United States
Securities and Exchange Commission
Washington, D.C. 20549
____________________________________________________

FORM 10-Q/A
Amendment No. 1

[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2017

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File No. 000-55030

_____________________________________

GREENWAY TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

   

Texas

(State or other jurisdiction of

incorporation or organization)

90-0893594

(I.R.S. Employer Identification Number)

8851 Camp Bowie West Boulevard, Suite 240

Fort Worth, Texas

(Address of principal executive offices)

76116

(Zip Code)

(817) 346-6900

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [ X ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check One):

   
Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12(b)-2 of the Exchange Act). Yes [ ] No [ X ]

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. At August 5, 2017, the registrant had outstanding 275,484,754 shares of our Class A common stock and 126,938 shares of Class B common stock.

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Table of Contents

Part I – Financial Information.

 

Item 1. Financial Statements

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Item 4. Controls and Procedures

 

Part II- Other Information

 

Item 1. Legal Proceedings

Item 1A. Risk Factors

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 3. Defaults Upon Senior Securities

Item 4. Mine Safety Disclosures

Item 5. Other Information

Item 6. Exhibits

 

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EXPLANATORY NOTE

On August 14, 2017, we filed with the Securities and Exchange Commission our Current Report on Form 10-Q with respect to our second quarter results of operations. However, in the filing on August 14, 2017, we failed to include certain information as required by the rules of the Commission. This Amendment No. 1 to our Current Report on Form 10-Q is being filed to provide the required information that was omitted from our Current Report on Form 10-Q filed on August 14, 2017.

The filing of this Form 10-Q/A, Amendment No. 1, is not an admission that our Form 10-Q filed on August 14, 2017, when filed, knowingly included any untrue statement of a material fact or omitted to state a material fact necessary to make the statements made therein not misleading.

Except as described herein, no other changes have been made to our Current Report on Form 10-Q filed on August 14, 2017. We have not updated the disclosures in this Form 10-Q/A, Amendment No. 1, to speak as of a later date or to reflect events which occurred at a later date, except as noted.

In the interest of clarity, we have decided to file this Form 10-Q/A, Amendment No. 1, in its entirety.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

GREENWAY TECHNOLOGIES, INC.

Condensed Consolidated Balance Sheet

(Unaudited)

 

  June 30,   December 31,
    2017   2016
Assets        
Current Assets                
Cash   $ 578,111     $ 67,964  
Prepaid insurance     0       13,476  
    Total Current Assets     578,111       81,440  
Fixed assets                
Property & equipment     4,015       4,015  
Less depreciation     3,865       3,666  
      150       349  
Other Assets     20,000       5,000  
           Total Assets   $ 598,261     $ 86,789  
     Liabilities & Stockholders’ Deficit                
Current Liabilities                
Accounts payable   $ 52,522     $ 86,518  
Stockholder advances     0       59,690  
Accrued management fees     1,829,102       1,916,602  
Accrued expenses     250,024       250,522  
Note payable     8,500       13,500  
Convertible note payable, net of discounts of $0 and $13,647     0       120,753  
Derivative liability – warrants     71,759       56,057  
           Total Current Liabilities     2,211,907       2,503,642  
Total Liabilities     2,211,907       2,503,642  
Commitments and contingencies                
Stockholders’ Deficit                
Common Class B stock, 20,000,000 shares authorized, par value $0.0001,                
126,938 issued and outstanding at June 30, 2017 and                
December 31, 2016     13       13  
Common Class A stock 300,000,000 shares authorized, par value $0.0001,                
            275,432,123 and 231,118,372 issued and outstanding at                
June 30, 2017 and December 31, 2016, respectively     27,545       23,114  
Additional paid-in capital     19,110,482       12,036,225  
Accumulated deficit     (20,751,686 )     (14,476,205 )
           Total Stockholders’ Deficit     (1,613,646 )     (2,416,853 )
Total Liabilities & Stockholders’ Deficit   $ 598,261     $ 86,789  

 

See the accompanying notes to condensed consolidated financial statements.

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GREENWAY TECHNOLOGIES, INC.

Consolidated Statements of Operations – Unaudited

For the three and six months ended June 30, 2017 and 2016

 

    Three Months Ended June 30,   Six Months Ended June 30,
    2017   2016   2017   2016
                 
Sales   $ 0     $ 0     $ 0     $ 0  
                                 
Expenses                                
  General and administrative     908,772       147,850       5,957,152       437,343  
  Research and development     160,274       94,836       337,932       259,671  
  Depreciation     99       99       198       198  
Total Expense     1,069,145       242,785       6,295,282       697,212  
                                 
Operating loss     (1,069,145 )     (242,785 )     (6,295,282 )     (697,212 )
                                 
Other income (expenses)                                
  Gain (loss) on derivative     63,781       15,033       10,396       (25,065 )
  Interest (expense) income     (124 )     (11,615 )     9,405       (11,730 )
Total other income (expense)     63,657       3,418       19,801       (36,795 )
                                 
Loss before income taxes     (1,005,488 )     (239,367 )     (6,275,481 )     (734,007 )
Provision for income taxes     0       0       0       0  
Net loss   $ (1,005,488 )   $ (239,367 )   $ (6,275,481 )   $ (734,007 )
                                 
Net loss per share;                                
  Basic and diluted net income                                
  loss per share   $ (0.01 )   $ (0.01 )   $ (0.02 )   $ (0.01 )
                                 
Weighted average shares                                
Outstanding;                                
  Basic and diluted     272,735,459       189,516,705       271,206,915       186,441,276  
                                 

 

 

See the accompanying notes to condensed consolidated financial statements.

 

 

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GREENWAY TECHNOLOGIES, INC.

Condensed Consolidated Statements of Cash Flows - Unaudited

For the six months ended June 30, 2017 and 2016

 

    2017   2016
Cash Flows from Operating Activities                
Net Loss from operations   $ (6,275,481 )   $ (734,007 )
                 
Adjustments to reconcile net loss to net cash used in                
 Operating activities:                
     Depreciation     198       198  
     Stock based compensation     5,326,244       40,480  
   Loss on derivative     10,396       25,065  
     Changes in operating assets and liabilities:                
   Prepaid insurance     13,476       0  
     Accounts payable     (33,996 )     (39,513 )
     Accrued management fees     (87,500 )     134,985  
   Advances     (15,000 )     0  
     Derivative liability     0       51,826  
     Accrued expenses     (498 )     23,884  
                 
Net Cash Used in Operating Activities     (1,062,160 )     (497,082 )
                 
Cash Flows from Investing Activities     0       0  
                 
Cash Flows from Financing Activities                
     Repayments of shareholder advances     (59,690 )     (23,087 )
     (Payments on) proceeds from - note payable     (5,000 )     36,000  
     (Decrease) Increase in convertible notes payable     (120,753 )     224,000  
   Proceeds from sale of common stock     1,757,750       380,000  
   Shareholder advances converted to stock     0       51,501  
     Debt issue costs     0       (68,243 )
Net Cash Provided by Financing Activities     1,572,307       600,171  
                 
Net Increase in Cash     510,147       103,089  
Cash Beginning of Period     67,964       0  
Cash End of Period   $ 578,111     $ 103,089  
                 
                 
Supplemental Disclosure of Cash Flow Information:                
     Cash Paid during the period for interest   $ 0     $ 0  
     Cash Paid during the period for taxes   $ 0     $ 0  
     Conversion of shareholder advances to common stock   $ 0     $ 51,501  

 

The accompanying notes are an integral part of these condensed financial statements.

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GREENWAY TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2017

(Unaudited)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Greenway Technologies, Inc. (“ Greenway Technologies,” “GTI,” or the “Company”) was organized on March 13, 2002, under the laws of the State of Texas as Dynalyst Manufacturing Corporation.  On August 18, 2009, in connection with a merger with Universal Media Corporation, a privately held Nevada company, the Company changed its name to Universal Media Corporation (“Universal Media”).  The Company changed its name to UMED Holdings, Inc. on March 23, 2011, and to Greenway Technologies, Inc. on June 23, 2017.

The Company’s mission is to operate as a holding company through the acquisition of businesses as wholly-owned subsidiaries that meet some key requirements: (1) solid management that will not have to be replaced in the near future (2) the ability to grow with steady growth to follow and (3) an emphasis on emerging core industry markets, such as energy and metals.  It is the Company’s intention to add experienced personnel and select strategic partners to manage and operate the acquired business units.

In September 2010, the Company acquired 1,440 acres of placer mining claims on Bureau of Land Management land in Mohave County, Arizona. See discussion in Note 3.  Due to the Company not producing any revenues from its BLM mining leases since its acquisition of the leases, achieving a position of producing cash flow levels to fund the development of its BLM mining leases in December 2010 and not having current resources for an appraisal, we recognized an impairment charge of $100,000 during the year ended December 31, 2014.

In August 2012, the Company acquired 100% of Greenway Innovative Energy, Inc. (sometimes, “GIE”) which owns patents and trade secrets for a proprietary process and related technology to convert natural gas into synthesis gas (syngas). Syngas is an important intermediate gas used by industry in the production of ammonia, methane, liquid fuels, and other downstream products. The Company’s unique process is called Fractional Thermal Oxidation™ (FTO). When combined with Greenway Technologies’ Fischer-Tropsch (FT) system, we offer a new economical, relatively small scale (125 to 2,475 bbls/day) method of converting gas-to-liquids (GTL) that can be located in field locations where needed.

NOTE 2 - BASIS OF PRESENTATION AND GOING CONCERN UNCERTAINTIES

Principles of Consolidation

The accompanying condensed consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries. All significant inter-company accounts and transactions were eliminated in consolidation.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulations S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.  For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2016.

The accompanying condensed consolidated financial statements include the accounts of the following entities:

Name of Entity %   Entity Incorporation Relationship
Greenway Technologies, Inc.     Corporation Texas Parent
Universal Media Corporation 100  % Corporation Wyoming Subsidiary
Greenway Innovative Energy, Inc. 100  % Corporation Nevada Subsidiary
Logistix Technology Systems, Inc. 100  % Corporation Texas Subsidiary

 

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Going Concern Uncertainties

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying condensed consolidated financial statements, the Company sustained a loss of approximately $6.3 million for the six-month period ended June 30, 2017, and has a working capital deficiency of approximately $1.7 million and an accumulated deficit of approximately $21 million at June 30, 2017. The ability of the Company to continue as a going concern is in doubt and dependent upon achieving a profitable level of operations or on the ability of the Company to obtain necessary financing to fund ongoing operations. Management believes that its current and future plans enable it to continue as a going concern for the next twelve months.

The Company is in discussions with several oil and gas companies and other organizations regarding joint venture funding for its first gas-to-liquids (GTL) plant using the Company’s unique GTL system. Should an agreement be made, the joint venture relationship will provide funding at a level of $20M to $50M with an ongoing profit-sharing arrangement between the Company and the partner organizations and/or individuals with an economic profile previously not achievable in the GTL industry segment. While there are no assurances that financing for the first plant will be obtained on acceptable terms and in a timely manner, the failure to obtain the necessary working capital may cause the Company to move in one or more alternate directions to shepherd this revolutionary GTL system into production. Several alternate paths are under consideration in conjunction with the joint venture/profit sharing approach.

The accompanying condensed consolidated financial statements do not include any adjustment to the recorded assets or liabilities that might be necessary should the Company have to curtail operations or be unable to continue in existence.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies applied in the presentation of the condensed consolidated financial statements are as follows:

Property and Equipment

Property and equipment is recorded at cost. Major additions and improvements are capitalized. The cost and related accumulated depreciation of equipment retired or sold, are removed from the accounts and any differences between the undepreciated amount and the proceeds from the sale or salvage value are recorded as a gain or loss on sale of equipment. Depreciation is computed using the straight-line method over the estimated useful life of the assets as follows:

Straight Line Depreciation = (Purchase Price of Asset - Approximate Salvage Value) ÷ Estimated Useful Life of Asset.

Impairment of Long-Lived Assets

The Company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, in accordance with ASC Topic 360, “Property, Plant and Equipment.”  An asset or asset group is considered impaired if its carrying amount exceeds the undiscounted future net cash flow the asset or asset group is expected to generate.  If an asset or asset group is considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds its fair value.  If estimated fair value is less than the book value, the asset is written down to the estimated fair value and an impairment loss is recognized.

Revenue Recognition

The Company has not, to date, generated any revenues.  The Company plans to recognize revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.

ASC 605-10 incorporates Accounting Standards Codification subtopic 605-25, Multiple-Element Arraignments (“ASC 605-25”). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing 605-25 on the Company’s financial position and results of operations was not significant.

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  Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reported period.  Actual results could differ materially from the estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.  There were no cash equivalents at June 30, 2017, or December 31, 2016.

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740, “Income Taxes,” which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized.

The Company has adopted the provisions of FASB ASC 740-10-05 Accounting for Uncertainty in Income Taxes . The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements.  The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.  Open tax years, subject to IRS examination include 2013 – 2016.

Net Loss Per Share, basic and diluted

Basic loss per share has been computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding for the period. Shares issuable upon the exercise of warrants (314,733) have been excluded as a common stock equivalent in the diluted loss per share because their effect is anti-dilutive.

Derivative Instruments

The Company accounts for derivative instruments in accordance with Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”), which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities.  They require that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value.

If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change.

See Note 6 below for discussion regarding convertible notes payable and a warrant agreement.

Fair Value of Financial Instruments

Effective January 1, 2008, fair value measurements are determined by the Company’s adoption of authoritative guidance issued by the FASB, with the exception of the application of the statement to non-recurring, non-financial assets and liabilities, as permitted. Fair value is defined in the authoritative guidance as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels as follows:

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 Level 1 – Valuation based on unadjusted quoted market prices in active markets for identical assets or liabilities.

Level 2 – Valuation based on, observable inputs (other than level one prices), quoted market prices for similar assets such as at the measurement date; quoted prices in the market that are not active; or other inputs that are observable, either directly or indirectly.

Level 3 – Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would use as fair value.

Original Issue Discount

For certain convertible debt issued, the Company provides the debt holder with an original issue discount (“OID”).  An OID is the difference between the original cash proceeds and the amount of the note upon maturity. The Note is originally recorded for the total amount payable. The OID is amortized into interest expense pro-rata over the term of the Note.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. The valuation of the Company’s notes recorded at fair value is determined using Level 3 inputs, which consider (i) time value, (ii) current market and (iii) contractual prices.

The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, receivables, accounts payable, notes payable and other payables, approximate their fair values because of the short maturity of these instruments.

