Document:

Exhibit 10.1

 

 

	
        SONIFI Solutions Inc.

        3900 West Innovation Street

        Sioux Falls, SD 57107-7002
        

        Phone 605-988-1000

        www.sonifi.com

         
	 	
         

        

 

Submission/Insertion
Order

 

Date: July 9, 2015

Submission/Order #:0605689 Provider ID
#: (To Be Assigned) Content Provider:

 

	Name: 	Zonzia Media, Inc.
	Contact:	Myles A. Pressey III, Chairman
	Address:	112 West 34th Street, Suite 1555
	 	New York, NY 10120
	Phone: 	609-792-7481
	Fax:	________________________
    (Please indicate fax or permanent email address)

 

		1.	Content Description: The subject matter of the Submissions
shall be high definition audio-video content, relating to delivering programs, movies, documentaries and other original content,
and live sports and other events. Submissions will be made available by SONIFI Solutions, Inc. (“SONIFI”) as
a looping (repeating), free-to-guest, linear channel (i.e. on a “Linear Basis”) and on a video-on-demand, free-to-guest
basis (i.e. on a “VOD Basis”). Submissions for distribution on either a Linear Basis or VOD Basis shall be scheduled
monthly, must comply with the guidelines attached hereto as Schedule A, and Content Provider must deliver all metadata,
graphic and video elements as requested in advance of SONIFI’s monthly deadlines.

 

		a.	Submissions offered
on a Linear Basis may be distributed at any time of day, seven days per week, initially in a minimum of approximately 450,000 SONIFI-served
lodging facility guest rooms (as determined by SONIFI in its sole discretion) and through SONIFI's mobile applications (e.g. to
smart phones, tablets and personal computers wherever located). Submissions for distribution on a Linear Basis will total up to
four (4) hours in duration, consistent with a mutually-agreed upon programming wheel (as such programming wheel may change from
time to time based on SONIFI needs and subject to Content Provider’s
mutual consent). Up to fifty percent (50%) of content may be refreshed monthly. SONIFI will customize a channel guide listing,
description, and on-screen display to Content Provider specification where technically feasible using commercially reasonable efforts;
provided, however, the foregoing shall not require SONIFI to make any out-of-pocket expenditures for customization or deployment.

 

		b.	Submissions offered on a VOD Basis will be distributed as part of SONIFI’s
“Free Views” or “Free On Demand” or other programming category at any time of the day in SONIFI-served
hotels as determined by SONIFI. SONIFI shall use commercially reasonable efforts to distribute Submissions to approximately 900,000
guest rooms at SONIFI-served hotels which have “Free Views” or “Free On Demand” categories. If distribution
of Submissions falls materially below 900,000 guest rooms during the Term, the parties, by mutual agreement, may change the monthly
fee specified in Section 3 hereof. Submissions for distribution on a VOD Basis will total up to two (2) hours in duration. Up to
fifty percent (50%) of content may be refreshed monthly.

 

		2.	Advertising/Promotional Content:

 

		a.	SONIFI authorizes Content Provider to insert third party advertisements
and/or third party promotional materials within the Submissions (such advertisements and materials inserted by Content Provider
herein referred to as “Content Provider Sourced Ads”). All Content Provider Sourced Ads shall constitute and
be deemed part of the “Submissions” for all purposes under this Order including the attached Terms and Conditions,
for which Content Provider assumes full responsibility, must comply with SONIFI’s guidelines attached hereto as Schedule
A, and be pre- approved by both Content Provider and SONIFI.

  

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		b.	Content provider authorizes SONIFI to insert third party advertisements
and/or third party promotional materials between segments of Submissions, which will conform to SONIFI’s guidelines attached
hereto as Schedule A and which have been pre-approved by both Content Provider and SONIFI.

		c.	Content Provider authorizes SONIFI to insert SONIFI promotional materials
between segments of Submission as SONIFI deems appropriate in accordance with the provisions contained in Schedule A
(excluding, however, promotion of SONIFI’s Mature Adult content).

