UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest
event reported): July 5, 2015
SMARTAG INTERNATIONAL, INC.
(Exact name of registrant issuer as specified
in its charter)
File Number 000-53792
Nevada |
|
81-0554149 |
(State or other jurisdiction of incorporation) |
|
(I.R.S. Employer Identification No.) |
|
|
|
3651 Lindell Road Ste D269, Las Vegas, NV 89103 |
(Address of principal executive offices, including zip code) |
|
Registrant’s phone number, including area code (949) 310-1762 |
Check the appropriate box below if the Form 8-K filing
is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2. below): [ ]
¨ Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material
Definitive Agreement.
Securities Purchase Agreement
On July
5, 2015, Smartag International, Inc., a Nevada corporation (the “Company” or “Purchaser”), entered
into a Securities Purchase Agreement (the “Purchase Agreement”) with Essential Beverage
Corporation, a Nevada corporation (“EBC”), pursuant to which the Company purchased a 51% interest in EBC for a
total consideration of $399,709.43 and one million shares of the Company’s restricted common stock. A copy of the
Purchase Agreement is attached as Exhibit 2.1 to this Current Report on Form 8-K, and is incorporated herein by
reference.
EBC develops,
produces, markets and sells healthy, sports related drinks, alkaline water and functional beverages. Their current products are
ThrividaTM Sport Water, ThrividaTM Elite Sport, and ThrividaTM Essentials.
Item 2.01 Completion of Acquisition
or Disposition of Assets.
Reference is made
to the disclosure related to the Purchase Agreement in Item 1.01 of this Current Report on Form 8-K, which disclosure is incorporated
herein by reference.
Item 3.02 Unregistered Sales of
Equity Securities.
Reference is made
to the disclosure related to the Purchase Agreement in Item 1.01 of this Current Report on Form 8-K, which disclosure is incorporated
herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) |
Exhibits.
2.1 |
Securities Purchase Agreement dated July 5, 2015,
by and among Smartag
International, Inc. and Essential Beverage Corp. |
SIGNATURES
Pursuant to the requirements of
the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
Smartag International, Inc.
/s/ Yow Lock Sen
Name: Lock Sen Yow
Title: Chief Financial Officer
Exhibit 2.1
SECURITIES PURCHASE AGREEMENT
This Securities
Purchase Agreement (this “Agreement”) is dated as of July 5, 2015 (“Effective Date”) between Essential
Beverage Corporation, a Nevada corporation (the “Company”), and Smartag International, Inc. (each, including
its successors and assigns, a “Purchaser” and collectively the “Purchasers”).
WHEREAS, the
Company and the Purchaser entered into an agreement dated January 21, 2015 whereby the Purchaser was to lend money to the Company.
As an inducement Purchaser was to receive 65% of the revenues of the Company and the Purchaser was to have an option to purchase
75% of the Company. It is the parties’ intent that this Agreement dated July 5, 2015 shall supersede any previous agreements
and the previous agreement shall be terminated in full.
WHEREAS, The
Purchaser has directly advanced the Company $253,237.75 to date; the Purchaser has advanced the predecessor entity Legendary Liquids
$96,500 and is owed $49,971.68 as relates to the percentage of revenue for a total of $399,709.43 (“Amounts Owed”).
The Company agrees that it is responsible for the Amounts Owed. The Purchaser desires to exchange Amounts Owed and 1 million shares
of the Purchaser’s restricted common stock for 51% of the fully diluted stock of the Company (“Shares”). The
Shares shall consist of 1,010 newly issued common stock of the Company;
WHEREAS, upon
signing of this Agreement, the Company will immediately replace one of its Board of Directors members with a person designated
by the Purchaser and allow two more directors of the Purchaser to reflect the percentage ownership of common stock in the Company,
whereupon the bank accounts of the Company shall be managed by the Purchaser.
WHEREAS, it
is contemplated that prior to or immediately following the execution of this Agreement the Company shall amend its articles of
incorporation to change the name to Essential Beverage Corporation, increase the authorized common stock to 5,000 shares with a
par value of $0.001, and change the purpose to any lawful purpose (“Articles Amendment”); and
WHEREAS, subject
to the Articles Amendment and the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities
Act of 1933, as amended (the “Securities Act”), and Rule 506 promulgated thereunder, the Company desires to
issue and sell to the Purchaser, and each Purchaser desires to purchase from the Company, securities of the Company as more fully
described in this Agreement.
NOW, THEREFORE,
in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:
ARTICLE I.
DEFINITIONS
1.1
Definitions. In addition to the terms defined elsewhere in this Agreement the following
terms have the meanings set forth in this Section 1.1:
“Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act. With respect to a Purchaser,
any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Purchaser
will be deemed to be an Affiliate of such Purchaser.
“Board
of Directors” means the board of directors of the Company.
“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of Nevada are authorized or required by law or other governmental action to
close.
“Closing”
shall have the meaning ascribed to such term in Section 2.1(a).
