SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of November 25, 2019, is betweenUS NUCLEAR CORP., a company incorporatedunder thelaws ofthe State of Delaware (the “Company”), and each of the investors listed on the Schedule of Buyers attached hereto (individually, a “Buyer” and collectively the “Buyers”).
WITNESSETH
WHEREAS, the Company and each Buyer desire to enter into this transaction for the Company to sell and the Buyers to purchase the Convertible Debentures (as defined below) pursuant to an exemption from registration pursuant to Section 4(2) and/or Rule 506 of Regulation D (“Regulation D”) as promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”);
WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Buyer(s), as provided herein, and the Buyer(s) shall purchase $500,000 of convertible debentures in the form attached hereto as “Exhibit A” (the “Convertible Debentures”), which shall be convertible into the Company’s common stock, par value $0.0001 per share (the “Common Shares”) (as converted, the “Conversion Shares”), which shall be purchased after the signing this Agreement, upon the satisfaction of the conditions precedent (the “Closing”), for a total purchase price of $475,000 (the “Purchase Price”) in the respective amounts set forth opposite each Buyer(s) name on Schedule I (the “Subscription Amount”);
WHEREAS, in connection with the purchase of the Convertible Debentures by the Buyers, the Company shall issue to the Buyers a warrant in the form attached hereto as “Exhibit B” (the “Warrants”) to purchase an additional 333,333 Common Shares (the “Warrant Shares”) at an exercise price of $1.50 per share for three years from the date of issuance;
WHEREAS,theConvertible Debentures,the Conversion Shares, the Warrant, and the Warrant Shares arecollectivelyreferredto herein asthe “Securities.”
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and each Buyer hereby agree as follows:
| 1. | PURCHASE AND SALE OF CONVERTIBLE DEBENTURES. |
(a) Purchase of Convertible Debentures. Subject tothesatisfaction (or waiver)ofthe conditionsset forth in Sections 6 and 7 below,theCompany shall issue and sell to each Buyer, and eachBuyerseverally,but notjointly, agrees to purchasefrom the Company at the Closing Convertible Debentures in amounts corresponding with the Subscription Amount set forth opposite each Buyer’s name on Schedule of Buyers attached as Schedule I hereto.
(b) Closing Date. TheClosing ofthepurchaseofConvertible DebenturesbytheBuyers shalloccurattheoffices Yorkville Advisors Global, LP, 1012 Springfield Avenue, Mountainside, NJ 07092. The date and time of the Closing shallbe10:00a.m.,NewYorktime,on the Business Dayonwhich the conditionstotheClosingset forth in Sections 6 and 7beloware satisfiedor waived(or suchotherdateas ismutuallyagreed tobytheCompany and each Buyer) (the “Closing Date”). In the event that the Closing has not occurred within 30 days after the date hereof, the Buyers shall have the right to terminate this Agreement without any further obligations or liabilities by providing written notice to the Company.
(c) Form of Payment; Deliveries. Subject to the satisfaction of the terms and conditions of this Agreement, on the Closing Date, (i) the Buyers shall deliver in cash to the Company such aggregate proceeds for the Convertible Debentures to be issued and sold to such Buyer at the Closing, minus the fees to be paid directly from the proceeds of such Closing as set forth herein, and (ii) the Company shall deliver to each Buyer, Convertible Debentures which such Buyer is purchasing at the Closing in amounts indicated opposite such Buyer’s name on Schedule I, duly executed on behalf of the Company.
| 2. | BUYER’S REPRESENTATIONS AND WARRANTIES. |
Each Buyer, severally and not jointly, represents and warrants to the Company with respect to only itself that, as of the date hereof and as of each Closing Date:
(a) Investment Purpose. The Buyer is acquiring the Securities for its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the Securities Act; provided, however, that by making the representations herein, such Buyer reserves the right to dispose of the Securities at any time in accordance with or pursuant to an effective registration statement covering such Securities or an available exemption under the Securities Act. Such Buyer does not presently have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Securities.
(b) Accredited Investor Status. The Buyer is an “Accredited Investor” as that term is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and such Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of such Buyer to acquire the Securities.
(d) Information. The Buyer and its advisors (and his or, its counsel), if any, have been furnished with all materials relating to the business, finances and operations of the Company and information he deemed material to making an informed investment decision
regarding his purchase of the Securities, which have been requested by such Buyer. The Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company and its management. Neither such inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if any, or its representatives shall modify, amend or affect such 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 high degree of risk. The Buyer has sought such accounting, legal and tax advice, as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities.
(e) Transfer or Resale. The Buyer understands that: (i) the Securities have not been registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) such Buyer shall have delivered to the Company an opinion of counsel, in a generally acceptable form, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration requirements, or (C) such Buyer provides the Company with reasonable assurances (in the form of seller and broker representation letters) that such Securities can be sold, assigned or transferred pursuant to Rule 144 promulgated under the Securities Act, as amended (or a successor rule thereto) (collectively, “Rule 144”), in each case following the applicable holding period set forth therein; and (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the 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 Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the SEC thereunder.
(f) Legends. The Buyer agrees to the imprinting, so long as its required by this Section 2(f), of a restrictive legend on the Securities in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE [AND THOSE SECURITIES INTO WHICH THEY ARE CONVERTIBLE] HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES [AND THOSE SECURITIES INTO WHICH THEY ARE CONVERTIBLE] HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
Certificates evidencing the Conversion Shares shall not contain any legend (including the legend set forth above), (i) while a registration statement covering the resale of such security is effective under the Securities Act, (ii) following any sale of such Conversion Shares pursuant to an effective registration statement under the Securities Act or pursuant to Rule 144, or (iii) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the SEC). The Buyer agrees that the removal of restrictive legend from certificates representing Securities as set forth in this Section 3(f) is predicated upon the Company’s reliance that the buyer will sell any Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if Securities are sold pursuant to a registration statement, they will be sold in compliance with the plan of distribution set forth therein.
(g) Organization; Authority.SuchBuyeris anentity dulyorganized,validlyexistingand ingoodstandingunder thelaws ofthejurisdiction of itsorganizationwith therequisitepowerandauthoritytoenterintoand to consummatethetransactionscontemplated bytheTransactionDocuments(as definedbelow)towhichit is a party and otherwise tocarryoutitsobligationshereunder and thereunder.
(h) Authorization, Enforcement. This Agreement has beendulyandvalidlyauthorized, executedand deliveredon behalf ofsuchBuyerand shallconstitutethelegal, validandbindingobligationsofsuchBuyerenforceable against suchBuyerin accordancewithitsterms,exceptas such enforceability maybelimitedbygeneralprinciples ofequityortoapplicablebankruptcy, insolvency, reorganization, moratorium,liquidationandothersimilarlawsrelatingto,oraffecting generally,theenforcementofapplicablecreditors' rights and remedies.
(i) NoConflicts. Theexecution,delivery and performancebysuchBuyer ofthisAgreement andtheconsummationbysuchBuyer ofthetransactionscontemplatedherebywill not(i) result in aviolationoftheorganizational documents ofsuch Buyer, (ii) conflictwith,or constitutea default (or aneventwhich with noticeorlapseoftimeorboth wouldbecome a default) under,orgiveto others any rightsoftermination, amendment, accelerationor cancellationof, any agreement,indenture orinstrument towhichsuchBuyeris a partyor(iii) result in aviolationofany law, rule,regulation,order,judgment ordecree(includingfederal and state securities laws)applicableto such Buyer,except,inthecaseofclauses (ii) and (iii)above,for such conflicts, defaults, rightsorviolations which could not, individuallyorintheaggregate, reasonablybe expectedtohavea material adverseeffectonthe abilityof suchBuyer to performitsobligations hereunder.
(j) Certain Trading Activities. TheBuyerhasnotdirectlyorindirectly,norhas any Personacting on behalf of orpursuant to anyunderstandingwith theBuyer,engagedin any transactions inthesecuritiesoftheCompany(including,withoutlimitation,any Short Sales (as definedbelow)involvingtheCompany's securities)duringtheperiod commencing asofthetimethattheBuyerfirstcontactedtheCompanyortheCompany'sagentsregardingthespecific investment intheCompanycontemplated bythisAgreement andending
immediately prior totheexecution ofthisAgreementbysuch Buyer. “Short Sales” means all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the 1934 Act.
(k) Trading Information. Upon the Company’s request, the Buyer agrees to provide the Company with trading reports setting forth the number and average sales prices of Conversion Shares sold the Buyer during the prior trading week.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth under the corresponding section of the Disclosure Schedules which Disclosure Schedules shall be deemed a part hereof and to qualify any representation or warranty otherwise made herein to the extent of such disclosure, the Company hereby makes the representations and warranties set forth below to The Buyer:
(a) Organization andQualification.The Company and eachof itsSubsidiaries areentitiesdulyformed,validlyexistingand ingoodstandingunder thelaws ofthejurisdictioninwhichtheyare formed, andhavetherequisitepowerandauthoritytoowntheirproperties and tocarryon theirbusiness asnow being conductedand as presently proposed tobeconducted.The Company and eachof itsSubsidiaries isdulyqualified as a foreignentitytodobusiness and is ingoodstandingin everyjurisdictioninwhichitsownershipofpropertyorthenatureofthebusinessconductedbyit makes suchqualificationnecessary,excepttotheextent thatthefailure tobeso qualifiedor beingoodstandingwould notreasonablybe expectedtohavea Material AdverseEffect(as defined below).Asused inthisAgreement, “Material AdverseEffect”means any material adverseeffecton(i)thebusiness, properties, assets,liabilities, operations (includingresults thereof) orcondition(financialorotherwise)oftheCompany anditsSubsidiaries,takenas awhole,(ii)thetransactionscontemplatedherebyorin anyofthe otherTransactionDocuments oranyotheragreementsorinstruments tobeenteredintobytheCompany inconnectionherewithortherewithor(iii)theauthority orabilityoftheCompany to perform anyof itsobligations underanyoftheTransactionDocuments(as defined below). “Subsidiaries” means any Person inwhich theCompany, directlyorindirectly,ownsa majorityofthe outstandingcapitalstockhaving voting powerorholdsa majorityofthe equityor similar interestof such Person, and eachofthe foregoing, isindividuallyreferred to herein as a “Subsidiary”.
(b) Authorization;Enforcement; Validity. The Company hastherequisitepowerandauthoritytoenterintoand performitsobligations under thisAgreement andthe otherTransactionDocumentsand to issuetheSecurities in accordancewith theterms hereof and thereof. Theexecutionand deliveryofthisAgreement andthe otherTransactionDocuments bytheCompany andtheconsummationbytheCompanyofthetransactionscontemplatedhereby and thereby(including,withoutlimitation,theissuanceoftheConvertible Debentures,thereservation for issuance and issuanceoftheConversion Shares issuableuponconversionoftheConvertible Debentures),havebeendulyauthorizedbytheCompany's boardofdirectors andnofurtherfiling,consentor authorizationis requiredbytheCompany,itsboardofdirectorsor its stockholders orothergovernmental body (except such governmental filings and authorizations as are contemplated under the Registration Rights Agreement). This
Agreement hasbeen,andthe otherTransactionDocumentstowhich theCompany is a partywillbeprior totheClosing,dulyexecutedand deliveredbytheCompany, and eachconstitutesthelegal, validandbindingobligationsoftheCompany, enforceable againsttheCompany in accordancewithitsrespective terms,exceptas such enforceability maybelimitedbygeneralprinciples ofequityorapplicablebankruptcy, insolvency, reorganization, moratorium,liquidationorsimilarlawsrelatingto,oraffecting generally,theenforcementofapplicablecreditors' rights and remedies andexceptas rights to indemnification and tocontributionmaybelimitedbyfederalorstate securities law. “Transaction Documents” means, collectively,thisAgreement,the Warrants,theConvertible Debentures,and eachofthe otheragreements and instruments enteredintobytheCompanyordeliveredbytheCompany inconnection with thetransactionscontemplatedhereby and thereby, as maybeamendedfromtime to time.
(c) IssuanceofSecurities. The issuanceoftheConvertible Debentures, theConversion Shares, the Warrants, and the Warrant Shares aredulyauthorizedand,uponissuance and payment in accordancewith thetermsoftheTransactionDocuments,theSecurities, when issued in accordance with the terms hereof and thereof shallbevalidlyissued, fullypaidand non-assessable andfreefromall preemptiveorsimilar rights, and all mortgages, defects, claims, liens,pledges,charges, taxes, rightsoffirstrefusal, encumbrances, security interests andotherencumbrances arising by or through the Company(collectively“Liens”)withrespect totheissuance thereof.As oftheClosing,theCompany shallhavereservedfromitsdulyauthorizedcapitalstocknotlessthan300%ofthemaximum numberofsharesofStock issuableuponconversionofallConvertible Debenturesto be issued hereunder(assuming for purposes hereofthat(x) suchConvertible Debenturesareconvertibleatthe MarketConversion Price (as defined therein) as of the date of determination, and (y) any such conversion shallnottakeintoaccountanylimitations ontheconversionoftheConvertible Debentures set forth therein), and 100% of the number of Warrant Shares issuable upon exercise of the Warrants.Uponissuanceorconversion in accordancewith theConvertible Debentures,theholders of Conversion Shares shallbeentitledto all rights accorded to aholderofCommon Shares anduponissuanceorexercise in accordancewith theWarrants,theholders of Warrant Shares shallbeentitledto all rights accorded to aholderofCommon Shares.
