Document:

EX-10.11

 Exhibit 10.11 

THOUGHTWORKS HOLDING, INC. 

EXECUTIVE SEVERANCE PLAN 

Thoughtworks Holding, Inc. (the “Company”) has adopted this Thoughtworks Holding, Inc. Executive Severance Plan,
including the attached Exhibits (the “Plan”), for the benefit of Participants (as defined below), on the terms and conditions hereinafter stated. The Plan, as set forth herein, is intended to provide severance protections to a
select group of management or highly compensated employees (within the meaning of ERISA (as defined below)) in connection with qualifying terminations of employment. 

1. Defined Terms. Capitalized terms used but not otherwise defined herein shall have their respective meanings set forth below: 

1.1 “Accrued Obligations” means, with respect to any Participant, the Participant’s (a) Base Salary earned through,
but unpaid as of, the Termination Date, (b) business expenses reimbursable under Company policies then in effect that are unreimbursed as of the Termination Date and (c) payment in lieu of any vacation pay earned and accrued but unused as
of the Termination Date, if applicable, to the extent not theretofore paid. The Company shall pay the Participant the Accrued Obligations on the dates such amounts would have been payable under the Company’s policies if the Participant’s
employment had not terminated, but in no event more than sixty (60) days after Participant’s Termination Date, or sooner if required by applicable law. The Participant’s benefits and rights under any of the Company’s benefit
plans shall be determined in accordance with the applicable provisions of such plans, as may be in effect at the Participant’s Termination Date. 

1.2 “Affiliate” means any Subsidiary or other entity that is directly or indirectly controlled by the Company or any entity
in which the Company has a significant ownership interest, as determined by the Administrator. 
 1.3 “Base Cash Severance”
means, with respect to any Participant, the aggregate amount determined in accordance with, (a) (i) in the case of a Qualifying Termination that is not a CIC Termination, Exhibit A attached hereto, and (ii) in the case of a
Qualifying Termination that is a CIC Termination, Exhibit B attached hereto, and (b) the Participant’s Severance Classification. 

1.4 “Base Salary” means, with respect to any Participant, the Participant’s annual base salary rate in effect
immediately prior to a Qualifying Termination, as reflected in the Company Group’s payroll records, without regard to any reduction giving rise to Good Reason. Base Salary shall not include commissions, bonuses, overtime pay, incentive
compensation, benefits paid under any qualified plan, benefits provided under any group medical, dental or other welfare benefit plan, non-cash compensation or any other additional compensation, but shall
include amounts reduced pursuant to a Participant’s salary reduction agreement under Sections 125, 132(f)(4) or 401(k) of the Code, if any, or a nonqualified elective deferred compensation arrangement, if any, to the extent that, in each such
case, the reduction is to base salary. 
 1.5 “Board” means the Board of Directors of the Company. 

1.6 “C-Suite Participants” means any of the Company’s CEO, Chief Financial
Officer, Chief Legal Officer, Chief Technology Officer, Chief Talent Officer, Chief Transformation Officer, Chief Commercial Officer, Chief Strategy Officer, Chief Marketing Officer, Chief Information Officer, Chief Scientist, CEO – North
America and Managing Director, China. 

 1.7 “Cause” means, with respect to any Participant, unless otherwise set
forth in an employment agreement or other written agreement between the Company Group and the Participant, any of the Participant’s: (a) material and repeated failure to perform his or her duties (other than any such failure resulting from
incapacity due to physical or mental illness); (b) material and repeated failure to comply with any valid and legal directive of the Board or the person to whom the Participant reports; (c) engagement in dishonesty, illegal conduct or gross
misconduct, or act(s) of gross negligence, which, in each case, would reasonably be expected to be materially injurious to any member of the Company Group; (d) embezzlement, misappropriation or fraud, whether or not related to the
Participant’s employment with the Company Group; (e) conviction of, or plea of guilty or nolo contendere to, a crime that constitutes a felony (or state law equivalent) or a crime that constitutes a misdemeanor involving moral turpitude;
(f) violation of a material policy of any member of the Company Group, which, in each case, would reasonably be expected to be materially injurious to any member of the Company Group; or (g) violation of any applicable restrictive
covenants between the Participant and the Company Group. With respect to any acts otherwise constituting Cause under subparagraphs (a), (b) or (f) of this definition, the Participant shall have thirty (30) days from the delivery of written
notice by the Company within which to cure such acts. 
 1.8 “CEO” means the Chief Executive Officer of the Company. 

1.9 “Change in Control” shall have the meaning set forth in the Equity Incentive Plan. 

1.10 “CIC Protection Period” means the period (a) beginning three (3) months prior to the date on which a Change in
Control is consummated (the “CIC Closing Date”) and (b) ending, (i) in the case of the CEO, on (and including) the eighteen (18)-month anniversary of the CIC Closing Date, and (ii) in the case of any other Participant, on
(and including) the twelve (12)-month anniversary of the CIC Closing Date. 
 1.11 “CIC Termination” means a Qualifying
Termination that occurs during the CIC Protection Period. 
 1.12 “COBRA” means the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended. 
 1.13 “COBRA Subsidy Period” means, with respect to any Participant, the period
determined in accordance with, (a) (i) in the case of a Qualifying Termination that is not a CIC Termination, Exhibit A attached hereto, and (ii) in the case of a Qualifying Termination that is a CIC Termination, Exhibit B
attached hereto, and (b) the Participant’s Severance Classification. 
 1.14 “Code” means the
Internal Revenue Code of 1986, as amended from time to time, or any successor thereto. 
 1.15 “Committee” means the
Compensation Committee of the Board, or such other committee as may be appointed by the Board to administer the Plan. 
 1.16
“Company Group” means the Company and its Subsidiaries and Affiliates. 
 1.17 “Employee” means an
individual who is an employee (within the meaning of Code Section 3401(c)) of the Company Group. 
 1.18 “Equity Incentive
Plan” means the Company’s 2021 Omnibus Incentive Plan, as may be amended from time to time, or any successor equity incentive plan established by the Company. 

  
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 1.19 “Equity Vesting” means the benefit set forth in Section 4.2(d) of
the Plan. 
 1.20 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations
promulgated thereunder. 
 1.21 “Good Reason” means, with respect to any Participant, without such Participant’s
consent, during the period following the effective date of the Plan and prior to a Change in Control, (a) a change to the Participant’s principal work location to a location more than fifty (50) miles from the Participant’s
principal work location prior to the change; (b) a material reduction in the Participant’s target cash compensation (including both Base Salary and Target Bonus); or (c) solely in the case of the CEO and other Participants designated
as C-Suite Participants by the Administrator, a material diminution in such C-Suite Participant’s duties or responsibilities taken as a whole, provided,
that, neither changes in the allocation between Base Salary and Target Bonus nor any failure to achieve “target” bonus levels shall be deemed a material reduction or otherwise constitute Good Reason for any reason in connection with the
Plan. A reduction in the Participant’s target cash compensation shall be “material” for purposes of the Plan if the sum of the Participant’s Base Salary plus Target Bonus is less than 80% of the Participant’s target cash
compensation for the immediately preceding calendar year. Any such reduction shall constitute Good Reason effective on the date the Participant is notified that his or her target cash compensation has been reduced below such 80% level.
Notwithstanding the foregoing, the Participant cannot terminate his or her employment for Good Reason unless he or she has provided written notice to the Company explaining in sufficient detail the existence and grounds constituting Good Reason
within thirty (30) days of the initial existence of such grounds, and the Company has had at least thirty (30) days from the date on which such notice is provided to cure such circumstances, if curable. If the Participant does not
terminate his or her employment for Good Reason within ninety (90) days after the first (1st) occurrence of the applicable grounds, then the Participant will be deemed to have waived his or
her right to terminate for Good Reason with respect to such grounds. 
 1.22 “Participant” means each Employee who is
designated in writing by the Administrator (or designee thereof in accordance with Section 3 hereof) to participate in the Plan and is provided with (and, if applicable, countersigns) a Participation Notice in accordance with Section 13.2
hereof, other than any Employee who, at the time of his or her termination of employment, is covered by an employment or other individual agreement with the Company Group that provides for a greater level of cash severance or termination benefits.
For the avoidance of doubt, retention bonus payments, change in control bonus payments and other similar payments shall not constitute “cash severance” for purposes of this definition. 

1.23 “Pro-Rata Target Bonus” means, with respect to any Participant, a pro-rated portion of the Participant’s Target Bonus for the year in which the Termination Date occurs, determined by multiplying the Participant’s Target Bonus for the year in which the Termination Date
occurs by a fraction, (a) the numerator of which equals the number of calendar days that the Participant was employed by the Company Group during the calendar year in which the Termination Date occurs and (b) the denominator of which
equals three hundred sixty-five (365) or three hundred sixty-six (366) (as applicable). 
 1.24
“Qualifying Termination” means a termination of the Participant’s employment with the Company Group (a) by the Company Group without Cause or (b) by the Participant for Good Reason. Notwithstanding anything contained
herein, in no event shall a Participant be deemed to have experienced a Qualifying Termination (a) if such Participant is offered and/or accepts a comparable employment position with the Company Group, or (b) if, in connection with a
Change in Control or any other corporate transaction or sale of assets involving the Company Group, such Participant is offered and accepts a comparable employment position with the successor or purchaser entity (or an affiliate thereof), as
applicable. A Qualifying Termination shall not include a termination due to the Participant’s death or disability. 

  
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 1.25 “Severance Benefits” means, collectively, the Base Cash Severance, the
Pro-Rata Target Bonus, the COBRA Benefits and, if applicable, the Equity Vesting, in each case, to which a Participant may become entitled pursuant to the Plan. 

