Document:

ex10-6.htm

EXHIBIT 10.6

 

PREFERRED STOCK PURCHASE AGREEMENT

 

THIS PREFERRED STOCK PURCHASE AGREEMENT (this “Agreement”), dated as the 23rd day of February, 2013, is entered into by and between RUBICON FINANCIAL INCORPORATED, a Nevada corporation, with headquarters located at 18872 MacArthur Boulevard, First Floor, Irvine, California  92612 (the “Company”), and Kathleen McPherson (the “Buyer”).

 

WITNESSETH:

 

WHEREAS, the Company and the Buyer is executing and delivering this Agreement in accordance with and in reliance upon the exemption from securities registration afforded, inter alia, by Rule 506 under Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”), and Section 4(2) of the 1933 Act; and

 

WHEREAS, the Buyer wishes to purchase, upon the terms and subject to the conditions of this Agreement, $426,000.00 of Series B Convertible preferred stock, $0.001 par value, of the Company (the “Preferred Stock”), which will be convertible into shares of Common Stock, par value $0.001 per share, of the Company (the “Common Stock”), upon the terms and subject to the conditions of such Preferred Stock, and subject to acceptance of this Agreement by the Company.

 

NOW THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1.           AGREEMENT TO PURCHASE; PURCHASE PRICE.

 

a.           Purchase.

 

(i) The Buyer hereby agrees to purchase from the Company $426,000.00 of the Preferred Stock, having the terms and conditions and being in the form attached hereto as Exhibit A.

 

(ii) Subject to the terms and conditions of this Agreement, the Buyer will purchase the Preferred Stock at a Closing (the “Closing”) held on the Closing Date (as defined below).

 

(iii) The purchase price to be paid by the Buyer shall be $1.00 per share of Preferred Stock and shall be payable in United States Dollars.

 

(iv) The Preferred Stock shall not be available for conversion prior to twelve (12) months from the Closing Date.

 

b.           Certain Definitions.  As used herein, each of the following terms has the meaning set forth below, unless the context otherwise requires:

 

  

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(i)  

	
“Affiliate” means, with respect to a specific Person referred to in the relevant provision, another Person who or which controls or is controlled by or is under common control with such specified Person.

 

	
(ii)  

	
“Certificates” means the relevant Preferred Stock duly executed on behalf of the Company and issued in the name of the respective Buyer.

 

	
(iii)  

	
“Closing Date” means the date of the Closing.

 

	
(iv)  

	
“Conversion Shares” means the shares of Common Stock issuable upon conversion of the Preferred Stock.

 

	
(v)  

	
“Person” means any living person or any entity, such as, but not necessarily limited to, a corporation, partnership or trust.

 

	
(vi)  

	
“Purchase Price” means the purchase price for the Preferred Stock.

 

	
(vii)  

	
“SEC Documents” shall mean, as of a particular date, any documents, forms or materials the Company has filed with the SEC prior to the date of this Agreement.

 

	
(viii)  

	
“Securities” means the Preferred Stock and the Common Stock issuable upon conversion of the Preferred Stock.

 

	
(ix)  

	
“Shares” means the shares of Common Stock representing any or all of the Conversion Shares.

 

c.           Form of Payment; Delivery of Certificates.

 

(i) The Buyer shall pay the Purchase Price for the Preferred Stock by delivering immediately available good funds in United States Dollars to the Company at the Closing on the Closing Date, subject to the payment of fees and expenses as provided in Section 12(a) and 12(b).

 

(ii) Upon payment by the Buyer to the Company of the Purchase Price, the Company shall deliver the Certificate to the Buyer within thirty (30) business days.

 

d.           Method of Payment.  Payment to the Company of the Purchase Price shall be made at the Closing by certified funds, or other form of payment acceptable to the Company.

 

2.            BUYER’S REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION; INDEPENDENT INVESTIGATION.

 

Buyer represents and warrants to, and covenants and agrees with, the Company as follows:

 

a. Without limiting any Buyer’s right to sell the Common Stock pursuant to the conversion of the Preferred Stock, the Buyer is purchasing the Preferred Stock and will be acquiring the Shares for its own account for investment only and not with a view towards the public sale or distribution thereof and not with a view to or for sale in connection with any distribution thereof.

 

  

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b. The Buyer confirms that (i) (either alone, or with her advisor, if any) she has carefully reviewed the risks of, and other considerations relating to, investment in the Company and (either alone, or with her advisor, if any) possesses the knowledge and experience in financial and business matters generally, and in illiquid investments in particular, to be capable of evaluating the merits and risks (including, without limitation, the economic and tax risks) of an investment in the Company and of making an informed investment decision; (ii) she has the financial means to make and pay for her subscription and can bear the risk of loss of her entire investment; and (iii) she had individual income in excess of U.S.$200,000, or joint income with her spouse in excess of U.S.$300,000, in each of the calendar years 2011 and 2012 and reasonably expects to have individual income in excess of U.S.$200,000, or joint income in excess of U.S.$300,000, in the calendar year 2013, or has individual net worth in excess of U.S.$1,000,000 (excluding the value of Buyer’s primary residence and the related amount of indebtedness secured by the primary residence up to its fair market value).

 

c. The Buyer understands that the Preferred Stock has not been and will not be registered under the 1933 Act or under the securities or “blue sky” laws of any state or any jurisdiction outside the United States and, therefore, cannot be resold unless they are registered under the 1933 Act (and, in some cases, under state securities or “blue sky” laws or the laws of other jurisdictions) or an exemption from registration is available and that she will have no right to require registration of the Preferred Stock.

 

d. All subsequent offers and sales of the Preferred Stock and the Shares by Buyer shall be made pursuant to registration of the Shares under the 1933 Act or pursuant to an exemption from registration.

 

e. Buyer understands that the Preferred Stock is being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Preferred Stock.

 

f. The Buyer reviewed the SEC Documents and has conducted her own independent analysis of the prospective operations and assets of the Company and investment in the Securities.  The Buyer has relied solely upon the such independent investigations made by the Buyer in making a decision to purchase the Securities and has not received from the Company, officers thereof, or any other person or entity acting on behalf of the Company any representations or warranties that are inconsistent with the SEC Documents.

 

g. The Buyer understands that its investment in the Securities involves a high degree of risk that the Buyer will lose all or part of its investment.

 

  

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h. The Buyer confirms that she has adequate means of providing for contingencies; the Buyer has no need for liquidity in this investment; and the Buyer can afford the loss of this entire investment.

 

i. The Buyer confirms that, except for the Preferred Stock in the form attached hereto as Exhibit A, neither the Buyer or her advisors, if any, has been furnished any offering materials or literature by the Company, its agents, officers, or directors.

 

j. The Buyer confirms that she has the full right and power to perform pursuant to this Agreement, or is executing this Agreement in a representative or fiduciary capacity, that she has full power and authority to execute and deliver this Agreement in such capacity and on behalf of the subscribing individual for whom she is executing this Agreement, and such individual has full right and power to perform pursuant to this Agreement.

 

k. The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities.

 

3.           COMPANY REPRESENTATIONS, ETC.  The Company represents and warrants to the Buyer that:

 

a. Concerning the Preferred Stock and the Shares.  There are no preemptive rights of any stockholder of the Company to acquire the Preferred Stock or the Shares.

 

b. Reporting Company Status. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and has the requisite corporate power to own its properties and to carry on its business as now being conducted.  The Company is duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary, other than those jurisdictions in which the failure to so qualify would not have a material adverse effect on the business, operations or condition (financial or otherwise) or results of operation of the Company and its subsidiaries taken as a whole (a “Material Adverse Effect”).  The Company has registered its Common Stock pursuant to Section 12g of the 1934 Act, and the Common Stock is quoted for trading on the Pink Sheets.

 

c. Authorized Shares; Common. The authorized capital stock of the Company consists of 100,000,000 shares of Common Stock, par value $0.001 per share, of which 15,089,023, which does not include 250,000 shares authorized but unissued, were outstanding on November 13, 2012. All issued and outstanding shares of Common Stock have been duly authorized and validly issued and are fully paid and nonassessable.  The Company has sufficient authorized and unissued shares of Common Stock as may be necessary to effect the issuance of the Shares.  The Shares have been duly authorized and, when issued upon conversion of the Preferred Stock will be duly and validly issued, fully paid and non-assessable and will not subject the holder thereof to personal liability by reason of being such holder.  At all times, the Issuer shall keep available Common Stock duly authorized for issuance against the Preferred Stock.

