Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of September 26, 2016 (this
"Agreement"), is entered into by and between Trident Brands Incorporated, a
Nevada corporation (the "Company"), and LPF (MCTECH) Investment Corp. (the
"Purchaser").
W I T N E S S E T H:
WHEREAS, the Company and the Purchaser are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration for offers and sales in an "offshore transaction" to a non-U.S.
Person afforded, inter alia, by Rule 904 under Regulation S ("Regulation S") as
promulgated by the United States Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "1933 Act"), and/or Section
4(2) of the 1933 Act;
WHEREAS, the Purchaser wishes to purchase one or more separate 8%
Convertible Promissory Notes of the Company (collectively, the "Notes," and
each, a "Note"), subject to and upon the terms and conditions of this Agreement
and acceptance of this Agreement by the Company, on the terms and conditions
referred to herein; and
WHEREAS, the Company's obligations to repay the Notes will be secured by
certain of the assets of the Company pursuant to the General Security Agreement
dated as at the initial Closing Date, with respect to each Note, between the
Company and the Purchaser (the "Security Agreement").
NOW THEREFORE, in consideration of the mutual covenants and the agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE; PURCHASE AMOUNT.
(a) PURCHASE.
(i) Subject to the terms and conditions of this Agreement and the other
Transaction Documents, the Company will issue, sell and deliver to the Purchaser
and the Purchaser hereby agrees to purchase the Notes in the aggregate principal
amount of up to US$10,000,000 (the "Purchase Amount") with terms and conditions
as set forth in the Notes, which Notes shall be paid for, funded and issuable as
follows:
(A) US$4,100,000 of the principal amount of the Notes shall be funded and
issued on September 26, 2016;
(B) the balance of the of the principal amount of the Notes shall be funded
and issued at the election of the Company, in one or more tranches (each a
"TRANCHE") from time to time during the Term, within 30 days following the
notice by the Company to the Purchaser requesting same, with such notice
providing details of the use of the funds to the satisfaction of the Purchaser,
and provided that no Tranche requested by the Company shall be less than
$1,500,000 or in excess of $4,400,000; and
(C) The following restrictions shall apply to the funding and issuance of
Tranches:
I. the Purchaser shall not be required to fund any Tranche until January
1, 2017 following issuance of the first $4,100,000 Note pursuant to
above Section 1 (a)(i)(A), with the exception of the contemplated
Oceans Omega transaction to be funded by the Purchaser, in its sole
and absolute discretion;
II. the Purchaser shall not be required to fund more than one (1) Tranche
during any consecutive 60 day period during the Term (beginning on the
date a Tranche becomes due);
III the funding of any Tranche other than the first $4,100,000 Note
pursuant to Section 1(a)(i)(A) above is subject to the mutual
agreement by the Purchaser and the Company as to the use of such
funds, it being understood and agreed that the Purchaser shall not be
required to fund for purposes which it is not agreeable to, provided
that, within 10 business days following the first Closing Date, the
parties shall enter into good faith negotiations and shall use their
mutual best efforts to establish, within 120 days following the first
Closing Date, mutually pre-approved and commercially reasonable
performance metrics and/or uses of proceeds, each of which shall
satisfy the criteria for the funding of future Tranches the purposes
of this Section 1. Thereafter, the Purchaser shall use its good faith,
commercially reasonable efforts to evaluate alternative or
supplementary funding purposes on a case by case basis, the approval
of which shall not be unreasonably withheld.
IV any Tranche requested by notice delivered prior to the expiration of
the Term shall remain due and payable notwithstanding the expiration
of the Term.
(ii) The Notes referred to herein shall be in the form of Annex I annexed
hereto. The Purchase Amount for each Note shall be the applicable portion of the
principal amount thereof. The Notes will be secured by a pledge of certain of
the Company's assets pursuant to the Security Agreement in the form of Annex II.
(iii) The purchase of the Notes and the issuance of the underlying
Conversion Shares to the Purchaser and the other transactions contemplated
hereby are sometimes referred to herein and in the other Transaction Documents
as the purchase and sale of the Securities (as defined below), and are referred
to collectively as the "Transactions".
(b) CERTAIN DEFINITIONS. As used herein, each of the following terms has
the meaning set forth below, unless the context otherwise requires:
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"1933 Act" has the meaning set forth in the recitals hereof.
"1934 Act" has the meaning set forth in Section 3(a).
"Additional Shares" has the meaning set forth in Section 9.
"Affiliate" means, with respect to a specific Person referred to in the
relevant provision, another Person who or which controls or is controlled by or
is under common control with such specified Person.
"Agreement" has the meaning set forth in the preamble hereof.
"Certificate" means each original signed Note duly executed by the Company.
"Claim Notice" has the meaning set forth in Section 11(b)(i).
"Closing Date" means the date of the closing of the issuance of each of the
respective Notes and/or the funding of each Tranche thereunder.
"Common Stock" all of the issued and outstanding shares of the Company,
issued in one class, as of the date hereof and hereafter from time to time.
"Common Stock Equivalents" means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
"Company" has the meaning set forth in the preamble hereto.
"Company Control Person" means each director, executive officer, promoter,
and such other Persons as may be deemed in control of the Company pursuant to
Rule 405 under the 1933 Act or Section 20 of the 1934 Act (as defined below).
"Conversion Shares" means shares of Common Stock underlying the Notes.
"Damages" has the meaning set forth in Section 11(a).
"Dispute Period" has the meaning set forth in Section 11(b)(i).
"Effective Date" means the date of this Agreement.
"GAAP" has the meaning set forth in Section 3(i).
"Holder" means the Person holding the relevant Securities at the relevant
time.
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"Indemnified Parties" or "Indemnified Party" has the meaning set forth in
Section 11(a)(i).
"Indemnifying Party" has the meaning set forth in Section 11(b)(i).
"Indemnity Notice" has the meaning set forth in Section 11(b)(ii).
"Last Audited Date" means November 30, 2015,
"Material Adverse Effect" means an event or combination of events, which
individually or in the aggregate, would reasonably be expected to (w) adversely
affect the legality, validity or enforceability of the Securities or any of the
Transaction Documents, (x) have or result in a material adverse effect on the
results of operations, assets, prospects, or condition (financial or otherwise)
of the Company and its subsidiaries, taken as a whole, (y) adversely impair the
Company's ability to perform fully on a timely basis its obligations under any
of the Transaction Documents or the Transactions contemplated thereby, or (z)
materially and adversely affect the value of the rights granted to the Purchaser
in the Transaction Documents.
"Note" or "Notes" has the meaning set forth in the recitals hereof.
"Notice(s)" or "notice(s)" has the meaning set forth in Section 14.
"Person" means any living person or any entity, such as, but not
necessarily limited to, a corporation, partnership or trust.
"Principal Trading Market" means the Over the Counter Bulletin Board or
such other market on which the Common Stock is principally traded at the
relevant time.
"Purchase Amount" has the meaning set forth in Section 1(a)(i).
"Purchaser" has the meaning set forth in the preamble hereof.
"Purchaser Control Person" means each director, executive officer,
promoter, and such other Persons as may be deemed in control of the Purchaser
pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act.
"Registrable Securities" has the meaning set forth in Section 10(a).
"Regulation S" has the meaning set forth in the recitals hereof.
"Rule 144" has the meaning set forth in Section 4(a).
"SEC" has the meaning set forth in the recitals hereof.
"SEC Documents" has the meaning set forth in Section 2(d).
"SEC Reports" has the meaning set forth in Section 3(i).
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"Securities" means the Note, the Conversion Shares, and any Common Stock
that may be issued to the Purchaser in connection with any other agreements
between the parties.
"Security Agreement" has the meaning set forth in the recitals hereof.
"State of Incorporation" means the State of Nevada.
"Subsidiary" means any subsidiary of the Company.
"Term" means the period beginning on the Effective Date and ending on the
two (2) year anniversary of the Effective Date.
"Third Party Claim" has the meaning set forth in Section 11(b)(i).
"Trading Day" means any day during which the Principal Trading Market shall
be open for business.
"Transaction Documents" means this Agreement, the Note, Security Agreement
and includes all ancillary documents referred to in those agreements.
"Transactions" has the meaning set forth in Section 1(a)(iii).
"Transfer Agent" means, at any time, the transfer agent for the Company's
Common Stock.
"U.S. Person" has the meaning set forth in Section 2(b).
"US$" means legal currency of the United States of America.
"Violation" has the meaning set forth in Section 10(d)(i).
(c) FORM OF PAYMENT; DELIVERY OF CERTIFICATES.
(i) The Purchaser shall pay the applicable portion of the Purchase Amount
by delivering immediately available good funds in United States Dollars to the
Company on the applicable Closing Date.
(ii) On the applicable Closing Date, the Company shall deliver the
applicable Certificate, each duly executed on behalf of the Company to the
Purchaser.
(iii) By signing this Agreement, each of the Purchaser and the Company
agrees to all of the terms and conditions of the Transaction Documents, all of
the provisions of which are incorporated herein by this reference as if set
forth in full.
(d) METHOD OF PAYMENT. Payment of the Purchase Amount shall be made by wire
transfer of funds to:
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Trident Brands Canada Limited
Bank Information:
Royal Bank of Canada
Oakville-Cornwall & Trafalgar Branch
361 Cornwall Rd Unit 107
Oakville, Ontario
L6J 7Z5
Swift Code - ROYCCAT2
Bank Information (ABA#) - 005330003
U.S. Dollar Account Number -
2. PURCHASER REPRESENTATIONS AND WARRANTIES.
The Purchaser represents and warrants to, and covenants and agrees with,
the Company as follows:
(a) Without limiting Purchaser's right to sell the Securities pursuant to
an effective registration statement or otherwise in compliance with the 1933
Act, the Purchaser is purchasing the Securities for its own account for
investment only and not with a view towards the public sale or distribution
thereof and not with a view to or for sale in connection with any distribution
thereof.
(b) The Purchaser is (i) not a "U.S. Person" as that term is defined in
Rule 502 of Regulation S, (ii) experienced in making investments of the kind
described in this Agreement and the related documents, (iii) able, by reason of
the business and financial experience of its officers and professional advisors
(who are not affiliated with or compensated in any way by the Company or any of
its Affiliates or selling agents), to protect its own interests in connection
with the Transactions described in this Agreement, and the related documents,
and to evaluate the merits and risks of an investment in the Securities, and
(iv) able to afford the entire loss of its investment in the Securities.
(c) The Purchaser understands that the Securities are being offered and
sold to it in reliance on specific exemptions from the registration requirements
of the 1933 Act and state securities laws and that the Company is relying upon
the truth and accuracy of, and the Purchaser's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Purchaser set forth herein in order to determine the availability of such
exemptions and the eligibility of the Purchaser to acquire the Securities.
(d) The Purchaser and its advisors, if any, have been furnished with or
have been given access to all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by the Purchaser, including those set forth
on in any annex attached hereto. The Purchaser and its advisors, if any, have
been afforded the opportunity to ask questions of the Company and its management
and have received complete and satisfactory answers to any such inquiries.
Without limiting the generality of the foregoing, the Purchaser has also had the
opportunity to obtain and to review the Company's filings on EDGAR
(collectively, the "SEC Documents").
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(e) The Purchaser understands that its investment in the Securities
involves a high degree of risk.
(f) The Purchaser hereby represents that, in connection with its purchase
of the Securities, it has not relied on any statement or representation by the
Company or any of its officers, directors and employees or any of their
respective attorneys or agents, except as specifically set forth herein.
(g) The Purchaser understands that no United States federal or state agency
or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities.
(h) This Agreement and the other Transaction Documents to which the
Purchaser is a party, and the Transactions contemplated thereby, have been duly
and validly authorized, executed and delivered on behalf of the Purchaser and
are valid and binding agreements of the Purchaser enforceable in accordance with
their respective terms, subject as to enforceability to general principles of
equity and to bankruptcy, insolvency, moratorium and other similar laws
affecting the enforcement of creditors' rights generally.
3. COMPANY REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Purchaser as of the date hereof and as of each Closing Date.
(a) STATUS. The Company: (a) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Incorporation and
has the requisite corporate power to own its properties and to carry on its
business as now being conducted; (b) is duly qualified as a foreign corporation
to do business and is in good standing in each jurisdiction where the nature of
the business conducted or property owned by it makes such qualification
necessary, other than those jurisdictions in which the failure to so qualify
would not have or result in a Material Adverse Effect; (c) has all requisite
power and authority and the legal right to own, pledge, mortgage and operate its
property, to lease or sublease any property it operates under lease or sublease
and to conduct its business as now or currently proposed to be conducted; and
(d) is in compliance with its constituent documents. In addition, the Company
has registered its stock and is obligated to file reports pursuant to Section 12
or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "1934
Act"). The Common Stock is, or immediately following the initial Closing Date
will be, quoted on the Principal Trading Market. The Company has received no
notice, either oral or written, with respect to the continued eligibility of the
Common Stock for such quotation on the Principal Trading Market, and the Company
has maintained all requirements on its part for the continuation of such
quotation.
(b) AUTHORIZED SHARES.
(i) The authorized capital stock of the Company consists of 300,000,000
shares of Common Stock, US$0.001 par value, of which 34,534,719 shares are
outstanding as of the date hereof.
(ii) The Company has sufficient authorized and unissued shares of Common
Stock as may be necessary to effect the issuance of the Conversion Shares on the
conversion of the Notes.
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(iii) As of each Closing Date, the applicable Conversion Shares shall have
been duly authorized by all necessary corporate action on the part of the
Company, and, when issued on the conversion of the Notes or pursuant to other
relevant provisions of the Transaction Documents, in each case in accordance
with their respective terms, shall be duly and validly issued, fully paid and
non-assessable.
(c) TRANSACTION DOCUMENTS AND STOCK. This Agreement and each of the other
Transaction Documents, and the Transactions contemplated thereby, have been duly
and validly authorized by the Company, this Agreement has been duly executed and
delivered by the Company and this Agreement is, and the Note and each of the
other Transaction Documents, when executed and delivered by the Company, will
be, valid and binding agreements of the Company enforceable in accordance with
their respective terms, subject as to enforceability to general principles of
equity and to bankruptcy, insolvency, moratorium, and other similar laws
affecting the enforcement of creditors' rights generally.
(d) FILINGS. None of the SEC Documents contained, at the time they were
filed, any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the statements made
therein in light of the circumstances under which they were made, not
misleading.
(e) ABSENCE OF CERTAIN CHANGES. Since the Last Audited Date, there has been
no material adverse change and no Material Adverse Effect, except as disclosed
in the SEC Documents. Since the Last Audited Date, except as provided in the SEC
Documents, the Company has not (i) incurred or become subject to any material
liabilities (absolute or contingent) except liabilities incurred in the ordinary
course of business consistent with past practices; (ii) discharged or satisfied
any material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to its shareholders with
respect to its capital stock, or purchased or redeemed, or made any agreements
to purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts owed to the Company
by any third party or claims of the Company against any third party, except in
the ordinary course of business consistent with past practices; (v) waived any
rights of material value, whether or not in the ordinary course of business, or
suffered the loss of any material amount of existing business; (vi) made any
increases in employee compensation, except in the ordinary course of business
consistent with past practices; or (vii) experienced any material problems with
labor or management in connection with the terms and conditions of their
employment.
(f) ABSENCE OF LITIGATION. There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body pending or, to the
knowledge of the Company, threatened against or affecting the Company before or
by any governmental authority or nongovernmental department, commission, board,
bureau, agency or instrumentality or any other person, wherein an unfavorable
decision, ruling or finding would have a Material Adverse Effect or which would
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, any of the Transaction
Documents. The Company is not aware of any valid basis for any such claim that
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(either individually or in the aggregate with all other such events and
circumstances) could reasonably be expected to have a Material Adverse Effect.
