of its Secretary or an
Assistant Secretary at its principal office and with its stock transfer agent, if any, an officer’s
certificate showing the adjusted Exercise Price determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment, including a statement of the number of
additional shares of Common Stock, if any, and such other facts as shall be necessary to show the
reason for and the manner of computing such adjustment. Each such officer’s certificate shall be
made available at all reasonable times for inspection by Holder and the Company shall, forthwith
after each such adjustment, mail a copy by certified mail of such certificate to the Holder.

 

5

 

(g) All calculations under this Section 6 shall be made to the nearest cent or to the nearest
one one-hundredth (1/100th) of a share, as the case may be.

7. Investment Intent, Exercise Restrictions and Transfer Restrictions.

(a) Neither this Warrant nor any Exercise Share may be offered for sale or sold, or otherwise
transferred or sold in any transaction which would constitute a sale thereof within the meaning of
the Securities Act of 1933, as amended (the “1933 Act”), unless (i) such security has been
registered for sale under the 1933 Act and registered or qualified under applicable state
securities laws relating to the offer and sale of securities, or (ii) exemptions from the
registration requirements of the 1933 Act and the registration or qualification requirements of all
such state securities laws are available and the Company shall have received an opinion of counsel
satisfactory to the Company that the proposed sale or other disposition of such securities may be
effected without registration under the 1933 Act and would not result in any violation of any
applicable state securities laws relating to the registration or qualification of securities for
sale, such counsel and such opinion to be satisfactory to the Company.

(b) The certificates evidencing any Exercise Shares issued upon the exercise of this Warrant
shall have endorsed thereon (except to the extent that the restrictions described in any such
legend are no longer applicable) the following legend, appropriate notations thereof will be made
in the Company’s stock transfer books, and stop transfer instructions reflecting these restrictions
on transfer will be placed with the transfer agent of the Exercise Shares.

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. THE
SECURITIES REPRESENTED HEREBY HAVE BEEN TAKEN BY THE REGISTERED OWNER FOR INVESTMENT
PURPOSES ONLY, AND NOT WITH A VIEW TO RESALE OR DISTRIBUTION THEREOF, AND MAY NOT BE
SOLD, TRANSFERRED OR DISPOSED OF WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH TRANSFER OR DISPOSITION DOES NOT VIOLATE THE SECURITIES ACT OF
1933, AS AMENDED, THE RULES AND REGULATIONS THEREUNDER OR OTHER APPLICABLE
SECURITIES LAWS.

8. Indemnification. Holder agrees to indemnify, defend and hold harmless the Company and
its respective affiliates and agents from and against any and all demands, claims, actions or
causes of action, judgments, assessments, losses, liabilities, damages or penalties and reasonable
attorneys’ fees and related disbursements incurred by the Company that arise out of or result
from a breach of any representations, warranties, covenants or agreements made by Holder herein,
and Holder agrees that in the event of any breach of any representations, warranties, covenants or
agreements made by Holder herein, the Company may, at its option, forthwith rescind the issuance of
this Warrant to Holder.

 

6

 

9. Call. Notwithstanding anything herein to the contrary, the Company may, at its
option, call (a “Call”) up to one hundred percent (100%) of this Warrant if the Current Market
Value of the Common Stock has been equal to or greater than $0.75 (as may be adjusted for any stock
splits or combinations of the Common Stock) for a period of ten (10) consecutive Trading Days
immediately prior to the date of delivery of the Call Notice (a “Call Notice Period”), by providing
the Holder of this Warrant written notice pursuant to Section 11 (the “Call Notice”). The Call
Notice shall set forth (a) the number of Exercise Shares subject to the Call Notice (the “Called
Exercise Shares”) and (b) the date on which this Warrant shall terminate with respect to the Called
Exercise Shares (the “Early Termination Date”). The rights and privileges granted pursuant to this
Warrant with respect to the Called Exercise Shares shall expire on the Early Termination Date if
this Warrant is not exercised with respect to such Called Exercise Shares prior to such Early
Termination Date. In the event this Warrant is not exercised with respect to the Called Exercise
Shares prior to such Early Termination Date, upon the Holder tendering to the Company this Warrant
Certificate, the Company shall remit to the Holder of this Warrant (i) $.01 per Called Exercise
Share and (ii) a new Warrant to purchase that number of Exercise Shares, if any, which shall not
have been subject to the Call Notice.

