Document:

Exhibit-FormofWarrantAgreement

NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER SECURITIES LAWS, AND NO SUCH SECURITIES MAY BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNDER SAID ACT AND LAWS OR AN EXEMPTION THEREFROM.
 

SIGA TECHNOLOGIES, INC.
 
COMMON STOCK PURCHASE WARRANT
 
1.    Issuance; Certain Definitions.
 
1.1    For good and valuable consideration, the receipt of which is hereby acknowledged by SIGA TECHNOLOGIES, INC., a Delaware corporation (the “Company”), MacAndrews & Forbes LLC, a Delaware limited liability corporation (the “Original Holder”), or its registered assigns, is hereby granted the right to purchase at any time until 5:00 P.M., New York City time, on the Expiration Date, 250,000 fully paid and non-assessable shares of Common Stock, at an initial exercise price per share (the “Exercise Price”) of $3.29 per share, subject to adjustment as set forth herein.  The shares of Common Stock issued upon exercise of this Warrant, as adjusted from time to time pursuant to Section 6 hereof, are referred to as “Consideration Warrant Shares.”  This Warrant is being issued as consideration for the services to be performed by the Original Holder or its affiliates pursuant to the Services Agreement.
 
1.2    As used in this Warrant, the following terms have the respective meanings set forth below:
 
“Actual Minimum” has the meaning assigned to it in Section 11.2 hereof.
 
“Affiliate” means, with respect to any specified Person, (i) any other Person 50% or more of whose Outstanding voting securities are directly or indirectly owned, controlled or held with the power to vote by such specified Person or (ii) any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Person.  For purposes of this definition, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person by virtue of ownership of voting securities, by contract or otherwise.
 
“Appraisal Procedure” means the following procedure to determine the fair market value, as to any security, for purposes of the definition of “Fair Market Value” or the fair market value, as to any other property (in either case, the “Valuation Amount”).  The Valuation Amount shall be determined in good faith jointly by the Board of Directors and the Holder; provided, however, that if such parties are not able to agree on the Valuation Amount within a reasonable period of time (not to exceed 20 Business Days) the Valuation Amount shall be determined by an investment banking firm of national reputation, which firm shall be reasonably acceptable to the Board of Directors and the Holder.  If the Board of Directors and the Holder are unable to agree upon an acceptable investment banking firm within 10 days after the date either party proposed that one be selected, the investment banking firm will be selected by an arbitrator located in New York City, New York, selected by the American Arbitration Association (or if such organization ceases to exist, the arbitrator shall be chosen by a court of competent jurisdiction). The arbitrator shall select the investment banking firm (within 10 days of his appointment) from a list, jointly prepared by the Board of Directors and the Holder, of not more than six investment banking firms of national reputation in the United States, of which no more than three may be named by the Board of Directors and no more than three may be named by the Holder.  The arbitrator may consider, within the 10-day period allotted, arguments from the parties regarding which investment banking firm to choose, but the selection by the arbitrator shall be made in its sole discretion from the list of six.  The Board of Directors 

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and the Holder shall submit their respective valuations and other relevant data to the investment banking firm, and the investment banking firm shall, within 30 days of its appointment, make its own determination of the Valuation Amount.  The determination of the final Valuation Amount by such investment banking firm shall be final and binding upon the parties.  The Company shall pay all of the fees and expenses of the investment banking firm and arbitrator (if any) used to determine the Valuation Amount.  If required by any such investment banking firm or arbitrator, the Company shall execute a retainer and engagement letter containing reasonable terms and conditions, including, without limitation, customary provisions concerning the rights of indemnification and contribution by the Company in favor of such investment banking firm or arbitrator and its officers, directors, partners, employees, agents and Affiliates.
 
“Board of Directors” means the board of directors of the Company.
 
“Business Day” means any day that is not a Saturday or Sunday or a day on which banks are required or permitted to be closed in the State of New York.

“Common Stock” means the Common Stock of the Company, par value $0.0001 per share, as constituted on the Original Issue Date, and any capital stock into which such Common Stock may thereafter be changed, and shall also include (i) capital stock of the Company of any other class (regardless of how denominated) issued to the holders of shares of any Common Stock upon any reclassification thereof which is not preferred as to dividends or liquidation over any other class of stock of the Company and which is not subject to redemption and (ii) shares of common stock of any successor or acquiring corporation received by or distributed to the holders of Common Stock of the Company in the circumstances contemplated by Section 6.5 hereof.
 
“Company” has the meaning assigned to it in Section 1.1 hereof.

“Consideration Warrant Shares” has the meaning assigned to it in Section 1.1 hereof.
 
“Designated Office” has the meaning assigned to it in Section 11.3 hereof.
 
“Excluded Stock” has the meaning assigned to it in Section 6.10 hereof.
 
“Exercise Date” has the meaning assigned to it Section 2.1(a) hereof.
 
 “Exercise Price” means, in respect of a share of Common Stock at any date herein specified, the initial Exercise Price set forth in Section 1.1 hereof, as adjusted from time to time pursuant to Section 6 hereof.
 
“Expiration Date” means April 29, 2015.
 
“Fair Market Value” means, as to any security, the Twenty Day Average of the average closing prices of such security’s sales on all domestic securities exchanges on which such security may at the time be listed, or, if there have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day such security is not so listed, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar or successor organization (and in each such case excluding any trades that are not bona fide, arm’s length transactions).  If at any time such security is not listed on any domestic securities exchange or quoted on the domestic over-the-counter market, the “Fair Market Value” of such security shall be the fair market value thereof as determined in accordance with the Appraisal Procedure, using any appropriate valuation method, assuming an arms-length sale to an independent party.
 
“Form of Assignment” has the meaning assigned to it in Section 4.1 hereof.
 

“Governmental Entity” means any national, federal, state, municipal, local, territorial, foreign or other government or any department, commission, board, bureau, agency, regulatory authority or instrumentality thereof, or any court, judicial, administrative or arbitral body or public or private tribunal.
 
“Holder” means (a) with respect to this Warrant, the Person in whose name the Warrant set forth herein is registered on the books of the Company maintained for such purpose and (b) with respect to any other Warrant or Consideration Warrant Shares, the Person in whose name such Warrant or Consideration Warrant Shares is registered on the books of the Company maintained for such purpose.
 
“Issuable Minimum” has the meaning assigned to it in Section 11.2 hereof.
 
“Lien” means any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Uniform Commercial Code or comparable law of any jurisdiction).
 
“Notice of Exercise” has the meaning assigned to it in Section 2.1(a) hereof.

“Original Issue Date” means April 30, 2013.

 “Outstanding” means, (a) when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of the Company or any Subsidiary, and shall include all shares issuable in respect of Outstanding scrip or any certificates representing fractional interests in shares of Common Stock and (b) when used with reference to Warrants, at any date as of which the number thereof is to be determined, all issued Warrants.
 
“Permitted Transferee” means (i) any Affiliate of the Holder, including, without limitation, directors, executives and officers of the Holder, (ii) any member of the family of any Affiliate of the Holder, including any such Person’s spouse and descendants and any trust, partnership, corporation, limited liability company or other entity for the benefit of such spouse and/or descendants to whom or which any of the Securities have been transferred by any such Person for estate or tax planning purposes, (iii) any charity or foundation to which the Securities have been transferred by the Holder or any Person or entity described in clause (i) or (ii) above for estate or tax planning or charitable purposes, or (iv) the beneficiary of any bona fide pledge by the Holder of any of the Securities.
 
“Person” means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, incorporated organization, association, corporation, institution, Governmental Entity or any other entity.
 
“Reserved Spin Off Securities” has the meaning assigned to it in Section 6.2 hereof.
 
“SEC” means the U.S. Securities and Exchange Commission or any other federal agency then administering the Securities Act and other federal securities laws.
 
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the time.

“Services Agreement” means that certain Services Agreement, dated April 30, 2013, by and between the Original Holder or one if its affiliates, on the one hand, and the Company, on the other hand.
 
“Spin Off Securities” has the meaning assigned to it in Section 6.2 hereof.

 
“Subsidiary” means, with respect to any Person, any corporation, association, trust, limited liability company, partnership, joint venture or other business association or entity (i) at least 50% of the Outstanding voting securities of which are at the time owned or controlled, directly or indirectly, by such Person or (ii) with respect to which the Company possesses, directly or indirectly, the power to direct or cause the direction of the affairs or management of such Person.
 
“Transfer” means any disposition of any Warrant or Consideration Warrant Shares or of any interest therein, which would constitute a “sale” thereof within the meaning of the Securities Act.
 
“Twenty Day Average” means, with respect to any prices and in connection with the calculation of Fair Market Value, the average of such prices over the 20 Business Days ending on the Business Day immediately prior to the day as of which Fair Market Value is being determined.
 
“Warrant Price” means an amount equal to (i) the number of Consideration Warrant Shares being purchased upon exercise of this Warrant pursuant to Sections 1 and 2 hereof, multiplied by (ii) the Exercise Price.
 
“Warrants” means these Warrants and all warrants issued upon transfer, division or combination of, or in substitution for, these Warrants.
 
2.    Exercise of Warrants.
 
2.1    Manner of Exercise.
 
(a) This Warrant is exercisable in whole or in part at any time and from time to time on any Business Day from and after the Original Issue Date and at any time until 5:00 P.M., New York time, on the Expiration Date; provided, that, the Warrant shall not be exercisable during any time during which there is an uncured breach by the Original Holder or its affiliates of any obligation to perform services under the Services Agreement.  Such exercise shall be effectuated by submitting to the Company at its Designated Office (i) a completed and duly executed written notice of the Holder’s election to exercise this Warrant (a “Notice of Exercise”) (substantially in the form attached to this Warrant as Annex A) indicating the Consideration Warrant Shares then being purchased pursuant to such exercise, together with this Warrant and (ii) payment to the Company of the Warrant Price. The date on which such delivery and payment shall have taken place being sometimes referred to as the “Exercise Date.”
 