1.26 “Severance Classification” means, with respect to any Participant, his or her designation as the CEO or as a “Tier
1” or “Tier 2” Participant in the Plan. 
 1.27 “Severance Period” means, with respect to any Participant,
the number of months following the Participant’s Termination Date, as determined in accordance with, (a) (i) in the case of a Qualifying Termination that is not a CIC Termination, Exhibit A attached hereto, and (ii) in the case
of a Qualifying Termination that is a CIC Termination, Exhibit B attached hereto, and (b) the Participant’s Severance Classification. 

1.28 “Subsidiary” means any company (other than the Company) in an unbroken chain of companies beginning with the Company;
provided, that, each company in the unbroken chain (other than the Company) owns, at the time of determination, stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other companies in such
chain. 
 1.29 “Target Bonus” means, with respect to any Participant, the Participant’s target annual cash performance
bonus, if any, for the year in which the Termination Date occurs. For the avoidance of doubt, with respect to any Participant who is not eligible to receive an annual cash performance bonus as part of his or her annual compensation, such
Participant’s Target Bonus shall be equal to zero. 
 1.30 “Termination Date” means, with respect to any Participant,
the effective date of the termination of the Participant’s employment with the Company Group. 
 2. Effectiveness of the Plan.
The Plan shall become effective on the date on which it is adopted by the Board (the “Effective Date”). 
 3.
Administration. 
 3.1 Administrator. Subject to Section 13.4 hereof, the Plan shall be interpreted, administered and
operated by the Committee (the “Administrator”), which shall have complete authority, subject to the express provisions of the Plan, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan
and to make all other determinations necessary or advisable for the administration of the Plan. The Administrator may delegate any of its duties hereunder to a subcommittee, or to such person or persons from time to time as it may designate (other
than to any Participant in the Plan). All decisions, interpretations and other actions of the Administrator (including with respect to whether a Qualifying Termination has occurred) shall be final, conclusive and binding on all parties who have an
interest in the Plan. 
 3.2 Reimbursement of Expenses of Administrator. The Company may, in its sole discretion, pay or reimburse
the Administrator for all reasonable expenses incurred in connection with its duties hereunder, including, without limitation, expenses of outside legal counsel. 

3.3 Retention of Professional Assistance. The Administrator may employ such legal counsel, accountants and other persons as may be
required in carrying out its work in connection with the Plan. 

  
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 3.4 Accounts and Records. The Administrator shall maintain such accounts and records
regarding the fiscal and other transactions of the Plan and such other data as may be required to carry out its functions under the Plan and to comply with all applicable laws. 

3.5 Indemnification. The Administrator and any person designated pursuant to Section 3.1 above shall not be liable for any action
or determination made in good faith with respect to the Plan. The Company Group shall, to the fullest extent permitted by law, indemnify and hold harmless the Administrator and each director, officer and employee of the Company Group, and any person
designated above, for liabilities or expenses any of them incur in carrying out their respective duties under the Plan, other than for any liabilities or expenses arising out of such individual’s willful misconduct or fraud. 

4. Severance Benefits.  

4.1 Eligibility. Each Employee who qualifies as a Participant and who experiences a Qualifying Termination is eligible to receive
Severance Benefits under the Plan. 
 4.2 Qualifying Termination Severance. In the event that a Participant experiences a
Qualifying Termination, then, subject to the Participant’s execution of a Release that becomes effective and irrevocable in accordance with Section 4.3 hereof, and subject to any additional requirements specified in the Plan, the Company
shall pay or provide to the Participant, in addition to the Accrued Obligations, the following Severance Benefits: 
 (a)
Base Cash Severance. Subject to Section 6.2 hereof, the Company shall pay to the Participant the Base Cash Severance, (i) in the case of a Qualifying Termination that is not a CIC Termination, in substantially equal installments
over the applicable Severance Period in accordance with the Company’s normal payroll practices, or (ii) in the case of a Qualifying Termination that is a CIC Termination (and provided that the corresponding Change in Control is a
“change in control” event for purposes of Code Section 409A (as defined below)), in a single cash lump sum payment; provided, however, that the first (1st) such
installment or the single cash lump sum payment, as applicable, shall be paid on the first payroll date immediately after the sixtieth (60th) day following the Termination Date and shall include
any portion of the Base Cash Severance that would have otherwise been payable during the period between the Termination Date and such first (1st) payment date. 

(b) Pro-Rata Target Bonus. The Company shall pay to the Participant an amount
equal to his or her Pro-Rated Target Bonus, on the first (1st) payroll date immediately after the sixtieth
(60th) day following the Termination Date. 
 (c) COBRA. Subject
to the Participant’s valid election to continue healthcare coverage under COBRA, to the extent that the Participant is eligible to do so, the Company shall reimburse the Participant for the cost of healthcare continuation coverage for the
Participant and his or her covered dependents under its group health plans, at the same levels and at the same cost to the Participant as would have applied if the Participant’s employment had not been terminated, based on the
Participant’s elections in effect on the Termination Date, until the earlier of (i) the end of the month in which the Participant’s COBRA Subsidy Period ends and (ii) the date on which the Participant becomes covered by a group
health insurance program provided by a subsequent employer (the “COBRA Benefits”). Notwithstanding the foregoing, (A) if any plan pursuant to which the COBRA Benefits are provided is not, or ceases prior to the expiration of
the period of continuation coverage to be, exempt from the application of Code Section 409A under Treasury 

  
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Regulation Section 1.409A-1(a)(5), or (B) the Company is otherwise unable to continue to cover the Participant under its group health plans
without incurring penalties (including, without limitation, pursuant to Section 2716 of the Public Health Service Act or the Patient Protection and Affordable Care Act), then, in either case, the Company shall pay to the Participant an amount
equal to the amount of the Company’s monthly COBRA contribution on a monthly basis over the COBRA Subsidy Period (or the remaining portion thereof). In addition, solely with respect to the CEO in the case of a Qualifying Termination that is a
CIC Termination, if the CEO has not become eligible for coverage under a comprehensive group health plan sponsored by another employer on or before the date that is the eighteen (18)-month anniversary of the CEO’s Termination Date (the
“COBRA Payment Trigger Date”), then, on the Company’s first (1st) regularly scheduled payroll date immediately after the COBRA Payment Trigger Date, the CEO shall receive a
one (1)-time lump sum cash payment in an amount equal to six (6) times the monthly amount the CEO paid to effect and continue coverage for the CEO and the CEO’s covered dependents, if any, under the Company’s group health plan for the
full calendar month immediately preceding the COBRA Payment Trigger Date, plus an additional amount equal to the sum of the income tax payable by the CEO with respect to such six (6)-month COBRA payment, plus the amount necessary to put the CEO in
the same after-tax position (taking into account any and all applicable federal, state, and local taxes at the highest applicable rates) as if no income tax had been imposed on the six (6)-month COBRA payment.

 (d) Equity Vesting. Solely in the case of a Qualifying Termination that is a CIC Termination, all equity-based
awards granted to the Participant prior to the Change in Control under the Company Group’s equity plans, each as amended, including, but not limited to, the Equity Incentive Plan, or any predecessor or successor plan(s) thereto, that are
(i) outstanding and unvested as of immediately prior to the date of the Change in Control (including, but not limited to, stock options, restricted stock units and performance-based restricted stock units) and (ii) assumed or substituted
by the successor in connection with such Change in Control (“Assumed Pre-CIC Awards”), shall become fully vested as of the Participant’s Termination Date, with any Assumed Pre-CIC Awards subject to performance-based vesting conditions vesting at the greater of (A) actual performance, determined by terminating the applicable performance cycle(s) as of the date of Change in Control
and measuring performance achievement at such time and (B) target performance. Any stock option, stock appreciation right or similar award that provides for a Participant-elected exercise shall become fully exercisable and will remain
exercisable for the applicable period following the Termination Date, as specified in the applicable equity plan and/or the applicable award agreement. In the case of restricted stock or similar awards that are not subject to a Participant-elected
exercise, the Company shall remove any restrictions (other than restrictions required by applicable securities laws) or conditions in respect of such award as of the Participant’s Termination Date. For the avoidance of doubt, (I) this
Section 4.2(d) shall apply to any equity-based awards that are outstanding immediately prior to the Change in Control and are assumed or substituted by the successor in connection with such Change in Control; (II) notwithstanding the
foregoing, to the extent any equity-based awards granted to a Participant are not assumed or substituted in connection with a Change in Control, such equity-based awards shall immediately become fully vested upon the consummation of such Change in
Control; (III) in the event the Equity Incentive Plan and/or the applicable award agreement provides more favorable treatment to a Participant with respect to such Participant’s equity-based awards as compared to this Section 4.2(d),
such more favorable treatment shall apply instead of this Section 4.2(d); and (IV) for purposes of Section 10(d) of the Equity Incentive Plan, a Qualifying Termination shall constitute an “involuntary Termination,” such that
all of a Participant’s Assumed Pre-CIC Awards will vest as described in this Section 4.2(d) upon a Qualifying Termination that occurs at any time beginning on the date of the Change in Control up to
and including the second (2nd) anniversary of the Change in Control. 

  
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 4.3 Release. Notwithstanding anything herein to the contrary, no Participant shall be
eligible or entitled to receive or retain any Severance Benefits under the Plan unless he or she executes a general release of claims substantially in the form attached hereto as Exhibit C (subject to such changes thereto as are legally
necessary at the time of execution to make it enforceable and effective with respect to all claims intended to be covered thereby and released therein, including, but not limited to, the addition of any federal, state or local laws) (the
“Release”). The Company shall provide the Release to the Participant within seven (7) days following the Participant’s Termination Date. The Release must be executed and become
non-revocable during the period set forth therein, but in any event no later than sixty (60) days following Participant’s Termination Date. 