10. Registration Rights. The Holder shall be entitled to the rights and subject to the
obligations set forth in “Registration Rights Provisions” attached hereto and made a part hereof as
Appendix B.

11. Notices. All notices or other communications under this Warrant shall be in writing
and shall be deemed to have been given on the day of delivery if delivered by hand, on the fifth
day after deposit in the mail if mailed by certified mail, postage prepaid, return receipt
requested, or on the next business day after mailing if sent by a nationally recognized overnight
courier such as federal express, addressed as follows:

If to the Company:

Neutron Enterprises, Inc.

3500 de Maisonneuve West

Suite 1650

Montreal, Quebec, Canada H3Z 3C1

Attention: Chief Executive Officer

with a copy to:

Fox Rothschild LLP

997 Lenox Drive, Building 3

Lawrenceville, NJ 08646

Attention: Vincent A. Vietti, Esquire

 

7

 

and to the Holder at the address of the Holder appearing on the books of the Company
or the Company’s transfer agent, if any.

Either of the Company or the Holder may from time to time change the address to which notices
to it are to be mailed hereunder by notice in accordance with the provisions of this Section 11.

12. Supplements and Amendments. The Company may from time to time supplement or amend this
Warrant without the approval of the Holder of this Warrant in order to cure any ambiguity or to
correct or supplement any provision contained herein which may be defective or inconsistent with
any other provision, or to make any other provisions in regard to matters or questions herein
arising hereunder which the Company may deem necessary or desirable and which shall not materially
adversely affect the interests of the Holder. Except as set forth in the immediately preceding
sentence, this Warrant may not be amended, modified or supplemented except by an instrument or
instruments in writing signed by the party against whom enforcement of any such amendment,
modification or supplement is sought.

13. Successors and Assigns. This Warrant shall inure to the benefit of and be binding on
the respective successors, assigns and legal representatives of the Holder and the Company.

14. Severability. If for any reason any provision, paragraph or terms of this Warrant is
held to be invalid or unenforceable, all other valid provisions herein shall remain in full force
and effect and all terms, provisions and paragraphs of this Warrant shall be deemed to be
severable.

15. Governing Law. This Warrant shall be governed by and construed in accordance with the
laws of the State of Nevada, without regard to the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.

16. Headings. Section and subsection headings used herein are included herein for
convenience of reference only and shall not affect the construction of this Warrant nor constitute
a part of this Warrant for any other purpose.

IN WITNESS WHEREOF, the Company has caused these presents to be duly executed as of the
 _____ 

day of
 _____ 
, 2007.

	 	 	 	 	 
	 	 	NEUTRON ENTERPRISES, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:

 

8

 

APPENDIX A

NOTICE OF EXERCISE

	 	 	 
	To:

	 	Neutron Enterprises, Inc.
	 

	 	3500 de Maisonneuve West
	 

	 	Suite 1650
	 

	 	Montreal, Quebec, Canada H3Z 3C1
	 
	 	 
	 

	 	Attention: Chief Executive Officer

(1) The undersigned hereby elects to purchase
 _____ 
shares of Common Stock of Neutron
Enterprises, Inc., a Nevada corporation, pursuant to the terms of the attached Warrant, and tenders
herewith payment of the Exercise Price for such shares in full in accordance with the terms of the
Warrant.

(2) In exercising this Warrant, the undersigned hereby confirms and acknowledges that the
shares of Common Stock to be issued upon conversion hereof are being acquired solely for the
account of the undersigned, not as a nominee for any other party, and for investment purposes only,
and that the undersigned will not offer, sell or otherwise dispose of any such shares of Common
Stock except under circumstances that will not result in a violation of the Securities Act of 1933,
as amended, any state securities laws or other applicable securities laws.

(3) Terms not otherwise defined in this Notice of Exercise shall have the meanings ascribed to
such terms in the attached Warrant

(4) Please issue a certificate or certificates representing said shares of Common Stock in the
name of the undersigned.

	 	 	 
	 

	 	HOLDER
	 
	 	 
	 

	 	 
	(Date)

	 	(Signature)

 

 

 

APPENDIX B

REGISTRATION RIGHTS PROVISIONS

Registration Rights. The Company and Holder covenant and agree as follows:

1.1 For the purpose of these Registration Rights Provisions, the following definitions shall
apply:

“Agreement” shall mean these Registration rights Provisions.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the SEC thereunder, all as the same shall be in effect at the time.

