Document:

f8k020314ex10i_codesmart.htm

Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of January 30, 2014, by and between CodeSmart Holdings, Inc., a Florida corporation, with headquarters located at  275 7th Avenue, 7th Floor, New York, NY 10001  (the “Company”), and ____________, a _________ corporation, with its address at _______________ (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 9% convertible note of the Company, in the form attached hereto as Exhibit A in the aggregate principal amount of $52,631.57 with a 5% original issue discount (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 into shares of common stock, $0.0001 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

NOW THEREFORE, the Company and the Buyer severally (and not jointly) hereby agree as follows:

1.           Purchase and Sale of Note.

a.           Purchase of Note.  On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees to purchase from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature pages hereto.

b.           Form of Payment.  On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note to be issued and sold to it at the Closing (as defined below) (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 in the principal amount equal to the Purchase Price as is set forth immediately below the Buyer’s name on the signature pages hereto, and (ii) the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer, against delivery of such Purchase Price.

 

  

 

  

c.           Closing Date.  The date and time of the issuance and sale of the First Note pursuant to this Agreement (the “Closing Date”) shall be on or about January 30, 2014, or such other mutually agreed upon time.  The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.

 

2.           Buyer’s Representations and Warranties.  The Buyer represents and warrants to the Company that:

a.           Investment Purpose.  As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note, such shares of Common Stock being collectively referred to herein as the “Conversion Shares” and, collectively with the Note, the “Securities”) 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.

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 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 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 remain 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.

 

  

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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 sale or re-sale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities laws, and 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 Buyer, 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 (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 Buyer, 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 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.

g.           Legends.  The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Conversion 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.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

  

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The legend set forth above shall be removed and the Company shall issue a certificate 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 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) 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, within 2 business days, it will be considered an Event of Default under 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 a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature pages hereto

j.           Trading Activities.  Neither the Buyer nor its affiliates has an open short position in the Common Stock of the Company and the Buyer hereby agrees that it shall not, and that it will cause its affiliates not to, engage in any short sales (as defined in Rule 200 of Regulation SHO under the 1934 Act) of or hedging transactions with respect to the common stock of the Company

 

  

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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, if any, is a corporation 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.

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.           Issuance of Shares.  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.

d.           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.  The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.

e.           No Conflicts.  The execution, delivery and performance of this Agreement, the Note 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).  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 Over-the-Counter Quotations Bureau (the “OTCQB”) and does not reasonably anticipate that the Common Stock will be delisted by the OTCQB in the foreseeable future, nor are the Company’s securities “chilled” by FINRA.  The Company and its subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

 

  

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f.           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(f) 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.

g.          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 respective 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.

h.          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 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.

 

i.           Title to Property.  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 except such as are described in Schedule 3(i) 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.

 

  

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j.           Breach of Representations and Warranties by the Company.  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, it will be considered an Event of default under the Note.

4.           COVENANTS.

a.           Expenses.  At the Closing, the Company shall reimburse Buyer for 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, 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. The Company’s obligation with respect to this transaction is to reimburse Buyer’ expenses shall be $2,500 in legal fees, which shall be deduced from the Note.

b.          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 OTCQB or any equivalent replacement exchange, the Nasdaq Stock Market (“Nasdaq”), the New York Stock Exchange (“NYSE”), or the NYSE MKT LLC (“MKT”) 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 notices it receives from the 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.

c.           Corporate Existence.  So long as the Buyer beneficially owns any 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 OTCQB, Nasdaq, NYSE or MKT.

 

  

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d.          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.

e.           Breach of Covenants.  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 the Note.

5.           Governing Law; Miscellaneous.

a.           Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws.  Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state and county 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.  The Company and Buyer waive trial by jury.  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.

 

  

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

e.           Entire Agreement; Amendments.  This Agreement 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 majority in interest of 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, 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 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:

CodeSmart Holdings, Inc.

275 7th Avenue

7th Floor

New York, NY 10001

Attn:  Ira Shapiro, CEO

 

If to the Buyer:

________________

________________

________________

Attn: ________________

 

  

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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, 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 notwithstanding 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.

 

  

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

CodeSmart Holdings, Inc.

By:________________________________

Name: Ira Shapiro

Title: Chief Executive Officer

 

[INVESTOR NAME]

By:                                                                           

Name:

Title:

 

AGGREGATE SUBSCRIPTION AMOUNT:

Aggregate Principal Amount of Note:

Aggregate Purchase Price:

  

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Schedule 3(f)

Litigation

 

None.

  

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Schedule 3(i)

Title to Property

 

On December 16, 2013 and January 17, 2014, the Company sold two senior convertible promissory notes of its respective principal amount of $175,000 (the “Secured Notes”) to accredited investors (the “Note Investors”) pursuant to two Securities Purchase Agreements, dated December 13, 2013 and January 10, 2014, respectively. The Company granted the Note Investors a first priority security interest on all the Company’s assets.

 

 

13ex10_1.htm

Exhibit 10.1

 

 

 

RESPECT YOUR UNIVERSE, INC.

 

 

 

PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT

(UNITS)

 

INSTRUCTIONS TO PURCHASER

 

 

	
1.

	
All purchasers must complete all the information on page 12 and sign where indicated.

 

	
2.

	
If you are resident in Canada, you must complete and sign Exhibit A “Canadian Investor Questionnaire” that starts on page 14. The purpose of the form is to determine whether you meet the standards for participation in a private placement under applicable Canadian securities law (National Instrument 45-106).

 

	
3.

	
If you are resident in the United States, you must complete and sign Exhibit B “United States Accredited Investor Questionnaire” that starts on page 16.

 

	
4.

	
If the subscriber is a corporation, partnership, trust or entity other than an individual or you are a portfolio manager, then complete and sign Exhibit E “Corporate Placee Registration Form” (Form 4C) that starts on page 26.  If you have previously submitted this form to the TSX Venture Exchange and there have been no changes to its content, then please check the box to that effect on page 12.

 

	
4.

	
If you are paying for your subscription with funds drawn from a Canadian bank, you may pay by certified cheque or bank draft drawn on a Canadian chartered bank or by wire transfer to legal counsel for the Company pursuant to the wiring instructions set out in Exhibit C that is on page 18. If you are paying for your subscription with funds drawn on any source other than a Canadian chartered bank, you may only pay by wire transfer to the legal counsel for the Company pursuant to the wiring instructions set out in Exhibit C that is on page 18. The Subscriber irrevocably authorizes and directs such lawyers to immediately deliver the funds to the Company upon receipt of the funds from the purchaser.

 

  

 

  

 

NONE OF THE SECURITIES TO WHICH THIS PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT (THE “AGREEMENT”) RELATES HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (AS DEFINED HEREIN) EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

 

IF YOU ARE A RESIDENT OF CANADA, UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS FOUR MONTHS AND A DAY AFTER THE DISTRIBUTION DATE.

 

WITHOUT PRIOR WRITTEN APPROVAL OF THE TSX VENTURE EXCHANGE AND COMPLIANCE WITH ALL APPLICABLE SECURITIES LEGISLATION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE TRADED ON OR THROUGH THE FACILITIES OF THE TSX VENTURE EXCHANGE OR OTHERWISE IN CANADA OR TO OR FOR THE BENEFIT OF A CANADIAN RESIDENT UNTIL THE DATE THAT IS FOUR MONTHS AND A DAY AFTER THE DISTRIBUTION DATE.

 

CONFIDENTIAL

PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT

(Subscribers Resident in the United States, Canada, and International Jurisdictions)

 

	
TO:

	
Respect Your Universe, Inc. (the “Company”)

	
  

	
818 North Russell St.

	
  

	
Portland, OR 97227

 

PURCHASE OF UNITS

 

	
1.

	
Subscription

 

1.1                           On the basis of the representations and warranties and subject to the terms and conditions set forth herein, the undersigned (the “Subscriber”) hereby irrevocably subscribes for and agrees to purchase units (each, a ”Unit”) of the Company at a price of US$0.10 per Unit (such subscription and agreement to purchase being the “Subscription”), for an aggregate purchase price as set out on the signature page of this Subscription Agreement (the “Subscription Proceeds”) which is tendered herewith, on the basis of the representations and warranties and subject to the terms and conditions set forth herein.

 

1.2                          Each Unit will consist of one common share in the capital of the Company (each, a “Share”) and one common share purchase warrant (each warrant, a “Warrant”) subject to adjustment. Each Warrant shall be non-transferable. Each Warrant shall entitle the holder thereof to purchase one common share in the capital of the Company (each, a “Warrant Share”), as presently constituted, for a period of three years commencing from the Closing Date (defined herein) at an exercise price of US$0.25 per Warrant Share.  Certificates representing the Warrants will be in the form attached as Exhibit D hereto. The Shares, Warrants and Warrant Shares are referred to herein as the “Securities”.

 

1.3                           The Company hereby agrees to sell, on the basis of the representations and warranties and subject to the terms and conditions set forth herein, the Units to the Subscriber.  Subject to the terms hereof, the Subscription Agreement will be effective upon its acceptance by the Company.