 

d. Authorized Shares; Preferred. The authorized capital stock of the Company currently consists of (i) 9,000,000 shares of blank check preferred stock, par value $0.001 per share, of which no shares were outstanding, and (ii) 1,000,000 shares of Series A Preferred Stock, par value $0.001 par value per share, of which 62,500 shares were issued and outstanding as of the date of this Agreement. The Company has undertaken to file a certificate of designation for the Preferred Stock within thirty (30) days of this Agreement, whereby the Company will authorize 1,000,000 shares of Preferred Stock, par value $0.001 per share. The Company has sufficient authorized and unissued shares of preferred stock as may be necessary to effect the issuance of the Preferred Stock.

 

  

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e. Stock Purchase Agreement. This Agreement and the transactions contemplated hereby, have been duly and validly authorized by the Company. This Agreement has been duly executed and delivered by the Company.  Each of this Agreement and the Preferred Stock, when executed and delivered by the Company, are and will be, valid and binding agreements of the Company, enforceable in accordance with their respective terms, subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium, and other similar laws affecting the enforcement of creditors’ rights generally.

 

f. Non-contravention. The execution and delivery of this Agreement and Preferred Stock by the Company, the issuance of the Securities, and the consummation by the Company of the other transactions contemplated by this Agreement, and the Preferred Stock do not and will not conflict with or result in a breach by the Company of any of the terms or provisions of, or constitute a default under (i) the articles of incorporation or by-laws of the Company, each as currently in effect, (ii) any indenture, mortgage, deed of trust, or other material agreement or instrument to which the Company is a party or by which it or any of its properties or assets are bound, including any listing agreement for the Common Stock, except as herein set forth, or (iii) to its knowledge, any existing applicable law, rule, or regulation or any applicable decree, judgment, or order of any court, United States federal or state regulatory body, administrative agency, or other governmental body having jurisdiction over the Company or any of its properties or assets, except such conflict, breach or default which would not have a Material Adverse Effect.

 

g. Approvals. No authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, or stock exchange or market or the stockholders of the Company is required to be obtained by the Company for the issuance and sale of the Securities to the Buyer as contemplated by this Agreement, except such authorizations, approvals and consents that have been obtained.

 

h. SEC Filings. None of the Company’s SEC Documents contained, at the time it was filed, any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements made therein in light of the circumstances under which they were made, not misleading.

 

i. Full Disclosure. There is no fact known to the Company (other than general economic conditions known to the public generally or as disclosed in the Company’s SEC Documents) that has not been disclosed to the Buyer that (i) would reasonably be expected to have a Material Adverse Effect, (ii) would reasonably be expected to materially and adversely affect the ability of the Company to perform its obligations pursuant to this Agreement or any of the agreements contemplated hereby, or (iii) would reasonably be expected to materially and adversely affect the value of the rights granted to the Buyer in this Agreement.

 

  

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j. Absence of Litigation. Except as set forth in the Company’s SEC Documents or disclosed to the Buyer, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body pending or, to the knowledge of the Company, threatened against or affecting the Company, wherein an unfavorable decision, ruling or finding would have a Material Adverse Effect or which would adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, any of the Transaction Agreements.

 

k. Absence of Events of Default. Except as set forth in Section 3(e) hereof, no Event of Default (or its equivalent term), as defined in the respective agreement to which the Company is a party, and no event which, with the giving of notice or the passage of time or both, would become an Event of Default (or its equivalent term) (as so defined in such agreement), has occurred and is continuing, which would have a Material Adverse Effect.

 

l. No Default. The Company is not in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any material indenture, mortgage, deed of trust or other material instrument or agreement to which it is a party or by which it or its property is bound.

 

m. Dilution. The number of Shares issuable upon conversion of the Preferred Stock may increase substantially in certain circumstances, including, but not necessarily limited to, the circumstance wherein the market price of the Common Stock declines prior to the conversion of the Preferred Stock.  The Company’s executive officers and directors have studied and fully understand the nature of the securities being sold hereby and recognize that they have a potential dilutive effect and further that the conversion of the Preferred Stock and/or sale of the Conversion Shares may have an adverse effect on the market price of the Common Stock.  The board of directors of the Company has concluded, in its good faith business judgment, that such issuance is in the best interests of the Company.  The Company specifically acknowledges that its obligation to issue the Shares upon conversion of the Preferred Stock is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of other shareholders of the Company.

 

4.           CERTAIN COVENANTS AND ACKNOWLEDGMENTS.

 

a. Transfer Restrictions. The Buyer acknowledge that (1) the Preferred Stock has not been and is not being registered under the provisions of the 1933 Act and the Shares have not been and are not being registered under the 1933 Act, and may not be transferred unless (A) subsequently registered thereunder or (B) the Buyer shall have delivered to the Company an opinion of counsel, reasonably satisfactory in form, scope and substance to the Company, to the effect that the Securities to be sold may be sold pursuant to an exemption from such registration; (2) the Preferred Stock is not available for conversion prior to twelve (12) months from the Closing Date; (3) any sale of the Securities made in reliance on Rule 144 promulgated under the 1933 Act may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any resale of such Securities under circumstances in which the seller, or the person through whom the sale is made, may be deemed to be an underwriter, as that term is used in the 1933 Act, may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (4) neither the Company nor any other person is under any obligation to register the Securities under the 1933 Act or to comply with the terms and conditions of any exemption thereunder.

 

  

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b. Restrictive Legend. The Buyer acknowledge and agree that the Preferred Stock certificates and other instruments representing any of the Securities shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of any such Securities):

 

THESE SECURITIES (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED. IN ADDITION, THE SECURITIES SHALL NOT BE AVAILABLE FOR CONVERSION PRIOR TO TWELVE (12) MONTHS FROM THE DATE HEREOF.

 

c. Filings. The Company undertakes and agrees to make all necessary filings in connection with the sale of the Securities to the Buyer required under any United States laws and regulations applicable to the Company, or by any domestic securities exchange or trading market, and to provide a copy thereof to the Buyer promptly after such filing.

 

d. Available Shares. The Company shall have at all times authorized and reserved for issuance, free from preemptive rights, shares of Common Stock sufficient to yield enough shares of Common Stock issuable at conversion as may be required to satisfy the conversion rights of the Buyer pursuant to the terms and conditions of the Preferred Stock which have been issued and not yet converted.  If at any time, the Company does not have available an amount of authorized and non-issued Shares necessary to satisfy full Conversion of the then outstanding amount of the Preferred Stock, the Company shall call and hold a special meeting within 60 days of such occurrence, for the sole purpose of increasing the number of shares authorized.  Management of the Company shall recommend to shareholders to vote in favor of increasing the number of Common Stock authorized. Management shall also vote all of its shares in favor of increasing the number of Common Stock authorized.

 

5.           TRANSFER AGENT INSTRUCTIONS.

 

a. Promptly following the purchase by the Buyer of the Preferred Stock in accordance with Section 1(c) hereof, the Company will irrevocably instruct its transfer agent to issue Common Stock from time to time upon conversion of the Preferred Stock in such amounts as specified from time to time by the Company to the transfer agent, bearing the restrictive legend specified in Section 4(b) of this Agreement prior to registration of the Shares under the 1933 Act, registered in the name of the respective Buyer or its permitted assigns and in such denominations to be specified by such Buyer in connection with each conversion of the Preferred Stock.  The Company warrants that if the Buyer is not in breach of the representations and warranties contained in this Agreement, no instruction other than such instructions referred to in this Section 5 and stop transfer instructions to give effect to Section 4(a) hereof prior to registration and sale of the Shares under the 1933 Act will be given by the Company to the transfer agent and that the Shares shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and applicable law. Nothing in this Section shall affect in any way the Buyer’ obligations and agreement to comply with all applicable securities laws upon resale of the Securities.  If any Buyer provides the Company with an opinion of counsel reasonably satisfactory to the Company that registration of a resale by such Buyer of any of the Securities in accordance with clause (1)(B) of Section 4(a) of this Agreement is not required under the 1933 Act, the Company shall (except as provided in clause (2) of Section 4(a) of this Agreement) permit the transfer of the Securities and, in the case of the Converted Shares or the Warrant Shares, as the case may be, promptly instruct the Company’s transfer agent to issue one or more certificates for Common Stock without legend in such name and in such denominations as specified by the Buyer.

 

  

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b. (i) The Company will permit the Buyer to exercise their rights to convert the Preferred Stock by telecopying or delivering an executed and completed Notice of Conversion to the Company and delivering, within five (5) business days thereafter, the original Preferred Stock being converted to the Company by express courier, with a copy to the transfer agent.