		d.	Payment/Distribution:In
the first 12 months of the term Content Provider shall pay SONIFI the greater of the amount of $55,000.00 or fifty percent (50%)
of Content Provider’s gross ad sales (after Content Provider
has paid agency commission) per month but no more than $140,000.00 per month for distribution of Linear Based and VOD Based distribution
in accordance with Section 1 hereof. In the second 12 months of the term Content Provider shall pay SONIFI the greater of the amount
of $70,000.00 or fifty percent (50%) of Content Provider’s
gross ad sales (after Content Provider has paid agency commission) per month, but no more than $140,000.00 per month for distribution
of Linear Based and VOD Based distribution in accordance with Section 1 hereof. In the third 12 months of the term and until the
end of the term Content Provider shall pay SONIFI the amount of $110,000.00 per month for distribution of Linear Based and VOD
Based distribution in accordance with Section 1 hereof. Payment terms shall be Net 30 days from date of invoice.

		e.	Notwithstanding anything to the contrary contained herein, (a) no revenue
levels associated with Submissions are promised or guaranteed by SONIFI, (b) no viewership levels for Submissions are promised
or guaranteed by SONIFI, (c) Content Provider acknowledges that distribution footprints may fluctuate for various reasons, including,
without limitation, due to lodging facility owners (or their representatives) refusing to permit distribution of Submissions (whether
on a Linear Basis, a VOD Basis, or both), and (d) while Content Provider must provide all Submissions in a high- definition format,
SONIFI may down-convert and distribute any Submissions in a standard definition format as technically required for transmission
or distribution.

 

		3.	Term: The term of this Submission/Insertion Order shall commence
with Submissions made available by SONIFI beginning on or after July 15, 2015 and will end on June 30, 2018 unless
earlier terminated as herein provided, (the “Term”).

 

		4.	No Exclusivity: The parties acknowledge and agree that they
are entering into a non-exclusive arrangement, and all rights not specifically granted to the other party are reserved for each
party’s sole and exclusive use, disposition and exploitation, and are exercisable at any time in any location by any means
whatsoever without regard to the extent to which any such rights may be competitive with the other party hereto.

 

The attached Terms and Conditions, together with any Schedules attached hereto, are made a part
of this Submission/Insertion Order and are incorporated herein by this reference. Collectively, Insertion Order, any such Schedules,
and such Terms and Conditions shall be referred to as this “Agreement”.

	Accepted by:	Zonzia Media, Inc.	`	
	 	 	 	 
	 	By: /s/ Myles A Pressey III             	 	 
	 	Print Name: Myles A. Pressey III	 	 
	 	Its: Chairman	 	 
	 	Date: 	 	 

 

 

	Accepted by:	SONIFI Solutions, Inc.	 	 
	 	 	 	 
	 	By: 	 	 
	 	Print Name:  	 	 
	 	Its:  	 	 
	 	Date:  	 	 

 

[SCHEDULE A and TERMS AND CONDITIONS follow.]

 

 

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SCHEDULE A

 

GENERAL
CONTENT & ADVERTISING GUIDELINES

FOR SUBMISSIONS AND
CONTENT NOT PROVIDED BY SONIFI

 

		1.	The following prohibitions will apply to all content:

		o	Nudity – No viewing of genitalia, pubic hair, bare breasts or bare buttocks.

		o	Sex Acts – No sex acts (real or simulated).

		o	Competing Services – No promotion of services that compete with SONIFI’s core businesses
(examples: movie downloads, music services, broadband Internet access, mature subject matter).

		o	Hotel and Travel Industry Themes – Issues that are likely to upset hotel operators or which
negatively portray SONIFI’s business partners (examples: theatrical business, TV shows, and adult businesses) are prohibited.
Examples include content showing hotel and related industries (examples: airline, car rental, food and beverage) in a negative
light, pranks in hotels, highlighting particular hotel brands (good or bad), and negative food and beverage related stories. For
purposes of clarity, the foregoing prohibits advertising or other Submissions relating to goods or services if such content could
be deemed to be competitive with the businesses of SONIFI’s lodging facility customers.

		o	Shocking and Gratuitous Violence – Content, whether real or simulated, which glorifies
violence, demonstrates cruelty, brutality or torture, or is intended to shock the viewer are prohibited.

		o	Demeaning Acts and Language – Acts that humiliate or deeply insult someone or their beliefs
are prohibited.

		o	Gory and Gross – No content meant to simply shock.