(b) Upon receipt by the Company of such Notice of Exercise, surrender of this Warrant and payment of the Warrant Price (in accordance with Section 2.1(c) hereof), the Holder shall be entitled to receive as promptly as practicable, and in any event within five Business Days thereafter, a certificate or certificates for Consideration Warrant Shares so purchased in such denomination or denominations as the exercising Holder shall reasonably request in the Notice of Exercise, registered in the name of the Holder or, subject to Section 4 hereof, such other name as shall be designated in the Notice of Exercise, together with cash in lieu of any fraction of a share, as provided in Section 2.3 hereof.  If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing the Consideration Warrant Shares being issued, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the remaining Consideration Warrant Shares underlying this Warrant.  Such new Warrant shall in all other respects be identical to this Warrant.  This Warrant shall be deemed to have been exercised and such certificate or certificates of Consideration Warrant Shares shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such Consideration Warrant Shares for all purposes, as of the Exercise Date.
 
(c) Payment of the Warrant Price shall be made at the option of the Holder by one or more of the following methods: (i) by delivery of a certified or official bank check or by wire transfer of immediately available funds in the amount of such Warrant Price payable to the order of the Company, (ii) by instructing the Company to withhold 

a number of Consideration Warrant Shares then issuable upon exercise of this Warrant with an aggregate Fair Market Value equal to such Warrant Price, (iii) by surrendering to the Company shares of Common Stock previously acquired by the Holder with an aggregate Fair Market Value equal to such Warrant Price, or (iv) any combination of the foregoing.  In the event of any withholding of Consideration Warrant Shares or surrender of Common Stock pursuant to clause (ii), (iii) or (iv) above where the number of shares whose Fair Market Value is equal to the Warrant Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount determined in accordance with Section 2.3 hereof.
 
2.2    Payment of Taxes.  All Consideration Warrant Shares issuable upon the exercise of this Warrant pursuant to the terms hereof shall be validly issued, fully paid and non-assessable, issued without violation of any preemptive or similar rights of any stockholder of the Company and free and clear of all Liens.  The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issue or delivery thereof.  The Company shall not, however, be required to pay any tax or governmental charge which may be issuable upon exercise of this Warrant payable in respect of any Transfer involved in the issue and delivery of Consideration Warrant Shares in a name other than that of the holder of the Warrants to be exercised, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid.
 
2.3    Fractional Shares.  The Company shall not be required to issue a fractional share of Common Stock upon exercise of any Warrant.  As to any fraction of a share that the Holder of one or more Warrants, the rights under which are exercised in the same transaction, would otherwise be entitled to purchase upon such exercise, the Company shall pay to such Holder an amount in cash equal to such fraction multiplied by the Fair Market Value of one share of Common Stock on the Exercise Date.
 
3.    Reservation and Authorization of Common Stock.  The Company shall at all times during the term of this Warrant reserve for issuance upon exercise of the then outstanding balance of this Warrant such number of shares of its Common Stock as shall be required for issuance of the Consideration Warrant Shares.  Before taking any action that would result in an adjustment in the number of Consideration Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction over such action.  If any Consideration Warrant Shares required to be reserved for issuance upon exercise of Warrants require registration or qualification with any Governmental Entity (other than under the Securities Act or any state securities law) before such shares may be so issued, the Company will in good faith and as expeditiously as possible and at its expense endeavor to cause such shares to be duly registered.  Before taking any action that would cause an adjustment reducing the Exercise Price below the then par value (if any) of the shares of Common Stock deliverable upon exercise of the Warrant or that would cause the number of Consideration Warrant Shares issuable upon exercise of the Warrant to exceed (when taken together with all other Outstanding shares of Common Stock) the number of Consideration Warrant Shares that the Company is authorized to issue, the Company will take any corporate action that, in the opinion of its counsel, is necessary in order that the Company may validly and legally issue the full number of fully paid and non-assessable shares of Common Stock issuable upon exercise of the Warrant at such adjusted exercise price.
 
4.    Transfer, Assignment, Division, Combination, Mutilation or Loss of Warrant.
 
4.1    Transfer or Assignment of Warrant.  Subject to the limitations set forth in Section 7 hereof, upon (a) surrender of this Warrant to the Company at its Designated Office accompanied by a Form of Assignment annexed hereto as Annex B (each, a “Form of Assignment”) duly executed and funds sufficient to pay any applicable transfer tax, and (b) delivery of an opinion of counsel to the Holder reasonably satisfactory to the Company to the effect that, in the 

opinion of such counsel, the transfer is exempt from the registration requirements of the Securities Act (provided that no such opinion shall be required in the event of a Transfer to a Permitted Transferee), the Company shall, without charge, execute and deliver a new Warrant registered in the name of the assignee named in the Form of Assignment at the address, and evidencing the right to purchase the shares of Common Stock, specified in the Form of Assignment, and the Warrant represented by this Warrant shall promptly be cancelled.
 
4.2    Mutilation or Loss of Warrant.  Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will execute and deliver a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.
 
4.3    Division and Combination.  Subject to compliance with the applicable provisions of this Warrant, this Warrant may be divided or combined with other Warrants upon presentation hereof at the Designated Office, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with the applicable provisions of this Warrant as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.
 
4.4    Expenses.  The Company shall prepare, issue and deliver at its own expense any new Warrant or Warrants required to be issued hereunder.
 
4.5    Maintenance of Books.  The Company agrees to maintain, at the Designated Office, books for the registration and transfer of the Warrants.
 
5.    Rights of the Holder.  The Holder shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in this Warrant and are not enforceable against the Company except to the extent set forth herein.
 
6.    Protection Against Dilution and Other Adjustments.
 
6.1    Adjustment of Number of Shares Purchasable. Upon any adjustment of the Exercise Price as provided in Sections 6.3 through 6.6 hereof, the Holders of the Warrants shall thereafter be entitled to purchase upon the exercise thereof, at the Exercise Price resulting from such adjustment, the number of shares of Common Stock (calculated to the nearest 1/100th of a share) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable on the exercise hereof immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment.
 
6.2    Adjustment Upon Spin Off.  If, at any time or from time to time after the Original Issue Date, the Company shall spin off or otherwise divest itself of a part of its business or operations or dispose of all or of a part of its assets in a transaction in which the Company does not receive compensation for such business, operations or assets, but causes securities of another entity (the “Spin Off Securities”) to be issued to security holders of the Company, then the Company shall cause (i) to be reserved a number of Spin Off Securities (the “Reserved Spin Off Securities”) equal to the number of Spin Off Securities that would have been issued to the Holder had all of the Holder’s Outstanding Warrants on the record date for determining the number of Spin Off Securities to be issued to stockholders of the Company been exercised as of the close of business on the trading day immediately before such record date, and (ii) to be issued to the Holder on the exercise of all or any of the Outstanding Warrants, a number of  Reserved Spin Off Securities equal to (x) the Reserved Spin Off Securities multiplied by (y) a fraction, the numerator of which shall be the amount of the Outstanding Warrants then being exercised, and the denominator of which shall be the amount of the Outstanding Warrants.

 
6.3    Upon Stock Dividends, Subdivisions or Splits.  If, at any time or from time to time after the Original Issue Date, the number of shares of Common Stock Outstanding is increased by a stock dividend payable in shares of Common Stock or by a subdivision or split-up of shares of Common Stock, then, following the record date for the determination of holders of Common Stock entitled to receive such stock dividend, or to be affected by such subdivision or split-up, the Exercise Price shall be appropriately decreased by multiplying the Exercise Price by a fraction, the numerator of which is the number of shares of Common Stock Outstanding immediately prior to, and the denominator of which is the number of shares of Common Stock Outstanding immediately after, such increase in Outstanding shares.
 
6.4    Upon Combinations or Reverse Stock Splits.  If, at any time or from time to time after the Original Issue Date, the number of shares of Common Stock Outstanding is decreased by a combination or reverse stock split of the Outstanding shares of Common Stock into a smaller number of shares of Common Stock, then, following the record date to determine shares affected by such combination or reverse stock split, the Exercise Price shall be appropriately increased by multiplying the Exercise Price by a fraction, the numerator of which is the number of shares of Common Stock Outstanding immediately prior to, and the denominator of which is the number of shares of Common Stock Outstanding immediately after, such decrease in Outstanding shares.
 
6.5    Upon Reclassifications, Reorganizations, Consolidations or Mergers.  If, at any time or from time to time after the Original Issue Date, there is any capital reorganization of the Company, any reclassification of the stock of the Company (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 stock dividend or subdivision, split-up or combination of shares), or any consolidation or merger of the Company with or into another Person (where the Company is not the surviving Person or where there is a change in or distribution with respect to the Common Stock), each Warrant shall after such reorganization, reclassification, consolidation, or merger be exercisable for the kind and number of shares of stock or other securities or property of the Company or of the successor Person resulting from such consolidation or surviving such merger, if any, to which the holder of the Consideration Warrant Shares deliverable (immediately prior to the time of such reorganization, reclassification, consolidation or merger) upon exercise of such Warrant would have been entitled upon such reorganization, reclassification, consolidation or merger.  The provisions of this clause shall similarly apply to successive reorganizations, reclassifications, consolidations, or mergers.  The Company shall not effect any such reorganization, reclassification, consolidation or merger unless, prior to the consummation thereof, the successor Person (if other than the Company) resulting from such reorganization, reclassification, consolidation or merger, shall assume, by written instrument, the obligation to deliver to the Holders of the Warrant such shares of stock, securities or assets, which, in accordance with the foregoing provisions, such Holders shall be entitled to receive upon such conversion.
 