(d) NoConflicts. Theexecution,delivery and performanceoftheTransactionDocuments bytheCompany andtheconsummationbytheCompanyofthetransactionscontemplatedhereby and thereby(including,withoutlimitation,theissuanceoftheConvertible Debentures, theConversion Shares,the Warrants, and the Warrant Shares,andthe reservation for issuanceofsuch Shares)will not(i) result in aviolationoftheArticlesofIncorporation (as definedbelow),Bylaws(as defined below), certificateofformation, memorandumofassociation, articlesofassociation,bylawsorotherorganizational documents oftheCompanyoranyof itsSubsidiaries,oranycapitalstockorothersecuritiesoftheCompanyoranyof itsSubsidiaries, (ii) except to the extent waived, conflictwith,or constitutea default under,orgiveto others any rightsoftermination, amendment, accelerationor cancellationof, any agreement,indenture orinstrument towhich theCompanyoranyof itsSubsidiaries is a party,or(iii) result in aviolationofany law, rule,regulation,order,
judgment ordecree(including,withoutlimitation,U.S. federal and state securitieslawsandregulations,thesecuritieslaws ofthejurisdictions oftheCompany's incorporationorinwhichitor itssubsidiaries operate andtherules andregulations oftheOTC Markets (including any segment of the OTC Markets, or any other primary market for the shares from time to time) (collectively, the “Principal Market”) andincludingallapplicablelaws, rules andregulations ofthe State of Delaware)applicabletotheCompanyoranyof itsSubsidiariesor bywhichany propertyorassetoftheCompanyoranyof itsSubsidiaries isboundoraffected,exceptinthecaseof(ii) and (iii) for any conflict, default, rightorviolationthatwould notreasonablybe expectedto result in a Material AdverseEffect.
(e) Consents. The Company isnotrequired toobtainany material consentfrom,authorization ororder of,ormake any filingorregistrationwith(otherthan anyfilingsas mayberequiredbyany federal or state securitiesagenciesand anyfilingsas mayberequiredbythePrincipal Market), any GovernmentalEntity(as definedbelow)orany regulatoryorself-regulatoryagency oranyotherPerson in order for it toexecute, deliver orperform anyof itsobligations underor contemplated bytheTransaction Documents, in each case, in accordancewith theterms hereoforthereof.Allconsents,authorizations,orders,filingsand registrationswhich theCompanyorany Subsidiary is required toobtainpursuant tothepreceding sentencehavebeenorwillbeobtainedor effectedon or prior toeachClosing Date, andneitherthe Companynor anyof its Subsidiaries are awareof any factsorcircumstanceswhichmight preventtheCompanyoranyof itsSubsidiariesfromobtainingoreffecting anyoftheregistration,applicationor filings contemplated bytheTransactionDocuments. The Company isnotinviolationoftherequirementsofthePrincipal Market and hasnoknowledgeofany factsorcircumstanceswhich couldreasonably lead todelisting orsuspensionoftheCommon Shares intheforeseeable future. The Company has notifiedthePrincipal MarketoftheissuanceofalloftheSecurities hereunder,whichdoesnotrequireobtaining theapprovalofthestockholders oftheCompanyoranyotherPersonorGovernmentalEntity, andthePrincipal Market has completeditsreviewoftherelated ListingofAdditionalShareform.“Governmental Entity” means anynation,state, county, city,town, village,district,orother politicaljurisdiction ofany nature, federal, state,local, municipal,foreign,orothergovernment, governmentalorquasi-governmentalauthority ofany nature(includingany governmental agency, branch, department, official,orentityand any courtorothertribunal),multi-nationalorganizationorbody;orbodyexercising,or entitledto exercise, any administrative,executive,judicial,legislative, police,regulatory,ortaxingauthority orpowerofany natureorinstrumentalityofanyoftheforegoing,includinganyentityorenterpriseownedor controlled bya governmentorapublicinternationalorganizationoranyofthe foregoing.
(f) AcknowledgmentRegarding Buyer's PurchaseofSecurities. The Companyacknowledgesand agreesthateachBuyerisactingsolely inthecapacity ofanarm'slengthpurchaserwithrespect totheTransactionDocumentsandthetransactionscontemplatedhereby and thereby andthat no Buyeris (i) an officerordirectoroftheCompanyoranyof itsSubsidiaries, (ii) toitsknowledge,an "affiliate" (as defined inRule144promulgatedunder the 1933Act (or a successor rule thereto) (collectively, “Rule 144”))oftheCompanyoranyof itsSubsidiariesor(iii) toitsknowledge,a “beneficial owner”ofmorethan10%ofthe
Common Shares (as defined for purposesof Rule13d-3ofthe 1934Act). The Company furtheracknowledgesthat no Buyerisactingas a financialadvisor orfiduciaryoftheCompanyoranyof itsSubsidiaries (or in any similarcapacity)withrespect tothe TransactionDocumentsandthetransactionscontemplatedhereby and thereby, and anyadvicegivenbyaBuyer oranyof itsrepresentativesor agentsinconnection with theTransactionDocumentsandthetransactionscontemplatedhereby and thereby is merelyincidentalto such Buyer's purchaseoftheSecurities. The Company further represents to eachBuyer thattheCompany'sdecisiontoenterinto theTransactionDocumentstowhichit is a party has been based solelyonthe independent evaluationbytheCompany andits representatives.
(g) NoIntegrated Offering.Noneofthe Company,its Subsidiariesor anyof their affiliates,nor any Personacting on their behalfhas, directlyorindirectly, made anyoffersorsalesofany securityor solicitedanyofferstobuyany security,undercircumstancesthatwouldcausethisofferingoftheSecurities to require approvalof stockholders oftheCompanyunderanyapplicablestockholderapproval provisions,including,withoutlimitation,under therules andregulations ofanyexchange orautomatedquotationsystemonwhichanyofthesecuritiesoftheCompany are listedor designatedforquotation. NoneoftheCompany,itsSubsidiaries,theiraffiliatesnorany Personacting on their behalfwilltakeanyaction orstepsthatwouldcausetheofferingof anyofthe Securities tobe integratedwith other offeringsof securitiesofthe Company.
(h) DilutiveEffect.The Company understands andacknowledgesthatthenumberofConversion Shareswillincrease in certain circumstances. The Company furtheracknowledgesitsobligationto issuetheConversion SharesuponconversionoftheConvertible Debentures in accordancewith thisAgreement,theConvertible Debentures,absoluteandunconditionalregardlessofthe dilutiveeffectthatsuch issuance mayhave ontheownership interestsofotherstockholders oftheCompany.
(i) ApplicationofTakeover Protections;RightsAgreement. The Company anditsboardofdirectorshave takenall necessaryaction,if any, in order to renderinapplicableany control shareacquisition,interested stockholder, businesscombination, poisonpill(including,withoutlimitation,anydistributionundera rights agreement),stockholderrightsplan orothersimilaranti-takeover provisionunder the Articlesof Incorporation,Bylaws orotherorganizational documents orthelaws ofthejurisdiction of itsincorporationorotherwisewhichisorcouldbecomeapplicableto anyBuyeras a resultofthetransactionscontemplated bythisAgreement,including,withoutlimitation,theCompany's issuanceoftheSecurities and any Buyer's ownershipofthe Securities.
(j) SECDocuments; Financial Statements. Duringthe two(2) years prior tothedatehereof,theCompany has timely filed all reports, schedules,forms,proxy statements, statements andotherdocumentsrequired tobefiledbyitwith theSECpursuant tothereporting requirementsoftheSecuritiesExchangeActof1934,as amended (the “1934 Act”) (alloftheforegoing filed prior tothedatehereof and filed after the Closing Date disclosing definitive agreements of the Company in transactions that do not constitute a Material Adverse Effect, and allexhibitsandappendicesincludedtherein and financial statements,notesand
schedulesthereto anddocumentsincorporatedbyreference thereinbeinghereinafterreferredto asthe“SECDocuments”).The Company has deliveredorhas madeavailabletotheBuyersor theirrespective representatives true, correct and completecopies ofeachoftheSECDocumentsnotavailable ontheEDGARsystem.As of theirrespective dates,theSECDocumentscomplied in all material respectswith therequirementsofthe 1934Act andtherules andregulations oftheSECpromulgated thereunderapplicabletotheSECDocuments, andnoneoftheSECDocuments, atthetimetheywere filedwith theSEC,containedany untrue statementofa material factoromitted to state a material fact required tobestated thereinornecessary in order to makethestatements therein, inthe lightofthecircumstancesunder whichtheywere made,notmisleading.As of theirrespective dates,thefinancial statementsoftheCompanyincludedintheSECDocuments(the “FinancialStatements”)complied in all material respectswith applicable accountingrequirements andthepublishedrules andregulations oftheSECwithrespect thereto as ineffectasofthetimeof filing.Such financial statementshavebeen prepared in accordancewithgenerally acceptedaccountingprinciples(“GAAP”),consistentlyapplied,duringtheperiodsinvolved(except (i) as maybeotherwiseindicatedin such financial statementsorthe notesthereto,or(ii) inthecaseofunauditedinterim statements, totheextent theymayexcludefootnotes ormaybe condensed orsummarystatements) and fairly present in all material respectsthefinancialpositionoftheCompany asofthedatesthereof andtheresultsof its operationsand cash flows fortheperiodsthen ended(subject, inthecaseofunauditedstatements, to normal year-endauditadjustmentswhich will notbematerial,eitherindividuallyorintheaggregate). The Company isnotcurrentlycontemplatingamendingorrestating anyoftheFinancial Statements(including,withoutlimitation,anynotesoranyletter ofthe independentaccountants oftheCompanywithrespect thereto)includedintheSECDocuments,norhas the Company been informed by its independent accountants that they recommend that the Company amend or restate any of the Financial Statements. The Company has engaged an approved audit form to audit the consolidated financial results for the Company and its subsidiaries.
(k) AbsenceofCertain Changes. Sincethedate oftheCompany's most recentauditedfinancial statementscontainedin aForm10-K,there has beennoMaterial Adverse Effect, nor any event or occurrence specifically affecting the Company or its Subsidiaries that would be reasonably expected to result in a Material Adverse Effect. Sincethedate oftheCompany's most recentauditedfinancial statementscontainedin aForm10-K,neithertheCompanynoranyof itsSubsidiaries has (i) declaredor paidanydividends,(ii) sold any material assets,individuallyorintheaggregate,outside oftheordinary courseofbusinessor(iii) made any materialcapitalexpenditures,individuallyorintheaggregate,outside oftheordinary courseofbusiness.NeithertheCompanynoranyof itsSubsidiaries hastakenany steps to seekprotectionpursuant to any lawor statuterelating to bankruptcy, insolvency, reorganization, receivership,liquidationorwindingup, nordoestheCompanyorany Subsidiaryhaveanyknowledgethatanyof theirrespective creditorsintendtoinitiateinvoluntary bankruptcy proceedings.
(l) No UndisclosedEvents,Liabilities, Developments orCircumstances.No event, liability, development orcircumstance has occurredorexists,oris reasonablyexpectedto
existor occurspecific totheCompany, anyof itsSubsidiariesoranyof theirrespective businesses, properties,liabilities,prospects,operations (includingresults thereof)orcondition(financialorotherwise),thathasnotbeenpubliclydisclosed andwouldreasonablybe expectedtohavea Material AdverseEffect.
(m) ConductofBusiness; Regulatory Permits.NeithertheCompanynoranyof itsSubsidiaries is inviolationofany termunderitsArticlesofIncorporation, any certificateofdesignation,preferencesorrightsofanyother outstandingseriesofpreferredstockoftheCompanyoranyof itsSubsidiariesor Bylaws or their organizationalcharter, certificateofformation, memorandumofassociation, articlesofassociation, ArticlesofIncorporationorcertificateofincorporationor bylaws,respectively.NeithertheCompanynoranyof itsSubsidiaries is inviolationofanyjudgment,decreeororderorany statute,ordinance,ruleor regulationapplicabletotheCompanyoranyof itsSubsidiaries, andneithertheCompanynoranyof itsSubsidiarieswill conductitsbusiness inviolationofanyoftheforegoing,exceptin all cases forviolations which would notreasonablybe expectedtohavea Material AdverseEffect.Withoutlimitingthegeneralityoftheforegoing,theCompany isnotinviolationofanyoftherules,regulations orrequirementsofthePrincipal Market and hasnoknowledgeofany factsorcircumstancesthatcouldreasonably lead todelisting orsuspensionoftheCommon SharesbythePrincipal Market intheforeseeable future. Duringthe oneyear prior tothedatehereof, (i)theCommon Shares have been listedor designatedforquotationonthePrincipal Market, (ii) trading intheCommon Shares hasnotbeen suspendedbytheSECorthePrincipal Market and (iii)theCompany has receivednocommunication, writtenororal,fromtheSECorthePrincipal Market regardingthesuspensionor delisting oftheCommon SharesfromthePrincipal Market, which has not been publicly disclosed. The Company and eachof itsSubsidiaries possess all certificates,authorizationsand permits issuedbytheappropriate regulatoryauthoritiesnecessary toconducttheirrespective businesses,exceptwherethefailure to possess such certificates,authorizations orpermitswould notreasonablybe expectedtohave,individuallyorintheaggregate, a Material AdverseEffect,andneithertheCompanynoranyof itsSubsidiaries has received anynoticeof proceedingsrelating totherevocationormodificationofany such certificate,authorization orpermit. There isnoagreement, commitment,judgment,injunction,orderordecreebindingupon theCompanyoranyof itsSubsidiariesortowhich theCompanyoranyof itsSubsidiaries is a partywhichhasorwouldreasonablybe expectedtohavetheeffectofprohibitingormaterially impairing any business practiceoftheCompanyoranyof itsSubsidiaries, anyacquisition ofpropertybytheCompanyoranyof itsSubsidiariesorthe conductofbusinessbytheCompanyoranyof itsSubsidiaries as currentlyconducted otherthansuch effects,individuallyorintheaggregate,whichhavenothad andwould notreasonablybe expectedtohavea Material AdverseEffectontheCompanyoranyof its Subsidiaries.