The following table represents the Company’s assets and liabilities by level measured at fair value on a recurring basis at June 30, 2017:

Description   Level 1     Level 2   Level 3  
Derivative Liabilities   $       $     $ 71,759  
                         

The following assets and liabilities are measured on the balance sheets at fair value on a recurring basis utilizing significant unobservable inputs or Level 3 assumptions in their valuation. The following tables provide a reconciliation of the beginning and ending balances of the liabilities:

The change in the notes payable at fair value for the six-month period ended June 30, 2017, is as follows:

                     
 

Fair

Value

 

 

Change in

 

 

New

     

 

Fair Value

 
 

January 1,

2017

 

Fair

Value

 

Convertible

Notes

 

 

Conversions

  June 30, 2017  
                     
Derivative Liabilities   $ 56,057     $ 15,702     $ 0     $ 0     $ 71,759  
                                         

 

All gains and losses on assets and liabilities measured at fair value on a recurring basis and classified as Level 3 within the fair value hierarchy are recognized in other interest income and expense in the accompanying financial statements.

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Stock Based Compensation

The Company follows Accounting Standards Codification subtopic 718-10, Compensation (“ASC 718-10”) which requires that all share-based payments to both employees and non-employees be recognized in the income statement based on their fair values.

At June 30, 2017, the Company did not have any issued or outstanding stock options.

Concentration and Credit Risk

Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash. The Company places its cash with high credit quality institutions.  At times, such deposits may be in excess of the FDIC insurance limit.

Research and Development

The Company accounts for research and development costs in accordance with Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved as defined under the applicable agreement. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. The Company incurred research and development expenses of $337,932 and $259,671 during the six months ended June 30, 2017 and 2016, respectively.

Issuance of Common Stock

The issuance of common stock for other than cash is recorded by the Company at market values.

Impact of New Accounting Standards

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying condensed consolidated financial statements.

NOTE 4 – PROPERTY, PLANT, AND EQUIPMENT

   

Range of Lives

in Years

 

June 30,

2017

  December 31, 2016
Equipment     5     $ 2,032     $ 2,032  
Furniture and fixtures     5       1,983       1,983  
              4,015       4,015  
Less accumulated depreciation             (3,865 )     (3,666 )
            $ 150     $ 349  
                         
Depreciation expense for the period ended           $ 199          

 

NOTE 5 – TERM NOTES PAYABLE

Term notes payable consisted of the following at June 30, 2017, and December 31, 2016:

    2017     2016  
             
Unsecured note payable dated March 8, 2016, to an individual            
at 5.0% interest, payable upon the Company’s availability of cash   $ 8,500     $ 13,500  
                 

 

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NOTE 6 – CONVERTIBLE PROMISSORY NOTES

May 2016 Convertible Note

On May 4, 2016, the Company issued a $224,000 convertible promissory note bearing interest at 10.0% per annum to an accredited investor, payable beginning November 10, 2016, in monthly installments of $44,800 plus accrued interest and a cash premium equal to 10.0% of the installment amount.  The convertible promissory note was paid on March 4, 2017.  The holder had the right under certain circumstances to convert the note into common stock of the Company at a conversion price equal to 70% of the average of the 3 lowest volume weighted average trading prices during the 20-day period ending on the latest complete trading day prior to the conversion date.

The Company evaluated the terms of the convertible note in accordance with ASC 815-40, Contracts in Entity’s Own Equity, and concluded that the Convertible Note resulted in a derivative. The Company evaluated the terms of the convertible note and concluded that there was a beneficial conversion feature since the convertible note was convertible into shares of common stock at a discount to the market value of the common stock. The discount related to the beneficial conversion feature on the note was valued at $224,000 based on the Black-Scholes Model . The discount related to the beneficial conversion feature ($51,829) was amortized over the term of the debt (10 months).  For the six months ended June 30, 2017, the Company recognized interest expense of $9,327 related to the amortization of the discount.

In connection with the issuance of the $224,000 note, the Company recorded debt issue cost and discount as follows:

· $20,000 original issue discount and $4,000 debt issue cost, which was amortized over 10 months, with amortization of $3,600 for six months ended June 30, 2017.
· The convertible promissory note was paid in full on March 10, 2017, reducing the embedded derivative for the 2016 beneficial conversion right to zero at June 30, 2017.

September 2014 Convertible Note

In connection with the issuance of a $158,000 convertible promissory note in 2014, the Company issued warrants to purchase shares of common stock.

· Warrants – recorded at fair value ($79,537) upon issuance, and marked -to-market on the balance sheet at $71,759 as of June 30 2017, and $20,820 as of December 31, 2016, which was computed as follows:
    Commitment Date  
Expected dividends     0%  
Expected volatility     188%  
Expected term: conversion feature                      2.25 years  
Risk free interest rate     0.62%  

 

NOTE 7 – ACCRUED EXPENSES

Accrued expenses consisted of the following at June 30, 2017, and December 31, 2016:

    2017     2016  
             
Accrued consulting fees   $ 249,500     $ 249,500  
Accrued interest expense     524       1,022  
Total accrued expenses   $ 250,024     $ 250,522  

 

NOTE 8– CAPITAL STRUCTURE

The Company is authorized to issue 300,000,000 shares of class A common stock with a par value of $0.0001 per share and 20,000,000 shares of class B common with a par value of $0.0001 per share.  Each common stock share has one voting right and the right to dividends, if and when declared by the Board of Directors.

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Class A Common Stock

At June 30, 2017, there were 275,432,123 shares of class A common stock issued and outstanding.

During the three-month period ended June 30, 2017, the Company issued 4,859,585 shares of restricted common stock to 31 individuals through private placements for cash of $924,500 at an average price of $0.19 per share.

During the three-month period ended June 30, 2017, the Company issued 1,541,666 shares of restricted common stock for consulting services of $327,500 at an average price of $0.21 per share.

All of our unregistered securities were issued in reliance upon an exemption from registration pursuant to Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D promulgated under the Securities Act.

Class B Common Stock

At June 30, 2017, there were 126,938 shares of class B common stock issued and outstanding. Each class B share is convertible, at the option of the class B shareholder, into one share of class A common stock.

Stock options, warrants and other rights

At June 30, 2017, the Company has not adopted any employee stock option plans.

On October 1, 2015, the Company issued 4,000,000 warrants for legal work. The warrants are exercisable at $0.20 per share for a period of five years from the date of issue. The Company valued the warrants as of December 31, 2015, at $386,549 using the Black-Scholes Model with expected dividend rate of 0%, expected volatility rate of 189%, expected conversion term of 4.75 years and risk-free interest rate of 1.75%.

On February 3, 2017, the Company issued 6,000,000 warrants (4,000,000 at $0.35 for two years and 2,000,000 at $0.45 for three years) as part of a separation agreement with a co-founder and former president. The Company valued the warrants as of March 31, 2017, at $639,284 using the Black-Scholes Model with expected dividend rate of 0%, expected volatility rate of 787%, expected conversion term of two and three years and risk-free interest rate of 1.75%.

NOTE 9 - RELATED PARTY TRANSACTIONS

Shareholders have made advances to the Company in the amounts of $0 and $129,374 (Kevin Jones $109,374 and Tunstall Canyon Group LLC $20,000) during the six months ended June 30, 2017, and 2016, respectively.  Tunstall Canyon Group, LLC elected to convert advances of $0 and $51,500 to shares of common stock at market value ($0.08 per share) and Kevin Jones received repayments of $59,690 and $101,000 during the six months ended June 30, 2017, and 2016, respectively.

NOTE 10 – INCOME TAXES

At June 30, 2017, and December 31, 2016, the Company had approximately $2.3 million and $1.9 million, respectively, of net operating losses (“NOL”) carry forwards for federal and state income tax purposes.  These losses are available for future years and expire through 2033.  Utilization of these losses may be severely or completely limited if the Company undergoes an ownership change pursuant to Internal Revenue Code Section 382.

The provision for income taxes for continuing operations consists of the following components for the six months ended June 30, 2017, and the year ended December 31, 2016:

  2017   2016  
         
Current   $ 0     $ 0  
Deferred     0       0  
   Total tax provision   $ 0     $ 0  

 

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A comparison of the provision for income tax expense at the federal statutory rate of 34% for the six months ended June 30, 2017, and the year ended December 31, 2016, the Company’s effective rate is as follows:

    2017   2016
         
Federal statutory rate     (34.0 )%     (34.0 )%
State tax, net of federal benefit     (0.0 )     (0.0 )
Permanent differences and other including surtax exemption     0.0       0.0  
Valuation allowance     34.0       34.0  
Effective tax rate     0.0 %     0.0 %

 

The net deferred tax assets and liabilities included in the financial statements consist of the following amounts at June 30, 2017, and December 31, 2016:

    2017     2016  
Deferred tax assets            
Net operating loss carry forwards   $ 6,602,936     $ 5,602,576  
Deferred compensation     2,444,698       2,570,198  
Stock based compensation     10,486,062       5,165,124  
Other     1,217,990       1,138,307  
Total     20,751,686       14,476,205  
Less valuation allowance     (20,751,686 )     (14,476,205 )
Deferred tax asset     0       0  
Deferred tax liabilities                
Depreciation and amortization   $ 0     $ 0  
Net long-term deferred tax asset   $ 0     $ 0  

 

The change in the valuation allowance was $6,275,481 and $2,018,074 for the six months ended June 30, 2017, and the year ended December 31, 2016, respectively.  The Company has recorded a 100% valuation allowance related to the deferred tax asset for the loss from operations, interest expense, interest income and other income subsequent to the change in ownership, which amounted to $20,751,686 and $14,476,205 at June 30, 2017, and December 31, 2016, respectively.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, historical taxable income including available net operating loss carry forwards to offset taxable income, and projected future taxable income in making this assessment.

NOTE 11 – COMMITMENTS

Employment Agreements

In May 2011, the Company entered into employment agreements with its chief executive officer, president and chief financial officer.  The Agreements were for a term of five years (ending on May, 31, 2016).  During the six months ended June 30, 2016, the Company accrued a total of $150,000 as management fees in accordance with the terms of these agreements.

In August 2012, the Company entered into employment agreements with the president and chairman of the board of Greenway Innovative Energy, Inc. for a term of five years with compensation of $90,000 per year. In June 2014, the president’s employment agreement was amended to increase his annual pay to $180,000.  On April 30, 2015, accrual on the Greenway Innovative Energy chairman of the board agreement ceased due to his absence from the Company for more than a year. During the six months ended June 30, 2017, and 2016, the Company accrued $90,000, respectively for the president.

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The Company does not have any other employment agreements, other than as described above.

Leases

In October 2015, the Company entered into a two-year lease for approximately 1,800 square feet a base rate of $2,417 per month. During the six months ended June 30, 2017, and 2016, respectively, the Company expensed $17,948 and $19,052, respectively, in, rent expense.

The Company has a minimum commitment for 2017 of approximately $11,160 in annual maintenance fees for its United States Bureau of Land Management (“BLM”) mining lease, which are due September 1, 2017.  Once the Company enters the production phase, royalties owed to the BLM will be equal to 10% of production. There is no actual lease agreement with the BLM, the Company just files an annual maintenance fee form.

Legal

On April 22, 2016, the Company filed suit under Cause No. DC-16-004718, in the 193rd District Court, Dallas County, Texas against Mamaki of Hawaii, Inc. (“Mamaki”), Hawaiian Beverages, Inc.(“HBI”), Curtis Borman and Lee Jenison for breach of a Stock Purchase Agreement dated October 29, 2015, wherein we sold our shares in Mamaki to HBI for $700,000 (along with the assumption of certain debt). The Defendants failed to make payments of $150,000 each on November 30, 2015, December 28, 2015, and January 27, 2016. On January 13, 2017, we executed a Settlement and Mutual Release Agreement with the Defendants. However, the Defendants defaulted in their payment obligations under Settlement and Mutual Release Agreement, and as result, the Company will move for Summary Judgment as soon as possible.

NOTE 12 – SUBSEQUENT EVENTS

Subsequent to June 30, 2017, we sold 52,631 shares of our class A restricted common stock to one individual for $5,263 ($0.10 per share).

Item 2. Management s Discussion and Analysis of Financial Condition and Results of Operations.

THE FOLLOWING DISCUSSION SHOULD BE READ TOGETHER WITH THE INFORMATION CONTAINED IN THE FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS REPORT ON FORM 10-Q.

The following discussion and analysis of financial condition, results of operations, liquidity, and capital resources, should be read in conjunction with our audited consolidated financial statements and notes thereto appearing elsewhere in this report, which have been prepared assuming that we will continue as a going concern, and in conjunction with our Annual Form 10-K filed on April 14, 2017. As discussed in Note 2 to the condensed consolidated financial statements, our recurring net losses and inability to generate sufficient cash flows to meet our obligations and sustain our operations raise substantial doubt about our ability to continue as a going concern. Management’s plans concerning these matters are also discussed in Note 2 to the condensed consolidated financial statements. This discussion contains forward-looking statements that involve risks and uncertainties, including information with respect to our plans, intentions and strategies for our businesses. Our actual results may differ materially from those estimated or projected in any of these forward-looking statements.

Unless the context otherwise suggests, “we,” “our,” “us,” and similar terms, as well as references to “UMED” and “Greenway Technologies,” all refer to Greenway Technologies, Inc, as of the date of this report.

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Overview

UMED Holdings, Inc. (“UMED”) was originally incorporated as Dynalyst Manufacturing Corporation (“Dynalyst”) under the laws of the State of Texas on March 13, 2002.

In connection with the merger with Universal Media Corporation (“UMC”), a Nevada corporation, on August 17, 2009, we changed our name to Universal Media Corporation. The transaction was accounted for as a reverse merger, and Universal Media Corporation was the acquiring company on the basis that Universal Media Corporation’s senior management became the entire senior management of the merged entity and there was a change of control of Dynalyst. The transaction was accounted for as recapitalization of Dyanlyst’s capital structure. In connection with the merger, Dynalyst issued 57,500,000 restricted common shares to the shareholders of Universal Media Corporation for 100% of Universal Media Corporation.

On August 18, 2009, Dynalyst approved the amendment of its Articles of Incorporation and filed with the Texas Secretary of State an amendment to change our name to Universal Media Corporation and approved the increase in authorized shares to 300,000,000 shares of common A stock, par value $0.0001 and 20,000,000 shares of common B, par value $0.0001.

On March 23, 2011, Universal Media Corporation approved the amendment of its Articles of Incorporation and filed with the Texas Secretary of State an amendment to change our name to UMED Holdings, Inc.

On June 22, 2017, UMED Holdings, Inc. approved the amendment of our certificate of formation and filed on June 23, 2017, with the Texas Secretary of State an amendment to change our name to Greenway Technologies, Inc.

Greenway Technologies is a holding company with present interests in energy and mining. We have our corporate offices at 8851 Camp Bowie West, Suite 240, Fort Worth, Texas 76116, consisting of approximately 1,800 square feet. Our wholly-owned subsidiary, GIE, has offices at 1521 North Cooper Street, Suite 207, Arlington, Texas 76011.