4.4 Non-U.S. Employees. Notwithstanding anything in the Plan to the contrary, with respect to
any Participant who resides outside of the United States (each, a “Non-U.S. Participant”), (a) if such Non-U.S. Participant (i) is entitled to
receive severance, notice or similar termination payments and/or benefits under the laws of his or her country of residence upon his or her termination of employment with the Company Group (collectively, “Statutory Severance”) and
(ii) becomes eligible to receive Severance Benefits under the Plan, such Non-U.S. Participant shall be entitled to receive either (A) the Severance Benefits described in Section 4.2 or
(B) such Non-U.S. Participant’s Statutory Severance, whichever is greater and (b) if such Non-U.S. Participant becomes eligible to receive Severance
Benefits under Section 4.2(c), including after application of Section 4.4(a), such Non-U.S. Participant shall instead receive a substantially equivalent benefit under applicable laws of the
jurisdiction in which such Non-U.S. Participant resides, as determined by the Administrator in its good faith discretion. 

5. Limitations. Notwithstanding any provision of the Plan to the contrary, if a Participant’s status as an Employee is
terminated for any reason other than due to a Qualifying Termination, the Participant shall not be entitled to receive any Severance Benefits under the Plan, and the Company shall not have any obligation to such Participant under the Plan. 

6. Section 409A. 
 6.1
General. To the extent applicable, the Plan shall be interpreted and applied consistent and in accordance with Code Section 409A and Department of Treasury regulations and other interpretive guidance issued thereunder (collectively,
“Code Section 409A”). Notwithstanding any provision of the Plan to the contrary, to the extent that the Administrator determines that any payments or benefits under the Plan may be either non-compliant with or not exempt from Code Section 409A, the Administrator may, in its sole discretion, adopt such amendments to the Plan or take such other actions that the Administrator determines are
necessary or appropriate to (a) exempt the compensation and benefits payable under the Plan from Code Section 409A and/or preserve the intended tax treatment of such compensation and benefits or (b) comply with the requirements of
Code Section 409A; provided, however, that this Section 6.1 shall not create any obligation on the part of the Administrator to adopt any such amendment or take any other action, nor shall the Company have any liability for
failing to do so. 
 6.2 Potential Six-Month Delay. Notwithstanding anything to the contrary
in the Plan, no amounts shall be paid to any Participant under the Plan during the six (6)-month period following such Participant’s “separation from service” (within the meaning of Code Section 409A(a)(2)(A)(i) and Treasury
Regulation Section 1.409A-1(h)), solely to the extent that the Administrator determines that paying such amounts at the time or times indicated in the Plan would result in a prohibited distribution under
Code Section 409A(a)(2)(B)(i). If the payment of any such amounts is delayed as a result of the previous 

  
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sentence, then on the first (1st) business day following the end of such six (6)-month period (or such earlier date upon which such amount can
be paid under Code Section 409A without resulting in a prohibited distribution, including as a result of the Participant’s death), the Participant shall receive a lump sum payment in an amount equal to the cumulative amount that would have
otherwise been payable to the Participant during such six (6)-month period, without interest thereon. 
 6.3 Separation from Service.
A termination of employment shall not be deemed to have occurred for purposes of any provision of the Plan providing for the payment of any amounts or benefits that constitute “nonqualified deferred compensation” under Code
Section 409A upon or following a termination of employment, unless such termination is also a “separation from service” within the meaning of Code Section 409A, and, for purposes of any such provision of the Plan, references to a
“termination,” “termination of employment” or like terms shall mean “separation from service”. 
 6.4
Reimbursements. To the extent that any payments or reimbursements provided to a Participant under the Plan are deemed to constitute compensation to the Participant to which Treasury Regulation
Section 1.409A-3(i)(1)(iv) would apply, such amounts shall be paid or reimbursed reasonably promptly, but not later than December 31st of the year following the year in which the expense was incurred. The
amount of any such payments eligible for reimbursement in one (1) year shall not affect the payments or expenses that are eligible for payment or reimbursement in any other taxable year, and the Participant’s right to such payments or
reimbursement of any such expenses shall not be subject to liquidation or exchange for any other benefit. 
 6.5 Installments. For
purposes of applying the provisions of Code Section 409A to the Plan, each separately identified amount to which a Participant is entitled under the Plan shall be treated as a separate payment. In addition, to the extent permissible under Code
Section 409A, the right to receive any installment payments under the Plan shall be treated as a right to receive a series of separate payments, and, accordingly, each such installment payment shall at all times be considered a separate and
distinct payment as permitted under Treasury Regulation Section 1.409A-2(b)(2)(iii). Whenever a payment under the Plan specifies a payment period with reference to a number of days, the actual date of
payment within the specified period shall be within the sole discretion of the Company. 
 7. Limitation on Payments. 

7.1 In the event it is determined, pursuant to Section 7.2 below, that part or all of the consideration, compensation and/or benefits to
be paid or provided to a Participant under the Plan, or under any other plan, arrangement or agreement, in connection with a Change in Control (each, a “Payment”) constitutes a “parachute payment” (or payments) under
Section 280G(b)(2) of the Code, then, if the aggregate present value of such parachute payments (the “Parachute Amount”) exceeds three (3) times the Participant’s “base amount,” as defined in
Section 280G(b)(3) of the Code (the “Participant Base Amount”), less one dollar ($1.00) (the “Safe Harbor Amount”), and would be subject to the excise tax imposed by Section 4999 of the Code (the
“Excise Tax”), the amounts constituting “parachute payments” that would otherwise be payable or provided to or for the benefit of the Participant shall be reduced to the extent necessary so that the Parachute Amount is
equal to the Safe Harbor Amount; provided, however, that the foregoing reduction shall be made only if and to the extent that such reduction would result in an increase in the aggregate Payment to be provided to the Participant, determined on
a net after-tax basis (taking into account the Excise Tax imposed, any tax imposed by any comparable provision of state law and any applicable federal, state and local income taxes). For purposes of
determining the amount of a Participant’s aggregate value of Payments on an after-tax basis, the Participant shall be deemed to pay federal income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Payments are to be made, and state and local income taxes at the highest marginal rate of taxation in the state and locality of such Participant’s residence on the date of the Change in Control. 

  
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 7.2 If the Payments must be reduced as provided in Section 7.1, any reduction in
Payments required by this provision will occur in the following order: (a) reduction of cash payments, (b) reduction of vesting acceleration of equity-based awards and (c) reduction of other benefits paid or provided. In the event
that acceleration of vesting of equity-based awards is to be reduced, such acceleration of vesting will be cancelled in the reverse order of the date of grant for the equity-based award. If two (2) or more equity-based awards are granted on the
same date, each award will be reduced on a pro-rata basis. The Participant shall be advised of the determination as to which Payments will be reduced and the reasons therefor, and the Participant and his or her advisors will be entitled to present
information that may be relevant to this determination. In no event shall such reduction be effected through a delay in the timing of any Payment that is subject to Code Section 409A (or that would become subject to Code Section 409A as a
result of such delay). 
 7.3 Any determination that a Payment constitutes a parachute payment and any calculation described in this
Section 7 (“determination”) shall be made by the independent public accountants who serve as the Company’s independent public accountants immediately prior to the Change in Control (the “Accountants”) and
may, at the Company’s election, be made prior to termination of the Participant’s employment where the Company determines that a Change in Control is imminent. The Accountants shall provide such determination to the Participant in writing
no later than thirty (30) days following the date of the Change in Control. If the Participant does not agree with such determination, he or she may give notice to the Company within ten (10) days of receipt of the determination from the
Accountants, and within fifteen (15) days thereafter, accountants of the Participant’s choice must deliver to the Company their determination that, in their professional judgment, complies with the Code. If the two (2) accountants
cannot agree upon the amount to be paid to the Participant pursuant to this Section 7 within ten (10) days of the delivery of the statement of the Participant’s accountants to the Company, the two (2) accountants shall choose a
third (3rd) accountant who shall deliver their determination of the appropriate amount to be paid to the Participant pursuant to this Section 7, which determination shall be final. If the
final determination provides for the payment of a greater amount than that proposed by the accountants of the Company, then the Company shall pay all of the Participant’s costs incurred in contesting such determination and all other costs
incurred by the Company with respect to such determination. However, if the third (3rd) accountant’s determination is within 110% of the determination of the accountants of the Company, the
Participant shall pay all reasonable costs incurred by both the Company and the Participant with respect to the determination. 
 7.4 Within
ten (10) days following the final determination made pursuant to this Section 7, the Company shall pay to or distribute to or for the benefit of the Participant such amounts as are then due to the Participant under the Plan and shall
promptly pay to or distribute to or for the benefit of the Participant in the future such amounts as become due to the Participant under the Plan. 

7.5 As a result of the uncertainty in the application of Section 280G of the Code at the time of a determination hereunder, it is possible
that payments will be made by the Company which should not have been made under Section 7.1 (an “Overpayment”) or that additional payments that are not made by the Company pursuant to Section 7.1 above should have been
made (an “Underpayment”). In the event that there is a final determination by the Internal Revenue Service, or a final determination by a court of competent jurisdiction, that an Overpayment has been made, any such Overpayment shall
be treated for all purposes as a loan to the Participant to the extent permitted by law, which the Participant shall repay to the Company, together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the

  
 9 

 
Code. Nothing in this Section 7.1 is intended to violate the Sarbanes-Oxley Act of 2002, and to the extent that any advance or repayment obligation hereunder would do so, such obligation
shall be modified so as to make the advance a nonrefundable payment to the Participant, and the repayment obligation null and void to the extent required by such Act. In the event that there is a final determination by the Internal Revenue Service,
a final determination by a court of competent jurisdiction or a change in the provisions of the Code or regulations pursuant to which an Underpayment arises under the Plan, any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Participant, together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code. 
 8.
No Mitigation. No Participant shall be required to seek other employment or attempt in any way to reduce or mitigate any Severance Benefits payable under the Plan; the amount of any such Severance Benefits shall not be reduced by any other
compensation paid or provided to any Participant following such Participant’s termination of service; and there shall be no offset against any amounts due to the Participant under the Plan on account of any remuneration attributable to any
subsequent employment that the Participant may obtain or otherwise. The amounts payable hereunder shall be subject to setoff, counterclaim, recoupment, defense or any other right which the Company Group may have against a Participant. In the event
of a Participant’s breach of any provision hereunder, including, without limitation, Sections 4.3 (other than as it applies to a release of claims under the Age Discrimination in Employment Act, as amended) and 12, the Company Group shall be
entitled to recover any payments previously made to the Participant hereunder. The Severance Benefits shall be reduced (offset) by any amounts payable under any statutory entitlement (including notice of termination, termination pay and/or severance
pay) of a Participant upon a termination of employment, including, without limitation, any payments related to an actual or potential liability under the Worker Adjustment and Retraining Notification Act (WARN) or similar state or local law. 