(n) Foreign Corrupt Practices.NeithertheCompanynoranyof itsSubsidiariesnorany director,officer,agent,employee,noranyotherpersonactingforor on behalf oftheCompanyoranyof itsSubsidiaries(individuallyand collectively, a “Company Affiliate”)haveviolated the U.S. Foreign Corrupt Practices Act (the“FCPA)or anyother applicable anti-briberyor anti-corruption laws,norhas any Company Affiliate offered,paid,promised to pay,orauthorizedthepaymentofany money,oroffered,given,promised togive,or
authorizedthe givingofanythingof value,to anyofficer,employeeoranyotherpersonactingin an officialcapacityfor any GovernmentalEntityto anypoliticalpartyorofficial thereoforto anycandidateforpoliticaloffice(individuallyand collectively, a “Government Official”)orto any personundercircumstances where such Company Affiliateknew orwas awareofahighprobability thatalloraportion ofsuch moneyorthingofvalue wouldbeoffered,givenorpromised, directlyorindirectly, to any Government Official, forthepurpose, inviolationofapplicablelaw, of: (i) (A)influencingany actor decision ofsuch Government Official inhis/herofficial capacity, (B)inducingsuch Government Official todo oromit todoany act inviolationof his/herlawful duty, (C) securing any improperadvantage, or(D)inducingsuch Government Official toinfluence oraffectany actor decision ofany Governmental Entity,or (ii)assistingtheCompanyor itsSubsidiaries inobtainingorretaining business fororwith,ordirecting businessto, theCompanyor its Subsidiaries.
(o) Equity Capitalization.
(i) Authorized and Outstanding Capital Stock. As of the date hereof, the authorized capital stock of the Company consists of 100,000,000Common Shares and 5,000,000 shares of Preferred Stock, par value $0.0001 per share, (the “Preferred Stock”), of which 18,540,474 Common Shares are issued and outstanding, andnone of the Preferred Stock have been designated or issued.
(ii) Valid Issuance; Available Shares. All of such outstanding shares are duly authorized and have been validly issued and are fully paid and nonassessable.
(iii) Existing Securities; Obligations. Except as disclosed in the SEC Documents: (A) none of the Company's or any Subsidiary's shares, interests or capital stock is subject to preemptive rights or any other similar rights or Liens arising by or through the Company or any Subsidiary; (B) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares, interests or capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares, interests or capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares, interests or capital stock of the Company or any of its Subsidiaries; (C) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the 1933 Act (except pursuant to this Agreement); (D) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (E) there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities; and (F) neither the Company nor any Subsidiary has any stock appreciation rights or "phantom stock" plans or agreements or any similar plan or agreement.
(iv) Organizational Documents. The Company has furnished to the Buyers or filed on EDGAR true, correct and complete copies of the Company's Articles of Incorporation, as amended and as in effect on the date hereof (the “Articles of Incorporation”), and the Company's bylaws, as amended and as in effect on the date hereof (the “Bylaws”), and the terms of all convertible securities and the material rights of the holders thereof in respect thereto.
(p) Litigation.Except as disclosed intheSECDocuments, there isno action,suit, arbitration,proceeding, inquiry orinvestigationbeforeor bythePrincipal Market, any court,publicboard,otherGovernmental Entity, self-regulatory organizationorbody pendingor,tothe knowledgeoftheCompany, threatened againstoraffectingtheCompanyoranyof itsSubsidiaries,theCommon SharesoranyoftheCompany'sor itsSubsidiaries' officersordirectors,whetherofacivil orcriminal natureorotherwise, intheir capacitiesas such,which wouldreasonablybe expectedto result in a Material AdverseEffect.Withoutlimitation oftheforegoing, there hasnotbeen,and tothe knowledgeoftheCompany, there isnot pendingor contemplated,anyinvestigationbytheSECinvolvingtheCompany, anyof itsSubsidiariesorany currentorformerdirectororofficeroftheCompanyoranyof itsSubsidiaries.NeithertheCompanynoranyof itsSubsidiaries isthesubjectofany order, writ,judgment,injunction,decree, determinationorawardofany GovernmentalEntity thatwouldreasonablybe expectedto result in a Material AdverseEffect.
(q) Insurance. The Company and eachof itsSubsidiaries are insuredbyinsurersofrecognized financial responsibility against such losses and risks and in such amounts as managementoftheCompanybelievestobeprudent and customary inthebusinesses inwhich theCompany anditsSubsidiaries areengaged. NeithertheCompanynorany such Subsidiary has been refused any insurance coveragesought or appliedfor,andneithertheCompanynorany such Subsidiary has any reason tobelieve thatitwillbeunableto renewits existinginsurance coverage as andwhensuch coverage expiresortoobtainsimilar coveragefromsimilar insurers as maybenecessary tocontinueitsbusiness at a costthatwould nothavea Material AdverseEffect.
(r) ManipulationofPrice.NeithertheCompanynoranyof itsSubsidiaries has,and,tothe knowledgeoftheCompany,noPersonacting on their behalfhas, directlyorindirectly,takenanyaction designedto causeorto result inthestabilization or manipulation ofthepriceofany securityoftheCompanyoranyof itsSubsidiaries to facilitatethesaleorresaleofanyoftheSecurities.
(s) RegistrationEligibility.The Company iseligibleto registertheresaleoftheConversion SharesbytheBuyersusingFormS-1promulgatedunder the 1933Act.
(t) RESERVED.
(u) MoneyLaundering. The Company anditsSubsidiaries are in compliancewith,andhavenotpreviouslyviolated, theUSA Patriot Actof2001and allother applicableU.S. and non-U.S. anti-moneylaundering lawsandregulations,including, but notlimitedto, thelaws,regulationsandExecutiveOrders andsanctionsprograms (“Sanctions Programs”) administeredbytheU.S. OfficeofForeign AssetsControl (“OFAC”),including,withoutlimitation,(i)ExecutiveOrder13224ofSeptember23, 2001 entitled,"Blocking Property and Prohibiting Transactions With PersonsWho Commit, Threaten to Commit,or SupportTerrorism" (66 Fed. Reg.49079 (2001)); and any regulations contained in 31 CFR, Subtitle B, Chapter V.
(v) Disclosure. The Company confirmsthat neitheritnoranyotherPersonacting on its behalfhasprovidedanyoftheBuyersor their agents orcounselwithany informationthat constitutes orcouldreasonablybe expectedtoconstitutematerial,non-publicinformation concerningtheCompanyoranyof itsSubsidiaries,otherthantheexistence ofthetransactionscontemplated bythisAgreement andthe otherTransaction Documents. The Company understands and confirmsthateachoftheBuyerswillrelyontheforegoing representations in effecting transactions in securitiesoftheCompany.Alldisclosureprovided or made availabletotheBuyers regardingtheCompany anditsSubsidiaries,theirbusinesses andthetransactionscontemplatedhereby,including theschedulestothisAgreement, furnishedby or on behalf oftheCompanyoranyof itsSubsidiaries,takenas awhole,is true and correct anddoesnotcontainany untrue statementofa material factoromit to state any material fact necessary in order to makethestatements made therein, inthe lightofthecircumstancesunder whichtheywere made,notmisleading. The Companyacknowledgesand agreesthat no Buyermakesorhas made any representationsorwarrantieswithrespect tothetransactionscontemplatedherebyotherthan thosespecifically set forth in Section 2.
(w) No General Solicitation. Neither the Company, nor any of its affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Securities.
(x) Private Placement. Assuming the accuracy of the Buyers’ representations and warranties set forth in Section 2, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Buyers as contemplated hereby. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Principal Market.
(a) Reporting Status. For the period beginning on the date hereof, and ending sixty days after the date on which all the Debentures are no longer outstanding (the “Reporting Period”),theCompany shall use its best efforts to file on a timely basis all reports required to be filedwith theSECpursuant tothe 1934Act, andtheCompany shallnotterminate its status
as an issuer required to file reportsunder the 1934Act even ifthe 1934Act ortherules and regulations thereunderwouldnolongerrequire or otherwise permit such termination.
(b) Use of Proceeds. Neither the Company nor any Subsidiary will, directly or indirectly, use the proceeds of the transactions contemplated herein to repay any loans to any executives or employees of the Company. Neither the Company nor any Subsidiary will, directly or indirectly, use the proceeds of the transactions contemplated herein, or lend, contribute, facilitate or otherwise make available such proceeds to any Person (i) to fund, either directly or indirectly, any activities or business of or with any Person that is identified on the list of Specially Designated Nationals and Blocker Persons maintained by OFAC, or in any country or territory, that, at the time of such funding, is, or whose government is, the subject of Sanctions Programs, or (ii) in any other manner that will result in a violation of Sanctions Programs.
(c) Listing. To the extent applicable, the Company shall promptly securethelisting or designation forquotation(asthecase may be) of all oftheUnderlying Securities (as definedbelow) uponeachnationalsecurities exchange and automatedquotationsystem, if any,upon which theCommon Shares are then listed or designated forquotation(asthecase may be, each an “Eligible Market”), subject to officialnoticeof issuance, and shall use reasonable efforts to maintain such listing or designation forquotation(asthecase may be) of all Underlying Securitiesfromtime to time issuableunder theterms oftheTransaction Documents on such Eligible Market for the Reporting Period. NeithertheCompanynorany of its Subsidiaries shall take any actionwhich couldbe reasonably expected to result inthedelisting or suspension oftheCommon Shares on an Eligible Market during the Reporting Period. The Company shall pay all fees and expenses inconnection withsatisfying itsobligations under this Section 4(c). “Underlying Securities” meansthe (i)the Conversion Shares,(ii) the Warrant Shares,and (iii) any Common Shares issued or issuablewithrespect totheConversion Shares or Warrant Shares,including,withoutlimitation, (1) as a result of any stock split, stockdividend,recapitalization, exchange or similar event or otherwise and (2) shares of capital stock oftheCompanyinto which theCommon Shares are converted or exchangedwithoutregard to any limitations on conversion oftheConvertible Debentures or exercise of the Warrants.
(d) Fees. The Company shall pay to YA Global II SPV, LLC, an affiliate of the lead Buyer (the “Subsidiary Fund”), a structuring fee (the “Structuring Fee”) in the amount of $15,000, of which $5,000 has been paid, and the balance shall be deducted from the gross proceeds of the Closing. The Company authorizes each Buyer to deduct any such fees due hereunder from the gross process of the purchase of any Convertible Debentures.
(e) Pledge of Securities.Notwithstanding anythingtothecontrary contained inthisAgreement,theCompanyacknowledgesand agrees that, subject to compliance with applicable federal and state securities laws,theSecurities may bepledgedby a Buyer inconnection withabonafide margin agreement orotherloan or financing arrangement that is secured bytheSecurities. The Company hereby agrees to execute and deliver such documentation as apledgeeoftheSecurities may reasonably request inconnection withapledgeoftheSecurities to suchpledgee by a Buyer.
(f) Disclosure of Transactions andOtherMaterial Information. On or before9:30a.m.,NewYorktime, onthefourth(4th) Business Day (as used herein“BusinessDay”means any dayotherthan a Saturday, Sunday orotherday onwhichcommercialbanksin NewYork,NewYorkare authorized or required by law to remain closed) afterthedate ofthisAgreement,theCompany shall file a Current Report onForm8-K describing allthematerial terms ofthetransactions contemplated bytheTransaction Documents intheformrequired bythe 1934Act and attaching allthematerial Transaction Documents (including,withoutlimitation,thisAgreement (including all attachments,the“8-KFiling”).Fromand afterthefiling ofthe8-K Filing,theCompany shall have disclosed all material,non-publicinformation (if any) provided to any oftheBuyers bytheCompany or any of its Subsidiaries or any of their respective officers, directors, employees or agents inconnection with thetransactions contemplated bytheTransaction Documents.Inaddition,effectiveupon thefiling ofthe8-K Filing,theCompanyacknowledgesand agrees that any and all confidentiality or similarobligations withrespect tothetransactions contemplated bytheTransaction Documentsunderany agreement,whetherwritten or oral, betweentheCompany, any of its Subsidiaries or any of their respective officers, directors, affiliates, employees or agents, onthe one hand,and any oftheBuyers or any of their affiliates, onthe other hand,shall terminate. The Company shallnot,andtheCompany shall cause each of its Subsidiaries and each of its and their respective officers, directors, employees and agentsnot to,provide any Buyerwithany material,non-publicinformation regardingtheCompany or any of its Subsidiariesfromand afterthedate hereof except pursuant a specific request by such Buyer.
(g) Reservation of Shares.Solongas any oftheConvertible Debentures remainoutstanding, theCompany shall take all action necessary to at all times have authorized, and reserved forthepurpose of issuance, no less than300%ofthemaximum number of shares of Common Shares issuableuponconversion of alltheConvertible Debentures thenoutstanding(assuming for purposes hereof that (x)theConvertible Debenturesare convertible atthe Market Conversion Price (as defined therein) then in effect, and (y) any such conversion shallnottakeintoaccount any limitations ontheconversion oftheConvertible Debentures), and 100% of the Warrant Shares (the“Required ReserveAmount”);provided that at no time shallthenumber of Common Shares reserved pursuant tothisSection 4(g) be reducedotherthan proportionally inconnection withany conversionand/orredemption, or reverse stock split.Ifat any timethenumber of shares of Common Shares authorized and reserved for issuance isnotsufficient to meettheRequired Reserved Amount,theCompanywillpromptly take all corporate action necessary to authorize and reserve a sufficient number of shares,including,withoutlimitation, calling a special meeting of stockholders to authorizeadditionalshares to meettheCompany'sobligationspursuant totheTransaction Documents, inthecase of an insufficient number of authorized shares, and recommending that stockholders vote in favor of an increase in such authorized number of shares sufficient to meettheRequired Reserved Amount.
(h) Certain Transactions. Beginning on the date hereof and ending on the date three months following the date that theConvertible Debentures have been fully repaid, the Company shall not issue any securities, preferred shares, notes, loans, or other instruments which are convertible, exercisable, or exchangeable into Common Shares at a price that varies with the market price or can periodically be reset. For the sake of clarity, the Company shall remain free to participate in any non-variable rate equity or convertible debt financing transaction.
(i) Piggy-Back Registrations. If at any time there is not an effective registration statement covering the Securities and the Company shall determine to prepare and file with the SEC a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the stock option or other employee benefit plans, then the Company shall send to each Buyer a written notice of such determination and, if within fifteen (15) days after the date of such notice, any such Buyer shall so request in writing, the Company shall include in such registration statement all or any part of such Securities such Buyer requests to be registered.