 

(ii) The term “Conversion Date” means, with respect to any conversion elected by the holder of the Preferred Stock, the date specified in the Notice of Conversion, provided the copy of the Notice of Conversion is given either via mail or facsimile to or otherwise delivered to the Company in accordance with the provisions hereof so that it is received by the Company on or before such specified date.

 

(iii) The Company will transmit the certificates representing the Converted Shares issuable upon conversion of any Preferred Stock (together, unless otherwise instructed by the Buyer, with Preferred Stock not being so converted) to the Buyer at the address specified in the Notice of Conversion (which may be the Buyer’s address for notices as contemplated by Section 11 hereof or a different address) via express courier, by electronic transfer or otherwise, within five (5) business days if the address for delivery is in the United States and within seven (7) business days if the address for delivery is outside the United States (such fifth business day or seventh business day, as the case may be, the “Delivery Date”) after (A) the business day on which the Company has received both of the Notice of Conversion (by facsimile or other delivery) and the original Preferred Stock being converted (and if the same are not delivered to the Company on the same date, the date of delivery of the second of such items) or (B) the date an interest payment on the Preferred Stock, which the Company has elected to pay by the issuance of additional Preferred Stock, as contemplated by the Preferred Stock, was due.

 

c. The Company will authorize its transfer agent to give information to a Buyer or such Buyer’s representative relating to the transfer of the Company’s shares of Common Stock to the Buyer, upon the request of the Buyer or any such representative.  The Company will provide such Buyer with a copy of the authorization so given to the transfer agent.

 

  

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6.           CLOSING DATE.

 

a. The Closing Date shall occur on the date which is the first business day after each of the conditions contemplated by Sections 7 and 8 hereof shall have either been satisfied or been waived by the party in whose favor such conditions run.

 

b. The Closing of the purchase and issuance of Preferred Stock shall occur on the Closing Date at the offices of the Company and shall take place no later than 5:00 P.M., Pacific Standard time, on such day or such other time as is mutually agreed upon by the Company and the Buyer.

 

7.           CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

 

The Buyer understand that the Company’s obligation to sell the Preferred Stock to the Buyer pursuant to this Agreement on the Closing Date is conditioned upon:

 

a.  The execution and delivery of this Agreement by the Buyer;

 

b. Delivery by the Buyer to the Company of good funds as payment in full of an amount equal to the Purchase Price for the Preferred Stock in accordance with this Agreement;

 

c. The accuracy on the Closing Date of the representations and warranties of the Buyer contained in this Agreement, each as if made on such date, and the performance by the Buyer on or before such date of all covenants and agreements of the Buyer required to be performed on or before such date; and

 

d. There shall not be in effect any law, rule or regulation prohibiting or restricting the transactions contemplated hereby, or requiring any consent or approval which shall not have been obtained.

 

8.           CONDITIONS TO THE BUYER’ OBLIGATION TO PURCHASE.

 

The Company understands that the Buyer’ obligation to purchase the Preferred Stock on the Closing Date is conditioned upon:

 

a. The execution and delivery of this Agreement by the Company;

 

b. The accuracy in all material respects on the Closing Date of the representations and warranties of the Company contained in this Agreement, each as if made on such date, and the performance by the Company on or before such date of all covenants and agreements of the Company required to be performed on or before such date; and

 

c. There shall not be in effect any law, rule or regulation prohibiting or restricting the transactions contemplated hereby, or requiring any consent or approval which shall not have been obtained.

 

  

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9.           GOVERNING LAW; MISCELLANEOUS.

 

a. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Nevada for contracts to be wholly performed in such state and without giving effect to the principles thereof regarding the conflict of laws.  Each of the parties consents to the jurisdiction of the federal courts whose districts encompass any part of the County of Orange, California or the state courts of the State of California sitting in the County of Orange in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions.  To the extent determined by such court, the Company shall reimburse the Buyer for any reasonable legal fees and disbursements incurred by the Buyer in enforcement of or protection of any of its rights under any of the Transaction Agreements.

 

b. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

 

c. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto.

 

d. All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require.

 

e. A facsimile transmission of this signed Agreement shall be legal and binding on all parties hereto.

 

f. This Agreement may be signed in one or more counterparts, each of which shall be deemed an original.

 

g. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.

 

h. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other jurisdiction.

 

i. This Agreement may be amended only by the written consent of a majority in interest of the holders of the Preferred Stock and an instrument in writing signed by the Company.

 

j. This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof.

 

10.           NOTICES. Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively given on the earliest of

 

  

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(a) the date delivered, if delivered by personal delivery as against written receipt therefor or by confirmed facsimile transmission,

 

(b) the seventh business day after deposit, postage prepaid, in the United States Postal Service by registered or certified mail, or

 

(c) the third business day after mailing by next-day express courier, with delivery costs and fees prepaid,

 

in each case, addressed to each of the other parties thereunto entitled at the following addresses (or at such other addresses as such party may designate by ten (10) days advance written notice similarly given to each of the other parties hereto):

 

	
COMPANY:

	
Rubicon Financial Incorporated

	
  

	
18872 MacArthur Boulevard, First Floor

	
  

	
Irvine, California  92612

	
  

	
Telephone No.:  ______________

	
  

	
Telecopier No.:  ______________

 

	
  

	
with copies to:

 

	
  

	
DeMint Law, PLLC

	
  

	
3753 Howard Hughes Pkwy., Suite 200-314

	
  

	
Las Vegas, Nevada  89169

	
  

	
Telecopier No.:  (702) 442-7995

 

BUYER:                                At the address set forth on the signature page of this Agreement.

 

11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.  The Company’s and the Buyer’ representations and warranties herein shall survive for a period of twelve (12) months after the execution and delivery of this Agreement and shall inure to the benefit of the Buyer and the Company and their respective successors and assigns.

 

 

 

[SIGNATURE PAGE TO FOLLOW]

 

  

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IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer and the Company as of the date set forth above.

 

 

COMPANY:

 

RUBICON FINANCIAL INCORPORATED

 

By: /s/ Joseph Mangiapane, Jr.                                                     

       Joseph Mangiapane, Jr., CEO/President

 

BUYER:

 

/s/ Kathleen McPherson                                                                                                                                

Kathleen McPherson

	
Address: 3415 Bangor Place                                                          

                 San Diego, CA  92106                                                    

	
Telephone: 949-678-1024                                                                

	
Facsimile: N/A

	    

 

  

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Exhibit A - FORM OF PREFERRED STOCK

 

CERTIFICATE OF DESIGNATION

of

SERIES B CONVERTIBLE PREFERRED STOCK

of

RUBICON FINANCIAL INCORPORATED

Establishing the

Voting Powers, Designations, Preferences, Limitations,

Restrictions, and Relative Rights of

 

Pursuant to NRS 78.195 of the

Laws of the State of Nevada

 

Rubicon Financial Incorporated, a corporation organized and existing under the laws of the State of Nevada (hereinafter called the “Company”), hereby certifies that the following resolution was adopted by the board of directors of the Company as required by NRS 78.195 at a meeting duly called and held on February 23, 2013;

 

                RESOLVED, that pursuant to the authority granted to and vested in the board of directors of the Corporation (the “Board”) in accordance with the provisions of the articles of incorporation of the Company, as currently in effect, the Board hereby authorizes a new series of Preferred Stock, par value $0.001 per share (the “Preferred Stock”), of the Company and hereby states the designation and number of shares, and fixes the relative rights, preferences, and limitations thereof as follows:

 

Series B Convertible Preferred Stock:

 

The number of shares constituting the Series B Convertible Preferred Stock shall be 1,000,000. Such number of shares may be increased or decreased by resolution of the Board; provided, that no decrease shall reduce the number of shares of Series B Convertible Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Company convertible into Series B Convertible Preferred Stock.

 

Section 1.                      DESIGNATION.  The Shares are designated as the Company’s Series B Convertible Preferred Stock (the “Shares”).

Section 2.                      DIVIDEND PROVISIONS. The holders of the Shares will not be entitled to dividends.

Section 3.                      REDEMPTION.