 

1.4                          The Subscriber acknowledges that a finder’s fee or a broker’s commission may be paid by the Company in connection with the Subscription.

 

  

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1.5                         Unless otherwise provided, all dollar amounts referred to in this Subscription Agreement are in lawful money of the United States of America.

 

	
2.

	
Registration

 

2.1                         As used in this Agreement, the following terms shall have the following meanings.

 

	
  

	
(a)

	
“Holder” shall mean any person owning Registrable Securities (as defined below);

 

	
  

	
(b)

	
“register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the United States Securities Act of 1933, as amended (the “1933 Act”) and the declaration or order of effectiveness of such registration statement or document;

 

	
  

	
(c)

	
“Registrable Securities” shall mean the Shares and the Warrant Shares, provided, however, that securities shall only be treated as Registrable Securities if and only for so long as they (A) have not been disposed of pursuant to a registration statement declared effective by the SEC; (B) have not been sold in a transaction exempt from the registration and prospectus delivery requirements of the 1933 Act so that all transfer restrictions and restrictive legends with respect there to are removed upon the consummation of such sale; and (C) may not be disposed of under Rule 144 under the 1933 Act without restriction;

 

	
  

	
(d)

	
“SEC” means the United States Securities and Exchange Commission;

 

	
  

	
(e)

	
“SEC Guidance” means (i) any publicly-available written or oral guidance, requirements or notice of the staff of the SEC, and (ii) the 1933 Act; and

 

	
  

	
(f)

	
“Rule 415” means Rule 415 promulgated by the SEC pursuant to the 1933 Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same purpose and effect as such Rule.

 

2.2                         The Company will use its commercially reasonable efforts to file a registration statement (the “Registration Statement”), ninety (90) days after the closing of this Offering to register all or such portion of the Registrable Securities as permitted by SEC Guidance for an offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement filed pursuant to this Section 2.2 shall be on Form S-1, except if the Company is not then eligible to register for resale the Registrable Securities on Form S-1, in which case such registration shall be on another appropriate form.

 

2.3                        Whenever required under this Agreement to register any Registrable Securities, the Company shall, as expeditiously as reasonably possible, use reasonable efforts to:

 

	
  

	
(a)

	
cause such registration statement to become effective, and cause such registration statement to remain effective until the earliest to occur of:

 

	
  

	
(i)

	
such date as the sellers of Registrable Securities (the “Selling Holders”) have completed the distribution described in the registration statement, and

 

	
  

	
(ii)

	
such time that all of such Registrable Securities are eligible for resale by reason of Rule 144 under the 1933 Act;

 

	
  

	
(b)

	
during the period that such registration statement is required to be maintained hereunder, file such post-effective amendments and supplements there to as may be required by the 1933 Act and the rules and regulations there under or otherwise to ensure that the registration statement does not contain any untrue statement of material fact or omit to state a fact required to be stated there in or necessary to make the statements contained therein, in light of the circumstances under which they are made, not misleading; and

 

  

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(c)

	
prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the provisions of the 1933 Act with respect to the disposition of all securities covered by such registration statement.

 

2.4                        It shall be a condition precedent to the obligation of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any Holder that such Holder shall furnish to the Company such information regarding the Holder, the Registrable Securities held by the Holder, and the intended method of disposition of such securities as shall be reasonably required by the Company to effect the registration of such Holder’s Registrable Securities.

 

	
3.

	
Payment

 

3.1                        The Subscription Proceeds must accompany this Subscription and shall be wired to the Company’s lawyers pursuant to wiring instructions attached hereto as Exhibit C or sent directly to the Company. If the funds are wired to the Company’s lawyers, those lawyers are authorized by the Subscriber to immediately deliver the funds to the Company even if the offering of the Units to the Subscriber has not been consummated.

 

3.2                        The Subscriber acknowledges and agrees that this Subscription Agreement, the Subscription Proceeds and any other documents delivered in connection herewith will be held on behalf of the Company. In the event that this Subscription Agreement is not accepted by the Company for whatever reason, which the Company expressly reserves the right to do, within 45 days of the delivery of an executed Subscription Agreement by the Subscriber, this Subscription Agreement, the Subscription Proceeds (without interest thereon) and any other documents delivered in connection herewith will be returned to the Subscriber at the address of the Subscriber as set forth in this Subscription Agreement.

 

3.3                         Where the Subscription Proceeds are paid to the Company, the Company is entitled to treat such Subscription Proceeds as an interest free loan to the Company until such time as the Subscription is accepted and the certificates representing the Securities have been issued to the Subscriber.

 

	
4.

	
Documents Required from Subscriber

 

4.1                        The Subscriber must complete, sign and return to the Company the following documents:

 

	
  

	
(a)

	
an executed copy of this Subscription Agreement;

 

	
  

	
(b)

	
if resident in Canada, the Canadian Investor Questionnaire in the form attached as Exhibit A (the ”CDN Questionnaire”);

 

	
  

	
(c)

	
if resident in the United States, an Untied States Accredited Investor Questionnaire in the form attached as Exhibit B (together with the CDN Questionnaire, the “Questionnaires”); and

 

	
  

	
(d)

	
if applicable, a completed Corporate Placee Registration Form.

 

4.2                       The Subscriber shall complete, sign and return to the Company as soon as possible, on request by the Company, any additional documents, questionnaires, notices and undertakings as may be required by any regulatory authorities and applicable law.

 

4.3                        Both parties to this Subscription Agreement acknowledge and agree that Clark Wilson LLP has acted as counsel only to the Company and is not protecting the rights and interests of the Subscriber. The Subscriber acknowledges and agrees that the Company and Clark Wilson LLP have given the Subscriber the opportunity to seek, and have recommended that the Subscriber obtain, independent legal advice with respect to the subject matter of this Subscription Agreement and, further, the Subscriber hereby represents and warrants to the Company and Clark Wilson LLP that the Subscriber has sought independent legal advice or waives such advice.

 

  

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5.

	
Closing

 

5.1                        Closing of the purchase and sale of the Units shall occur on such date as may be determined by the Company in its sole discretion (the “Closing Date”). The Subscriber acknowledges that Securities may be issued to other subscribers under this offering (the “Offering”) before or after the Closing Date. The Company, may, at its discretion, elect to close the Offering in one or more closings, in which event the Company may agree with one or more subscribers (including the Subscriber hereunder) to complete delivery of the Securities to such subscriber(s) against payment therefore at any time on or prior to the Closing Date.

 

5.2                       The Subscriber acknowledges that the certificates representing the Securities will be available for delivery upon Closing provided that the Subscriber has satisfied the requirements of Section 3 hereof and the Company has accepted this Subscription Agreement.

 

	
6.

	
Acknowledgements and Agreements of Subscriber

 

6.1                        The Subscriber acknowledges and agrees that:

 

	
  

	
(a)

	
none of the Securities have been registered under the 1933 Act, or under any state securities or “blue sky” laws of any state of the United States, and, unless so registered, may not be offered or sold in the United States or, directly or indirectly, to U.S. Persons, as that term is defined in Regulation S under the 1933 Act (“Regulation S”), except in accordance with the provisions of Regulation S, pursuant to an effective registration statement under the 1933 Act, or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act and in each case only in accordance with applicable securities laws;

 

	
  

	
(b)

	
the Subscriber acknowledges that the Company has not undertaken, and will have no obligation, to register any of the Securities under the 1933 Act or any other securities legislation;

 

	
  

	
(c)

	
by completing the CDN Questionnaire, the Subscriber is representing and warranting that the Subscriber satisfies one of the categories of prospectus exemptions provided in National Instrument 45-106 (“NI 45-106”) adopted by the British Columbia Securities Commission (the ”BCSC”) and other provincial securities commissions;

 

	
  

	
(d)

	
the decision to execute this Subscription Agreement and purchase the Securities agreed to be purchased hereunder has not been based upon any oral or written representation as to fact or otherwise made by or on behalf of the Company and such decision is based entirely upon a review of any public information which has been filed by the Company with the SEC and/or the BCSC in compliance, or intended compliance, with applicable securities legislation;

 

	
  

	
(e)

	
the Subscriber and the Subscriber’s advisor(s) have had a reasonable opportunity to ask questions of and receive answers from the Company in connection with the distribution of the Securities hereunder, and to obtain additional information, to the extent possessed or obtainable without unreasonable effort or expense, necessary to verify the accuracy of the information about the Company;

 

	
  

	
(f)

	
the books and records of the Company were available upon reasonable notice for inspection, subject to certain confidentiality restrictions, by the Subscriber during reasonable business hours at its principal place of business, and all documents, records and books in connection with the distribution of the Securities hereunder have been made available for inspection by the Subscriber, the Subscriber’s lawyer and/or advisor(s);

 

  