(j) Conductof Business. The business oftheCompany and its Subsidiaries shallnotbeconductedinviolationof any law, ordinance or regulation of any Governmental Entity, except where suchviolations would notreasonably be expected to result, eitherindividuallyor intheaggregate, in a Material AdverseEffect.
(k) No Short Sales. The Buyer hereby agrees that it shall not directly or indirectly, engage in any Short Sales involving the Company’s securities during the period commencing on the date hereof and ending five months after the date when no Convertible Debentures remain outstanding. "Short Sales" means all "short sales" as defined in Rule200promulgatedunder RegulationSHOunder the 1934Act (as defined below), whether or not against the box, and forward sale contracts, options, puts, calls, “put equivalent positions” (as defined in Rule 16a-1(h) under the 1934 Act) and similar arrangements, and sales and other transactions through non-U.S. broker dealers or foreign regulated brokers.
| 5. | REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND. |
(a) Register. The Company shall maintain at its principal executive offices orwith theTransferAgent(or at suchotheroffice or agency oftheCompany as it may designate bynoticeto eachholderof Securities), a register fortheConvertible Debentures and the Warrants inwhich theCompany shall recordthename and address ofthePerson in whose nametheConvertible Debentures and Warrants have been issued (includingthename and address of each transferee),theamount of Convertible Debentures and Warrants held by such Person, andthenumber of Conversion Shares issuableuponconversion oftheConvertible Debentures held by such Person and Warrants Shares issuable upon exercise of the Warrants held by such Person. The Company shall keeptheregister open and available at all times during business hours for inspection of any Buyer or its legal representatives.
(b) Transfer Restrictions. 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 Buyer or in connection with a pledge as contemplated herein, 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 and obligations of a Buyer under this Agreement.
| 6. | CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL. |
TheobligationoftheCompany hereunder to issue and selltheConvertible Debentures to eachBuyerateachClosingis subject tothesatisfaction, atorbeforetheClosing Date, ofeachofthefollowingconditions,provided thattheseconditionsare fortheCompany's sole benefit and maybe waived bytheCompany at any time initssole discretionby providingeachBuyerwithprior writtennotice thereof:
(a) Such Buyer shall have executed each oftheTransaction Documents towhichit is a party and deliveredthesame tothe Company.
(b) Such Buyer and eachotherBuyer shall have delivered totheCompanythePurchase Price (less, inthecase of any Buyer,theamountswithheldpursuant to Section 4(d)) fortheConvertible Debenturesbeingpurchased by such Buyer attheClosing by wire transfer of immediately available funds in accordancewith theClosing Statement.
(c) The representations and warranties of such Buyer shall be true and correct in all material respects as ofthedate when made and as ofeachClosing Date asthoughoriginally made at that time (except for representations and warranties that speak as of a specific date,which shall be true and correct as of such specific date), and such Buyer shall have performed, satisfied and complied in all material respectswith thecovenants, agreements andconditionsrequired bythisAgreement to be performed, satisfied or compliedwith by such Buyer at or prior tosuchClosing Date.
| 7. | CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. |
The obligation of each Buyer hereunder to purchase its Convertible Debentures at each Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for each Buyer's sole benefit and may be waived by such Buyer at any time in its sole discretion by providing the Company with prior written notice thereof:
(a) The Company shall havedulyexecuted and delivered to such Buyer each oftheTransaction Documents towhichit is a party andtheCompany shall havedulyexecuted and delivered to such Buyer such aggregate amount ofConvertible Debentures as is set forthoppositesuch Buyer's name in column (b) oftheSchedule of Buyers for each Closing.
(b) The Company shall have delivered to each Buyer copies of its and each Subsidiaries certified copies of its charter, as well as any shareholder or operating agreements by or among the shareholders or members of any of the Company’s Subsidiaries.
(c) Each and every representation and warranty oftheCompany shall be true and correct in all material respects (other than representations and warranties qualified by
materiality,whichshall be true and correct in all respects) as ofthedate when made and as oftheClosing Date asthoughoriginally made at that time (except for representations and warranties that speak as of a specific date,whichshall be true and correct as of such specific date) andtheCompany shall have performed, satisfied and complied in all respectswith thecovenants, agreements andconditionsrequired to be performed, satisfied or compliedwithbytheCompany at or prior totheClosing Date, as set forth in section 3 and 4.
(d) The Common Shares, to the extent applicable (A) shall be designated forquotationor listed (as applicable) onthePrincipal Market and (B) shallnothave been suspended, as oftheClosing Date, bytheSECorthePrincipal Marketfromtrading onthePrincipal Marketnorshall suspension bytheSECorthePrincipal Market have been threatened, as ofeachClosing Date, either(I) in writing bytheSEC orthe Principal Market or(II) by fallingbelow the minimum maintenance requirements ofthePrincipal Market.
(e) The Company shall haveobtainedall governmental, regulatory or third-party consents and approvals, if any, necessary forthe sale ofthe Securities,includingwithout limitation, those required bythe Principal Market, if any.
(f) No statute, rule, regulation, executive order, decree, ruling orinjunctionshall have been enacted, entered, promulgated or endorsed by any court or Governmental Entity of competent jurisdiction that prohibitstheconsummation of any ofthetransactions contemplated bytheTransaction Documents.
(g) Sincethedate of execution ofthisAgreement, no event or series of events shall have occurred that has resulted in orwouldreasonably be expected to result in a Material AdverseEffect.
(h) The Company shall haveobtainedapproval ofthePrincipal Market to list or designate forquotation theConversion Shares, if applicable.
(i) Such Buyer shall have received a letter,duly executed byan officeroftheCompany, setting forththewire amounts of each Buyer andthewire transfer instructions oftheCompany (the “Closing Statement”).
(j) Fromthedate hereof tothe applicableClosing Date, (i) trading intheCommon Shares shallnothave been suspended bytheSECorthePrincipal Market (except for any suspension of trading of limited duration agreed to bytheCompany,whichsuspension shall be terminated prior totheClosing), and (ii) at any time prior totheClosing Date, trading in securities generally as reported by BloombergL.P.shallnothave been suspended or limited, or minimum prices shallnothave been established on securities whose trades are reported by such service, or onthePrincipal Market,norshall abankingmoratorium have been declared either bythe UnitedStates or NewYorkState authoritiesnorshall there have occurred any material outbreak or escalation of hostilities orother nationalor international calamity of such magnitude in itseffecton,or any material adverse changein,any financial marketwhich,in each case, inthereasonable judgment of each Buyer, makes it impracticable or inadvisable to purchasetheSecurities atthe Closing.
(k) The Company and its Subsidiaries shall have delivered to such Buyer suchotherdocuments, instruments or certificates relating tothetransactions contemplated bythisAgreement as such Buyer or its counsel may reasonably request.
(l) Such Buyer shall have received the opinion of counsel to the Company dated as of the Closing Date, in an agreed upon form.
(m) The Company shall have been admitted to the OTCQB market.
(n) The Company and the Company’s transfer agent shall have executed and delivered irrevocable transfer agent instructions with respect to the issuance of the Conversion Shares and Warrant Shares, in a form satisfactory to the Buyer.
In the event that the Closing shall not have occurred with respect to a Buyer within twenty days of the date hereof, then such Buyer shall have the right to terminate its obligations under this Agreement with respect to itself at any time on or after the close of business on such date without liability of such Buyer to any other party; provided, however, (i) the right to terminate this Agreement under this Section 8 shall not be available to such Buyer if the failure of the transactions contemplated by this Agreement to have been consummated by such date is the result of such Buyer's breach of this Agreement and (ii) the abandonment of the sale and purchase of the Convertible Debentures shall be applicable only to such Buyer providing such written notice, provided further that no such termination shall affect any obligation of the Company under this Agreement to reimburse such Buyer for the expenses described herein. Nothing contained in this Section 8 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement or the other Transaction Documents.
(a) Governing Law; Jurisdiction; Jury Trial.Allquestions concerningtheconstruction, validity, enforcement and interpretation ofthisAgreement shall be governed bytheinternal laws oftheState of NewYork,withoutgivingeffectto any choice of law or conflict of law provision or rule (whether oftheState of NewYorkor anyotherjurisdictions) thatwouldcausethe applicationofthelaws of any jurisdictionsotherthantheState of NewYork. Each party hereby irrevocably waives personal service of process and consents to processbeingserved in any such suit, action or proceeding by mailing a copy thereof to such party attheaddress for such notices to itunder thisAgreement and agrees that such service shall constitutegoodand sufficient service of process andnoticethereof.Nothingcontained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.Nothingcontained herein shall be deemed or operate to preclude any Buyerfrombringing suit ortaking otherlegal action againsttheCompany in anyotherjurisdiction to collect ontheCompany'sobligationsto such Buyer or to enforce a judgment orothercourt ruling in favor of such Buyer.EACHPARTYHEREBY IRREVOCABLYWAIVESANYRIGHT ITMAYHAVETO,ANDAGREES NOT TO REQUEST, A JURY TRIALFOR
THE ADJUDICATIONOFANYDISPUTE HEREUNDERORUNDER ANYOTHER TRANSACTION DOCUMENTORIN CONNECTION WITHORARISING OUTOFTHIS AGREEMENT,ANYOTHER TRANSACTION DOCUMENTORANYTRANSACTION CONTEMPLATED HEREBYORTHEREBY.
(b) Counterparts. This Agreement may be executed intwoor more identical counterparts, all ofwhichshall be consideredoneandthesame agreement and shall become effective when counterparts have been signed by each party and delivered tothe otherparty.Intheevent that any signature is delivered by facsimile transmission or by an e-mailwhich containsa portable documentformat(.pdf) file of an executed signature page, such signature page shall create a valid andbindingobligationoftheparty executing (or on whose behalf such signature is executed)with thesame force andeffectas if such signature page were an original thereof.
(c) Headings; Gender. TheheadingsofthisAgreement are forconvenienceof reference and shallnotformpart of, oraffecttheinterpretation of,thisAgreement. Unlessthe contextclearly indicates otherwise, each pronoun herein shall be deemed toinclude themasculine, feminine, neuter, singular and pluralformsthereof. The terms "including," "includes," "include" and words oflikeimport shall be construed broadly as if followed bythewords "without limitation." The terms "herein," "hereunder," "hereof" and words oflikeimportrefertothisentire Agreement instead of justtheprovision inwhichthey are found.
(d) Entire Agreement, Amendments. This Agreement supersedes all other prior oral or written agreements between the Buyer, the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and 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 any 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 party to be charged with enforcement.
(e) Notices.Anynotices, consents, waivers orothercommunications required or permitted to begiven under theterms ofthisAgreement must be in writing by letter and email andwillbe deemed to have been delivered: upon the later of (A) either (i) receipt, when delivered personally or (ii)one(1) Business Day after depositwithan overnight courier servicewithnext day delivery specified, in each case, properly addressed totheparty to receivethesame and (B) receipt, when sent by electronic mail. The addresses and e-mail addresses for such communications shall be:
If to the Company, to: | US Nuclear Corp. 7051 Eton Avenue Canoga Park, CA 91303 Attention: Bob Goldstein Email: rgoldsteinta@gmail.com |
| |
| |
With Copy to: | Anthony R. Paesano Paesano Akkashian Apkarian, PC 7457 Franklin Road, Suite 200 Bloomfield Hills, MI 48301 Email: apaesano@paalawfirm.com |
| |
If to a Buyer, to its address, e-mail address and facsimile number set forth on the Schedule of Buyers, with copies to such Buyer's representatives as set forth on the Schedule of Buyers, |
| |
| |
With copy to: | David Gonzalez, Esq. c/o Yorkville Advisors Global, LP 1012 Springfield Avenue Mountainside, NJ 07092 Email: legal@yorkvilleadvisors.com |
| |
or to such other address, e-mail address and/or facsimile number and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine or e-mail containing the time, date, recipient facsimile number and, with respect to each facsimile transmission, an image of the first page of such transmission or (C) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively.
(f) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. Neither party may assign this Agreement or any rights or obligations hereunder without the prior written consent of the other party hereto.
(g) Indemnification.
(i) Inconsiderationofeach Buyer'sexecutionand deliveryoftheTransactionDocumentsandacquiringtheSecurities thereunder and inadditionto alloftheCompany'sother obligations under theTransaction Documents,theCompany shall defend, protect, indemnify andholdharmless eachBuyerand each of theirstockholders, partners, members, officers, directors, employees and anyoftheforegoing Persons'agents orotherrepresentatives(including,withoutlimitation, thoseretained inconnection with thetransactions
contemplated bythisAgreement) (collectively,the"Indemnitees")fromand against any and allactions,causesof action,suits, claims, losses, costs,penalties,fees,liabilitiesand damages, and expenses inconnectiontherewith (irrespectiveofwhetherany such Indemnitee is a party totheactionforwhichindemnification hereunder is sought), andincludingreasonable attorneys' fees and disbursements (the"IndemnifiedLiabilities"), incurredbyany Indemnitee as a result of,orarisingoutof,orrelating to (i) any misrepresentationorbreachofany representationorwarranty madebytheCompany in anyoftheTransaction Documents, (ii) any breachofanycovenant,agreementorobligationoftheCompanyorany Subsidiarycontainedin anyoftheTransactionDocuments or(iii) any causeof action,suit, proceedingorclaimbrought ormade against such Indemniteebya third party(includingfor these purposes aderivative action brought on behalf oftheCompanyorany Subsidiary) orwhichotherwiseinvolvessuch Indemnitee, in each instancethatarisesoutof orresultsfrom(A)the execution,delivery, performanceorenforcementofanyoftheTransaction Documents, (B) any transaction financedortobefinanced inwholeorin part, directlyorindirectly,with theproceedsoftheissuanceoftheSecurities,or(C) any disclosure properly madebysuchBuyerpursuant to Section 4(f).Totheextent thattheforegoingundertaking bytheCompany maybeunenforceable for any reason,theCompany shall makethemaximumcontributiontothepayment and satisfactionofeachoftheIndemnifiedLiabilitieswhichis permissibleunder applicable law.