(a)           The Company shall be required to utilize certain amounts of funds it receives from equity or debt financing after the date of issuance of shares of Preferred Stock to redeem the shares in accordance with the following: (i) the Company shall utilize 100% of funds received from the issuance and sale of shares of Series A preferred stock to redeem the shares of Preferred Stock; (ii) the Company will not be required to redeem any shares of Preferred stock for financings up to $500,000 in the aggregate; (iii) the Company shall utilize a minimum of 10% of the funds received to redeem the shares of Preferred Stock from financings from $500,001 up to $1,000,000 in the aggregate; and (iv) the Company shall utilize a minimum of 25% of the funds received to redeem the shares of Preferred Stock for financings in excess of $1,000,001 in the aggregate. The Company may choose to redeem the shares of Preferred Stock from time to time after the date of issuance (each a “Redemption Date”), in whole or in part, by paying in cash in exchange for the shares of Preferred Stock to be redeemed a sum equal to $1.00 per Share of Preferred Stock (as adjusted for any stock dividends, combinations or splits with respect to such shares) plus all declared or accumulated but unpaid dividends on such shares (the "Redemption Price"). Any redemption effected pursuant to this subsection (3)(a) shall be made on a pro rata basis among the holders of the Preferred Stock in proportion to the number of shares of Preferred Stock then held by them. Notwithstanding anything set forth above, the Board may redeem any outstanding Shares of Preferred Stock from time to time in its sole discretion in accordance with this Section 3.

 

  

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(b)           Subject to the rights of series of preferred stock which may from time to time come into existence, at least two (2) but no more than thirty (30) days prior to each Redemption Date, written notice shall be mailed, first class postage prepaid, to each holder of record (at the close of business on the business day next preceding the day on which notice is given) of the Preferred Stock to be redeemed, at the address last shown on the records of this corporation for such holder, notifying such holder of the redemption to be effected, specifying the number of shares to be redeemed from such holder, the Redemption Date, the Redemption Price, the place at which payment may be obtained and calling upon such holder to surrender to this corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares to be redeemed (the "Redemption Notice"). Except as provided in subsection (3)(c) on or after the Redemption Date, each holder of Preferred Stock to be redeemed shall surrender to the Company the certificate or certificates representing such shares, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be cancelled. In the event less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares.

(c)           From and after the Redemption Date, unless there shall have been a default in payment of the Redemption Price, all rights of the holders of Shares of Preferred Stock designated for redemption in the Redemption Notice as holders of Preferred Stock (except the right to receive the Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of this corporation or be deemed to be outstanding for any purpose whatsoever. Subject to the rights of series of preferred stock which may from time to time come into existence, if the funds of the corporation legally available for redemption of shares of Preferred Stock on any Redemption Date are insufficient to redeem the total number of shares of Preferred Stock to be redeemed on such date, those funds which are legally available will be used to redeem the maximum possible number of such shares ratably among the holders of such shares to be redeemed based upon their holdings of Preferred Stock. The shares of Preferred Stock not redeemed shall remain outstanding and entitled to all the rights and preferences provided herein. Subject to the rights of series of preferred stock which may from time to time come into existence, at any time thereafter when additional funds of the corporation are legally available for the redemption of shares of Preferred Stock, such funds will immediately be used to redeem the balance of the shares which the corporation has become obliged to redeem on any Redemption Date but which it has not redeemed.

 

Section 4.                      CONVERSION. Following the expiration of twelve months from the date of issuance, the holders of the Shares shall have conversion rights as follows (the “Conversion Rights”):

(a)           Right to Convert. Each Share shall be convertible into shares of the Company’s Common Stock at a price per share of $0.20 (the “Conversion Price”) (i.e. every 1 Share converts to 5 shares of Common Stock), at the option of the holder thereof, at any time following the date of issuance of such Share and on or prior to the fifth (5th) day prior to the Redemption Date, if any, as may have been fixed in any Redemption Notice with respect to the Shares, at the office of this Company or any transfer agent for such stock.

(b)           Mechanics of Conversion. Before any holder of Shares shall be entitled to convert the same into shares of Common Stock, he shall surrender the certificate or certificates therefor, duly endorsed, at the office of this Company or of any transfer agent for the Shares, and shall give written notice to this Company at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. This Company shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Shares, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Shares to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date.

 

  

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(c)           No Impairment. This Company will not, by amendment of its Certificate of incorporation or through any reorganization, recapitalization, 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 to be observed or performed hereunder by this Company, but will at all times in good faith assist in the carrying out of all the provisions of this section and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Shares against impairment.

(d)           Reservation of Stock Issuable Upon Conversion. This Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Shares, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Shares; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Shares, in addition to such other remedies as shall be available to the holder of such Shares, this Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite shareholder approval of any necessary amendment to the Company’s Certificate of incorporation.

(e)           Notice. Any notice required by the provisions of this section to be given to the holders of Shares shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at his address appearing on the books of this Company.

Section 5.                      LIQUIDATION PREFERENCE.

(a)           In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, subject to the rights of series of preferred stock that may from time to time come into existence, the holders of Shares shall be entitled to receive, prior and in preference to any distribution of any of the assets of this Company to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the sum of (i) $1.00 for each outstanding Share and (ii) an amount equal to 12% of such amount for each 12 months that has passed since the date of issuance of any Shares plus any accrued or declared but unpaid dividends on such Share (such amount (of declared but unpaid dividends) being referred to herein as the “Premium”). If upon the occurrence of such event, the assets and funds thus distributed among the holders of the Shares shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then, subject to the rights of series of preferred stock that may from time to time come into existence, the entire assets and funds of the Company legally available for distribution shall be distributed ratably among the holders of the Shares in proportion to the preferential amount each such holder is otherwise entitled to receive.

(b)           Upon the completion of the distribution required by subparagraph (a) above and any other distribution that may be required with respect to series of preferred stock that may from time to time come into existence, the remaining assets of the Company available for distribution to stockholders shall be distributed among the holders of Shares and Common Stock pro rata based on the number of shares of Common Stock held by each (assuming conversion of all such Shares).

(i)                For purposes of this provision, a liquidation, dissolution or winding up of this Company shall be deemed to be occasioned by, or to include, (A) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation but, excluding any merger effected exclusively for the purpose of changing the domicile of the Company); or (B) a sale of all or substantially all of the assets of the Company; unless the Company’s shareholders of record as constituted immediately prior to such acquisition or sale will, immediately after such acquisition or sale (by virtue of securities issued as consideration for the Company’s acquisition or sale or otherwise) hold at least 50% of the voting power of the surviving or acquiring entity.

 

  

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(ii)           In any of such events, if the consideration received by the Company is other than cash, its value will be deemed its fair market value. Any securities shall be valued as follows:

 

(A)           Securities not subject to investment letter or other similar restrictions on free marketability (covered by (B) below):

 

(1)           If traded on a securities exchange (NASDAQ, AMEX, NYSE, etc.), the value shall be deemed to be the average of the closing prices of the securities on such exchange over the thirty-day period ending three (3) days prior to the closing;

(2)           If traded on a quotation system, such as the Over-the-Counter Bulletin Board or Pink Sheets, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty-day period ending three (3) days prior to the closing; and

(3)           If there is no active public market, the value shall be the fair market value thereof, as mutually determined by the Company and the holders of at least a majority of the voting power of all then outstanding shares of Preferred Stock.

(B)           The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a shareholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (A) (1), (2) or (3) to reflect the approximate fair market value thereof, as mutually determined by the Company and the holders of at least a majority of the voting power of all then outstanding shares of such Preferred Stock.

(iii)           In the event the requirements of this provision are not complied with, this Company shall forthwith either:

 

(A)           cause such closing to be postponed until such time as the requirements of this provision have been complied with; or

(B)           cancel such transaction, in which event the rights, preferences and privileges of the holders of the Shares shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in subsection 3(c)(iv) hereof.

(iv)           The Company shall give each holder of record of Shares written notice of such impending transaction not later than ten (10) days prior to the shareholders’ meeting called to approve such transaction, or ten (10) days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Section 3, and the Company shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than twenty (20) days after the Company has given the first notice provided for herein or sooner than ten (10) days after the Company has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of Shares that are entitled to such notice rights or similar notice rights and that represent at least a majority of the voting power of all then outstanding shares of such Shares.

 

  

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Section 6.                      VOTING RIGHTS. Holders of the Shares shall be entitled to cast ten (10) votes for each Share held on all matters presented to the stockholders of the Corporation for stockholder vote which shall vote along with holders of the Corporation’s Common Stock on such matters.