“Company” shall mean Neutron Enterprises, Inc.

“Offering” shall mean that certain offering by the Company of up to 4,000,000 or more units at
a purchase price of US$0.25 per unit.

“Person” shall mean an individual, partnership (general or limited), corporation, limited
liability company, joint venture, business trust, cooperative, association or other form of
business organization, whether or not regarded as a legal entity under applicable law, a trust
(inter vivos or testamentary), an estate of a deceased, insane or incompetent person, a
quasi-governmental entity, a government or any agency, authority, political subdivision or other
instrumentality thereof, or any other entity.

“Register,” “registered,” and “registration” shall refer to a registration effected by
preparing and filing a registration statement in compliance with the Securities Act, and the
declaration or order of effectiveness of such registration statement or document by the SEC.

“Registration Statement” shall mean any registration statement of the Company filed with the
SEC pursuant to the provisions of Section 1.2 of this Agreement, which covers the resale of the
Restricted Stock on an appropriate form then permitted by the SEC to be used for such registration
and the sales contemplated to be made thereby under the Securities Act, or any similar rule that
may be adopted by the SEC, and all amendments and supplements to such registration statement,
including any pre- and post- effective amendments thereto, in each case including the prospectus
contained therein, all exhibits thereto and all materials incorporated by reference therein.

“Restricted Stock” shall mean (i) the Exercise Shares; and (ii) any additional shares of
Common Stock of the Company issued or issuable after the date hereof in respect of the Exercise
Shares, by way of a stock dividend or stock split; provided that as to any particular shares of
Restricted Stock, such securities shall cease to constitute Restricted Stock when (x) a
Registration Statement with respect to the sale of such securities shall have become effective
under the Securities Act and such securities shall have been disposed of thereunder, (y) such
securities are permitted to be transferred pursuant to Rule 144 (or any successor provision to such
rule) under the Securities Act without restriction or (z) such securities are otherwise freely
transferable to the public without further registration under the Securities Act.

 

2

 

“Selling Stockholders” shall mean Holder and any other holder of Warrants issued in the
Offering, and their respective successors and assigns.

“SEC” shall mean the United States Securities and Exchange Commission.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Subscription Agreement” shall mean that certain Subscription Agreement by and between the
Holder and the Company dated on or about the date of the Warrant.

Capitalized terms used and not otherwise defined herein shall have the meanings ascribed thereto in
the Subscription Agreement or the Warrant to which this Annex is attached, as applicable .

1.2. Registration of the Securities.

(a) The Company shall use its reasonable best efforts to prepare and file with the SEC, within
120 days of the date the Subscription Agreement is executed by the Company, a Registration
Statement under the Securities Act to permit the public sale of the Restricted Stock, and to cause
such Registration Statement to be declared effective as soon as reasonably practicable thereafter.
The Selling Stockholders shall furnish such information as may be reasonably requested by the
Company in order to include such Restricted Stock in such Registration Statement. If any Selling
Stockholder decides not to include all of its Restricted Stock in any registration statement
thereafter filed by the Company, such Selling Stockholder shall provide written notice to the
Company and shall continue to have the right to include any Restricted Stock in any subsequent
registration statement or registration statements as may be filed by the Company with respect to
offerings of its securities, all upon the terms and conditions set forth herein. In the event that
any registration pursuant to this Section 1.2(a) is terminated or withdrawn, the Company shall use
its reasonable best efforts to prepare and file with the SEC, as soon thereafter as practicable, a
Registration Statement under the Securities Act to permit the public sale of the Restricted Stock.