(ii) Promptly after receiptby an Indemniteeunder this Section 9(g)ofnoticeofthe commencementof anyaction orproceeding(includingany governmentalaction or proceeding)involvingan Indemnified Liability, such Indemnitee shall, if a claim in respect thereof is tobemade againsttheCompanyunder thisSection 9(g),delivertotheCompany a writtennoticeofthecommencement thereof, andtheCompany shallhavetheright to participatein,and,totheextenttheCompany so desires, to assume controlofthedefense thereofwithcounselmutuallyreasonably satisfactory totheCompany andtheIndemnitee;provided,however,thatan Indemnitee shallhavetheright to retainitsowncounselwith thefees and expensesofsuch counsel tobe paid bytheCompany if: (A)theCompany has agreed inwritingto pay such fees and expenses; (B)theCompany shallhavefailed promptly to assumethedefenseofsuch IndemnifiedLiabilityand to employ counsel reasonably satisfactory to such Indemnitee in any such IndemnifiedLiability; or(C)thenamed parties to any such IndemnifiedLiability (includingany impleaded parties)include bothsuch Indemnitee andtheCompany, and such Indemnitee shallhavebeen advisedbycounselthata conflictofinterest islikelyto exist ifthesame counsel were to represent such Indemnitee andtheCompany (inwhichcase, if such Indemnitee notifiestheCompany inwriting thatit elects to employ separate counsel attheexpenseoftheCompany,thentheCompany shallnothavetheright to assumethedefense thereof and such counsel shallbeattheexpenseoftheCompany),providedfurther,thatinthecaseofclause (C)above theCompany shallnotberesponsible forthereasonable fees and expensesofmorethanone(1) separatelegalcounsel fortheIndemnitees. The Indemnitee shall reasonably cooperatewith theCompany inconnection withanynegotiationordefenseofany suchaction orIndemnifiedLiability bytheCompany and shall furnish totheCompany all information reasonablyavailabletotheIndemniteewhichrelates to suchaction orIndemnified Liability. The Company shall keeptheIndemnitee reasonably apprised at all times as tothestatusofthedefenseorany settlementnegotiations withrespect thereto. The Company shallnotbeliablefor any settlementofanyaction,claimorproceeding effectedwithoutitsprior writtenconsent, provided,however,thattheCompany shallnotunreasonablywithhold,delay orconditionits consent.The Company shallnot,withouttheprior written consentofthe
Indemnitee, consent to entryofanyjudgment or enterintoany settlementorothercompromisewhichdoesnot includeas anunconditionalterm thereofthe givingbytheclaimantorplaintiff to such Indemniteeofa releasefromallliabilityin respect to such IndemnifiedLiability orlitigation,and such settlement shallnot includeany admission as to faultonthepartoftheIndemnitee.Followingindemnification asprovidedfor hereunder,theCompany shallbesubrogated to all rightsoftheIndemniteewithrespect to all third parties,firmsorcorporations relating tothematter forwhichindemnification has been made. The failure todeliverwrittennoticetotheCompanywithina reasonable timeofthecommencementofany suchactionshallnotrelievetheCompanyofanyliabilitytotheIndemniteeunder thisSection 9(g),excepttotheextent thattheCompany is materially and adversely prejudiced initsabilityto defend suchaction.
(iii) The indemnification requiredbythisSection 9(g) shallbemadeby periodicpaymentsoftheamount thereofduringthecourseofthe investigationordefense,withinten (10)daysafterbillssupportingtheIndemnifiedLiabilitiesare receivedbythe Company.
(iv) Theindemnityagreementcontainedherein shallbeinadditionto (A) any causeof action orsimilar rightoftheIndemnitee againsttheCompanyorothers, and (B) anyliabilities theCompany maybesubject to pursuant tothe law.
(h) 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.
[REMAINDER PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.
| COMPANY: |
| US NUCLEAR CORP. |
| |
| By:/s/ Bob Goldstein |
| Name: Bob Goldstein |
| Title: CEO |
| |
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.
| BUYER: |
| YA II PN, LTD. |
| |
| By: Yorkville Advisors Global, LP |
| Its: Investment Manager |
| |
| By: Yorkville Advisors Global II, LLC |
| Its: General Partner |
| |
| By:/s/ David Gonzalez |
| Name: David Gonzalez |
| Title: Member |
EXHIBIT A
FORM OF CONVERTIBLE DEBENTURES
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE BEEN SOLD IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND ACCORDINGLY, MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR PURSUANT TO AVAILABLE EXEMPTION FROM THE REGISTATION REQUIREMENTS OF THE SECURITIES ACT, THE AVAILABILITY OF WHICH IS CONFIRMED BY AN OPINION OF COUNSEL IN GENERALLY ACCEPTABLE FORM, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
US NUCLEAR CORP.
Convertible Debenture
Issuance Date: November 25, 2019 | Original Principal Amount: $500,000 |
No. UCLE 1 | |
FOR VALUE RECEIVED, US NUCLEAR CORP., a company organized and existing under the laws of the State of Delaware (the "Company"), hereby promises to pay to the order of YA II PN, LTD. or registered assigns (the "Holder") the amount set out above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the "Principal") when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest ("Interest"), if any, on any outstanding Principal at the applicable Interest Rate from the date set out above as the Issuance Date (the "Issuance Date") until the same becomes due and payable, whether upon the Maturity Date or acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof). This Convertible Debenture (including all Convertible Debentures issued in exchange, transfer or replacement hereof, this "Debenture") is issued pursuant to the Securities Purchase Agreement. Certain capitalized terms used herein are defined in Section (15).
GENERAL TERMS
A. Payment of Principal. The Company shall pay to the Holder an amount in cash representing all outstanding Principal, accrued and unpaid Interest on March 25, 2021[1] (the "Maturity Date). Other than as specifically permitted by this Debenture, the Company may not prepay or redeem any portion of the outstanding Principal at any time.
B. Interest. Interest shall accrue on the outstanding Principal at an annual rate equal to 8% (the “Interest Rate”). Interest shall be calculated on the basis of a 365-day year and the actual number of days elapsed, to the extent permitted by applicable law. Interest hereunder shall be paid on each the Maturity Date (or sooner as provided herein) to the Holder or its assignee in whose name this Debenture is registered on the records of the Company regarding registration and transfers of Debentures.
C. Default Interest. From and after the occurrence and during the continuance of an Event of Default, the Interest Rate shall be increased to 12% per annum. In the event that such Event of Default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure.
EVENTS OF DEFAULT.
D. An “Event of Default”, wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
1. the Company's failure to pay to the Holder any amount of Principal, Interest, or other amounts when and as due under this Debenture or any other Transaction Document within five (5) Business Days after such payment is due;
2. The Company or any subsidiary of the Company shall commence, or there shall be commenced against the Company or any subsidiary of the Company under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company or any subsidiary of the Company commences any other proceeding under any dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any subsidiary of the Company or there is commenced against the Company or any subsidiary of the Company any such bankruptcy, insolvency or other liquidation proceedings which remains undismissed for a period of 61 days; or the Company or any subsidiary of the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or any subsidiary of the Company suffers any appointment of any custodian, private or court appointed receiver or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of 61 days; or the Company or any subsidiary of the Company makes a general assignment for the benefit of creditors; or the Company or any subsidiary of the Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its
debts generally as they become due unless disputed by the Company in good faith; or the Company or any subsidiary of the Company shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or the Company or any subsidiary of the Company shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company or any subsidiary of the Company for the purpose of effecting any of the foregoing. For the sake of clarity, any action or proceeding instituted in reliance upon the exchange provisions afforded by Section 3(a)(10) of the Securities Act shall not constitute and Event of Default.
3. the Company or any subsidiary of the Company shall default in any of its obligations under any other debenture or any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement of the Company or any subsidiary of the Company in an amount exceeding $25,000, whether such indebtedness now exists or shall hereafter be created and such default is not cured within five (5) Business Days;
4. The Stock ceases to be so quoted or listed for trading for on an Eligible Market for a period of 5 consecutive Trading Days;
5. The Company's (A) failure to cure a Conversion Failure by delivery of the required number of shares of Stock within 3 Business Days after the applicable Conversion Failure or (B) notice, written or oral, to any holder of the Debenture, including by way of public announcement, at any time, of its intention not to comply with a request for conversion of the Debenture into shares of Stock that is tendered in accordance with the provisions of the Debentures;
6. The Company shall fail for any reason to deliver the payment in cash pursuant to a Buy-In (as defined herein) within 3 Business Days after such payment is due;
7. The Company shall fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach or default of any provision of this Debenture (except as may be covered by Section 2(a)(i) through 2(a)(vi) hereof) or any Transaction Documents (as defined in Section 15) which is not cured within the time prescribed.
8. any Event of Default occurs with respect to any Transaction Document.
E. During the time that any portion of this Debenture is outstanding, if any Event of Default has occurred, the full unpaid Principal amount of this Debenture, together with Interest and other amounts owing in respect thereof, to the date of acceleration shall become immediately due and. In addition to any other remedies, the Holder shall have the right (but not the obligation) to convert any outstanding amounts owed under this Debenture at any time, and from time to time, after an Event of Default at the applicable Conversion Price. Except as provided for herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, (other than required notice of conversion) and the Holder may if such Event of Default remains uncured after notice as may be provided for in the Transaction
Documents immediately enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such declaration may be rescinded and annulled by Holder at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.
COMPANY REDEMPTION.
F. Company’s Optional Redemption. The Company at its option shall have the right to redeem (“Optional Redemption”) a portion of or all amounts outstanding under this Debenture prior to the Maturity Date as set forth in this Section 3. The Company shall pay an amount equal to the Principal amount being redeemed plus the applicable Redemption Premium, and accrued Interest, (collectively referred to as the “Redemption Amount”). In order to make a redemption pursuant to this Section, the Company shall first provide written notice to the Holder of its intention to make a redemption (the “Redemption Notice”) setting forth the amount of Principal it desires to redeem, provided that the Company shall not, without the prior consent of the Holder, provide a Redemption Notice at any time during which the price of the Stock is trading above the Fixed Conversion Price. After receipt of the Redemption Notice the Holder shall have 5 Business Days to elect to convert all or any portion of this Debenture, subject to the limitations set forth herein and in accordance with the terms herein. On the 6th Business Day after the Redemption Notice, the Company shall deliver to the Holder the Redemption Amount with respect to the Principal amount redeemed after giving effect to conversions effected during the 5 Business Day period.
CONVERSION OF DEBENTURE. This Debenture shall be convertible into shares of the Company's Stock, on the terms and conditions set forth in this Section 4.
G. Conversion Right. Subject to the provisions of Section 4(c) below, at any time or times on or after the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and unpaid Principal and accrued Interest (the “Conversion Amount”) into fully paid and nonassessable shares of Stock in accordance with Section 4(b) and 4(c), at the applicable Conversion Price (as defined below). The number of shares of Stock issuable upon conversion of any Conversion Amount pursuant to this Section 4(a) shall be determined by dividing (x) such Conversion Amount by (y) the applicable Conversion Price. The Company shall not issue any fraction of a share of Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Stock, the Company shall round such fraction of a share of Stock up to the nearest whole share. The Company shall pay any and all transfer, stamp and similar taxes that may be payable with respect to the issuance and delivery of Stock upon conversion of any Conversion Amount.
"Conversion Price" means, as of any Conversion Date (as defined below) or other date of determination shall be the lower (i) $1.50 (the “Fixed Conversion Price”) or (ii) 80% of the lowest daily VWAPs during the 5 consecutive Trading Days immediately preceding the Conversion Date or other date of determination (the “Market Conversion Price”). The Conversion Price shall be adjusted from time to time for any stock splits or stock dividends and pursuant to the other terms and conditions of this Debenture.
H. Mechanics of Conversion.
1. To convert any Conversion Amount into shares of Stock on any date (a "Conversion Date"), the Holder shall (A) transmit by electronic mail (or otherwise deliver), for receipt on or prior to 5:00 p.m., New York Time, on such date, a copy of an executed notice of conversion in the form attached hereto asExhibit I (the "Conversion Notice") to the Company and (B) if required by Section (4)(b)(iii), surrender this Debenture to a nationally recognized overnight delivery service for delivery to the Company (or an indemnification undertaking reasonably satisfactory to the Company with respect to this Debenture in the case of its loss, theft or destruction). On or before the 3rd Business Day following (i) the date of receipt of a Conversion Notice (the "Share Delivery Date"), the Company shall (X) if legends are not required to be placed on certificates of Stock pursuant to the Securities Purchase Agreement and provided that the Transfer Agent is participating in the Depository Trust Company's ("DTC") Fast Automated Securities Transfer Program, credit such aggregate number of shares of Stock to which the Holder shall be entitled to the Holder's or its designee's balance account with DTC through its DWAC system or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Stock to which the Holder shall be entitled which certificates shall not bear any restrictive legends unless required pursuant to the Securities Purchase Agreement. If this Debenture is physically surrendered for conversion and the outstanding Principal of this Debenture is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than 3 Business Days after receipt of this Debenture and at its own expense, issue and deliver to the holder a new Debenture representing the outstanding Principal not converted. The Person or Persons entitled to receive the shares of Stock issuable upon a conversion of this Debenture shall be treated for all purposes as the record holder or holders of such shares of Stock upon the transmission of a Conversion Notice.
2. Company's Failure to Timely Convert. Company shall issue and deliver a certificate to the Holder or credit the Holder's balance account with DTC for the number of shares of Stock to which the Holder is entitled upon each conversion of any Conversion Amount within 3 Trading Days after the Company's receipt by electronic mail of a copy of a Conversion Notice. If the Company fails to deliver such shares within 3 Trading Days, unless such delivery failure results from a failure of the Company’s transfer agent to issue such shares as a result of an act of terrorism, war, natural disaster, act of god or other force majeure event, (a "Conversion Failure"), and if on or after a Conversion Failure the Holder purchases (in an open market transaction or otherwise) Stock to deliver in satisfaction of a sale by the Holder of Stock issuable upon such conversion that the Holder anticipated receiving from the Company (a "Buy-In"), then the Company shall, within 3 Business Days after the Holder's request and in the Holder's discretion, either (i) pay cash to the Holder in an amount equal to the Holder's total purchase price (including brokerage commissions and other out of pocket expenses, if any) for the shares of Stock so purchased (the"Buy-In Price"), at which point the Company's obligation to deliver such certificate (and to issue such Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Stock and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Stock, times (B) the Closing Bid Price on the Conversion Date.