Section 7.                      PROTECTIVE PROVISIONS. So long as any Shares are outstanding, this Company shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of Shares which is entitled, other than solely by law, to vote with respect to the matter, and which Shares represents at least a majority of the voting power of the then outstanding Shares:

(a)           sell, convey, or otherwise dispose of or encumber all or substantially all of its property or business or merge into or consolidate with any other corporation (other than a wholly-owned subsidiary corporation) or effect any transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Company is disposed of;

(b)           alter or change the rights, preferences or privileges of the Shares so as to affect adversely the Shares;

(c)           increase or decrease (other than by redemption or conversion) the total number of authorized shares of preferred stock;

(d)           authorize or issue, or obligate itself to issue, any other equity security, including any other security convertible into or exercisable for any equity security (i) having a preference over, or being on a parity with, the Shares with respect to dividends or upon liquidation, or (ii) having rights similar to any of the rights of the Preferred Stock;

(e) issue any cash dividend to the holders of its Common Stock, without the full prior redemption of all outstanding Shares of Preferred stock; or

(f)  amend the Company’s Articles of Incorporation or bylaws.

In WITNESS WHEREOF, the undersigned hereby declares and certifies that this Certificate of Designation is executed on behalf of the Company as of this 23rd day of February, 2013.

Company:

Rubicon Financial Incorporated

By: _________________________

      Joseph Mangiapane, Jr., CEO

  

A-5Exhibit 10.9

REPRESENTATION & MANUFACTURING AGREEMENT

THIS AGREEMENT made as of the 11th day of March 2013 (“Effective Date”) by and between IDO Security Inc. with offices at 17 State St. 22nd Floor, NY, NY 10004 (referred to as “IDO”), and Circum-CM Ltd. a private company incorporated under the company laws of Israel, with offices at 26 Hamitnachalim St. Ganei Yehuda, Israel (the “Representative”).

W I T N E S S E T H

WHEREAS, IDO design, develops and manufactures and sales a range of technologies for security screening applications; and

WHEREAS, IDO is desirous of retaining Representative’s Services (as defined below) to act as representative to IDO’s customers during the term of the Agreement and to manufacture Products (as defined below); and

 

NOW, THEREFORE, in consideration of the foregoing, the parties, by their duly authorized representatives, hereby covenant and agree as follows:

The Preamble forms an integral part of this Agreement.

1.            Definitions

1.1          “Intellectual Property Rights” means intellectual property or proprietary rights, including but not limited to copyright rights, patent rights (including patent applications and disclosures), rights of priority, and trade secret rights, recognized in any jurisdiction in the world.

“Product(s)”- shall mean IDO’s products set forth on Schedule A.

“Confidential Information” refers to: (i) the specification and any related documentation or technical or design information related to the Products; (ii) and any other business or technical information of either of the Parties, including but not limited to any information relating to such Party’s product plans, designs, costs, product prices and names, finances, marketing plans, business opportunities, personnel, research, development or know-how designated by a Party as “confidential” or “proprietary” or which, under the circumstances taken as a whole, would reasonably be deemed to be confidential; and (iv) the terms and conditions of this Agreement. Notwithstanding the foregoing, “Confidential Information” will not include information that: (i) is or becomes generally known or available by publication, commercial use or otherwise through no fault or breach of confidentiality undertakings of the receiving Party; (ii) is known to the receiving Party at the time of disclosure without violation of any confidentiality restriction, as demonstrated by prior tangible evidence, and without any restriction on the receiving Party’s further use or disclosure.

“IDO Property” shall mean the Specifications (defined below) and Products and such items owned and provided by IDO under this Agreement relating to Specifications and Products and all Intellectual Property Rights related thereto. IDO Property shall include any derivatives, improvements or modifications thereto or thereof and any Intellectual Property Rights related thereto. including without limitation any innovation, development, design, technology, manufacturing processes or engineering materials, that are developed in whole or in part by IDO, Representative or any third party acting on their behalf.

 

    	  

    	 

    
 

 

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“Materials” shall mean components, materials and supplies that are used in the manufacturing, testing and packaging of products.

 

“Territory” – shall mean the world. IDO may delete countries from Territory upon written notice.

2            Grant of Right to Manufacture Product

2.1         Subject to the terms and conditions set forth in this Agreement, IDO hereby appoints Representative as its non-exclusive manufacturer of Products. Pursuant to such appointment Representative is authorized to perform Work. “Work” shall mean to procure Materials and to manufacture, assemble, and test Products pursuant to detailed written Specifications. The “Specifications” for each Product or revision thereof, shall include but are not limited to bills of materials, designs, schematics, assembly drawings, process documentation, test specifications and current revision number all as approved in writing by IDO, which are provided or developed by IDO or Representative, or by parties on their behalf, from time to time. This Agreement includes any new product introduction (NPI) or product prototype services related to the Products. Representative is not entitled to manufacture Product for any third party or it self- all manufacturing of Product shall only be pursuant to orders placed by IDO.

2.2         New product introduction (NPI) and modifications. IDO may, in its reasonable business judgment, supplement, modify and update the Specifications from time to time, provided that the Representative will be entitled to be notified of any changes proposed by IDO that affect product safety or impact the regulatory approval or clearance, or efficacy of the Products. IDO shall provide the Representative with thirty (30) days advance written notice of any such changes, including those that should be communicated to end-users of the Product or necessary for regulatory compliance.

 

2.3         This Agreement shall not be construed to limit or restrict IDO in any way from manufacturing the Product and other IDO products at any location.

 

2.4         IDO Controlled Materials.

2.4.1           “IDO Controlled Materials” shall mean those Materials provided by IDO or by suppliers with whom IDO has a commercial contractual or non-contractual relationship.

 

2.4.2           “IDO Controlled Materials Terms” shall mean the terms and conditions that IDO has negotiated with its suppliers for the purchase of IDO Controlled Materials.

 

2.4.3            IDO may direct Representative to purchase IDO Controlled Materials in accordance with the IDO Controlled Materials Terms. IDO agrees to provide copies to Representative of all IDO Controlled Materials Terms in force from time to time.

 

2.5         Preferred Supplier. IDO may provide to Representative and maintain an Approved Vendor List (AVL). Representative shall purchase from vendors on a current AVL the Materials required to manufacture the Product.

 

    	  

    	 

    
 

 

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3.           Regulatory Compliance

 

3.1         General

 

3.1.1           IDO and Representative shall comply with all applicable federal, state and local statutes, regulations, rules, ordinances and policies that pertain to the activities for which IDO and Representative are responsible under this Agreement.

 

3.1.2           Termination of the Agreement does not relieve either party of its responsibility to comply with any on-going safety and public health regulatory requirements associated with Products that have been designed, manufactured and distributed under the Agreement or that Representative distributes after termination.

 

3.1.3           IDO shall bear the cost and expense of complying with all disbursements which Representative may incur in complying with federal, state and local statutes, regulations, rules, ordinances and policies that relate to the performance of such party’s obligations under the Agreement provided such costs are pre approved in writing by IDO (ie. ISO, CE, FCC etc).

 

3.1.4           Both parties are obligated to comply with any recordkeeping requirements that are required to be met and that relate to the performance of such party’s obligations under the Agreement.

 

3.1.5           Both parties are obligated to maintain a record of all Products shipped by them, irrespective of whether regulatory requirements require that such records be maintained.

 

3.2         Regulatory Provisions Specific to Representative

 

3.2.1           Representative shall obtain and maintain all applicable regulatory marketing clearances, approvals and licenses for the manufacturing and sale of the Products in the Territory. IDO shall pay for all third party related costs, provided such costs are pre approved in writing by IDO.

 

3.2.2           Representative shall label the Products in a manner agreed to by the Parties, consistent with regulatory requirements regarding the identification of the name and place of business of the Representative.

 

3.2.3           Representative shall meet all applicable import / export requirements imposed by law.

 

4.           Purchase of Product by IDO

4.1         Ordering & Specifications. IDO may place manufacturing orders for Product with Representative from time to time.

4.2         Price, Terms of Payment, Delivery. The price of the Products to IDO shall be ‘cost of materials. The parties shall agree on ‘cost of materials’ from time to time. IDO acknowledges that Representative is not transferring raw material into Product parts (no CNC or injection moulding etc.) and that ir purchases finishes parts for Product from third parties for assembly of Product. Provided however, that Representative is obligated to do the copper coiling for the Product and not sub contract same to third parties. Terms of payment and deliver dates shall be agreed upon from time to time. Shipments will be made EXW (Ex works, Incoterms 2000) Representative’s facility, at which time risk of loss and title will pass to IDO. All freight, insurance and other shipping expenses, as well as any special packing expenses not included in the original quotation for the Products, will be paid by IDO.