“Closing
Date” shall have the meaning ascribed to such term in Section 2.1(a).
“Commission”
means the Securities and Exchange Commission.
“Common
Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which
such securities may hereafter be reclassified or changed into.
“Disclosure
Schedules” shall have the meaning ascribed to such term in Section 3.1.
“Discussion
Time” shall have the meaning ascribed to such term in Section 3.2(f).
“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Intellectual
Property” means any and all United States and foreign: (a) patent registrations and patent applications (including all
reissues, divisions, continuations, continuations-in-part, extensions and reexaminations) and all rights therein and all improvements
to the inventions disclosed in each such registration or application, (b) trademarks, service marks, trade dress, trade names and
corporate names, whether or not registered, including but not limited to all common law rights, and registrations and applications
for registration thereof, (c) copyrights (including but not limited to copyrights on designs) (registered or otherwise) and registrations
and applications for registration thereof, (d) computer software, including, without limitation, source code, operating systems
and specifications, data, data bases, files, documentation and other materials related thereto, data and documentation, (e) trade
secrets and confidential technical and business information (including but not limited to formulas, compositions, and inventions
reduced to practice, whether or not patentable), (f) confidential technology (including know-how and show-how), manufacturing and
production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial, marketing and business data, pricing and cost information, business and marketing
plans and customer and supplier lists and information, (h) any right arising under any law providing protection to industrial or
other designs, (i) all rights to obtain and rights to apply for patents, and to register trademarks and copyrights, and (j) all
rights to sue or recover and retain damages and costs and attorney’s fees for present and past infringement of any of the
foregoing.
“Liens”
means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“Material
Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).
“Maximum
Rate” shall have the meaning ascribed to such term in Section 5.17.
“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
“Purchaser
Party” shall have the meaning ascribed to such term in Section 4.10.
“Required
Approvals” shall have the meaning ascribed to such term in Section 3.1(e).
“Required
Minimum” means, as of any date, the maximum aggregate number of shares of Common Stock then issued.
“Securities”
means the Common Stock.
“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Short
Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall
not be deemed to include the location and/or reservation of borrowable shares of Common Stock).
“Subscription
Amount” means, as to each Purchaser, the aggregate amount to be paid for Shares purchased hereunder as specified below
such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,”
in United States dollars and in immediately available funds.
“Subsidiary”
means any subsidiary of the Company as set forth on Schedule 3.1(a) and shall, where applicable, include any direct or indirect
subsidiary of the Company formed or acquired after the date hereof.
“Trading
Day” means a day on which the Nasdaq Capital Market is open for trading.
“Trading
Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date
in question: the American Stock Exchange, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market,
the New York Stock Exchange or the OTC Bulletin Board.
“Transaction
Documents” means this Agreement and all exhibits and schedules thereto and hereto and any other documents or agreements
executed in connection with the transactions contemplated hereunder.
ARTICLE II.
PURCHASE AND SALE
2.1
Closing.
The purchase
and sale of the Shares (the “Closing”) shall take place on or before July 5, 2015, at 5.00pm a.m., EST (“Closing
Date”), at the offices of Company or at such other location or time or on such other date mutually agreed upon by the
Company and all of the Purchasers subject to the conditions precedent for the Closing as set forth in Section 2.3, and to each
party’s obligations hereunder having been satisfied or waived. At the Closing, upon the terms and subject to the conditions
set forth herein, the Company agrees to sell, and the Purchasers agree to purchase 1,010 shares of the Company’s common stock,
by exchanging the Amounts Owed for the Shares. On or prior to the Closing, the Company shall deliver to the Purchaser the Shares,
as determined pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver the other items set forth in Section
2.2 deliverable at the Closing.
2.2
Deliveries.
(a)
On the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser
the following:
| (i) | this Agreement, duly executed by the Company; |
(ii)
Shares registered in the name of such Purchaser; and
(b)
On the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company
the following:
| (i) | this Agreement, duly executed by such Purchaser; |
(c)
On the Closing Date, the Company shall convene a board meeting whereupon any increase in common
stock shall be perfected in terms of transfer documents or issuance of new common stock in accordance with Clause 2.1 above.
2.3
Closing Conditions.
(a)
The obligations of the Company hereunder in connection with the Closing are subject to the
following conditions being met:
(i)
the accuracy in all material respects on the Closing Date of the representations and warranties
of the Purchasers contained herein;
(ii)
all obligations, covenants and agreements of each Purchaser required to be performed at or
prior to the Closing Date shall have been performed;
(iii)
filed Articles Amendment with the State of Nevada; and
(iv)
at the Closing, the delivery by each Purchaser of the items set forth in Section 2.2(b) of
this Agreement.