3. Book-Entry. Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Debenture in accordance with the terms hereof, the Holder shall not be required to physically surrender this Debenture to the Company unless (A) the full Conversion Amount represented by this Debenture is being converted or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of this Debenture upon physical surrender of this Debenture. The Holder and the Company shall maintain records showing the Principal and Interest converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Debenture upon conversion.
I. Limitations on Conversions.
1. Beneficial Ownership. The Holder shall not have the right to convert any portion of this Debenture or otherwise receive shares of Stock hereunder to the extent that after giving effect to such conversion or receipt of such shares, the Holder, together with any affiliate thereof, would beneficially own (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 4.99% of the number of shares of Stock outstanding immediately after giving effect to such conversion or receipt of shares as payment of interest. Since the Holder will not be obligated to report to the Company the number of shares of Stock it may hold at the time of a conversion hereunder, unless the conversion at issue would result in the issuance of shares of Stock in excess of 4.99% of the then outstanding shares of Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction contained in this Section will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section applies, the determination of which portion of the principal amount of this Debenture is convertible shall be the responsibility and obligation of the Holder. If the Holder has delivered a Conversion Notice for a principal amount of this Debenture that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the conversion for the maximum principal amount permitted to be converted on such Conversion Date in accordance with Section 4(a) and, any principal amount tendered for conversion in excess of the permitted amount hereunder shall remain outstanding under this Debenture. The provisions of this Section may be waived by a Holder (but only as to itself and not to any other Holder) upon not less than 65 days prior notice to the Company. Other Holders shall be unaffected by any such waiver.
J. Other Provisions.
1. The Company shall at all times reserve and keep available out of its authorized Stock the full number of shares of Stock issuable upon conversion of all outstanding amounts under this Debenture; and within 3 Business Days following the receipt by the Company of a Holder's notice that such minimum number of Underlying Shares is not so reserved, the Company shall promptly reserve a sufficient number of shares of Stock to comply with such requirement.
2. All calculations under this Debenture shall be rounded to the nearest $0.0001 or whole share.
K. Adjustment of the Fixed Conversion Price upon Subdivision or Combination of Stock. If the Company, at any time while this Debenture is outstanding, shall (a) pay a stock dividend or otherwise make a distribution or distributions on shares of its Stock or any other equity or equity equivalent securities payable in shares of its Stock, (b) subdivide outstanding shares of Stock into a larger number of shares, (c) combine (including by way of reverse stock split) outstanding shares of its Stock into a smaller number of shares, or (d) issue by reclassification of shares of the Stock any shares of capital stock of the Company, then the Fixed Conversion Price, as applicable, shall be multiplied by a fraction of which the numerator shall be the number of shares of Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Stock outstanding after such event. Any adjustment made pursuant to this Section 4(g) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
REISSUANCE OF THIS DEBENTURE.
L. Transfer. If this Debenture is to be transferred, the Holder shall surrender this Debenture to the Company, whereupon the Company will, subject to the satisfaction of the transfer provisions of the Securities Purchase Agreement, forthwith issue and deliver upon the order of the Holder a new Debenture (in accordance with Section 5(d)), registered in the name of the registered transferee or assignee, representing the outstanding Principal being transferred by the Holder and, if less than the entire outstanding Principal is being transferred, a new Debenture (in accordance with Section 5(d)) to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Debenture, acknowledge and agree that, by reason of the provisions of Section 4(c)(iii) following conversion or redemption of any portion of this Debenture, the outstanding Principal represented by this Debenture may be less than the Principal stated on the face of this Debenture.
M. Lost, Stolen or Mutilated Debenture. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Debenture, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Debenture, the Company shall execute and deliver to the Holder a new Debenture (in accordance with Section 5(d)) representing the outstanding Principal.
N. Debenture Exchangeable for Different Denominations. This Debenture is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Debenture or Debentures (in accordance with Section 5(d)) representing in the aggregate the outstanding Principal of this Debenture, and each such new Debenture will
represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.
O. Issuance of New Debentures. Whenever the Company is required to issue a new Debenture pursuant to the terms of this Debenture, such new Debenture (i) shall be of like tenor with this Debenture, (ii) shall represent, as indicated on the face of such new Debenture, the Principal remaining outstanding (or in the case of a new Debenture being issued pursuant to Section 5(a) or Section 5(c), the Principal designated by the Holder which, when added to the principal represented by the other new Debentures issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Debenture immediately prior to such issuance of new Debentures), (iii) shall have an issuance date, as indicated on the face of such new Debenture, which is the same as the Issuance Date of this Debenture, (iv) shall have the same rights and conditions as this Debenture, and (v) shall represent accrued and unpaid Interest from the Issuance Date to the date the Debenture is reissued.
NOTICES. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered upon: (i) receipt, when delivered personally, (ii) 1 Business Day after depositwithan overnight courier servicewithnext day delivery specified, in each case, properly addressed totheparty to receivethesame, or (iii) receipt, which shall mean the next Business day if such notice is sent after 5:00pm EST, when sent by electronic mail (provided that the electronic mail transmission is not returned in error or the sender is not otherwise notified of any error in transmission. The addresses and e-mail addresses for such communications shall be:
If to the Company, to: | US Nuclear Corp. |
| Attention: Robert Goldstein |
| Email: rgoldsteinta@gmail.com |
If to the Holder: | YA II PN, Ltd. c/o Yorkville Advisors Global, LP |
| 1012 Springfield Avenue |
| Mountainside, NJ 07092 |
| Attention: Matt Beckman |
| Email: mbeckman@yorkvilleadvisors.com |
| |
With a copy to: | David Gonzalez, Esq. |
| 1012 Springfield Avenue |
| Mountainside, NJ 07092 |
| Email: Legal@yorkvilleadvisors.com |
| |
or at such other address and/or electronic email address and/or to the attention of such other person as the recipient party has specified by written notice given to each other party 3 Business Days prior to the effectiveness of such change. Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) mechanically or electronically generated by the sender’s computer containing the time, date, recipient’s electronic
mail address and the text of such electronic mail or (iii) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by electronic mail or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.
Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligations of the Company, which are absolute and unconditional, to pay the principal of, interest and other charges (if any) on, this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct obligation of the Company. As long as this Debenture is outstanding, the Company shall not and shall cause their subsidiaries not to, without the consent of the Holder, (i) amend its certificate of incorporation, bylaws or other charter documents so as to adversely affect any rights of the Holder (which shall include combining (by way of reverse stock split) outstanding shares of Stock into a smaller number of shares); (ii) repay, repurchase or offer to repay, repurchase or otherwise acquire shares of its Stock or other equity securities other than as to the Underlying Shares to the extent permitted or required under the Transaction Documents or as may be required pursuant to the Company’s convertible loans outstanding as of the date hereof, or as long as there is not in existence any uncured Event of Default, as may be permitted pursuant to the Company’s convertible loans; or (iii) enter into any agreement with respect to any of the foregoing. This Debenture shall not entitle the Holder to any of the rights of a stockholder of the Company, including without limitation, the right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of stockholders or any other proceedings of the Company, unless and to the extent converted into shares of Stock in accordance with the terms hereof.
This Debenture shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflicts of laws thereof. Each of the parties consents to the jurisdiction of the state and federal courts sitting in The City of NewYork,Borough of Manhattan in connection with any dispute arising under this Debenture and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens to the bringing of any such proceeding in such jurisdictions.
If the Company fails to strictly comply with the terms of this Debenture, then the Company shall reimburse the Holder promptly for all reasonable fees, costs and expenses, including, without limitation, attorneys’ fees and expenses incurred by the Holder in any action in connection with this Debenture, including, without limitation, those incurred: (i) during any workout, attempted workout, and/or in connection with the rendering of legal advice as to the Holder’s rights, remedies and obligations, (ii) collecting any sums which become due to the Holder, (iii) defending or prosecuting any proceeding or any counterclaim to any proceeding or appeal; or (iv) the protection, preservation or enforcement of any rights or remedies of the Holder.
Any waiver by the Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture. The failure of the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver or deprive that party
of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture. Any waiver must be in writing.
If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder shall violate applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.
Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.
THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.
CERTAIN DEFINITIONS For purposes of this Debenture, the following terms shall have the following meanings:
P. "Bloomberg" means Bloomberg Financial Markets.
Q. “Business Day” means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions are authorized or required by law or other government action to close.
R. “Closing Bid Price” means the price per share in the last reported trade of the Stock on the Eligible Market or on the exchange which the Stock is then listed as quoted by Bloomberg.
S. “Convertible Securities” means any stock or securities (other than Options) directly or indirectly convertible into or exercisable or exchangeable for Stock.
T. “Commission” means the Securities and Exchange Commission.
U. “Eligible Market” means any of the NASDAQ Capital Market, NASDAQ Global Market the NewYorkStock Exchange,theNYSEMKT, or the OTCQX, the OTCQB, and any successor to any of the foregoing markets or exchanges.
V. “Exchange Act” means the Securities Exchange Act of 1934, as amended.
W. “Original Issue Date” means the date of the first issuance of this Debenture regardless of the number of transfers and regardless of the number of instruments, which may be issued to evidence such Debenture.
X. “Person” means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency.
Y. “Redemption Premium” means 20% of the Principal amount being redeemed.
Z. “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
AA. “Securities Purchase Agreement” means the Securities Purchase Agreement dated November 25, 2019 by and among the Company and the Investor.
BB. “Stock” means the common shares, par value $0.0001 per share, of the Company and stock of any other class into which such shares may hereafter be changed or reclassified.
CC. “Trading Day” means a day on which the shares of Stock are quoted on the Eligible Market on which the shares of Stock are then quoted or listed; provided, that in the event that the shares of Stock are not listed or quoted, then Trading Day shall mean a Business Day.
DD. “Transaction Documents” means the Securities Purchase Agreement or any other agreement delivered in connection with the Securities Purchase Agreement.
EE. “Underlying Shares” means the shares of Stock issuable upon conversion of this Debenture in accordance with the terms hereof.
FF. “Underlying Shares Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement, covering among other things the resale of the Underlying Shares and naming the Holder as a “selling stockholder” thereunder.
GG. "VWAP" means, for any security as of any date, the daily dollar volume-weighted average price for such security as reported by Bloomberg, LP through its “Historical Price Table Screen (HP)” with Market: Weighted Ave function selected.
[Signature Page Follows]
IN WITNESS WHEREOF, the Company has caused this Convertible Debenture to be duly executed by a duly authorized officer as of the date set forth above.
| COMPANY: |
| US NUCLEAR CORP. |
| |
| By:/s/ Robert Goldstein |
| Name: Robert Goldstein |
| Title: CEO |
| |
EXHIBIT I
CONVERSION NOTICE
(To be executed by the Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $_________ of the principal amount of Debenture No. UCLE-1 into Shares of Stock ofUS NUCLEAR CORP., according to the conditions stated therein, as of the Conversion Date written below.
Conversion Date: | |
Principal Amount to be Converted: | |
Accrued Interest to be Converted: | |
Total Conversion Amount to be converted: | |
Applicable Conversion Price: | |
Number of shares of Stock to be issued: | |
| |
| |
Please issue the shares of Stock in the following name and to the following address: |
Issue to: | |
| |
Authorized Signature: | ______________________________ |
Name: | ______________________________ |
Title: | ______________________________ |
Broker DTC Participant Code: | |
Account Number: | |
| | |
EXHIBIT B
WARRANT
NEITHER THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS EXERCISABLE INTO HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE BEEN SOLD IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND ACCORDINGLY, MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR PURSUANT TO AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, THE AVAILABILITY OF WHICH IS CONFIRMED BY AN OPINION OF COUNSEL IN GENERALLY ACCEPTABLE FORM AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS..
US NUCLEAR CORP.
Warrant To Purchase Common Stock
Warrant No.: UCLE 1 | Number of Shares: 333,333 |
| Warrant Exercise Price: $1.50 |
| Expiration Date: November 25, 2022 |
Date of Issuance: November 25, 2019
US NUCLEAR CORP., a company organized and existing under the laws of the State of Delaware (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,YA II PN, Ltd.(the “Holder”), the registered holder hereof or its permitted assigns, is entitled, subject to the terms set forth below, to purchase from the Company upon surrender of this Warrant, at any time or times on or after the date hereof, but not after 11:59 P.M. Eastern Time on the Expiration Date (as defined herein) up 333,333 fully paid and nonassessable shares of Common Stock (as defined herein) of the Company (the “Warrant Shares”) at the exercise price per share provided in Section 1(b) below or as subsequently adjusted; provided, however, that in no event shall the holder be entitled to exercise this Warrant for a number of Warrant Shares in excess of that number of Warrant Shares which, upon giving effect to such exercise, would cause the aggregate number of shares of Common Stock beneficially owned by the holder and its affiliates to exceed 4.99% of the outstanding shares of the Common Stock following such exercise, except within 60 days of the Expiration Date (however, such restriction may be waived by Holder (but only as to itself and not to any other holder) upon not less than 65 days prior notice to the Company). For purposes of the foregoing proviso, the aggregate number of shares of Common Stock beneficially owned by the holder and its affiliates shall include the number of shares of Common Stock issuable
upon exercise of this Warrant with respect to which the determination of such proviso is being made, but shall exclude shares of Common Stock which would be issuable upon (i) exercise of the remaining, unexercised Warrants beneficially owned by the holder and its affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially owned by the holder and its affiliates (including, without limitation, any convertible notes or preferred stock) subject to a limitation on conversion or exercise analogous to the limitation contained herein. Except as set forth in the preceding sentence, for purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this Warrant, in determining the number of outstanding shares of Common Stock a holder may rely on the number of outstanding shares of Common Stock as reflected in (1) the Company’s most recent Form 10-Q or Form 10-K, as the case may be, (2) a more recent public announcement by the Company or (3) any other notice by the Company or its transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written request of any holder, the Company shall promptly, but in no event later than 1 Business Day following the receipt of such notice, confirm in writing to any such holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the exercise of Warrants (as defined below) by such holder and its affiliates since the date as of which such number of outstanding shares of Common Stock was reported.