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(g)

	
the Subscriber will indemnify and hold harmless the Company and, where applicable, its directors, officers, employees, agents, advisors and shareholders, from and against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against any claim, lawsuit, administrative proceeding or investigation whether commenced or threatened) arising out of or based upon any representation or warranty of the Subscriber contained in this Subscription Agreement, the Questionnaires or in any document furnished by the Subscriber to the Company in connection herewith being untrue in any material respect or any breach or failure by the Subscriber to comply with any covenant or agreement made by the Subscriber to the Company in connection therewith;

 

	
  

	
(h)

	
the Company will refuse to register any transfer of the Securities not made in accordance with the provisions of Regulation S, pursuant to an effective registration statement under the 1933 Act or pursuant to an available exemption from the registration requirements of the 1933 Act and in accordance with any other applicable securities laws;

 

	
  

	
(i)

	
the Subscriber has been advised to consult the Subscriber’s own legal, tax and other advisors with respect to the merits and risks of an investment in the Securities and with respect to applicable resale restrictions, and it is solely responsible (and the Company is not in any way responsible) for compliance with:

 

	
  

	
(i)

	
any applicable laws of the jurisdiction in which the Subscriber is resident in connection with the distribution of the Securities hereunder, and

 

	
  

	
(ii)

	
applicable resale restrictions;

 

	
  

	
(j)

	
neither the SEC nor any other securities commission or similar regulatory authority has reviewed or passed on the merits of any of the Securities and the Shares;

 

	
  

	
(k)

	
no documents in connection with the sale of the Securities hereunder have been reviewed by the SEC or any securities administrators;

 

	
  

	
(l)

	
there is no government or other insurance covering any of the Securities; and

 

	
  

	
(m)

	
this Subscription Agreement is not enforceable by the Subscriber unless it has been accepted by the Company.

 

	
7.

	
Representations, Warranties and Covenants of the Subscriber

 

7.1                        The Subscriber hereby represents and warrants to and covenants with the Company (which representations, warranties and covenants shall survive the Closing) that:

 

	
  

	
(a)

	
the Subscriber (i) has adequate net worth and means of providing for its current financial needs and possible personal contingencies, (ii) has no need for liquidity in this investment, (iii) is able to bear the economic risks of an investment in the Securities for an indefinite period of time, and (iv) can afford the complete loss of such investment;

 

	
  

	
(b)

	
if applicable, all information contained in the Questionnaires is complete and accurate and may be relied upon by the Company, and the Subscriber will notify the Company immediately of any material change in any such information occurring prior to the closing of the purchase of the Units;

 

	
  

	
(c)

	
the Subscriber is purchasing the Units for its own account for investment purposes only and not for the account of any other person and not for distribution, assignment or resale to others, and no other person has a direct or indirect beneficial interest is such Securities, and the Subscriber has not subdivided his interest in the Securities with any other person;

 

  

- 6 -

  

 

	
  

	
(d)

	
the Subscriber (i) is able to fend for itself in the Subscription; (ii) has such knowledge and experience in business matters as to be capable of evaluating the merits and risks of its prospective investment in the Securities; and (iii) has the ability to bear the economic risks of its prospective investment and can afford the complete loss of such investment;

 

	
  

	
(e)

	
the Subscriber is aware that an investment in the Company is speculative and involves certain risks, including the possible loss of the investment;

 

	
  

	
(f)

	
the Subscriber has received and carefully read this Subscription Agreement;

 

	
  

	
(g)

	
the Subscriber has made an independent examination and investigation of an investment in the Securities and the Company and has depended on the advice of its legal and financial advisors and agrees that the Company will not be responsible in anyway whatsoever for the Subscriber’s decision to invest in the Securities and the Company;

 

	
  

	
(h)

	
the Subscriber has the requisite knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the investment in the Securities and the Company and the Subscriber is providing evidence of such knowledge and experience in these matters through the information requested in the Questionnaires;

 

	
  

	
(i)

	
the Subscriber understands and agrees that the Company and others will rely upon the truth and accuracy of the acknowledgements, representations and agreements contained in this Subscription Agreement and the Questionnaires and agrees that if any of such acknowledgements, representations and agreements are no longer accurate or have been breached, it shall promptly notify the Company;

 

	
  

	
(j)

	
the Subscriber has the legal capacity and competence to enter into and execute this Subscription Agreement and to take all actions required pursuant hereto and, if the Subscriber is a corporation, it is duly incorporated and validly subsisting under the laws of its jurisdiction of incorporation and all necessary approvals by its directors, shareholders and others have been obtained to authorize execution and performance of this Subscription Agreement on behalf of the Subscriber;

 

	
  

	
(k)

	
the entering into of this Subscription Agreement and the transactions contemplated hereby do not result in the violation of any of the terms and provisions of any law applicable to, or, if applicable, the constating documents of, the Subscriber or of any agreement, written or oral, to which the Subscriber may be a party or by which the Subscriber is or may be bound;

 

	
  

	
(l)

	
the Subscriber has duly executed and delivered this Subscription Agreement and it constitutes a valid and binding agreement of the Subscriber enforceable against the Subscriber;

 

	
  

	
(m)

	
the Subscriber is not an underwriter of, or dealer in, the Shares, nor is the Subscriber participating, pursuant to a contractual agreement or otherwise, in the distribution of the Securities;

 

	
  

	
(n)

	
the Subscriber is not aware of any advertisement of any of the Securities and is not acquiring the Securities as a result of any form of general solicitation or general advertising including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising;

 

	
  

	
(o)

	
no person has made to the Subscriber any written or oral representations:

 

	
  

	
(i)

	
that any person will resell or repurchase any of the Securities;

 

  

- 7 -

  

 

	
  

	
(ii)

	
that any person will refund the purchase price of any of the Securities; or

 

	
  

	
(iii)

	
as to the future price or value of any of the Securities;

 

	
  

	
(p)

	
if the Subscriber is resident outside of United States:

 

	
  

	
(i)

	
the Subscriber is not a U.S. Person (as defined in Regulation S), is outside the United States when receiving and executing this Subscription Agreement and is acquiring the Units as principal for its own account, as applicable, for investment purposes only, and not with a view to, or for, resale, distribution or fractionalization thereof, in whole or in part, and no other person has a direct or indirect beneficial interest in such Securities;

 

	
  

	
(ii)

	
None of the Securities may be offered or sold to a U.S. Person or for the account or benefit of a U.S. Person (other than a distributor) prior to the end of the Distribution Compliance Period (as defined below);

 

	
  

	
(iii)

	
the statutory and regulatory basis for the exemption claimed for the offer and issuance of the Securities, although in technical compliance with Regulation S, would not be available if the offering is part of a plan or scheme to evade the registration provisions of the U.S. Securities Act;

 

	
  

	
(iv)

	
the Subscriber is acquiring the Shares as principal for investment purposes only and not with a view to resale or distribution and, in particular, the undersigned has no intention to distribute, either directly or indirectly, any of the Shares in the United States or to U.S. Persons;

 

	
  

	
(v)

	
the undersigned understands and agrees that offers and sales of any of the Securities prior to the expiration of a period of six months after the date of original issuance of the Shares (the six month period hereinafter referred to as the “Distribution Compliance Period”) shall only be made in compliance with the safe harbor provisions set forth in Regulation S, pursuant to the registration provisions of the U.S. Securities Act or an exemption therefrom, and that all offers and sales after the Distribution Compliance Period shall be made only in compliance with the registration provisions of the U.S. Securities Act or an exemption therefrom and in each case only in accordance with applicable state securities laws;

 

	
  

	
(vi)

	
the undersigned acknowledges that it has not acquired the Shares as a result of, and will not itself engage in, any “directed selling efforts” (as defined in Regulation S under the U.S. Securities Act) in the United States in respect of any of the Securities which would include any activities undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for the resale of any of the Securities; provided, however, that the undersigned may sell or otherwise dispose of any of the Securities pursuant to registration of any of the Securities pursuant to the U.S. Securities Act of 1933 and any applicable state securities laws or under an exemption from such registration requirements and as otherwise provided herein;

 

	
  

	
(vii)

	
the Subscriber agrees that the Securities will bear a legend, in addition to any other legend required by this agreement, in substantially the following form:

 

NONE OF THE SECURITIES TO WHICH THIS SUBSCRIPTION AGREEMENT RELATES HAVE BEEN REGISTERED UNDER THE 1933 ACT OR ANY U.S. STATE SECURITIES LAWS AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OR TO U.S. PERSONS (AS DEFINED HEREIN) EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT.