(b) In the event that any Selling Stockholder decides not to include its Restricted Stock in
the Registration Statement filed pursuant to Section 1.2(a) above, the Company shall notify such
Selling Stockholders in writing at least twenty (20) days prior to the filing of any registration
statement under the Securities Act for the purpose of registering securities of the Company,
excluding registration statements on SEC Forms S-4, S-8 or any similar or successor forms, and will
afford each such Selling Stockholder an opportunity to include in such registration statement all
or part of such Restricted Stock held by such Selling Stockholder. Each Selling Stockholder
desiring to include in any such registration statement all or any part of the Restricted Stock held
by it shall, within ten (10) days after the above-described notice from the Company, so notify the
Company in writing. Such notice shall state the intended method of disposition of the Restricted
Stock by such Selling Stockholder. If a Selling Stockholder decides not to include all of its
Restricted Stock in any registration statement thereafter filed by the Company, such Selling
Stockholder shall nevertheless continue to have the right to include any Restricted Stock in any
subsequent registration statement or registration statements as may be filed by the Company with
respect to offerings of its securities, all upon the terms and conditions set forth herein. The
Company may, without the consent of the Selling Stockholders, withdraw such registration statement
prior to its becoming effective if the proposal to register the securities proposed to be
registered thereby is abandoned. If the registration pursuant to Section 1.2(b) shall be, in whole
or in

 

3

 

part, an underwritten public offering of Common Stock on behalf of the Company, all Selling
Stockholders proposing to distribute their Restricted Stock through such underwriting shall enter
into an underwriting agreement in customary form with the underwriter or underwriters selected for
such underwriting by the Company. If the managing underwriter thereof advises the Company in
writing that in its opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in an orderly manner in such offering within a price range
acceptable to the Company, the Company shall include in such registration (i) first, the securities
the Company proposes to sell, and (ii) second, any securities that are subject to demand or
mandatory registration rights and (iii) third Restricted Stock and any other registrable securities
eligible and requested to be included in such registration to the extent that the number of shares
to be registered under this clause (iii) will not, in the opinion of the managing underwriter,
adversely affect the offering of the securities pursuant to clauses (i) or (ii). In such a case,
shares shall be registered pro rata among the holders of such Restricted Stock and registrable
securities on the basis of the number of shares eligible for registration that are owned by all
such holders and requested to be included in such registration.

(c) Notwithstanding anything to the contrary contained herein, the Company’s obligation in
Sections 1.2(a) and 1.2(b) above shall extend only to the inclusion of the Restricted Stock in a
Registration Statement. The Company shall have no obligation to assure the terms and conditions of
distribution, to obtain a commitment from an underwriter relative to the sale of the Restricted
Stock or to otherwise assume any responsibility for the manner, price or terms of the distribution
of the Restricted Stock.

(d) The Company shall have the right to terminate or withdraw any registration initiated by it
under this Section 1.2 prior to the effectiveness of such registration without thereby incurring
liability to the holders of the Restricted Stock, regardless of whether any holder has elected to
include securities in such registration. The Registration Expenses (as defined in Section 1.5) of
such withdrawn registration shall be borne by the Company in accordance with Section 1.5 hereof.

1.3. Registration Procedures. Whenever it is obligated to register any Restricted
Stock pursuant to this Agreement, the Company shall:

(a) prepare and file with the SEC a Registration Statement with respect to the Restricted
Stock in the manner set forth in Section 1.2 hereof and use its reasonable best efforts to cause
such Registration Statement to become effective as promptly as possible and to remain effective
until the earlier of: (i) the sale of all shares of Restricted Stock covered thereby, (ii) the
availability under Rule 144 for the Selling Stockholder to freely resell without restriction all
Restricted Stock covered thereby, or (iii) the Termination Date of the Warrant;

(b) prepare and file with the SEC such amendments (including post-effective amendments) and
supplements to such Registration Statement and the prospectus used in connection therewith as may
be necessary to keep such Registration Statement effective for the period specified in Section
1.3(a) above and to comply with the provisions of the Act with respect to the disposition of all
Restricted Stock covered by such Registration Statement in accordance with the intended method of
disposition set forth in such Registration Statement for such period;

(c) furnish to the Selling Stockholders such number of copies of the Registration Statement
and the prospectus included therein (including each preliminary prospectus) as such person may reasonably request in order to facilitate the public sale or other disposition
of the Restricted Stock covered by such Registration Statement;

 

4

 

(d) use its reasonable best efforts to register or qualify the Restricted Stock covered by
such Registration Statement under the state securities laws of such jurisdictions as any Selling
Stockholder shall reasonably request; provided, however, that the Company shall not
for any such purpose be required to qualify generally to transact business as a foreign corporation
in any jurisdiction where it is not so qualified or to consent to general service of process in any
such jurisdiction;

(e) in the event of any underwritten public offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of
such offering. Each Selling Stockholder participating in such underwriting shall also enter into
and perform its obligations under such an agreement, as described in Section 1.2(b);