(b)
The respective obligations of the Purchasers hereunder in connection with the Closing are
subject to the following conditions being met:
(i)
the accuracy in all material respects when made and on the Closing Date of the representations
and warranties of the Company contained herein;
(ii)
all obligations, covenants and agreements of the Company required to be performed at or prior
to the Closing Date shall have been performed;
(iii)
at the Closing, the delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement; and
(iv)
there shall have been no Material Adverse Effect with respect to the Company since the date
hereof.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1
Representations and Warranties of the Company. Except as set forth under the corresponding
section of the disclosure schedules delivered to the Purchasers concurrently herewith (“Disclosure Schedules”)
which Disclosure Schedules shall be deemed a part hereof, the Company hereby makes the following representations and warranties
to each Purchaser.
(a)
Subsidiaries. All of the direct and indirect subsidiaries of the Company are set forth
on Schedule 3.1(a). The Company owns, directly or indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.
(b)
Organization and Qualification. The Company and each of the Subsidiaries is an entity
duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation
or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on
its business as currently conducted. Neither the Company nor any Subsidiary is in violation or default of any of the provisions
of its respective articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries
is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure
to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in (i) a material
adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results
of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as
a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis
its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and
no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail
such power and authority or qualification. The Company has furnished to the Purchasers true and correct copies of the Company’s
articles of incorporation and the Company’s bylaws, as each is currently in effect.
(c)
Authorization; Enforcement. The Company and the Subsidiaries have the requisite corporate
power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise
to carry out their obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents by the
Company and the Subsidiaries and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized
by all necessary action on the part of the Company and the Subsidiaries and no further action is required by the Company, the Subsidiaries,
their board of directors or their stockholders in connection therewith other than in connection with the Required Approvals. Each
Transaction Document has been (or upon delivery will have been) duly executed by the Company and the Subsidiaries, as applicable,
and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company
and the Subsidiaries enforceable against the Company and the Subsidiaries in accordance with its terms, except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by
applicable law.
(d)
No Conflicts. The execution, delivery and performance of the Transaction Documents
by the Company and the Subsidiaries and the consummation by the Company and the Subsidiaries of the other transactions contemplated
hereby and thereby do not and will not: (i) conflict with or violate any provision of the Company’s or any Subsidiary’s
articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default
(or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any
of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration
or cancellation (with or without notice, lapse of time or both) of, any agreement, loan or credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party
or by which any property or asset of the Company or any Subsidiary is bound or affected (other than Liens in favor of the Purchasers),
or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to
result in a Material Adverse Effect.
(e)
Filings, Consents and Approvals. Neither the Company nor any Subsidiary is required
to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court
or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance
by the Company and the Subsidiaries of the Transaction Documents, other than (i) filings required pursuant to Section 4.6, (ii)
the notice and/or application(s) to each applicable Trading Market for the issuance and sale of the Securities and the listing
of the Underlying Shares for trading thereon in the time and manner required thereby, (iii) the filing of Form D with the Commission
and such filings as are required to be made under applicable state securities laws, and (iv) filings required under the terms of
the Security Documents (collectively, the “Required Approvals”).
(f)
Issuance of the Securities. The Securities are duly authorized and, when issued and
paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable,
free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents.
The Underlying Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid
and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction
Documents. The Company has reserved from its duly authorized capital stock a number of shares of Common Stock for issuance of the
Underlying Shares at least equal to the Required Minimum on the date hereof.
(g)
Capitalization. There is a total of 970 shares of the Company’s common stock
issued and outstanding. The capitalization of the Company is as set forth on Schedule 3.1(g), which Schedule 3.1(g)
shall also include the number of shares of Common Stock owned beneficially, and of record, by Affiliates of the Company as of the
date hereof. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate
in the transactions contemplated by the Transaction Documents. Except as set forth on Schedule 3.1(g) and a result of the
purchase and sale of the Securities, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments
of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for,
or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings
or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common
Stock Equivalents. The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust
the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock
of the Company are validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities
laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or
purchase securities. No further approval or authorization of any stockholder, the Board of Directors or others is required for
the issuance and sale of the Securities. There are no stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among
any of the Company’s stockholders.
(h)
Litigation. There is no suit, action, claim, arbitration, proceeding or investigation
pending or, to the knowledge of the Company, threatened against, relating to or involving the Company, any Subsidiary, or real
or personal property of the Company or any Subsidiary, before any governmental entity or other third party. To the knowledge of
the Company, there is no basis for any such suit, action, proceeding or investigation. The Commission has not issued any stop order
or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.
(i)
Labor; Benefits. Schedule 3.1(k) contains a true and complete list of each benefit
plan currently sponsored, maintained or contributed to by the Company and the Subsidiaries. The Company’s records accurately
reflect the service histories of the Company and the Subsidiaries’ employees, contractors and consultants, including their
hours of service, and all such data is maintained in a usable form. Neither the Company nor any Subsidiary is a party to any employment,
contractor or consultant agreement which could result in the payment to any current, former or future director, employee, contractor
or consultant of the Company or the Subsidiaries of any money or other property or rights or accelerate or provide any other rights
or benefits to any such director, employee, contractor or consultant as a result of the transactions contemplated by this Agreement,
whether or not (i) such payment, acceleration or provision would constitute a “parachute payment” (within the meaning
of Section 280G of the Code), or (ii) some other subsequent action or event would be required to cause such payment, acceleration
or provision to be triggered.