9. Successors. 
 9.1
Company Successors. The Plan shall inure to the benefit of and shall be binding upon the Company and its successors and assigns. Any successor (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company’s business and/or assets shall assume and agree to perform the obligations of the Company under the Plan. 

9.2 Participant Successors. The Plan shall inure to the benefit of and be enforceable by a Participant’s personal or legal
representatives, executors, administrators, successors, heirs, distributees, devisees, legatees or other beneficiaries. If a Participant dies while any amount remains payable to such Participant hereunder, all such amounts shall be paid in
accordance with the terms of the Plan to the executors, personal representatives or administrators of such Participant’s estate. 
 10.
Notices. All communications relating to matters arising under the Plan shall be in writing and shall be deemed to have been duly given when hand delivered, faxed, emailed or mailed by reputable overnight carrier or United States certified
mail, return receipt requested, addressed, if to a Participant, to the address on file with the Company or to such other address as the Participant may have furnished to the other in writing in accordance herewith, and, if to the Company, to such
address as may be specified from time to time by the Administrator, except that notice of change of address shall be effective only upon actual receipt. 

  
 10 

 11. Claims Procedure; Arbitration. 

11.1 Claims. Generally, Participants are not required to present a formal claim in order to receive benefits under the Plan. If,
however, any person (the “Claimant”) believes that benefits are being denied improperly, that the Plan is not being operated properly, that fiduciaries of the Plan have breached their duties or that the Claimant’s legal rights
are being violated with respect to the Plan, the Claimant must file a formal claim, in writing, with the Administrator. This requirement applies to all claims that any Claimant has with respect to the Plan, including claims against fiduciaries and
former fiduciaries, except to the extent the Administrator determines, in its sole discretion, that it does not have the power to grant all relief reasonably being sought by the Claimant. A formal claim must be filed within ninety (90) days
after the date the Claimant first knew or should have known of the facts on which the claim is based, unless the Administrator consents otherwise in writing. The Administrator shall provide a Claimant, on request, with a copy of the claims
procedures established under Section 11.2 hereof. 
 11.2 Claims Procedure. The Administrator has adopted procedures for
considering claims (which are set forth in Exhibit D attached hereto), which it may amend or modify from time to time, as it sees fit. These procedures shall comply with all applicable legal requirements. These procedures may provide that
final and binding arbitration shall be the ultimate means of contesting a denied claim (even if the Administrator or its delegates have failed to follow the prescribed procedures with respect to the claim). The right to receive benefits under the
Plan is contingent on a Claimant using the prescribed claims and arbitration procedures to resolve any claim. 
 12. Covenants. 

12.1 Restrictive Covenants. A Participant’s right to receive and/or retain the Severance Benefits payable under the Plan is
conditioned upon and subject to the Participant’s continued compliance with any restrictive covenants (e.g., confidentiality, non-solicitation, non-competition, non-disparagement, etc.) contained in the Release and any other written agreement between the Participant and the Company Group, as in effect on the date of the Participant’s Qualifying Termination. 

12.2 Return of Property. A Participant’s right to receive and/or retain the Severance Benefits payable under the Plan is
conditioned upon the Participant’s return to the Company Group of all Company Group documents (and all copies thereof) and other Company Group property (in each case, whether physical, electronic or otherwise) in the Participant’s
possession or control. 
 13. Miscellaneous. 

13.1 Entire Plan; Relation to Other Agreements. The Plan, together with any Participation Notice issued in connection with the Plan,
contains the entire understanding of the parties relating to the subject matter hereof and supersedes any prior agreement, arrangement and understanding between any Participant and the Company Group with respect to the subject matter hereof.
Severance Benefits payable under the Plan are not intended to duplicate any other severance benefits payable to a Participant by the Company. By participating in the Plan and accepting the Severance Benefits hereunder, the Participant acknowledges
and agrees that any prior agreement, arrangement and understanding between any Participant and the Company Group with respect to the subject matter hereof is hereby revoked and ineffective with respect to the Participant. 

13.2 Participation Notices. The Administrator shall have the authority, in its sole discretion, to select Employees to participate in
the Plan and to provide written notice to any such Employee that he or she is a Participant in, and eligible to receive Severance Benefits under, the Plan (a “Participation Notice”) at or any time prior to his or her termination of
employment. 
 13.3 No Right to Continued Service. Nothing contained in the Plan shall (a) confer upon any Participant any right
to continue as an employee of the Company Group, (b) constitute any contract of employment or agreement to continue employment for any particular period or (c) interfere in any way with the right of the Company to terminate a service
relationship with any Participant, with or without Cause. 

  
 11 

 13.4 Termination and Amendment of Plan. Prior to the consummation of a Change in
Control, the Plan may be amended or terminated by the Administrator at any time and from time to time, in its sole discretion; provided, that, unless the Administrator determines otherwise, the Plan may not be amended or terminated during the one
(1)-year period following the Effective Date, except with the express written consent of each Participant who would be adversely affected by any such amendment or termination. For a period of twenty-four (24) months from and after the
consummation of a Change in Control, the Plan may not be amended, modified, suspended or terminated, except with the express written consent of each Participant who would be adversely affected by any such amendment, modification, suspension or
termination. After the expiration of such twenty-four (24)-month period, and subject to Section 2 hereof, the Plan may again be amended or terminated by the Administrator at any time and from time to time, in its sole discretion (provided,
that, no such amendment or termination shall adversely affect the rights of any Participant who has experienced a Qualifying Termination on or prior to such amendment or termination). 

13.5 Survival. Section 7 (Limitation on Payments), Section 11 (Claims Procedure; Arbitration) and Section 12 (Covenants)
hereof shall survive the termination or expiration of the Plan and shall continue in effect. 
 13.6 Severance Benefit Obligations.
Notwithstanding anything contained herein, Severance Benefits paid or provided under the Plan may be paid or provided by any member of the Company Group. 

13.7 Withholding. Each member of the Company Group shall have the authority and the right to deduct and withhold an amount sufficient to
satisfy federal, state, local and foreign taxes required by law to be withheld with respect to any Severance Benefits payable under the Plan. 

13.8 Benefits Not Assignable. Except as otherwise provided herein or by law, no right or interest of any Participant under the Plan
shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including, without limitation, by execution, levy, garnishment, attachment, pledge or in any manner; no attempted assignment or transfer
thereof shall be effective; and no right or interest of any Participant under the Plan shall be liable for, or subject to, any obligation or liability of such Participant. When a payment is due under the Plan to a Participant who is unable to care
for his or her affairs, payment may be made directly to his or her legal guardian or personal representative. 
 13.9 Applicable Law.
The Plan is intended to be an unfunded “top hat” pension plan within the meaning of U.S. Department of Labor Regulation Section 2520.104-23 and shall be interpreted, administered and enforced as
such in accordance with ERISA. To the extent that state law is applicable, the statutes and common law of the State of Delaware, excluding any that mandate the use of another jurisdiction’s laws, will apply. 

13.10 Validity. The invalidity or unenforceability of any provision of the Plan shall not affect the validity or enforceability of any
other provision of the Plan, which shall remain in full force and effect. 
 13.11 Captions. The captions contained in the Plan are
for convenience only and shall have no bearing on the meaning, construction or interpretation of the Plan’s provisions. 
 13.12
Expenses. The expenses of administering the Plan shall be borne by the Company or its successor, as applicable. 

  
 12 

 13.13 Unfunded Plan. The Plan shall be maintained in a manner to be considered
“unfunded” for purposes of ERISA. The Company shall be required to make payments only as benefits become due and payable. No person shall have any right, other than the right of an unsecured general creditor against the Company, with
respect to the benefits payable hereunder, or which may be payable hereunder, to any Participant, surviving spouse or beneficiary hereunder. If the Company, acting in its sole discretion, establishes a reserve or other fund associated with the Plan,
no person shall have any right to or interest in any specific amount or asset of such reserve or fund by reason of amounts which may be payable to such person under the Plan, nor shall such person have any right to receive any payment under the Plan
except as and to the extent expressly provided in the Plan. The assets in any such reserve or fund shall be part of the general assets of the Company, subject to the control of the Company. 