(f) immediately notify each Selling Stockholder at any time when a prospectus relating thereto
is required to be delivered under the Act, of the happening of any event as a result of which the
prospectus contained in such Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required or necessary to be stated
therein in order to make the statements contained therein not misleading in light of the
circumstances under which they were made. The Company will use reasonable efforts to amend or
supplement such prospectus in order to cause such prospectus not to include any untrue statement of
a material fact or omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances under which they were made;

(g) prepare and file with the SEC such amendments and supplements to such Registration
Statement and the prospectus used in connection with such Registration Statements as may be
necessary to comply with the provisions of the Securities Act with respect to the disposition of
all securities covered by such Registration Statement;

(h) use its reasonable best efforts to list the Restricted Stock covered by such Registration
Statement on each exchange or automated quotation system on which similar securities issued by the
Company are then listed (with the listing application being made at the time of the filing of such
Registration Statement or as soon thereafter as is reasonably practicable);

(i) notify each Selling Stockholder of any threat by the SEC or state securities commission to
undertake a stop order with respect to sales under the Registration Statement; and

(j) cooperate in the timely removal of any restrictive legends from the shares of Restricted
Stock in connection with the resale of such shares covered by an effective Registration Statement.

1.4. Delay of Registration. No Selling Stockholder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or implementation of this Section
1.

 

5

 

1.5 Expenses.

(a) For the purposes of this Section 1.5, the term “Registration Expenses” shall mean: all
expenses incurred by the Company in complying with Section 1.2 and 1.3 above, including, without
limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel
and independent public accountants for the Company, fees under state securities laws, fees of the
National Association of Securities Dealers, Inc. (“NASD”), fees and expenses of listing shares of
Restricted Stock on any securities exchange or automated quotation system on which the Company’s
shares are listed and fees of transfer agents and registrars. The term “Selling Expenses” shall
mean: all underwriting discounts and selling commissions applicable to the sale of Restricted Stock
and all accountable or non-accountable expenses paid to any underwriter in respect of such sale.

(b) Except as otherwise provided herein, the Company will pay all Registration Expenses in
connection with the Registration Statements filed pursuant to Section 1.2 above. All Selling
Expenses in connection with any Registration Statements filed pursuant to Section 1.2 above shall
be borne by the Selling Stockholders pro rata on the basis of the number of shares registered by
each Selling Stockholder whose shares of Restricted Stock are covered by such Registration
Statement, or by such persons other than the Company (except to the extent the Company may be a
seller) as they may agree.

1.6. Obligations of the Selling Stockholders.

(a) In connection with each registration hereunder, each Selling Stockholder will furnish to
the Company in writing such information with respect to it and the securities held by it and the
proposed distribution by it, as shall be reasonably requested by the Company in order to assure
compliance with applicable federal and state securities laws as a condition precedent to including
the Selling Stockholder’s Restricted Stock in the Registration Statement. Each Selling Stockholder
shall also promptly notify the Company of any changes in such information included in the
Registration Statement or prospectus as a result of which there is an untrue statement of material
fact or an omission to state any material fact required or necessary to be stated therein in order
to make the statements contained therein not misleading in light of the circumstances under which
they were made.

(b) In connection with the filing of the Registration Statement, each Selling Stockholder
shall furnish to the Company in writing such information and affidavits as the Company reasonably
requests for use in connection with such Registration Statement or prospectus.

(c) In connection with each registration pursuant to this Agreement, each Selling Stockholder
agrees that it will not effect sales of any Restricted Stock until notified by the Company of the
effectiveness of the Registration Statement, and thereafter will suspend such sales after receipt
of telegraphic or written notice from the Company to suspend sales to permit the Company to correct
or update a Registration Statement or prospectus. At the end of any period during which the
Company is obligated to keep a Registration Statement current, each Selling Stockholder shall
discontinue sales of Restricted Stock pursuant to such Registration Statement upon receipt of
notice from the Company of its intention to remove from registration the Restricted Stock covered
by such Registration Statement that remains unsold, and each Selling Stockholder shall notify the
Company of the number of shares registered which remain unsold immediately upon receipt of such
notice from the Company.