 

    	  

    	 

    
 

 

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4.3         The Parties agree that each Order is placed solely under the terms of this Agreement and that the terms and conditions of this Agreement only shall govern all Orders regardless of any varying or additional terms or conditions in the Order.

 

5.           PRODUCT ACCEPTANCE AND EXPRESS LIMITED WARRANTY

5.1         Product Acceptance. If Products delivered to IDO do not comply with the express limited warranty set forth in Section 5.2 below, IDO has the right to reject such Products. IDO may return defective Products, freight collect, after obtaining a return material authorization number from Representative to be displayed on the shipping container and completing a failure report. Rejected Products will be promptly repaired or replaced, at Representative’s option, and returned freight pre-paid.

5.2           Express Limited Warranty. This Section 5.2 sets forth Representative’s sole and exclusive warranty and IDO’s sole and exclusive remedies with respect to a breach by Representative of such warranty.

5.2.1           Representative warrants that the Products will have been manufactured in accordance with the applicable Specifications and will be free from defects in workmanship for a period which is the lessor of one year from the date of shipment to end user and eighteen months from shipments from Representative’s facility under section 4.2. In addition, Representative warrants that the Products will be free from defects in Materials to the same extent that the original manufacturer of the Material provides a warranty for the Materials to Representative, provided, however, in the event of a defect in Material provided by a third party the Representative’s sole liability and obligation shall be to use best commercial efforts to act as IDO’s agent in procuring warranty rights from such third party.

 

5.2.2 Notwithstanding anything else in this Agreement, this express limited warranty does not apply to, and Representative makes no representations or warranties whatsoever with respect to: (i) IDO Controlled Materials; (ii) defects resulting from the Specifications or the design of the Products; (iii) Product that has been abused, damaged, altered or misused by any person or entity after title passes to IDO; (iv) first articles, prototypes, pre-production units, test units or other similar Products or (v) defects resulting from tooling, designs or instructions produced or supplied by IDO.

5.2.3           Upon any failure of a Product to comply with this express limited warranty, Representative’s sole obligation, and IDO’s sole remedy, is for Representative, at its option, to promptly repair or replace such unit and return it to IDO freight prepaid. IDO shall return Products covered by this warranty freight prepaid after completing a failure report and obtaining a return material authorization number from Representative to be displayed on the shipping container.

6.           Appointment of Representative; Restrictions.

6.1         IDO hereby engages and appoints Representative as its non exclusive representative to Customers in the Territory for the purpose of, without limitation, representing IDO’s interests; to act as liaison and relationship manager on behalf of IDO with Customers; to assist Customers in the purchase, distribution and marketing of the Products and to carry out those responsibilities and tasks normally associated with a territory representative that manages a sales, marketing and distribution relationship, all in accordance with IDO’s instructions and in accordance with the terms and conditions of this Agreement (collectively, the “Rep Services”). As used in this Agreement “Customers” mean purchasers and potential purchasers of Product, whether end users or distributors.

 

    	  

    	 

    
 

 

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6.2         Subject to prior written approval of IDO the Representative is hereby authorized to enter into agreements with sub-representatives for the Rep Services, all subject to the terms and conditions of this Agreement. All sub-representatives of Products shall be required to enter into a contract not less protective of IDO’s rights then contained herein.

6.3         So long as this Agreement is in effect Representative will not market, sell, distribute or use the Products outside the Territory nor shall Representative be concerned or interested, either directly or indirectly, in the manufacture, production, importation, marketing, sale or distributing of products that compete with or are similar to the Products in any manner. Representative shall promptly refer to IDO all inquiries or orders for the Products from customers located outside the Territory unless Representative has obtained IDO’s written consent to deal with such inquiries or orders.

6.4         Representative shall use forms of agreements for sale, marketing and distribution of Products approved by IDO from time to time. Representative acknowledges that the Product contains software. Representative shall insure that all end users of Product execute the Software End User License Agreement set out in Appendix A hereto.

6.5         Representative shall keep a full and proper record of its activities on behalf of IDO and shall furnish IDO and its representative’s full and unimpeded access to such records, upon reasonable advance notice, from time to time. Representative shall provide IDO with such additional information regarding the promotion and sale of the Products, competing products, market conditions and Representative’ s activities in the Territory with respect to the Products, as IDO may reasonably request.

6.6         In performance of its duties hereunder, Representative shall have no right to negotiate on behalf of IDO or bind IDO to any agreement. All terms and conditions of sale of Products shall be determined by IDO and IDO may refuse or accept any offer to purchase Products in IDO’s absolute and sole discretion. The price of Products shall be as set out on a price list provided from time to time by IDO.

 

7.           Promotion of the Products; Support

7.1         Representative shall use its best efforts to promote and sell and support the Products in accordance with the IDO’s marketing guidelines provided from time to time, including, but not limited to:

(a) ensuring that its staff is appropriately trained as needed;

(b) following-up any and all leads of prospective Customers furnished to Representative by IDO in a timely and efficient manner;

(c) complying with all reasonable standards of IDO for displaying, advertising, demonstrating and explaining the operation and use of the Products to Representative’s Customers and prospective Customers;

(d) using its best efforts to resolve any customer satisfaction issues that may arise from the use of IDO’s Products by Representative’s customers;

(e) maintain website in accordance with IDO’s instructions;

(f) Representative shall maintain offices with sufficient staff which shall consist of marketing personnel, engineers, assembler, manager, to properly oversee manufacture and support the Products and to perform Services.

7.2         Representative shall be responsible for providing all support for all customers of Products manufactured by Representative, in accordance with IDO standard policy.

7.3         Representative shall conduct its business in compliance with all applicable laws in the Territory.

 

    	  

    	 

    
 

 

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7.4         Representative shall keep records of all locations of Products purchased hereunder and advise IDO of such location and any change of thereto. Reports to IDO pursuant to this section shall be provided once per calendar quarter in form agreeable to IDO.

7.5         In consideration of the all services (Rep Services and manufacturing services) by Representative under this Agreement and subject to Representative properly fulfilling the terms and conditions herein IDO Security Inc. shall pay to Representative a monthly fee of $40,000. The $40,000 monthly fee shall be paid in advance on a calendar quarterly basis (ie. $120,000). All expenses incurred in providing Rep Services shall be paid for by IDO, provided that expenses greater than $1,000 aggregate per month shall be approved in writing in advance by IDO.

8.          Term and Termination

8.1         This Agreement shall become effective on the date that it is signed by both parties hereto and, unless terminated as provided below, shall continue in full force and effect for three years.

8.2         Either Party shall be entitled to terminate this Agreement forthwith, by written notice, should the other party fail to comply with its obligations in this Agreement and does not remedy such non-compliance within thirty (30) days after receipt of notice from the other party that it intends to terminate this Agreement if such failure is not corrected.

8.3         Either party may terminate said agreement without cause by written notice. Said notice requires sixty (60) days written notice. If as a result of Representative’s Rep Services efforts IDO has sold at least 20 units of Magshoe in a country during the 12 months prior to date of termination of Agreement by ISO without cause, then the ISO shall pay to Representative for a period of 12 months after such termination 6% of all money received by IDO from such country from sales of Magshoe.

8.3         Either party may terminate this Agreement forthwith, by notice, if the other party is declared insolvent or bankrupt, or makes an assignment for the benefit of creditors, or shall have a receiver or trustee appointed for its business or property or is dissolved or liquidated or otherwise ceases business, and such declaration or execution, or appointment is not cancelled within forty five (45) days.

8.4         Effect of Termination or Expiration. Upon the termination of this Agreement for any reason whatsoever each party shall promptly return to the disclosing party, and/or erase or destroy all copies of any Confidential Information in the possession of such party or its subsidiaries. Upon such return, erasure and/or destruction, such party shall confirm in writing to the disclosing party that it has complied with its obligations under this section. For a period of 90 days after termination or expiration of this Agreement, unless terminated for cause by IDO, Representative may continue to manufacture Product; and the Parties shall otherwise fulfil all terms of previously agreed to orders for manufacture by IDO.

8.6         Survival. Sections 3.1, 5, 7.4, 8 - 14 of this Agreement shall survive the termination and/or expiration of this Agreement for any reason whatsoever.