6.6    Upon Issuance of Common Stock.  If, at any time or from time to time after the Original Issue Date, the Company shall issue any shares of Common Stock, options to purchase or rights to subscribe for Common Stock, securities by their terms convertible into or exchangeable for Common Stock, or options to purchase or rights to subscribe for such convertible or exchangeable securities, other than Excluded Stock, without consideration or for consideration per share less than either (x) the Exercise Price in effect immediately prior to such issuance or (y) the Fair Market Value per share of the Common Stock immediately prior to such issuance, then such Exercise Price shall forthwith be lowered to a price equal to the price obtained by multiplying:
 
(i) the Exercise Price in effect immediately prior to the issuance of such Common Stock, options, rights or securities by
 
(ii) a fraction of which (x) the numerator shall be the sum of (A) the number of shares of Common Stock Outstanding on a fully-diluted basis immediately prior to such issuance and (B) the number of additional shares of Common Stock which the aggregate consideration for the number of shares of Common Stock so offered would purchase at the greater of the Exercise Price  in effect immediately prior to such issuance or the Fair Market Value per share of Common 

Stock and (y) the denominator shall be the number of shares of Common Stock Outstanding on a fully-diluted basis immediately after such issuance.
 
6.7    Provisions Applicable to Adjustments.  For purposes of any adjustment of the Exercise Price pursuant to Section 6.6 hereof, the following provisions shall be applicable:
 
(i) In the case of the issuance of Common Stock for cash in a public offering or private placement, the consideration shall be deemed to be the amount of cash paid therefor before deducting therefrom any discounts, commissions or placement fees payable by the Company to any underwriter or placement agent in connection with the issuance and sale thereof.
 
(ii) In the case of the issuance of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the Valuation Amount as determined in accordance with the Appraisal Procedure.
 
(iii) In the case of the issuance of options to purchase or rights to subscribe for Common Stock, securities by their terms convertible into or exchangeable for Common Stock, or options to purchase or rights to subscribe for such convertible or exchangeable securities (except for options to acquire Excluded Stock):
 
(A) the aggregate maximum number of shares of Common Stock deliverable upon exercise of such options to purchase or rights to subscribe for Common Stock shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration (determined in the manner provided in subparagraphs (i) and (ii) above), if any, received by the Company upon the issuance of such options or rights plus the minimum purchase price provided in such options or rights for the Common Stock covered thereby;
 
(B) the aggregate maximum number of shares of Common Stock deliverable upon conversion of or in exchange for any such convertible or exchangeable securities or upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof shall be deemed to have been issued at the time such securities, options, or rights were issued and for a consideration equal to the consideration received by the Company for any such securities and related options or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the minimum additional consideration, if any, to be received by the Company upon the conversion or exchange of such securities or the exercise of any related options or rights (the consideration in each case to be determined in the manner provided in paragraphs (i) and (ii) above);
 
(C) on any change in the number of shares or exercise price of Common Stock deliverable upon exercise of any such options or rights or conversions of or exchanges for such securities, other than a change resulting from the anti-dilution provisions thereof, the Exercise Price shall forthwith be readjusted to such Exercise Price as would have been obtained had the adjustment made upon the issuance of such options, rights or securities not converted prior to such change or options or rights related to such securities not converted prior to such change been made upon the basis of such change;
 
(D) upon the expiration of any options to purchase or rights to subscribe for Common Stock which shall not have been exercised, the Exercise Price computed upon the issuance thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon such expiration, be recomputed as if the only additional shares of Common Stock issued were the shares of Common Stock, if any, actually issued upon the exercise of such options to purchase or rights to subscribe for Common Stock, and the consideration received therefor was the consideration actually received by the Company for the issue of the options to purchase or rights to subscribe for Common Stock that were exercised, plus the consideration actually received by the Company upon such exercise; and
 

(E) no further adjustment of the Exercise Price adjusted upon the issuance of any such options, rights, convertible securities or exchangeable securities shall be made as a result of the actual issuance of Common Stock on the exercise of any such rights or options or any conversion or exchange of any such securities.
 
6.8    Deferral in Certain Circumstances.  In any case in which the provisions of this Section 6 shall require that an adjustment shall become effective immediately after a record date of an event, the Company may defer until the occurrence of such event (a) issuing to the Holder of any Warrant exercised after such record date and before the occurrence of such event the shares of capital stock issuable upon such exercise by reason of the adjustment required by such event and issuing to such Holder only the shares of capital stock issuable upon such exercise before giving effect to such adjustments, and (b) paying to such Holder any amount in cash in lieu of a fractional share of capital stock pursuant to Section 2.3 above; provided, however, that the Company shall deliver to such Holder an appropriate instrument or due bills evidencing such Holder’s right to receive such additional shares or such cash.
 
6.9    Appraisal Procedure.  In any case in which the provisions of this Section 6 shall necessitate that the Appraisal Procedure be utilized for purposes of determining an adjustment to the Exercise Price, the Company may defer until the completion of the Appraisal Procedure and the determination of the adjustment (a) issuing to the Holder of any Warrant exercised after the date of the event that requires the adjustment and before completion of the Appraisal Procedure and the determination of the adjustment, the shares of capital stock issuable upon such exercise by reason of the adjustment required by such event and issuing to such Holder only the shares of capital stock issuable upon such exercise before giving effect to such adjustment and (b) paying to such Holder any amount in cash in lieu of a fractional share of capital stock pursuant to Section 2.3 above; provided, however, that the Company shall deliver to such Holder an appropriate instrument or due bills evidencing such Holder’s right to receive such additional shares or such cash.
 
6.10    Exceptions.  This Section 6 shall not apply to (a) securities offered to the public pursuant to a public offering; (b) securities issued to employees or directors of the Company pursuant to an employee stock option plan or stock incentive plan approved by the Board of Directors; or (c) securities Outstanding as of the date hereof (provided that the terms of such securities will not be modified in any manner following the date hereof) (collectively, “Excluded Stock”).
 
6.11    Notice of Adjustment of Exercise Price.  Whenever the Exercise Price is adjusted as herein provided:
 
(i) the Company shall compute the adjusted Exercise Price in accordance with this Section 6 and shall prepare a certificate signed by the treasurer or chief financial officer of the Company setting forth the adjusted Exercise Price and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed at each Designated Office; and
 
(ii) a notice stating that the Exercise Price has been adjusted and setting forth the adjusted Exercise Price shall forthwith be prepared by the Company and mailed to all Holders at their last addresses as they shall appear in the warrant register.
 
7.    Transfer to Comply with the Securities Act.
 
7.1    Transfer.  This Warrant has not been registered under the Securities Act and has been issued to the Holder for investment and not with a view to the distribution of either the Warrant or the Consideration Warrant Shares.  Neither this Warrant nor any of the Consideration Warrant Shares or any other security issued or issuable upon exercise of this Warrant may be sold, transferred, pledged or hypothecated in the absence of an effective registration statement under the Securities Act relating to such security or an opinion of counsel satisfactory to the Company that registration is not required under the Securities Act; provided, that, no registration statement or opinion of counsel shall be required in the event of a Transfer to a Permitted Transferee.  Each Warrant, the 

Consideration Warrant Shares and any other security issued or issuable upon exercise of this Warrant shall contain a legend on the face thereof, in substantially the following form by which the Holder (and any transferee thereof) shall be bound:
 
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER SECURITIES LAWS, AND SUCH SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNDER SAID ACT AND LAWS OR AN EXEMPTION THEREFROM.
  
8.    Notice of Corporate Actions; Taking of Record; Transfer Books.
 
8.1    Notices of Corporate Actions.  In case:
 
(a) of the Company granting to all of the holders of its Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class; or
 
(b) of any reclassification of the Common Stock (other than a subdivision or combination of the Outstanding shares of Common Stock), or of any consolidation, merger or share exchange to which the Company is a party and for which approval of any stockholders of the Company is required, or of the sale or transfer of all or substantially all of the assets of the Company; or
 
(c) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; or
 
(d) of the commencement by the Company or any Subsidiary of a tender offer for all or a portion of the Outstanding shares of Common Stock (or the amending of any such tender offer to change the maximum number of shares being sought or the amount or type of consideration being offered therefor);  
 
then the Company shall cause to be filed at each office or agency maintained for such purpose, and shall cause to be mailed to all Holders at their last addresses as they shall appear in the warrant register, at least 30 days prior to the applicable record, effective or expiration date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution or granting of rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record who will be entitled to such dividend, distribution, rights or warrants are to be determined, (y) the date on which such reclassification, consolidation, merger, share exchange, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, share exchange, sale, transfer, dissolution, liquidation or winding up, or (z) the date on which such tender offer commenced, the date on which such tender offer is scheduled to expire unless extended, the consideration offered and the other material terms thereof (or the material terms of the amendment thereto).  Such notice shall also set forth such facts with respect thereto as shall be reasonably necessary to indicate the effect of such action on the Exercise Price and the number and kind or class of shares or other securities or property which shall be deliverable or purchasable upon the occurrence of such action or deliverable upon exercise of the Warrants.  Neither the failure to give any such notice nor any defect therein shall affect the legality or validity of any action described in clauses (a) through (d) of this Section 8.1.
 
8.2    Taking of Record.  In the case of all dividends or other distributions by the Company to the holders of its Common Stock with respect to which any provision of hereof refers to the taking of a record of such holders, the Company will in each such case take such a record and will take such record as of the close of business on a Business Day.
 

8.3    Closing of Transfer Books.  The Company shall not at any time, except upon dissolution, liquidation or winding up of the Company, close its stock transfer books or Warrant transfer books so as to result in preventing or delaying the exercise or transfer of any Warrant.
 