We will be unable to pay our obligations in the normal course of business or service our debt in a timely manner throughout 2017 without raising additional debt or equity capital. There can be no assurance that additional debt or equity capital will be raised.

Greenway Technologies is currently evaluating strategic alternatives that include the following: (i) raising of capital, or (ii) issuance of debt instruments. This process is ongoing and can be lengthy and has inherent costs. There can be no assurance that the exploration of strategic alternatives will result in any specific action to alleviate our 12 month working capital needs or result in any other transaction.

Greenway Technologies currently has a need of approximately $130,000 per month to sustain operations and pay the University of Texas at Arlington (UTA) Sponsored Research Agreements until the first gas to liquids (“GTL”) Unit is completed.

Energy Interest

In August 2012, Greenway Technologies (formerly, UMED) acquired 100% of Greenway Innovative Energy, Inc. which owns patents and trade secrets for a proprietary technology to convert natural gas into synthesis gas (syngas). Based on a new, breakthrough process called Fractional Thermal Oxidation™ (FTO), Greenway Technologies’ G-Reformer™, combined with   a Fischer-Tropsch process, offers an economical and scalable method to converting natural gas to liquid fuel.

On June 26, 2017, Greenway Technologies, in conjunction with UTA, announced that it had successfully demonstrated its GTL technology at the Conrad Greer Laboratory at UTA proving the viability of the GTL system. Greenway Technologies now plans to commercialize the system and related technology and is in discussions with several oil and gas companies, and other individuals and organizations regarding joint venture funding for its first gas-to-liquids (GTL) plant using our proprietary processes. Should an agreement be made, the joint venture relationship will provide funding at a level of $20M to $50M with an ongoing profit-sharing arrangement between Greenway Technologies and the partner.

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 Greenway Technologies’ technology is unique in that it allows for plants with a smaller footprint, versus legacy large-scale technologies, combined with lower up-front and ongoing costs.

One of several important applications for our technology is the harvesting of stranded natural gas. There is an abundance of stranded natural gas located throughout the United States with no practical way to transfer the gas to existing distribution systems for sale. This valuable energy resource sits untapped, unused, or more harmfully, is vented to the atmosphere. Greenway Technologies’ technology allows this valuable energy resource to be harvested and monetized.

Greenway Technologies’ breakthrough patented GTL system offers a solution to this energy challenge. Our system allows for relatively small by comparison, scalable plants to be deployed at geographically dispersed locations to convert natural gas into synthetic fuel that is transportable and can be sold directly to markets without the need for additional processing at a refinery.

Our research has been centered on developing a portable production-scale FT system (“the Portable Technology”) to accommodate the needs of smaller gas plays that are increasingly beginning to characterize natural gas production within the United Stated and elsewhere. We are currently seeking funding of $20M to $50M to build the initial GTL unit.

Since March 1, 2016, we have raised approximately $1,500,000 and have built a small-scaled prototype unit at UTA in conjunction with a sponsored research agreement.

Mining Interest

In December 2010, UMED acquired the rights to approximately 1,440 acres of placer mining claims in Mohave County, Arizona for 5,066,000 shares of our restricted common stock. Early indications, from samples taken and processed, provides reason to believe that the potential recovery value of the metals located on the 1,440 acres is significant, but actual mining and processing will determine the ultimate value which may be realized. Funding of $500,000 is being sought to begin certified assaying, to determine the viability of continued development of the mining claims.

Going Concern

As of June 30, 2017, the registrant had an accumulated deficit during development stage of $20,751,686. During the three months ended June 30, 2017, the registrant used net cash of $562,898 for operating activities. These factors raise substantial doubt about the registrant’s ability to continue as a going concern.

While the registrant is attempting to commence operations and generate revenues, the registrant’s cash position may not be significant enough to support the registrant’s daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the registrant to continue as a going concern. While the registrant believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the registrant to continue as a going concern is dependent upon the registrant’s ability to further implement its business plan and generate revenues.

Three Months Ended June 30, 2017, Compared to Three Months Ended June 30, 2016.

Revenues. During the three months ended June 30, 2017, and 2016, the registrant had no revenues from operations. The registrant is aggressively looking for ways to leverage our technology to develop revenue streams.

Operating Expenses.

Consulting Fees . During the three months ended June 30, 2017, consulting expense increased to $82,950 as compared to $11,250 from the prior year three months ended June 30, 2016. The increase was primarily the result of more cash paid and more stock being issued to consultants for services rendered to the registrant.

Officer Compensation . During the three months ended June 30, 2017, officer compensation decreased to $101,000 as compared to $105,000 from the prior year three months ended June 30, 2016. Officer compensation decreased due to expiration of executive employment agreements expiring in May 2016.

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  Professional Fees . During the three months ended June 30, 2017, professional fees increased to $2,813 as compared to $2,603 from the prior year three months ended June 30, 2016. Professional fees increased because of an increase in filing fees and press releases.

Operating Expenses . During the three months ended June 30, 2017, operating expenses increased to $1,069,145 as compared to $242,785 from the prior year three months ended June 30, 2016. The increase was due primarily to research and development costs of $160,274 in the three months ended June 30, 2017, compared to $94,836 in the three months ended June 30, 2016. Stock based compensation expense increased to $541,567 in the three months ended June 30, 2017, compared to $0 in the three months ended June 30, 2016. Travel expenses increased to $18,769 in the three months ended June 30, 2017, compared to $6,399 in the three months ended June 30, 2016. Legal expenses increased to $81,224 in the three months ended June 30, 2017, compared to $7,530 in the three months ended June 30, 2016.

Interest Expense . During the three months ended June 30, 2017, interest expense increased to $42,687 as compared to $11,615 from the prior year three months ended June 30, 2016. The increase was primarily due to original issue discount on issued convertible promissory notes. Interest expense accrued pursuant to the outstanding convertible notes stayed fairly constant.

Derivative Adjustment . During the three months ended June 30, 2017, loss on derivative adjustment was $12,841 as compared to $15,033 for the prior year three months ended June 30, 2016. The change was due to the derivative liability calculated using the Black-Scholes Model pursuant to the outstanding convertible note payable and warrants.

Net Loss from Operations . Our net loss from operations increased to $1,005,488 for the three months ended June 30, 2017 compared to $239,367 for the three months ended June 30, 2016. The increase was primarily due to more stock issued for consulting services and increase in research and development cost.

Six Months Ended June 30, 2017, Compared to Six Months Ended June 30, 2016.

Revenues. During the six months ended June 30, 2017, and 2016, the registrant had no revenues. The registrant is aggressively looking for ways to leverage our technology to develop revenue streams.

Operating Expenses.

Consulting Fees . During the six months ended June 30, 2017, consulting expense increased to $118,450 as compared to $98,500 from the prior year six months ended June 30, 2016. The increase was primarily the result of consultants added for the Greenway Technologies GTL project.

Officer Compensation . During the six months ended June 30, 2017, officer compensation increased to $276,000 as compared to $242,000 from the prior year six months ended June 30, 2016. Officer compensation increased due to additional payments made to our chief executive office for services rendered.

Professional Fees . During the six months ended June 30, 2017, professional fees increased to $12,853 as compared to $4,514 from the prior year six months ended June 30, 2016. Professional fees increased because of an increase in the fees charged by the OTC Market.

Operating Expenses . During the six months ended June 30, 2017, operating expenses increased to $6,295,282 as compared to $697,212 from the prior year six months ended June 30, 2016. The increase was due primarily to research and development costs of $337,932 in the six months ended June 30, 2017, compared to $259,671 in the six months ended June 30, 2016. Stock based compensation expense increased to $5,238,938 in the six months ended June 30, 2017, compared to $0 in the six months ended June 30, 2016. Travel expenses increased to $29,065 in the six months ended June 30, 2017, compared to $7,293 in the six months ended June 30, 2016. Legal expenses increased to $110,573 in the six months ended June 30, 2017, compared to $32,623 in the six months ended June 30, 2016.

Interest Expense . During the six months ended June 30, 2017, interest expense increased to $(9,405) as compared to $11,730 from the prior year six months ended June 30, 2016. The increase was primarily due to change in derivative values on convertible note and warrants. Interest expense accrued pursuant to the outstanding convertible note stayed fairly constant.

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Derivative Adjustment . During the six months ended June 30, 2017, gain on derivative adjustment was $10,396 as compared to loss of $25,065 for the prior year six months ended June 30, 2016. The change was due to the derivative liability calculated using the Black-Scholes Model pursuant to the outstanding convertible note payable and warrants.

Net Loss from Operations . Our net loss from operations increased to $6,275,481 for the six months ended June 30, 2017, compared to $734,007 for the six months ended June 30, 2016. The increase was primarily due to increased stock based compensation.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate adequate amounts of cash to meet its needs for cash. The following table provides certain selected balance sheet comparisons between June 30, 2017, and December 31, 2016:

    June 30,   December 31,   $   %
2017 2016 Change Change
                 
Working Capital                
Cash                                                                              $578,111   $67,964   $510,147   751%
Total current assets   $578 ,111   $81,440   $496,671   610%
Total assets   $598,251   $86,789   $511,472   589%
Accounts payable and accrued liabilities   $2,131,124   $2,312,310   $(181,186)   (8%)
Notes payable and accrued interest   $9,024   $135,275   $(126,251)   (93%)
Derivative liability   $71,759   $56,057   $15,702   28%
Total current liabilities   $2,211,907   $2,503,642   $(291,735)   (12%)
Total liabilities   $2,211,907   $2,503,642   $(291,735)   (12%)

 

In the six months ended June 30, 2017, our working capital deficit decreased primarily as a result of an increase in cash of 510,147 decrease in accounts payable and accrued liabilities of $181,186 and a decrease in notes payable and accrued interest of $126,251.

Operating activities

Net cash used for continuing operating activities during the three months ended June 30, 2017, was $(562,898) as compared to $(110,334) for the three months ended June 30, 2016. Non-cash items totaling approximately $442,589 contributing to the net cash used in continuing operating activities for the three months ended June 30, 2017, include:

 

 

 

$546,874 representing the value of stock based compensation,

$ (18,148) gain on derivative liability adjustment,

$ 6,262 in prepaids to a manufacturer and a lawyer for future legal services,

   

$ 99 of depreciation,

$ (92,498) decrease in accounts payable and accrued expenses

Net cash used for continuing operating activities for the three months ended June 30, 2016, was $110,334. Non-cash items totaling approximately $129,033 contributing to the net cash used in continuing operating activities for the three months ended June 30, 2016, include:

 

 

$ 0 representing the value of stock based compensation,

$ 15,033 gain on derivative liability adjustment,

$ 0 in prepaids to a manufacturer and a lawyer for future legal services,

 

$ 99 of depreciation,

$ (144,165) decrease in accounts payable and accrued expenses

Investing activities

Net cash used in investing activities was $0 for the three months ended June 30, 2017, and 2016.

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F inancing Activities

Net cash provided by financing activities was $862,810 for the three months ended June 30, 2017, composed of $924, 500 in sales of common stock, $59,690 of repayments of shareholder advances and $2,000 of payments on note payable.

Net cash provided by financing activities was $203,128 for the three months ended June 30, 2016, composed primarily of $135,000 in sales of common stock, $224,000 increase in convertible note, $87,629 of repayments of shareholder advances and $68,243 of debt issue costs. 

Seasonality

We do not anticipate that our business will be affected by seasonal factors.

Impact of Inflation

General inflation in the economy has driven the operating expenses of many businesses higher. We will continuously seek methods of reducing costs and streamlining operations while maximizing efficiency through improved internal operating procedures and controls. While we are subject to inflation as described above, our management believes that inflation currently does not have a material effect on our operating results. However, inflation may become a factor in the future.

Commitments

Employment Agreements. In May 2011, UMED entered into employment agreements with its chief executive officer, president and chief financial officer. The Agreements were for a term of five years ending May 31, 2016. During the three months ended March 31, 2016, UMED expensed a total of $90,000 in expense and accrual as management fees in accordance with the terms of these agreements.

In August 2012, UMED entered into employment agreements with the president and chairman of the board of Greenway Innovative Energy, Inc. for a term of five years with compensation of $90,000 per year. In June 2014, the president’s employment agreement was amended to increase his annual pay to $180,000. On March 31, 2015, accrual on the Greenway chairman of the board agreement was ceased due to his absence from the Company for more than a year. During the three months ended March 31, 2017 and 2016, UMED expensed a total of $45,000 in expense and accrual, respectively.

Greenway Technologies does not have any other employment agreements, other than as described above.

Leases. In October 2015, UMED entered into a two-year lease for approximately 1,800 square feet a base rate of $2,417 per month. During the three months ended March 31, 2017 and 2016, we expensed $8,550 and $7,251, respectively, in rent expense.

Mining Interest. In December 2010, UMED acquired from Melek Mining, Inc. and 4HM Partners, LLC the rights to approximately 1,440 acres of placer mining claims in Mohave County, Arizona for 5,066,000 shares of our restricted common stock. Our minimum commitment for 2017 is approximately $11,160 in annual maintenance fees, which are due September 1, 2017, payable to the United States Bureau of Land Management (“BLM”). Once we enter the production phase, royalties owed to the BLM will be are equal to 10% of production. As of the date of this report, the mining claims are not covered by any lease agreement.

Critical Accounting Policies

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Critical accounting policies include revenue recognition and impairment of long-lived assets.

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We recognize revenue in accordance with Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements.” Sales are recorded when products are shipped to customers. Provisions for discounts and rebates to customers, estimated returns and allowances and other adjustments are provided for in the same period the related sales are recorded.

We evaluate our long-lived assets for financial impairment on a regular basis in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” which evaluates the recoverability of long-lived assets not held for sale by measuring the carrying amount of the assets against the estimated discounted future cash flows associated with them. At the time such evaluations indicate that the future discounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values.

Quantitative and Qualitative Disclosures About Market Risk

We conduct all of our transactions, including those with foreign suppliers and customers, in U.S. dollars. We are therefore not directly subject to the risks of foreign currency fluctuations and do not hedge or otherwise deal in currency instruments in an attempt to minimize such risks. Demand from foreign customers and the ability or willingness of foreign suppliers to perform their obligations to us may be affected by the relative change in value of such customer or supplier’s domestic currency to the value of the U.S. dollar. Furthermore, changes in the relative value of the U.S. dollar may change the price of our products relative to the prices of our foreign competitors.

Stock-Based Compensation

We recognize compensation cost for stock-based awards based on the estimated fair value of the award on the date of grant. We measure compensation cost at the grant date based on the fair value of the award and recognize compensation cost upon the probable attainment of a specified performance condition or over a service period.