* * * * 

  
 13 

 Exhibit A 

CALCULATION OF NON-CHANGE IN CONTROL SEVERANCE AMOUNTS 

 

							
	 Severance
Classification
	  	 Base Cash Severance
	  	 Severance Period
	  	 COBRA Subsidy
Period

	CEO	  	One and one-half (1.5) times the CEO’s Base Salary	  	18 months	  	12 months
	Tier 1	  	One and one-half (1.5) times the Participant’s Base Salary	  	18 months	  	12 months
	Tier 2	  	One (1) times the Participant’s Base Salary	  	12 months	  	12 months

  
 Exhibit A-1 

 Exhibit B 

CALCULATION OF CHANGE IN CONTROL SEVERANCE AMOUNTS 
  

							
	 Severance
Classification
	  	 Base Cash Severance
	  	 Severance Period
	  	 COBRA Subsidy
Period

	CEO	  	Two (2) times the sum of the CEO’s Base Salary plus Target Bonus	  	24 months	  	24 months
	Tier 1	  	One and one-half (1.5) times the sum of the Participant’s Base Salary plus Target Bonus	  	18 months	  	18 months
	Tier 2	  	One (1) times the sum of the Participant’s Base Salary plus Target Bonus	  	12 months	  	12 months

  
 Exhibit B-1ex_278543.htm

 

Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of August 20, 2021, by and between NOVACCESS GLOBAL INC., a Colorado corporation, with headquarters located at 8834 Mayfield Road, Suite C, Chesterland, OH 44026 (the “Company”), and AJB CAPITAL INVESTMENTS, LLC, a Delaware limited liability company, with its address at 4700 Sheridan Street, Suite J, Hollywood, FL 33021 (the “Buyer”).

 

WHEREAS:

 

A.    The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”);

 

B.    Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement a 10% promissory note of the Company, in the form attached hereto as Exhibit A, in the aggregate principal amount of US$500,000.00 (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Note”), convertible following an Event of Default into shares of common stock, having no par value per share, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note;

 

 

C.    The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth immediately below its name on the signature pages hereto; and

 

 

D.    Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement a warrant to purchase up to 1,000,000 shares of the Common Stock, in the form attached hereto as Exhibit B (the “Warrant”), subject to adjustments and limitations as provided therein.

 

NOW THEREFORE, the Company and the Buyer hereby agree as follows:

 

1.    PURCHASE AND SALE OF NOTE.

 

a.    Purchase of Note and the Warrant. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer the Note and the Buyer shall purchase the Note from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature pages hereto, and the Warrant to purchase up to 1,000,000 shares of Common Stock, subject to adjustment as provided therein. The Agreement, the Note, the

 

 

 

 

Warrant and those other documents executed in connection therewith shall be referred to herein as the “Transaction Documents.”

 

b.    Form of Payment. On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note in the amount of US$450,000.00 (the “Purchase Price”) by wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note and the Warrant in the principal amount equal to the Purchase Price, and (ii) the Company shall deliver such duly executed Note, the Warrant, and the Commitment Fee Shares (as defined herein) on behalf of the Company, to the Buyer, against delivery of such Purchase Price.

 

c.    Closing Date. Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 7 and Section 8 below, the date and time of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be 12:00 noon, Eastern Standard Time on the date hereof, or such other mutually agreed upon time. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date by remote exchange of documents, or at such location as may be agreed to by the parties.

 

2.    REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and warrants to the Company that:

 

a.    Investment Purpose. As of the date hereof, the Buyer is purchasing the Commitment Fee Shares, the Note, the shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note (including, without limitation, such additional shares of Common Stock, if any, as are issuable (i) on account of interest on the Note (ii) as a result of the events described in Sections 1.3 and 1.4(g) of the Note or (iii) in payment of the Standard Liquidated Damages Amount (as defined in Section 2(f) below) pursuant to this Agreement, such shares of Common Stock being collectively referred to herein as the “Conversion Shares”), the Warrant, and the shares of Common Stock issuable upon exercise of or otherwise pursuant to the Warrant (the “Warrant Shares”), for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided, however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act. For purposes of this Agreement, the Note and the transactions contemplated thereby, the Conversion Shares, the Commitment Fee Shares, the Warrant and the Warrant Shares, shall be referred to as the “Securities”

 

b.    Accredited Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”).

 

c.    Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration

 

2

 

 

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 Securities.

 

d.    Information. The Buyer and its advisors, if any, have been, and for so long as the Note and the Warrant remain outstanding will continue to be, furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been, and for so long as the Note and the Warrant remains outstanding will continue to be, afforded the opportunity to ask questions of the Company. Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. The Buyer understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware of any facts that may constitute a breach of any of the Company's representations and warranties made herein.

 

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

 

f.    Transfer or Re-sale. The Buyer understands that (i) the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to the Company, at the cost of the Company, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold pursuant to Rule 144 or other applicable exemption, or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost of the Company, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through

 

3

 

 

whom the sale is made) may be deemed to be an underwriter (as that term is defined 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 (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona fide margin account or other lending arrangement. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, within three (3) business days of delivery of the opinion to the Company, the Company shall pay to the Buyer liquidated damages of two percent (2%) of the outstanding amount of the Note per day plus accrued and unpaid interest on the Note, prorated for partial months, in cash or shares at the option of the Buyer (“Standard Liquidated Damages Amount”). If the Buyer elects to be pay the Standard Liquidated Damages Amount in shares of Common Stock, such shares shall be issued at the Conversion Price (as defined in the Note) at the time of payment.

 

g.    Legends. The Buyer understands that the Note and, until such time as the Conversion Shares, the Commitment Fee Shares and the Warrant Shares have been registered under the 1933 Act may be sold pursuant to Rule 144 or Regulation S or other applicable exemption without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Conversion Shares, the Commitment Fee Shares and the Warrant Shares may bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such Securities):

 

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT OR OTHER APPLICABLE EXEMPTION. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR

 

4

 

 

FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

The legend set forth above shall be removed and the Company shall issue a certificate or book entry statement without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S or other applicable exemption without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those represented by a certificate(s) or a book entry statement(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

 

h.    Authorization; Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.

 

i.    Residency. The Buyer is organized in the jurisdiction set forth in the preamble.

 

5

 

 

3.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Buyer that:

 

a.    Organization and Qualification. The Company and each of its Subsidiaries (as defined below), if any, is a corporation or other entity duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. The Company and each of its Subsidiaries is duly qualified as a foreign corporation or other entity to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. “Material Adverse Effect” means any material adverse effect on the business, operations, assets, financial condition or prospects of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith. “Subsidiaries” means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest.

 

b.    Authorization; Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.

 

c.    Capitalization. As of the date hereof, the authorized capital stock of the Company consists of: 2,000,000,000 shares of Common Stock, of which approximately 12,856,342 shares are issued and outstanding, and 50,000,000 shares of Preferred Stock, of which 25,000 shares are issued and outstanding. Except as disclosed in the SEC Documents, no shares are reserved for issuance pursuant to the Company’s stock option plans, no shares are reserved for issuance pursuant to securities (other than the Note and any other promissory note issued to the Buyer) exercisable for, or convertible into or exchangeable for shares of Common Stock and 5,700,000 shares are reserved for issuance upon conversion of the Note or exercise of

 

6

 

 

the Warrant. All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the shareholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company. Except as disclosed in the SEC Documents, as of the effective date of this Agreement, (i) there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities under the 1933 Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Note or the Conversion Shares. The Company has filed in its SEC Documents true and correct copies of the Company’s Certificate of Incorporation as in effect on the date hereof (“Certificate of Incorporation”), the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible into or exercisable for Common Stock of the Company and the material rights of the holders thereof in respect thereto.

 

d.    Issuance of Note and Shares. The issuance of the Note is duly authorized and, upon issuance in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable and free from all preemptive or similar rights, taxes, liens, charges and other encumbrances with respect to the issue thereof. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof. The issuance of the Commitment Fee Shares is duly authorized and, upon issuance in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable and free from all preemptive or similar rights, taxes, liens, charges and other encumbrances with respect to the issue thereof. The issuance of the Warrant is duly authorized and, upon exercise of the Warrant, the Warrant Shares, will be validly issued, fully paid and non-assessable and free from all preemptive or similar rights, taxes, liens, charges and other encumbrances with respect to the issue thereof.

 

e.    Acknowledgment of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares upon conversion of the Note and exercise of the Warrant. The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Note in accordance with this Agreement and the Note and Warrant Shares upon exercise of the

 

7

 

 

Warrant, is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.

 

f.    No Conflicts. The execution, delivery and performance of this Agreement, the Note and the Warrant by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). Neither the Company nor any of its Subsidiaries is in violation of its Certificate of Incorporation, By-laws or other organizational documents and neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party or by which any property or assets of the Company or any of its Subsidiaries is bound or affected, except for possible defaults as would not, individually or in the aggregate, have a Material Adverse Effect. The businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall not be conducted so long as the Buyer owns any of the Securities, in violation of any law, ordinance or regulation of any governmental entity. Except as specifically contemplated by this Agreement and as required under the 1933 Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, regulatory agency, self-regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement, the Note in accordance with the terms hereof or thereof or to issue and sell the Note in accordance with the terms hereof and to issue the Conversion Shares upon conversion of the Note. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company is not in violation of the listing requirements of the OTC Pink (the “OTC Pink”), the OTCQB or any similar quotation system, and does not reasonably anticipate that the Common Stock will be delisted by the OTC Pink, the OTCQB or any similar quotation system, in the foreseeable future nor are the Company's securities “chilled” by DTC.

 

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The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

 

g.    SEC Documents; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”) since March 31, 2021 (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the “SEC Documents”). The Company has delivered to the Buyer true and complete copies of the SEC Documents, except for such exhibits and incorporated documents. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings prior the date hereof). As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Except as set forth in the financial statements of the Company included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to March 31, 2021, and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial statements, which, individually or in the aggregate, are not material to the financial condition or operating results of the Company. The Company is subject to the reporting requirements of the 1934 Act. For the avoidance of doubt, filing of the documents required in this Section 3(g) via the SEC’s Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”) shall satisfy all delivery requirements of this Section 3(g).

 

h.    Absence of Certain Changes. Since March 31, 2021, there has been no material adverse change and no material adverse development in the assets, liabilities, business, properties, operations, financial condition, results of operations, prospects or 1934 Act reporting status of the Company or any of its Subsidiaries.