9.    Notices.  Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, telegraphed, telexed, sent by facsimile transmission or sent by certified, registered or express mail, postage pre-paid.  Any such notice shall be deemed given when so delivered personally, telegraphed, telexed or sent by facsimile transmission, or, if mailed, two days after the date of deposit in the United States mails, as follows:
 
(i)     if to the Company, to:
 
SIGA Technologies, Inc.
660 Madison Avenue, Suite 1700
New York, New York 10065
Attention:  Chief Financial Officer
Telephone No.:  (212) 672-9100
Facsimile No.:   (212) 697-3130
 
 with a copy (which shall not constitute notice) to:

Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, New York 10036
Attention:  James A. Grayer, Esq.
Facsimile No.: (212) 715-8000

(ii)   if to the Holder, to:
 
MacAndrews & Forbes LLC
35 East 62nd Street
New York, New York 10021
Attention: Michael C. Borofsky, Esq.
Facsimile No.: (212) 572-8435

Any party may be given notice in accordance with this Section 9, unless such party designates another address or person for receipt of notice hereunder.
 
10.    No Impairment; Regulatory Compliance And Cooperation; Notice Of Expiration.  The Company shall not by any action, including, without limitation, amending its charter documents or through any reorganization, reclassification, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other similar voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder against impairment.
 
11.    Miscellaneous.
 
11.1    Successors and Assigns. This Warrant shall inure to the benefit of and be binding upon the successors and assigns of the Company, the Holder and their respective successors and assigns.  The Holder’s rights under this Warrant may be assigned, in whole or in part, to (a) any Permitted Transferee, and any Permitted Transferee shall be deemed to be a Holder for all purposes hereunder or (b) any transferee of a Warrant, or, if applicable, any 

portion of a Warrant, that represents 10% of the Consideration Warrant Shares exercisable by such transferor on the date of such transfer and any such transferee shall be deemed to be a Holder for all purposes hereunder.
 
11.2    Limitation on Exercise.  Notwithstanding anything to the contrary contained herein, the maximum number of shares of Common Stock that the Company may issue pursuant to the Services Agreement or any other documentation contemplated thereby at an effective purchase price less than the greater of book or market value of the Company’s Common Stock on the trading day immediately preceding the date of the Office Services Letter equals 19.99% of the outstanding shares of Common Stock immediately preceding the date of the Services Agreement (the “Issuable Maximum”), unless the Company obtains shareholder approval in accordance with the rules and regulations of the Nasdaq Stock Market.  If, at the time any Holder requests an exercise of any of the Warrants, the Actual Minimum (excluding any shares issued or issuable at an effective purchase price in excess of the greater of book or market value of the Company’s Common Stock on the trading day immediately preceding the date of the Services Agreement) exceeds the Issuable Maximum (and if the Company has not previously obtained the required shareholder approval), then the Company shall issue to such Holder requesting such exercise a number of shares of Common Stock equal to the Issuable Maximum.  The Company shall not be obligated to seek stockholder approval under the rules and regulations of the Nasdaq Stock Market and shall not be in breach under this Warrant Agreement, the Office Services Letter or any other documentation contemplated hereunder or thereunder for failure to issue securities as a result of its failure to obtain shareholder approval as contemplated hereby.  For purposes hereof, “Actual Minimum” shall mean, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the Services Agreement or any other documentation contemplated, without giving effect to any limits on the number of shares of Common Stock that may be owned by a Holder at any one time.
 
11.3    Designated Office.  As long as any of the Warrants remain Outstanding, the Company shall maintain an office or agency, which may be the principal executive offices of the Company (the “Designated Office”), where the Warrants may be presented for exercise, registration of transfer, division or combination as provided in this Warrant.  Such Designated Office shall initially be the office of the Company at 660 Madison Avenue, Suite 1700 Street, New York, New York 10065.  The Company may from time to time change the Designated Office to another office of the Company or its agent within the United States by notice given to all registered Holders at least 10 Business Days prior to the effective date of such change.
 
11.4    Supplements and Amendments; Whole Agreement.  This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto.  This Warrant and the Services Agreement contain the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings other than expressly contained herein and therein.
 
11.5    Governing Law; Jurisdiction; Waiver Of Jury Trial.  The internal laws, and not the laws of conflicts (other than Section 5-1401 of the General Obligations Law of the State of New York), of New York shall govern the enforceability and validity of this Warrant, the construction of its terms and the interpretation of the rights and duties of the Company.  Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Warrant or the transactions contemplated hereby may be brought in any federal or state court located in the County and State of New York, and the Company hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum.  Process in any such suit, action or proceeding may be served on the company anywhere in the world, whether within or without the jurisdiction of any such court.  The Company hereby irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or related to this Warrant or the transactions contemplated hereby.
 

11.6    Remedies.  Each Holder of Warrants, in addition to being entitled to exercise its rights granted by law, including recovery of damages, shall be entitled to specific performance of its rights provided under this Warrant.  The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and shall waive, in an action for specific performance, the defense that a remedy at law would be adequate.
 
11.7    Limitation of Liability.  No provision hereof and no enumeration herein of the rights or privileges of the Holder hereof, shall give rise to any liability of such Holder to pay the Exercise Price for any Consideration Warrant Shares other than pursuant to an exercise of this Warrant or any liability as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
 
11.8    Severability.  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Warrant.
 
11.9    Descriptive Headings.  Descriptive headings of the several sections of this Warrant are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.
 
[Remainder of Page Intentionally Left Blank]
 

  

IN WITNESS WHEREOF, this Warrant has been executed as of the 30th day of April, 2013.
 
            SIGA TECHNOLOGIES, INC.

            By: /s/ Daniel J. Luckshire
                  Daniel J. Luckshire
                  Chief Financial Officer
 

 

  

  

ANNEX A
 
NOTICE OF EXERCISE OF WARRANT
 
[To be executed only upon exercise of Warrant]
 

The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant dated as of April  30, 2013, to purchase ______ shares of common stock, par value $0.0001 per share (the “Consideration Warrant Shares”), of SIGA TECHNOLOGIES, INC. and tenders herewith payment in accordance with Sections 1 and 2 of such Warrant.  The undersigned further requests, in accordance with Section 2.1(b) of the Warrant, that certificates for the Consideration Warrant Shares hereby purchased (and any securities or other property issuable upon exercise) be issued in the name of and delivered to ______________ and, if such Consideration Warrant Shares are not all of the Consideration Warrant Shares issuable upon exercise of the Warrant, that a new Warrant of like tenor be issued for the balance of the Consideration Warrant Shares.
 

 
        _______________________________
        (Name of Registered Owner)
 
        _______________________________
        (Signature of Registered Owner)
 
        _______________________________
        (Street Address)
 
        _______________________________
        (City)    (State)    (Zip Code)
 
 
	
		
	NOTICE:
	The signature on this notice of exercise must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlarge­ment or any change whatsoever.

  

 
ANNEX B
 
FORM OF ASSIGNMENT
 
(To be executed by the registered holder if such
holder desires to transfer the Warrant.)
 
FOR VALUE RECEIVED ________________ hereby sells, assigns and transfers unto 
______________________________________________________________
 
________________________________________________________________________________________________________________________________
(Please print name and address of transferee)
 
the Warrants represented by this Warrant, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ___________________________ attorney-in-fact, with full power of substitution, to transfer the within Warrant on the books of SIGA TECHNOLOGIES, INC. to give effect to the transfer made hereby.
 
Date:  _____________, ____

                _________________________________
                        Signature

	
		
	NOTICE:
	The signature on this assignment must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlarge­ment or any change whatsoever.beamz8kex101051513.htm

 

 

BEAMZ INTERACTIVE, INC.

 

2013 CONVERTIBLE DEBT AND SECURITY AGREEMENT

 

This Convertible Debt and Security Agreement (this “Agreement”), dated as of May 1, 2013, is by and among the parties executing this Agreement as Investors on the signature pages hereto (each, an “Investor,” and collectively, the “Investors”), and Beamz Interactive, Inc., a Delaware corporation (the “Company”).  Investors and the Company are sometimes referred to herein collectively as the “Parties” and each individually as a “Party”.

 

RECITALS:

 

A.           The Company wishes to issue up to $4,000,000 in principal amount of Notes (as defined below), together with Warrants (as defined below), to Investors on the terms and conditions set forth below; and

 

B.           Investors, severally and not jointly, wish to purchase the Notes and receive the Warrants from the Company upon the terms and conditions set forth in this Agreement.

 

AGREEMENT:

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and agreed, and intending to be legally bound, the Parties agree as follows:

 

ARTICLE 1

 

INTERPRETATIONS

 

1.1 Definitions.  Terms used herein but not otherwise defined shall have the meanings ascribed thereto in Exhibit A attached hereto.

 

ARTICLE 2

 

PURCHASE AND SALE OF SECURITIES

 

2.1 Purchase and Sale of Notes.

 

(a) The Company hereby agrees to borrow, and Investors hereby severally, and not jointly, agree to loan to the Company, the principal amounts (each a “Loan” and collectively the “Loans”) set forth under the heading “Principal Amount of Loan” on Exhibit B attached hereto.

 

(b) Each Loan shall be separately evidenced by and subject to the provisions of a Convertible Secured Subordinated Promissory Note, substantially in the form attached hereto as Exhibit C (each a “Note,” and collectively, the “Notes”) to be executed by the Company and delivered to each Investor in respect of such Investor’s applicable Loan amount on the applicable Closing Date (as defined below).  Upon the execution of this Agreement, each Investor shall deliver his/its applicable Loan amount to the Company by check or electronic transfer of immediately available funds to such account as the Company shall specify in writing to such Investor and the Company shall promptly deliver the applicable Note to the Investor.