Recently Issued Accounting Pronouncements

In June 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.” The update removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. In addition, the update adds an example disclosure in Risks and Uncertainties (Topic 275) to illustrate one way that an entity that has not begun planned principal operations could provide information about the risks and uncertainties related to the Company’s current activities. Furthermore, the update removes an exception provided to development stage entities in Consolidations (Topic 810) for determining whether an entity is a variable interest entity-which may change the consolidation analysis, consolidation decision, and disclosure requirements for a company that has an interest in a company in the development stage. The update is effective for the annual reporting periods beginning after December 15, 2014, including interim periods therein. Early application with the first annual reporting period or interim period for which the entity’s financial statements have not yet been issued (Public business entities) or made available for issuance (other entities). We adopted this pronouncement for the three months ended June 30, 2017.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

There has been no material change in our market risks since the end of the fiscal year 2016.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

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The term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act (15 U.S.C. 78a, et seq. ) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive officer and principal financial officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

· Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer;
· Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and
· Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements.

Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of inherent limitations in all control systems, internal control over financial reporting may not prevent or detect misstatements, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the registrant have been detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In June 2017, we conducted an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in “Internal Control -- Integrated Framework,” issued by the Committee of Sponsoring Organizations (COSO II) of the Treadway Commission. Based upon this assessment, we determined that our internal control over financial reporting is ineffective.

The matters involving internal controls and procedures that our management considers to be material weaknesses under COSO II and SEC rules are: (1) lack of a functioning audit committee and lack of independent directors on our board of directors, resulting in potentially ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; (3) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (4) ineffective controls over period end financial disclosure and reporting processes. The aforementioned potential material weaknesses were identified by our chief financial officer in connection with the preparation of our financial statements as of June 30, 2017, who communicated the matters to our management and board of directors.

  22  
 

Management believes that the material weaknesses set forth above did not have an effect on our financial results. However, the lack of a functioning audit committee and lack of a majority of independent directors on our board of directors resulting in potentially ineffective oversight in the establishment and monitoring of required internal controls and procedures, can impact our financial statements.

  23  
 

  Management’s Remediation Initiatives

Although we are unable to meet the standards under COSO II because of the limited funds available to a company of our size, we are committed to improving our financial organization. As funds become available, we will undertake to: (1) create positions to segregate duties consistent with control objectives, (2) increase our personnel resources and technical accounting expertise within the accounting function (3) appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures; and (4) prepare and implement sufficient written policies and checklists which will set forth procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.

We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal control over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow. However, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within Greenway Technologies have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

On April 22, 2016, Greenway Technologies filed suit under Cause No. DC-16-004718, in the 193rd District Court, Dallas County, Texas against Mamaki of Hawaii, Inc. (“Mamaki”), Hawaiian Beverages, Inc.(“HBI”), Curtis Borman and Lee Jenison for breach of a Stock Purchase Agreement dated October 29, 2015, wherein we sold our shares in Mamaki to HBI for $700,000 (along with the assumption of certain debt). The Defendants failed to make payments of $150,000 each on November 30, 2015, December 28, 2015 and January 27, 2016. On January 13, 2017, we executed a Settlement and Mutual Release Agreement with the Defendants. However, the Defendants defaulted in their payment obligations under Settlement and Mutual Release Agreement, and as result, Greenway Technologies will move for Summary Judgment as soon as possible.

Item 1A. Risk Factors.

Not applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Beginning on January 25, 2017, through July 28, 2017, we sold 16,764,716 unregistered shares of our common stock to various investors for $1,763,013. In addition, during the same period, we issued 3,056,666 unregistered shares of our common stock to eight consultants, at a value equal to $524,150, in payment of consulting services, and, we issued 250,000 unregistered shares of our common stock in satisfaction of two legal claims, at a value equal to $27,500. The number of investors, consultants, and legal claimants, totaled 48, including no more than 35 non-accredited investors   as defined in the Securities Act. The proceeds from the sales of our common stock to the various investors were used to pay our general and administrative expenses and the expenses for the development of our GTL technology at The University of Texas at Arlington since January 2017.

Purchases of Equity Securities by the Registrant and Affiliated Purchasers

On the dates specified below, we issued unregistered shares of our common stock to various officers and directors of Greenway Technologies, all of whom were accredited investors as defined in the Securities Act:

· On January 4, 2017, we issued, at a value equal to $1,400,000   , 10,000,000 shares of our class A common stock to D. Patrick Six, our chairman and president, for management services valued at $0.04 per share.

 

  24  
 

 

 

· On January 4, 2017, we issued, at a value equal to $1,400,000, 10,000,000 shares of our class A common stock to Raymond Wright, our corporate secretary and one of our directors, for management services valued at $0.04 per share.
· On January 4, 2017, we issued, at a value equal to $490,000, 3,500,000 shares of our class A common stock to Ransom Jones, one of our directors and our former president, for management services valued at $0.04 per share.
· On January 4, 2017, we issued, at a value equal to $420,000, 3,000,000 shares of our class A common stock to Kevin Jones, one of our directors, for board of director services valued at $0.04 per share.
· On January 4, 2017, we issued, at a value equal to $420,000, 3,000,000 shares of our class A common stock to Kent Harer, one of our directors, for board of director services valued at $0.04 per share.

All of our unregistered securities described in this Item 2 were issued in reliance upon an exemption from registration pursuant to Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D promulgated under the Securities Act. Each investor took his securities for investment purposes without a view to distribution and had access to information concerning Greenway Technologies and our business prospects, as required by the Securities Act. In addition, there was no general solicitation or advertising for the purchase of our securities. Our securities were sold only to accredited or sophisticated investors, as defined in Regulation D with whom we had a direct personal preexisting relationship, and after a thorough discussion. Each certificate contained a restrictive legend as required by the Securities Act. Finally, our stock transfer agent has been instructed not to transfer any of such securities, unless such securities are registered for resale or there is an exemption with respect to their transfer.

Each purchaser or recipient of our shares, who was not an accredited investor, either alone or with his purchaser representative(s) had such knowledge and experience in financial and business matters that he was capable of evaluating the merits and risks of the prospective investment, or Greenway Technologies reasonably believed immediately prior to making any sale that such purchaser came within this description.

All of the above described investors who received shares of our common were provided with access to our filings with the SEC, including the following:

· The information contained in our annual report on Form 10-K under the Exchange Act.
· The information contained in any reports or documents required to be filed by Greenway Technologies under sections 13(a), 14(a), 14(c), and 15(d) of the Exchange Act since the distribution or filing of the reports specified above.
· A brief description of the securities being offered, and any material changes in our affairs that were not disclosed in the documents furnished.
Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.
Exhibit No. Identification of Exhibit
2.1** Combination Agreement executed as of August 18, 2009, between Dynalyst Manufacturing Corporation and Universal Media Corporation, filed as Exhibit 10.2 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
3.1** Articles of Incorporation of Dynalyst Manufacturing Corporation filed with the Secretary of State of Texas on March 13, 2002, filed as Exhibit 3.1 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
3.2** Articles of Amendment of Articles of Incorporation of Dynalyst Manufacturing Corporation filed with the Secretary of State of Texas on June 7, 2006, filed as Exhibit 3.2 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
3.3** Articles of Amendment of Articles of Incorporation of Dynalyst Manufacturing Corporation filed with the Secretary of State of Texas on August 28, 2009, changing the corporate name to Universal Media Corporation, filed as Exhibit 3.3 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
3.4** Articles of Amendment of Articles of Incorporation of Universal Media Corporation filed with the Secretary of State of Texas on March 23, 2011, changing the corporate name to UMED Holdings, Inc., filed as Exhibit 3.4 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
3.5** Articles of Amendment of Certificate of Formation of UMED Holdings, Inc. filed with the Secretary of State of Texas on June 23, 2017, changing the corporate name to Greenway Technologies, Inc., filed as Exhibit 3.1 to the registrant’s Form 8-K/A on July 20, 2017, Commission File Number 000-55030.
3.6** Bylaws of Dynalyst Manufacturing Corporation, filed as Exhibit 3.5 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
3.7* Articles of Incorporation of Greenway Innovative Energy, Inc. filed with the Secretary of State of Nevada on July 6, 2012.
3.8* Bylaws of Greenway Innovative Energy, Inc.
10.1** Code of Ethics for Senior Financial Officers, filed as Exhibit 10.1 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.2** Purchase Agreement dated as of May 1, 2012, between Universal Media Corporation and Mamaki Tea & Extract, Inc., filed as Exhibit 10.3 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.3** Addendum and Modification to Purchase Agreement dated as of December 31, 2012, between Universal Media Corporation and Mamaki of Hawaii, Inc. formerly Mamaki Tea & Extract, Inc., filed as Exhibit 10.4 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.4** Second Addendum and Modification to Purchase Agreement dated as of December 31, 2012, between Universal Media Corporation and Mamaki of Hawaii, Inc. formerly Mamaki Tea & Extract, Inc., filed as Exhibit 10.5 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.5** Purchase Agreement dated August 29th, 2012, between Universal Media Corporation and Greenway Innovative Energy, Inc., filed as Exhibit 10.6 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.6** Purchase Agreement dated as of February 23, 2012, between Rig Support Services, Inc. and UMED Holdings, Inc., filed as Exhibit 10.7 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.7** Asset Purchase Agreement dated as of October 2, 2011, between Jet Regulators, L.C., R/T Jet Tech, L.P. and UMED Holdings, Inc., filed as Exhibit 10.8 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.8** Employee Agreement dated May 27, 2011, between UMED Holdings, Inc. and Kevin Bentley, filed as Exhibit 10.9 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.

 

  26  
 

 

 

10.9** Employee Agreement dated May 27, 2011, between UMED Holdings, Inc. Randy Moseley, filed as Exhibit 10.10 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.10** Employee Agreement dated May 27, 2011, between UMED Holdings, Inc. and Richard Halden, filed as Exhibit 10.11 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.11** Employee Agreement dated August 29, 2012, between UMED Holdings, Inc. and Raymond Wright, filed as Exhibit 10.12 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.12** Employee Agreement dated August 29, 2012, between UMED Holdings, Inc. and Conrad Greer, filed as Exhibit 10.13 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.13** Consulting Agreement dated May 27, 2011, between UMED Holdings, Inc. and Jabez Capital Group, LLC, filed as Exhibit 10.14 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.14** Promissory Note in the amount of $850,000 dated August 17, 2012, executed by Mamaki Tea, Inc. payable to Southwest Capital Funding, Ltd., filed as Exhibit 10.15 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.15** Modification of Note and Liens effective as of October 1, 2012, between Southwest Capital Funding, Ltd. and Mamaki Tea, Inc., filed as Exhibit 10.16 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.16** Second Modification of Note and Liens effective as of December 20, 2012, between Southwest Capital Funding, Ltd., Mamaki Tea, Inc., and Mamaki of Hawaii, Inc., filed as Exhibit 10.17 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.17** Promissory Note in the amount of $150,000 dated August 17, 2012, executed by Mamaki Tea, Inc. payable to Robert R. Romer, filed as Exhibit 10.18 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.18** Addendum and Modification to Purchase Agreement dated as of December 31, 2012, between Rig Support Services, Inc. and UMED Holdings, Inc., filed as Exhibit 10.19 to the registrant’s registration statement on Form 10-12G on August 29, 2013, Commission File Number 000-55030.
10.19* Securities Purchase Agreement dated September 18, 2014, between UMED Holdings, Inc. and Tonaquint, Inc.
10.20* Promissory Note in the amount of $158,000 dated September 18, 2014, executed by UMED Holdings, Inc. payable to Tonaquint, Inc.
10.21* Warrant dated September 18, 2014, for $47,400 worth of UMED Holdings, Inc. shares issued to Tonaquint, Inc.
10.22* Office Lease Agreement dated October 2015, between UMED Holdings, Inc. and The Atrium Remains the Same, LLC.
10.23* Warrant dated October 31, 2015, for 4,000,000 shares issued to Norman T. Reynolds, Esq.
10.24* Promissory Note in the amount of $36,000 dated March 8, 2016, executed by UMED Holdings, Inc. payable to Peter C. Wilson.
10.25* Convertible Promissory Note in the amount of $224,000 dated May 4, 2016, executed by UMED Holdings, Inc. payable to Tonaquint, Inc.
10.26* Severance and Release Agreement by and between UMED Holdings, Inc. and Randy Moseley dated November 11, 2016.
10.27* Settlement and Mutual Release Agreement dated January 13, 2017, executed by UMED Holdings, Inc. in connection with Cause No. DC-16-004718, in the 193rd District Court, Dallas County, Texas against Mamaki of Hawaii, Inc., Hawaiian Beverages, Inc., Curtis Borman, and Lee Jenison.
10.28* Warrant dated February 1, 2017, for 2,000,000 shares issued to Richard J. Halden.
10.29* Warrant dated February 1, 2017, for 4,000,000 shares issued to Richard J. Halden.
10.30* Severance and Release Agreement by and between UMED Holdings, Inc. and Richard Halden dated February 1, 2017.
10.31* Assignment Agreement dated December 27, 2010, between Melek Mining, Inc., 4HM Partners, LLC, and UMED Holdings, Inc.

 

  27  
 

 

 

31.1* Certification of D. Patrick Six, Chief Executive Officer of Greenway Technologies, Inc., pursuant to 18 U.S.C. §1350, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.
31.2* Certification of D. Patrick Six, Chief Financial Officer and Principal Accounting Officer of Greenway Technologies, Inc., pursuant to 18 U.S.C. §1350, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.
32.1* Certification of D. Patrick Six, Chief Executive Officer of Greenway Technologies, Inc., pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
32.2* Certification of D. Patrick Six, Chief Financial Officer and Principal Accounting Officer of Greenway Technologies, Inc., pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.

____________

*       Filed herewith.

**       Previously filed.

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GREENWAY TECHNOLOGIES, INC.

Date: September 20, 2017.

By /s/ D. Patrick Six

D. Patrick Six, Chief Executive Officer

 

 

By /s/ D. Patrick Six

D. Patrick Six, Chief Financial Officer and

Principal Accounting Officer

  28  
 

Exhibit 3.7 

 

 

  

 

 

 

 

ARTICLES OF INCORPORATION

OF

GREENWAY INNOVATIVE ENERGY INC a NV Corporation

l, the undersigned, being the original incorporator herein named, for the purpose of forming a Corporation under the General Corporation Laws of the State of NV, to do business both within and without the State of NV, do make and file these Articles of Incorporation, hereby declaring and certifying that the facts herein stated are true:

NAME. The name of the corporation is:

GREENWAY INNOVATIVE ENERGY, INC

ll. REGISTERED AGENT. The street address of the corporation's registered agent and the principal or statutory address of this corporation in the State of Nevada shall be:

NEVADA CORPORATE HEADQUARTERS, INC.