(j)
Compliance. To the knowledge of the Company, the Company and the Subsidiaries are in
compliance in all material respects with all applicable laws (including, without limitation, applicable laws relating to zoning,
environmental matters and the safety and health of employees), ordinances, regulations and orders of all governmental entities.
Neither the Company nor any of the Subsidiaries has been charged with and, to the knowledge of the Company, is not now under investigation
with respect to, a violation of any applicable law, regulation, ordinance, order or other requirement of a governmental entity.
Neither the Company nor any of its Subsidiaries is a party to or bound by any order, judgment, decree or injunction of any governmental
entity.
(k)
Title to Assets. The Company and the Subsidiaries have good, clear and marketable title
to all the tangible properties and tangible assets reflected in their latest balance sheet as being owned by them or acquired after
the date thereof which are, individually or in the aggregate, material to the Company’s business (except properties sold
or otherwise disposed of since the date thereof in the ordinary course of business), free and clear of all Liens. All equipment
and other items of tangible personal property and assets of the Company and the Subsidiaries (i) are in good operating condition
and in a state of good maintenance and repair, ordinary wear and tear excepted, and (ii) are usable in the regular and ordinary
course of the Company’s business. The Company and the Subsidiaries do not own any real property. Schedule 3.1(m) sets
forth all real property leases to which the Company and the Subsidiaries are a party. The Company and/or the Subsidiaries, as applicable,
have a valid leasehold interest in such leased real property, and such leases are in full force and effect. The improvements and
fixtures on such real property leased by the Company and/or the Subsidiaries are in good operating condition and in a state of
good maintenance and repair, ordinary wear and tear excepted.
(l)
Intellectual Property.
(i)
Company owns or have the right to use pursuant to an enforceable contract all Intellectual
Property necessary or desirable to operate the businesses as currently conducted and as currently proposed to be conducted (the
“Intellectual Property. The Company has taken all necessary and desirable action to maintain and protect each item
of Intellectual Property.
(ii)
The Company has delivered to the Purchasers correct and complete copies of all written documentation
evidencing ownership and prosecution (if applicable) of each item of any Intellectual Property. With respect to each such item
of Intellectual Property:
(A) The
Company possess all right, title, and interest in and to the item, free and clear of any Lien;
(B) the
item is not subject to any order, judgment, decree or injunction of any Governmental Entity;
(C) no
action or proceeding is pending or, to the Company’s best knowledge, threatened (and, to the Company’s best knowledge,
there is no basis therefor) which challenges the enforceability, use, or ownership of the item; and
(D) neither
the Company nor any Subsidiary has ever agreed to indemnify any Person for or against any interference, infringement, misappropriation,
or other conflict with respect to the item.
(iii)
The Intellectual Property does not interfere with, infringe upon, misappropriate, or otherwise
violate or come into conflict with any other Person’s Intellectual Property, and neither the Company nor any Subsidiary has
received any notice alleging any such interference, infringement, misappropriation, violation, or conflict (including any claim
that the Company or any Subsidiary must license or refrain from using any other Person’s Intellectual Property). No third
Person has any Intellectual Property that interferes or would be likely to interfere with the Company’s use of any Intellectual
Property. The Intellectual Property will not interfere with, infringe upon, misappropriate, or otherwise come into conflict with,
any Intellectual Property rights of any other Person as a result of the continued operation by the Company or the Subsidiaries
of their businesses as currently conducted and as currently proposed to be conducted. No other Person has interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any Intellectual Property.
(iv)
Schedule 3.1(n) identifies each contract pursuant to which the Company or any Subsidiary
has granted to a third party rights under or with respect to any Intellectual Property (together with any exceptions). The
Company has made available to the Purchasers correct and complete copies of all contracts with respect to such use as amended to
date. With respect to the Contracts (1) related to each item of Intellectual Property, the statements in clauses (A) through
(H) below are true and correct, and (2) in Schedule 3.1(n), the statements in clauses (A) through (D) below are true and
correct:
(A) the
contract is enforceable against each of the parties thereto in accordance with its terms;
(B) The
Company is not (and no counter-party is) in breach of such contract, and no event has occurred that with notice or lapse of time
would constitute a breach thereunder;
(D) no
party to the contract has repudiated any provision thereof;
(E) with
respect to each sublicense contract, the representations and warranties set forth in (A) – (D) are true and correct with
respect to the underlying license contract;
(F) the
underlying item of Intellectual Property is not subject to any outstanding order, judgment, decree or injunction of any governmental
entity;
(G) no
action or proceeding is pending or threatened (and there is no basis therefor) that challenges the enforceability of the underlying
item of Intellectual Property; and
(H) neither
the Company nor any Subsidiary has granted any sublicense or similar contract with respect to the contract.