There are no outstanding or unsatisfied judgments, orders, decrees, writs,
injunctions or stipulations to which the Company is a party or by which it or
any of its properties is bound, that involve the transaction contemplated herein
or that, alone or in the aggregate, could reasonably be expect to have a
Material Adverse Effect.
(g) NO UNDISCLOSED LIABILITIES OR EVENTS. To the best of the Company's
knowledge, the Company has no liabilities or obligations other than those
disclosed in the Transaction Documents or the SEC Documents or those incurred in
the ordinary course of the Company's business since the Last Audited Date, or
which individually or in the aggregate, do not or would not have a Material
Adverse Effect. No event or circumstances has occurred or exists with respect to
the Company or its properties, business, operations, condition (financial or
otherwise), or results of operations, which, under applicable law, rule or
regulation, requires public disclosure or announcement prior to the date hereof
by the Company but which has not been so publicly announced or disclosed. There
are no proposals currently under consideration or currently anticipated to be
under consideration by the Board of Directors or the executive officers of the
Company which proposal would (x) change the articles or certificate of
incorporation or other charter document or by-laws of the Company, each as
currently in effect, with or without shareholder approval, which change would
reduce or otherwise adversely affect the rights and powers of the shareholders
of the Common Stock or (y) materially or substantially change the business,
assets or capital of the Company, including its interests in subsidiaries.
(h) AUTHORIZATION; ENFORCEMENT.
(i) The Company has the requisite corporate power and authority to enter
into and to consummate the Transactions contemplated by each of the Transaction
Documents and otherwise to carry out its obligations thereunder. The execution
and delivery of each of the Transaction Documents by the Company and the
consummation by it of the Transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company and no further
action is required by the Company in connection therewith. Each Transaction
Document has been (or upon delivery will have been) duly executed by the Company
and, when delivered in accordance with the terms hereof, will constitute the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except (x) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally and (y) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies.
(ii) The execution, delivery and performance by the Company of the
Transaction Documents and the consummation of the Transactions contemplated
therein: (x) do not (A) contravene the Company's constituent documents, (B)
violate any applicable requirement of law, except for any such violations which
would not individually or in the aggregate, have or reasonably be expected to
have, a Material Adverse Effect, (C) conflict with, contravene, constitute a
default or breach under, or result in or permit the termination or acceleration
of, any contractual obligation of the Company other than those that would not,
individually or in the aggregate, have or reasonably be expected to have, a
Material Adverse Effect and are not created or caused by a conflict, breach,
default or termination or acceleration event, or (D) result in the imposition of
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any lien, security interest, mortgage, deed of trust, priority, pledge, charge,
right of first refusal or other encumbrance or similar right of others, or any
agreement to give any of the following upon the Securities or any property of
the Company; and (y) do not require any Permit of, or filing with, any
governmental authority or any consent of, or notice to, any Person (other than
with respect to the Purchaser's acquisition of the Securities), the filings
that, if not obtained, would not, individually or in the aggregate, have or
reasonably be expected to have, a Material Adverse Effect. For purposes of this
Agreement, a "Permit" means any permit, approval, authorization, license,
registration, certificate, concession, grant, franchise, variance or permission
from, and any other contractual obligation with, any governmental authority
(excluding any contractual obligations with "pools" and other governmental
authorities entered into in the ordinary course of business consistent with past
practices), in each case whether or not having the force of law and applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
(i) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed all reports
required to be filed by it under the 1934 Act, including pursuant to Section
13(a) or 15(d) thereof, for the two years preceding the date hereof (or such
shorter period as the Company was required by law to file such material) (the
foregoing materials, including the exhibits thereto, being collectively referred
to herein as the "SEC Reports") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company comply
in all material respects with applicable accounting requirements and the rules
and regulations of the SEC with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis
during the periods involved ("GAAP"), except as may be otherwise specified in
such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, and fairly
present in all material respects the financial position of the Company and its
consolidated subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit adjustments.
(j) SOLVENCY. Both before and after giving effect to (i) the issuance of
the Securities, (b) the consummation of the Purchaser's acquisition of the
Securities, and (ii) the payment and accrual of all transaction costs in
connection with the foregoing, the Company on a consolidated basis in accordance
with GAAP, is solvent.
(k) INVESTMENT COMPANY ACT. The Company is not an "investment company" as
such term is defined in the Investment Company Act of 1940, as amended.
(l) FULL DISCLOSURE. The written information prepared or furnished by or on
behalf of the Company in connection with any Transaction Document, when taken as
a whole when furnished (including the consummation of the Transactions or any
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other transaction contemplated therein) does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements contained therein, in light of the circumstances when made, not
misleading; provided, however, that projections contained therein are not to be
viewed as factual and that actual results during the periods covered thereby may
differ from the results set forth in such projections by a material amount. All
projections that are part of such information (including those set forth in any
projections delivered subsequent to the Closing Date) are based upon good faith
estimates and stated assumptions believed by the Company to be reasonable and
fair as of the date made in light of conditions and facts then known and, as of
such date, reflect good faith estimates of the information projected for the
periods set forth therein.
(m) NO BROKERS. Neither the Company nor any of its subsidiaries, employees
or agents has employed or incurred any liability to any broker, finder or agent
for any brokerage fees, finder's fees, commissions or other amounts with respect
to the Transaction Documents or the Transactions. The Company agrees to
indemnify and hold harmless the Purchaser from any liability for any commission
or compensation in the nature of a finder's or broker's fee arising out of this
transaction (and the costs and expenses of defending against such liability or
asserted liability) for which the Company or any of its officers, employees or
representatives is responsible.
(n) OFFERING OF SECURITIES; SUBSEQUENT OFFERS AND SALES. It is not
necessary in connection with the offer, sale and delivery of the Securities to
the Purchaser to register the offer and sale of the Securities under the 1933
Act. The Company has not, directly or indirectly, offered, sold or solicited any
offer to buy and will not, directly or indirectly, offer, sell or solicit any
offer to buy, any security of a type or in a manner which would be integrated
with the sale of the Common Stock and require any of the Securities to be
registered under the 1933 Act. Neither the Company nor any Person acting on its
behalf has engaged or will engage in any form of general solicitation or general
advertising (within the meaning of Rule 502(c) under the 1933 Act) in connection
with the offering of the Securities. In addition, all subsequent offers and
sales of the Securities by the Company shall be made pursuant to registration of
the relevant Securities under the 1933 Act or pursuant to an exemption from
registration.
(o) PATRIOT ACT.
(i) Neither the Company nor any of their respective directors, officers,
agents, employees or Affiliates (and, to the knowledge of the Company, no joint
venture or subsidiary thereof) is in violation in any material respects of any
United States requirements of law relating to terrorism, sanctions or money
laundering, including the United States Executive Order No. 13224 on Terrorist
Financing and the PATRIOT Act.
(ii) Neither any (A) director, officer, agent, employee or Affiliate of the
Company nor (B) any material supplier or customer of the Company, is a Person
with whom dealings are prohibited under any sanctions administered by the Office
of Foreign Assets Control of the U.S. Treasury Department ("OFAC") or any other
applicable U.S. sanctions laws; and neither the Company nor any of their
respective directors, officers, agents, employees or Affiliates will directly or
indirectly use the proceeds derived from any of the Transactions or otherwise
make available such proceeds to any Person, for the purpose of financing the
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activities of any Person in violation of sanctions administered by OFAC or any
other applicable U.S. sanction laws.
(iii) The Company is in compliance, in all material respects, with the
PATRIOT Act. No part of the proceeds of the Common Stock will be used by the
Company or any of its directors, officers, agents, employees or Affiliates,
directly or indirectly, for any payments to any Person, including any government
official or employee, political party, official of a political party, candidate
for political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation
of the United States Foreign Corrupt Practices Act of 1977, as amended or any
other applicable anti-corruption law.
(p) NO VIOLATION. The entering into and performance of this Agreement by
the Company will not result in any violation of the articles or by-laws of the
Company or of the terms of any agreement or instrument by which the Company are
bound or of any judgment or order to which the Company is subject.
(q) BANKRUPTCY. No bankruptcy, insolvency or receivership proceedings have
been instituted or are pending against Company and it is able to satisfy his
liabilities as they become due.
(r) EMPLOYEES, ETC.
(i) The Company is not party to any written contracts of employment with
any of its employees or any oral contracts of employment which are not
terminable on the giving of reasonable notice and/or severance pay in accordance
with applicable law and no inducements to accept employment with the Company
were offered to such employees which have the effect of increasing the period of
notice of termination to which any such employee is entitled. The Company has
deducted and remitted to the relevant governmental authority or entity all
income taxes, employment or unemployment insurance contributions, Canada Pension
Plan contributions, provincial employer health tax remittances and any taxes or
deductions or other amounts which it is required by statute or contract to
collect and remit to any governmental authority or other entity entitled to
receive payment of such deduction. The Company has not entered into any written
or other contracts of employment with any employees which the Company has not
disclosed in writing to the Purchaser;
(ii) The Company has paid to the date of this Agreement, all amounts
payable on account of salary, bonus payments and commission to or on behalf of
all of its employees;
(iii) All levies, if any, under the Workplace Safety and Insurance Act,
1997 (Ontario) have been paid by the Company.
(s) MATERIAL CONTRACTS. Each contract to which the Company is a party is in
good standing and in full force and effect unamended and no material default or
breach exists in respect of them on the part of any of the parties to them and
no event has occurred which, after the giving notice or the lapse of time or
both, would constitute a default thereunder.
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(t) NO TRADEMARKS. The Company does not own or claim any right or title in
or to any trademark, whether registered or unregistered.
(u) RELATED PARTY INDEBTEDNESS. None of the indebtedness listed in Annex IV
attached hereto which is to be repaid from the proceeds of the first $4,100,000.
Note issued put to Section 1(a)(i)(A) is owed to a person who does not act at
arm's length with either the Company or any of its principal or controlling
shareholders (including Anthony Pallante), as such term is defined for purposes
of the INCOME TAX ACT (Canada) and the regulations made thereunder.
(v) FDA APPROVAL. None of the products which the Company currently
manufactures, distributes and/or sells or contemplates manufacturing,
distributing and/or selling require any approvals from either the Food and Drug
Administration or any other governmental agency in the United States prior to
such manufacturing, selling or distributing.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(a) TRANSFER RESTRICTIONS. The Purchaser acknowledges that (1) the
Securities have not been and are not being registered under the provisions of
the 1933 Act and, the Conversion Shares have not been and are not being
registered under the 1933 Act, and may not be transferred unless (A)
subsequently registered thereunder or (B) the Purchaser shall have delivered to
the Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act ("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
such Securities under circumstances in which the seller, or the Person through
whom the sale is made, may be deemed to be an underwriter, as that term is used
in the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other Person is under any obligation to register the Securities
(other than pursuant to Section 10 hereof) under the 1933 Act or to comply with
the terms and conditions of any exemption thereunder.
(b) RESTRICTIVE LEGEND. The Purchaser acknowledges and agrees that the
certificates and other instruments representing any of the Securities shall bear
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of any such Securities):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."
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(c) FILINGS. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Securities to the Purchaser under any
United States laws and regulations applicable to the Company, or by any domestic
securities exchange or trading market, and to provide a copy thereof to the
Purchaser promptly after such filing.
(d) REPORTING STATUS. So long as the Purchaser beneficially owns any of the
Securities, the Company shall file all reports required to be filed with the SEC
pursuant to Section 13 or 15(d) of the 1934 Act, shall take all reasonable
action under its control to ensure that adequate current public information with
respect to the Company, as required in accordance with Rule 144(c)(2) of the
1933 Act, is publicly available, and shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would permit such termination. The Company will take
all reasonable action under its control to maintain the continued listing and
quotation and trading of its Common Stock on the Principal Trading Market or a
listing on the NASDAQ/Small Cap or National Markets and, to the extent
applicable to it, will comply in all material respects with the Company's
reporting, filing and other obligations under the by-laws or rules of the
Principal Trading Market and/or the National Association of Securities Dealers,
Inc., as the case may be, applicable to it for so long as the Purchaser
beneficially owns any of the Securities.
(e) USE OF PROCEEDS. The Company will use the proceeds received hereunder
(excluding amounts paid by the Company for legal fees in connection with the
sale of the Securities) as follows:
(i) the funds from the first $4,100,000 Note issued pursuant to Section
1(a)(i)(A) shall any be used for the purposes outlined in Annex IV; and
(ii) thereafter, all other funds shall any be used in the manner mutually
agreed to by the Company and the Purchaser.
(f) TAXES. The Company shall be responsible for any liability with respect
to any transfer, stamp or similar non-income taxes that may be payable in
connection with the execution, delivery and performance of this Agreement.
5. TRANSFER AGENT INSTRUCTIONS.
(a) The Company warrants that, with respect to the Securities, other than
the stop transfer instructions to give effect to Section 4(a) hereof, it will
give its transfer agent no instructions inconsistent with instructions to issue
Common Stock to the Purchaser as contemplated in the Transaction Documents.
Nothing in this Section shall affect in any way the Purchaser's obligations and
agreement to comply with all applicable securities laws upon resale of the
Securities. If the Purchaser provides the Company with an opinion of counsel
reasonably satisfactory to the Company that registration of a resale by the
Purchaser of any of the Securities in accordance with clause (1)(B) of Section
4(a) of this Agreement is not required under the 1933 Act, the Company shall
(except as provided in clause (2) of Section 4(a) of this Agreement) permit the
transfer or reissue of the Conversion Shares represented by one or more
14
certificates for Common Stock without legend (or where applicable, by electronic
registration) in such name and in such denominations as specified by the
Purchaser.
(b) The Company will authorize the Transfer Agent to give information
relating to the Company directly to the Purchaser or the Purchaser's
representatives upon the request of the Purchaser or any such representative, to
the extent such information relates to (i) the status of shares of Common Stock
issued or claimed to be issued to the Purchaser in connection with a Conversion
Notice (as defined in the Notes) of the option to convert the Conversion Shares,
or the transfer of Conversion Shares to the Purchaser, or (ii) the aggregate
number of outstanding shares of Common Stock of all shareholders (as a group,
and not individually) as of a current or other specified date. At the request of
the Purchaser, the Company will provide the Purchaser with a copy of the
authorization so given to the Transfer Agent.
6. CLOSING DATE.
(a) The respective Closing Date shall occur as indicated in Section 1(a)(i)
after each of the conditions contemplated by Sections 7 and 8 hereof shall have
either been satisfied or been waived by the party in whose favor such conditions
run.
(b) The closing of the Transactions shall occur on the respective Closing
Date at the offices of the Purchaser and shall take place no later than 3:00
P.M., PST, on such day or such other time as is mutually agreed upon by the
Company and the Purchaser.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Purchaser understands that the Company's obligation to sell each Note
(and/or to fund each Tranche) and the applicable Conversion Shares to the
Purchaser pursuant to this Agreement on each Closing Date is conditioned upon:
(a) The execution and delivery of this Agreement by the Purchaser;
(b) Delivery by the Purchaser to the Company of good funds as payment in
full of an amount equal to the applicable portion of the Purchase Amount in
accordance with this Agreement;
(c) The accuracy on each such Closing Date of the representations and
warranties of the Purchaser contained in this Agreement, each as if made on such
date, and the performance by the Purchaser on or before such date of all
covenants and agreements of the Purchaser required to be performed on or before
such date; and
(d) There shall not be in effect any law, rule or regulation prohibiting or
restricting the Transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.