 

  

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(viii)

	
the Subscriber is knowledgeable of, or has been independently advised as to, the applicable laws of the securities regulators having application in the jurisdiction in which the Subscriber is resident (the “International Jurisdiction”) which would apply to the offer and sale of the Securities,

 

	
  

	
(ix)

	
the Subscriber is purchasing the Securities pursuant to exemptions from prospectus or equivalent requirements under applicable laws or, if such is not applicable, the Subscriber is permitted to purchase the Securities under the applicable laws of the securities regulators in the International Jurisdiction without the need to rely on any exemptions,

 

	
  

	
(x)

	
the applicable laws of the authorities in the International Jurisdiction do not require the Company to make any filings or seek any approvals of any kind whatsoever from any securities regulator of any kind whatsoever in the International Jurisdiction in connection with the offer, issue, sale or resale of any of the Securities,

 

	
  

	
(xi)

	
the purchase of the Securities by the Subscriber does not trigger:

 

	
  

	
A.

	
any obligation to prepare and file a prospectus or similar document, or any other report with respect to such purchase in the International Jurisdiction, or

 

	
  

	
B.

	
any continuous disclosure reporting obligation of the Company in the International Jurisdiction, and

 

	
  

	
(xii)

	
the Subscriber will, if requested by the Company, deliver to the Company a certificate or opinion of local counsel from the International Jurisdiction which will confirm the matters referred to in subparagraphs (ii), (iii) and (iv) above to the satisfaction of the Company, acting reasonably.

 

7.2                        In this Subscription Agreement, the term “U.S. Person” shall have the meaning ascribed thereto in Regulation S promulgated under the 1933 Act and for the purpose of the Subscription Agreement includes any person in the United States.

 

	
8.

	
Representations and Warranties will be Relied Upon by the Company

 

8.1                        The Subscriber acknowledges that the representations and warranties contained herein, and in the Questionnaires are made by it with the intention that such representations and warranties may be relied upon by the Company and its legal counsel in determining the Subscriber’s eligibility to purchase the Securities under applicable securities legislation, or (if applicable) the eligibility of others on whose behalf it is contracting hereunder to purchase the Securities under applicable securities legislation. The Subscriber further agrees that by accepting delivery of the certificates representing the Securities on the Closing Date, it will be representing and warranting that the representations and warranties contained herein and in the Questionnaires are true and correct as at the Closing Date with the same force and effect as if they had been made by the Subscriber on the Closing Date and that they will survive the purchase by the Subscriber of the Securities and will continue in full force and effect notwithstanding any subsequent disposition by the Subscriber of such Securities.

 

  

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9.

	
Acknowledgement and Waiver

 

9.1                        The Subscriber has acknowledged that the decision to purchase the Securities was solely made on the basis of publicly available information. The Subscriber hereby waives, to the fullest extent permitted by law, any rights of withdrawal, rescission or compensation for damages to which the Subscriber might be entitled in connection with the distribution of any of the Securities.

 

	
10.

	
Legending of Subject Securities

 

10.1                      The Subscriber hereby acknowledges that that upon the issuance thereof, and until such time as the same is no longer required under the applicable securities laws and regulations, the certificates or other document representing any of the Securities will bear a legend in substantially the following form:

 

	
  

	
“NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.”

 

“WITHOUT PRIOR WRITTEN APPROVAL OF THE TSX VENTURE EXCHANGE AND COMPLIANCE WITH ALL APPLICABLE SECURITIES LEGISLATION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE TRADED ON OR THROUGH THE FACILITIES OF THE TSX VENTURE EXCHANGE OR OTHERWISE IN CANADA OR TO OR FOR THE BENEFIT OF A CANADIAN RESIDENT UNTIL [DATE THAT IS FOUR MONTHS AND A DAY AFTER THE CLOSING.”

 

10.2                       If a resident of Canada, the Subscriber hereby acknowledges that that upon the issuance thereof, and until such time as the same is no longer required under the applicable securities laws and regulations, the certificates or other document representing any of the Securities will bear a legend, in addition to the legend set out in Section 9.1, in substantially the following form:

 

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE [INSERT THE DATE THAT IS FOUR MONTHS AND A DAY AFTER THE DISTRIBUTION DATE.]”

 

10.3                      The Subscriber hereby acknowledges and agrees to the Company making a notation on its records or giving instructions to the registrar and transfer agent of the Company in order to implement the restrictions on transfer set forth and described in this Subscription Agreement.

 

	
11.

	
Resale Restrictions

 

11.1                      The Subscriber acknowledges that any resale of any of the Securities will be subject to resale restrictions contained in the securities legislation applicable to the Subscriber or proposed transferee. The Subscriber acknowledges that none of the Securities have been registered under the 1933 Act or the securities laws of any state of the United States. The Securities may not be offered or sold in the United States unless registered in accordance with federal securities laws and all applicable state securities laws or exemptions from such registration requirements are available.

 

11.2                      If the Subscriber is resident in Canada, then:

 

  

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(a)

	
the Subscriber is acquiring the Securities pursuant to an exemption from the prospectus requirements of the applicable securities laws and regulations (collectively, the “Legislation”) in all jurisdictions relevant to the purchase, and, as a consequence, the Subscriber will not be entitled to use most of the civil remedies available under the Legislation, including statutory rights of rescission and damages, and the Subscriber will not receive information that would otherwise be required to be provided to the Subscriber pursuant to the Legislation; and

 

	
  

	
(b)

	
any transfer, resale or other subsequent disposition of the Securities may be subject to restrictions contained in the Legislation applicable to the holder of the Securities or to the proposed transferee, including, but not limited to, resale restrictions under the Legislation and the certificates representing the Securities may bear a restrictive legend.

 

11.3                      The Subscriber acknowledges that the Securities are subject to resale restrictions in Canada and may not be traded in Canada except as permitted by the applicable provincial securities laws and the rules made thereunder.

 

	
12.

	
Collection of Personal Information

 

12.1                      The Subscriber acknowledges and consents to the fact that the Company is collecting the Subscriber’s personal information for the purpose of fulfilling this Agreement and completing the Offering. The Subscriber’s personal information (and, if applicable, the personal information of those on whose behalf the Subscriber is contracting hereunder) may be disclosed by the Company to (a) stock exchanges or securities regulatory authorities, (b) the Company’s registrar and transfer agent, (c) Canadian tax authorities, (d) authorities pursuant to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) and (e) any of the other parties involved in the Offering, including legal counsel, and may be included in record books in connection with the Offering. By executing this Agreement, the Subscriber is deemed to be consenting to the foregoing collection, use and disclosure of the Subscriber’s personal information (and, if applicable, the personal information of those on whose behalf the Subscriber is contracting hereunder) for the foregoing purposes and to the retention of such personal information for as long as permitted or required by law or business practice and for the purposes described in Exhibit “F” to this Agreement. Notwithstanding that the Subscriber may be purchasing Units as agent on behalf of an undisclosed principal, the Subscriber agrees to provide, on request, particulars as to the nature and identity of such undisclosed principal, and any interest that such undisclosed principal has in the Company, all as may be required by the Company in order to comply with the foregoing.

 

12.2                       Furthermore, the Subscriber is hereby notified that:

 

	
  

	
(a)

	
the Company may deliver to any securities commission having jurisdiction over the Company, the Subscriber or this subscription, including any Canadian provincial securities commissions and/or the SEC (collectively, the “Commissions”) certain personal information pertaining to the Subscriber, including such Subscriber’s full name, residential address and telephone number, the number of shares or other securities of the Company owned by the Subscriber, the number of Units purchased by the Subscriber and the total purchase price paid for such Units, the prospectus exemption relied on by the Company and the date of distribution of the Units,

 

	
  

	
(b)

	
such information is being collected indirectly by the Commissions under the authority granted to them in securities legislation, and

 

	
  

	
(c)

	
such information is being collected for the purposes of the administration and enforcement of the securities laws.

 

	
13.

	
Costs

 

13.1                      The Subscriber acknowledges and agrees that all costs and expenses incurred by the Subscriber (including any fees and disbursements of any special counsel retained by the Subscriber) relating to the purchase of the Securities shall be borne by the Subscriber.

 

  

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14.

	
Governing Law

 

14.1                      This Subscription Agreement is governed by the laws of the State of Nevada. The Subscriber, in its personal or corporate capacity and, if applicable, on behalf of each beneficial purchaser for whom it is acting, irrevocably attorns to the exclusive jurisdiction of the courts of the State of Nevada.

 

	
15.

	
Survival

 

15.1                      This Subscription Agreement, including without limitation the representations, warranties and covenants contained herein, shall survive and continue in full force and effect and be binding upon the parties hereto notwithstanding the completion of the purchase of the Securities by the Subscriber pursuant hereto.

 

	
16.

	
Assignment

 

16.1                      This Subscription Agreement is not transferable or assignable.

 

	
17.

	
Severability

 

17.1                      The invalidity or unenforceability of any particular provision of this Subscription Agreement shall not affect or limit the validity or enforceability of the remaining provisions of this Subscription Agreement.

 

	
18.

	
Entire Agreement

 

18.1                      Except as expressly provided in this Subscription Agreement and in the agreements, instruments and other documents contemplated or provided for herein, this Subscription Agreement contains the entire agreement between the parties with respect to the sale of the Securities and there are no other terms, conditions, representations or warranties, whether expressed, implied, oral or written, by statute or common law, by the Company or by anyone else.

 

	
19.