101 Convention Center Dr., Ste 700

Las Vegas, NV 89109

This corporation may maintain an office, or offices, in such other place or places within or without the State of Nevada as may be from time to time designated by the Board of Directors, or by the bylaws of said corporation, and that this corporation may conduct all corporation business of every kind and nature, including the holding of all meetings of directors and stockholders, outside the State of Nevada as well as within the State of Nevada.

SHARES OF STOCK

Section 3.01 Number and Class . The Corporation shall authorize the issuance of a single class of Capital Stock in the amount of seventy five thousand (75,000) shares of Common Stock, at no par value.

Notwithstanding the foregoing, these Articles hereby vest the Board of Directors of the Corporation with such authority as may be necessary to prescribe such classes, series and numbers of each class or series of Stock. In addition the Board is hereby vested with such authority as may be necessary to prescribe the voting powers, designations, preferences, limitations, restrictions and relative rights of each class or series of Stock created. All classes of Stock may be issued from time to time without action by the Stockholders.

Section 3.02. No Preemptive Rights . Unless othetwise determined by the Board of Directors, holders of the Stock of the Corporation shall not have any preference, preemptive right, or right of subscription to acquire any shares of the Corporation authorized, issued or sold, or to be authorized, issued or sold, and convertible into shares of the Corporation, nor to any right of subscription thereto.

 

 

 

Section 3.03. Non-Assessabilitv of Shares . The Shares of the Corporation, after the amount of the subscription price has been paid, in money, property or services, as the Directors shall determine, shall not be subject to assessment to pay the debts of the Corporation, nor for any other purpose, and no Stock issued as fully paid shall ever be assessable or assessed, and the Articles of Incorporation shall not be amended in this particular.

IV. DIRECTORS

Section 4.01. Governinq Board . The members of the Governing Board of the Corporation shall be styled as Directors.

Section 4.02. Initial Board of Directors . The initial Board of Directors shall consist of not less than one (1) and not more than seven (7) members. The name and address of an initial member of the Board of Directors is as follows:

NAME ADDRESS
Dianna R. Temple

P.O. Box 27740

Las Vegas, Nevada 89126

This individual shall serve as Director until the first annual meeting of the Stockholders or until his successor(s) shall have been elected and qualified.

 

Section 4.03. Chanqe in Number of Directors . The number of Directors may be increased or decreased by a duly adopted amendment to the Bylaws of the Corporation.

 

V. BUSINESS PURPOSE. The corporation shall have unlimited power to engage in and do any lawful act concerning any or all lawful business for which corporations may O be organized under the Law and not limited by the Statutes of Nevada, or any other state in which it conducts its business.

 

VI. INCORPORATOR. The name and address of the incorporator is Nevada Corporate Headquarters, Inc., P.O. Box 27740, Las Vegas, Nevada 89126.

 

Vil. PERIOD OF DURATION . The Corporation is to have a perpetual existence.

 

VI ll. PECUNIARY INTEREST. Any corporate officer, director, or shareholder of this corporation shall not, in the absence of fraud, be prohibited from dealing with this corporation either as vendor, purchaser or otherwise. A pecuniary interest in any transaction by any such director, shareholder or officer shall not disqualify him in any way from acting in his corporate capacity. No director nor officer, nor any firm, association, or corporation of which he shall be a member, or in which he may be pecuniarily interested, in any manner, shall be disqualified from dealing with the corporation as a result of the association. No director nor officer, nor any firm, association, or corporation with which he is connected as aforesaid shall be liable to account to this corporation or its shareholders for any profit realized by him from or though any such transaction or contract, it being the express purpose and intent of the Article to permit this corporation to buy from, sell to, or otherwise deal with the partnerships, firms, or corporations of directors and officers of the corporation, or any one or more of them who may have pecuniary interest, and the contracts of this corporation, in the absence of fraud, shall not be void or voidable or affecting in any manner by reason of such positiom• z ufthermore, directors of this corporation may be counted for a quorum of the Board of Directors of this corporation at a

 

 

 

 

meeting even through they may be pecuniarily interested in matters considered at a meeting; any action taken at such a meeting with reference to such matters by a majority of the disinterested directors shall not be void or voidable by this corporation in the absence of fraud.

IX. INDEMNITY . Every person who was or is a party to, or is threatened to be made a party to, or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he, or a person of whom he is the legal representative, is or was a Director or Officer of the Corporation, or is or was serving at the request of the Corporation as a Director or Officer of another Corporation, or as its representative in a partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless to the fullest extent legally permissible under the laws of the State of NV from time to time against all expenses, liability and loss (including attorneys' fees, judgments, fines and amounts paid or to be paid in settlement) reasonably incurred or suffered by him in connection therewith. Such right of indemnification shall be a contract right which may be enforced in any manner desired by such person. The expenses of Officers and Directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the Corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the Director or Officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the Corporation. Such right of indemnification shall not be exclusive of any other right which such Directors, Officers or representatives may have or hereafter acquire, and, without limiting the generality of such statement, they shall be entitled to their respective rights of indemnification under any bylaw, agreement, vote of Stockholders, provision of law, or otherwise, as well as their rights under this Article.

Without limiting the application of the foregoing, the Stockholders or Board of Directors may adopt bylaws from time to time with respect to indemnification, to provide at all times the fullest indemnification permitted by the laws of the State of NV, and may cause the Corporation to purchase and maintain insurance on behalf of any person who is or was a Director or Officer of the Corporation, or is or was serving at the request of the Corporation as Director or Officer of another Corporation, or as its representative in a partnership, joint venture, trust or other enterprises against any liability asserted against such person and incurred in any such capacity or arising out of such status, whether or not the Corporation would have the power to indemnify such person.

 

The indemnification provided in this Article shall continue as to a person who has ceased to be a Director, Officer, Employee or Agent, and shall inure to the benefit of the heirs, executors and administrators of such person.

 

X. AMENDMENTS . Subject at all times to the express provisions of Section 3.03 which cannot be amended, this Corporation reserves the right to amend, alter, change, or repeal any provision contained in these Articles of Incorporation or its Bylaws, in the manner now or hereafter prescribed by statute or by these Articles of Incorporation or said Bylaws, and all rights conferred upon the Stockholders are granted subject to this reservation.

 

POWERS OF DIRECTORS . In furtherance and not in limitation of the powers conferred by statute the Board of Directors is expressly authorized:

(1)                 Subject to the Bylaws, if any, adopted by the Stockholders, to make, alter or repeal the Bylaws of the 'Corporation,

 

 

 

 

(2)                 To authorize and cause to be executed mortgages and liens, with or without limit as to amount, upon the real and personal property of the Corporation;

(3)                 To authorize the guaranty by the Corporation of securities, evidences of indebtedness and obligations of other persons, Corporations and business entities;

(4)                 To set apart out of any of the funds of the Corporation available for distributions a reserve or reserves for any proper purpose and to abolish any such reserve;

(5)                 By resolution, to designate one or more committees, each committee to consist of at least one Director of the Corporation, which, to the extent provided in the resolution or in the Bylaws of the Corporation, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be stated in the Bylaws of the Corporation or as may be determined from time to time by resolution adopted by the Board of Directors; and

(6)                 To authorize the Corporation by its Officers or agents to exercise all such powers and to do all such acts and things as may be exercised or done by the Corporation, except and to the extent that any such statute shall require action by the Stockholders of the Corporation with regard to the exercising of any such power or the doing of any such act or thing.

In addition to the powers and authorities hereinbefore or by statute expressly conferred upon them, the Board of Directors may exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, except as otherwise provided herein and by law.

IN WITNESS WHEREOF, I have hereunto set my hand on this July 6, 2012, hereby declaring and certifying that the facts stated hereinabove are true. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 3.8

BYLAWS

 

OF

GREENWAY INNOVATIVE ENERGY, INC

A NEVADA Corporation

ARTICLE 1.

Stockholders

Section l. Annual Meeting. The annual meeting of the stockholders of this corporation shall be held at the NEVADA offices of the Corporation on July 6th at 11:00 am each and every year, or at such other places and times as the directors

shall from time to time determine. The purpose of this meeting shall be for the election of directors and such other business as may properly come before said meeting. Notice of the time, place and object of such meeting shall be given by publication thereof by serving personally or by mailing at least ten (10) days prior to such meeting, postage prepaid, and a copy of such notice, addressed to each stockholder at his residence or place of business, as the same shall appear on the books of the corporation. No business other than that stated in such notice shall be transacted at such meeting without the unanimous consent of all the stockholders thereat, in person or by proxy.

Section 2. Special Meetings . Special meetings of stockholders, other than those regulated by statute, may be called at any time by the president or by a majority of the directors. It shall also be the duty of the president to call such meetings whenever requested to do so by the holder or holders of the majority share of the capital stock of the corporation. A notice of every meeting stating the time, place and object thereof, shall be given by mailing, postage prepaid, at least ten (10) days before such meeting, a copy of such notice addressed to each stockholder at his post office address as the same appears on the books of the corporation.

 

 

 

 

Section 3. Quorum; Adjourned Meetings . The holders of a majority of the Stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the Stockholders for the transaction of business except as otherwise provided by statute or by the Articles of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the Stockholders, the Stockholders entitled to vote thereat, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified.

Section 4. Voting Capacity . At all meetings of the stockholders, each stockholder shall be entitled to one vote for each share of stock in his own name on the books of the corporation, whether represented in person or by proxy. All proxies shall be in writing and signed.

Section 5. Order of Business. At all meetings of stockholders the following shall be the order of business so far as is practicable:

l . Calling the roll

2. Reading, correcting, and approving of the minutes of the previous meeting
3. Reports of officers
4. Reports of committees
5. Unfinished business
6. New business
7. Election of directors
8. Miscellaneous business

Section 6. Proxies . At any meeting of the Stockholders any Stockholder may be represented and vote by a proxy or proxies appointed by an instrument in writing. In the event that any such instrument in writing shall designate two or more persons to act as proxies, a majority of such persons present at the meeting, or, if only one shall be present, then that one shall have and may exercise all of the powers conferred by such written instrument upon all of the persons so designated unless the instrument shall otherwise provide. No proxy or power of attorney to vote shall be used to vote at a meeting of the Stockholders unless it shall have been filed with the secretary of the meeting. All questions regarding the qualification of voters, the validity of proxies and the acceptance or rejection of votes shall be decided by the inspectors of election who shall be appointed by the Board of Directors, or if not so appointed, then by the presiding Officer of the meeting.

 

 

Section 7. Action Without Meeting . Any action which may be taken by the vote of the Stockholders at a meeting may be taken without a meeting if authorized by the written consent of Stockholders holding at least a majority of the voting power, unless the provisions of the statutes or of the Articles of Incorporation require a greater proportion of voting power to authorize such action in which case such greater proportion of written consents shall be required.

ARTICLE 11

Section l. Management of Corporation . The business of the Corporation shall be managed by its Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not prohibited by statute or by the Articles of Incorporation or by these Bylaws directed or required to be exercised or done by the Stockholders.

Section 2. Number, Tenure, and Qualifications . The number of Directors which shall constitute the whole board shall be at least one. The number of Directors may from time to time be increased or decreased to not less than one nor more than fifteen. The Directors shall be elected at the annual meeting of the Stockholders and except as provided in Section 3 of this Article, each Director elected shall hold office until his successor is elected and qualified. Directors need not be Stockholders.

Section 3. Vacancies . Vacancies in the Board of Directors including those caused by an increase in the number of Directors, may be filled by a majority of the remaining Directors, though less than a quorum, or by a sole remaining Director, and each Director so elected shall hold office until his successor is elected at an annual or a special meeting of the Stockholders. A vacancy or vacancies in the Board of Directors shall be deemed to exist in case of the death, resignation or removal of any Directors, or if the authorized number of Directors be increased, or if the Stockholders fail at any annual or special meeting of Stockholders at which any Director or Directors are elected to elect the full authorized number of Directors to be voted for at that meeting.

 

 

 

If the Board of Directors accepts the resignation of a Director tendered to take effect at a future time, the Board or the Stockholders shall have power to elect a successor to take office when the resignation is to become effective.

No reduction of the authorized number of Directors shall have the effect of removing any Director prior to the expiration of his term of office.

In case the entire board of directors shall die or resign, any stockholder may call a special meeting in the same manner that the president may call such meetings, and directors for the unexpired term may be elected at such special meeting in the manner provided for their election at annual meetings.

Section 4. Annual and Regular Meetings . Regular meetings of the Board of Directors shall be held at any place within or without the State which has been designated from time to time by resolution of the Board or by written consent of all members of the Board. In the absence of such designation regular meetings shall be held at the registered office of the Corporation. Special meetings of the Board may be held either at a place so designated or at the registered office.

Regular meetings of the Board of Directors may be held without call or notice at such time and at such place as shall from time to time be fixed and determined by the Board of Directors.

Section 5. First Meeting . The first meeting of each newly elected Board of Directors shall be held immediately following the adjournment of the meeting of Stockholders and at the place thereof. No notice of such meeting shall be necessary to the Directors in order legally to constitute the meeting, provided a quorum be present. In the event such meeting is not so held, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors.

Section 6. Special Meetings . Special meetings of the Board of Directors may be called by the Chairman or the President or by any Vice President or by any two Directors.

Written notice of the time and place of special meetings shall be delivered personally to each Director, or sent to each Director by mail or by other form of written communication, charges prepaid, addressed to him at his address as it is shown upon the records or if such address is not readily ascertainable, at the place in which the meetings of the Directors are regularly held. In case such notice is mailed, it shall be deposited in the United States mail or delivered to the company at least three (3) days prior to the time of the holding of the meeting. In case such notice is hand delivered as above provided, it shall be so delivered at least twenty-four (24) hours prior to the time of the holding of the meeting. Such mailing or delivery as above provided shall be due, legal and personal notice to such Director.

 

 

Section 7. Business of Meetings . The transactions of any meeting of the Board of Directors, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present, and if, either before or after the meeting, each of the Directors not present signs a written waiver of notice, or a consent to holding such meeting, or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

Section 8. Quorum; Adjourned Meetings . A majority of the authorized number of Directors shall be necessary to constitute a quorum for the transaction of business, except to adjourn as hereinafter provided. Every act or decision done or made by a majority of the Directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board of Directors, unless a greater number be required by law or by the Articles of Incorporation. Any action of a majority, although not at a regularly called meeting, and the record thereof, if assented to in writing by all of the other members of the Board shall be as valid and effective in all respects as if passed by the Board in regular meeting.

A quorum of the Directors may adjourn any Directors meeting to meet again at a stated day and hour; provided, however, that in the absence of a quorum, a majority of the Directors present at any Directors meeting, either regular or special, may adjourn from time to time until the time fixed for the next regular meeting of the Board.