15
8. CONDITIONS TO THE PURCHASER'S OBLIGATION TO PURCHASE.
The Company understands that the Purchaser's obligation to purchase each
Note and its acceptance of any shares of the Company's Common Stock that may be
issued in connection with any agreements between the parties hereto on each
Closing Date is conditioned upon:
(a) The execution and delivery of this Agreement and the other Transaction
Documents by the Company;
(b) Delivery by the Company to the Purchaser of the Certificates in
accordance with this Agreement or any other agreements between the parties;
(c) The execution and delivery of the Security Agreement and UCC-1
Financing Statement on certain of the Company's assets;
(d) The execution and delivery of the Convertible Promissory Note Amendment
Agreement attached hereto as Annex III;
(e) The Notes to be issued shall be senior to all other debt of the Company
(f) The accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement, each
as if made on such date, and the performance by the Company on or before such
date of all covenants and agreements of the Company required to be performed on
or before such date;
(g) The Company must be current with all required 1934 Act filings;
(h) There shall not be in effect any law, rule or regulation prohibiting or
restricting the Transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained;
(i) From and after the date hereof to and including each Closing Date, each
of the following conditions will remain in effect: (i) the trading of the Common
Stock shall not have been suspended by the SEC or on the Principal Trading
Market; (ii) trading in securities generally on the Principal Trading Market
shall not have been suspended; and (iii) there shall not have been any Material
Adverse Effect in regards to the Company; and
(j) the Company shall not be in default in respect of any obligations it
has to the Purchaser under this Agreement, any Note or any other agreement, note
or instrument that the Company has with the Purchaser.
9. PRE-EMPTIVE RIGHTS. In the event the Company sells any additional Common
Stock (the "Additional Shares"), the Company will offer Additional Shares to the
Purchaser (such right of the Purchaser, a "Pre-Emptive Right") in accordance
with paragraphs (a) through (d) below. Notwithstanding the failure of the
Purchaser to participate in any offer of Additional Shares from the Company,
this Pre-Emptive Right does not terminate, and otherwise expires one (1) year
from the date hereof.
16
(a) After or immediately prior to the conclusion of a new offering of
Additional Shares, the Company will deliver a notice by certified mail to the
Purchaser stating (i) the number of Additional Shares sold in the offering, (ii)
the price and terms of the offering, and (iii) the number of Additional Shares
which the Purchaser would be entitled to purchase in order to maintain the
Purchaser's PRO RATA interest in the Company. The Purchaser's PRO RATA interest
is defined as the Purchaser's percentage ownership of the total outstanding
Common Stock and Conversion Shares in the Company immediately prior to the
offering of the Additional Shares.
(b) Within ten (10) calendar days after receipt of the Notice, the
Purchaser may elect to purchase at the price and on the terms specified in the
Notice, the number of Additional Shares necessary for the Purchaser to maintain
the Purchaser's PRO RATA interest in the Company.
(c) The Company will not enter into any agreement that restricts or in any
way diminishes the Purchaser's protections or rights under this Section 9.
(d) If the Purchaser does not participate in an offering of Additional
Shares, the Purchaser will be entitled to receive notices of any subsequent
offerings.
10. REGISTRATION RIGHTS.
(a) COMPANY REGISTRATION. If the Company proposes to register any of its
Common Stock under the 1933 Act in connection with the public offering of such
securities, the Company shall, at such time, promptly give the Purchaser written
notice of such registration. Upon the written request of the Purchaser given
within twenty (20) days after the Company mails such notice, the Company shall
cause to be registered under the 1933 Act all of the Conversion Shares that the
Purchaser has requested to be registered (the "Registrable Securities").
(b) COMPANY OBLIGATIONS. Whenever required under this Section to effect the
registration of the Purchaser's Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration statement with respect to
such Registrable Securities and use its best efforts to cause such registration
statement to become effective, and, upon the request of the Purchaser, keep such
registration statement effective for up to ninety (90) days;
(ii) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
1933 Act with respect to the disposition of all securities covered by such
registration statement for up to ninety (90) days;
(iii) Furnish to the Purchaser such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
1933 Act, and such other documents as the Purchaser may reasonably request in
order to facilitate the disposition of Registrable Securities owned by the
Purchaser;
17
(iv) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. The Purchaser, if
participating in such underwriting, shall also enter into and perform its
obligations under such an agreement;
(v) Notify the Purchaser at any time when a prospectus relating to the
registration statement is required to be delivered under the 1933 Act of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing, such obligation to continue for ninety (90) days;
(vi) Cause all such Registrable Securities registered pursuant hereunder to
be listed on each securities exchange on which similar securities issued by the
Company are then listed;
(vii) Provide a transfer agent and registrar for all Registrable Securities
registered pursuant hereunder and a CUSIP number for all such Registrable
Securities, in each case not later than the effective date of such registration;
and
(viii) Use its best efforts to furnish, at the request of the Purchaser, if
requesting registration of Registrable Securities pursuant to this Section, on
the date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this section, if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (x) an opinion, dated such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Purchaser requesting registration of Registrable Securities and (y) a
letter, dated such date, from the Company's independent certified public
accountants, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to the Purchaser requesting
registration of Registrable Securities.
(c) REGISTRATION EXPENSES. The Company shall pay all expenses incurred in
connection with any registration, filing or qualification of Registrable
Securities with respect to the registrations pursuant hereto for the Purchaser
(which right may be assigned), including, without limitation, all registration,
filing, and qualificaftion fees, printers' and accounting fees relating or
apportionable thereto and the reasonable fees and disbursements of one counsel
for the Purchaser, if selling, as selected by the Purchaser with the Company's
approval, which approval shall not be unreasonably withheld, but excluding
underwriting discounts and commissions relating to Registrable Securities.
(d) INDEMNIFICATION. If any Registrable Securities are included in a
registration statement under this Section:
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(i) To the extent permitted by law, the Company shall indemnify and hold
harmless the Purchaser, any underwriter (as defined in the 1933 Act) for the
Purchaser and each Person, if any, who controls the Purchaser or underwriter
within the meaning of the 1933 Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the 1933 Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (x) any untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (y) the omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading, or (z) any violation by the Company of the 1933 Act, the 1934 Act,
any state securities law or any rule or regulation promulgated under any of the
foregoing; and the Company will pay to the Purchaser, underwriter or controlling
Person, as incurred, any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this subsection (i) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the Company's consent, which shall not be unreasonably withheld, nor shall the
Company be liable in any such case for any such loss, claim, damage, liability,
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any the Purchaser,
underwriter or controlling Person.
(ii) To the extent permitted by law, the Purchaser shall indemnify and hold
harmless the Company, each of its directors, each of its officers who has signed
the registration statement, each Person, if any, who controls the Company within
the meaning of the 1933 Act, any underwriter against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing Persons
may become subject, under the 1933 Act, the 1934 Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information that the Purchaser furnished
expressly for use in connection with such registration; and the Purchaser will
pay, as incurred, any legal or other expenses reasonably incurred by any Person
intended to be indemnified pursuant to this subsection (ii), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
(ii) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the
Purchaser's consent, which shall not be unreasonably withheld; provided,
further, that, in no event shall any indemnity under this subsection (ii) exceed
the net proceeds from the offering received by the Purchaser.
(e) ASSIGNMENT OF REGISTRATION RIGHTS. The Purchaser may assign (but only
with all related obligations) the rights to cause the Company to register
Registrable Securities pursuant to this section by the Purchaser to a transferee
or assignee; provided, that the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
19
further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act. For the purposes of determining the number of
shares of Registrable Securities held by a transferee or assignee, the holdings
of transferees and assignees of a partnership who are partners or retired
partners of such partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses who acquire Registrable
Securities by gift, will or intestate succession) shall be aggregated together
and with the partnership; provided, that all assignees and transferees who would
not qualify individually for assignment of registration rights shall have a
single attorney-in-fact for the purpose of exercising any rights, receiving
notices or taking any action under this Section.
11. INDEMNIFICATION AND REIMBURSEMENT.
(a) (i) The Company agrees to indemnify and hold harmless the Purchaser and
its officers, directors, employees, and agents, and each Purchaser Control
Person (collectively, the "Indemnified Parties" and each, an "Indemnified
Party") from and against any losses, claims, damages, liabilities or expenses
incurred (collectively, "Damages"), joint or several, and any action in respect
thereof to which any Indemnified Party becomes subject to, resulting from,
arising out of or relating to any misrepresentation, breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement on the part of
the Company contained in this Agreement, as such Damages are incurred, except to
the extent such Damages result primarily from the Indemnified Party's failure to
perform any covenant or agreement contained in this Agreement or the Indemnified
Party's negligence, recklessness or bad faith in performing its obligations
under this Agreement.
(ii) The Company hereby agrees that, if the Purchaser, other than by reason
of its negligence, illegal or willful misconduct (in each case, as determined by
a non-appealable judgment to such effect), (x) becomes involved in any capacity
in any action, proceeding or investigation brought by any shareholder of the
Company, in connection with or as a result of the consummation of the
Transactions contemplated by this Agreement or the other Transaction Documents,
or if the Purchaser is impleaded in any such action, proceeding or investigation
by any Person, or (y) becomes involved in any capacity in any action, proceeding
or investigation brought by the SEC, any self-regulatory organization or other
body having jurisdiction, against or involving the Company or in connection with
or as a result of the consummation of the Transactions contemplated by this
Agreement or the other Transaction Documents, or (z) is impleaded in any such
action, proceeding or investigation by any Person, then in any such case, the
Company shall indemnify, defend and hold harmless the Purchaser from and against
and in respect of all losses, claims, liabilities, damages or expenses resulting
from, imposed upon or incurred by the Purchaser, directly or indirectly, and
reimburse such Purchaser for its reasonable legal and other expenses (including
the cost of any investigation and preparation) incurred in connection therewith,
as such expenses are incurred. The indemnification and reimbursement obligations
of the Company under this paragraph (a) shall be in addition to any liability
which the Company may otherwise have, shall extend upon the same terms and
conditions to any Affiliates of the Purchaser who are actually named in such
action, proceeding or investigation, and partners, directors, agents, employees
and Purchaser Control Persons (if any), as the case may be, of the Purchaser and
any such Affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company, the
Purchaser, any such Affiliate and any such Person. The Company also agrees that
20
neither the Purchaser nor any such Affiliate, partner, director, agent, employee
or Purchaser Control Person shall have any liability to the Company or any
Person asserting claims on behalf of or in right of the Company in connection
with or as a result of the consummation of this Agreement or the other
Transaction Documents, except as may be expressly and specifically provided in
or contemplated by this Agreement.
(b) All claims for indemnification by any Indemnified Party (as defined
below) under this Section shall be asserted and resolved as follows:
(i) In the event any claim or demand in respect of which any Person
claiming indemnification under any provision of this Section (an "Indemnified
Party") might seek indemnity under paragraph (a) of this Section is asserted
against or sought to be collected from such Indemnified Party by a Person other
than a party hereto or an Affiliate thereof (a "Third Party Claim"), the
Indemnified Party shall deliver a written notification, enclosing a copy of all
papers served, if any, and specifying the nature of and basis for such Third
Party Claim and for the Indemnified Party's claim for indemnification that is
being asserted under any provision of this Section against any Person (the
"Indemnifying Party"), together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such Third
Party Claim (a "Claim Notice") with reasonable promptness to the Indemnifying
Party. If the Indemnified Party fails to provide the Claim Notice with
reasonable promptness after the Indemnified Party receives notice of such Third
Party Claim, the Indemnifying Party shall not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been prejudiced by such failure of
the Indemnified Party. The Indemnifying Party shall notify the Indemnified Party
as soon as practicable within the period ending thirty (30) calendar days
following receipt by the Indemnifying Party of either a Claim Notice or an
Indemnity Notice (as defined below) (the "Dispute Period") whether the
Indemnifying Party disputes its liability or the amount of its liability to the
Indemnified Party under this Section and whether the Indemnifying Party desires,
at its sole cost and expense, to defend the Indemnified Party against such Third
Party Claim. The following provisions shall also apply.
(x) If the Indemnifying Party notifies the Indemnified Party within
the Dispute Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to
this paragraph (b) of this Section, then the Indemnifying Party shall
have the right to defend, with counsel reasonably satisfactory to the
Indemnified Party, at the sole cost and expense of the Indemnifying
Party, such Third Party Claim by all appropriate proceedings, which
proceedings shall be vigorously and diligently prosecuted by the
Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party in the case of any settlement that provides for any
relief other than the payment of monetary damages or that provides for
the payment of monetary damages as to which the Indemnified Party
shall not be indemnified in full pursuant to paragraph (a) of this
Section). The Indemnifying Party shall have full control of such
defense and proceedings, including any compromise or settlement
thereof; provided, however, that the Indemnified Party may, at the
sole cost and expense of the Indemnified Party, at any time prior to
the Indemnifying Party's delivery of the notice referred to in the
21
first sentence of this subparagraph (x), file any motion, answer or
other pleadings or take any other action that the Indemnified Party
reasonably believes to be necessary or appropriate protect its
interests; and provided further, that if requested by the Indemnifying
Party, the Indemnified Party will, at the sole cost and expense of the
Indemnifying Party, provide reasonable cooperation to the Indemnifying
Party in contesting any Third Party Claim that the Indemnifying Party
elects to contest. The Indemnified Party may participate in, but not
control, any defense or settlement of any Third Party Claim controlled
by the Indemnifying Party pursuant to this subparagraph (x), and
except as provided in the preceding sentence, the Indemnified Party
shall bear its own costs and expenses with respect to such
participation. Notwithstanding the foregoing, the Indemnified Party
may take over the control of the defense or settlement of a Third
Party Claim at any time if it irrevocably waives its right to
indemnity under paragraph (a) of this Section with respect to such
Third Party Claim.
(y) If the Indemnifying Party fails to notify the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to
defend the Third Party Claim pursuant to paragraph (b) of this
Section, or if the Indemnifying Party gives such notice but fails to
prosecute vigorously and diligently or settle the Third Party Claim,
or if the Indemnifying Party fails to give any notice whatsoever
within the Dispute Period, then the Indemnified Party shall have the
right to defend, at the sole cost and expense of the Indemnifying
Party, the Third Party Claim by all appropriate proceedings, which
proceedings shall be prosecuted by the Indemnified Party in a
reasonable manner and in good faith or will be settled at the
discretion of the Indemnified Party (with the consent of the
Indemnifying Party, which consent will not be unreasonably withheld).
The Indemnified Party will have full control of such defense and
proceedings, including any compromise or settlement thereof; provided,
however, that if requested by the Indemnified Party, the Indemnifying
Party will, at the sole cost and expense of the Indemnifying Party,
provide reasonable cooperation to the Indemnified Party and its
counsel in contesting any Third Party Claim which the Indemnified
Party is contesting. Notwithstanding the foregoing provisions of this
subparagraph (y), if the Indemnifying Party has notified the
Indemnified Party within the Dispute Period that the Indemnifying
Party disputes its liability or the amount of its liability hereunder
to the Indemnified Party with respect to such Third Party Claim and if
such dispute is resolved in favor of the Indemnifying Party in the
manner provided in subparagraph (z) below, the Indemnifying Party will
not be required to bear the costs and expenses of the Indemnified
Party's defense pursuant to this subparagraph (y) or of the
Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party shall reimburse the Indemnifying
Party in full for all reasonable costs and expenses incurred by the
Indemnifying Party in connection with such litigation. The
Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this
subparagraph (y), and the Indemnifying Party shall bear its own costs
and expenses with respect to such participation.
22
(z) If the Indemnifying Party notifies the Indemnified Party that it
does not dispute its liability or the amount of its liability to the
Indemnified Party with respect to the Third Party Claim under
paragraph (a) of this Section or fails to notify the Indemnified Party
within the Dispute Period whether the Indemnifying Party disputes its
liability or the amount of its liability to the Indemnified Party with
respect to such Third Party Claim, the amount of Damages specified in
the Claim Notice shall be conclusively deemed a liability of the
Indemnifying Party under paragraph (a) of this Section and the
Indemnifying Party shall pay the amount of such Damages to the
Indemnified Party on demand. If the Indemnifying Party has timely
disputed its liability or the amount of its liability with respect to
such claim, the Indemnifying Party and the Indemnified Party shall
proceed in good faith to negotiate a resolution of such dispute;
provided, however, that if the dispute is not resolved within thirty
(30) days after the date of the Claim Notice, the Indemnifying Party
shall be entitled to institute such legal action as it deems
appropriate.