(v)
Except as set forth in Schedule 3.1(n), all former and current employees, contractors
and consultants of the Company have executed written contracts with the Company that assign to the Company all rights to any inventions,
improvements, discoveries or information relating to the Company’ business. No employee, contractor or consultant of the
Company has entered into any contract that restricts or limits in any way the scope or type of work in which the employee, contractor
or consultant may be engaged or requires the employee, contractor or consultant to transfer, assign, or disclose information concerning
his or her work to any Person other than Company.
(vi)
To the Company’s knowledge, there are no new products, inventions, procedures, or methods
of manufacturing or processing that any competitors or other Person have developed which reasonably could be expected to supersede
or make obsolete any, or any planned, product or process of the Company.
(m)
Insurance. The Company and the Subsidiaries do not maintain any insurance policies.
(n)
Transactions with Affiliates and Employees. The Company and the Subsidiaries are not
a party to any contract, lease, license, commitment or arrangement, written or oral, which, were the Company “registrants”
under the Exchange Act, would be required to be disclosed pursuant to Item 404(a) or (c) of Regulation S-K as promulgated by the
SEC, and there are no loans outstanding to or from any Person specified in Item 404(a) of Regulation S-K from or to the Company
or the Subsidiaries.
(o)
Certain Fees. No brokerage or finder’s fees or commissions are or will be payable
by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by the Transaction Documents. The Purchasers shall have no obligation with respect
to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section
that may be due in connection with the transactions contemplated by the Transaction Documents.
(p)
Private Placement. Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Securities
by the Company to the Purchasers as contemplated hereby. The issuance and sale of the Securities hereunder does not contravene
the rules and regulations of the Trading Market.
(q)
Investment Company. The Company is not, and is not an Affiliate of, and immediately
after receipt of payment for the Securities, will not be or be an Affiliate of, an “investment company” within the
meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not
become subject to the Investment Company Act of 1940, as amended.
(r)
Registration Rights. no Person has any right to cause the Company to effect the registration
under the Securities Act of any securities of the Company.
(s)
Application of Takeover Protections. The Company and the Board of Directors have taken
all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s articles
of incorporation or the laws of its state of incorporation that is or could become applicable to the Purchasers as a result of
the Purchasers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including,
without limitation, as a result of the Company’s issuance of the Securities and the Purchasers’ ownership of the Securities.
(t)
Disclosure. None of the Transaction Documents, nor any Schedule or Exhibit thereto,
nor any other statements, documents or certificates made or delivered in connection herewith or therewith contains any untrue statement
of a material fact or omits to state a material fact necessary to make the statements contained herein and therein not misleading
in light of the circumstances under which such statements were made.
(u)
No Integrated Offering. Assuming the accuracy of the Purchasers’ representations
and warranties set forth in Section 3.2, 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 of any security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes
of (i) the Securities Act which would require the registration of any such securities under the Securities Act, or (ii) any applicable
shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.
(v)
Solvency. Based on the consolidated financial condition of the Company as of the Closing
Date after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder, (i) the fair
saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s
existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company’s assets do
not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its
capital needs taking into account the particular capital requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company
would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient
to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Company does not intend to
incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable
on or in respect of its debt). The Company has no knowledge of any facts or circumstances which lead it to believe that it will
file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the
Closing Date.
(w)
Tax Status. Except for matters that would not, individually or in the aggregate, have
or reasonably be expected to result in a Material Adverse Effect, the Company and each Subsidiary has filed all necessary federal,
state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has
no knowledge of a tax deficiency which has been asserted or threatened against the Company or any Subsidiary.
(x)
No General Solicitation. Neither the Company nor any person acting on behalf of the
Company has offered or sold any of the Securities by any form of general solicitation or general advertising. The Company has offered
the Securities for sale only to the Purchasers and certain other “accredited investors” within the meaning of Rule
501 under the Securities Act.
(y)
Foreign Corrupt Practices. Neither the Company, nor to the knowledge of the Company,
any agent or other person acting on behalf of the Company, has (i) directly or indirectly, used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment
to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate
funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which
the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt
Practices Act of 1977, as amended.
(z)
Seniority. As of the Closing Date, there is no secured indebtedness or other claim
against the Company.
(aa)
No Disagreements with Accountants and Lawyers. There are no disagreements of any kind
presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly
or presently employed by the Company and the Company is current with respect to any fees owed to its accountants and lawyers which
could affect the Company’s ability to perform any of its obligations under any of the Transaction Documents.
(bb)
Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company acknowledges
and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the
Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as
a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the
transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in
connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers’
purchase of the Securities. The Company further represents to each Purchaser that the Company’s decision to enter into this
Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated
hereby by the Company and its representatives.