	
Notices

 

19.1                      Any notice required or permitted to be given to the Company will be in writing and may be given by prepaid registered post, electronic facsimile transmission or other means of electronic communication capable of producing a printed copy to the address of the Company set forth below or such other address as the Company may specify by notice in writing to the Subscriber, and any such notice will be deemed to have been given and received by the Company to whom it was addressed if mailed, on the third day following the mailing thereof, if by facsimile or other electronic communication, on successful transmission, or, if delivered, on delivery; but if at the time or mailing or between the time of mailing and the third business day thereafter there is a strike, lockout, or other labour disturbance affecting postal service, then the notice will not be effectively given until actually delivered:

 

Respect Your Universe, Inc.

818 North Russell St.

Portland, OR 97227

 

	 	
Attention: 

	
Jim Nowodworski, Chief Financial Officer

	 	
Fax No. 

	
503-766-6496

 

with a copy to:

        

Clark Wilson LLP

900-885 West Georgia Street

Vancouver, BC, Canada V6C 3H1

 

	 	
Attention: 

	
Victor Dudas

	 	
Fax No.: 

	
604-687-6314

 

  

- 12 -

  

 

	
20.

	
Counterparts and Electronic Means

 

20.1                      This Subscription Agreement may be executed in any number of counterparts, each of which, when so executed and delivered, shall constitute an original and all of which together shall constitute one instrument. Delivery of an executed copy of this Subscription Agreement by electronic facsimile transmission or other means of electronic communication capable of producing a printed copy will be deemed to be execution and delivery of this Subscription Agreement as of the date hereinafter set forth.

 

 

 

 

 

 

  

- 13 -

  

 

IN WITNESS WHEREOF the Subscriber has duly executed this Subscription Agreement as of the date of acceptance by the Company.

 

	 	 	 
	  	  	  
	
(Number of Units being purchased)

	  	
(Name of Subscriber – Please type or print)

	 	 	 
	 	 	 
	  	  	  
	
(Total Subscription Price)

	  	
(Signature and, if applicable, Office)

	 	 	 
	  	  	  
	  	  	
(Address of Subscriber)

	 	 	 
	  	  	  
	  	  	
(City, State or Province, Postal Code of Subscriber)

	 	 	 
	 	 	 
	  	  	
(Country of Subscriber)

	 	 	 
	  	  	  
	  	  	
(Email Address)

	 	 	 
	  	  	  
	  	  	
(Telephone Number)

 

The Purchaser directs the Issuer to issue, register and deliver the certificates representing the Securities as follows:

 

	
 

REGISTRATION INSTRUCTIONS

 

	  	
 

DELIVERY INSTRUCTIONS

 

	  	  	  
	
Name to appear on certificate

 

 

	  	
Name and account reference, if applicable

	  	  	  
	
Account reference if applicable

 

 

	  	
Contact name

	  	  	  
	
Address

 

 

	  	
Address

	  	  	  
	
Tax ID Number

(for US citizens only)

	  	
Telephone Number

	
1.     State whether the Subscriber is an Insider of the Issuer:

      Yes     o                 No    o

2.     State whether Subscriber is a member of the Pro Group:

      Yes     o                 No    o

3.     State whether the Subscriber has a current Form 4C on file with the TSX Venture Exchange (if not an individual):

      Yes     o                 No    o

4.     State whether the Subscriber is a registrant:

         Yes     o                 No    o

5.     Number of Shares of the Company held:

 

 

  

- 14 -

  

 

A C C E P T A N C E

 

The above-mentioned Subscription Agreement in respect of the Units is hereby accepted by Respect Your Universe, Inc.

 

DATED at                                                                                                        the                     day of                                            , 2013.

 

RESPECT YOUR UNIVERSE, INC.

 

	
Per:

	  	  
	  	
Authorized Signatory

	  

 

 

 

 

  

- 15 -

  

 

EXHIBIT A

 

CANADIAN INVESTOR QUESTIONNAIRE

 

All capitalized terms herein, unless otherwise defined, have the meanings ascribed thereto in the Subscription Agreement between Respect Your Universe, Inc. (the “Company”) and the undersigned (the “Subscriber”).

 

The purpose of this Questionnaire is to assure the Company that the Subscriber will meet certain requirements of National Instrument 45-106 (“NI 45-106”).  The Company will rely on the information contained in this Questionnaire for the purposes of such determination.

 

The Subscriber covenants, represents and warrants to the Company that:

 

	
  

	
1.

	
the Subscriber is (tick one or more of the following boxes):

	 	 	 
	o	
(A)

	
a director, executive officer, founder or control person of the Company or an affiliate of the Company

	 	 	 
	o	
(B)

	
a spouse, parent, grandparent, brother, sister or child of a director, executive officer, founder or control person of the Company or an affiliate of the Company

	 	 	 
	o	
(C)

	
a parent, grandparent, brother, sister or child of the spouse of a director, executive officer, founder or control person of the Company or an affiliate of the Company

	 	 	 
	o	
(D)

	
a close personal friend of a director, executive officer, founder or control person of the Company

	 	 	 
	o	
(E)

	
a close business associate of a director, executive officer, founder or control person of the Company or an affiliate of the Company

	 	 	 
	o	
(F)

	
an accredited investor

	 	 	 
	o	
(G)

	
a company, partnership or other entity of which a majority of the voting securities are beneficially owned by, or a majority of the directors are, persons described in paragraphs A to F

	 	 	 
	o	
(H)

	
a trust or estate of which all of the beneficiaries or a majority of the trustees or executors are persons described in paragraphs A to F

 

	
  

	
2.

	
if the Subscriber has checked box B, C, D, E, G or H in Section 1 above, the director, executive officer, founder or control person of the Company with whom the undersigned has the relationship is:

 

	  	  
	 	 
	 	 
	  	  

(Instructions to Subscriber: fill in the name of each director, executive officer, founder and control person which you have the above-mentioned relationship with. If you have checked box G or H, also indicate which of A to F describes the securityholders, directors, trustees or beneficiaries which qualify you as box G or H and provide the names of those individuals. Please attach a separate page if necessary).

 

  

- 16 -

  

 

	
  

	
3.

	
if the Subscriber has ticked box F in Section 1 above, the Subscriber satisfies one or more of the categories of “accredited investor” (as that term is defined in NI 45-106) indicated below (please check the appropriate box):

 

	
  

	 o	
(a) an individual who either alone or with a spouse beneficially owns, directly or indirectly, financial assets (cash or securities) having an aggregate realizable value that before taxes, but net of any related liabilities, exceeds CDN$1,000,000;

 

	
  

	 o	
(b) an individual whose net income before taxes exceeded CDN$200,000 in each of the two more recent calendar years or whose net income before taxes combined with that of a spouse exceeded CDN$300,000 in each of those years and who, in either case, reasonably expects to exceed that net income level in the current calendar year;

 

	
  

	 o	
(c) an individual who, either alone or with a spouse, has net assets of at least CDN $5,000,000;

 

	
  

	 o	
(d) a person, other than an individual or investment fund, that had net assets of at least CDN$5,000,000 as reflected on its most recently prepared financial statements.

 

	
  

	 o	
(e) a person registered under securities legislation of a jurisdiction of Canada as an advisor or dealer, or an individual registered or formerly registered as a representative of such an adviser or dealer, other than a limited market dealer registered under the Securities Act (Ontario) or the Securities Act (Newfoundland);

 

	
  

	 o	
(f) an investment fund that distributes it securities only to persons that are accredited investors at the time of distribution, a person that acquires or acquired a minimum of CDN$150,000 of value in securities, or a person that acquires or acquired securities under Sections 2.18 or 2.19 of NI 45-106; or

 

	
  

	 o	
(g) a person in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law are persons or companies that are accredited investors.

 

The Subscriber acknowledges and agrees that the Subscriber may be required by the Company to provide such additional documentation as may be reasonably required by the Company and its legal counsel in determining the Subscriber’s eligibility to acquire the Securities under relevant legislation.

 

IN WITNESS WHEREOF, the undersigned has executed this Questionnaire as of the                    day of                         , 2013.

 

	
If an Individual:

	 	
If a Corporation, Partnership or Other Entity:

	  	 	  
	 	 	 
	 	 	 
	
Signature

	 	
Print or Type Name of Entity

	  	 	  
	  	 	  
	
Print or Type Name

	 	
Signature of Authorized Signatory

	  	 	  
	  	 	  
	  	 	
Type of Entity

     

  

- 17 -

  

        

EXHIBIT B

 

UNITED STATES ACCREDITED INVESTOR QUESTIONNAIRE

 

All capitalized terms herein, unless otherwise defined, have the meanings ascribed thereto in the Agreement.

 

This Questionnaire is for use by each Subscriber. The purpose of this Questionnaire is to assure the Company that each Subscriber will meet the standards imposed by the 1933 Act and the appropriate exemptions of applicable state securities laws. The Company will rely on the information contained in this Questionnaire for the purposes of such determination. The Securities will not be registered under the 1933 Act in reliance upon the exemption from registration afforded by Section 3(b) and/or Section 4(2) and Regulation D of the 1933 Act. This Questionnaire is not an offer of the Securities or any other securities of the Company in any state other than those specifically authorized by the Company.