(ii) In the event any Indemnified Party should have a claim under paragraph
(a) of this Section against the Indemnifying Party that does not involve a Third
Party Claim, the Indemnified Party shall deliver a written notification of a
claim for indemnity under paragraph (a) of this Section specifying the nature of
and basis for such claim, together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such claim (an
"Indemnity Notice") with reasonable promptness to the Indemnifying Party. The
failure by any Indemnified Party to give the Indemnity Notice shall not impair
such party's rights hereunder except to the extent that the Indemnifying Party
demonstrates that it has been irreparably prejudiced thereby. If the
Indemnifying Party notifies the Indemnified Party that it does not dispute the
claim or the amount of the claim described in such Indemnity Notice or fails to
notify the Indemnified Party within the Dispute Period whether the Indemnifying
Party disputes the claim or the amount of the claim described in such Indemnity
Notice, the amount of Damages specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under paragraph (a) of
this Section and the Indemnifying Party shall pay the amount of such Damages to
the Indemnified Party on demand. If the Indemnifying Party has timely disputed
its liability or the amount of its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party shall proceed in good faith to
negotiate a resolution of such dispute; provided, however, that it the dispute
is not resolved within thirty (30) days after the Claim Notice, the Indemnifying
Party shall be entitled to institute such legal action as it deems appropriate.
(c) The indemnity agreements contained herein shall be in addition to (i)
any cause of action or similar rights of the indemnified party against the
indemnifying party or others, and (ii) any liabilities the indemnifying party
may be subject to.
12. JURY TRIAL WAIVER. The Company and the Purchaser hereby waive a trial
by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other in respect of any matter arising out or in
connection with the Transaction Documents.
23
13. GOVERNING LAW: MISCELLANEOUS.
(a) (i) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York for contracts to be wholly performed in
such state and without giving effect to the principles thereof regarding the
conflict of laws. Each of the parties consents to the exclusive jurisdiction of
the federal courts whose districts encompass any part of the state courts of the
State of New York as in connection with any dispute arising under this Agreement
or any of the other Transaction Documents 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 or
to any claim that such venue of the suit, action or proceeding is improper. To
the extent determined by such court, the Company shall reimburse the Purchaser
for any reasonable legal fees and disbursements incurred by the Purchaser in
enforcement of or protection of any of its rights under any of the Transaction
Documents. Nothing in this Section shall affect or limit any right to serve
process in any other manner permitted by law.
(ii) The Company and the Purchaser acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Agreement or
the other Transaction Documents were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and the other Transaction Documents
and to enforce specifically the terms and provisions hereof and thereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.
(b) If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
(c) This Agreement may be amended only by an instrument in writing signed
by the party to be charged with enforcement thereof.
14. NOTICES. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of:
(a) the date delivered, if delivered by personal delivery as against
written receipt therefor or by confirmed facsimile transmission,
(b) the fifth Trading Day after deposit, postage prepaid, in the United
States Postal Service by registered or certified mail, or
(c) the third Trading Day after mailing by domestic or international
express courier, with delivery costs and fees prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
24
COMPANY: Trident Brands Incorporated
200 South Executive Drive, Suite 101
Brookfield, WI 53005
U.S.A.
Tel: 262-789-6689
Fax: 262-789-6689
Attention: Michael Browne
PURCHASER: LPF (MCTECH) Investment Corp.
1315 North Service Rd. East, 6th Floor
Oakville, ON, L6H 1A7
CANADA
Tel: 289-291-3666
Fax: 289-291-0651
Attention : Administrator and Controller
15. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and the
Purchaser's representations and warranties herein shall survive the execution
and delivery of this Agreement and the delivery of the Certificates and the
payment of the Purchase Amount, and shall inure to the benefit of the Purchaser
and the Company and their respective successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
25
IN WITNESS WHEREOF, this Agreement has been duly executed by the Purchaser
and the Company as of the date set first above written.
LPF (MCTECH) INVESTMENT CORP.
By:/s/ Joseph Mancinello
--------------------------------------------
Name: Joseph Mancinelli
Title: President
By:/s/ Carmen Principato
--------------------------------------------
Name: Carmen Principato
Title: Director
TRIDENT BRANDS INCORPORATED
By:/s/ Mark Holcombe
--------------------------------------------
Name: Mark Holcombe
Title: Chairman
26
ANNEX I
FORM OF NOTES
FORM OF CONVERTIBLE PROMISSORY NOTES
THESE CONVERTIBLE PROMISSORY NOTES (THE "NOTES," AND EACH, A "NOTE") HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"),
OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE
COMPANY OF AN OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY
SATISFACTORY TO THE COMPANY THAT EACH NOTE MAY BE SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT
AND SUCH STATE SECURITIES LAWS.
TRIDENT BRANDS INCORPORATED
Convertible Promissory Note for up to US$10,000,000
Dated: September 26, 2016 US$10,000,000
For value received, TRIDENT BRANDS INCORPORATED, a Nevada corporation (the
"Company"), hereby promises to pay to the order of LPF (MCTECH) Investment Corp.
(together with its successors, representatives, and permitted assigns, the
"Holder"), in accordance with the terms hereinafter provided for the Notes, up
to an aggregate of TEN MILLION (US$10,000,000) (the "Principal Amount") plus
accrued and unpaid Interest (as defined in below Section 1.2) in accordance with
the grid attached hereto as Exhibit A (the "Grid") and subject to the terms
hereof. The applicable portion of the Principal Amount and the Interest
outstanding shall be due and payable on September 30, 2019 subject to the
conversion terms hereof. The due date, with respect to each applicable Note, of
any outstanding Principal Amount and Interest is referred to herein as the
"Maturity Date." The "Issuance Date," with respect to the Note for the portion
of the Principal Amount equal to US$4,100,000, is the date hereofand with
respect to any portion of the Principal Amount advanced hereafter shall be the
date that such Principal Amount is advanced as set out in the Grid.
All payments under or pursuant to each Note refer to and shall be made in
United States Dollars in immediately available funds to the Holder at the
address of the Holder first set forth above or at such other place as the Holder
may designate from time to time in writing to the Company.
ARTICLE I
GENERAL TERMS
Section 1.1 Purchase Agreement. Each Note has been executed and delivered
pursuant to the Note Purchase Agreement dated as of September 26, 2016(the
"Purchase Agreement") by and between the Company and the purchaser listed
therein. Capitalized terms used and not otherwise defined herein shall have the
meanings set forth for such terms in the Purchase Agreement.
Section 1.2 Interest. Each portion of the Principal Amount applicable to
each Note advanced to the Company pursuant to the Purchase Agreement shall bear
interest from the applicable Issuance Date at the rate of eight percent (8%) per
annum, calculated daily in arrears based on a three hundred and sixty (360) day
year (the "Interest").
Section 1.3 Payment on Non-Business Days. Whenever any payment to be made
shall be due on a Saturday, Sunday or a public holiday under the laws of the
State of New York, such payment may be due on the next succeeding Business Day.
The term "Business Day" shall mean any day except Saturday, Sunday and any day
that shall be a federal legal holiday or a day on which banking institutions in
the state of New York are authorized or required by law or other governmental
action to close.
Section 1.4 Transfer. Each Note may be transferred or sold, pledged,
hypothecated or otherwise granted as security by the Holder, either in whole or
in part, subject to the provisions of Section 4.8 hereof, and to prior notice of
same to the Company in accordance with Section 4.1 hereof.
Section 1.5 Replacement. Upon receipt of a duly executed, notarized and
unsecured written statement from the Holder with respect to the loss, theft or
destruction of the applicable Note (or any replacement hereof), and without
requiring an indemnity bond or other security, or, in the case of a mutilation
of this applicable Note, upon surrender and cancellation of such applicable
Note, the Company shall issue a new Note, of like tenor and amount, in lieu of
such lost, stolen, destroyed or mutilated applicable Note.
Section 1.6 Security. To secure the due payment of the Principal Amount and
Interest payable under the applicable Note, the Company shall cause to be
provided to the Holder contemporaneously with the execution of this Agreement,
the General Security Agreement annexed hereto as Exhibit C granting the Holder a
security interest in all of the present and after acquired personal property
(the "Security") of the Company.
ARTICLE II
EVENTS OF DEFAULT; REMEDIES
Section 2.1 Events of Default. The occurrence of any of the following
events shall be an "Event of Default" under the applicable Note:
(a) the Company shall fail to make the payment of any outstanding Principal
Amount or Interest on the date such payment is due hereunder;
(b) the suspension from listing, without subsequent listing on any one of,
or the failure of the Company's common stock, par value US$0.001 per share (the
"Common Stock") to be listed on at least one of the OTC Markets (QB or QX), the
OTC Bulletin Board, NASDAQ Capital Market, NASDAQ Global Market, NASDAQ Global
Select Market, NYSE MKT or The New York Stock Exchange, Inc. for a period of
five (5) consecutive Trading Days (as defined under Section 3.2(b));
(c) the Company's notice to the Holder, including by way of public
announcement, at any time, of its inability to comply or its intention not to
comply with proper requests for conversion of the applicable Note into shares of
Common Stock;
(d) the Company shall fail to (i) timely deliver the shares of Common Stock
upon conversion of the applicable Note, or (ii) make the payment of any fees
and/or liquidated damages under the applicable Note or the Purchase Agreement,
which failure in the case of items (i) and (ii) of this Section 2.1(d) is not
remedied within three (3) Business Days after the incurrence thereof;
(e) default shall be made in the performance or observance of (i) any
covenant, condition or agreement contained in the applicable Note (other than as
set forth in clause (d) of this Section 2.1) and such default is not fully cured
within five (5) Business Days after the occurrence thereof or (ii) any covenant,
condition or agreement contained in the Purchase Agreement, the Security
Agreement, or all ancillary documents referred to in those agreements
(collectively, the "Transaction Documents," which is not covered by any other
2
provisions of this Section 2.1 and such default is not fully cured within five
(5) Business Days after the occurrence thereof;
(f) any representation, warranty or covenant made by the Company herein or
in the Purchase Agreement or any other Transaction Document shall prove to have
been false or incorrect or breached on the date as of which made;
(g) the Company shall (i) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee, liquidator or the
like of itself or of all or a substantial part of its property or assets, (ii)
make a general assignment for the benefit of its creditors, (iii) commence a
voluntary case under the U.S. Bankruptcy Code (as now or hereafter in effect) or
under the comparable laws of any jurisdiction (foreign or domestic), (iv) file a
petition seeking to take advantage of any bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting the enforcement of creditors'
rights generally, (v) acquiesce in writing to any petition filed against it in
an involuntary case under U.S. Bankruptcy Code (as now or hereafter in effect)
or under the comparable laws of any jurisdiction (foreign or domestic), (vi)
issue a notice of bankruptcy or winding down of its operations or issue a press
release regarding same, or (vii) take any action under the laws of any
jurisdiction (foreign or domestic) analogous to any of the foregoing;
(h) a proceeding or case shall be commenced in respect of the Company,
without its application or consent, in any court of competent jurisdiction,
seeking (i) the liquidation, reorganization, moratorium, dissolution, winding
up, or composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of itself or of all or any
substantial part of its property or assets in connection with the liquidation or
dissolution of the Company or (iii) similar relief in respect of it under any
law providing for the relief of debtors, and such proceeding or case described
in clause (i), (ii) or (iii) shall continue undismissed, or unstayed and in
effect, for a period of sixty (60) days or any order for relief shall be entered
in an involuntary case under U.S. Bankruptcy Code (as now or hereafter in
effect) or under the comparable laws of any jurisdiction (foreign or domestic)
against the Company or action under the laws of any jurisdiction (foreign or
domestic) analogous to any of the foregoing shall be taken with respect to the
Company and shall continue undismissed, or unstayed and in effect for a period
of sixty (60) days;
(i) the failure of the Company to pay any amounts due to the Holder (other
than outstanding Principal Amount and Interest referred to in Section 2.1(a),
the failure of which to pay when due shall be an immediate Event of Default)
herein within three (3) Business Days of receipt of notice to the Company;
(j) actions, suits, proceedings, claims or disputes pending, at law, in
equity, in arbitration or before any governmental authority, arise against the
Company, which result in equitable relief or monetary judgment(s) or liens
against the Company;
(k) the Collateral fails to perfect, or is delayed from perfection; or
(l) the Company fails to perform or comply with any term, provision or
condition of any other agreement, document or other instrument evidencing or
supporting any indebtedness owing from the Company to the Holder, whether
currently existing or incurred after the date of this Agreement.
Section 2.2 Remedies Upon An Event of Default. If an Event of Default, with
respect to each applicable Note, shall have occurred and shall be continuing,
the Holder may at any time at its option, (a) declare the entire unpaid balance
of the Principal Amount and all Interest accrued but unpaid thereon of each
applicable Note, and all other amounts owing or payable hereunder or under any
Transaction Document, due and payable, and thereupon, the same shall be
accelerated and so due and payable, without presentment, demand, protest, or
notice, all of which are hereby expressly unconditionally and irrevocably waived
3
by the Company; provided, however, that upon the occurrence of an Event of
Default described in (i) Section 2.1(g) or 2.1(h) (in the case of Section 2.1(h)
upon the expiration of the 60-day period mentioned therein), the outstanding
Principal Amount and all Interest accrued but unpaid thereon of each applicable
Note, and all other amounts owing or payable hereunder or under any Transaction
Document, shall be automatically due and payable, and (ii) Sections 2.1(a)-(f)
and 2.1(i) demand the prepayment of each applicable Note pursuant to Section
3.6, (b) subject to Section 3.4, demand that the Principal Amount and all
Interest accrued but unpaid thereon of each applicable Note, and all other
amounts owing or payable hereunder or under any Transaction Document,
then-outstanding shall be converted into shares of Common Stock at a Conversion
Price (as defined in Section 3.2(a) hereof) per share calculated pursuant to
Section 3.1 hereof assuming that the date that the Event of Default occurs is
the Conversion Date (as defined in Section 3.1), or (c) exercise or otherwise
enforce any one or more of the Holder's rights, powers, privileges, remedies and
interests under this Note, the Purchase Agreement, other Transaction Document or
applicable law. If the entire unpaid balance of the Principal Amount, together
with accrued and unpaid Interest thereon, is not paid when due at maturity,
whether on the Maturity Date or any earlier date as a result of acceleration of
the applicable Note(s) pursuant to the terms hereof, then interest shall accrue
on the outstanding Principal Amount from the date of such Event of Default at
the rate of 18% per annum. No course of delay on the part of the Holder shall
operate as a waiver thereof or otherwise prejudice the right of the Holder. No
remedy conferred hereby shall be exclusive of any other remedy referred to
herein or now or hereafter available at law, in equity, by statute or otherwise.
ARTICLE III
CONVERSION; ANTIDILUTION; PREPAYMENT
Section 3.1 Conversion. On any date(s) (each a "Conversion Date") elected
by the Holder following the applicable Issuance Date, each Note may be converted
at the option of the Holder from time to time, in whole or in part, into such
number of fully paid and non-assessable shares of Common Stock as is determined
by dividing that portion of the outstanding Principal Amount plus any accrued
Interest under each applicable Note as of such Conversion Date by the Conversion
Price (as defined in Section 3.2(a)) then in effect on the Conversion Date;
provided, however, that the Conversion Price shall be subject to adjustment as
described in Section 3.4 below. The Holder shall deliver each Note, as
applicable, to the Company at the address designated in the Purchase Agreement
at such time that each Note, as applicable, is fully converted. With respect to
partial conversions of the applicable Note, the Company shall keep written
records of the amount of the applicable Note converted as of each Conversion
Date.