 

 

  

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(c) Notwithstanding the separate payment obligations of the Company to each Investor under this Agreement and each Note, the Parties agree that all payments made by the Company hereunder and under the Notes shall be made pro rata among the Investors, without any preference to any Investor, whether such payments are made before or following an Event of Default (as defined in the Notes).  In such regard, if and to the extent the Company fails to pay the full amount due and owing to Investors hereunder and under the Notes, the aggregate amount (if any) actually paid to Investors shall be divided among them pro rata in relation to the original principal amounts of their respective Loans.  To the extent the Company gives any payment-related preference to any Investor in violation of this Section 2.1(c), such Investor shall, upon being made aware of such payment preference, forward the applicable portion of such payment to each other Investor to correct such violation by the Company.  In such event, the records of the Company and Investors shall be adjusted to reflect such redistributed payments.

 

(d) The occurrence of any Event of Default under the Notes shall constitute an “Event of Default” under this Agreement.  Upon the occurrence of an Event of Default, each Investor may, at its option, accelerate and make immediately payable all sums of principal and interest outstanding and unpaid under its Loan, without demand, presentment or notice, all of which are hereby expressly waived by the Company.

 

(e) Upon the occurrence and during the continuation of an Event of Default, each Investor may, at its sole election, without notice of such election and without demand, exercise any one or more of the rights or remedies available to Investors at law or in equity.

 

(f) Optional Conversion.  At the option of each Investor, the Note may be converted at any time into fully-paid and non-assessable shares of Common Stock at the rate of $0.40 per share (as appropriately adjusted for any stock split, stock dividends, recapitalizations and the like) (“Optional Conversion Securities”); it being agreed and understood that, as a condition to receiving the Optional Conversion Securities, such converting Investor must deliver to the Company the original Note being converted, which will be marked “canceled” by the Company.

 

(g) Automatic Conversion.  Upon the closing of the Permanent Financing (the “Permanent Financing Closing”), each Note holder will be given written notice thereof (the “Closing Notice”), and effective as of the date of the Permanent Financing Closing, all of the principal balance of, and accrued but unpaid interest on, such Investor’s Note will automatically and without any action on the part of Investor convert on the books of the Company into securities offered in the Permanent Financing at the price at which such securities are sold in the Permanent Financing (the “Automatic Conversion Securities”); it being agreed and understood that, as a condition to receiving the Automatic Conversion Securities in the Permanent Financing, such converting Investor must deliver to the Company the original Note being converted, which will be marked “canceled” by the Company.

 

 

  

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2.2 Warrants.  The Company hereby agrees to issue to each Investor a warrant to purchase one share (as appropriately adjusted for any stock split, stock dividends, recapitalizations and the like) of common stock, par value $0.001 per share, of the Company (the “Common Stock”) at a price of $0.02 per share for each two dollars of principal amount of Notes purchased by such Investor, which warrants will be in substantially the form of Exhibit D attached hereto (the “Warrants”).  The Common Stock underlying the Warrants is referred to herein as the “Underlying Warrant Securities”.

 

2.3 Closing.

 

(a) The Parties shall hold an initial closing hereunder (the “Initial Closing”) on May __, 2013 (the “Initial Closing Date”).

 

(b) The Company may hold additional closings after the Initial Closing; provided, however, that no additional closings may be held after the earlier to occur of the Permanent Financing or December 31, 2013.  Any such additional closings are each hereinafter referred to as an “Additional Closing” and shall occur on one or more dates each hereinafter referred to as an “Additional Closing Date”.  Each Loan made pursuant to an Additional Closing, and the rights and obligations of each Investor making a Loan to the Company at such Additional Closing, shall be subject to the same terms and conditions of each of the Loans made at the Initial Closing.  Each Investor at each Additional Closing shall join in this Agreement by executing a counterpart signature page hereto and Exhibit B shall be amended accordingly.  The Initial Closing and each Additional Closing are each sometimes hereinafter referred to as a “Closing,” and the Initial Closing Date and each Additional Closing Date are each sometimes hereinafter referred to as a “Closing Date”.

 

2.4 Investment by TM 07 Investments.  The Company and Investors agree that  the Company’s account payable to TM 07 Investments (currently approximately $996,472.07) shall be converted into a Note at the Initial Closing.  Investors acknowledge TM 07 Investments is owned or controlled by Charles R. Mollo, the Chief Executive Officer and a director of the Company, and his wife Janice L. Mollo.

 

2.5 Existing Investor Investment Commitment. Charles R. Mollo hereby commits and guarantees that he, along with other existing investors, will purchase at least $2.5 Million worth of the Notes, which amount includes the conversion of existing accounts payable described in Section 2.4. Such amounts will be funded in one or more installments between the date of this Agreement and September 30, 2013.

 

  

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ARTICLE 3

 

SECURITY AND SUBORDINATION

 

3.1 Grant of Security Interest.  Subject to Section 3.2 below, in order to secure the Company’s prompt repayment of the Notes, the Company hereby grants to Investors, jointly, a continuing security interest in all presently existing and hereafter acquired or arising Collateral.

 

3.2 Subordination.  Notwithstanding any other provision of this Agreement or the Notes, Investors acknowledge and agree that (i) Investors’ rights hereunder and under the Notes shall be subordinate to, and subject at all times to, the rights of the holder(s) of any Senior Indebtedness.  Investors shall execute and deliver such subordination, inter-creditor or other agreements, in form and substance reasonably acceptable to the holder(s) of any Senior Indebtedness, as those holder(s) may reasonably require to evidence the subordination of the Loans and Investors’ rights hereunder and under the Notes.

 

ARTICLE 4

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth on the Schedule of Exceptions in Exhibit E, the Company hereby represents and warrants to each Investor as follows:

 

4.1 Organization, Good Standing and Qualification.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.  The Company has the requisite corporate power and authority to own and operate its properties and assets, to carry on its business as proposed to be conducted, to execute and deliver this Agreement, the Notes and the Warrants (collectively, the “Transaction Agreements”) and to perform its obligations pursuant to the Transaction Agreements. The Company is presently qualified to do business as a foreign corporation in each jurisdiction where the failure to be so qualified could reasonably be expected to have a material adverse effect on the Company’s financial condition or business as now proposed to be conducted (a “Material Adverse Effect”).

 

4.2 Subsidiaries.  The Company does not currently own or control, directly or indirectly, any interest in any other corporation, partnership, trust, joint venture, limited liability company, association, or other business entity.  The Company is not a participant in any joint venture, partnership or similar arrangement.

 

4.3 Capitalization.  Immediately prior to the Initial Closing, the authorized capital stock of the Company will consist of 40,000,000 shares of common stock, par value $0.001 per share (the “Common Stock”), and 10,000,000 shares of Preferred Stock, par value $0.001 per share (the “Preferred Stock”)

 

4.4 Public Reporting Company.  The Company is a reporting company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is current on all of its reporting requirements under the Exchange Act.  The Common Stock is listed for trading on the OTCQB.

 

 

  

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4.5 Authorization.  All corporate action on the part of the Company and its managers, officers and members necessary for the Company’s obligations under the Transaction Agreements has been taken or will be taken prior to the Closing. The Transaction Agreements, when executed and delivered by the Company, shall constitute valid and binding obligations of the Company, enforceable in accordance with their terms, except (i) as limited by laws of general application relating to bankruptcy, insolvency and the relief of debtors, (ii) as limited by rules of law governing specific performance, injunctive relief or other equitable remedies and by general principles of equity, and (iii) to the extent the indemnification provisions may further be limited by applicable laws and principles of public policy.

 

4.6 Financial Statements.  The Company’s audited financial statements, for the fiscal year ended 2012 and the Company’s unaudited financial statements for the quarter ended March 31, 2013 are available at www.sec.gov (collectively, the “Financial Statements”). The Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated, except that the unaudited Financial Statements may not contain all footnotes required by generally accepted accounting principles. The Financial Statements fairly present the financial condition and operating results of the Company as of the dates, and for the periods, indicated therein.  Except as set forth in the Financial Statements, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to March 31, 2013, (ii) obligations under contracts and commitments incurred in the ordinary course of business and (iii) liabilities and obligations of a type or nature not required under generally accepted accounting principles to be reflected in the Financial Statements, which, in all such cases, individually and in the aggregate would not have a Material Adverse Effect. The Company maintains and will continue to maintain a standard system of accounting established and administered in accordance with generally accepted accounting principles.

 

4.7 Changes.  Since March 31, 2013, there has not been:

 

(a) any change in the assets, liabilities, financial condition or operating results of the Company from that reflected in the Financial Statements, except changes in the ordinary course of business that have not resulted, in the aggregate, have a Material Adverse Effect;

 

(b) any damage, destruction or loss, whether or not covered by insurance, that would have a Material Adverse Effect;

 

(c)  any waiver or compromise by the Company of a valuable right or of a material debt owed to it;

 

(d) any satisfaction or discharge of any lien, claim, or encumbrance or payment of any obligation by the Company, except in the ordinary course of business and the satisfaction or discharge of which would not have a Material Adverse Effect;

 

(e) any material change to a material contract or agreement by which the Company or any of its assets is bound or subject;

 

(f) any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder;

 

 

  

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(g) any resignation or termination of employment of any officer of the Company;

 

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

 

(i) any loans or guarantees made by the Company to or for the benefit of its employees, officers or directors, or any immediate family members thereof, other than travel advances and other advances made in the ordinary course of its business;

 

(j) any declaration, setting aside or payment or other distribution in respect of any of the Company’s capital stock, or any direct or indirect redemption, purchase, or other acquisition of any of such stock by the Company;

 

(k) any sale, assignment or transfer of any Company Intellectual Property that could reasonably be expected to have a Material Adverse Effect;

 

(l) receipt of notice that there has been a loss of, or material order cancellation by, any major customer of the Company;

 

(m) to the Company’s knowledge, any other event or condition of any character that could reasonably be expected to have a Material Adverse Effect; or

 

(n) any arrangement or commitment by the Company to do any of the things described in this Section 3.7.