 

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i.    Absence of Litigation. There is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity as such, that could have a Material Adverse Effect. Schedule 3(i) contains a complete list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the Company or any of its Subsidiaries, without regard to whether it would have a Material Adverse Effect. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

 

j.    Patents, Copyrights, etc. The Company and each of its Subsidiaries owns or possesses the requisite licenses or rights to use all patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names and copyrights (“Intellectual Property”) necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future). Except as disclosed in the SEC Documents, there is no claim or action by any person pertaining to, or proceeding pending, or to the Company’s knowledge threatened, which challenges the right of the Company or of a Subsidiary with respect to any Intellectual Property necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); to the best of the Company’s knowledge, the Company’s or its Subsidiaries’ current and intended products, services and processes do not infringe on any Intellectual Property or other rights held by any person; and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing. The Company and each of its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of their Intellectual Property.

 

k.    No Materially Adverse Contracts, Etc. Neither the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected in the future to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement which in the judgment of the Company’s officers has or is expected to have a Material Adverse Effect.

 

l.    Tax Status. The Company and each of its Subsidiaries has made or filed all federal, state and foreign income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any

 

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material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local tax. None of the Company’s tax returns is presently being audited by any taxing authority.

 

m.    Certain Transactions. Except for arm’s length transactions pursuant to which the Company or any of its Subsidiaries makes payments in the ordinary course of business upon terms no less favorable than the Company or any of its Subsidiaries could obtain from third parties and other than the grant of stock options disclosed on Schedule 3(c), none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

 

n.    Disclosure. All information relating to or concerning the Company or any of its Subsidiaries set forth in this Agreement is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company’s reports filed under the 1934 Act are being incorporated into an effective registration statement filed by the Company under the 1933 Act).

 

o.    Acknowledgment Regarding Buyer’ Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyer’ purchase of the Securities. The Company further represents to the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.

 

p.    No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in

 

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any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.

 

q.    Brokers. The Company hereby represents and warrants that it has engaged a registered broker dealer (“Broker”) in connection with the negotiation, execution or delivery of this Agreement or the transactions contemplated hereunder. The Company covenants and agrees that should any claim be made against Purchaser for any commission or other compensation by the Broker, based upon the Company’s engagement of such person in connection with this transaction, the Company shall indemnify, defend and hold Purchaser harmless from and against any and all damages, expenses (including attorneys’ fees and disbursements) and liability arising from such claim. The Company shall pay the commission of the Broker, to the attention of the Broker, pursuant to their separate agreement(s) between the Company and the Broker.

 

r.    Permits; Compliance. The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it is now being conducted (collectively, the “Company Permits”), and there is no action pending or, to the knowledge of the Company, threatened regarding suspension or cancellation of any of the Company Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Since March 31, 2021, neither the Company nor any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect.

 

s.    Environmental Matters.

 

(i)    There are, to the Company’s knowledge, with respect to the Company or any of its Subsidiaries or any predecessor of the Company, no past or present violations of Environmental Laws (as defined below), releases of any material into the environment, actions, activities, circumstances, conditions, events, incidents, or contractual obligations which may give rise to any common law environmental liability or any liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or similar federal, state, local or foreign laws and neither the Company nor any of its Subsidiaries has received any notice with respect to any of the foregoing, nor is any action pending or, to the Company’s knowledge, threatened in connection with any of the foregoing. The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or

 

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protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

 

(ii)    Other than those that are or were stored, used or disposed of in compliance with applicable law, no Hazardous Materials are contained on or about any real property currently owned, leased or used by the Company or any of its Subsidiaries, and no Hazardous Materials were released on or about any real property previously owned, leased or used by the Company or any of its Subsidiaries during the period the property was owned, leased or used by the Company or any of its Subsidiaries, except in the normal course of the Company’s or any of its Subsidiaries’ business.

 

(iii)    There are no underground storage tanks on or under any real property owned, leased or used by the Company or any of its Subsidiaries that are not in compliance with applicable law.

 

t.    Title to Property. Except as disclosed in the SEC Documents the Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects or such as would not have a Material Adverse Effect. Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a Material Adverse Effect.

 

u.    Internal Accounting Controls. Except as disclosed in the SEC Documents the Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company’s board of directors, to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

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v.    Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

 

w.    Solvency. The Company (after giving effect to the transactions contemplated by this Agreement) is solvent (i.e., its assets have a fair market value in excess of the amount required to pay its probable liabilities on its existing debts as they become absolute and matured) and currently the Company has no information that would lead it to reasonably conclude that the Company would not, after giving effect to the transaction contemplated by this Agreement, have the ability to, nor does it intend to take any action that would impair its ability to, pay its debts from time to time incurred in connection therewith as such debts mature. The Company did not receive a qualified opinion from its auditors with respect to its most recent fiscal year end other than with respect to its ability to continue as a “going concern” and, after giving effect to the transactions contemplated by this Agreement, does not anticipate or know of any basis upon which its auditors might issue a qualified opinion in respect of its current fiscal year (other than with respect to its ability to continue as a “going concern”).

 

x.    No Investment Company. The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement will not be an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment Company”). The Company is not controlled by an Investment Company.

 

y.     Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect. Upon written request the Company will provide to the Buyer true and correct copies of all policies relating to directors’ and officers’ liability coverage, errors and omissions coverage, and commercial general liability coverage.

 

z.    Bad Actor. No officer or director of the Company would be disqualified under Rule 506(d) of the Securities Act as amended on the basis of being a “bad actor” as that term is established in the September 19, 2013 Small Entity Compliance Guide published by the SEC.

 

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aa. Shell Status. The Company represents that it is not a “shell” issuer and that if it previously has been a “shell” issuer, that at least twelve (12) months have passed since the Company has reported Form 10 type information indicating that it is no longer a “shell” issuer. Further, the Company will instruct its counsel to either (i) write a 144- 3(a)(9) opinion to allow for salability of the Conversion Shares or (ii) accept such opinion from Holder’s counsel.

 

bb. No-Off Balance Sheet Arrangements. There is no transaction, arrangement, or other relationship between the Company or any of its Subsidiaries and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in its 1934 Act filings and is not so disclosed or that otherwise could be reasonably likely to have a Material Adverse Effect.

 

cc. Manipulation of Price. The Company has not, and to its knowledge no one acting on its behalf has: (i) taken, directly or indirectly, any action designed to cause or to result, or that could reasonably be expected to cause or result, in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of the Company.

 

dd. Sarbanes-Oxley Act. The Company and each Subsidiary is in material compliance with all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and all applicable rules and regulations promulgated by the SEC thereunder that are effective as of the date hereof.

 

ee. Employee Relations. Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or employs any member of a union. The Company believes that its and its Subsidiaries’ relations with their respective employees are good. No executive officer (as defined in Rule 501(f) promulgated under the 1933 Act) or other key employee of the Company or any of its Subsidiaries has notified the Company or any such Subsidiary that such officer intends to leave the Company or any such Subsidiary or otherwise terminate such officer’s employment with the Company or any such Subsidiary. To the knowledge of the Company, no executive officer or other key employee of the Company or any of its Subsidiaries is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non- competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer or other key employee (as the case may be) does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all federal, state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

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ff. Breach of Representations and Warranties by the Company. The Company agrees that if the Company breaches any of the representations or warranties set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement and it being considered an Event of Default under Section 3.5 of the Note, the Company shall pay to the Buyer the Standard Liquidated Damages Amount in cash or in shares of Common Stock at the option of the Company, until such breach is cured. If the Company elects to pay the Standard Liquidated Damages Amounts in shares of Common Stock, such shares shall be issued at the Conversion Price at the time of payment.

 

4.    COVENANTS.

 

a.    Best Efforts. The parties shall use their commercially reasonable best efforts to satisfy timely each of the conditions described in Section 7 and 8 of this Agreement.

 

b.    Form D; Blue Sky Laws. If requested by Buyer, the Company agrees to file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof to the Buyer promptly after such filing. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Securities for sale to the Buyer at the applicable closing pursuant to this Agreement under applicable securities or “blue sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Buyer on or prior to the Closing Date.

 

c.    Use of Proceeds. The Company shall use the proceeds from the sale of the Note for working capital and other general corporate purposes and shall not, directly or indirectly, use such proceeds for any loan to or investment in any other corporation, partnership, enterprise or other person (except in connection with its currently existing direct or indirect Subsidiaries).

 

d.    Right of First Refusal. Unless it shall have first delivered to the Buyer, at least seventy two (72) hours prior to the closing of such Future Offering (as defined herein), written notice describing the proposed Future Offering, including the terms and conditions thereof, and providing the Buyer an option during the seventy two (72) hour period following delivery of such notice to purchase the securities being offered in the Future Offering on the same terms as contemplated by such Future Offering (the limitations referred to in this sentence and the preceding sentence are collectively referred to as the “Right of First Refusal”) (and subject to the exceptions described below), the Company will not conduct any equity financing (including debt with an equity component) (“Future Offerings”) during the period beginning on the Closing Date and ending twelve (12) months following the Closing Date. In the event the terms and conditions of a proposed Future Offering are amended in any respect after delivery of the notice to the Buyer concerning the proposed Future Offering, the Company shall deliver a new notice to the Buyer describing the amended terms and conditions of the proposed Future Offering and the Buyer thereafter shall have an option during the seventy two

 

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(72) hour period following delivery of such new notice to purchase its pro rata share of the securities being offered on the same terms as contemplated by such proposed Future Offering, as amended. The foregoing sentence shall apply to successive amendments to the terms and conditions of any proposed Future Offering. The Right of First Refusal shall not apply to any transaction involving (i) issuances of securities in a firm commitment underwritten public offering (excluding a continuous offering pursuant to Rule 415 under the 1933 Act), (ii) issuances to employees, officers, directors, contractors, consultants or other advisors approved by the Board, (iii) issuances to strategic partners or other parties in connection with a commercial relationship, or providing the Company with equipment leases, real property leases or similar transactions approved by the Board (iv) issuances of securities as consideration for a merger, consolidation or purchase of assets, or in connection with any strategic partnership or joint venture (the primary purpose of which is not to raise equity capital), or in connection with the disposition or acquisition of a business, product or license by the Company (each of the foregoing, an “Exempt Issuance”). The Right of First Refusal also shall not apply to the issuance of securities upon exercise or conversion of the Company’s options, warrants or other convertible securities outstanding as of the date hereof or to the grant of additional options or warrants, or the issuance of additional securities, under any Company stock option or restricted stock plan approved by the shareholders of the Company.