 

All information contained in this Questionnaire will be treated as confidential. However, by signing and returning this Questionnaire, each Subscriber agrees that, if necessary, this Questionnaire may be presented to such parties as the Company deems appropriate to establish the availability, under the 1933 Act or applicable state securities law, of exemption from registration in connection with the sale of the Securities hereunder.

 

The Subscriber covenants, represents and warrants to the Company that it satisfies one or more of the categories of “Accredited Investors”, as defined by Regulation D promulgated under the 1933 Act, as indicated below: (Please initial in the space provide those categories, if any, of an “Accredited Investor” which the Subscriber satisfies.)

     

	
_______

	
Category 1

	
An organization described in Section 501(c)(3) of the United States Internal Revenue Code, a corporation, a Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the Securities, with total assets in excess of US $5,000,000.

	 	 	 
	
_______

	
Category 2

	
A natural person whose individual net worth, or joint net worth with that person’s spouse, on the date of purchase exceeds US $1,000,000 excluding the value of the primary residence of such person(s) and the related amount of indebtedness secured by the primary residence up to its fair market value.

	 	 	 
	
_______

	
Category 3

	
A natural person who had an individual income in excess of US $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of US $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.

	 	 	 
	
_______

	
Category 4

	
A director or executive officer of the Company.

	 	 	 
	
_______

	
Category 5

	
A trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the 1933 Act.

	 	 	 
	
_______

	
Category 6

	
An entity in which all of the equity owners satisfy the requirements of one or more of the foregoing categories.

 

Note that prospective Subscribers claiming to satisfy one of the above categories of Accredited Investor may be required to supply the Company with a balance sheet, prior years’ federal income tax returns or other appropriate documentation to verify and substantiate the Subscriber’s status as an Accredited Investor.

 

If the Subscriber is an entity which initialled Category 8 in reliance upon the Accredited Investor categories above, state the name, address, total personal income from all sources for the previous calendar year, and the net worth (exclusive of home, home furnishings and personal automobiles) for each equity owner of the said entity:

 

  

- 18 -

  

 

The Subscriber hereby certifies that the information contained in this Questionnaire is complete and accurate and the Subscriber will notify the Company promptly of any change in any such information. If this Questionnaire is being completed on behalf of a corporation, partnership, trust or estate, the person executing on behalf of the Subscriber represents that it has the authority to execute and deliver this Questionnaire on behalf of such entity.

 

IN WITNESS WHEREOF, the undersigned has executed this Questionnaire as of the ________ day of __________________, 2013.

 

	
If a Corporation, Partnership or Other Entity:

	  	
If an Individual:

	  	  	  
	 	 	 
	  	  	  
	
Print of Type Name of Entity

	  	
Signature

	  	  	  
	  	  	  
	
Signature of Authorized Signatory

	  	
Print or Type Name

	  	  	  
	  	  	  
	
Type of Entity

	  	
Social Security/Tax I.D. No.

 

 

 

 

 

  

- 19 -

  

 

EXHIBIT C

 

US DOLLAR WIRE INSTRUCTIONS

 

INSTRUCTIONS FOR WIRING FUNDS TO CLARK WILSON LLP

 

	
Beneficiary: Clark Wilson LLP, 900 - 885, West Georgia Street, Vancouver BC V6C 3H1

 

Beneficiary Bank: HSBC Bank Canada, 885 West Georgia Street, Vancouver, BC V6C 3G1

 

SWIFT Code: HKBCCATT

 

Beneficiary Account number: 491689-002

 

Transit Number: 10020 Bank Code: 016

 

Intermediary Bank: HSBC Bank USA, New York, NY, USA

 

ABA Number: 021 001 088

 

SWIFT Code: MRMDUS33

 

PLEASE ALSO INSTRUCT YOUR BANKER TO QUOTE

YOUR NAME AND OUR FILE NO. 39149-0001

 

THE SUBSCRIBER IRREVOCABLY AUTHORIZES AND DIRECTS SUCH LAWYERS TO IMMEDIATELY DELIVER THE FUNDS TO THE COMPANY UPON RECEIPT OF THE FUNDS FROM THE PURCHASER.

 

PLEASE ENSURE THAT APPLICABLE WIRE FUNDS FOR YOUR BANK AND $25.00 FOR THE RECEIVING BANK’S WIRE CHARGES ARE ADDED TO YOUR WIRED SUBSCRIPTION AMOUNT.

 

  

- 20 -

  

    

EXHIBIT D

 

Form of Warrant

 

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

 

IF YOU ARE A RESIDENT OF CANADA, UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE SECURITIES SHALL NOT TRADE THE SECURITIES BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE DISTRIBUTION DATE.

 

Warrant No. ___________

 

THESE WARRANTS WILL EXPIRE AND BECOME NULL AND VOID

AT _____________ (______________ TIME) ON ____________________, 2016.

 

SHARE PURCHASE WARRANTS TO PURCHASE COMMON SHARES OF

 

RESPECT YOUR UNIVERSE, INC.

 

THIS IS TO CERTIFY THAT _____________________, (the “Holder”) of ___________________________, has the right to purchase, upon and subject to the terms and conditions hereinafter referred to, up to _______________ fully paid and non-assessable common shares (the “Shares”) in the capital of Respect Your Universe, Inc. (the “Company”) on or before _______ p.m. (________ time) on ____________________, 2016 (the “Expiry Date”) at a price per Share of US$0.25 (the “Exercise Price”) on the terms and conditions attached hereto as Appendix A (the “Terms and Conditions”).

 

	
  

	
1.

	
ONE (1) WARRANT AND THE EXERCISE PRICE ARE REQUIRED TO PURCHASE ONE SHARE. THIS CERTIFICATE REPRESENTS __________________ WARRANTS.

 

	
  

	
2.

	
These Warrants are issued subject to the Terms and Conditions, and the Warrant Holder may exercise the right to purchase Shares only in accordance with those Terms and Conditions.

 

	
  

	
3.

	
Nothing contained herein or in the Terms and Conditions will confer any right upon the Holder hereof or any other person to subscribe for or purchase any Shares at any time subsequent to the Expiry Date, and from and after such time, this Warrant and all rights hereunder will be void and of no value.

 

IN WITNESS WHEREOF the Company has executed this Warrant Certificate this ________ day of ______________, 2013.

 

RESPECT YOUR UNIVERSE, INC.

 

	
Per:

	  	  
	  	
Authorized Signatory

	  

 

  

- 21 -

  

     

APPENDIX A

TERMS AND CONDITIONS dated _________________, 2013 attached to the Warrants issued by Respect Your Universe, Inc.

 

	
1. 

	
INTERPRETATION

 

	
(a) 

	
Definitions

 

In these Terms and Conditions, unless there is something in the subject matter or context inconsistent therewith:

 

	
  

	
(i)

	
“Company” means Respect Your Universe, Inc. until a successor corporation will have become such as a result of consolidation, amalgamation or merger with or into any other corporation or corporations, or as a result of the conveyance or transfer of all or substantially all of the properties and estates of the Company as an entirety to any other corporation and thereafter “Company” will mean such successor corporation;

 

	
  

	
(ii)

	
“Company’s Auditors” means an independent firm of accountants duly appointed as auditors of the Company;

 

	
  

	
(iii)

	
“Director” means a director of the Company for the time being, and reference, without more, to action by the directors means action by the directors of the Company as a Board, or whenever duly empowered, action by an executive committee of the Board;

 

	
  

	
(iv)

	
“herein”, “hereby” and similar expressions refer to these Terms and Conditions as the same may be amended or modified from time to time; and the expression “Article” and “Section,” followed by a number refer to the specified Article or Section of these Terms and Conditions;

 

	
  

	
(v)

	
“person” means an individual, corporation, partnership, trustee or any unincorporated organization and words importing persons have a similar meaning;

 

	
  

	
(vi)

	
“Shares” means the common shares in the capital of the Company as constituted at the date hereof and any shares resulting from any subdivision or consolidation of the shares;

 

	
  

	
(vii)

	
“Warrant Holders” or “Holders” means the holders of the Warrants; and

 

	
  

	
(viii)

	
“Warrants” means the warrants of the Company issued and presently authorized and for the time being outstanding.

 

	
(b) 

	
Gender

 

Words importing the singular number include the plural and vice versa and words importing the masculine gender include the feminine and neuter genders.

 

	
(c) 

	
Interpretation not affected by Headings

 

The division of these Terms and Conditions into Articles and Sections, and the insertion of headings are for convenience of reference only and will not affect the construction or interpretation thereof.

 

	
(d) 

	
Applicable Law

 

The Warrant and the terms hereof are governed by the laws of the State of Nevada. The Holder, in its personal or corporate capacity and, if applicable, on behalf of each beneficial purchaser for whom it is acting, irrevocably attorns to the jurisdiction of the courts of the State of Nevada.

 

	
2. 

	
ISSUE OF WARRANTS

 

	
(a) 

	
Additional Warrants

 

  

- 22 -

  

 

The Company may at any time and from time to time issue additional warrants or grant options or similar rights to purchase shares of its capital stock.