 

    	  

    	 

    
 

 

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9.           Confidentiality

9.1         No Unauthorized Use or Disclosure. Each party shall: (i) hold in confidence, and not disclose or reveal to any person or entity, any Confidential Information of the other party without the clear and express prior written consent of a duly authorized representative of such other party, except that a party receiving Confidential Information from the other party may reveal such information solely to its employees or contractors or consultants who require such disclosure to allow such receiving party to perform its obligations or exercise its rights under this Agreement and who agree in writing to refrain from making any unauthorized use or disclosure thereof; and (ii) not use any Confidential Information of the other party for any purpose at any time, other than for the purpose(s) of performing its obligations or exercising its rights under this Agreement. Each party shall protect the Confidential Information of the other party using at least the same degree of care it uses to protect its own proprietary and confidential information and materials of like importance, but in no event less care than a reasonably prudent business person would take in a like or similar situation. Each party shall return any Confidential Information of the other upon written request, except to the extent that doing so would undermine or interfere with the exercise by the receiving party of its rights under this Agreement.

 

9.2         Terms of Agreement.. Each party shall treat the terms of this Agreement as confidential and shall not disclose such terms, except that disclosure of such terms shall be permitted as required by law and to accountants, attorneys and other professionals providing services to the disclosing party to the extent that such professionals are notified of the confidential nature of such terms.

 

10.         Trademarks; Ownership

10.1       Trade Names, Trademarks and Service Marks. Representative acknowledges that the trade names, trademarks and service marks used by IDO in relation to its Products, are the exclusive property of IDO. Representative agrees that it shall not hold itself out as having acquired any proprietary right to any trade name, trademark, or service mark of IDO by virtue of its use thereof or anything herein, except as specifically set forth in this Agreement, and any such right shall immediately cease upon the termination or cancellation of this Agreement.

10.2       During the term of this Agreement Representative is hereby authorized by IDO to use the trademarks associated with the in connection with Representative’s sale, advertisement, and promotion of Products. Representative shall sale Products only using IDO authorized trademarks. Representative’s use of such trademarks and tradenames shall be only in accordance with IDO’s established trademark guidelines. IDO may from time to time use other additional trademarks or tradenames with respect to Products. In such an event, upon written notice to Representative from IDO, this section 13.2 shall apply to such trademarks or tradenames as specified herein.

The authorization contained herein to use and authorize the use of any trademarks or tradenames shall cease by the ninetieth (90th) day after Representative has received written notice from IDO to the effect that such tradenames or trademark has been superseded or replaced by a new tradename or trademark.

10.3       Title to Products. Representative acknowledges that all of IDO Property is the sole and exclusive property of IDO and that Representative shall not obtain any interest of any kind in any of IDO Property by or through this Agreement. Representative shall execute such documents, render such assistance, and take such other action as IDO may reasonably request, to apply for, register, perfect, confirm, and protect IDO’s rights therein. IDO shall have the exclusive right to apply for or register any patents, mask work rights, copyrights, and such other proprietary protections with respect thereto.

10.4       Restricted Uses. Without written approval from IDO the Representative is prohibited from changing, developing, enhancing or otherwise modifying IDO Property (or any component thereof) in any way whatsoever.

 

    	  

    	 

    
 

 

8

 

10.5       Waiver of Moral Rights. Representative hereby waives any and all moral rights, including without limitation any right to identification of authorship or limitation on subsequent modification that Representative (or its employees, agents or consultants) has or may have in the IDO Property or any part thereof as included in the Products.

10.6       Trade Secrets. Representative acknowledges that each Product contains trade secrets which are the sole property of IDO and which are confidential and are not in the public domain, the unauthorized use or disclosure of which may cause irreparable harm to IDO.

10.7       Licenses. IDO hereby grants Representative a non-exclusive license during the term of this Agreement to use IDO’s patents, trade secrets and other intellectual property as necessary to perform Representative’s obligations under this Agreement.

10.8       No Other Licenses. Except as otherwise specifically provided in this Agreement, each party acknowledges and agrees that no licenses or rights under any of the intellectual property rights of the other party are given or intended to be given to such other party.

 

11.         Indemnity for third-party Proprietary Rights Infringement

 

11.1       IDO shall indemnify and hold harmless Representative against any loss, expense, claim or damages (including reasonable attorney fees) incurred by the infringement of the proprietary rights of any third-party in the Product, provided IDO is given sole control of any action regarding such claim, including control of the defense of any legal proceedings made against the Representative or its sub-Representatives, agents or customers based upon such claim and of any negotiations for settlement thereof. IDO may, at its sole option and expense (i) procure for the Representative the right to continue using the infringing product (ii) modify the infringing product so that it is noninfringing (iii) procure a replacement product that has substantially the same functionality, or if none of the above options is reasonably available (iv) terminate this Agreement and all sublicenses granted hereunder.

11.2       The foregoing obligation will not cover any claim of infringement solely resulting by the use of the Product in combination with any software or hardware neither supplied nor recommended, specified or intended by IDO for use with such Product, if that claim could have been avoided by the use of the Product alone or in combination with other software or hardware.

11.3       Notwithstanding anything in this Agreement, under no circumstances shall IDO be liable or obligated to indemnify Representative for any loss, damage and/or expenses arising from any cause or reason whatsoever in an amount greater than the aggregate amount of which IDO shall have received from sales of Product in the twelve month period preceding notice of claim under section 14.1 by Representative.

11.4       Representative will indemnify, hold harmless and, upon IDO’s request, defend IDO against any claims, liabilities and expenses (including court costs and reasonable attorneys’ fees) arising from the acts or omissions of Representative, its employees or agents.

12.5.      LIMITATION ON LIABILITY.

IN NO EVENT SHALL EITHER PARTY BE LIABLE IN RESPECT OF OR ARISING OUT OF THE PERFORMANCE AND/OR BREACH OF ITS OBLIGATIONS HEREUNDER FOR ANY INDIRECT, INCIDENTAL OR SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING LOSS OF PROFITS, REVENUE, DATA OR USE, INCURRED BY THE OTHER PARTY WHETHER IN AN ACTION IN CONTRACT OR TORT, EVEN IF THAT PARTY OR ANY OTHER PERSON HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

 

    	  

    	 

    
 

 

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13.         Force Majeure

13.1       No liability shall result to any Party due to a delay in performance caused by circumstances beyond the reasonable control of the Party affected, including, but not limited to acts of God, flood, war, terrorism, embargo, accident, and governmental laws, or request, or any ruling of a court or tribunal;

13.2       Each Party affected by an event of force majeure shall (a) promptly notify the other Party hereto of the expected duration thereof, and its anticipated effect on the Party effected in terms of the performance required hereunder; and (b) make reasonable efforts to remedy any such event of force majeure. Performance that is delayed by any event of force majeure shall be extended for such time as the event shall continue.

14.         Miscellaneous

14.1       Severability:

	
Any term or provision of this Agreement which is found by a court, tribunal or arbitration panel to be invalid or unenforceable shall be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms or provisions of this Agreement or affecting the validity or enforceability of any of the other terms or provisions of this Agreement. In the event that any term or provision of this Agreement is found to be unenforceable or ineffective, then the reviewing court, tribunal or arbitration panel may modify such term or provision to the extent necessary to render it enforceable and the parties agree to be bound by and perform this Agreement as modified.

14.2       Entire Agreement:

	
This Agreement (including any appendixes and schedules) contains the full and complete understanding between the Parties and supersedes all prior understandings, whether written or oral, pertaining to the subject matter hereof. The Parties expressly acknowledge that any representation, promise or inducement by any Party to any other Party that is not embodied in this Agreement is not part of this Agreement; and they agree that no party shall be bound or liable for any such alleged representation, promise, or inducement not set forth herein.

14.3       Assignment:

Except as otherwise provided in this Agreement the rights and obligations of the Representative shall not be assignable without the prior written consent of the IDO which consent shall not be unreasonably withheld.

14.4       Amendments and Waivers

This Agreement cannot be amended, modified or altered except by written instrument signed by the Parties hereto. In the event that any Party seeks a waiver of any part or portion of this Agreement, such waiver must be by written instrument signed by the Party waiving compliance. The failure of any Party at any time to require performance of any Provision in this Agreement shall in no manner affect its right at a later time to enforce the same. And, no waiver by either party of the breach of any term or covenant contained in this Agreement, whether by conduct or otherwise in any or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach or a waiver of the breach of any other term or covenant contained in this Agreement.