 

e.    Expenses. The Company shall reimburse Buyer for any and all expenses incurred by them in connection with the negotiation, preparation, execution, delivery and performance of this Agreement and the other agreements to be executed in connection herewith (“Documents”), including, without limitation, reasonable attorneys’ and consultants’ fees and expenses, transfer agent fees, fees for stock quotation services, fees relating to any amendments or modifications of the Documents or any consents or waivers of provisions in the Documents, fees for the preparation of opinions of counsel, escrow fees, and costs of restructuring the transactions contemplated by the Documents. When possible, the Company must pay these fees directly, including, but not limited to, any and all wire fees, otherwise the Company must make immediate payment for reimbursement to the Buyer for all fees and expenses immediately upon written notice by the Buyer or the submission of an invoice by the Buyer. At Closing, the Company’s initial obligation with respect to this transaction is to reimburse Buyer’s legal expenses shall be $12,500.00 plus the cost of wire fees and $10,000.00 to J.H. Darbie & Co., Inc. and $2,000 to the Buyer for management expenses.

 

f.    Financial Information. The Company agrees to send or make available the following reports to the Buyer until the Buyer transfers, assigns, or sells all of the Securities:

(i) within ten (10) days after the filing with the SEC, a copy of its Annual Report on Form 10-K its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; (ii) within one (1) day after release, copies of all press releases issued by the Company or any of its Subsidiaries; and (iii) contemporaneously with the making available or giving to the shareholders of the Company, copies of any notices or other information the Company makes available or gives to such shareholders. For the avoidance of doubt, filing the documents required in (i) above via

 

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EDGAR or releasing any documents set forth in (ii) above via a recognized wire service shall satisfy the delivery requirements of this Section 4(f).

 

g.    Listing. The Company shall promptly secure the listing of the Conversion Shares upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as the Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Conversion Shares from time to time issuable upon conversion of the Note. The Company will obtain and, so long as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the OTC Pink, OTCQB or any equivalent replacement exchange, the Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York Stock Exchange (“NYSE”), or the NYSE American and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable. The Company shall promptly provide to the Buyer copies of any material notices it receives from the OTC Pink, OTCQB and any other exchanges or quotation systems on which the Common Stock is then listed regarding the continued eligibility of the Common Stock for listing on such exchanges and quotation systems. The Company shall pay any and all fees and expenses in connection with satisfying its obligation under this Section 4(g).

 

h.    Corporate Existence. So long as the Buyer beneficially owns the Note, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is listed for trading on the OTC Pink, OTCQB, Nasdaq, NasdaqSmallCap, NYSE or AMEX.

 

i.    No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.

 

j.    Failure to Comply with the 1934 Act. So long as the Buyer beneficially owns the Note, the Company shall comply with the reporting requirements of the 1934 Act; and the Company shall continue to be subject to the reporting requirements of the 1934 Act.

 

k.    Restriction on Activities. Commencing as of the date first above written, and until the sooner of the twelve (12) month anniversary of the date first written above or payment of the Note in full, or full conversion of the Note, the Company shall not, directly or

 

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indirectly, without the Buyer’s prior written consent, which consent shall not be unreasonably withheld: (a) change the nature of its business; (b) sell, divest, acquire, change the structure of any material assets other than in the ordinary course of business; or (c) solicit any offers for, respond to any unsolicited offers for, or conduct any negotiations with any other person or entity in respect of any variable rate debt transactions (i.e., transactions were the conversion or exercise price of the security issued by the Company varies based on the market price of the Common Stock) with a price per share below $0.10, whether a transaction similar to the one contemplated hereby or any other investment.

 

l.    Legal Counsel Opinions. Upon the request of the Buyer from to time to time, the Company shall be responsible (at its cost) for promptly supplying to the Company’s transfer agent and the Buyer a customary legal opinion letter of its counsel (the “Legal Counsel Opinion”) to the effect that the sale of Conversion Shares by the Buyer or its affiliates, successors and assigns is exempt from the registration requirements of the 1933 Act pursuant to Rule 144 (provided the requirements of Rule 144 are satisfied and provided the Conversion Shares are not then registered under the 1933 Act for resale pursuant to an effective registration statement) or other applicable exemption. Should the Company’s legal counsel fail for any reason to issue the Legal Counsel Opinion, the Buyer may (at the Company’s cost) secure another legal counsel to issue the Legal Counsel Opinion, and the Company will instruct its transfer agent to accept such opinion.

 

m.    Reserved.

 

n.    Breach of Covenants. The Company agrees that if the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of Default under Section 3.4 of the Note, the Company shall pay to the Buyer the Standard Liquidated Damages Amount in cash or in shares of Common Stock at the option of the Buyer, until such breach is cured, or with respect to Section 4(d) above, the Company shall pay to the Buyer the Standard Liquidated Damages Amount in cash or shares of Common Stock, at the option of the Buyer, upon each violation of such provision. If the Company elects to pay the Standard Liquidated Damages Amounts in shares of Common Stock, such shares shall be issued at the Conversion Price at the time of payment.

 

o.    Commitment Fee Shares. The Company shall pay to Buyer, as a commitment fee, Three Hundred Thousand and No/100 United States Dollars (US$300,000.00) (the “Commitment Fee”) by issuing to Buyer that number of shares of the Company’s Common Stock equal to such amount. It is agreed that the number of shares of Common Stock issuable to Buyer under this Section 4(o) shall be 400,000 (the “Commitment Fee Shares”). The Company shall instruct its transfer agent (the “Transfer Agent”) to issue two (2) certificates or book entry statements, representing the Commitment Fee Shares issuable to the Buyer immediately upon the Company’s execution of this Agreement, and shall cause its Transfer Agent to deliver such

 

19

 

 

certificate or book entry statement to Buyer within five (5) Business Days from the Effective Date. The Buyer shall never be in possession of an amount of Common Stock greater than 4.99% of the issued and outstanding Common Stock of the Company provided, however that this ownership restriction described in this Section may be waived by Buyer, in whole or in part, upon 61 days’ prior written notice. In the event such certificate representing the Commitment Fee Shares issuable hereunder shall not be delivered to the Buyer within said five (5) Business Day period, same shall be an immediate default under this Agreement and the other Transaction Documents. The Commitment Fee Shares and Warrant Shares, when issued, shall be deemed to be validly issued, fully paid, and non-assessable shares of the Company’s Common Stock. The Commitment Fee Shares and the Commitment Fee Warrants shall be deemed fully earned as of the Effective Date, regardless of the amount or number of Loans made hereunder.

 

(i)    Adjustments. It is the intention of the Company and Buyer that the Buyer shall be able to sell (if Buyer so elects, in Buyer’s sole and absolute discretion) the Commitment Fee Shares, and generate net proceeds (net of all brokerage commissions and other fees or charges payable by Buyer in connection with the sale thereof) from such sale equal to the Commitment Fee. The Buyer shall use its best efforts to sell the Commitment Fee Shares in the principal trading market of the Company’s Common Stock or otherwise, at any time in accordance with applicable securities laws. At any time the Buyer may elect during the period beginning on the date which is the six (6) month anniversary of the Closing Date and ending on the date which is the eighteen (18) month anniversary of the Closing Date (the “Adjustment Period”), the Buyer may deliver to the Company on a one time basis a reconciliation statement showing the net proceeds actually received by the Buyer from the sale of the Commitment Fee Shares (the “Sale Reconciliation”). If, as of the date of the delivery by Buyer of the Sale Reconciliation, the Buyer has not realized net proceeds from the sale of such Commitment Fee Shares equal to at least the Commitment Fee, as shown on the Sale Reconciliation, then the Company shall either pay in cash the applicable shortfall amount or immediately take all required action necessary or required in order to cause the issuance of additional shares of Common Stock to the Buyer in an amount equal to the applicable shortfall amount divided by the lowest trading price of the Common Stock in 15 trading day period prior to the date of the delivery of the Sale Reconciliation. In the event additional Common Stock is required to be issued as outlined above, the Company shall instruct its Transfer Agent to issue certificates or book entry statements representing such additional shares of Common Stock to the Buyer immediately subsequent to the Buyer’s notification to the Company that additional shares of Common Stock are issuable hereunder, and the Company shall in any event cause its Transfer Agent to deliver such certificates or book entry statements to Buyer within three (3) Business Days following the date Buyer notifies the Company that additional shares of Common Stock are to be issued hereunder. In the event such certificates or book entry statements representing such additional shares of Common Stock issuable hereunder shall not be delivered to the Buyer within said three (3) Business Day period, same shall be an immediate default under this Agreement and the Transaction Documents. Nothing herein contained shall be interpreted to in any way limit the net proceeds from the sale of the

 

20

 

 

Commitment Fee Shares which shall be generated by the Buyer. The Company’s obligation to pay the Commitment Fee contemplated by this Section 4(o) thru the sale of Commitment Fee Shares, shall be an obligation hereunder, secured by all transaction documents.