 

		2.	Advertising must meet contemporary moral standards, comply with applicable laws and fulfill
any other reasonable, usual and customary industry standards.

		3.	Advertising must not insult SONIFI’s stockholders, lodging facility customers or other content
providers.

		4.	Prohibited Advertising:

		o	Competitive lodging/hotel accommodations or any other entities that directly compete with SONIFI
customer hotel companies or their affinity programs. This includes referencing a specific hotel associated with an advertised spa
or golf course.

		o	Advertising that may have an adverse impact on any hotel’s business or financial operations.

		o	Advertising that violates or otherwise adversely affects any hotel's relationships with any third party.

		o	Cruise lines, Timeshares or Vacation Clubs.

		o	Fast food restaurants: (i.e.: McDonalds, Burger King).

		o	Value or standard chain restaurants (i.e.: Denny’s, Domino's, Applebee's).

		o	Discount Stores (i.e.: Wal-Mart, Kmart, Target).

		o	Discount booking/reservation services, online travel agencies.

		o	Mature Adult, escort or related companies/products/services (including advertisements for "900"
or "976" telephone services, or other services or announcements of a similar nature).

		o	Potentially illegal, regulated, or restricted products/services (e.g., tobacco products, firearms/weapons,
fireworks, or gambling, lotteries, or sweepstakes).

 

		5.	Advertising must not make a claim for its product that is not clearly substantiated. Content
Provider may be required to submit supporting documentation to substantiate claims.

 

		6.	No implied endorsements are allowed, and SONIFI’s display of advertising does not imply SONIFI’s
endorsement. Advertising must not imply association with SONIFI, the lodging facility, the lodging flag or brand, or the hotel
interactive system.

 

		7.	Collecting and selling of personal information gained through the advertising without a user’s
express permission is not allowed.

 

Application of this policy involves an element of
discretion and SONIFI reserves the right to reject or not approve any advertising, and to suspend or disable any Submissions or
other programming, for violation of these policies in the exercise of SONIFI's sole discretion.

 

 

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TERMS AND CONDITIONS

 

Section 1. License Grant.
The entity identified as "Content Provider" on the facing page of this document (hereinafter, "Content Provider")
has agreed to submit audio- visual content and/or textual content (collectively, and together with
associated metadata, "Submissions") to SONIFI Solutions, Inc. ("SONIFI"). While
Content Provider retains all ownership rights in Submissions, by submitting Submissions to SONIFI, Content Provider hereby grants
SONIFI (and SONIFI’s controlled affiliates) (collectively, “Licensees”), during the term described in
Section 7, an irrevocable (except as otherwise described herein), non-exclusive, royalty free license to use, reproduce, distribute,
display and perform Submissions throughout the United States and its territories and possessions, in connection with their (and
their successors') business, in any media format and through any media channel (e.g. the Internet, even though the Internet is
available worldwide), whether currently existing or not, including, without limitation, for purposes of selling third- party advertising,
promoting third-party sponsors and entertaining guests of lodging facilities. Any use, reproduction, distribution, display or performance
in connection with any media format or media channel (including the Internet) that is outside of SONIFI’s Licensee’s
hotel rooms must be mutually approved in advance by Content Provider, which approval will not be unreasonably withheld. SONIFI
shall have the right to insert a visual graphic overlay over the Submissions to alert viewers of associated interactive
material and to encode any full motion video if appropriate. Content’s Provider’s trademarks,
service marks, logos and designs, or those of any affiliated company, as well as Content Provider’s name or the name of any
affiliated company, may appear in any exhibition of Submissions or in advertisements for Submissions made available by Licensee
systems. 