 

	
(b) 

	
Warrants to RankPari Passu

 

All Warrants and additional warrants, options or similar rights to purchase shares from time to time issued or granted by the Company, will rank pari passu whatever may be the actual dates of issue or grant thereof, or of the dates of the certificates by which they are evidenced.

 

	
(c) 

	
Issue in substitution for Lost Warrants

 

	
  

	
(i)

	
In case a Warrant becomes mutilated, lost, destroyed or stolen, the Company, at its sole discretion, may issue and deliver a new Warrant of like date and tenor as the one mutilated, lost, destroyed or stolen, in exchange for and in place of and upon cancellation of such mutilated Warrant, or in lieu of, and in substitution for such lost, destroyed or stolen Warrant and the substituted Warrant will be entitled to the benefit hereof and rank equally in accordance with its terms with all other Warrants issued or to be issued by the Company.

 

	
  

	
(ii)

	
The applicant for the issue of a new Warrant pursuant hereto will bear the cost of the issue thereof and in case of loss, destruction or theft furnish to the Company such evidence of ownership and of loss, destruction, or theft of the Warrant so lost, destroyed or stolen as will be satisfactory to the Company in its discretion and such applicant may also be required to furnish indemnity in amount and form satisfactory to the Company in its sole discretion, and will pay the reasonable charges of the Company in connection therewith.

 

	
(d) 

	
Warrant Holder Not a Shareholder

 

The holding of a Warrant will not constitute the Holder thereof as a shareholder of the Company, nor entitle him to any right or interest in respect thereof except as in the Warrant expressly provided.

 

	
3. 

	
NOTICE

 

	
(a) 

	
Notice to Warrant Holders

 

Any notice required or permitted to be given to the Holders will be in writing and may be given by prepaid registered post, electronic facsimile transmission or other means of electronic communication capable of producing a printed copy to the address of the Holder appearing on the Holder’s Warrant or to such other address as any Holder may specify by notice in writing to the Company, and any such notice will be deemed to have been given and received by the Holder to whom it was addressed if mailed, on the third day following the mailing thereof, if by facsimile or other electronic communication, on successful transmission, or, if delivered, on delivery; but if at the time or mailing or between the time of mailing and the third business day thereafter there is a strike, lockout, or other labour disturbance affecting postal service, then the notice will not be effectively given until actually delivered.

 

	
(b) 

	
Notice to the Company

 

Any notice required or permitted to be given to the Company will be in writing and may be given by prepaid registered post, electronic facsimile transmission or other means of electronic communication capable of producing a printed copy to the address of the Company set forth below or such other address as the Company may specify by notice in writing to the Holder, and any such notice will be deemed to have been given and received by the Company to whom it was addressed if mailed, on the third day following the mailing thereof, if by facsimile or other electronic communication, on successful transmission, or, if delivered, on delivery; but if at the time or mailing or between the time of mailing and the third business day thereafter there is a strike, lockout, or other labour disturbance affecting postal service, then the notice will not be effectively given until actually delivered:

 

  

- 23 -

  

 

Respect Your Universe, Inc.

818 North Russell St.

Portland, OR 97227

 

	 	
Attention: 

	
Jim Nowodworski, Chief Financial Officer

	 	
Fax No. 

	
503-766-6496

 

with a copy, which shall not constitute notice, to:

 

Clark Wilson LLP

900-885 West Georgia Street

Vancouver, BC, Canada  V6C 3H1

 

	 	
Attention: 

	
Victor Dudas

	 	
Fax No.: 

	
604-687-6314

 

	
4. 

	
EXERCISE OF WARRANTS

 

	
(a) 

	
Method of Exercise of Warrants

 

The right to purchase shares conferred by the Warrants may be exercised by the Holder surrendering the Warrant Certificate representing same, with a duly completed and executed subscription in the form attached hereto and a bank draft or certified cheque payable to the Company for the purchase price applicable at the time of surrender in respect of the shares subscribed for in lawful money of the United States of America, to the Company at the address set forth in, or from time to time specified by the Company pursuant to, Section 3 (a).

 

	
(b) 

	
Effect of Exercise of Warrants

 

	
  

	
(i)

	
Upon surrender and payment as aforesaid the shares so subscribed for will be deemed to have been issued and such person or persons will be deemed to have become the Holder or Holders of record of such shares on the date of such surrender and payment, and such shares will be issued at the subscription price in effect on the date of such surrender and payment.

 

	
  

	
(ii)

	
Within ten business days after surrender and payment as aforesaid, the Company will forthwith cause to be delivered to the person or persons in whose name or names the shares so subscribed for are to be issued as specified in such subscription or mailed to him or them at his or their respective addresses specified in such subscription, a certificate or certificates for the appropriate number of shares not exceeding those which the Warrant Holder is entitled to purchase pursuant to the Warrant surrendered.

 

	
(c) 

	
Subscription for Less Than Entitlement

 

The Holder of any Warrant may subscribe for and purchase a number of shares less than the number which he is entitled to purchase pursuant to the surrendered Warrant. In the event of any purchase of a number of shares less than the number which can be purchased pursuant to a Warrant, the Holder thereof upon exercise thereof will in addition be entitled to receive a new Warrant in respect of the balance of the shares which he was entitled to purchase pursuant to the surrendered Warrant and which were not then purchased.

 

	
(d) 

	
Warrants for Fractions of Shares

 

To the extent that the Holder of any Warrant is entitled to receive on the exercise or partial exercise thereof a fraction of a share, such right may be exercised in respect of such fraction only in combination with another Warrant or other Warrants which in the aggregate entitle the Holder to receive a whole number of such shares.

 

	
(e) 

	
Expiration of Warrants

 

After the expiration of the period within which a Warrant is exercisable, all rights thereunder will wholly cease and terminate and such Warrant will be void and of no effect.

 

	
(f) 

	
Time of Essence

 

Time will be of the essence hereof.

 

  

- 24 -

  

 

	
(g) 

	
Subscription Price

 

Each Warrant is exercisable at the Exercise Price of US$0.25.  One (1) Warrant and the Exercise Price are required to subscribe for each share during the term of the Warrants.

 

	
(h) 

	
Adjustment of Exercise Price

 

	
  

	
(i)

	
The Exercise Price and the number of shares deliverable upon the exercise of the Warrants will be subject to adjustment in the event and in the manner following:

 

	
  

	
A.

	
if and whenever the shares at any time outstanding are subdivided into a greater or consolidated into a lesser number of shares the Exercise Price will be decreased or increased proportionately as the case may be; upon any such subdivision or consolidation the number of shares deliverable upon the exercise of the Warrants will be increased or decreased proportionately as the case may be;

 

	
  

	
B.

	
in case of any capital reorganization or of any reclassification of the capital of the Company or in the case of the consolidation, merger or amalgamation of the Company with or into any other Company (hereinafter collectively referred to as a “Reorganization”), each Warrant will after such Reorganization confer the right to purchase the number of shares or other securities of the Company (or of the Company’s resulting from such Reorganization) which the Warrant Holder would have been entitled to upon Reorganization if the Warrant Holder had been a shareholder at the time of such Reorganization.

 

In any such case, if necessary, appropriate adjustments will be made in the application of the provisions of this Section 4(i) relating to the rights and interest thereafter of the Holders of the Warrants so that the provisions of this Section 4(i) will be made applicable as nearly as reasonably possible to any shares or other securities deliverable after the Reorganization on the exercise of the Warrants.

 

The subdivision or consolidation of shares at any time outstanding into a greater or lesser number of shares (whether with or without par value) will not be deemed to be a Reorganization for the purposes of this clause.

 

	
  

	
(ii)

	
The adjustments provided for in this Section 4(i) are cumulative and will become effective immediately after the record date or, if no record date is fixed, the effective date of the event which results in such adjustments.

 

	
(i) 

	
Determination of Adjustments

 

If any questions will at any time arise with respect to the Exercise Price or any adjustment provided for in Section 4.8, such questions will be conclusively determined by the Company’s Auditors, or, if they decline to so act any other firm of certified public accountants in the United States of America or chartered accountants in Canada that the Company may designate and who will have access to all appropriate records and such determination will be binding upon the Company and the Holders of the Warrants.

 

	
5. 

	
WAIVER OF CERTAIN RIGHTS

 

	
(a) 

	
Immunity of Shareholders, etc.

 

The Warrant Holder, as part of the consideration for the issue of the Warrants, waives and will not have any right, cause of action or remedy now or hereafter existing in any jurisdiction against any past, present or future incorporator, shareholder, Director or officer (as such) of the Company for the issue of shares pursuant to any Warrant or on any covenant, agreement, representation or warranty by the Company herein contained or in the Warrant.

 

  

- 25 -

  

 

	
6. 

	
MODIFICATION OF TERMS, ETC.

 

	
(a) 

	
Modification of Terms and Conditions for Certain Purposes

 

From time to time the Company may, subject to the provisions of these presents, modify the Terms and Conditions hereof, for the purpose of correction or rectification of any ambiguities, defective provisions, errors or omissions herein.