Section 3.2 Conversion Price.
The term "Conversion Price" shall mean the price that is equal to a 25%
discount to the average closing price of the Common Stock for the 10 Trading
Days immediately prior to the date upon which the first installment of the
Purchase Amount (as defined in the Purchase Agreement) is paid to the Company in
accordance with the Purchase Agreement.
The term "Trading Day" shall mean any day on which the Common Stock is
listed or quoted and traded on any other national securities exchange, market,
trading or quotation facility on which the Common Stock is then listed or
traded, or, if the Common Stock is not then listed or traded, any Business Day.
Section 3.3 Mechanics of Conversion.
(a) Not later than five (5) Trading Days after any Conversion Date, the
Company or its designated transfer agent, as applicable, shall issue and deliver
to the Holder, as specified in the Holder's Conversion Notice, registered in the
4
name of the Holder or its designee, the number of shares of Common Stock to
which the Holder shall be entitled, that represent the number of shares of
Common Stock being acquired upon the conversion of the applicable Note (the
"Delivery Date"). If in the case of any Conversion Notice such Common Stock
certificate or certificates are not delivered to or as directed by the Holder by
the Delivery Date, the Holder shall be entitled by written notice to the Company
at any time on or before its receipt of such Common Stock certificate or
certificates thereafter, to rescind such conversion, in which event the Company
shall immediately return the applicable Note if tendered for conversion,
whereupon the Company and the Holder shall each be restored to their respective
positions immediately prior to the delivery of such notice of revocation. A
"Conversion Notice" means the notice of conversion, substantially in the form of
Exhibit B, delivered by the Holder to the Company on the Conversion Date.
Section 3.4 Adjustment of Conversion Price.
(a) The Conversion Price shall be subject to adjustment from time to time
as follows:
(i) Adjustments for Stock Splits and Combinations. If the Company shall at
any time or from time to time after the initial Issuance Date, effect a stock
split of the outstanding Common Stock, the applicable Conversion Price in effect
immediately prior to the stock split shall be proportionately decreased. If the
Company shall at any time or from time to time after the initial Issuance Date,
combine the outstanding shares of Common Stock, the applicable Conversion Price
in effect immediately prior to the combination shall be proportionately
increased. Any adjustments under this Section 3.4(a)(i) shall be effective at
the close of business on the date the stock split or combination occurs.
(ii) Adjustments for Certain Dividends and Distributions. If the Company
shall at any time or from time to time after the initial Issuance Date, make or
issue or set a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in shares of Common
Stock, then, and in each event, the applicable Conversion Price in effect
immediately prior to such event shall be decreased as of the time of such
issuance or, in the event such record date shall have been fixed, as of the
close of business on such record date, by multiplying, the applicable Conversion
Price then in effect by a fraction:
(1) the numerator of which shall be the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date; and
(2) the denominator of which shall be the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date plus the number of shares of Common
Stock issuable in payment of such dividend or distribution.
(iii) Adjustment for Other Dividends and Distributions. If the Company
shall at any time or from time to time after each applicable Issuance Date, make
or issue or set a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in any form other
than shares of Common Stock, then, and in each event, an appropriate revision to
the applicable Conversion Price shall be made and provision shall be made (by
adjustments of the Conversion Price or otherwise) so that the Holder shall
receive upon conversions thereof, in addition to the number of shares of Common
Stock receivable thereon, the number of securities of the Company which the
Holder would have received had this Note been converted into Common Stock on the
date of such event and had thereafter, during the period from the date of such
event to and including the Conversion Date, retained such securities (together
with any distributions payable thereon during such period), giving application
to all adjustments called for during such period under this Section 3.4(a)(iii)
5
with respect to the rights of the Holder; provided, however, that if such record
date shall have been fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, the Conversion Price
shall be adjusted pursuant to this Section 3.4(a)(iii) as of the time of actual
payment of such dividends or distributions.
(iv) Adjustments for Reclassification, Exchange or Substitution. If the
Common Stock issuable upon conversion of each applicable Note at any time or
from time to time after the Issuance Date shall be changed to the same or
different number of shares of any class or classes of stock, whether by
reclassification, exchange, substitution or otherwise (other than by way of a
stock split or combination of shares or stock dividends provided for in Sections
3.4(a)(i), (ii) and (iii), or a reorganization, merger, consolidation, or sale
of assets provided for in Section 3.4(a)(v)), then, and in each event, an
appropriate revision to the Conversion Price shall be made and provisions shall
be made (by adjustments of the Conversion Price or otherwise) so that the Holder
shall have the right thereafter to convert each applicable Note into the kind
and amount of shares of stock and other securities receivable upon
reclassification, exchange, substitution or other change, by holders of the
number of shares of Common Stock into which each such applicable Note might have
been converted immediately prior to such reclassification, exchange,
substitution or other change, all subject to further adjustment as provided
herein.
(v) Adjustments for Reorganization, Merger, Consolidation or Sales of
Assets. If at any time or from time to time after the Issuance Date there shall
be a capital reorganization of the Company (other than by way of a stock split
or combination of shares or stock dividends or distributions provided for in
Section 3.4(a)(i), (ii) and (iii), or a reclassification, exchange or
substitution of shares provided for in Section 3.4(a)(iv)), or a merger or
consolidation of the Company with or into another corporation where the holders
of outstanding voting securities of the Company prior to such merger or
consolidation do not own over fifty percent (50%) of the outstanding voting
securities of the merged or consolidated entity, immediately after such merger
or consolidation, or the sale of all or substantially all of the Company's
properties or assets to any other person (an "Organic Change"), then as a part
of such Organic Change an appropriate revision to the Conversion Price shall be
made and provision shall be made (by adjustments of the Conversion Price or
otherwise) so that the Holder shall have the right thereafter to convert each
applicable Note into the kind and amount of shares of stock and other securities
or property of the Company or any successor corporation resulting from Organic
Change. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 3.4(a)(v) with respect to the
rights of the Holder after the Organic Change to the end that the provisions of
this Section 3.4(a)(v) (including any adjustment in the applicable Conversion
Price then in effect and the number of shares of stock or other securities
deliverable upon conversion of each applicable Note) shall be applied after that
event in as nearly an equivalent manner as may be practicable.
(vii) Consideration for Stock. In case any shares of Common Stock or any
Common Stock Equivalents (as defined in the Purchase Agreement) shall be issued
or sold:
(1) in connection with any merger or consolidation in which the Company is
the surviving corporation (other than any consolidation or merger in which the
previously outstanding shares of Common Stock of the Company shall be changed to
or exchanged for the stock or other securities of another corporation), the
amount of consideration therefor shall be, deemed to be the fair value, as
determined reasonably and in good faith by the Board of Directors of the
Company, of such portion of the assets and business of the nonsurviving
corporation as such Board of Directors may determine to be attributable to such
shares of Common Stock, Common Stock Equivalents, rights or warrants or options,
as the case may be; or
(2) in the event of any consolidation or merger of the Company in which the
Company is not the surviving corporation or in which the previously outstanding
6
shares of Common Stock of the Company shall be changed into or exchanged for the
stock or other securities of another corporation, or in the event of any sale of
all or substantially all of the assets of the Company for stock or other
securities of any corporation, the Company shall be deemed to have issued a
number of shares of its Common Stock for stock or securities or other property
of the other corporation computed on the basis of the actual exchange ratio on
which the transaction was predicated, and for a consideration equal to the fair
market value on the date of such transaction of all such stock or securities or
other property of the other corporation. If any such calculation results in
adjustment of the applicable Conversion Price, or the number of shares of Common
Stock issuable upon conversion of each Note, the determination of the applicable
Conversion Price or the number of shares of Common Stock issuable upon
conversion of the Note immediately prior to such merger, consolidation or sale,
shall be made after giving effect to such adjustment of the number of shares of
Common Stock issuable upon conversion of the Note. In the event Common Stock is
issued with other shares or securities or other assets of the Company for
consideration which covers both, the consideration computed as provided in this
Section 3.5(vii) shall be allocated among such securities and assets as
determined in good faith by the Board of Directors of the Company.
(b) Record Date. In case the Company shall take record of the holders of
its Common Stock for the purpose of entitling them to subscribe for or purchase
Common Stock or Common Stock Equivalents, then the date of the issue or sale of
the shares of Common Stock shall be deemed to be such record date.
(c) Certain Issues Excepted. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment to the
Conversion Price in connection with (i) securities issued (other than for cash)
in connection with a merger, acquisition, or consolidation, except as provided
for in Section 3.4(a)(v), (ii) securities issued pursuant to a bona fide
firm-underwritten public offering of the Company's securities, (iii) securities
issued pursuant to the conversion or exercise of convertible or exercisable
securities issued or outstanding on or prior to the date hereof or issued
pursuant to the Purchase Agreement, (iv) securities issued in connection with
strategic license agreements or other partnering arrangements so long as such
issuances are not for the purpose of raising capital, (v) Common Stock issued or
options to purchase Common Stock granted or issued pursuant to the Company's
stock option plans and employee stock purchase plans as they now exist and (vi)
the payment of any accrued interest in shares of Common Stock pursuant to each
Note.
(d) No Impairment. The Company shall not, by amendment of its Certificate
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 hereunder by the Company, but will at all
times in good faith, assist in the carrying out of all the provisions of this
Section 3.4 and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder under the Agreement
against impairment.
(e) Certificates as to Adjustments. Upon occurrence of each adjustment or
readjustment of the Conversion Price or number of shares of Common Stock
issuable upon conversion of each applicable Note pursuant to this Section 3.4,
the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to the Holder a
certificate setting forth such adjustment and readjustment, showing in detail
the facts upon which such adjustment or readjustment is based. The Company
shall, upon written request of the Holder, at any time, furnish or cause to be
furnished to the Holder a like certificate setting forth such adjustments and
readjustments, the applicable Conversion Price in effect at the time, and the
number of shares of Common Stock and the amount, if any, of other securities or
property which at the time would be received upon the conversion of each
applicable Note. Notwithstanding the foregoing, the Company shall not be
obligated to deliver a certificate unless such certificate would reflect an
increase or decrease of at least one percent (1%) of such adjusted amount.
7
Section 3.5 Taxes; No Fractional Shares; Reservation of Shares.
(a) Issue Taxes. The Company shall pay any and all issue and other taxes,
excluding federal, state or local income taxes, that may be payable in respect
of any issue or delivery of shares of Common Stock on conversion of each Note
pursuant thereto; provided, however, that the Company shall not be obligated to
pay any transfer taxes resulting from any transfer requested by the Holder in
connection with any such conversion.
(b) Fractional Shares. No fractional shares of Common Stock shall be issued
upon conversion of each Note.
(c) Reservation of Common Stock. The Company shall at all times when each
Note shall be outstanding, reserve and keep available out of its authorized but
unissued Common Stock, such number of shares of Common Stock as shall from time
to time be sufficient to effect the conversion of each Note; provided that the
number of shares of Common Stock so reserved shall at no time be less than two
hundred percent (200%) of the number of shares of Common Stock for which the
applicable Note is at any time convertible. The Company shall, from time to time
in accordance with Nevada corporate law, with applicable securities law and
regulations, and with its constitutive documents, increase the authorized number
of shares of Common Stock if at any time the unissued number of authorized
shares shall not be sufficient to satisfy the Company's obligations under this
Section 3.5(c).
(d) Regulatory Compliance. If any shares of Common Stock to be reserved for
the purpose of conversion of each applicable Note require registration or
listing with or approval of any governmental authority, stock exchange or other
regulatory body under any federal or state law or regulation or otherwise before
such shares may be validly issued or delivered upon conversion, the Company
shall, at its sole cost and expense, in good faith and as expeditiously as
possible, endeavor to secure such registration, listing or approval, as the case
may be.
Section 3.6 Prepayment.
(a) Prepayment Upon an Event of Default. Notwithstanding anything to the
contrary contained herein, upon the occurrence of an Event of Default described
in Sections 2.1(a)-(i), the Holder shall have the right, at such Holder's
option, to require the Company to prepay (prior to the Maturity Date) in cash
all or a portion of the applicable Note at a price equal to one hundred percent
(100%) of the aggregate outstanding Principal Amount and accrued but unpaid
Interest of each applicable Note (the "Event of Default Prepayment Price").
Nothing in this Section 3.6(a) shall limit the Holder's rights under Section
2.2.
(b) Prepayment at the Election of the Company. Notwithstanding anything to
the contrary contained in the Notes, at any time during the period beginning on
the advance date of any installment of the Purchase Amount and ending on the
date that is prior to the Conversion Date, the Company shall have the right,
exercisable on not less than three (3) Trading Days prior written notice to the
Holder, to prepay in cash the applicable portion of the then-outstanding portion
of the Purchase Amount plus the then-outstanding portion of any accrued and
unpaid Interest thereon as at the date fixed for prepayment, in full, in
accordance with this Section 3.6 (such prepayment amount, the "Optional
Prepayment Amount"). Any notice of prepayment hereunder (an "Optional Prepayment
Notice") shall be delivered by the Company to the Holder at its registered
addresses and shall state: (1) that the Company is exercising its right to
prepay each applicable Note, and (2) the date of prepayment which shall be not
more than three (3) Trading Days from the date of the Optional Prepayment
Notice.
Section 3.7 Inability to Fully Convert.
(a) Holder's Option if Company Cannot Fully Convert. If, upon the Company's
receipt of a Conversion Notice, the Company cannot issue shares of Common Stock
8
for any reason, including, without limitation, because the Company (w) does not
have a sufficient number of shares of Common Stock authorized and available, or
(x) is otherwise prohibited by applicable law or by the rules or regulations of
any stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Company or any of its securities from
issuing all of the Common Stock which is to be issued to the Holder pursuant to
a Conversion Notice, then the Company shall issue as many shares of Common Stock
as it is able to issue in accordance with the Holder's Conversion Notice and,
with respect to the unconverted portion of each Note (as applicable), the
Holder, solely at its option, can elect to:
(i) require the Company to prepay that portion of each applicable Note for
which the Company is unable to issue Common Stock in accordance with the
Holder's Conversion Notice (the "Mandatory Prepayment") in an amount equal to
Optional Prepayment Amount as of such Conversion Date (the "Mandatory Prepayment
Price"), plus an amount equal to the Holder's out-of-pocket expenses incurred in
connection with the transactions (which are contemplated by the Transaction
Documents) and enforcing its rights hereunder;
(ii) void the Conversion Notice and retain or have returned, as the case
may be, each applicable Note that was to be converted pursuant to the Conversion
Notice (provided that the Holder's voiding its Conversion Notice shall not
affect the Company's obligations to make any payments which have accrued prior
to the date of such notice).
(b) Mechanics of Fulfilling Holder's Election. The Company shall
immediately send via facsimile to the Holder, upon receipt of a facsimile copy
of a Conversion Notice from the Holder which cannot be fully satisfied as
described in Section 3.7(a) above, a notice of the Company's inability to fully
satisfy the Conversion Notice (the "Inability to Fully Convert Notice"). Such
Inability to Fully Convert Notice shall indicate (i) the reason why the Company
is unable to fully satisfy the Holder's Conversion Notice, (ii) the amount of
the applicable Note which cannot be converted and (iii) the applicable Mandatory
Prepayment Price. The Holder shall notify the Company of its election pursuant
to Section 3.7(a) above by delivering written notice via facsimile to the
Company (the "Notice in Response to Inability to Convert").