 

Section 2. Representations,
Warranties, Covenants. Content Provider affirms, represents and warrants to SONIFI that it owns
or has the necessary licenses, rights, consents and permissions to use and authorize Licensees to use throughout the term, and
will maintain throughout the term hereof, all patent, trademark, trade secret, copyright, performance (including, without limitation,
music performance and any rights owned or controlled by BMI, ASCAP, SESAC or similar organizations) or other proprietary rights
(collectively, "Intellectual Property Rights") in and to any and all Submissions to enable use of the Submissions
throughout the term hereof in the manner contemplated herein, including, without limitation, as necessary for Submissions to be
displayed on Licensees’ interactive television systems (or over the Internet) and exhibited thereby to viewers without infringing
upon any Intellectual Property Rights, distribution right, privacy right, publicity right or any other right owned or controlled
by any third party. Content Provider warrants that all license fees, royalties or other fees
related to Submissions have been and will continue to be paid by it to the appropriate parties in a full and timely manner. Content
Provider represents and warrants that the Submissions do not and will not contain any statement that is false, misleading, malicious,
libelous or defamatory, and do not and will not violate any applicable law, rule or regulation.

 

Section 3. Submission Format;
Costs; Refusal to Display. Content Provider, as producer of the Submissions, shall have sole control over the content of the
programs; provided, however, (a) all Submissions must meet the standards of quality generally found in existing content aired by
SONIFI in facilities throughout the United States and shall be consistent with the current level of quality of television programs
similar to the Submissions that currently are being distributed by Content Provider, and (b) no Submissions shall jeopardize the
reputation or image of SONIFI or any facility to which it is distributed or be contrary to the public interest. Content
Provider, at its own expense, will submit Submissions in whatever format, by whatever delivery method and in conformance with whatever
specifications are desired by SONIFI, and will deliver all metadata, graphics and video associated with Submissions as required
by SONIFI. Content Provider will bear all production, formatting and delivery costs. If the format or media in which any Submission
originally is submitted is converted into and published or exhibited in any other format or media, the license granted above grants
to Licensees any and all rights necessary to convert, publish, broadcast and distribute such materials in such other format and
media without seeking written approval or permission from Content Provider. SONIFI reserves the right to not distribute or publish
or to cease distributing or publishing Submissions without prior notice. Such refusal to distribute or publish Submissions shall
not constitute a breach or default of SONIFI hereunder and SONIFI, at its sole option, may issue a credit for exposure of equal
value or a refund of fees paid.

 

Section 4. Limitation
of Liability. EXCEPT WITH RESPECT TO INDEMNIFICATION OBLIGATIONS UNDER SECTION 6, NEITHER CONTENT PROVIDER NOR LICENSEES SHALL
BE LIABLE FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES ARISING OUT OF OR IN CONNECTION WITH
SUBMISSIONS OR THESE TERMS AND CONDITIONS.

 

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Section 5. Disclaimer
of Warranties. EXCEPT AS SPECIFICALLY SET FORTH IN THESE TERMS AND CONDITIONS, EACH OF CONTENT PROVIDER AND LICENSEES DISCLAIM
ALL WARRANTIES OF ANY KIND, WHETHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE AND THOSE ARISING FROM COURSE OF DEALING

 

OR COURSE OF PERFORMANCE. SONIFI
does not endorse any Submission or any opinion, recommendation or advice expressed therein, and SONIFI expressly disclaims any
and all liability in connection with Submissions.

 

Section 6. Indemnification.
Content Provider agrees to defend, indemnify and hold harmless Licensees, and their respective
parent and affiliated companies, and their respective officers, directors, employees and agents, and SONIFI agrees to defend, indemnify
and hold harmless Content Provider, and its respective officers, directors,employees and agents, in each case from and against
any and all third party claims, and associated damages, obligations, losses, liabilities, costs, debt and expenses (including,
but not limited to, reasonable attorneys' fees) (collectively, “Losses”) arising from or related to Content
Provider’s or SONIFI’s, respectively, violation of any term of, or any misrepresentation under, these Terms and Conditions.
This defense and indemnification obligation will survive in perpetuity.

 

Section 7. Term. The
term of the license granted by Section 1 shall be as stated on the cover of this document; provided, however, either party may
terminate such license and this Agreement at any time for convenience following 60 days’ written notice of termination to
the other party. In the event SONIFI seeks to terminate this Agreement because SONIFI desires to enter into an agreement with another
content provider, SONIFI will permit Content Provider the right to match any legitimate offer of any such competitor. All Submissions
provided by Content Provider to SONIFI will cease to air on the SONIFI system as soon as possible following termination date using
commercially reasonable efforts.