(cc)
Acknowledgment Regarding Purchasers’ Trading Activity. Notwithstanding anything
in this Agreement or elsewhere herein to the contrary (except for Section 3.2(f)), it is understood and acknowledged by the Company
that (i) none of the Purchasers has been asked to agree by the Company, nor has any Purchaser agreed, to desist from purchasing
or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by
the Company or to hold the Securities for any specified term, (ii) past or future open market or other transactions by any Purchaser,
specifically including, without limitation, Short Sales or “derivative” transactions, before or after the closing of
this or future private placement transactions, may negatively impact the market price of the Company’s publicly-traded securities,
(iii) any Purchaser, and counter-parties in “derivative” transactions to which any such Purchaser is a party, directly
or indirectly, may presently have a “short” position in the Common Stock, and (iv) each Purchaser shall not be deemed
to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction.
The Company further understands and acknowledges that (a) one or more Purchasers may engage in hedging activities at various times
during the period that the Securities are outstanding, including, without limitation, during the periods that the value of the
Underlying Shares deliverable with respect to Securities are being determined and (b) such hedging activities (if any) could reduce
the value of the existing stockholders' equity interests in the Company at and after the time that the hedging activities are being
conducted. The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents.
(dd)
Regulation M Compliance. The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased,
or paid any compensation for soliciting purchases of, any of the securities of the Company or (iii) paid or agreed to pay to any
Person any compensation for soliciting another to purchase any other securities of the Company.
3.2
Representations and Warranties of the Purchasers. Each Purchaser, for itself and for
no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows:
(a)
Organization; Authority. Such Purchaser is an entity duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization with full right, corporate or partnership power and
authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out
its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by such Purchaser
of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate or similar action
on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when
delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms, except (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’
rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
(b)
Own Account. Such Purchaser understands that the Securities are “restricted securities”
and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as
principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation
of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in
violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings
with any other persons to distribute or regarding the distribution of such Securities (this representation and warranty not limiting
such Purchaser’s right to sell the Securities pursuant to any registration statement filed under the Securities Act or otherwise
in compliance with applicable federal and state securities laws) in violation of the Securities Act or any applicable state securities
law. Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.
(c)
Purchaser Status. At the time such Purchaser was offered the Securities, it was an
“accredited investor” as defined in Rule 501 under the Securities Act. Such Purchaser is not required to be registered
as a broker-dealer under Section 15 of the Exchange Act.
(d)
Experience of Such Purchaser. Such Purchaser, either alone or together with its representatives,
has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits
and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser
is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss
of such investment.
(e)
General Solicitation. Such Purchaser is not purchasing the Securities as a result of
any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar
media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.
(f)
Short Sales and Confidentiality Prior To The Date Hereof. Other than consummating the
transactions contemplated hereunder, such Purchaser has not directly or indirectly, nor has any Person acting on behalf of or pursuant
to any understanding with such Purchaser, executed any purchases or sales, including Short Sales, of the securities of the
Company during the period commencing from the time that such Purchaser first received a term sheet (written or oral) from the Company
or any other Person representing the Company setting forth the material terms of the transactions contemplated hereunder until
the date hereof (“Discussion Time”). Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed
investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser's assets and the portfolio managers
have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser's
assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager
that made the investment decision to purchase the Securities covered by this Agreement. Other than to other Persons party to this
Agreement, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction
(including the existence and terms of this transaction).
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1
Transfer Restrictions.
(a)
The Securities may only be disposed of in compliance with state and federal securities laws.
In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company
or to an Affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the
Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer
does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee
shall agree in writing to be bound by the terms of this Agreement and shall have the rights of a Purchaser under this Agreement.
(b)
The Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend
on any of the Securities in the following form:
[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH
THIS SECURITY IS CONVERTIBLE] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY [AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that a Purchaser
may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest
in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501
under the Securities Act and who agrees to be bound by the provisions of this Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees or secured parties. Such a pledge or transfer
would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor
shall be required in connection therewith. Further, no notice shall be required of such pledge. At the appropriate Purchaser’s
expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably
request in connection with a pledge or transfer of the Securities, including, if the Securities are subject to a registration statement
filed under the Securities Act, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the
Securities Act or other applicable provision of the Securities Act to appropriately amend the list of selling stockholders thereunder.
(c)
In addition to such Purchaser’s other available remedies, the Company shall be subject
to the liquidated damage provisions and other remedies for failing timely to provide proper certificates to a Purchaser. Nothing
herein shall limit such Purchaser’s right to pursue actual damages for the Company’s failure to deliver certificates
representing any Securities as required by the Transaction Documents, and such Purchaser shall have the right to pursue all remedies
available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.
4.2
Acknowledgment of Dilution. The Company acknowledges that the issuance of the Securities
may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions.