(c) Payment of Prepayment Price. If the Holder shall elect to have each
applicable Note prepaid pursuant to Section 3.7(a)(i) above, the Company shall
pay the Mandatory Prepayment Price to the Holder within ten (10) days of the
Company's receipt of the Notice in Response to Inability to Convert, provided
that prior to the Company's receipt of the Notice in Response to Inability to
Convert the Company has not delivered a notice to the Holder stating, to the
satisfaction of the Holder, that the event or condition resulting in the
Mandatory Prepayment has been cured and all Conversion Shares (as defined in the
Purchase Agreement) issuable to the Holder can and will be delivered to the
Holder in accordance with the terms of the Notes. If the Company shall fail to
pay the applicable Mandatory Prepayment Price to the Holder on a timely basis as
described in this Section 3.7(c) (other than pursuant to a dispute as to the
determination of the arithmetic calculation of the Mandatory Prepayment Price),
in addition to any remedy the Holder may have under each applicable Note and the
Purchase Agreement, such unpaid amount shall bear interest at the rate of 0.67%
per month (prorated for partial months) until paid in full. Until the full
Mandatory Prepayment Price is paid in full to the Holder, the Holder may (i)
void the Mandatory Prepayment with respect to that portion of each applicable
Note for which the full Mandatory Prepayment Price has not been paid, (ii)
receive back each such Note, and (iii) require that the Conversion Price of such
returned Note be adjusted to the lesser of (A) the Conversion Price as in effect
on the date on which the Holder voided the Mandatory Prepayment and (B) the
lowest average closing price of the Common Stock for the Trading Days during the
period beginning on the Conversion Date and ending on the date the Holder voided
the Mandatory Prepayment.
Section 3.8 No Rights as Shareholder. Nothing contained in each Note shall
be construed as conferring upon the Holder, prior to the conversion of each
Note, the right to vote or to receive dividends or to consent or to receive
9
notice as a shareholder in respect of any meeting of shareholders for the
election of directors of the Company or of any other matter, or any other rights
as a shareholder of the Company.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Notices.
(a) Any notice, demand, request, waiver or other communication required or
permitted to be given hereunder shall be in writing and shall be effective (a)
upon hand delivery by telex (with correct answer back received), telecopy or
facsimile at the address or number designated in the Purchase Agreement (if
delivered on a Business Day during normal business hours where such notice is to
be received), or the first Business Day following such delivery (if delivered
other than on a Business Day during normal business hours where such notice is
to be received) or (b) on the second Business Day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The Company will
give written notice to the Holder at least ten (10) days prior to the date on
which the Company takes a record (x) with respect to any dividend or
distribution upon the Common Stock, (y) with respect to any PRO RATA
subscription offer to holders of Common Stock or (z) for determining rights to
vote with respect to any Major Transaction, dissolution, liquidation or
winding-up and in no event shall such notice be provided to such holder prior to
such information being made known to the public. The Company will also give
written notice to the Holder at least ten (10) days prior to the date on which
any Major Transaction, dissolution, liquidation or winding-up will take place
and in no event shall such notice be provided to the Holder prior to such
information being made known to the public.
(b) A "Major Transaction" shall be deemed to have occurred at such time as
any of the following events:
(i) the consolidation, merger or other business combination of the Company
with or into another person (other than (A) pursuant to a migratory merger
effected solely for the purpose of changing the jurisdiction of incorporation of
the Company or (B) a consolidation, merger or other business combination in
which the Company is the surviving entity and the shareholders of the Company's
voting power immediately prior to the transaction continue after the transaction
to hold, directly or indirectly, the voting power of the surviving entity or
entities necessary to elect a majority of the members of the board of directors
(or their equivalent if other than a corporation) of such entity or entities);
(ii) the sale or transfer of more than fifty percent (50%) of the Company's
assets (based on the fair market value as determined in good faith by the
Company's Board of Directors) other than inventory in the ordinary course of
business in one or a related series of transactions; or
(iii) closing of a purchase, tender or exchange offer made to the
shareholders of more than fifty percent (50%) of the outstanding shares of
Common Stock in which more than fifty percent (50%) of the outstanding shares of
Common Stock were tendered and accepted.
Section 4.2 Governing Law. The Notes shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to any of the conflicts of law principles which would result in the
application of the substantive law of another jurisdiction. The Notes shall not
be interpreted or construed with any presumption against the party causing the
Notes to be drafted.
10
Section 4.3 Headings. Article and section headings in the Notes are
included herein for purposes of convenience of reference only and shall not
constitute a part of these Notes for any other purpose.
Section 4.4 Remedies, Characterizations, Other Obligations, Breaches and
Injunctive Relief. The remedies provided in the Notes shall be cumulative and in
addition to all other remedies available under the Notes, at law or in equity
(including, without limitation, a decree of specific performance and/or other
injunctive relief), no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit the Holder's right to pursue actual damages for any failure by the
Company to comply with the terms of the Notes. Amounts set forth or provided for
herein with respect to payments, conversion and the like (and the computation
thereof) shall be the amounts to be received by the Holder and shall not, except
as expressly provided herein, be subject to any other obligation of the Company
(or the performance thereof). The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable and material harm to the Holder
and that the remedy at law for any such breach may be inadequate. Therefore the
Company agrees that, in the event of any such breach or threatened breach, the
Holder shall be entitled, in addition to all other available rights and
remedies, at law or in equity, to seek and obtain such equitable relief,
including but not limited to an injunction restraining any such breach or
threatened breach, without the necessity of showing economic loss and without
any bond or other security being required.
Section 4.5 Enforcement Expenses. The Company agrees to pay all costs and
expenses of enforcement of the Notes, including, without limitation, reasonable
attorneys' fees and expenses.
Section 4.6 Binding Effect. The obligations of the Company and the Holder
set forth herein shall be binding upon the successors and assigns of each such
party, whether or not such successors or assigns are permitted by the terms
hereof.
Section 4.7 Amendments. The Notes may not be modified or amended in any
manner except in writing executed by the Company and the Holder.
Section 4.8 Compliance with Securities Laws. The Holder acknowledges that
the Notes are being acquired solely for the Holder's own account and not as a
nominee for any other party, and for investment, and that the Holder shall not
offer, sell or otherwise dispose of the Notes except in accordance with and in
reliance upon the exemption from securities registration for offers and sales in
an "offshore transaction" to a non-U.S. Person afforded, inter alia, by Rule 904
under Regulation S ("Regulation S") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act"), and/or Section 4(2) of the 1933 Act. [NTD: NEED
CONFIRMATION OF HOW THIS APPLIES TO LPF.] The Notes and any Note issued in
substitution or replacement therefor shall be stamped or imprinted with a legend
in substantially the following form:
"EACH CONVERTIBLE PROMISSORY NOTE ("NOTE") HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT
BY THE COMPANY OF AN OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND
SCOPE REASONABLY SATISFACTORY TO THE COMPANY THAT EACH NOTE MAY BE
SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM
REGISTRATION UNDER THE 1933 ACT AND SUCH STATE SECURITIES LAWS."
11
Section 4.9 Consent to Jurisdiction. Each of the Company and the Holder (i)
hereby irrevocably submits to the non-exclusive jurisdiction of the State of New
York for the purposes of any suit, action or proceeding arising out of or
relating to these Notes and (ii) hereby waives, and agrees not to assert in any
such suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of such court, that the suit, action or proceeding is brought
in an inconvenient forum or that the venue of the suit, action or proceeding is
improper. Each of the Company and the Holder consents to process being served in
any such suit, action or proceeding by mailing a copy thereof to such party at
the address in effect for notices to it under the Purchase Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing in this Section 4.9 shall affect or limit any right to
serve process in any other manner permitted by law. Each of the Company and the
Holder hereby agree that the prevailing party in any suit, action or proceeding
arising out of or relating to these Notes shall be entitled to reimbursement for
reasonable legal fees from the non-prevailing party.
Section 4.10 Parties in Interest. The Notes shall be binding upon, inure to
the benefit of and be enforceable by the Company, the Holder and their
respective successors and permitted assigns.
Section 4.11 Failure or Indulgence Not Waiver. No failure or delay on the
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege.
Section 4.12 Company Waivers. Except as otherwise specifically provided
herein, the Company and all others that may become liable for all or any part of
the obligations evidenced by this Note, hereby waive presentment, demand, notice
of nonpayment, protest and all other demands' and notices in connection with the
delivery, acceptance, performance and enforcement of these Notes, and do hereby
consent to any number of renewals of extensions of the time or payment hereof
and agree that any such renewals or extensions may be made without notice to any
such persons and without affecting their liability herein and do further consent
to the release of any person liable hereon, all without affecting the liability
of the other persons, firms or the Company liable for the payment of these
Notes, AND DO HEREBY WAIVE TRIAL BY JURY.
(a) No delay or omission on the part of the Holder in exercising its rights
under these Notes, or course of conduct relating hereto, shall operate as a
waiver of such rights or any other right of the Holder, nor shall any waiver by
the Holder of any such right or rights on any one occasion be deemed a waiver of
the same right or rights on any future occasion.
(b) THE COMPANY ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THESE NOTES ARE
A PART IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW,
HEREBY WAIVES ITS RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT
REMEDY WHICH THE HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.
TRIDENT BRANDS INCORPORATED
By: /s/ Mark Holcombe
--------------------------------------
Name: Mark Holcombe
Title: Chairman
12
EXHIBIT A
ADVANCES AND PAYMENT
DATE: ? August 31st, 2016
Total Principal
Total Principal and Accrued
Amount Outstanding Accrued Interest
Issuance Dates Advanced (US$) (US$) Interest (US$) (US$)
-------------- -------------- ----- -------------- -----
The Date Hereof 4,100,000 4,100,000
Annex I- 1
EXHIBIT B
FORM OF CONVERSION NOTICE
(To be executed by the registered Holder in order to convert the applicable
Note)
The undersigned hereby irrevocably elects to convert $ ________________ of the
Principal Amount of the above Note for __________________________ into shares of
Common Stock of TRIDENT BRANDS INCORPORATED according to the conditions hereof,
as of the date written below.
Conversion Date: ___________________________________________
Applicable Conversion Price: _______________________________
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the Conversion Date:
Signature:___________________________________________
Print Name:__________________________________________
Address:_____________________________________________
Annex I- 2
EXHIBIT C
FORM OF GENERAL SECURITY AGREEMENT
SEE ATTACHED
Annex I- 3
ANNEX II
FORM OF SECURITY AGREEMENT
ANNEX II TO SECURITIES PURCHASE AGREEMENT
EXHIBIT C TO SECURED CONVERTIBLE PROMISSORY NOTES
GENERAL SECURITY AGREEMENT
THIS GENERAL SECURITY AGREEMENT made as of the 26th day of September, 2016
(this "AGREEMENT")
BETWEEN:
TRIDENT BRANDS INCORPORATED
(the "GUARANTOR")
AND:
LPF (MCTECH) INVESTMENT CORP.
(the "SECURED PARTY")
WHEREAS:
As evidenced by a secured Convertible Promissory Note dated for reference ?
A. , and a secured Convertible Promissory Note dated for reference
September 26, 2016, as the same may be amended, supplemented, extended, renewed,
restated, replaced or superseded from time to time (collectively, the "NOTES"
and each, a "NOTE") between the Guarantor, as borrower, and the Secured Party,
as lender, the Guarantor has obtained loans in the minimum amount of $4,100,000
and the maximum aggregate amount $10,000,000 ;
B. As a material inducement to the Secured Party to purchase the Notes, the
Guarantor has agreed to provide a security agreement securing the loans
documented by the Notes. FOR VALUE RECEIVED, the Guarantor covenants, agrees,
warrants, represents, acknowledges, and confirms to and with the Secured Party
and creates and grants the mortgages, pledges, charges, transfers, assignments,
and security interests as follows:
1. SECURITY INTEREST.
As security for the payment and performance of the Obligations (as defined
in Section 3), the Guarantor, subject to the exceptions set out in Section 2,
does:
1.1 Grant to the Secured Party a lien on, and a security interest in, and
mortgages, pledges, charges, transfers and assigns absolutely, all of the
Guarantor's present and after acquired personal property, and all personal
property in which the Guarantor has rights, of whatever nature or kind and
wherever situated, including, without limitations, all of the following now
owned or in future owned or acquired by or on behalf of the Guarantor;
(a) all goods, including:
(i) all inventory of whatever kind and wherever situate, including,
without limitation, goods acquired or held for sale or lease or
furnished or to be furnished under contracts of rental or service, all
raw materials, work in progress, finished goods, returned goods,
repossessed goods and all packaging materials, supplies, and
containers relating to or used or consumed in connection with any of
the foregoing (collectively, the "Inventory");
(ii) all equipment of whatever kind and wherever situated, including,
without limitation, all machinery, tools, apparatus, plant, fixtures,
furniture, furnishings, chattels, motor vehicles, vessels, and other
tangible personal property of whatever nature or kind (collectively,
the "EQUIPMENT");
(b) all book accounts and book debts and generally all accounts, debts,
dues, claims, choses in action, and demands of every nature and kind
however arising or secured including letters of credit and advices of
credit, which are now due, owing, or accruing, or growing due to, or
owned by, or which may in future become due, owing, or accruing, or
growing due to, or owned by the Guarantor (the "ACCOUNTS");
(c) all contractual rights, insurance, claims, licenses, goodwill,
patents, trademarks, trade names, copyrights, and other industrial or
intellectual property of the Guarantor or in which the Guarantor has
an interest, all other choses in action of the Guarantor of every kind
which now are, or which may in future be, due or owing to or owned by
the Guarantor, and all other intangible property of the Guarantor
which is not Accounts, Chattel Paper, Instruments, Documents of Title,
securities, or Money;
(d) all Money;
(e) all property described in Schedule "A" to this Agreement, or in any
schedule now or at any time in future annexed to this Agreement or
agreed to form part of this Agreement;
(f) the undertaking of the Guarantor;
(g) all Chattel Paper, Documents of Title (whether negotiable or not),
Instruments, intangibles, and securities now owned or in future owned
or acquired by or on behalf of the Guarantor (including those returned
to or repossessed by the Guarantor) and all other goods of the
Guarantor that are not Equipment, Inventory, or Accounts;
(h) all deeds, documents, writings, papers, books of account, and other
books and electronically recorded data relating to any of the
foregoing or by which any of the foregoing is or may in future be
secured, evidenced, acknowledged, or made payable; and
(i) all renewals, accretions and substitutions of any of the foregoing and
all after acquired personal property and fixtures and farm products in
any form derived directly or indirectly from any dealing with the
Collateral (as defined in Section 1.2) or the Proceeds, including
rights to insurance payments and any other payments representing
indemnity or compensation for loss or damage to the Collateral or the
Proceeds.
1.2 The security interests created or granted under Section 1.1 of this
Agreement are collectively called the "SECURITY INTEREST", and all property,
assets, interests, and undertakings (including Proceeds) subject to the Security
Interest or otherwise charged or secured by this Agreement or expressed to be
charged, assigned or transferred, or secured by any Instruments supplemental to
this Agreement or in implementation of this Agreement are collectively called
the "COLLATERAL".
2
2. EXCEPTIONS AND DEFINITIONS.
2.1 Any reference in this Agreement to the "UNIFORM COMMERCIAL CODE" or
"UCC" means the Uniform Commercial Code, as adopted and enacted and as in effect
from time to time in the State of Nevada. Terms used herein which are defined in
the UCC and not otherwise defined herein shall have the respective meanings
ascribed to such terms in the UCC.
2.2 The Security Interest granted by this Agreement shall not extend or
apply to and the Collateral shall not extend to the last day of the term of any
lease or agreement to lease real property, but upon the enforcement of the
Security Interest the Guarantor shall stand possessed of such last day in trust
to assign and dispose thereof as the Secured Party shall direct.