 

6

 

1.7. Information Blackout and Holdbacks.

(a) At any time when a Registration Statement effected pursuant to Section 1.2 is effective,
upon written notice from the Company to Selling Stockholder that the Company has determined in good
faith that the sale of Restricted Stock pursuant to the Registration Statement would require
disclosure of non-public material information, Purchaser shall suspend sales of Restricted Stock
pursuant to such Registration Statement until such time as the Company notifies Purchaser that such
material information has been disclosed to the public or has ceased to be material, or that sales
pursuant to such Registration Statement may otherwise be resumed.

(b) Notwithstanding any other provision of this Agreement, Selling Stockholder shall not
effect any public sale or distribution (including sales pursuant to Rule 144 under the Securities
Act), if and when available, of equity securities of the Company, or any securities convertible
into or exchangeable or exercisable for such securities, during the thirty (30) days prior to the
commencement of any primary offering to be undertaken by the Company of shares of its unissued
Common Stock (“Primary Offering”), which may also include other securities, and ending one hundred
twenty (120) days after completion of any such Primary Offering, unless the Company, in the case of
a non-underwritten Primary Offering, or the managing underwriter, in the case of an underwritten
Primary Offering, otherwise agree.

1.8. Indemnification.

(a) The Company agrees to indemnify, to the extent permitted by law, each Selling Stockholder,
such Selling Stockholder’s respective partners, officers, directors, underwriters and each Person
who controls any Selling Stockholder (within the meaning of the Securities Act) against all losses,
claims, damages, liabilities and expenses caused by (i) any untrue statement of or alleged untrue
statement of material fact contained in the Registration Statement, prospectus or preliminary
prospectus or any amendment or supplement thereto, (ii) any omission of or alleged omission of a
material fact required to be stated therein or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law in connection with the offering covered by such
Registration Statement (“Violations”); provided, however, that the indemnity
agreement contained in this Section 1.8(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected without the consent of
the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable in
for any loss, claim, damage, liability or action to the extent that it arises out of or is based
upon a Violation which occurs in reliance upon and in conformity with information furnished to the
Company by such Selling Stockholder, partner, officer, director, underwriter or controlling person
of such Selling Stockholder.

(b) To the extent permitted by law, each Selling Stockholder shall indemnify and hold harmless
the Company, each of its directors, its officers and each person, if any, who controls the Company
within the meaning of the Securities Act, any underwriter and any other Selling Stockholder selling
securities under such registration statement or any of such other Selling Stockholder’s partners,
directors or officers or any person who controls such Selling Stockholder, against any losses,
claims, damages or liabilities (joint or several) to which the Company or any such director,
officer, controlling person, underwriter or other such Selling Stockholder, or partner, director,
officer or controlling person of such other Selling Stockholder, may become subject under the
Securities Act, the

 

7

 

Exchange Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs (i) in reliance upon and in
conformity with information furnished by such Selling Stockholder to the Company, (ii) as a result
of any failure to deliver a copy of the prospectus relating to such Registration Statement, or
(iii) as a result of any disposition of the Restricted Stock in a manner that fails to comply with
the permitted methods of distribution identified within the Registration Statement.

(c) Any Person entitled to indemnification hereunder shall (i) give prompt written notice to
the indemnifying party of any claim with respect to which it seeks indemnification (provided that
the failure to give prompt notice shall not impair any Person’s right to indemnification hereunder
to the extent such failure has not prejudiced the indemnifying party), and (ii) unless in such
indemnified party’s reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume
the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such
defense is assumed, the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be unreasonably
withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a
claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between such indemnified party
and any other of such indemnified parties with respect to such claim.

(d) If the indemnification provided for in this Section 1.8 is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages
or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified
party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect the relative fault of the indemnifying party on the one
hand and of the indemnified party on the other in connection with the violation(s) described in
Section 1.8(a) that resulted in such loss, claim, damage or liability, as well as any other
relevant equitable considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by the indemnified party
and the parties’ relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission; provided, that in no event shall any contribution by a
Selling Stockholder hereunder exceed the net proceeds from the offering received by such Selling
Stockholder.

(e) The indemnification provided for under this Agreement shall remain in full force and
effect regardless of any investigation made by or on behalf of the indemnified party or any
officer, director or controlling Person of such indemnified party and shall survive the transfer of
securities. The Company also agrees to make such provisions as are reasonably requested by any
indemnified party for contribution to such party in the event the Company’s indemnification is
unavailable for any reason.

 

8

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00134-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00134-of-00352.parquet"}]]