Notice of the time and place of holding an adjourned meeting need not be given to the absent Directors if the time and place be fixed at the meeting adjourned.

 

The directors shall have the general control and management of the business and affairs of the company and shall exercise all the powers that may be exercised or performed by the corporation. The board of directors may adopt such rules and regulations for the conduct of their meetings and management of the affairs of the corporation as they may deem proper, not inconsistent with the laws and statutes of the state of Nevada, the articles of incorporation, or these bylaws. Such management will be by majority vote of the board of directors with each director having an equal vote.

 

 

  Section 9. Committees . The Board of Directors may, by resolution adopted by a majority of the whole Board, designate one or more committees of the Board of Directors, each committee to consist of at least one or more of the Directors of the Corporation which, to the extent provided in the resolution, shall have and may exercise the power of the Board of Directors in the management of the business and affairs of the Corporation and may have power to authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by the Board of Directors. The members of any such committee present at any meeting and not disqualified from voting may, whether or not they constitute a quorum, unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. At meetings of such committees, a majority of the members or alternate members shall constitute a quorum for the transaction of business, and the act of a majority of the members or alternate members at any meeting at which there is a quorum shall be the act of the committee.

The committees shall keep regular minutes of their proceedings and report the same to the Board of Directors.

Section 10. Action Without Meeting . Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if a written consent thereto is signed by all members of the Board of Directors or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or committee.

Section l l. Special Compensation . The Directors may be paid their expenses of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as Director. No such payment shall preclude any Director from serving the Corporation in any other capacity and receiving compensation therefore. Members of special or standing committees may be allowed like reimbursement and compensation for attending committee meetings.

 

 

ARTICLE III

Notices 

Section l. Notice of Meetings . Notices of meetings shall be in writing and signed by the President or a Vice President or the Secretary or an Assistant Secretary or by such other person or persons as the Directors shall designate. Such notice shall state the purpose or purposes for which the meeting is called and the time and the place, which may be within or without this State, where it is to be held. A copy of such notice shall be either delivered personally to or shall be mailed, postage prepaid, to each Stockholder of record entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before such meeting. If mailed, it shall be directed to a Stockholder at his address as it appears upon the records of the Corporation and upon such mailing of any such notice, the service thereof shall be complete and the time of the notice shall begin to run from the date upon which such notice is deposited in the mail for transmission to such Stockholder. Personal delivery of any such notice to any Officer of a Corporation or association, or to any member of a partnership shall constitute delivery of such notice to such Corporation, association or partnership. In the event of the transfer of Stock after delivery of such notice of and prior to the holding of the meeting it shall not be necessary to deliver or mail notice of the meeting to the transferee.

Section 2. Effect of Irregularly Called Meetings . Whenever all parties entitled to vote at any meeting, whether of Directors or Stockholders, consent, either by a writing on the records of the meeting or filed with the Secretary, or by presence at such meeting and oral consent entered on the minutes, or by taking part in the deliberations at such meeting without objection, the doings of such meeting shall be as valid as if had at a meeting regularly called and noticed, and at such meeting any business may be transacted which is not excepted from the written consent or to the consideration of which no objection for want of notice is made at the time, and if any meeting be irregular for want of notice or of such consent, provided a quorum was present at such meeting, the proceedings of said meeting may be ratified and approved and rendered likewise valid and the irregularity or defect therein waived by a writing signed by all parties having the right to vote at such meeting; and such consent or approval of Stockholders may be by proxy or attorney, but all such proxies and powers of attorney must be in writing.

 

Section 3. Waiver of Notice . Whenever any notice whatever is required to be given under the provisions of the statutes, of the Articles of Incorporation or of these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

 

 

 

ARTICLE IV

Officers 

 

Section 1. Election . The Officers of the Corporation shall be chosen by the Board of Directors and shall be a President, a Secretary and a Treasurer, none of whom need be Directors. Any person may hold two or more offices. The Board of Directors may appoint a Chairman of the Board, Vice Chairman of the Board, one or more Vice Presidents, Assistant Treasurers and Assistant Secretaries.

Section 2. Chairman of the Board . The Chairman of the Board shall preside at meetings of the Stockholders and the Board of Directors, and shall see that all orders and resolutions of the Board of Directors are carried into effect.

Section 3. Vice Chairman of the Board . The Vice Chairman shall, in the absence or disability of the Chairman of the Board, perform the duties and exercise the powers of the Chairman of the Board and shall perform such other duties as the Board of Directors may from time to time prescribe.

Section 4. President . The President shall be the Chief Executive Officer of the Corporation and shall have active management of the business of the Corporation. He shall execute on behalf of the Corporation all instruments requiring such execution except to the extent the signing and execution thereof shall be expressly designated by the Board of Directors to some other Officer or agent of the Corporation.

Section 5. Vice President . The Vice President shall act under the direction of the President and in the absence or disability of the President shall perform the duties and exercise the powers of the President. They shall perform such other duties and have such other powers as the President or the Board of Directors may from time to time prescribe. The Board of Directors may designate one or more Executive Vice Presidents or may otherwise specify the order of seniority of the Vice Presidents. The duties and powers of the President shall descend to the Vice Presidents in such specified order of seniority.

 

 

Section 6. Secretary . The Secretary shall act under the direction of the President. Subject to the direction of the President he shall attend all meetings of the Board of Directors and all meetings of the Stockholders and record the proceedings. He shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the Stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the President or the Board of Directors.

Section 7. Assistant Secretaries . The Assistant Secretaries shall act under the direction of the President. In order of their seniority, unless otherwise determined by the President or the Board of Directors, they shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary. They shall perform such other duties and have such other powers as the President or the Board of Directors may from time to time prescribe.

Section 8. Treasurerr . The Treasurer shall act under the direction of the President. Subject to the direction of the President he shall have custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the President or the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation.

If required by the Board of Directors, he shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.

 

Section 9. Assistant Treasurers . The Assistant Treasurers in the order of their seniority, unless otherwise determined by the President or the Board of Directors, shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer. They shall perform such other duties and have such other powers as the President or the Board of Directors may from time to time prescribe.

 

 

 

Section 10. Duties of the Registered Agent. The registered agent shall be in charge of the corporation's registered or principal office in the state of Nevada, upon whom process on behalf of the corporation may be served and shall perform all duties as required by statute.

Section 11. Compensation . The salaries and compensation of all Officers of the Corporation shall be fixed by the Board of Directors.

Section 12. Removal: Resignation . The Officers of the Corporation shall hold office at the pleasure of the Board of Directors. Any Officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors. Any vacancy occurring in any office of the Corporation by death, resignation, and removal or otherwise shall be filled by the Board of Directors.

ARTICLE V

Capital Stock

Section l. Certificates . Every Stockholder shall be entitled to have a certificate signed by the President or a Vice President and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by him in the Corporation. If the Corporation shall be authorized to issue more than one class of Stock or more than one series of any class, the designations, preferences and relative, participating, optional or other special rights of the various classes of Stock or series thereof and the qualifications, limitations or restrictions of such rights, shall be set forth in full or summarized on the face or back of the certificate, which the Corporation shall issue to represent such Stock.

If a certificate is signed (l) by a transfer agent other than the Corporation or its employees or

(2) by a registrar other than the Corporation or its employees, the signatures of the Officers of the Corporation may be facsimiles. In case any Officer who has signed or whose facsimile signature has been placed upon a certificate shall cease to be such Officer before such certificate is issued, such certificate may be issued with the same effect as though the person had not ceased to be such Officer. The seal of the Corporation, or a facsimile thereof, may, but need not be, affixed to certificates of Stock.

 

 

 

Section 2. Surrendered; Lost or Destroyed Certificates . The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost or destroyed upon the making of an affidavit of that fact by the person claiming the certificate of Stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed.

Section 3. Replacement Certificates . Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation, if it is satisfied that all provisions of the laws and regulations applicable to the Corporation regarding transfer and ownership of shares have been complied with, to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

Section 4. Record Date . The Board of Directors may fix in advance a date not exceeding sixty (60) days nor less than ten (10) days preceding the date of any meeting of Stockholders, or the date for the payment of any distribution, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital Stock shall go into effect, or a date in connection with obtaining the consent of Stockholders for any purpose, as a record date for the determination of the Stockholders entitled to notice of and to vote at any such meeting, and any adjournment thereof, or entitled to receive payment of any such distribution, or to give such consent, and in such case, such Stockholders, and only such Stockholders as shall be Stockholders of record on the date so fixed, shall be entitled to notice of and to vote at such meeting, or any adjournment thereof, or to receive payment of such distribution, or to receive such allotment of rights, or to exercise such rights, or to give such consent, as the case may be, notwithstanding any transfer of any Stock on the books of the Corporation after any such record date fixed as aforesaid.

 

 

 

 

Section 5. Registered Owner . The Corporation shall be entitled to recognize the person registered on its books as the owner of shares to be the exclusive owner for all purposes including voting and distribution, and the Corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of NEVADA.

ARTICLE VI

General Provisions

Section l. Registered Office . The registered office of this Corporation shall be in the

County of Clark, State of Nevada.

The Corporation may also have offices at such other places both within and without the

State of Nevada as the Board of Directors may from time to time determine or the business of the Corporation may require.

Section 2. Distributions . Distributions upon capital stock of the Corporation, subject to the provisions of the Articles of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Distributions may be paid in cash, in property or in shares of capital stock, subject to the provisions of the Articles of Incorporation.

Section 3. Reserves . Before payment of any distribution, there may be set aside out of any funds of the Corporation available for distributions such sum or sums as the Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing distributions or for repairing or maintaining any property of the Corporation or for such other purpose as the Directors shall think conducive to the interest of the Corporation, and the Directors may modify or abolish any such reserve in the manner in which it was created.

Section 4. Checks• Notes . All checks or demands for money and notes of the Corporation shall be signed by such Officer or Officers or such other person or persons as the Board of Directors may from time to time designate.

Section 5. Fiscal Year . The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.

 

 

Section 6. Corporate Seal . The Corporation may or may not have a corporate seal, as may from time to time be determined by resolution of the Board of Directors. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced.

ARTICLE VII

Indemnification 

 

Section 1. Indemnification of Officers and Directors. Employees and Other Persons . Every person who was or is a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or a person of whom he is the legal representative is or was a Director or Officer of the Corporation or is or was serving at the request of the Corporation or for its benefit as a Director or Officer of another Corporation, or as its representative in a partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless to the fullest extent legally permissible under the general Corporation law of the State of NEVADA from time to time against all expenses, liability and loss (including attorneys' fees, judgments, fines and amounts paid or to be paid in settlement) reasonably incurred or suffered by him in connection therewith. The expenses of Officers and Directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the Corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding upon receipt of an undertaking by or on behalf of the Director or Officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the Corporation. Such right of indemnification shall be a contract right which may be enforced in any manner desired by such person. Such right of indemnification shall not be exclusive of any other right which such Directors, Officers or representatives may have or hereafter acquire and, without limiting the generality of such statement, they shall be entitled to their respective rights of indemnification under any bylaw, agreement, vote of Stockholders, provision of law or otherwise, as well as their rights under this Article.

Section 2. Insurance . The Board of Directors may cause the Corporation to purchase and maintain insurance on behalf of any person who is or was a Director or Officer of the Corporation, or is or was serving at the request of the Corporation as a Director or Officer of another Corporation, or as its representative in a partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred in any such capacity or arising out of such status, whether or not the Corporation would have the power to indemnify such person.

 

 

Section 3. Further Bylaws . The Board of Directors may from time to time adopt further Bylaws with respect to indemnification and may amend these and such Bylaws to provide at all times the fullest indemnification permitted by the General Corporation Law of the State of

NEVADA.

ARTICLE VIII

Amendments 

Amendments

Section 1. Amendments by Stockholders . The Bylaws may be amended by a majority vote of all the Stock issued and outstanding and entitled to vote for the election of Directors of the Stockholders, provided notice of intention to amend shall have been contained in the notice of the meeting.

Section 2. Amendments by Board of Directors . The Board of Directors by a majority vote of the whole Board at any meeting may amend these Bylaws, including Bylaws adopted by the Stockholders, but the Stockholders may from time to time specify particular provisions of the

Bylaws, which shall not be amended by the Board of Directors.

APPROVED AND ADOPTED this 6th day of July, 2012

 

 

 

 

 

CERTIFICATE OF SECRETARY

1 hereby certify that 1 am the Secretary of GREENWAY INNOVATIVE ENERGY, INC, and that the foregoing Bylaws, constitute the code of Bylaws of GREENWAY INNOVATIVE ENERGY, INC, as duly adopted at a regular meeting of the Board of Directors of the Corporation.

DATED this 6th day of July, 2012

 

 

 

 

 

 

Exhibit 10.19

 

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of September 18, 2014, is entered into by and between UMED HOLDINGS, INC., a Texas corporation ("Company"), and TONAQUINT, INC., Utah corporation, its successors and/or assigns (“Investor').

Company and Investor are executing and delivering this agreement in reliance upon the exemption from securities registration afforded by the rules and regulations promulgated by the United States Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933 Act").

B. Investor desires to purchase and Company desires to issue and sell, upon the terms and conditions set forth in this Agreement (i) a Convertible Promissory Note, in the form attached hereto as Exhibit A, in the original principal amount of $158,000.00 (the 'Note"), convertible into shares of common stock, $0.0001 par value per share, of Company (the "Common Stock"), upon the terms and subject to the limitations and conditions set forthsuch Note, and (it) a Warrant to Purchase Common Stock, in the form hereto as (the "Warrant").

c. This Agreement, the Note, the Warrant, and all other certificates, documents, agreements, resolutions and instilments delivered to any party under or in connection with this Agreement, as the same may be amended from time to time, are collectively referred to herein as the “Transaction Documents".

D, For purposes of this Agreement: "Conversion Shan€' means all shares of Common Stock issuable upon conversion of all or any portion of the Note; "Warrant Shares" means all shares of Common Stock issuable upon the exercise of or pursuant to the Warrant; and "Securities" means the Note, the Conversion Shares, the Warrant and the Warrant Shares.

NOW, THEREFORE Company and Investor hereby agree as follows:

l . Purchase and Sale of Securities .

 

1.1 Purchase of Securities . Company shall issue and sell to Investor and Investor agrees to purchase from Company the Note and the Warrant. In consideration thereon Investor shall pay the Purchase Price to Company. For the avoidance of doubt, the Purchase Price constitutes payment in full for the Warrant.