 

    	  

    	 

    
 

 

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14.5

	
Notices

Any notice, demand or communication which under the terms of this Agreement or otherwise must or may be given or made by a Party shall be in writing and shall be given or made by facsimile with confirmation of receipt, certified or registered air mail, return receipt requested, or any delivery services, requiring signature of receipt, addressed to the respective parties to the addresses first noted above:

 

	For IDO	 	For Representative
	 	 	 
	 	 	Address Above
	 	 	 
	With a copy to	 	Att: Yaniv Beran
	 	 	yaniv@circum-cm.com>
	 	 	 
	Att: Gerald Brounstein	 	mobile:(972)54-6600261
	Aboudi & Brounstein	 	 
	HaGavish St 3, POB 2432	 	office :(972)777648648
	Kfar Saba Industrial Zone	 	fax      :(972)3-5344531
	Israel	 	 
	Fax: 972-9-764-4834	 	 

 

Such notice, demand or other communications shall be deemed to have been given on the date confirmed by fax confirmation or as the actual date of delivery by the delivery service if sent by such service, and in the case of certified or registered air mail ten (10) days following the date on which it was deposited postage prepaid (or the date shown on the actual mail receipt if it is earlier).

The above addresses may be changed at any time by giving prior written notice as provided above.

14.6       No Joint Venture

Nothing herein contained shall be construed to place the Parties in any partnership, agency or joint venture relationship.

14.7       Headings

The headings herein are for reference only and shall not affect the construction of this Agreement.

 14.8      Successors & Assigns

The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties.

14.9       Counterparts & Execution

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Execution of this Agreement shall be valid if served on the other party by facsimile and such other party confirms in writing receipt and acceptance of service.

 

    	  

    	 

    
 

 

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14.10     Governing Law; Forum

This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York for contracts to be wholly performed in such state and without giving effect to the principles thereof regarding the conflict of laws. Each of the parties consents to the jurisdiction of the federal courts whose districts encompass any part of the City of New York or the state courts of the State of New York sitting in the City of New York in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions. The Parties hereby waive a trial by jury in any action, proceeding or counterclaim brought by either of the Parties hereto against the other in respect of any matter arising out or in connection with this Agreement.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly signed on the date stated above.

 

 

 

IDO Security Inc.

 

 

	 	 
	
By:/s/ Magdiel Rodriguez

 

	 
	
Name: Magdiel Rodriguez

 

	 
	Title: CEO	 

 

	 	 	 
	Circum-CM Ltd.	 
	 	 	 
	 	 	 
	By: 	 	 

 

	Name: 	 	 
	 	 	 
	Title:	 	 

 

    	  

    	 

    
 

 

12

 

SCHEDULE A

Products

 

Magshoe

 

Appendix A

SUPPLIER’S END USER LICENSE

For product item _______________________________

 

This SUPPLIER’S END USER LICENSE provides a sublicense to qualified customers (“Customer”) of IDO Security Inc. (“Supplier”). Customers include customers of authorized Representatives of Supplier, including _____________.

1. Grant

Supplier hereby grants Customer a non-transferable, non-exclusive licence, without right to sublicense, to use the software developed or acquired by Supplier and delivered to Customer under this Supplier’s End User License Agreement (“Software”), only with the Supplier hardware for which the software is intended and exclusively for use with Supplier hardware owned, possessed and operated by Customer and specified in Customer’s invoice (“System”). No source code or licence to use source code is provided hereunder. Software includes the programs delivered to Customer, all related documentation and any update, revision, translation, adaptation, modification, derivation or copy of the foregoing. Software does not include software delivered to Customer with a shrink-wrap licence. As to such licences, Customer agrees to be bound by the terms set forth therein, unless it notifies Supplier of any objections and returns the software within ten days of receipt thereof.

2. Use

Customer will use the Software only in its own internal business operations. Customer will not remove Software from hardware on which the Software is pre-loaded. Customer will not copy, translate, modify, adapt, decompile, disassemble or reverse engineer the Software.

3. Ownership

Title to the Software and all patents, copyrights, trade marks, mask works, circuit layout rights, design rights, trade secrets and other proprietary rights in or related to the Software are and will remain the exclusive property of Supplier or its licenser, whether or not specifically recognized or perfected under the laws of the country where the Software is located. Customer will not take any action that jeopardizes such proprietary rights nor will it acquire any right in the Software, except the limited use rights specified herein.

 

    	  

    	 

    
 

 

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4. Confidentiality

(1) The Software incorporates confidential and proprietary information developed or acquired by Supplier. Customer will protect the confidentiality of the Software and all such information with the same degree of care as it employs to protect its own confidential and proprietary information, but at least with a reasonable degree of care. Customer will not allow the removal or defacement of any confidentiality or proprietary notice placed on the Software, which notice will not constitute publication or otherwise impair the Software’s confidential nature. Customer will have no confidentiality obligation with respect to any confidential or proprietary information incorporated within the Software which:

	 	 
	

(a)

	

was in Customer’s lawful possession prior to receipt of the Software without any obligation to keep it confidential;

 

	

(b)

	

is later lawfully obtained by Customer from a third party under no obligation of secrecy;

 

	

(c)

	

is independently developed by Customer and evidenced in writing; or

 

	

(d)

	

is, or later becomes, available to the public through no act or failure to act by Customer.

 

(2) Customer will not disclose the Software to any person, except to those of its employees, agents or consultants who require access for Customer’s authorized use of the Software. Before disclosure to such parties, Customer will require that they expressly:

	 	 
	

(a)

	

recognize Supplier’s or its licenser’s confidential and proprietary rights in the Software;

 

	

(b)

	

agree to comply with the use, ownership, confidentiality and export control restrictions applicable to the Software; and

 

	

(c)

	

acknowledge Supplier’s, its licenser’s right to enforce these restrictions, in each case in writing.

(3) Customer will be liable for non-compliance by its agents and contractors to the same extent it would be liable for non-compliance by its employees.

5. NO WARRANTIES; LIMITATION ON DAMAGES

THIS SUBLICENSE AGREEMENT DOES NOT INCLUDE ANY WARRANTIES, EXPRESS OR IMPLIED, BY OR ON BEHALF OF SUPPLIER OR ANY ENTITY GRANTING SUPPLIER LICENSE RIGHTS TO THE SOFTWARE. IN NO EVENT WILL SUPPLIER OR ITS LICENSER:

	 	 
	(A)         BE LIABLE FOR ANY SPECIAL, PUNITIVE, MORAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSS OF PROFIT, WHETHER OR NOT FORESEEABLE, INCLUDING, BUT NOT LIMITED TO, LOST PROFIT OR DATA; OR

 

    	  

    	 

    
 

 

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	(B)          INCUR AGGREGATE LIABILITY IN ANY ACTION OR PROCEEDING WHICH EXCEEDS THE TOTAL AMOUNT ACTUALLY PAID TO SUPPLIER BY REPRESENTATIVE FOR THE SOFTWARE THAT DIRECTLY CAUSED THE DAMAGE.

 

6. Termination

(1) This Supplier’s End User License Agreement will automatically terminate if Customer stops owning, possessing or operating the System, and it may be otherwise terminated with thirty days’ prior written notice if the Customer violates any of its terms or conditions. Upon any such termination, all rights granted to Customer, including but not limited to the right to use to the Software, will immediately cease.

(2) Any provision of this Supplier’s End User License Agreement which by its sense and context deals with Software use, disclosure, ownership, confidentiality, inspection, re-exportation and third party enforcement rights will survive its expiration or termination for any reason.

7. Export Controls

The confidential information of Supplier, and all related technical documents and materials are subject to export controls under the U.S. Export Administration Regulations and related U.S. laws. Customer will:

	 
	(a)          comply strictly with all legal requirements established under these controls;
	 
	(b)          co-operate fully with Supplier in any official or unofficial audit or inspection that relates to these controls; and
	 
	(c)          not export, re-export, divert, transfer or disclose, directly or indirectly, any Software, confidential information of Supplier, or related technical documents and materials or any direct product thereof to any country (or to any national or resident thereof) which the U.S. Government determines from time to time is a country (or end-user) to which such export, re-export, diversion, transfer, or disclosure is restricted, without obtaining the prior written authorization of Supplier and the applicable U.S. Government agency.

 

8. Assignment; Enforcement

Customer may not assign, delegate or otherwise transfer the Software, this Supplier’s End User License Agreement or any of its rights or obligations without Supplier’s prior approval. Any assignment, delegation or transfer which violates the foregoing will be void. The provisions of this Sublicense Agreement are intended to enure to the benefit of Supplier and its licenser. Supplier or its licensor has the right to enforce these provisions directly against Customer, whether in Supplier’s or Representative ‘s name, and Supplier accepts this right.

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