2.3 The Security Interest shall not render the Secured Party liable to
observe or perform any term or covenant or condition of any agreement, document
or Instrument to which the Guarantor is a party or by which it is bound. In
addition, the Security Interests do not and shall not extend to, and the
Collateral shall not include, any agreement, right, franchise, licence or permit
(the "CONTRACTUAL RIGHTS") to which the Guarantor is a party or of which the
Guarantor has the benefit, to the extent that the creation of the Security
Interests herein would constitute a breach of the terms of or permit any person
to terminate the Contractual Rights, but the Guarantor shall hold its interest
therein in trust for the Secured Party and shall assign such Contractual Rights
to the Secured Party forthwith upon obtaining the consent of all other parties
thereto. The Guarantor agrees that it shall, if required by the Secured Party,
use commercially reasonable efforts to obtain any consent required to permit any
Contractual Rights to be subject to the Security Interests herein.
2.4 All Consumer Goods are excepted from the Security Interest.
2.5 Any reference in this Agreement to "Collateral" shall, unless the
context otherwise requires, be deemed a reference to "Collateral or any part
thereof". The Collateral shall not include Consumer Goods of the Guarantor.
2.6 The term "PROCEEDS", whenever used and interpreted as above, shall by
way of example include trade-ins, Equipment, cash, bank accounts, notes, Chattel
Paper, goods, contract rights, Accounts, and any other personal property or
obligation received when such Collateral or Proceeds are sold, exchanged,
collected, or otherwise disposed of.
3. OBLIGATIONS SECURED.
This Agreement and the Security Interest are in addition to and not in
substitution for any other security interest now or in future held by the
Secured Party from the Guarantor, or from any other person and shall be general
and continuing security for the payment of all indebtedness and liability of the
Guarantor to the Secured Party (including interest thereon), present or future,
absolute or contingent, joint or several, direct or indirect, matured or not,
extended or renewed, wherever and however incurred, and any ultimate balance
thereof, including all advances on current or running account and all future
advances and re-advances, and whether the same is from time to time reduced and
thereafter increased or entirely extinguished and thereafter incurred again, and
whether the Guarantor be bound alone or with another or others, and whether as
principal or surety, and for the performance and satisfaction of all obligations
of the Guarantor to the Secured Party, whether or not contained in this
Agreement or the Notes (all of which indebtedness, liability, and obligations
are collectively the "OBLIGATIONS").
4. COVENANTS OF GUARANTOR.
THE GUARANTOR COVENANTS AND AGREES WITH THE SECURED PARTY:
(a) not to change its name, its principal place of business, its chief
executive office or the location of any of the Collateral without
giving 15 days' prior written notice thereof to the Secured Party;
(b) not to sell, exchange, transfer, assign, lease or otherwise dispose of
or deal in any way with the Collateral or release, surrender or
abandon possession of the Collateral or move or transfer the
3
Collateral, or enter into any agreement or undertaking to do any of
the foregoing;
(c) not to create or permit to exist any encumbrance against any of the
Collateral, except the Security Interests created by this Agreement
and other permitted encumbrances, as set forth in Schedule "B" (the
"Permitted Encumbrances");
(d) to defend the title to the Collateral for the benefit of the Secured
Party against all claims and demands;
(e) that the Guarantor shall maintain the Security Interest created by
this Agreement as a perfected security having at least the priority
described in Section 12 and shall defend such Security Interest and
such priority against the claims and demands of all persons;
(f) to promptly pay when due all taxes, assessments, rates, levies,
payroll deductions, workers' compensation assessments, and any other
charges which could result in the creation of a statutory lien or
deemed trust in respect of the Collateral;
(g) to do, make, execute and deliver such further and other
assignments, transfers, deeds, security agreements and other
documents as may be required by the Secured Party to establish
in favor of the Secured Party and perfect the Security
Interest intended to be created hereby and to accomplish the
intention of this Agreement and, if requested by the Secured
Party, to specifically assign to the Secured Party, the
Guarantor's rights and interests (but not the Guarantor's
obligations) under any contracts to which the Guarantor is a
party, which include the Guarantor instructing the transfer
agent of the Guarantor:
(i) to comply with the Secured Party's orders without the Guarantor's
further consent; or
(ii) that the Secured Party has the same rights to the Security Interests
as the Guarantor;
(h) to pay all expenses, including reasonable solicitors' fees and
disbursements, receivers' fees and disbursements, and accounting fees
and disbursements incurred by or on behalf of the Secured Party, its
secured parties, or any Receiver, as hereinafter defined, in
connection with inspecting the Collateral, investigating title to the
Collateral, the preparation, perfection, preservation, and enforcement
of this Agreement, including taking, recovering and keeping possession
of the Collateral and all expenses incurred by or on behalf of the
Secured Party, its agents or any Receiver (as defined in Section
11.1(a)) in dealing with other creditors of the Guarantor in
connection with the establishment and confirmation of the priority of
the Security Interests, all of which expenses shall be payable
forthwith upon demand with interest at the rate specified in the Notes
and shall form part of the Obligations; and
(i) to observe and perform all of its obligations under or in connection
with any other security agreement creating a security interest over
the Collateral or any part thereof.
4
5. ATTACHMENT.
The Guarantor acknowledges and confirms that:
(a) there is no intention to delay the time of attachment of the Security
Interest created by this Agreement, and the Security Interest shall
attach at the earliest time permissible under the laws governing this
Agreement;
(b) that value has been given; and
(c) that the Guarantor has (or in the case of any after acquired property,
will have at the time of acquisition) rights in the Collateral.
6. USE AND VERIFICATION OF COLLATERAL.
The Guarantor may, until default, possess, operate, collect, use and enjoy,
and deal with the Collateral in the ordinary course of the Guarantor's business
in any manner not inconsistent with the provisions of this Agreement; provided
always that the Secured Party shall have the right at any time and from time to
time to verify the existence and state of the Collateral in any manner the
Secured Party may consider appropriate. The Guarantor agrees to furnish all
assistance and information and to perform all such acts as the Secured Party may
reasonably request in connection therewith, and for such purposes to grant to
the Secured Party or its agents access to all places where the Collateral may be
located and to all premises occupied by the Guarantor.
7. INCOME FROM AND INTEREST ON COLLATERAL.
7.1 Until the occurrence of an Event of Default (as defined in Section
10.1), the Guarantor reserves the right to receive any money constituting income
from or interest on the Collateral and if the Secured Party receives any such
money before the occurrence of an Event of Default, the Secured Party shall
either credit the amount of such money against the Obligations or pay the amount
of such money promptly to the Guarantor. 7.2 Upon the occurrence of an Event of
Default, the Guarantor shall not request or receive any money constituting
income from or interest on the Collateral and if the Guarantor receives any such
money in any event, the Guarantor shall hold that money in trust for the Secured
Party and shall pay the amount of that money promptly to the Secured Party.
8. DISPOSITION OF MONIES.
Subject to any applicable requirements of the UCC, all monies collected or
received by the Secured Party under or in exercise of any right it possesses
with respect to Collateral shall be applied on account of the Obligations in
such manner as the Secured Party deems best or, at the option of the Secured
Party, may be held unappropriated in a collateral account or released to the
Guarantor, all without prejudice to the liability of the Guarantor or the rights
of the Secured Party under this Agreement, and any surplus shall be accounted
for as required by law.
9. PERFORMANCE OF OBLIGATIONS.
If the Guarantor fails to perform any of its obligations under this
Agreement, the Secured Party may, but shall not be obliged to, perform any or
all of those obligations without prejudice to any other rights and remedies of
the Secured Party under this Agreement.
10. DEFAULT.
10.1 Unless waived by the Secured Party (whether in whole or in part), it
shall be an event of default (an "EVENT OF DEFAULT") under this Agreement and
the security constituted by this Agreement shall become enforceable if:
(a) an "Event of Default" (as that term is defined in the Notes, only for
purposes of this clause (a)) occurs under the Notes;
(b) any term, covenant, representation or warranty set out in this
Agreement is breached or if an Event of Default occurs under this
Agreement;
5
(c) any amount owed to the Secured Party is not paid when due; or
(d) the Guarantor declares itself to be insolvent, makes an assignment for
the benefit of its creditors, is declared bankrupt, declares
bankruptcy, makes a proposal, or otherwise takes advantage of
provisions under the U.S. Bankruptcy Code or similar legislation in
any jurisdiction, or fails to pay its debts generally as they become
due; or
(e) a receiver or receiver-manager is appointed.
11. ENFORCEMENT.
11.1 Upon the occurrence and during the continuance of an Event of Default
under this Agreement, the Obligations shall, at the option of the Secured Party,
be immediately due and payable and the Security Interests granted hereby shall,
at the option of the Secured Party, become immediately enforceable. To enforce
and realize on the security constituted by this Agreement, the Secured Party may
take any action permitted by law or in equity, as it may deem expedient, and in
particular, but without limiting the generality of the foregoing, the Secured
Party may do any of the following:
(a) appoint by instrument a receiver, receiver and manager, or
receiver-manager (the person so appointed is called the "RECEIVER") of
the Collateral, with or without bond as the Secured Party may
determine, and from time to time in its absolute discretion remove
such Receiver and appoint another in its stead;
(b) enter upon any premises of the Guarantor and take possession of the
Collateral with power to exclude the Guarantor, its agents, and its
servants from those premises, without becoming liable as a mortgagee
in possession;
(c) preserve, protect, and maintain the Collateral and make such
replacements and repairs and additions as the Secured Party may deem
advisable;
(d) sell, lease, or otherwise dispose of all or any part of the
Collateral, whether by public or private sale or lease or otherwise,
in such manner, at such price as can be reasonable obtained, and on
such terms as to credit and with such conditions of sale and
stipulations as to title or conveyance or evidence of title or
otherwise as the Secured Party may deem reasonable, provided that if
any sale, lease or other disposition is on credit, the Guarantor shall
not be entitled to be credited with the proceeds of any such sale,
lease or other disposition until the monies therefor are actually
received;
(j) exercise any of the powers set out in this Section 11.1, without the
appointment of a Receiver;
(k) institute proceedings in any court of competent jurisdiction for the
appointment of a Receiver or for the sale of the Collateral;
(l) file proofs of claim and other documents in order to have the claims
of the Secured Party lodged in any bankruptcy, winding-up, or other
judicial proceeding relating to each Guarantor; and
(m) exercise all of the rights and remedies accorded to a "secured party"
under the UCC.
11.2 Any Receiver appointed by the Secured Party may be any person licensed
as a trustee under applicable law, and the Secured Party may remove any Receiver
so appointed and appoint another or others instead. Any Receiver appointed shall
act as the Secured Party for the Guarantor for all purposes, including the
occupation of any premises of the Guarantor and in carrying on the Guarantor's
business and the Secured Party shall not be liable for any act or omission of
any Receiver. The Guarantor agrees to ratify and confirm all actions of the
Receiver and to release and indemnify the Receiver and the Secured Party in
respect of all such actions. Any Receiver so appointed shall have the power:
6
(a) to enter upon, use, and occupy all premises owned or occupied by the
Guarantor;
(b) to take possession of the Collateral;
(c) to carry on the business of the Guarantor;
(d) to borrow money required for the maintenance, preservation or
protection of the Collateral or for the carrying on of the business of
the Guarantor, and in the discretion of such Receiver, to charge and
grant further security interests in the Collateral in priority to the
Security Interests, as security for the money so borrowed;
(e) to sell, lease, or otherwise dispose of the Collateral in whole or in
part and for cash or credit, or part cash and part credit on such
terms and conditions and in such manner as the Receiver shall
determine in its discretion;
(f) to demand, commence, continue or defend any judicial or administrative
proceedings for the purpose of protecting, seizing, collecting,
realizing or obtaining possession or payment of the Collateral, and to
give valid and effectual receipts and discharges therefor and to
compromise or give time for the payment or performance of all or any
part of the Accounts or any other obligation of any third party to the
Guarantor; and
(g) to exercise any rights or remedies which could have been exercised by
the Secured Party against the Guarantor or the Collateral.
11.3 Subject to the claims, if any, of the creditors of the Guarantor
ranking in priority to this Agreement, all amounts realized from the disposition
of Collateral under this Agreement shall be applied as the Secured Party, in its
absolute discretion, may direct. Subject to applicable law and the claims, if
any, of other creditors of the Guarantor, any surplus shall be paid to the
Guarantor.
11.4 The Guarantor agrees that the Secured Party may exercise its rights and
remedies under this Agreement immediately upon default, except as may be
otherwise provided in the UCC, and the Guarantor expressly confirms that, except
as may be otherwise provided in this Agreement or in the UCC, the Secured Party
has not given any covenant, express or implied, and is under no obligation to
allow the Guarantor any period of time to remedy any Event of Default before the
Secured Party exercises its rights and remedies under this Agreement.
11.5 The Guarantor hereby irrevocably constitutes and appoints any officer,
for the time being, of the Secured Party to be, upon the occurrence and during
the continuance of an Event of Default, the true and lawful attorney of the
Guarantor, with full power of substitution, to do, make and execute all such
statements, assignments, documents, acts, matters of things with the right to
use the name of the Guarantor whenever and wherever the officer may deem
necessary or expedient and from time to time to exercise all rights and powers
and to perform all acts of ownership in respect to the Collateral in accordance
with this Agreement.
11.6 The Secured Party shall not be liable for any delay or failure to
enforce any remedies available to it or to institute any proceedings for such
purposes. The Secured Party may waive any Event of Default, provided that no
such waiver shall be binding upon the Secured Party unless in writing nor shall
it affect the rights or remedies of the Secured Party in connection with any
other or subsequent Event of Default.
12. REPRESENTATIONS OF GUARANTOR.
12.1 The Guarantor represents and warrants that:
(a) this Agreement is granted in accordance with resolutions of the
directors (and of the shareholders as applicable) of the Guarantor,
and all other matters and things have been done and performed so as to
authorize and make the execution and delivery of this Agreement and
7
the performance of the obligations of the Guarantor hereunder legal,
valid and binding;
(b) it lawfully owns and possesses all presently held Collateral and has
good title thereto, free from all security interests, charges,
encumbrances, liens and claims, save only the Permitted Encumbrances
and has good right and lawful authority to grant the Security
Interests hereunder, free and clear of all security interests,
charges, encumbrances, liens and claims, other than the Permitted
Encumbrances; and
(c) the locations specified in the attached Schedule "C" with respect to
goods constituting the Collateral and of the business operations and
records of the Guarantor are accurate and complete; and
(d) the Security Interest granted pursuant to this Agreement constitutes a
valid and continuing perfected Security Interest in favor of the
Secured Party in the Collateral, subject (for the following
Collateral) to the occurrence of the following: (i) in the case of the
Collateral in which a Security Interest may be perfected by filing a
financing statement under the UCC, the completion of the filings and
other actions specified in this Agreement (which, in the case of all
filings and other documents referred to in this Agreement, have been
delivered to the Secured Party in completed and duly authorized form),
(ii) with respect to any Deposit Account, the execution of a control
account, (iii) in the case of all copyrights, trademarks and patents
for which UCC filings are insufficient, all appropriate filings having
been made with the U.S. Copyright Office or the U.S. Patent and
Trademark Office, as applicable, (iv) in the case of letter-of-credit
rights that are not supporting obligations of the Collateral, the
execution of a contractual obligation granting control to the Secured
Party over such letter-of-credit rights, (v) in the case of Electronic
Chattel Paper, the completion of all steps necessary to grant control
to the Secured Party over such Electronic Chattel Paper, and (vi) in
the case of vehicles, the actions required pursuant to the UCC. The
Security Interest shall be prior to all other liens on the Collateral,
except for permitted liens having priority over the Secured Party's
lien by operation of law upon (x) in the case of all pledged
certificated stock, pledged debt Instruments and pledged investment
priority the delivery thereof to the Secured Party of such consisting
of Instruments and certificates, in each case properly endorsed for
transfer to the Secured Party or in blank, (y) in the case of all
pledged investment property not in certificated form, the execution of
control agreements with respect to such investment property, and (z)
in the case of all other Instruments and Tangible Chattel Paper that
are not pledged certificated stock, pledged debt Instruments or
pledged investment property, the delivery thereof to the Secured Party
of such Instruments and Tangible Chattel Paper. Except as set forth in
this Section, all actions by the Guarantor necessary or desirable to
protect and perfect the lien granted hereunder on the Collateral have
been duly taken.