 

	
(b) 

	
Warrants Not Transferable

 

The Warrant and all rights attached to it are not transferable.

 

DATED as of the date first above written in these Terms and Conditions.

 

	  	
RESPECT YOUR UNIVERSE, INC.

	  	  	  
	  	  	  
	  	
Per:

	  
	  	  	
Authorized Signatory

 

 

 

 

 

 

  

- 26 -

  

FORM OF SUBSCRIPTION

 

	
TO:

	
Respect Your Universe, Inc.

	
  

	
818 North Russell St.

	
  

	
Portland, OR 97227

 

The undersigned Holder of the within Warrants hereby subscribes for ____________ common shares (the “Shares”) of Respect Your Universe, Inc. (the “Company”) pursuant to the within Warrants at US$0.25 per Share on the terms specified in the said Warrants.  This subscription is accompanied by a certified cheque or bank draft payable to or to the order of the Company for the whole amount of the purchase price of the Shares.

 

The undersigned represents that, at the time of the exercise of these Warrants, all of the representations and warranties contained in the Subscription Agreement between the Company and the undersigned pursuant to which these Warrants were issued are true and accurate.

 

The undersigned hereby directs that the Shares be registered as follows:

 

	
NAME(S) IN FULL

	  	
ADDRESS(ES)

	  	
NUMBER OF SHARES

	  	  	  	  	  
	 	 	 	 	 
	  	  	  	  	  
	 	 	 	 	 
	 	 	 	 	 
	  	  	
TOTAL:

	  	  

 

(Please print full name in which share certificates are to be issued, stating whether Mr., Mrs. or Miss is applicable).

 

DATED this ________  day of __________________ , 201_.

 

In the presence of:

 

	  	  	  
	
Signature of Witness

	  	
Signature of Warrant Holder

 

Please print below your name and address in full.

 

	
Name (Mr./Mrs./Miss)

	  	  
	 	 	 
	
Address

	  	  
	  	  	  
	 	 	 

 

INSTRUCTIONS FOR SUBSCRIPTION

 

The signature to the subscription must correspond in every particular with the name written upon the face of the Warrant without alteration or enlargement or any change whatever.  If there is more than one subscriber, all must sign.  In the case of persons signing by agent or attorney or by personal representative(s), the authority of such agent, attorney or representative(s) to sign must be proven to the satisfaction of the Company.  If the Warrant certificate and the form of subscription are being forwarded by mail, registered mail must be employed.

 

  

- 27 -

  

EXHIBIT E

FORM 4C

CORPORATE PLACEE REGISTRATION FORM

 

 

This Form will remain on file with the Exchange and must be completed if required under section 4(b) of Part II of Form 4B.  The corporation, trust, portfolio manager or other entity (the “Placee”) need only file it on one time basis, and it will be referenced for all subsequent Private Placements in which it participates.  If any of the information provided in this Form changes, the Placee must notify the Exchange prior to participating in further placements with Exchange listed Issuers.  If as a result of the Private Placement, the Placee becomes an Insider of the Issuer, Insiders of the Placee are reminded that they must file a Personal Information Form (2A) or, if applicable, Declarations, with the Exchange.

 

 

	
1.

	
Placee Information:

 

	
  

	
(a)

	
Name: _______________________________________________________________________

 

	
  

	
(b)

	
Complete Address: _____________________________________________________________

 

	
  

	
(c)

	
Jurisdiction of Incorporation or Creation: ____________________________________________

 

 

	
2.

	
(a)

	
Is the Placee purchasing securities as a portfolio manager: (Yes/No)? ___________________________

 

	
  

	
(b)

	
Is the Placee carrying on business as a portfolio manager outside of Canada:

	
  

	
(Yes/No)? __________

 

 

	
3.

	
If the answer to 2(b) above was “Yes”, the undersigned certifies that:

 

	
  

	
(a)

	
it is purchasing securities of an Issuer on behalf of managed accounts for which it is making the investment decision to purchase the securities and has full discretion to purchase or sell securities for such accounts without requiring the client’s express consent to a transaction;

 

	
  

	
(b)

	
it carries on the business of managing the investment portfolios of clients through discretionary authority granted by those clients (a “portfolio manager” business) in ____________________ [jurisdiction], and it is permitted by law to carry on a portfolio manager business in that jurisdiction;

 

	
  

	
(c)

	
it was not created solely or primarily for the purpose of purchasing securities of the Issuer;

 

	
  

	
(d)

	
the total asset value of the investment portfolios it manages on behalf of clients is not less than $20,000,000; and

 

	
  

	
(e)

	
it has no reasonable grounds to believe, that any of the directors, senior officers and other insiders of the Issuer, and the persons that carry on investor relations activities for the Issuer has a beneficial interest in any of the managed accounts for which it is purchasing.

 

  

- 28 -

  

 

	
4.

	
If the answer to 2(a). above was “No”, please provide the names and addresses of Control Persons of the Placee:

 

	
Name *

	
City

	
Province or State

	
Country

	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  

*   If the Control Person is not an individual, provide the name of the individual that makes the investment decisions on behalf of the Control Person.

 

	
5. 

	
Acknowledgement - Personal Information and Securities Laws

	
  

	
(a)

	
“Personal Information” means any information about an identifiable individual, and includes information contained in sections 1, 2 and 4, as applicable, of this Form.

 

The undersigned hereby acknowledges and agrees that it has obtained the express written consent of each individual to:

	
  

	
(i)

	
the disclosure of Personal Information by the undersigned to the Exchange (as defined in Appendix 6B) pursuant to this Form; and

	
  

	
(ii)

	
the collection, use and disclosure of Personal Information by the Exchange for the purposes described in Appendix 6B or as otherwise identified by the Exchange, from time to time.

 

	
  

	
(b)

	
The undersigned acknowledges that it is bound by the provisions of applicable Securities Law, including provisions concerning the filing of insider reports and reports of acquisitions.

 

Dated and certified (if applicable), acknowledged and agreed, at ______________________________________ on ______________________________________

 

 

	  	  
	  	
(Name of Purchaser - please print)

	  	  
	 	 
	  	
(Authorized Signature)

	  	  
	 	 
	  	
(Official Capacity - please print)

	  	  
	 	 
	  	
(Please print name of individual whose signature

	  	
appears above)

 

THIS IS NOT A PUBLIC DOCUMENT

 

  

- 29 -

  

 

EXHIBIT F

 

ACKNOWLEDGEMENT – PERSONAL INFORMATION

 

	
1.

	
TSX Venture Exchange Inc. and its affiliates, authorized agents, subsidiaries and divisions, including the TSX Venture Exchange (collectively referred to as the “Exchange”) collect Personal Information in certain Forms that are submitted by the individual and/or by an Issuer or Applicant and use it for the following purposes:

 

	
  

	
(a)

	
to conduct background checks;

 

	
  

	
(b)

	
to verify the Personal Information that has been provided about each individual;

 

	
  

	
(c)

	
to consider the suitability of the individual to act as an officer, director, insider, promoter, investor relations provider or, as applicable, an employee or consultant, of the Issuer or Applicant;

 

	
  

	
(d)

	
to consider the eligibility of the Issuer or Applicant to list on the Exchange;

 

	
  

	
(e)

	
to provide disclosure to market participants as to the security holdings of directors, officers, other insiders and promoters of the Issuer, or its associates or affiliates;

 

	
  

	
(f)

	
to conduct enforcement proceedings; and

 

	
  

	
(g)

	
to perform other investigations as required by and to ensure compliance with all applicable rules, policies, rulings and regulations of the Exchange, securities legislation and other legal and regulatory requirements governing the conduct and protection of the public markets in Canada.

 

As part of this process, the Exchange also collects additional Personal Information from other sources, including but not limited to, securities regulatory authorities in Canada or elsewhere, investigative, law enforcement or self-regulatory organizations, regulations service providers and each of their subsidiaries, affiliates, regulators and authorized agents, to ensure that the purposes set out above can be accomplished.

 

The Personal Information the Exchange collects may also be disclosed:

 

	
  

	
(a)

	
to the agencies and organizations in the preceding paragraph, or as otherwise permitted or required by law, and they may use it in their own investigations for the purposes described above; and

 

	
  

	
(b)

	
on the Exchange’s website or through printed materials published by or pursuant to the directions of the Exchange.

 

The Exchange may from time to time use third parties to process information and/or provide other administrative services. In this regard, the Exchange may share the information with such third party service providers.

 

	
2.

	
The Commissions may indirectly collect the Personal Information under the authority granted to them by securities legislation. The Personal Information is being collected for the purposes of the administration and enforcement of the securities legislation of the jurisdiction of each such Commission.

 

For questions about the collection of Personal Information by the British Columbia Securities Commission, please contact the Administrative Assistant to the Director of Corporate Finance, 12th Floor, 701 West Georgia Street, Box 10142, Vancouver, BC V7Y 1L2, phone: (604) 899-6854.

 

 

30

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