1.2.                Form of Payment On the Closing Dates Investor shall pay the Purchase Price to Company against delivery of the Note and the Warrant

1.3.               Closing Date . Subject to the satisfaction (or written waiver) of the conditions set forth in Section 5 and Section 6 below, the date and time of the issuance and sale of the Securities pursuant to this Agreement (the "Closing Date") shall be 5:00 p.m., Eastern Time on or about September 18, 2014, or such other mutually agreed upon time. The closing of the transactions contemplated by this Agreement (the "Closing") shall occur on the Closing Date at the offices of Investor unless otherwise agreed upon by the parties.

1.4   Collateral for the Note . The Note shall not be secured.

1.5. Original Issue Discount: Transaction Expenses . The Note carries an original issue discount of $14,000.00 (the "OID"). In addition, Company agrees to pay $4,000.00 to Investor to cover Investor's legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of the Securities (the "Transaction Expense Amount"), all of which amount is included in the initial principal balance of this Note. The "Purchase Price", therefore, shall be $140,000.00, computed as follows: $158,000 original principal balance, less the 00, less the Transaction Expense Amount.

   

 

 

2.                     Investor's Representations and Warranties Investor represents and warrants to Company that: (i) this Agreement has been duly and validly authorized; (ii) this Agreement constitutes a valid and binding agreement of Investor enforceable in accordance with its terms; and (iii) Investor is an “accredited investor" as that term is defined in Rule 501(a) of Regulation D of the 1933 Act,

3.                     Representations and Warranties of Company Company represents and warrants to Investor that'. (i) Company is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and has the requisite corporate power to own its properties and to carry on its business as now being conducted; (ii) Company 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; (iii) Company has registered its Common Stock under Section 12(g) of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and is obligated to file reports pursuant to Section 13 or Section 15(d) of the 1934 Act; (iv) each of the Transaction Documents and the transactions contemplated hereby and thereby, have been duly and validly authorized by Company, (v) this Agreement* the Note, the Warrant, and the other Transaction Documents have been duly executed and delivered by Company and constitute the valid and binding obligations of Company enforceable in accordance with their terms, subject as to enforceability only to general principles of equity and to bankruptcy, insolvency moratorium, and other similar laws affecting the enforcement of creditors' rights generally; (vi.) the execution and delivery of the Transaction Documents by Company, the issuance of Securities in accordance with the terms hereof, and the consummation by Company of the other transactions contemplated by the Transaction Documents do not and will not conflict with or result in a breach by Company of any of the terms or provisions of, or constitute a default under (a) Company's formation documents or bylaws, each as currently in effect, (b) any indenture, mortgage, deed of trust, or other material agreement or instrument to which Company is a party or by which it or any of its properties or assets are bound, including any listing agreement for the Common Stock* or (c) to Company's knowledge, any existing applicable law, rule, or regulation or any applicable decree, judgment, or order of any court, United States federal or state regulatory body, administrative agency, or other governmental body having jurisdiction over Company or any of Company's properties or assets; (vii) no further authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, or stock exchange or market or the stockholders or any tender of Company is required to be obtained by Company for the issuance of the Securities to Investor; (viii) none of Company's filings with the SEC 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, i.n light of the circumstances under which they were made, not misleading; (ix) Company has filed all reports, schedules, forms, statements and other documents required to be filed by Company with the SEC under the 1934 Act on a timely basis or has received a valid extension of such time of filing and has filed any such report, schedule, form, statement or other document prior to the expiration of any such extension; (x) Company is not, nor has it ever been, a "'Shell Company," as such type of "issuer" is described in Rule 144(i)(1) under the [933 Act; (xi) Company has taken no action which would give rise to any claim by any person or entity for a brokerage commission, placement agent or finder's fees 01' similar payments by Investor relating to the Note or the transactions contemplated hereby; (xii) except for such fees arising as a result of any agreement or arrangement entered into by Investor without the knowledge of Company (an "Investor's Fee"), Investor shall have no obligation with respect to such fees or with respect to any claims made by or on behalf of other persons for fees of a type contemplated in this subsection that may be due in connection with the transactions contemplated hereby and Company shall indemnify and hold harmless each of Investor, Investor's employees, officers, directors, stockholders, managers, agents, and partners, and their respective affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorneys' fees) and expenses suffered in respect of any such claimed or existing fees (other than an Investor's Fee, if any), and (xiii) when issued, each of the Securities (including, without limitation, the Conversion Shares and the Warrant Shares), will be validly issued, fully paid for and non-assessable, free and clear of all liens, claims, charges and encumbrances.

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4.                     Company Covenants Until all Of Company's obligations hereunder are paid and performed in full, or within the timeframes otherwise specifically set forth below, Company shall comply with the following covenants: (i) from the date hereof until the date that all the Conversion Shares and the Warrant Shares either have been sold by Investor, or may permanently be sold by Investor without any restrictions pursuant to Rule 144) Company shall timely make all filings required to be made by it under the 1933 Act, the 1934 Act, Rule 144 or any United States securities laws and regulations thereof applicable to Company or by the rules and regulations of its principal trading market, and such filings shall conform to the requirements of applicable laws, regulations and government agencies, and, unless such filings are publicly available on the SEC's EDGAR system (via the SEC's web site at no additional charge), Company shall provide a copy thereof to Investor promptly after such filings; (ii) so long as Investor beneficially owns any of the Securities and for at least twenty (20) Trading Days (as defined in the Note) thereafter, Company shall file all reports required to be filed with the SEC pursuant to Sections 13 or 15(d) of the 1934 Act, and shall take all reasonable action under its control to ensure that adequate current public information with respect to Company as required in accordance with Rule 144, 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; (iii) the Common Stock shall be listed or quoted for trading on any of (a) the NYSE Amex, (b) the New York Stock Exchange, (c) the Nasdaq Global Market, (d) the Nasdaq Capital Market, (e) the OTC Bulletin Board, (f) the OTCQX, or (g) the OTCQB; (iv) when issued, each of the Securities (including, without limitation, the Conversion Shares and the Warrant Shares), will be validly issued, fully paid for and non-assessable, free and clear of all liens, claims, charges and encumberances and (Y) Company shall use the net proceeds received hereunder for working capital and general corporate purposes only; provided, however, Company will not use such proceeds to pay fees payable (A) to any broker or finder relating to the offer and sale of the Securities unless such broker, finder, or other party is a registered investment adviser or registered broker-dealer and such fees are paid in fun compliance with all applicable laws and regulations, or (B) to any other party relating to any financing transaction effected prior to the date hereof.

5. Conditions to Company's Obligation to Sell . The obligation of Company hereunder to issue and sell the Securities to Investor at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions:

5.1.                  Investor shall have executed this Agreement and delivered the same to Company,

5.2.                  Investor shall have delivered the Purchase Price to Company in accordance with Section 1.2 above.

6. Conditions to Investor's Obligation to Purchase . The obligation of Investor hereunder to purchase the Securities at the Closing is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions for investor's sole benefit and may be waived by Investor nt any time in its sole discretion:

6.1, Company Shall have executed this Agreement and delivered the same to Investor.

6.2.                   Company shall have delivered to Investor the duly executed Note and Warrant in accordance with Section I .2 above.

6.3.                   The Irrevocable Letter of Instructions to Transfer Agent shall have been delivered to and acknowledged in writing by Company's transfer agent (the "Transfer Agent") substantially in the fom attached hereto as

 

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6.4.                   Company shall have delivered to Investor fully executed Secretary's Certificate evidencing Company's approval of the Transaction Documents substantially in the form attached hereto as Exhibjt D.

6.5.                   Company shall have delivered to Investor a fully executed Share Issuance Resolution to be delivered to the Transfer Agent substantially in the form attached hereto as Exhibit E.

6.6.                   Company shall have delivered to Investor fully executed copies of all other Transaction Documents required to be executed by Company herein or therein.

7.                   Reservation of Shares . At all times during which the Note is convertible or the Warrant -is exercisable, Company will reserve from its authorized and unissued Common Stock to provide for the issuance of Common Stock upon the full conversion of the Noe and full exercise of the Warrant. Company will at all times reserve at least (i) three (3) times the higher of (l) the Outstanding Balance (as defined in and determined pursuant to the Note) divided by the Lender Conversion Price (as defined in and determined pursuant to the Note), and (2) the Outstanding Balance divided by the Market Price (as defined in and determined pursuant to the Note), plus (ii) three times the number of Warrant Shares (as determined pursuant to the Warrant) deliverable upon full exercise of the Warrant (the "Share Reserve"), but in any event not less than 2,000,000 shares of Common Stock shall be reserved at all times for such purpose (the ''Transfer Agent Reserve"). Company further agrees that it will cause the Transfer Agent to immediately add shares of Common Stock to the Transfer Agent Reserve in increments of 500,000 shares as and when requested by Investor in writing from time to time, provided that such incremental increases do not cause the Transfer Agent Reserve to exceed the Share Reserve. In furtherance thereof, from and after the date hereof and until such time that the Note has been paid in full and the Warrant exercised in full* Company shall require the Transfer Agent to reserve for the purpose of issuance of Conversion Shares under the Note and Warrant Shares under the Warrant, a number of shares of Common Stock equal to the Transfer Agent Reserve. Company shall further require the Transfer Agent to hold such shares of Common Stock exclusively for the benefit of Investor and to issue such shares to Investor promptly upon Investor's delivery of a conversion notice under the Note or a Notice of Exercise under the Warrant. Finally, Company shall require the Transfer Agent to issue shares of Common Stock pursuant to the Note and the Warrant to Investor out of its authorized and unissued shares, and not the Transfer Agent Reserve, to the extent shares of Common Stock have been authorized, but not issued, and are not included in the Transfer Agent Reserve, The Transfer Agent shall only issue shares out of the Transfer Agent Reserve to the extent there are no Other Authorized shares available for issuance and then only with Investor's written consent.

8.                   Miscellaneous . The provisions set forth in this Section 8 shall apply to this Agreement, as well as all other Transaction Documents as if these terms were fully set forth therein,

8. 1. Original Signature Pages . Each party agrees to deliver its original signature pages to the Transaction Documents to the other party within five (5) Trading Days of the date hereof. Notwithstanding the foregoing, the Transaction Documents shall be fully effective upon exchange of electronic signature pages by the parties and payment of the Purchase Price by Investor. For the avoidance of doubt, the failure by either party to deliver its original signature pages to the other party shall not affect in any way the validity or effectiveness of any of the Transaction Documents, provided that such failure to deliver original signatures shall be a breach of the party's obligations hereunder.

8.2.               Cross Default . Any Event of Default (as defined in the Note) by Company under the Note shall be deemed a default under this Agreement, and any default by Company under this Agreement will be deemed an Event of Default under the Note.

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8.3.               Governing Law: Venue . This Agreement shall be governed by and interpreted in accordance with the laws of the State of Utah for contracts to be wholly performed in such state and without giving effect to the principles thereof regarding the conflict of laws, Each party consents to and expressly agrees that venue for Arbitration (as defined in Exhibit F) of any dispute arising out of or relating to any Transaction Document or the relationship of ffe parties or their affiliates shall be in Salt Lake County or Utah County, Utah). Without modifying the parties obligations to resolve disputes hereunder pursuant to the Arbitration Provisions (as defined below), for any litigation arising in connection with any of the Transaction Documents, each party hereto hereby (a) consents to and expressly submits to the exclusive personal jurisdiction of any state or federal court sitting in Salt Lake County, Utah, (b) expressly submits to the venue of any such court for the purposes hereof* and (c) waives any claim of improper venue and any claim or objection that such courts are an inconvenient forum or any other claim or objection 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,

8.4.               Arbitration of Claims The parties shall submit all Claims (as defined in Exhibit E) arising under this Agreement or any other Transaction Document or other agreements between the patties and their affiliates to binding arbitration pursuant to the arbitration provisions set forth in Exhibit E attached hereto (the "Arbitration Provisions"). The parties hereby acknowledge and agree that the Arbitration Provisions are unconditionally binding on the parties hereto and are severable from all other provisions of this Agreement. Any capitalized term not defined in the Arbitration Provisions shall have the meaning set forth in this Agreement. By executing this Agreement, Company represents warrants and covenants that Company has reviewed the Arbitration Provisions carefully, consulted with legal counsel about such provisions (or waived its right to do go), understands that the Arbitration Provisions are intended to allow for the expeditious and efficient resolution of any dispute hereunder, agrees to the terms and limitations set forth in the Arbitration Provisions, and that Company will not take a position contrary to the foregoing representations. Company acknowledges and agrees that Investor may rely upon the foregoing representations and covenants of Company regarding the Arbitration Provisions.

8.5.               Calculation of Disputes . Notwithstanding the Arbitration Provisions, in the case of a dispute as any arithmetic calculation under the Transaction Documents, including without limitation, calculating the Outstanding Balance, Warrant Shares, Exercise Shares (as defined in the Warrant), Delivery Shares (as defined in the Warrant) Lender Conversion Price, Lender Conversion Shares (as defined in the Warrant) to be Installment Conversion Price (as defined in and determined pursuant to the Note), Installment Conversion Shares (as defined in the Note) to be delivered, Market Price, Conversion Shares, or the VWAP (collectively, "Calculations"), Company or Investor (as the case may be) shall submit the disputed determinations or arithmetic calculations (as the case may be) via facsimile or email with confirmation of receipt (a) within two (2) Trading Days after receipt of the applicable notice giving rise to such dispute to Company or Investor (as the case may be) or (b) if no notice gave rise to such dispute, at any time after Investor learned of the circumstances giving rise to such dispute. If Investor and Company are unable to agree upon such determination or calculation within two (2) Trading Days of such disputed determination or arithmetic calculation (as the case may be) being submitted to Company or Investor (as the case may be), then Investor shall, within two (2) Trading Days, submit via facsimile the disputed Calculation to an independent, reputable investment bank or accounting firm selected by Investor. Company shall cause the investment bank or accounting firm to perform the determinations or calculations (as the case may be) and notify Company and Investor of the results no later than ten (10) Trading Days from the time it receives such disputed determinations or calculations (as the case may be). Such investment bank's or accounting firm's determination of the disputed Calculation shall be binding upon alt parties absent demonstrable error. The investment banker's or accounting firms fee for performing such Calculation shall be paid by the incorrect party, or if both parties are incorrect, the parties shall each pay fifty percent (50%) of the applicable fee. In the event Company is the losing party, no extension of the Delivery Date shall be granted and Company shall incur all effects for failing to deliver the applicable shares in a timely manner as set forth in the Transaction Documents.