1.
(a) This Warrant is issued pursuant to the Securities Purchase Agreement (“Securities Purchase Agreement”) dated November 25, 2019 between the Company and the Holder or issued in exchange or substitution thereafter or replacement thereof. Each Capitalized term used, and not otherwise defined herein, shall have the meaning ascribed thereto in the Securities Purchase Agreement.
(b) Definitions. The following words and terms as used in this Warrant shall have the following meanings:
(i) “Approved Stock Plan” means a stock plan, award or arrangement pursuant to which the Company’s securities may be issued to any employee, officer, or director or third party service providers in the normal course of business, for services provided to the Company or to a new hire in connection with future employment by the Company, provided that (i) such plan, award or arrangement and any issuance made pursuant thereto has been approved by the Board of Directors of the Company, and (ii) the issuance of any such shares are not subject to any registration statement or contain any registration rights.
(ii) “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in the City of New York are authorized or required by law to remain closed.
(iii) “Convertible Debentures” means the convertible debentures issued pursuant to the Securities Purchase Agreement.
(iv) “Convertible Securities” means any stock or securities (other than Options) directly or indirectly convertible into or exercisable or exchangeable for Common Stock.
(v) “Closing Bid Price” means the closing bid price (or closing trade if there is no closing bid price) of Common Stock as quoted on the Principal Market (as reported by Bloomberg, LP (“Bloomberg”)).
(vi) “Common Stock” means (i) the Company’s common stock, par value $0.0001 per share, and (ii) any capital stock into which such Common Stock shall have been changed or any capital stock resulting from a reclassification of such Common Stock.
(vii) “Event of Default” means an event of default under the Securities Purchase Agreement or the Convertible Debentures issued in connection therewith.
(viii) “Excluded Securities” means any Common Stock issued or issuable: (i) in connection with any Approved Stock Plan, (ii) upon conversion of any of the Convertible Debentures issued pursuant to the Securities Purchase Agreement, or exercise of any of the Warrants, or (iii) upon conversion or exercise of any Options or Convertible Securities which are outstanding on the day immediately preceding the date of the Securities Purchase Agreement, provided that the conversion or exercise price of such Options or Convertible Securities is not amended, modified or changed on or after the date of the Securities Purchase Agreement.
(ix) “Expiration Date” means the date set forth on the first page of this Warrant.
(x) “Issuance Date” means the date hereof.
(xi) “Options” means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.
(xii) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.
(xiii) “Primary Market” means the OTC Markets Group’s OTCQB Venture Market.
(xiv) “Securities Act” means the Securities Act of 1933, as amended.
(xv) “Warrant” means this Warrant and all Warrants issued in exchange, transfer or replacement thereof.
(xvi) “Warrant Exercise Price” shall be $1.50 or as subsequently adjusted as provided in Section 8 hereof.
(c) Other Definitional Provisions.
(i) Except as otherwise specified herein, all references herein (A) to the Company shall be deemed to include the Company’s successors and (B) to any applicable law defined or referred to herein shall be deemed references to such applicable law as the same may have been or may be amended or supplemented from time to time.
(ii) When used in this Warrant, the words “herein”, “hereof”, and “hereunder” and words of similar import, shall refer to this Warrant as a whole and not to any provision of this Warrant, and the words “Section”, “Schedule”, and “Exhibit” shall refer to Sections of, and Schedules and Exhibits to, this Warrant unless otherwise specified.
(iii) Whenever the context so requires, the neuter gender includes the masculine or feminine, and the singular number includes the plural, and vice versa.
2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this Warrant may be exercised by the holder hereof then registered on the books of the Company, pro rata as hereinafter provided, at any time on any Business Day on or after the opening of business on such Business Day, commencing with the first day after the date hereof, and prior to 5:00 P.M. Eastern Time on the Expiration Date (i) by delivery of a written notice, in the form of the subscription notice attached asExhibit A hereto (the “Exercise Notice”), of such holder’s election to exercise this Warrant, which notice shall specify the number of Warrant Shares to be purchased, payment to the Company of an amount equal to the Warrant Exercise Price(s) applicable to the Warrant Shares being purchased, multiplied by the number of Warrant Shares (at the applicable Warrant Exercise Price) as to which this Warrant is being exercised (plus any applicable issue or transfer taxes) (the “Aggregate Exercise Price”) in cash or wire transfer of immediately available funds and the surrender of this Warrant (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction) to a common carrier for overnight delivery to the Company or (ii) if at the time of exercise, the Warrant Shares are not subject to an effective registration statement or if an Event of Default has occurred and is continuing, by delivering an Exercise Notice and in lieu of making payment of the Aggregate Exercise Price in cash or wire transfer, elect instead to receive upon such exercise the “Net Number” of shares of Common Stock determined according to the following formula (the “Cashless Exercise”):
Net Number =(A x B) – (A x C)
B
For purposes of the foregoing formula:
A = the total number of Warrant Shares with respect to which this Warrant is then being exercised.
B = the Closing Bid Price of the Common Stock on the date of exercise of the Warrant.
C = the Warrant Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.
In the event of any exercise of the rights represented by this Warrant in compliance with this Section 2, the Company shall on or before the 3rd Business Day following the date of receipt of the Exercise Notice, the Aggregate Exercise Price and this Warrant (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction) and the receipt of the representations of the holder specified in Section 6 hereof, if requested by the Company (the “Exercise Delivery Documents”), and if the Warrant Shares are subject to an effective and current Registration Statement and the Common Stock is DTC eligible, credit such aggregate number of shares of Common Stock to which the holder shall be entitled to the holder’s or its designee’s balance account with The Depository Trust Company; provided, however, if the holder who submitted the Exercise Notice requested physical delivery of any or all of the Warrant Shares, or, if the Warrant Shares are not subject to an effective and current Registration Statement and the Common Stock is not DTC eligible then the Company shall, on or before the 3rd Business Day following receipt of the Exercise Delivery Documents, issue and surrender to a common carrier for overnight delivery to the address specified in the Exercise Notice, a certificate, registered in the name of the holder, for the number of shares of Common Stock to which the holder shall be entitled pursuant to such request. The Warrant Shares shall be issued with a legend unless they are subject to an effective and current Registration Statement or they are being transferred pursuant to an exemption from such registration requirements, the availability of which is confirmed in an opinion of counsel acceptable to the Company’s Transfer Agent. Upon delivery of the Exercise Notice pursuant to the notice delivery provisions in Section 11 herein and Aggregate Exercise Price referred to in clause (i) or (ii) above the holder of this Warrant shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised. In the case of a dispute as to the determination of the Warrant Exercise Price, the Closing Bid Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the holder the number of Warrant Shares that is not disputed and shall submit the disputed determinations or arithmetic calculations to the holder via facsimile within 1 Business Day of receipt of the holder’s Exercise Notice.
(b) If the holder and the Company are unable to agree upon the determination of the Warrant Exercise Price or arithmetic calculation of the Warrant Shares within 1 day of such disputed determination or arithmetic calculation being submitted to the holder, then the Company shall immediately submit via electronic mail (i) the disputed determination of the Warrant Exercise Price or the Closing Bid Price to an independent, reputable investment banking firm or (ii) the disputed arithmetic calculation of the Warrant Shares to its independent, outside accountant. The Company shall cause the investment banking firm or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the holder of the results no later than 72 hours from the time it receives the disputed determinations or calculations. Such investment banking firm’s or accountant’s determination or calculation, as the case may be, shall be deemed conclusive absent manifest error.
(c) Unless the rights represented by this Warrant shall have expired or shall have been fully exercised, the Company shall, as soon as practicable and in no event later than 5 Business Days after any exercise and at its own expense, issue a new Warrant identical in all respects to this Warrant exercised except it shall represent rights to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant exercised, less the number of Warrant Shares with respect to which such Warrant is exercised.
(d) No fractional Warrant Shares are to be issued upon any pro rata exercise of this Warrant, but rather the number of Warrant Shares issued upon such exercise of this Warrant shall be rounded up or down to the nearest whole number.
(e) If the Company or its Transfer Agent shall fail for any reason or for no reason to issue to the holder within 5 days of receipt of the Exercise Delivery Documents, a certificate for the number of Warrant Shares to which the holder is entitled or to credit the holder’s balance account with The Depository Trust Company for such number of Warrant Shares to which the holder is entitled upon the holder’s exercise of this Warrant, unless such failure results from a failure of the Company’s Transfer Agent to issue such shares as a result of an act of terrorism, war, natural disaster, act of god or other force majure event, the Company shall, in addition to any other remedies under this Warrant or otherwise available to such holder, pay as additional damages in cash to such holder on each day the issuance of such certificate for Warrant Shares is not timely effected an amount equal to 0.025% of the product of (A) the sum of the number of Warrant Shares not issued to the holder on a timely basis and to which the holder is entitled, and (B) the Closing Bid Price of the Common Stock for the trading day immediately preceding the last possible date which the Company could have issued such Common Stock to the holder without violating this Section 2.
(f) If within 5 days after the Company’s receipt of the Exercise Delivery Documents and the written request of the Holder that a new Warrant be issued, the Company fails to deliver a new Warrant to the holder for the number of Warrant Shares to which such holder is entitled pursuant to Section 2 hereof, then, in addition to any other available remedies under this Warrant, or otherwise available to such holder, the holder shall be entitled to exercise or transfer its rights under such new warrant as if it had received such new Warrant and the Company shall be obligated to honor such exercises or transfers as if the holder had submitted the new Warrant without violating this Section 2.
3. Covenants as to Common Stock. The Company hereby covenants and agrees as follows:
(a) This Warrant is, and any Warrants issued in substitution for or replacement of this Warrant will upon issuance be, duly authorized and validly issued.
(b) All Warrant Shares which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof.
(c) During the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved at least 100% of the
number of shares of Common Stock needed to provide for the exercise of the rights then represented by this Warrant and the par value of said shares will at all times be less than or equal to the applicable Warrant Exercise Price. If at any time the Company does not have a sufficient number of shares of Common Stock authorized and available, then the Company shall call and hold a special meeting of its stockholders within 60 days of that time for the sole purpose of increasing the number of authorized shares of Common Stock.
(d) If at any time after the date hereof the Company shall file a Registration Statement, the Company shall include the Warrant Shares issuable to the holder, pursuant to the terms of this Warrant and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Warrant Shares from time to time issuable upon the exercise of this Warrant on the Primary Market or such national securities exchange or automated quotation system on which the Common Stock of the Company is listed; and the Company shall so list on the Primary Market or such national securities exchange or automated quotation system on which the Common Stock of the Company is listed, as the case may be, and shall maintain such listing of, any other shares of capital stock of the Company issuable upon the exercise of this Warrant Shares if and so long as any shares of the same class shall be listed on the Primary Market or such national securities exchange or automated quotation system on which the Common Stock of the Company is listed.
(e) The Company will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the holder of this Warrant in order to protect the exercise privilege of the holder of this Warrant. The Company will not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Warrant Exercise Price then in effect, and (ii) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.
(f) This Warrant will be binding upon any entity succeeding to the Company by merger, consolidation or acquisition of all or substantially all of the Company’s assets.
4. Taxes. The Company shall pay any and all taxes, except any applicable withholding, which may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant.
5. Warrant Holder Not Deemed a Stockholder. Except as otherwise specifically provided herein, no holder, as such, of this Warrant shall be entitled to vote or receive dividends or be deemed the holder of shares of capital stock of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the
holder of this Warrant of the Warrant Shares which he or she is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on such holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 5, the Company will provide the holder of this Warrant with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders.
6. Representations of Holder. The holder of this Warrant, by the acceptance hereof, represents that it is acquiring this Warrant and the Warrant Shares for its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution of this Warrant or the Warrant Shares, except pursuant to sales registered or exempted under the Securities Act; provided, however, that by making the representations herein, the holder does not agree to hold this Warrant or any of the Warrant Shares for any minimum or other specific term and reserves the right to dispose of this Warrant and the Warrant Shares at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act. The holder of this Warrant further represents, by acceptance hereof, that, as of this date, such holder is an “accredited investor” as such term is defined in Rule 501(a)(1) of Regulation D promulgated by the Securities and Exchange Commission under the Securities Act (an “Accredited Investor”). Upon exercise of this Warrant the holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the Warrant Shares so purchased are being acquired solely for the holder’s own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale and that such holder is an Accredited Investor. If such holder cannot make such representations because they would be factually incorrect, it shall be a condition to such holder’s exercise of this Warrant that the Company receive such other representations as the Company considers reasonably necessary to assure the Company that the issuance of its securities upon exercise of this Warrant shall not violate any United States or state securities laws.
7. Ownership and Transfer.
(a) The Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate by notice to the holder hereof), a register for this Warrant, in which the Company shall record the name and address of the person in whose name this Warrant has been issued, as well as the name and address of each transferee. The Company may treat the person in whose name any Warrant is registered on the register as the owner and holder thereof for all purposes, notwithstanding any notice to the contrary, but in all events recognizing any transfers made in accordance with the terms of this Warrant.
8. Adjustment of Warrant Exercise Price. The Warrant Exercise Price of this Warrant shall be adjusted from time to time as follows:
(a) Adjustment of Warrant Exercise Price. If and whenever on or after the Issuance Date of this Warrant, the Company issues or sells, or is deemed to have issued or sold, any shares of Common Stock (other than Excluded Securities) for a consideration per share (the “New Issuance Price”) less than the Warrant Exercise Price in effect immediately
prior to such issuance or sale (the “Applicable Price”), then immediately after such issue or sale the Warrant Exercise Price then in effect shall be reduced to an amount equal to such New Issuance Price.