 

4.8 Liabilities.  The Company has no: (i) indebtedness for borrowed money or other obligations or liabilities that the Company has directly or indirectly created, incurred, assumed, or guaranteed, or with respect to which the Company has otherwise become directly or indirectly liable; or (ii) material liability or obligation, absolute or contingent, except, in either case (i) as set forth in the Financial Statements; (ii) liabilities incurred in the ordinary course of business subsequent to March 31, 2013, (iii) obligations under contracts and commitments incurred in the ordinary course of business and (iv) liabilities and obligations of a type or nature not required under generally accepted accounting principles to be reflected in the Financial Statements.

 

4.9 Material Contracts.

 

(a) Except for the agreements explicitly contemplated hereby or as disclosed in the Schedule of Exemptions, there are no agreements, understandings, instruments, contracts, proposed transactions, judgments, orders, writs or decrees to which the Company is or will be a party, or by which it is or will be or otherwise, bound which may involve (i) obligations of, or payments to, the Company in excess of $50,000 (other than obligations of, or payments to, the Company arising 

 

 

  

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from purchase or sale agreements entered into in the ordinary course of business), or (ii) the license of any patent, copyright, trade secret or other proprietary right to or from the Company, or (iii) the grant of rights to manufacture, produce, assemble, license, market or sell the Company’s products or affect the Company’s exclusive right to develop, manufacture, assemble, distribute, market or sell its products.  All of the material contracts identified on the Schedule of Exceptions (each a “Material Contract”, and collectively the “Material Contracts”) are valid, binding and in full force and effect in all material respects, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies and to general principles of equity. To the Company’s knowledge, there is no other party to the Material Contracts in material default under any of such Material Contracts.

 

(b) The Company has not entered into any letter of intent, memorandum of understanding or other similar document (i) with any representative of any corporation or corporations regarding the merger of the Company with or into any such corporation or corporations, (ii) with any representative of any corporation, partnership, association or other business entity or any individual regarding the sale, conveyance or disposition of all or substantially all of the assets of the Company or a transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Company would be disposed of, or (iii) regarding any other form of liquidation, dissolution or winding up of the Company.

 

(c) For the purposes of subsection (a) above, all indebtedness, liabilities, agreements, understandings, instruments, contracts and proposed transactions involving the same person or entity (including persons or entities the Company has reason to believe are affiliated therewith) shall be aggregated for the purpose of meeting the individual minimum dollar amounts of such subsections.

 

4.10 Intellectual Property.  Except as disclosed in the Schedule of Exceptions:

 

(a) The Company owns or possesses sufficient legal rights to the Intellectual Property necessary to the business of the Company as planned to be conducted, the lack of which could reasonably be expected to have a Material Adverse Effect, without any conflict with or infringement of the rights of others.  Except for agreements with its consultants, standard end-user license agreements, support/maintenance agreements and agreements entered in the ordinary course of the Company’s business, there are no outstanding options, licenses or agreements relating to the Intellectual Property, and the Company is not bound by or a party to any options, licenses or agreements with respect to the Intellectual Property of any other person or entity. The Company has not received any written communication alleging that the Company has violated or, by conducting the Company’s business as planned to be conducted, would violate any of the Intellectual Property of any other person or entity.  Except as set forth in the Schedule of Exceptions, the Company is not obligated to make any payments by way of royalties, fees or otherwise to any owner or licensor of or claimant to any Intellectual Property with respect to the use thereof in connection with the conduct of its business as conducted by or proposed to be conducted by the Company. There are no agreements, understandings, instruments, contracts, judgments, orders or decrees to which the Company is a party or by which the Company is bound which involve indemnification by the Company with respect to infringements of the Intellectual Property.

 

(b) The Company is not aware that any of its non-employee consultants is obligated under any contract or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would materially interfere with the use of his or her efforts to promote the interests of the Company or that would conflict with the Company’s business as conducted or contemplated under the Agreements. Neither the execution nor delivery of this Agreement, nor the carrying on of the Company’s business by non-employee consultants, nor the conduct of the Company’s business as conducted or contemplated under the Transaction Agreements, will, to the Company’s knowledge, conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any of such non-employee consultants is now obligated.  

  

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4.11 Proprietary Information and Invention Assignment.

 

(a) Each consultant to the Company that has had access to the Intellectual Property has entered into an agreement containing appropriate confidentiality and invention assignment provisions.

 

(b) To the Company’s knowledge no officer or consultant of the Company is in violation of such confidential information and invention assignment agreement or any prior employee contract or proprietary information agreement with any other corporation or third party.

 

4.12 Title to Properties and Assets; Liens.  The Company has good and marketable title to its properties and assets, and has good title to all its leasehold interests, in each case subject to no material mortgage, pledge, lien, lease, encumbrance or charge, other than (i) liens for current taxes not yet due and payable, (ii) liens imposed by law and incurred in the ordinary course of business for obligations not past due, (iii) liens in respect of pledges or deposits under workers’ compensation laws or similar legislation, and (iv) liens, encumbrances and defects in title which do not in any case materially detract from the value of the property subject thereto or have a Material Adverse Effect, and which have not arisen otherwise than in the ordinary course of business.  With respect to the property and assets it leases, the Company is in compliance with such leases in all material respects and holds a valid leasehold interest free of any liens, claims or encumbrances, subject to clauses (i)-(iv) above.

 

4.13 Compliance with Other Instruments.

 

(a) The Company is not in violation of any material term of its By-Laws or, to the Company’s knowledge, in any material respect of any term or provision of any mortgage, indebtedness, indenture, contract, agreement, instrument, judgment, order or decree to which it is party or by which it is bound which would have a Material Adverse Effect.  The Company is not in violation of any federal or state statute, rule or regulation applicable to the Company the violation of which would have a Material Adverse Effect.  The execution and delivery of the Transaction Agreements by the Company or the performance by the Company of its obligations pursuant to the Transaction Agreements will not result in any material violation of, or materially conflict with, or constitute a material default under, any of its agreements, nor to the Company’s knowledge, result in the creation of any material mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Company or the suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval applicable to the Company, its business or operations or any of its assets or properties other than as created under this Agreement.

 

 

  

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(b) The Company is not in default under any Material Contract.

 

4.14 Litigation.  There are no actions, suits, proceedings or investigations pending against the Company or their properties (nor has any such party received notice of any threat thereof) before any court or governmental agency. The Company is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality.  There is no action, suit or proceeding initiated by the Company currently pending or which the Company currently intends to initiate.

 

4.15 Governmental Consent.  No consent, approval or authorization of or designation, declaration or filing with any governmental authority on the part of the Company is required in connection with the valid execution and delivery of the Transaction Agreements or the consummation of any other transaction contemplated by the Transaction Agreements, except (i) the filing of such notices as may be required under the Securities Act of 1933, as amended (the “Securities Act”) and (ii) such filings as may be required under applicable state securities laws, which will be timely filed within the applicable periods therefor.

 

4.16 Permits.  The Company has all franchises, permits, licenses, and intellectual property and any similar authority necessary for the conduct of its business as now being conducted by it, the lack of which would have a Material Adverse Effect, and believes it can obtain, without undue burden or expense, any similar authority for the conduct of its business as presently planned to be conducted.  The Company is not in default in any material respect under any of such franchises, permits, licenses or other similar authority.

 

4.17 Offering.  Subject to the accuracy of the Investors’ representations and warranties in Section 5 below, the offer, sale and issuance of the Notes, Warrants, Underlying Warrant Securities, Optional Conversion Securities and Automatic Conversion Securities (and any shares that may be issuable upon conversion thereof (the “Underlying Conversion Shares”)) to be issued in conformity with the terms of this Agreement, constitute transactions exempt from the registration requirements of Section 5 of the Securities Act and from the registration or qualification requirements of applicable state securities laws, and the Company does not have any authorized agent acting on its behalf that will take any action hereafter that would cause the loss of such exemption.

 

4.18 Registration and Voting Rights.  The Company is presently not under any obligation and has not granted any rights to register under the Securities Act any of its presently outstanding securities or any of its securities that may hereafter be issued.  To the Company’s knowledge no shareholder of the Company has entered into any agreements with respect to the voting of membership interests of the Company.

 

4.19 Tax Returns and Payments.  The Company has filed in a timely manner all tax returns required to be filed by it with appropriate federal, state and local governmental agencies, except where the failure to do so would not have a Material Adverse Effect on the Company. Such returns and reports are true and correct in all material respects. All taxes shown to be due and payable on such returns, any assessments imposed, and, to Company’s knowledge, all other taxes due and payable by on or before the Closing have been paid or will be paid prior to the time they become delinquent. The Company has not been advised in writing (i) that any of its returns have been or are being audited as of the date hereof, or (ii) of any deficiency in assessment or proposed judgment with respect to its federal, state or local taxes.

 

 

  

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4.20 Employees; Non-Employee Consultants.  The Company does not have any employees.  Obligations to Related Parties.  The Company is not indebted (nor committed to make loans or extend or guarantee credit) to any non-employee consultant or any immediate family member thereof, other than (i) for payment for services rendered and (ii) reimbursement for reasonable expenses incurred on behalf of the Company.  To the Company’s knowledge, no senior non-management consultant of the Company or immediate family member of its officers has any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation that competes with the Company, except in connection with the ownership of stock in publicly-traded companies. To the Company’s knowledge, no non-employee consultant or any immediate family member thereof, is, directly or indirectly, interested in a Material Contract, or in any other material contract which may be assumed by the Company or to which the Company may succeed.

 

4.21 Disclosure.  The Company has provided Investors with all the information regarding the Company requested without undue expense that the Investors have requested for deciding whether to purchase the Notes, the Warrants, the Optional Conversion Securities, Automatic Conversion Securities, the Underlying Conversion Securities or Underlying Warrant Securities.