4.3
Intentionally Left Blank
4.4
Integration. The Company shall not sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities to the Purchasers in a manner that would require the registration under the Securities Act of the
sale of the Securities to the Purchasers or that would be integrated with the offer or sale of the Securities for purposes of the
rules and regulations of any Trading Market.
4.5
Intentionally Left Blank
4.6
Securities Laws Disclosure; Publicity. The Purchaser shall, by 8:30 a.m. (New York
City time) on the Trading Day following the date hereof, issue a Current Report on Form 8-K disclosing the material terms of the
transactions contemplated hereby and attaching the Transaction Documents as exhibits thereto. The Company and each Purchaser shall
consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the
Company nor any Purchaser shall issue any such press release or otherwise make any such public statement without the prior consent
of the Company, with respect to any press release of any Purchaser, or without the prior consent of each Purchaser, with respect
to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is
required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement
or communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include
the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written
consent of such Purchaser, except (a) as required by federal securities law in connection with (i) any registration statement filed
under the Securities Act covering the resale of the Securities, and (ii) the filing of final Transaction Documents (including signature
pages thereto) with the Commission and (b) to the extent such disclosure is required by law or Trading Market regulations, in which
case the Company shall provide the Purchasers with prior notice of such disclosure permitted under this clause (b).
4.7
Shareholder Rights Plan. No claim will be made or enforced by the Company or, with
the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control share acquisition,
business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement
in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan
or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company
and the Purchasers.
4.8
Non-Public Information. Except with respect to the material terms and conditions of
the transactions contemplated by the Transaction Documents, the Company covenants and agrees that neither it nor any other Person
acting on its behalf will provide any Purchaser or its agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have executed a written agreement regarding the confidentiality
and use of such information. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant
in effecting transactions in securities of the Company.
4.9
Use of Proceeds. Except as set forth on Schedule 4.9 attached hereto or as provide
in Section 5.2 hereof, the Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes
and shall not use such proceeds for (a) the satisfaction of any portion of the Company’s debt (other than payment of trade
payables in the ordinary course of the Company’s business and prior practices), (b) the redemption of any Common Stock or
Common Stock Equivalents or (c) the settlement of any outstanding litigation.
4.10
Indemnification of Purchasers. Subject to the provisions of this Section 4.10, the
Company will indemnify and hold each Purchaser and its directors, officers, shareholders, members, partners, employees and agents
(and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title
or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons
with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of
such controlling person (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to
(a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the
other Transaction Documents or (b) any action instituted against a Purchaser in any capacity, or any of them or their respective
Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser, with respect to any of the transactions
contemplated by the Transaction Documents (unless such action is based upon a breach of such Purchaser’s representations,
warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser may have with any such
stockholder or any violations by the Purchaser of state or federal securities laws or any conduct by such Purchaser which constitutes
fraud, gross negligence, willful misconduct or malfeasance). If any action shall be brought against any Purchaser Party in respect
of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing,
and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the
Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent
that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion
of such separate counsel, a material conflict on any material issue between the position of the Company and the position of such
Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate
counsel. The Company will not be liable to any Purchaser Party under this Agreement (i) for any settlement by a Purchaser Party
effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (ii) to the
extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of
any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other
Transaction Documents.
4.11
Reservation and Listing of Securities.
(a)
The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance
pursuant to the Transaction Documents in such amount as may be required to fulfill its obligations in full under the Transaction
Documents.
(b)
If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of
Common Stock is less than the Required Minimum on such date, then the Board of Directors shall use commercially reasonable efforts
to amend the Company’s articles of incorporation to increase the number of authorized but unissued shares of Common Stock
to at least the Required Minimum at such time, as soon as possible and in any event not later than the seventy-fifth (75th)
day after such date.
4.12
Corporate Structure. For a period of twelve (12) months following the Closing, the
Company and its Subsidiaries shall maintain and conduct its business at a physical office or offices, hire and retain key employees
and other personnel, and otherwise operate its business in a reasonable and customary manner similar to other public reporting
companies engaged in similar businesses.
4.13
Bank Account Signatures. Any check written against or other withdrawal from the Company
or any of its Subsidiaries’ bank account(s) in an amount greater than $15,000.00 shall require the approval by email of two
executive officers.
4.14
Intentionally Left Blank.
4.15
Form D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to
the Securities as required under Regulation D and to provide a copy thereof, promptly upon request of any Purchaser. The Company
shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify
the Securities for, sale to the Purchasers at the Closing under applicable securities or “Blue Sky” laws of the states
of the United States, and shall provide evidence of such actions promptly upon request of any Purchaser.
4.16
Intentionally Left Blank.
4.17
Directors. Prior to Closing, one director of the Board of Directors of the Company
shall resign and Company shall appoint a person designated by the Purchaser as a new director of the Company. An additional director
shall be designated by the Purchaser within 30 days of the Closing which shall be appointed to the Board of Directors by the Company.
ARTICLE V.