 

Section 8. Reporting.
SONIFI shall keep complete and accurate records relating to the Submissions displayed and will provide a monthly performance
report to Content Provider relating to Submissions displayed the previous month. Content Provider shall keep accurate records related
to any amount payable. Each party shall have the right to examine and audit, during normal business hours, those records of the
other party on reasonable written notice. The audited party shall immediately reimburse the auditing party for its costs associated
with the audit if the audit reveals an overreporting or underpayment of greater than 10%, and in all cases any overreporting or
underpayments revealed by the audit shall immediately be corrected, together with interest at the rate of 10% per annum.

 

Section 9. Modification;
Waiver. No terms, representations, warranties or conditions other than those set forth herein shall be binding on Content Provider
or SONIFI unless expressly agreed to in a writing signed by the parties and these Terms and Conditions may be modified only in
a writing signed by the parties. No waiver of any term hereof shall be deemed a further or continuing
waiver of such term or any other term. A party’s failure to assert any right hereunder shall not constitute a waiver of such
right except as specifically set forth herein.

 

Section 10. Confidentiality;
Public Disclosure. Each Party acknowledges and agrees that, in the course of this Agreement and the Parties’ relationship,
it may be given access to or may otherwise obtain Confidential Information belonging or pertaining to the other Party. For purposes
hereof, the term “Confidential Information” shall include non-public information about the disclosing Party’s
business or activities that is proprietary and confidential, including, without limitation, all business, financial, technical
and other information of a party marked or designated as “confidential” (or some similar designation) or that, by its
nature or the circumstances surrounding its disclosure, should reasonably be regarded as confidential. Each Party hereby agrees
to (i) use the Confidential Information of the disclosing Party solely for the purpose of performing its obligations under this
Agreement; (ii) hold the other Party’s Confidential Information in strict confidence, and; (iii) not disclose such Confidential
Information, or any part thereof, to any third party, except those of its officers, employees or professional advisors with a strict
“need to know” in order for the receiving Party to perform its obligations hereunder; provided that such officers,
employees or professional advisors shall, prior to any disclosure, have agreed by signed writing or otherwise be bound to confidentiality
obligations no less strict than those described herein. Confidential Information shall not include (i) any information already
rightfully in the public domain at the time of its disclosure, or subsequently released into the public domain by the disclosing
Party; (ii) any information already rightfully in the possession of the receiving Party at the time of its disclosure by the disclosing
Party without an obligation to maintain its confidentiality; (iii) any information that is independently developed by the receiving
Party without use of or reference to any Confidential Information of the disclosing Party, in either case such fact being proven
through documentary evidence; (iv) information obtained by the receiving Party from a third party not in breach of any confidentiality
obligations to the disclosing Party; or (v) information required to be disclosed by law, a court order or competent government
authority, provided that in such case the receiving Party shall promptly inform the disclosing Party of such requirement of disclosure
prior to the disclosure such that the disclosing Party has an opportunity to object to the production or disclosure through seeking
a protective order.

 

 

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Section 11. Governing
Law; Venue. These Terms and Conditions shall be governed by and construed in accordance with the internal substantive laws
of the State of New York, without giving effect to principles of conflicts of law. These Terms and Conditions are subject to the
terms and conditions of licenses and contracts applicable to Licensees and also to all federal, state and municipal laws and regulations
now enforced or which may be enacted in the future, including the rules and regulations of the Federal Communications Commission.
Content Provider agrees that the Licensees’ website(s) shall be deemed solely based in New York
and shall be deemed passive website(s) that do not give rise to personal jurisdiction over SONIFI or any Licensee, either specific
or general, in jurisdictions other than New York. Any claim or dispute between Content Provider and SONIFI (or any Licensee) that
arises in whole or in part from these Terms and Conditions or any Submission shall be decided exclusively by a court of competent
jurisdiction located in New York, New York.

 

Section 12. Successors
and Assigns. These Terms and Conditions shall be binding on and for the benefit of both parties and their respective assigns
and successors in interest. Nonetheless, neither party hereto shall assign these Terms and Conditions without the prior written
consent of the other party. Notwithstanding the above, either party may assign its rights and obligations hereunder to (a) any
corporation or other entity resulting from any merger or other reorganization to which the assigning party is a party, (b) any
corporation, partnership, limited liability company, association, or other person or entity to which the assigning party may transfer
all or substantially all of its assets or business existing at such time, or (c) any entity which controls the assigning party.