 

4.22 Obligations of Management.  Except as set forth in the Schedule of Exceptions, each officer of the Company is currently devoting substantially all of his or her business time to the conduct of the business of the Company. The Company is not aware that any officer of the Company is planning to work less than full time at the Company in the future. No officer is currently working or, to the Company’s knowledge, plans to work for a competitive enterprise, whether or not such officer is or will be compensated by such enterprise.

 

ARTICLE 5

 

REPRESENTATIONS AND WARRANTIES OF THE INVESTORS

 

Each Investor, severally, and not jointly, represents and warrants to the Company that, as of the date of the Closing at which such Investor is making a Loan:

 

5.1 No Registration.  Such Investor understands that the issuance of the Notes, the Warrants, the Automatic Conversion Securities, the Optional Conversion Securities, the Underlying Conversion Securities and the Underlying Warrant Securities, will not be registered under the Securities Act by reason of a specific exemption from the registration provisions of the Securities Act, the availability of which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of such Investor’s representations as expressed herein or otherwise made pursuant hereto.

 

5.2 Investment Intent.  Upon the automatic or optional conversion of the Notes and exercise of the Warrants, such Investor will be acquiring the Automatic Conversion Securities, Optional Conversion Securities, Underlying Conversion Securities and Underlying Warrant Securities for investment for its own account, not as a nominee or agent, and not with a view to, or for resale in connection with, any distribution thereof.  Such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same.  Such Investor further represents that it does not have any contract, undertaking, agreement or arrangement with any person or entity to sell, transfer or grant participation to such person or entity or to any third person or entity with respect to any of the Notes, the Warrant, Automatic Conversion Securities, Optional Conversion Securities, Underlying Conversion Securities or Underlying Warrant Securities.

 

 

  

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5.3 Investment Experience.  Such Investor has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to the Company and acknowledges that such Investor can protect its own interests.  Such Investor has sufficient knowledge and experience in financial and business matters such that it is capable of evaluating the merits and risks of its investment in the Company.

 

5.4 Speculative Nature of Investment.  Such Investor understands and acknowledges that the Company has a limited financial and operating history and that an investment in the Company is highly speculative and involves substantial risks.  Such Investor can bear the economic risk of such Investor’s investment and is able, without impairing its financial condition, to suffer a complete loss of the Investor’s investment in the Company.

 

5.5 Access to Data.  Such Investor has had an opportunity to ask questions of, and receive answers from, the officers of the Company concerning the Transaction Agreements, the exhibits and schedules attached hereto and thereto and the transactions contemplated by the Transaction Agreements, as well as the Company’s business, management and financial affairs, and any questions that may have been asked were answered to the Investor’s satisfaction.  Such Investor believes that it has received all the information it considers necessary or appropriate for deciding whether to purchase the Note, the Warrant, the Automatic Conversion Securities, Optional Conversion Securities, Underlying Conversion Securities and the Underlying Warrant Securities.  Such Investor acknowledges that any business plans prepared by the Company have been, and continue to be, subject to change and that any projections included in such business plans or other such documents are necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the projections will not materialize or will vary significantly from actual results.

 

5.6 Accredited Investor.  Such Investor is an “accredited investor” within the meaning of Regulation D, Rule 501(a), promulgated by the Securities and Exchange Commission under the Securities Act and shall submit to the Company such further assurances of such status as may be reasonably requested by the Company.

 

5.7 Residency.  The state of formation, and principal place of business, of such Investor is as provided on such Investor’s Signature Page to this Agreement.

 

 

  

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5.8 Authorization.

 

(a) Such Investor has all requisite power and authority to execute and deliver the Transaction Agreements, to purchase the Note, the Warrant, the Automatic Conversion Securities, the Optional Conversion Securities, the Underlying Conversion Securities and the Underlying Warrant Securities and to carry out and perform its obligations under the terms of the Transaction Agreements.  All action on the part of such Investor necessary for the authorization, execution, delivery and performance of the Transaction Agreements, and the performance of all of such Investor’s obligations under the Transaction Agreements, has been taken or will be taken prior to the Closing.

 

(b) The Transaction Agreements, when executed and delivered by such Investor, will constitute valid and legally binding obligations of such Investor, enforceable in accordance with their terms except: (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies or by general principles of equity.

 

(c) No consent, approval, authorization, order, filing, registration or qualification of or with any court, governmental authority or third person is required to be obtained by such Investor in connection with the execution and delivery of the Transaction Agreements by the Investor or the performance of such Investor’s obligations hereunder or thereunder.

 

5.9 Brokers or Finders.  Such Investor has not engaged any brokers, finders or agents, and neither the Company nor the Investor has, nor will, incur, directly or indirectly, as a result of any action taken by such Investor, any liability for brokerage or finders’ fees or agents’ commissions or any similar charges in connection with the Transaction Agreements.

 

5.10 Tax Advisors.  Such Investor has reviewed with its own tax advisors the U.S. federal, state, local and foreign tax consequences of this investment and the transactions contemplated by the Transaction Agreements.  With respect to such matters, such Investor relies solely on such advisors and not on any statements or representations of the Company or any of its agents, written or oral.  Such Investor understands that it (and not the Company) shall be responsible for its own tax liability that may arise as a result of this investment or the transactions contemplated by the Transaction Agreements.

 

5.11 Legends.  Such Investor understands and agrees that the certificates evidencing the Conversion Securities, Underlying Conversion Securities or Underlying Warrant Securities, or any other securities issued in respect of the foregoing upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall bear the following legend (in addition to any legend required by any registration rights agreement or under applicable state securities laws):

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

 

  

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5.12 No Investor nor the respective controlling persons, officers, directors, partners, agents, or employees of any Investor shall be liable to any other Investor for any action heretofore or hereafter taken or omitted to be taken by any of them in connection with the execution of the Transaction Documents and the purchase of the Notes.

 

ARTICLE 6

 

CLOSING CONDITIONS

 

6.1 Conditions of Investors.  The obligations of Investors to make the Loans are subject to the fulfillment, to the satisfaction of Investors, of each of the following conditions on or before the Closing Date applicable to each Investor:

 

(a) The Company shall have executed and delivered to Investors the Transaction Documents;

 

(b) The representations and warranties contained in Article 4 shall be true, complete, and correct on and as of such Closing Date;

 

(c) The Company shall have performed and complied in all material respects with all agreements contained herein required to be performed or complied with by it prior to or at such Closing Date, as appropriate;

 

(d) All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Notes and Warrants pursuant to this Agreement shall be obtained and effective as of such Closing Date; and

 

(e) The Transaction Agreements, and the transactions contemplated thereby, shall have been approved by the Board of Directors.

 

6.2 Conditions of the Company.  The obligation of the Company to consummate the transactions contemplated herein is, at the option of the Company, subject to the satisfaction, on or before each Closing Date, of the following conditions:

 

(a) Each Investor shall have executed and delivered to the Company the Transaction Documents to which such Investor is a party;

 

(b) The representations and warranties contained in Article 5 above shall be true, complete, and correct on and as of such Closing Date with the same effect as though such representations and warranties had been made on and as of such date;

 

 

  

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(c) Each Investor shall have delivered to the Company such Investor’s Principal Amount of Loan as set forth opposite such Investor’s name in Exhibit B attached hereto; and

 

(d) No action or proceeding before any court or any other governmental agency shall have been instituted or threatened to restrain or prohibit the transactions contemplated herein.

 

ARTICLE 7

 

MISCELLANEOUS

 

7.1 Expenses and Attorney’s Fees.  If suit is brought to enforce any provision of this Agreement, the prevailing Party shall be entitled to recover its reasonable attorneys’ fees and court costs in addition to any other remedy or recovery awarded by the court.  Furthermore, irrespective of whether the Initial Closing or any Additional Closing is effected, the Company shall pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery, and performance of this Agreement.

 

7.2 Survival.  All representations, warranties, and covenants made herein or in any agreement, certificate, or instrument delivered to the Investors pursuant to or in connection with this Agreement shall survive the execution and delivery of the Transaction Documents, the issuance, sale, and delivery of the Notes, and the issuance and delivery of the Warrants for a period of twelve months.

 

7.3 Parties in Interest.  This Agreement shall bind and inure to the benefit of the respective successors and assigns of the Parties whether so expressed or not.

 

7.4 Notices.  All notices, requests, demands, claims and other communications permitted or required to be given hereunder must be in writing and shall be deemed duly given and received (i) if personally delivered, when so delivered, (ii) if mailed, three (3) Business Days after having been sent by registered or certified mail, return receipt requested, postage prepaid and addressed to the intended recipient as set forth below, (iii) if sent by electronic facsimile, once transmitted to the fax number specified below and once the appropriate facsimile confirmation is received, provided that a copy of such notice, request, demand, claim or other communication is promptly thereafter sent in accordance with the provisions of clause (i) or (ii) hereof, or (iv) if sent through an overnight delivery service in circumstances to which such service guarantees next day delivery, the day following being so sent:

 

(a) If to Investors (or any of them), addressed to them at the address set forth on the signature pages hereto.

 

 

  

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(b) If to the Company:

 

 

Beamz Interactive, Inc.

15354 N. 83rd Way, Suite 102

Scottsdale, Arizona  85260

Attn:  Chief Executive Officer

 

Any Party may give any notice, request, demand, claim or other communication hereunder using any other written means (including ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the individual for whom it is intended.  Any Party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered to it by giving each other Party notice in the manner herein set forth.

 

7.5 Governing Law.  THIS AGREEMENT, THE ENTIRE RELATIONSHIP OF THE PARTIES HERETO, AND ANY LITIGATION BETWEEN THE PARTIES (WHETHER GROUNDED IN CONTRACT, TORT, STATUTE, LAW OR EQUITY) SHALL BE INTERPRETED, CONSTRUED, AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARIZONA, WITHOUT REGARD TO ITS CHOICE OF LAW PRINCIPLES.