 

(ii)    Redemption. In the event that the Note has been repaid in full (including accrued and unpaid interest) on or prior to the Maturity Date (without extension), the Company shall have the right to redeem 200,000 the Commitment Fee Shares (as adjusted for stock splits, stock dividends or similar events) which were originally issued (the “Redeemable Commitment Fee Shares”) for an amount payable by the Company to the Buyer in cash of an aggregate of one dollar ($1.00). Upon Buyer’s receipt of such cash payment in accordance with the immediately preceding sentence, the Redeemable Commitment Fee Shares shall be immediately redeemed without any further action on the part of the Company or the Buyer. Notwithstanding the foregoing, in the event of a redemption pursuant hereto, the adjustments permitted pursuant to Section 4(0)(i) shall not reduce the amounts owing pursuant thereto or the shares to be issued in connection therewith.

 

5.    Reserved.

 

6.    Transaction Expense Amount. Upon Closing, the Company shall pay Buyer’s legal counsel $12,500 to cover the Buyer’s legal fees incurred in connection herewith (the “Transaction Expense Amount”) pursuant to Section 4(e). The Transaction Expense Amount shall be offset against the proceeds of the Note and shall be paid to Buyer upon the execution hereof.

 

7.    Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent to issue certificates, registered in the name of the Buyer or its nominee, for the Conversion Shares in such amounts as specified from time to time by the Buyer to the Company upon conversion of the Note in accordance with the terms thereof and for the Warrant Shares in such amounts as specified from time to time by the Buyer to the Company upon exercise of the Warrant in accordance with the terms thereof (the “Irrevocable Transfer Agent Instructions”). In the event that the Company proposes to replace its transfer agent, the Company shall provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Company and the Company. Prior to registration of the Conversion Shares and the Warrant Shares under the 1933 Act or the date on which the Conversion Shares and the Warrant Shares may be sold pursuant to Rule 144 or other applicable exemption without any restriction as to the number of Securities as of a particular date that can then be immediately sold, all such certificates shall bear the restrictive legend specified in Section 2(g) of this Agreement. The Company warrants that: (i) no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section,

 

21

 

 

and stop transfer instructions to give effect to Section 2(f) hereof (in the case of the Conversion Shares, prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 or other applicable exemption without any restriction as to the number of Securities as of a particular date that can then be immediately sold and in the case of the Warrant Shares prior to registration of the Warrant Shares under the 1933 Act or the date on which the Warrant Shares may be sold pursuant to Rule 144 or other applicable exemption without any restriction as to the number of Securities as of a particular date that can then be immediately sold), will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Note; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in transferring (or issuing)(electronically or in certificated form) any certificate for Conversion Shares or the Warrant Shares under the 1933 Act or the date on which the Conversion Shares are to be issued to the Buyer upon conversion of or otherwise pursuant to the Note or the Warrant Shares are to be issued to the Buyer upon exercise of the Warrant as and when required by the Note and this Agreement; and (iii) it will not fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement or any Warrant Shares issued to the Buyer upon exercise of or otherwise pursuant to the Warrant as and when required by the Warrant. Nothing in this Section shall affect in any way the Buyer’s obligations and agreement set forth in Section 2(g) hereof to comply with all applicable prospectus delivery requirements, if any, upon re-sale of the Securities. If the Buyer provides the Company, at the cost of the Company, with (i) an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act and such sale or transfer is effected or (ii) the Buyer provides reasonable assurances that the Securities can be sold pursuant to Rule 144 or other applicable exemption, the Company shall permit the transfer, and, in the case of the Conversion Shares and the Warrant Shares, promptly instruct its transfer agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required.

 

22

 

 

8.    CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATIONS TO SELL. The obligation of the Company hereunder to issue and sell the Note to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

 

a.    The Buyer shall have executed this Agreement and delivered the same to the Company.

 

b.    The Buyer shall have delivered the Purchase Price in accordance with Section 1(b) above.

 

c.    The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.

 

d.    No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

 

9.    CONDITIONS PRECEDENT TO THE BUYER’S OBLIGATION TO PURCHASE. The obligation of the Buyer hereunder to purchase the Note and the Warrant at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:

 

a.    The Company shall have executed this Agreement and delivered the same to the Buyer.

 

b.    The Company shall have delivered to the Buyer the duly executed Note.

 

c.    The Company shall have delivered to the Buyer the duly executed Warrant (in such denominations as the Buyer shall request) and in accordance with Section 1(b) above.

 

d.    The Company shall have delivered to the Buyer the Commitment Fee Shares in two (2) book entry statements in accordance with Section 1(b) and Section 4(o) above.

 

23

 

 

e.    The Company shall have delivered to the Buyer a duly executed security agreement in a form acceptable to Buyer.

 

f.    The Irrevocable Transfer Agent Instructions, in form and substance satisfactory to the Buyer, shall have been delivered to and acknowledged in writing by the Company’s Transfer Agent.

 

g.    The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Buyer shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer including, but not limited to certificates with respect to the Company’s Certificate of Incorporation, By-laws and Board of Directors’ resolutions relating to the transactions contemplated hereby.

 

h.    No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

 

i.    No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934 Act reporting obligations.

 

j.    The Conversion Shares and the Warrant Shares shall have been authorized for quotation on the OTC Pink, OTCQB or any similar quotation system and trading in the Common Stock on the OTC Pink, OTCQB or any similar quotation system shall not have been suspended by the SEC or the OTC Pink, OTCQB or any similar quotation system.

 

k.    The Buyer shall have received an officer’s certificate in a form acceptable to Buyer, dated as of the Closing Date.

 

10.    GOVERNING LAW; MISCELLANEOUS.

 

a.    Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Wyoming without regard to principles of conflicts of

 

24

 

 

laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement, the Note or any other agreement, certificate, instrument or document contemplated hereby shall be brought only in the state courts located in the State of New York or in the federal courts located in the State of New York. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER TRANSACTION DOCUMENT OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

b.    Counterparts; Signatures by Facsimile. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

 

c.    Construction; Headings. This Agreement shall be deemed to be jointly drafted by the Company and the Buyer and shall not be construed against any person as the drafter hereof. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.

 

d.    Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or

 

25

 

 

unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

 

e.    Entire Agreement; Amendments. This Agreement, the Note, the Warrant and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the Buyer.

 

f.    Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, email, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by email or facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

 

If to the Company, to:

 

Novaccess Global Inc.

8834 Mayfield Road

Suite C

Chesterland, OH 44026

Attn: CEO

E-mail:                                   

 

If to the Buyer:

 

AJB Capital Investments LLC

4700 Sheridan Street, Suite J

Hollywood, FL 33021

Attn:                                       

Email:                                     

 

26

 

 

Each party shall provide notice to the other party of any change in address.

 

g.    Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, subject to Section 2(f), the Buyer may assign its rights hereunder to any person that purchases Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company.

 

h.    Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

 

i.    Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder not withstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

 

j.    Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

k.    No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

 

l.    Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.

 

27

 

 

m.    Publicity. The Company, and the Buyer shall have the right to review a reasonable period of time before issuance of any press releases, SEC, OTCQB or FINRA filings, or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of the Buyer, to make any press release or SEC, OTCQB (or other applicable trading market) or FINRA filings with respect to such transactions as is required by applicable law and regulations (although the Buyer shall be consulted by the Company in connection with any such press release prior to its release and shall be provided with a copy thereof and be given an opportunity to comment thereon).

 

n.    Indemnification. In consideration of the Buyer’s execution and delivery of this Agreement and acquiring the Securities hereunder, and in addition to all of the Company’s other obligations under this Agreement or the Note, the Company shall defend, protect, indemnify and hold harmless the Buyer and its stockholders, partners, members, officers, directors, employees and direct or indirect investors and any of the foregoing persons’ agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in this Agreement or the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in this Agreement or the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby or (c) any cause of action, suit or claim brought or made against such Indemnitee by a third party (including for these purposes a derivative action brought on behalf of the Company) and arising out of or resulting from (i) the execution, delivery, performance or enforcement of this Agreement or the Note or any other agreement, certificate, instrument or document contemplated hereby or thereby, (ii) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities, or (iii) the status of the Buyer or holder of the Securities as an investor in the Company pursuant to the transactions contemplated by this Agreement, other than in the case of this clause (c), as result of the gross negligence, willful misconduct or violation of law by the Buyer or any Indemnitee. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities that is permissible under applicable law

 

 

 

[signature page follows]

 

28

 

 

IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.

 

 

 

NOVACCESGLOBAL INC.

 

By: /s/ Dwain Irwin                      

Name: Dwain Irwin

Title: Chief Executive Officer

 

 

 

AJB CAPITAL INVESTMENTS, LLC

 

 

By: /s/ Ari Blaine                           

Name: Ari Blaine

Title: Partner

 

 

 

29

 

 

Exhibit A

 

Form of Make Whole Notice

 

COMMITMENT FEE SHARES MAKE WHOLE NOTICE

 

Reference is made to that certain Securities Purchase Agreement (the “Purchase Agreement”), dated as of August 20, 2021 among Novaccess Global Inc., a Colorado corporation (the “Borrower”) and AJB Capital Investments, LLC, a Delaware limited liability company (the “Buyer”). Pursuant to Section 4(o)(i) of the Purchase Agreement, the undersigned hereby directs you to issue that number of shares of Common Stock constituting the “Make Whole Amount” as set forth below, of the Borrower, within two days of the date hereof or the next succeeding business day. No fee will be charged to the Buyer for any such issuance, except for transfer taxes, if any.

 

Box Checked as to applicable instructions:

 

[ ]     The Borrower shall electronically transmit the Common Stock issuable pursuant to this Commitment Fee Shares Make Whole Notice to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

 

 

Name of DTC Prime Broker:

Account Number:

 

[ ]     The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

 

 

 

Make Whole Amount (number of shares of common stock to be issued)                          

 

 

 

AJB Capital Investments, LLC

 

 

By:                                                          

Name:

Title:

Date:

 

 

 

 

30

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