MISCELLANEOUS
5.1
Termination. This Agreement may be terminated by any Purchaser, as to such Purchaser’s
obligations hereunder only and without any effect whatsoever on the obligations between the Company and the Purchaser, by written
notice to the other parties, if the Closing has not been consummated on or before June 30, 2015; provided, however,
that such termination will not affect the right of any party to sue for any breach by the other party (or parties).
5.2
Fees and Expenses. The Company and Purchasers agree that, except as set forth in this
Section 5.2, all fees and expenses shall be paid by the individual parties.
5.3
Entire Agreement. The Transaction Documents, together with the exhibits and schedules
thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements
and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents,
exhibits and schedules.
5.4
Notices. Any and all notices or other communications or deliveries required or permitted
to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission
or delivery, if such notice or communication is delivered via facsimile at the facsimile number, or delivered by a U.S. nationally
recognized overnight courier service to the address, set forth on the signature pages attached hereto prior to 5:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number, or delivered by such courier service to the address, set forth on the signature pages attached
hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, or (c) upon actual receipt
by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth
on the signature pages attached hereto.
5.5
Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented
or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchasers of at least a
majority in interest of the Securities still held by Purchasers or, in the case of a waiver, by the party against whom enforcement
of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right.
5.6
Headings. The headings herein are for convenience only, do not constitute a part of
this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
5.7
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit
of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of each Purchaser (other than by merger). Any Purchaser may assign any or all of its
rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that such transferee
agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that
apply to the “Purchasers.”
5.8
No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties
hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.10.
5.9
Governing Law. All questions concerning the construction, validity, enforcement and
interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws
of the State of Nevada, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings
concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction
Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or
agents) shall be commenced exclusively in the state and federal courts sitting in the County of Clark. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in the County of Clark for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action
or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding
is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding 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. If either party shall commence
an action or proceeding to enforce any provisions of the Transaction Documents, then the prevailing party in such action or proceeding
shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.
5.10
Survival. The representations and warranties shall survive the Closing and the delivery
of the Securities for the applicable statute of limitations.
5.11
Execution. This Agreement may be executed in two or more counterparts, all of which
when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the
event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” or other document
image format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such facsimile or “.pdf” or other document image format
data file signature page were an original thereof.
5.12
Severability. If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
5.13
Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained
in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a
right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations
within the periods therein provided, then, until the earlier of sixty (60) days after such failure by the Company or the Company
performs such obligations, such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice
to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.
5.14
Replacement of Securities. If any certificate or instrument evidencing any Securities
is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but
only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new
certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement Securities.
5.15
Remedies. In addition to being entitled to exercise all rights provided herein or granted
by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason
of any breach of obligations contained in the Transaction Documents and hereby agrees to waive and not to assert in any action
for specific performance of any such obligation the defense that a remedy at law would be adequate.
5.16
Payment Set Aside. To the extent that the Company makes a payment or payments to any
Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent
or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law,
common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
5.17
Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist
upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage
of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any claim, action or proceeding that
may be brought by any Purchaser in order to enforce any right or remedy under any Transaction Document. Notwithstanding any provision
to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company
under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under
applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest
or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated
to pay under the Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed
by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent
to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction
Documents from the effective date forward, unless such application is precluded by applicable law. If under any circumstances whatsoever,
interest in excess of the Maximum Rate is paid by the Company to any Purchaser with respect to indebtedness evidenced by the Transaction
Documents, such excess shall be applied by such Purchaser to the unpaid principal balance of any such indebtedness or be refunded
to the Company, the manner of handling such excess to be at such Purchaser’s election.
5.18
Intentionally Left Blank
5.19
Liquidated Damages. The Company’s obligations to pay any partial liquidated damages
or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until
all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security
pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.
5.20
Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken
or such right may be exercised on the next succeeding Business Day.
5.21
Construction. The parties agree that each of them and/or their respective counsel has
reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect
that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction
Documents or any amendments hereto.
5.22
Waiver of Jury Trial. In any action, suit or proceeding in any jurisdiction brought
by any party against any other party, the parties each knowingly and intentionally, to the greatest extent permitted by applicable
law, hereby absolutely, unconditionally, irrevocably and expressly waives forever trial by jury.
(Signature Pages
Follow)
IN WITNESS WHEREOF, the parties hereto
have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first
indicated above.
Essential Beverage Corporation
|
Address for Notice:
|
By:__/s/ _Rick Bohner_______________
Name:
Title: President
|
|
|
|
Name of Purchaser: SMARTAG INTERNATIONAL
Inc.
Signature of Authorized Signatory
of Purchaser: ___/s/ Lock Sen Yow_______________________________
Name of Authorized Signatory: LOCK
SEN YOW
Title of Authorized Signatory: PRESIDENT
AND CHIEF EXECUTIVE OFFICER
Email Address of Purchaser:
Facsimile Number of Purchaser:
Subscription Amount: $399,709.43
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