(b) Effect on Warrant Exercise Price of Certain Events. For purposes of determining the adjusted Warrant Exercise Price under Section 8(a) above, the following shall be applicable:
(i) Issuance of Options. If after the date hereof, the Company in any manner grants any Options and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion or exchange of any Convertible Securities issuable upon exercise of any such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share. For purposes of this Section 8(b)(i), the lowest price per share for which one share of Common Stock is issuable upon exercise of such Options or upon conversion or exchange of such Convertible Securities shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the granting or sale of the Option, upon exercise of the Option or upon conversion or exchange of any convertible security issuable upon exercise of such Option. No further adjustment of the Warrant Exercise Price shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which 1 share of Common Stock is issuable upon the conversion or exchange thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this Section 8(b)(ii), the lowest price per share for which one share of Common Stock is issuable upon such conversion or exchange shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of Common Stock upon the issuance or sale of the convertible security and upon conversion or exchange of such convertible security. No further adjustment of the Warrant Exercise Price shall be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Warrant Exercise Price had been or are to be made pursuant to other provisions of this Section 8(b), no further adjustment of the Warrant Exercise Price shall be made by reason of such issue or sale.
(iii) Change in Option Price or Rate of Conversion. If the purchase price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock changes at any time, the Warrant Exercise Price in effect at the time of such change shall be adjusted to the Warrant
Exercise Price which would have been in effect at such time had such Options or Convertible Securities provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of this Section 8(b)(iii), if the terms of any Option or convertible security that was outstanding as of the Issuance Date of this Warrant are changed in the manner described in the immediately preceding sentence, then such Option or convertible security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change. No adjustment pursuant to this Section 8(b) shall be made if such adjustment would result in an increase of the Warrant Exercise Price then in effect.
(iv) Calculation of Consideration Received. If any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefore will be deemed to be the gross amount received by the Company therefore; provided that any deductions made from the gross amount are commercially reasonable commissions and expenses in connection with such capital raise. If any Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where such consideration consists of marketable securities, in which case the amount of consideration received by the Company will be the market price of such securities on the date of receipt of such securities. If any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefore will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by the Company and the holders of Warrants representing at least two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants then outstanding. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined within five (5) Business Days after the tenth (10th) day following the Valuation Event by an independent, reputable appraiser jointly selected by the Company and the holders of Warrants representing at least two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants then outstanding. The determination of such appraiser shall be final and binding upon all parties and the fees and expenses of such appraiser shall be borne jointly by the Company and the holders of Warrants.
(v) Integrated Transactions. In case any Option is issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for a consideration of $.01.
(vi) Treasury Shares. The number of shares of Common Stock outstanding at any given time does not include shares owned or held by or for the account of the Company, and the disposition of any shares so owned or held will be considered an issue or sale of Common Stock.
(vii) Record Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (1) to receive a dividend or other distribution payable in Common Stock, Options or in Convertible Securities or (2) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.
(c) Adjustment of Warrant Exercise Price upon Subdivision or Combination of Common Stock. If the Company at any time after the date of issuance of this Warrant subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, any Warrant Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of shares of Common Stock obtainable upon exercise of this Warrant will be proportionately increased. If the Company at any time after the date of issuance of this Warrant combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, any Warrant Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares issuable upon exercise of this Warrant will be proportionately decreased. Any adjustment under this Section 8(c) shall become effective at the close of business on the date the subdivision or combination becomes effective.
(d) Distribution of Assets. If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case:
(i) any Warrant Exercise Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of Common Stock entitled to receive the Distribution shall be reduced, effective as of the close of business on such record date, to a price determined by multiplying such Warrant Exercise Price by a fraction of which (A) the numerator shall be the Closing Sale Price of the Common Stock on the trading day immediately preceding such record date minus the value of the Distribution (as determined in good faith by the Company’s Board of Directors) applicable to one share of Common Stock, and (B) the denominator shall be the Closing Sale Price of the Common Stock on the trading day immediately preceding such record date; and
(ii) either (A) the number of Warrant Shares obtainable upon exercise of this Warrant shall be increased to a number of shares equal to the number of shares of Common Stock obtainable immediately prior to the close of business on the record date fixed for the determination of holders of Common Stock entitled to receive the Distribution multiplied by the reciprocal of the fraction set forth in the immediately preceding clause (i), or (B) in the event that the Distribution is of common stock of a company whose common stock is traded on a national securities exchange or a national automated quotation system, then the holder of this Warrant shall receive an additional warrant to purchase Common Stock, the terms of which shall
be identical to those of this Warrant, except that such warrant shall be exercisable into the amount of the assets that would have been payable to the holder of this Warrant pursuant to the Distribution had the holder exercised this Warrant immediately prior to such record date and with an exercise price equal to the amount by which the exercise price of this Warrant was decreased with respect to the Distribution pursuant to the terms of the immediately preceding clause (i).
(e) Certain Events. If any event occurs of the type contemplated by the provisions of this Section 8 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s Board of Directors will make an appropriate adjustment in the Warrant Exercise Price and the number of shares of Common Stock obtainable upon exercise of this Warrant so as to protect the rights of the holders of the Warrants; provided, except as set forth in section 8(c),that no such adjustment pursuant to this Section 8(e) will increase the Warrant Exercise Price or decrease the number of shares of Common Stock obtainable as otherwise determined pursuant to this Section 8.
(f) Voluntary Adjustments By Company. The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.
(g) Notices.
(i) Immediately upon any adjustment of the Warrant Exercise Price, the Company will give written notice thereof to the holder of this Warrant, setting forth in reasonable detail, and certifying, the calculation of such adjustment.
(ii) The Company will give written notice to the holder of this Warrant at least ten (10) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any pro rata subscription offer to holders of Common Stock or (C) for determining rights to vote with respect to any Organic Change (as defined below), dissolution or liquidation, provided that such information shall be made known to the public prior to or in conjunction with such notice being provided to such holder.
(iii) The Company will also give written notice to the holder of this Warrant at least 10 days prior to the date on which any Organic Change, dissolution or liquidation will take place, provided that such information shall be made known to the public prior to or in conjunction with such notice being provided to such holder.
9. Purchase Rights; Reorganization, Reclassification, Consolidation, Merger or Sale.
(a) In addition to any adjustments pursuant to Section 8 above, if at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “Purchase Rights”), then the holder of this Warrant will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such holder
could have acquired if such holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.
(b) Any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Company’s assets to another Person or other transaction in each case which is effected in such a way that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock is referred to herein as an “Organic Change.” Prior to the consummation of any (i) sale of all or substantially all of the Company’s assets to an acquiring Person or (ii) other Organic Change following which the Company is not a surviving entity, the Company will secure from the Person purchasing such assets or the successor resulting from such Organic Change (in each case, the “Acquiring Entity”) a written agreement to deliver to each holder of Warrants in exchange for such Warrants, a security of the Acquiring Entity evidenced by a written instrument substantially similar in form and substance to this Warrant (including an adjusted warrant exercise price equal to the value for the Common Stock reflected by the terms of such consolidation, merger or sale, and exercisable for a corresponding number of shares of Common Stock acquirable and receivable upon exercise of the Warrants without regard to any limitations on exercise, if the value so reflected is less than any Applicable Warrant Exercise Price immediately prior to such consolidation, merger or sale). Prior to the consummation of any other Organic Change, the Company shall make appropriate provision to insure that each of the holders of the Warrants will thereafter have the right to acquire and receive in lieu of or in addition to (as the case may be) the Warrant Shares immediately theretofore issuable and receivable upon the exercise of such holder’s Warrants (without regard to any limitations on exercise), such shares of stock, securities or assets that would have been issued or payable in such Organic Change with respect to or in exchange for the number of Warrant Shares which would have been issuable and receivable upon the exercise of such holder’s Warrant as of the date of such Organic Change (without taking into account any limitations or restrictions on the exercisability of this Warrant).
10. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is lost, stolen, mutilated or destroyed, the Company shall promptly, on receipt of an indemnification undertaking (or, in the case of a mutilated Warrant, the Warrant), issue a new Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed.
11. Notice. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered upon: (i) receipt, when delivered personally, (ii) 1 Business Day after depositwithan overnight courier servicewithnext day delivery specified, in each case, properly addressed totheparty to receivethesame, or (iii) receipt, when sent by electronic mail (provided that the electronic mail transmission is not returned in error or the sender is not otherwise notified of any error in transmission. The addresses and e-mail addresses for such communications shall be:
If to Holder: | YA II PN, Ltd. c/o Yorkville Advisors Global, LP |
| 1012 Springfield Avenue |
| Mountainside, NJ 07092 |
| Attention: Matt Beckman |
| Email: mbeckman@yorkvilleadvisors.com |
| |
With Copy to: | David Gonzalez, Esq. |
| 1012 Springfield Avenue |
| Mountainside, NJ 07092 |
| Email: Legal@yorkvilleadvisors.com |
| |
If to the Company, to: | US Nuclear Corp. |
| 7051 Eton Avenue Canoga Park, CA 91303 |
| Attention: Bob Goldstein Email: rgoldsteinta@gmail.com |
| |
With a copy to: | Anthony R. Paesano Paesano Akkashian Apkarian, PC 7457 Franklin Road, Suite 200 Bloomfield Hills, MI 48301 Email: apaesano@paalawfirm.com |
or at such other address and/or electronic email address and/or to the attention of such other person as the recipient party has specified by written notice given to each other party 3 Business Days prior to the effectiveness of such change. Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) mechanically or electronically generated by the sender’s computer containing the time, date, recipient’s electronic mail address and the text of such electronic mail or (iii) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by electronic mail or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.
12. Date. The date of this Warrant is set forth on page 1 hereof. This Warrant, in all events, shall be wholly void and of no effect after the close of business on the Expiration Date, except that notwithstanding any other provisions hereof, the provisions of Section 3(d) shall continue in full force and effect after such date as to any Warrant Shares or other securities issued upon the exercise of this Warrant.
13. Amendment and Waiver. Except as otherwise provided herein, the provisions of the Warrant may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the holders of Warrants representing at least 2/3rds of the Warrant Shares issuable upon exercise of the Warrants then outstanding; provided that, except for Section 8(c), no such action may increase the Warrant Exercise Price or decrease the number of shares or class of stock obtainable upon exercise of any Warrant without the written consent of the holder of such Warrant.
14. Assignment. This Warrant may be assigned by the Holder only if such assignment is made in compliance with all applicable laws, including federal and state securities laws. In connection with any permitted transfer, the transferee shall make such representation and warranties to the Company, consistent with Section 6 hereof, s the Company may reasonably request.
15. Descriptive Headings; Governing Law. The descriptive headings of the several sections and paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. This Warrant shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflicts of laws thereof. Each of the parties consents to the jurisdiction of the state and federal courts sitting in The City of NewYork,Borough of Manhattan in connection with any dispute arising under this Warrant and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens to the bringing of any such proceeding in such jurisdictions.
16. Remedies, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant, in any other agreement between the Company and the Holder, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.
17. Waiver of Jury Trial.AS A MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS WARRANT, THE PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS WARRANT AND/OR ANY AND ALL OF THE TRANSACTION DOCUMENTS ASSOCIATED WITH THIS TRANSACTION.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed as of the date first set forth above.
| US NUCLEAR CORP. |
| |
| By:Robert Goldstein |
| Name: Robert Goldstein |
| Title: CEO |
EXHIBIT A TO WARRANT
EXERCISE NOTICE
TO BE EXECUTED
BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
US NUCLEAR CORP.
The undersigned holder hereby exercises the right to purchase ______________ of the shares of Common Stock (“Warrant Shares”) of US Nuclear Corp. (the “Company”), evidenced by the attached Warrant (the “Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
Specify Method of exercise by check mark:
1. ___ Cash Exercise
(a)Payment of Warrant Exercise Price. The holder shall pay the Aggregate Exercise Price of $______________ to the Company in accordance with the terms of the Warrant.
(b)Delivery of Warrant Shares. The Company shall deliver to the holder _________ Warrant Shares in accordance with the terms of the Warrant.
2. ___ Cashless Exercise
(a)Payment of Warrant Exercise Price. In lieu of making payment of the Aggregate Exercise Price, if permitted by the terms of the Warrant, the holder elects to receive upon such exercise the Net Number of shares of Common Stock determined in accordance with the terms of the Warrant.
(b)Delivery of Warrant Shares. The Company shall deliver to the holder ____________Warrant Shares in accordance with the terms of the Warrant.
Date: _______________ __, ______
Name of Registered Holder
By: _______________________________
Name: _______________________________
Title: _______________________________
Address:_______________________________
Taxpayer ID No.:_______________________________
EXHIBIT B TO WARRANT
FORM OF WARRANT POWER
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to ________________, Federal Identification No. __________, a warrant to purchase ____________ shares of the capital stock of US Nuclear Corp. represented by warrant certificate no. _____, standing in the name of the undersigned on the books of said corporation. The undersigned does hereby irrevocably constitute and appoint ______________, attorney to transfer the warrant of said corporation, with full power of substitution in the premises.
Dated: _______________ | ___________________________ |
| |
| By: ___________________________ |
| Name:_________________________ |
| Title___________________________ |
| |
SCHEDULE OF BUYERS
(a) | | (b) | (c) |
Buyer | | Principal Amount of Convertible Debentures | Purchase Price (95% of Face Value) |
| | | |
YA II PN, Ltd. | | | |
1012 Springfield Avenue | Closing: | $500,000.00 | $475,000.00 |
Mountainside, NJ 07092 | | | |
Email: Legal@yorkvilleadvisors.com | | | |
| | |
| Aggregate: | $500,000.00 | $475,000.00 |
| | | |
| | |
Legal Representative’s Address and E-Mail Address | |
David Fine, Esq. | | | |
1012 Springfield Avenue | | | |
Mountainside, NJ 07092 | | | |
Email: Legal@yorkvilleadvisors.com | | |