 

Section 13. Force Majeure.
Neither party shall be in default or otherwise liable for any delay in or failure of its performance hereunder (except with
respect to payment obligations, with respect to which this Section 13 shall not apply) where such delay or failure of performance
arises by reason of any Act of God, disruptions of the Internet, telecommunications facilities or public utilities, or any government
or any governmental body, acts of war, the elements, strikes or labor disputes.

 

Section 14. Entire Agreement;
Miscellaneous. These Terms and Conditions constitute the complete and entire expression of the agreement between the parties
and supersede any and all other agreements, whether written or oral, between them. Nothing herein shall be construed or deemed
to create any taxable entity or relationship of joint venture, partnership, franchise, employment, master-servant or principal-agent
relationship between the parties hereto. The rights, duties, obligations and liabilities of each party are separate and not joint
or collective, it being understood that the parties are independent contractors vis-à-vis one another. If
any provision of these Terms and Conditions is deemed invalid by a court of competent jurisdiction, the invalidity of such provision
shall not affect the validity of the remaining provisions hereof, which shall remain in full force and effect. The prevailing party
in any legal dispute related to these Terms and Conditions shall be entitled to recover from the other its legal fees and other
costs payable in connection with such dispute. The parties acknowledge they mutually negotiated and drafted this document with
the advice of counsel, and thus no rule of construction shall apply on the basis that either was the drafter of this agreement

 

 

 

 

 

 

 

    	5ex4_1.htm

EXHIBIT 4.1

 

EXHIBIT B

 

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

COMMON STOCK PURCHASE WARRANT

BREATHE ECIG CORP.

 

	
Warrant Shares: 4,000,000

	
Initial Exercise Date: July 2, 2015

This COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, FirstFire Global Opportunities Fund LLC or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on the five (5) year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Breathe eCig Corp., a Nevada corporation (the “Company”), up to 4,000,000 shares (as subject to adjustment hereunder, the “Warrant Shares”) of Common Stock.  The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section 1.               Definitions.  Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (the “Purchase Agreement”), dated July [__], 2015, among the Company and the purchasers signatory thereto.

 

Section 2.               Exercise.

 

(a)           Exercise of Warrant.  Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy (or e-mail attachment) of the Notice of Exercise in the form annexed hereto and within three (3) Trading Days of the date said Notice of Exercise is delivered to the Company, the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank or, if available, pursuant to the cashless exercise procedure specified in Section 2(c) below. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required.  Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.  The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice.  The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

  

1

  

 

(b)           Exercise Price.  The exercise price per share of the Common Stock under this Warrant shall be $0.20, subject to adjustment hereunder (the “Exercise Price”).

 

(c)           Cashless Exercise.  If at any time after the completion of the then-applicable holding period required by Rule 144, or any successor provision then in effect, there is no effective Registration Statement registering, or no current prospectus available for, the resale of the Warrant Shares by the Holder, then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing (A-B) (X) by (A), where:

 

	 	
(A)   = 

	

the VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;

 

	 	
(B)   = 

	
the Exercise Price of this Warrant, as adjusted hereunder; and

	 	
(X)   = 

	
the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the characteristics of the Warrants being exercised, and the holding period of the Warrants being exercised may be tacked on to the holding period of the Warrant Shares.  The Company agrees not to take any position contrary to this Section 2(c).

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

  

2

  

 

Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).

(d)           Mechanics of Exercise.

 

i.            Delivery of Warrant Shares Upon Exercise.  Warrant Shares purchased hereunder shall be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (B) the Warrant Shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is one (1) Trading Day after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”).   The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised, with payment to the Company of the Exercise Price (or by cashless exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance of such shares, having been paid.  If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise.

 

ii.           Delivery of New Warrants Upon Exercise.  If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

iii.          Rescission Rights.  If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

 

  

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iv.          Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise.  In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder.  For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

 

v.           No Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

 

vi.           Charges, Taxes and Expenses.  Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.  The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.

 

vii.           Closing of Books.  The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

  

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(e)           Holder’s Exercise Limitations.  The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other  Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith.   To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.   In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported.  The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant.  The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply.  Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

 

  

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Section 3.               Certain Adjustments.