 

7.6 Venue for Disputes.  THE COURTS OF ARIZONA, FEDERAL OR STATE, SHALL HAVE EXCLUSIVE JURISDICTION OF ALL LEGAL ACTIONS ARISING OUT OF THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS.  BY EXECUTING THIS AGREEMENT, EACH PARTY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS OF ARIZONA. EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR ALL OF THE PARTIES’ MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE OBLIGATIONS, AND EACH SUCH PARTY HEREBY AGREES THAT ANY SUCH TRIAL OR OTHER PROCEEDING SHALL BE TRIED BEFORE A JUDGE AND NOT BEFORE A JURY.

 

7.7 Waiver; Remedies Cumulative.  The rights and remedies of the Parties hereunder are cumulative and not alternative.  Neither any failure nor any delay by any Party in exercising any right, power or privilege under this Agreement shall operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege shall preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege.  To the maximum extent permitted by applicable law, (i) no claim or right arising out of this Agreement can be discharged by one Party, in whole or in part, by a waiver or renunciation of the claim or right unless made in writing and signed by each other Party; (ii) no waiver that may be given by a Party shall be applicable except in the specific instance for which it is given; and (iii) no notice to or demand on one Party shall be deemed to be a waiver of any obligation of that Party or of the right of the Party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement.

 

 

  

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7.8 Severability.  If any provision of this Agreement, or the application of any such provision to any person, entity or circumstance, is held to be unenforceable or invalid by any court of competent jurisdiction or under any applicable law, the validity and enforceability of the remaining provisions of this Agreement shall not be affected thereby.  Without limiting the foregoing, the covenants and obligations contained in this Agreement shall be construed as separate covenants and obligations, covering their respective subject matters.  Each breach of a covenant or obligation set forth in this Agreement shall give rise to a separate and independent cause of action.

 

7.9 Entire Agreement; Modification.  This Agreement and the other Transaction Agreements collectively constitute the entire and final agreement among the Parties with respect to the subject matter hereof, and supersede and replace all prior agreements, understandings, commitments, communications and representations made between the Parties, whether written or oral, with respect to the subject matter hereof.  This Agreement may not be amended, supplemented, or otherwise modified except by a written agreement executed by the Company and Investors owning a majority of the then outstanding principal amount of the Notes.

 

7.10 No Assignment; Successors and Assigns; No Third-Party Rights.  No Party may assign any or all of his/its rights under this Agreement to any Person without the prior written consent of the other Parties.  Any attempted assignment or assumption without such written consent shall be null and void and without legal effect.  Subject to the foregoing, this Agreement shall apply to, be binding in all respects upon and inure to the benefit of the heirs, executors, personal representatives, successors and assigns of the Parties.  Nothing expressed or referred to in this Agreement shall be construed to give any Person other than the Parties any legal or equitable right, remedy or claim under or with respect to this Agreement or any provision of this Agreement.

 

7.11 Execution of Agreement.  This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original copy and all of which, when taken together, shall be deemed to constitute one and the same agreement.  The exchange of copies of this Agreement and of signature pages by facsimile transmission shall constitute effective execution and delivery of this Agreement as to the Parties and may be used in lieu of the original Agreement for all purposes.  Signatures of the Parties transmitted by facsimile shall be deemed to be their original signatures for all purposes.

 

 

  

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IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first written above.

 

	 	
BEAMZ INTERACTIVE, INC.

 

 

By: /s/ Charles R. Mollo

Charles R. Mollo,

Chief Executive Officer

 

	 	
INVESTORS:

 

[See attached signature pages]

 

 

 

 

  

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SIGNATURE PAGE OF INVESTOR TO

2013 BRIDGE LOAN AGREEMENT

 

Reference is hereby made to that certain 2013 Bridge Loan Agreement, dated as of May 1, 2013 (the “Agreement”), by and among Beamz Interactive, Inc., a Delaware corporation (the “Company”), and certain persons and entities who are executing the Agreement as Investors.  Each capitalized term used herein but not expressly defined shall have the meaning given to such term in the Agreement.

 

The undersigned accepts, joins in and agrees to be bound by, and subject to, the Agreement as an “Investor”.  The undersigned authorizes the Company to attach to the Agreement a copy of this Signature Page to Agreement to evidence the foregoing agreement of the undersigned.

 

Executed as of May 1, 2013.

 

	
 

 

 

	
If undersigned is an entity:

_____________________________________         

           (Print Name of Entity)

 

 

By: __________________________________                                                                    

Printed: _______________________________                                                                   

Title:   ________________________________                                                                  

 

 

Principal Business Address:

_____________________________________

_____________________________________

_____________________________________

_____________________________________

 

State of Formation:  ______________________

 

 

	 	
If undersigned is an individual:

 

By: __________________________________                                                                  

Printed: _______________________________                                                                  

Address ______________________________                                                                  

  

 

 

 

 

  

  

  

 

EXHIBIT A

 

 

Definitions

 

“Accounts” means all presently existing and hereafter arising accounts, accounts receivable, contract rights and other forms of monetary obligations and receivables (as such terms are defined in the UCC) owing to the Company, and any credit insurance, guaranties, or security therefor, irrespective of whether earned by performance.

 

“Affiliate” of any Person means a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with the first mentioned Person.  A Person shall be deemed to control another Person if such first Person possesses directly or indirectly the power to direct, or cause the direction of, the management and policies of the second Person, whether through the ownership of voting securities, by contract or otherwise.

 

 “Business Day” means a day that is not a Saturday or a Sunday or any other day on which banks in Phoenix, Arizona are required or permitted by applicable law to close.

 

“Chattel Paper” means all chattel paper (including tangible chattel paper and electronic chattel paper, as such terms are defined in the UCC).

 

“Collateral” means all of the Company’s right, title, and interest in and to all property or assets of the Company now existing or hereafter acquired, including without limitation, the following:  (i) the Accounts; (ii) the Company’s books and records (including electronic records) (“Books”); (iii) the Deposit Accounts; (iv) the Equipment; (v) the General Intangibles and all Patents; (vi) the Inventory; (vii) the Investment Property; (viii) the Negotiable Collateral; (ix) commercial tort claims, documents (including negotiable and non-negotiable documents of title); (x) cash and equivalents, whether on hand or in any Deposit Account or other financial institution; and (xi) the proceeds and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance covering any or all of the Collateral, and any and all Accounts, the Company’s Books, Deposit Accounts, Equipment, General Intangibles, Inventory, Negotiable Collateral, money, deposit accounts, or other tangible or intangible property received or receivable from the sale, exchange, collection, lease, license, use or other disposition of any of the foregoing, or any portion thereof or interest therein, and the proceeds thereof.

 

“Deposit Account” means any demand, time, savings, passbook or similar account now or hereafter maintained by or for the benefit of the Company with an organization that is engaged in the business of banking including a bank, savings bank, savings and loan association, credit union and trust companies, and all funds and amounts therein, whether or not restricted or designated for a particular purpose.

 

“Equipment” means all of the Company’s machinery, machine tools, apparatus, motors, equipment, fittings, furniture, furnishings, fixtures, vehicles (including motor vehicles and trailers), tools, parts, goods (including software imbedded in such goods) and other tangible personal property (other than Inventory) of every kind and description used in the Company’s operations or owned by the Company or in which the Company has an interest, whether now owned or hereafter acquired by the Company and wherever located, and all parts, accessories, and special tools, and all increases and accessions thereto and substitutions and replacements therefor.

 

 

  

A - 1

  

 

“General Intangibles” means all of the Company’s present and future general intangibles and other personal property (including payment intangibles, electronic Chattel Paper, contract rights, rights arising under common law, statutes, or regulations, choses or things in action, goodwill, Intellectual Property, blueprints, drawings, plans, diagrams, schematics, purchase orders, customer lists, monies due or recoverable from pension funds, route lists, rights to payment and other rights under any royalty or licensing agreements, infringement claims, software, information contained on computer disks or tapes, literature, reports, catalogs, deposit accounts, insurance premium rebates, tax refunds, and tax refund claims), other than goods, Accounts, and Negotiable Collateral.

 

 “Intellectual Property” means patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses (software or otherwise), information, processes and similar proprietary rights.

 

“Inventory” means all of the Company’s goods (including software imbedded in such goods), merchandise and other personal property which are held for sale or lease, including those held for display or demonstration or out on lease or consignment or to be furnished under a contract of service or are raw materials, work in process or materials used or consumed, or to be used or consumed in the Company’s business, and shall include any returns or repossessions thereof and all property rights, Intellectual Property, plans, drawings, diagrams, schematics, assembly and display materials relating thereto.

 

“Negotiable Collateral” means all of the Company’s present and future letters of credit, advises of credit, certificates of deposit, notes, drafts, money, instruments, documents, and tangible Chattel Paper.

 

“Investment Property” means any and all of the Company’s presently existing and hereafter acquired investment property (as defined in the UCC).

 

“Permanent Financing” means the receipt by the Company of an aggregate of $2,000,000 or more through one or more an equity investments  in the Company that is consummated simultaneously with, or after the date of, this Agreement.  Such equity investment can be in the form of either Common Stock or preferred stock of the Company.

 

“Person” means any individual, corporation, limited liability company, partnership (general or limited), syndicate, joint venture, society, association, trust, unincorporated organization or Governmental Authority, or any trustee, executor, administrator or other legal representative thereof.

 

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

 

“Senior Indebtedness” means indebtedness incurred from a lending institution for the purpose of funding working capital.

 

“UCC” means the Arizona Uniform Commercial UCC, as amended or supplemented from time to time.  Any and all terms used in the Agreement which are defined in the UCC shall be construed and defined in accordance with the meaning and definition ascribed to such terms under the UCC, unless otherwise defined herein.

 

 

  

A - 2

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