13. DEFICIENCY.
If the amounts realized from the disposition of the Collateral are not
sufficient to pay the Obligations in full, the Guarantor shall pay to the
Secured Party the amount of such deficiency immediately upon demand for the
same.
8
14. RIGHTS CUMULATIVE.
All rights and remedies of the Secured Party set out in this Agreement are
cumulative, and no right or remedy contained in this Agreement is intended to be
exclusive, but each right and remedy shall be in addition to every other right
or remedy contained in this Agreement or in any existing or future security
agreement or now or in future existing at law, in equity or by statute, or under
any other agreement between the Guarantor and the Secured Party that may be in
effect from time to time.
15. LIABILITY OF SECURED PARTY.
The Secured Party shall not be responsible or liable for any debts
contracted by it, for damages to persons or property or for salaries or
non-fulfilment of contracts during any period when the Secured Party shall
manage the Collateral upon entry, as provided in this Agreement, nor shall the
Secured Party be liable to account as mortgagee in possession or for anything
except actual receipts or be liable for any loss on realization or for any
default or omission for which a mortgagee in possession may be liable. The
Secured Party shall not be bound to do, observe or perform or to see to the
observance or performance by the Guarantor of any obligations or covenants
imposed upon the Guarantor, nor shall the Secured Party, in the case of
Securities, Instruments, or Chattel Paper, be obliged to preserve rights against
other persons, nor shall the Secured Party be obliged to keep any of the
Collateral identifiable. The Guarantor waives any applicable provision of law
permitted to be waived by it which imposes higher or greater obligations upon
the Secured Party than as contained in this Section.
16. ACCOUNTS.
Notwithstanding any other provision of this Agreement, the Secured Party
may collect, realize, sell, or otherwise deal with the Accounts or any part of
them in such manner, upon such terms and conditions, and at such time or times,
whether before or after an Event of Default, as may seem to it advisable, and
without notice to the Guarantor, except in the case of disposition after an
Event of Default and then subject to the provisions of Part 6 of Article 9 of
the UCC. All monies or other forms of payment received by the Guarantor in
payment of any Account shall be received and held by the Guarantor in trust for
the Secured Party.
17. APPROPRIATION OF PAYMENTS.
Any and all payments made in respect of the Obligations from time to time
and monies realized from the Security Interest held therefor (including monies
collected in accordance with or realized on any enforcement of this Agreement)
may be applied to such part or parts of the Obligations as the Secured Party may
see fit, and the Secured Party may at all times and from time to time change any
appropriation as the Secured Party may see fit.
18. WAIVER.
The Secured Party may from time to time and at any time waive in whole or
in part any right, benefit or default under any Section of this Agreement, but
any such waiver of any right, benefit, or default on any occasion shall be
deemed not to be a waiver of any such right, benefit, or default thereafter, or
of any other right, benefit or default, as the case may be, and no delay or
omission by the Secured Party in exercising any right or remedy under this
Agreement or with respect to any default shall operate as a waiver thereof or of
any other right or remedy.
19. NOTICE.
Any notice, demand, or other communication required or permitted to be
given under this Agreement shall be effectually made or given if delivered by
prepaid private courier or by facsimile transmission to the address of each
party set out below:
To the Guarantor: Trident Brands Incorporated
200 South Executive Drive, Suite 101
Brookfield, WI 53005
U.S.A.
Tel: 262-789-6689
Fax: 262-789-6689
Attention: Michael Browne
9
To the Secured Party: LPF (MCTECH) Investment Corp.
1315 North Service Rd. East, 6th Floor
Oakville, ON, L6H 1A7
CANADA
Tel: 289-291-3666
Fax: 289-291-0651
Attention: Administrator and Controller
or to such other address or facsimile number as either party may designate in
the manner set out above. Any notice, demand, or other communication shall be
deemed to have been given and received on the day of prepaid private courier
delivery or facsimile transmission.
20. EXTENSIONS.
The Secured Party may grant extensions of time and other indulgences, take
and give up security, accept compositions, compound, compromise, settle, grant
releases and discharges, refrain from perfecting or maintaining perfection of
the Security Interest, and otherwise deal with the Guarantor, account debtors of
the Guarantor, sureties, and others and with the Collateral, the Security
Interest, and other security interests as the Secured Party sees fit without
prejudice to the liability of the Guarantor or the Secured Party's right to hold
and realize on the security constituted by this Agreement.
21. NO MERGER.
This Agreement shall not operate to create any merger or discharge of any
of the Obligations, or of any assignment, transfer, guarantee, lien, mortgage,
contract, promissory note, bill of exchange, or security interest of any form
held or which may in future be held by the Secured Party from the Guarantor or
from any other person. The taking of a judgment with respect to any of the
Obligations shall not operate as a merger of any of the covenants contained in
this Agreement.
22. SATISFACTION AND DISCHARGE.
Any partial payment or satisfaction of the Obligations, or any ceasing by
the Guarantor to be indebted to the Secured Party, shall be deemed not to be a
redemption or discharge of this Agreement. The Guarantor shall be entitled to a
release and discharge of this Agreement upon full payment and satisfaction of
all Obligations and upon written request by the Guarantor and payment to the
Secured Party of all costs, charges, expenses, and legal fees and disbursements
(on a solicitor and own client basis) incurred by the Secured Party in
connection with the Obligations and such release and discharge.
23. INUREMENT.
This Agreement shall inure to the benefit of and be binding upon the
parties and their respective heirs, executors, personal representatives,
successors, and permitted assigns.
24. INTERPRETATION.
24.1 In this Agreement the word "including", when following any word or
words, is not to be construed as limiting the preceding word or words, but the
preceding word or words are to be construed as referring to all items or matters
that could fall within the broadest possible interpretation of the preceding
word or words.
24.2 Words and expressions used in this Agreement that have been defined in
the UCC shall be interpreted in accordance with their respective meanings given
in the UCC, whether expressed in this Agreement with or without initial capital
letters and whether in the singular or the plural, unless otherwise defined in
this Agreement or unless the context otherwise requires, and, wherever the
context so requires, in this Agreement the singular shall be read as if the
plural were expressed, and vice-versa, and the provisions of this Agreement
shall be read with all grammatical changes necessary dependent upon the person
referred to being a male, female, firm, or corporation.
10
24.3 Should any provision of this Agreement be declared or held invalid or
unenforceable in whole or in part or against or with respect to the Guarantor by
a court of competent jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of any or all of the remaining provisions
of this Agreement, which shall continue in full force and effect and be
construed as this Agreement had been executed without the invalid or
unenforceable provision.
24.4 The headings of the Sections of this Agreement have been inserted for
reference only and do not define, limit, alter, or enlarge the meaning of any
provision of this Agreement.
24.5 This Agreement shall be governed by the laws of the State of New York
and the federal laws of the United States applicable therein.
25. MISCELLANEOUS.
25.1 The Guarantor authorizes the Secured Party to file such financing
statements, financing change statements, and other documents, and do such acts,
matters, and things as the Secured Party may deem appropriate, to perfect on an
ongoing basis and continue the Security Interest, to protect and preserve the
Collateral, and to realize upon the Security Interest.
25.2 The Guarantor waives protest of any Instrument constituting Collateral
at any time held by the Secured Party on which the Guarantor is any way liable
and, subject to the provisions of the UCC, notice of any other action taken by
the Secured Party.
25.3 The Guarantor covenants that it shall not amalgamate with any other
company or entity without first obtaining the written consent of the Secured
Party. The Guarantor acknowledges and agrees that if it amalgamates with any
other company or companies, then it is the intention of the parties that the
term "Guarantor" when used in this Agreement shall apply to each of the
amalgamating companies and to the amalgamated company, so that the Security
Interest granted by this Agreement:
(a) shall extend to the "Collateral" (as that term is defined in this
Agreement) owned by each of the amalgamating companies and the
amalgamated company at the time of amalgamation and to any
"Collateral" owned or acquired by the amalgamated company thereafter,
and
(b) shall secure the "Obligations" (as that term is defined in this
Agreement) of each of the amalgamating companies and the amalgamated
company to the Secured Party at the time of amalgamation and any
"Obligations" of the amalgamated company to the Secured Party arising
thereafter. The Security Interest shall attach to "Collateral" owned
by each company amalgamating with the Guarantor, and by the
amalgamated company, at the time of amalgamation, and shall attach to
any "Collateral" thereafter owned or acquired by the amalgamated
company when that Collateral becomes owned or is acquired.
25.4 The Guarantor authorizes the Secured Party to provide a copy of this
Agreement and such other information and documents specified under the UCC to
any person entitled under the UCC to demand and receive them.
26. COPY OF AGREEMENT AND FINANCING STATEMENT.
The Guarantor:
(a) acknowledges receiving a copy of this Agreement, and
(b) waives all rights to receive from the Secured Party a copy of any
financing statement, financing change statement, or verification
statement filed, issued, or obtained at any time in respect of this
Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF the Guarantor has executed this Agreement on the
date indicated above.
TRIDENT BRANDS INCORPORATED, by its authorized signatory:
By: /s/ Mark Holcombe
----------------------------------------
Name: Mark Holcombe
Title: Chairman
LPF (MCTECH) INVESTMENT CORP., by its authorized signatory:
By: /s/ Joseph Mancinelli
----------------------------------------
Name: Joseph Mancinelli
Title: President
12
SCHEDULE "A"
DESCRIPTION OF COLLATERAL
Annex II - 1
SCHEDULE "B"
PERMITTED ENCUMBRANCES
"PERMITTED ENCUMBRANCES" means any of the following:
a) liens for taxes, assessments or governmental charges or levies not at
the time due and delinquent or the validity of which the Guarantor is
contesting in good faith and in respect of which such Guarantor has
set aside, on its books, reserves considered by the Guarantor and the
Secured Party as adequate therefor;
b) undetermined or inchoate liens and charges incidental to current
operations which have not been filed against the Guarantor or which
relate to obligations not due or delinquent;
c) the right reserved to or vested in any governmental or public
authority by any lease, license, franchise, grant, permit or statutory
provision to terminate any lease, license, franchise, grant or permit,
or to require annual or other period payments as a condition of the
continuance thereof;
d) the encumbrance resulting from the deposit of cash or obligations as
security when a Guarantor is required to do so by governmental or
other public authority or by normal business practice in connection
with contracts, licenses or tenders or similar matters in the ordinary
course of business and the purpose of carrying on the same or to
secure workers' compensation, surety or appeal bonds or to secure
costs of litigation when required by law; and
e) security given to any public utility or any governmental or other
public authority when required in connection with the operations of a
Guarantor.
Annex II - 2
SCHEDULE "C"
LOCATION OF COLLATERAL
LOCATION OF GUARANTOR'S BUSINESS OPERATION
REGISTERED AGENT'S OFFICE:
11 S. Carson Street, Suite 4. Carson City, NV 89701
OPERATIONS OFFICE:
200 South Executive Drive, Suite 101
Brookfield, WI 53005
OTHER LOCATION: N/A
LOCATIONS OF RECORDS RELATING TO COLLATERAL
OPERATIONS OFFICE:
200 South Executive Drive, Suite 101
Brookfield, WI 53005
OTHER LOCATION: N/A
LOCATIONS OF COLLATERAL
OPERATIONS OFFICE:
200 South Executive Drive, Suite 101
Brookfield, WI 53005
OTHER LOCATION: N/A
Annex II - 3
ANNEX III
CONVERTIBLE PROMISSORY NOTE AMENDMENT AGREEMENT
CONVERTIBLE PROMISSORY NOTE AMENDMENT AGREEMENT
THIS AGREEMENT (the "AMENDING AGREEMENT") made the 26th day of September, 2016.
BETWEEN:
TRIDENT BRANDS INCORPORATED, of 200 South Executive Drive, Suite 101,
Brookfield, WI 53005
(the "COMPANY")
AND:
LPF (MCTECH) INVESTMENT CORP., of 1315 North Service Rd. East,
6th Floor, Oakville, ON, L6H 1A7
("LPF")
WHEREAS LPF is the holder of convertible promissory notes of the Company dated
January 29, 2016 and March 31, 2016, in the original principal amounts of
US$1,800,000 and US$500,000, respectively (the "LPF NOTES"):
AND WHEREAS, as an inducement to LPF providing additional financing to the
Company pursuant to that Securities Purchase Agreement between the Company and
LPF dated concurrently herewith, the parties wish to amend the LPF Notes;
THEREFORE in consideration of the premises and mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
hereto agree as follows:
the second sentence of the LPF Notes shall be deleted and replaced with the
following:
"The applicable portion of the Principal Amount and the Interest
outstanding shall be due and payable on September 30, 2019 subject to the
conversion terms hereof."
Section 1.2 of the LPF Notes shall be deleted and replaced with the following:
"Section 1.2 Interest. Each portion of the Principal Amount applicable to
each Note advanced to the Company pursuant to the Purchase Agreement shall
bear interest from the applicable Issuance Date to August 31, 2016 at the
rate of six percent (6%) per annum and thereafter at the rate of eight
percent (8%) per annum, calculated daily in arrears based on a three
hundred and sixty (360) day year (the "Interest").".
Section 1.4 of the LPF Notes shall be deleted and replaced with the following:
Annex II - 4
Transfer. Each Note may be transferred or sold, pledged, hypothecated or
otherwise granted as security by the Holder, either in whole or in part,
subject to the provisions of Section 4.8 hereof, and to prior notice of
same to the Company in accordance with Section 4.1 hereof.
Section 4.8 of the LPF Notes shall be deleted and replaced with the following:
Compliance with Securities Laws. The Holder acknowledges that the Notes are
being acquired solely for the Holder's own account and not as a nominee for
any other party, and for investment, and that the Holder shall not offer,
sell or otherwise dispose of the Notes except in accordance with and in
reliance upon the exemption from securities registration for offers and
sales in an "offshore transaction" to a non-U.S. Person afforded, inter
alia, by Rule 904 under Regulation S ("Regulation S") as promulgated by the
United States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "1933 Act"), and/or Section 4(2) of
the 1933 Act. The Notes and any Note issued in substitution or replacement
therefor shall be stamped or imprinted with a legend in substantially the
following form:
"EACH CONVERTIBLE PROMISSORY NOTE ("NOTE") HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR APPLICABLE
STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE COMPANY
OF AN OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY
SATISFACTORY TO THE COMPANY THAT EACH NOTE MAY BE SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE 1933
ACT AND SUCH STATE SECURITIES LAWS."
The parties further agree that the intent and the wording of the LPF Notes be
and are hereby amended for such additional changes as may be necessary or
incidental in order to give effect to the foregoing agreement between the
parties.
Except as hereby amended, the LPF Notes shall remain un-amended and in full
force and effect.
This Amending Agreement shall be subject to, and become effective upon, the
initial Closing Date (as defined therein) of the Securities Purchase Agreement
dated September 26, 2016 between the Company and LPF.
This Amending Agreement shall enure to the benefit of, and be binding upon, the
parties hereto and their respective successors and permitted assigns.
This Amending Agreement shall be construed and interpreted in accordance with
the laws of the State of Nevada.
Annex II - 5
IN WITNESS WHEREOF the parties have properly executed this amending agreement as
of the day and year first above written.
TRIDENT BRANDS INCORPORATED.
Per: /s/ Mark Holcombe
-----------------------------------
Chairman
LPF (MCTECH) INVESTMENT CORP.
Per: /s/ Joseph Mancinelli
-----------------------------------
President
Per: /s/ Carmen Principato
-----------------------------------
Director
Annex II - 6
ANNEX IV
[TABLE TO BE INSERTED]
Annex II - 7