 

(a)           Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged.  Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

(b)           Subsequent Equity Sales. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents, at an effective price per share less than the Exercise Price then in effect but greater than $0.10 (as may be adjusted herein) (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (it being understood and agreed that if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance at such effective price), then simultaneously with the consummation of each Dilutive Issuance the Exercise Price shall be reduced and only reduced to equal the Base Share Price and the number of Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment.  Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued.  Notwithstanding the foregoing, no adjustments shall be made, paid or issued under this Section 3(b) in respect of an Exempt Issuance.  The Company shall notify the Holder, in writing, no later than the Trading Day following the issuance or deemed issuance of any Common Stock or Common Stock Equivalents subject to this Section 3(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”).  For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of Warrant Shares based upon the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise. If the Company enters into a Variable Rate Transaction, despite the prohibition thereon in the Purchase Agreement, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised.

 

  

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(c)           Subsequent Rights Offerings.  In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

(d)           Pro Rata Distributions.  During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a "Distribution"), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

  

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(e)           Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant).  For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction.  Notwithstanding anything to the contrary, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction, purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction.  “Black Scholes Value” means the value of this Warrant based on the Black and Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date.  The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

  

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(f)           Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

(g)           Notice to Holder.

 

i.           Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment..

 

ii.           Notice to Allow Exercise by Holder.  If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.  To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.  The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice  except as may otherwise be expressly set forth herein.

 

  

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Section 4.               Transfer of Warrant.

 

(a)           Transferability.  Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(c) hereof and to the provisions of Section 4.1 of the Purchase Agreement, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.  Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date the Holder delivers an assignment form to the Company assigning this Warrant full.  The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

(b)           New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, 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 Section 4(a), 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. All Warrants issued on transfers or exchanges shall be dated the Initial Exercise Date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

 

(c)           Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time.  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

(d)           Representation by the Holder.  The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.

 

Section 5.               Miscellaneous.

 

(a)           No Rights as Stockholder Until Exercise.  This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3.

 

(b)           Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

  

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

 

(d)           Authorized Shares.

 

i.           The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant.  The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.  The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

ii.           Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other 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 Holder as set forth in this Warrant against impairment.  Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

 

iii.           Before taking any action which would result in an adjustment in the number of 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 thereof.

 

  

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(e)           Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.

 

(f)            Restrictions.  The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.

 

(g)           Nonwaiver and Expenses.  No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date.  If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

 

(h)           Notices.  Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.

 

(i)            Limitation of Liability.  No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

(j)            Remedies.  The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights 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 hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

 

(k)           Successors and Assigns.  Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

 

(l)            Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

(m)          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 provisions or the remaining provisions of this Warrant.

 

(n)           Headings.  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

  

12

  

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

 

	  	
BREATHE ECIG CORP.

 

 

 

	  	
By: 

	  
	 	 	
Name

Title:

 

  

13

  

 

NOTICE OF EXERCISE

TO:           [_______________________

(1)      The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

(2)      Payment shall take the form of (check applicable box):

 

[  ] in lawful money of the United States; or

 

[ ] if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

 

(3)      Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

	  	  	  	  

 

 

The Warrant Shares shall be delivered to the following DWAC Account Number:

	  	  	  	  
	  	
  

 

	  	  
	  	
  

 

	  	  

(4)  Accredited Investor.  The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

[SIGNATURE OF HOLDER]

	
Name of Investing Entity:

	  	  
	
Signature of Authorized Signatory of Investing Entity:

	  	  
	
Name of Authorized Signatory:

	  	  
	
Title of Authorized Signatory:

	  	  
	
Date:

	  

  

14

  

 

EXHIBIT B

 

ASSIGNMENT FORM

 (To assign the foregoing Warrant, execute this form and supply required information.  Do not use this form to purchase shares.)

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

	
Name:

	 	  
	  	 	
(Please Print)

	  	 	  
	
Address:

	 	  
	  	 	
(Please Print)

	  	 	  
	
Dated: _______________ __, ______

	 	  
	  	 	  
	
Holder’s Signature: 

	  	 	  
	  	  	 	  
	
Holder’s Address:

	  	 	  

 

 

15

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