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8.6.               Counterparts . Each Transaction Document may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument, The parties hereto confirm that any electronic copy of another party's executed counterpart of a Transaction Document (or such party's signature page thereof) will be deemed to be an executed original thereof,

8.7, Headings . The headings of this Agreement are •for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement,

8.8, Severability In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform to such statute or rule of law, Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

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

8.10.               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 email to an executive officer, or by facsimile (with successful transmission confirmation), (b) the earlier of the date delivered or the third Trading Day after deposit, postage prepaid, in the United States Postal Service by certified mail or (c) the earlier of the date delivered or the third Trading Day after mailing by express courier, with delivery costs and fees prepaid, in each case, addressed to each of the other parties entitled at the following addresses (or at such other addresses as such party may designate by five (5) calendar days' advance written notice similarly given to each of the other parties hereto):

If to Company;

UMED Holdings, Inc.

Attn: Kevin Bentley

6628 Bryant Irvin Road, Suite 250

Fort Worth, Texas 16132

If to Investor:

Tonaquint, Inc, Attn: John Fife

303 East Wacker Drive, Suite 1200

Chicago, Illinois 60601

With a copy to (which copy shall not constitute notice):

Hansen Black Anderson Ashcraft PLLC

Attn: Jonathan K. Hansen

3051 West Maple Loop, Suite 325

Lehi, Utah 84043

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8.1 1. Successors and Assigns . This Agreement or any of the severable rights and obligations inuring to the benefit of or to be performed by Investor hereunder Il)ay be assigned by Investor to a third party, including its financing sources, in whole or in part, without the need to obtain Company's consent thereto. Company may not assign its rights or obligations under this Agreement or delegate its duties hereunder without the prior written consent of Investor.

8.12, Survival . The representations and warranties of Company and the agreements and covenants set forth in this Agreement shall survive the Closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of Investor. Company agrees to indemnity and hold harmless Investor and all its officers, directors, employees, attorneys, and agents for loss or damage arising as a result of or to any breach or alleged breach by Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

8.13.               Company and Investor shall have the right to review a reasonable period of time before issuance of any press releases by the other party with respect to the transactions contemplated hereby.

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

8.15,All rights, remedies, and powers in this Agreement and the Transaction Documents cumulative and not exclusive of any other rights or remedies, and shall be in addition to every offer right, power, and remedy that Investor may have, whether specifically granted in this Agreement or any other Transaction Document, or existing at law, in equity, or by statute, and any and all such rights and remedies may be exercised from time to time and as often and in such order as Investor may deem expedient. The parties acknowledge and agree that upon Company's failure to comply with the provisions of the Transaction Documents, Investor's damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties' inability to predict future interest rates and future share prices, Investor's increased risk, and the uncertainty of the availability of a suitable substitute investment opportunity for Investor, among other reasons. Accordingly, any fees, charges, and default interest due under the Note, the Warrant, and the other Transaction Documents ace intended by the parties to be, and shall be deemed, Liquidated damages (under Company's and Investor's expectations that any such liquidated damages will tack back to the Closing Date for purposes of determining the holding period under Rule 144). The parties agree that such liquidated damages are a reasonable estimate of Investor's actual damages and not a penalty, and shall not be deemed in any way to limit any other right or remedy Investor may have hereunder, at law or in equity. The parties acknowledge and agree that under the circumstances existing at the time this Agreement is entered into, such liquidated damages are fair and reasonable and are not penalties. All fees, charges, and default interest provided for in the Transaction Documents are agreed to by the parties to be based upon the obligations and the risks assumed by the parties as of the Closing Date and are consistent with investments of this type, The liquidated damages provisions of the Transaction Documents shall not limit or preclude a party from pursuing any other remedy available at law or in equity; provided* however, that the liquidated damages provided for in the Transaction Documents are intended to be in lieu of actual damages,

8.16.           Ownership Limitation , Notwithstanding anything to the contrary contained in this Agreement or the other Transaction Documents. if at any time Investor shall or would be issued shares of Common Stock under any of the Transaction Documents, but such issuance would cause Investor (together with its affiliates) to beneficially own a number of shares exceeding the Maximum Percentage (as defined in the Note)s then Company must not issue to Investor the shares that would cause Investor to exceed the Maximum Percentage. The shares of Common Stock issuable to Investor that would cause the Maximum Percentage to be exceeded are referred to herein as the "Ownership Limitation Shares" Company will reserve the Ownership Limitation Shares for the exclusive benefit of Investor. .From time to time, Investor may notify Company in writing of the number of the Ownership Limitation Shares that may be issued to Investor without causing Investor to exceed the Maximum Percentage. Upon of such notice, Company shall be unconditionally obligated to immediately issue such designated shares to Investor, with a corresponding reduction in the number of the Ownership Limitation Shares, For purposes of this Section, beneficial ownership of Common Stock will be determined under Section 13(d) of the 1934 Act.

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8.17.           Attorneys' Fees and Cost of Collection . In the event of any arbitration or action at law or in equity to enforce or interpret the terms of this Agreement or any of the other Transaction Documents, the parties agree that the party who is awarded the most money shall be deemed the prevailing party for all purposes and shall therefore be entitled to an additional award of the full amount of the attorneys' fees, deposition costs, and expenses paid by such prevailing party in connection with arbitration or litigation without reduction or apportionment based upon the individual claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict or impair an arbitrator's or a court’s power to award fees and expenses for frivolous or bad faith pleading. If (a) the Note or Warrant is placed in the hands of an attorney for collection or enforcement prior to commencing arbitration Or legal proceedings, or is collected or enforced through any arbitration or legal proceeding, or Investor otherwise takes action to collect mounts due under the Note or to enforce the provisions of the Note or the Warrant; or (b) there occurs any bankruptcy, reorganization, receivership of Company or other proceedings affecting Company's creditors' rights and involving a claim under the Note or the Warrant; then Company shall pay the costs incurred by Investor for such collection, enforcement or action or in connection with such bankruptcy, reorganizations receivership or other proceeding, including, without limitation, attorneys' fees, expenses, deposition costs, and disbursements.

8.18.           Waiver . No waiver of any provision of this Agreement shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar, No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

8.19.           Waiver of Jury Trial , EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDNG OR COUNTERCLAIM ARISTNG OUT OF OR m ANY WAY RELATED TO THIS AGREEMENT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY

APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING SUCH PARTY'S RIGHT TO DEMAND TRIAL BY JURY.

8.20.           Time of the Essence . Time is expressly made of the essence with respect to each and every provision of this Agreement and the other Transaction Documents.

[Remainder of page intentionally left blank; signature page follows]

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

SUBSCRIPTION AMOUNT:

Principal Amount of Note: $158,000.00
Purchase Price: $140,000.00

INVESTOR:  

TONAQUINT

By: 

John M. Fife, President

 

Exhibit 10.20

 

 

CONVERTIBLE PROMISSORY NOTE

Effective Date: September 18, 2014 U.S. $158,000.00

FOR VALUE RECEIVED, UMED HOLDINGS, INC., a Texas corporation ("Borrower"), promises to pay to TONAQU[NT, INC., a Utah corporation, or its successors or assigns ("Lender"), $158,000.00 and any interest, fees, charges, and late fees on the date that is ten (10) months after the Purchase Price Date (as defined below) (the "Maturity Date") in accordance with the terms set forth herein and to pay interest on the Outstanding Balance (as defined below) at the rate often percent (1 0%) per annum from the Purchase Price Date until the same is paid in full. This Convertible Promissory Note (this "Note") is issued and made effective as of September 18, 2014 (the "Effective Date"). For purposes hereof, the "Outstanding Balance" of this Note means, as of any date of determination, the Purchase price (as defined below), as reduced or increased, as the case may be, pursuant to the terms hereof for redemption, conversion, offset, or otherwise, plus any original issue discount ("OID"), the Transaction Expense Amount (as defined below), accrued but unpaid interest, collection and enforcements costs (including attorneys' fees) incurred by Lender, transfer, stamp, issuance and similar taxes and fees related to Conversions (as defined below), and any other fees or charges (including without limitation late charges) incurred under this Note. This Note is issued pursuant to that certain Securities Purchase Agreement dated September 18, 2014, as the same may be amended from time to time (the "Purchase Agreement"), by and between Borrower and Lender. All interest calculations hereunder shall be computed on the basis of a 360-day year comprised of twelve (12) thirty (30) day months, shall compound daily and shall be payable in accordance with the terms of this Note. Certain capitalized terms used herein but not otherwise defined shall have the meaning ascribed thereto in the Purchase Agreement. Certain other capitalized terms used herein are defined in Attachment attached hereto and incorporated herein by this reference.

This Note carries an OID of $14,000.00. In addition, Borrower agrees to pay to Lender to cover Lender's legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of this Note (the "Transaction Expense Amount"), all of which amount is included in the initial principal balance of this Note. The purchase price for this Note and the Warrant (as defined in the Purchase Agreement) shall be $140,000.00 (the "Purchase Price"), computed as follows: $158,000.00 original principal balance, less the 011), less the Transaction Expense Amount. The Purchase Price shall be payable by Lender by wire transfer of immediately available funds. For purposes hereof, the term "Purchase Price Date" means the date the Purchase Price is delivered by Lender to Borrower.

Payment: Prepayment . Provided there is an Outstanding Balance, on each Installment Date (as defined below), Borrower shall pay to Lender an amount equal to the Installment Amount (as defined below) due on such Installment Date in accordance with Section 8. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal. Notwithstanding the foregoing, so long as Borrower has not received a Lender Conversion Notice (as defined below) or an Installment Notice (as defined below) from Lender where the applicable Conversion Shares have not yet been delivered and so long as no Event of Default has occurred since the Effective Date (whether declared by Lender or undeclared), then Borrower shall have the right, exercisable on not less than five (5) Trading Days prior written notice to Lender to prepay the Outstanding Balance of this Note, in full, in accordance with this Section I. Any notice of prepayment hereunder (an 'Optional Prepayment Notice") shall be delivered to Lender at its registered address and shall state: (y) that Borrower is exercising its tight to prepay this Note, and (z) the date of prepayment, which shall be not less than five (5) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the 'Optional Prepayment Date"), Borrower shall make payment of the Optional Prepayment Amount (as defined below) to or upon the order of Lender as may be specified by Lender in writing to Borrower. If Borrower exercises its right to prepay this Note, Borrower shall make payment to Lender of an amount in cash (the "Optional Prepayment Amount") equal to 125% multiplied by the then Outstanding Balance of this Note. In the event Borrower delivers the Optional Prepayment Amount to Lender prior to the Optional Prepayment Date or without delivering an Optional Prepayment Notice to Lender as set forth herein without Lender's prior written consent, the Optional Prepayment Amount shall not be deemed to have been paid to Lender until the Optional Prepayment Date. Moreover, in such event the Optional Prepayment Liquidated Damages Amount will automatically be added to the Outstanding Balance of this Note on the day Borrower delivers the Optional Prepayment Amount 'to Lender. In the event Borrower delivers the Optional Prepayment Amount without an Optional Prepayment Notice, then the Optional Prepayment Date will be deemed to be the date that is five (5) Trading Days from the date that the Optional Prepayment Amount was delivered to Lender. In addition, if Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to Lender within two (2) Trading Days following the Optional Prepayment Date, Borrower shall forever forfeit its right to prepay this Note.

 

   

 

 

2.                    Security . This Note is unsecured.

3.                    Lender Optional Conversion .

3.1.                Lender Conversion Price . Subject to adjustment as set forth in this Note, the conversion price for each Lender Conversion (as defined below) shall be $0.45 (the "Lender Conversion Price").

3.2.                Len der Conversions . Lender has the right at any time on or after the date that is six (6) months from the Purchase Price Date until the Outstanding Balance has been paid in •full, including without limitation (i) until any Optional Prepayment Date (even if Lender has received an Optional Prepayment Notice) or at any time thereafter with respect to any amount that is not prepaid, and (ii) during or after any Fundamental Default Measuring Period, at its election, to convert (each instance of conversion is referred to herein as a "Lender Conversion") all or any part of the Outstanding Balance into shares ("Lender Conversion Shares") of fully paid and non-assessable common stock, $0.0001 par value per share ("Common Stock"), of Borrower as per the following conversion formula: the number of Lender Conversion Shares equals the amount being converted (the "Conversion Amount") divided by the Lender Conversion Price. Conversion notices in the form attached hereto as Exhibit A (each, a 'Lender Conversion Notice") may be effectively delivered to Borrower by any method of Lender's choice (including but not limited to facsimile, email, mail, overnight courier, or personal delivery), and all Lender Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Lender Conversion Shares from any Lender Conversion to Lender in accordance with Section 9 below within five (5) Trading Days of Lender's delivery of the Lender Conversion Notice to Borrower.

3.3.                Application to Installments . Notwithstanding anything to the contrary herein, including without limitation Section 8 hereof, Lender may, in its sole discretion, apply all or any portion of any Lender Conversion toward any Installment Conversion (as defined below), even if such Installment Conversion is pending, as determined in Lender's sole discretion, by delivering written notice of such election (which notice may be included as part of the applicable Lender Conversion Notice) to Borrower at any date on or prior to the applicable Installment Date. In such event, Borrower may not elect to allocate such portion of the Installment Amount being paid pursuant to this Section 3.3 in the manner prescribed in Section 8.3; rather, Borrower must reduce the applicable Installment Amount by the Conversion Amount described in this Section 3.3.

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4.                    Defaults and Remedies .

4. I. Defaults . The following are events of default under this Note (each, an "Event of Default"): (i) Borrower shall fail to pay any principal, interest, fees, charges, or any other amount When due and payable (or payable by Conversion) hereunder; or (ii) Borrower shall fail to deliver any Lender Conversion Shares in accordance with the terms hereof; or (iii) Borrower shall fail to deliver any Installment Conversion Shares (as defined below) or True-Up Shares (as defined below) in accordance with the terms hereof; or (iv) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; or (v) Borrower shall become insolvent or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any; or (vi) Borrower shall make a general assignment for the benefit Of creditors; or (vii) Borrower shall file a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (viii) an involuntary proceeding shall be commenced or filed against Borrower; or (ix) Borrower shall default or otherwise fail to observe or perform any covenant, obligation, condition or agreement of Borrower contained herein or in any Other Transaction Document, Other than those specifically set forth in this Section 4.1; or (x) Borrower shall become delinquent in its filing requirements as a fully-reporting issuer registered with the SEC or shall fail to timely file all required quarterly and annual reports and any other filings that are necessary to enable Lender to sell Conversion Shares or True-Up Shares pursuant to Rule 144; or (xi) any representation, warranty or other statement made or furnished by or on behalf of Borrower to Lender herein, in any Transaction Document, or otherwise in connection with the issuance of this Note shall be false, incorrect, incomplete or misleading in any material respect when made or furnished; or (xii) the occurrence of a Fundamental Transaction without Lender's prior written consent; provided, however, that if Borrower has repaid the entire Outstanding Balance prior to such Fundamental Transaction, then Lender's consent shall not be required; or (xiii) Borrower shall fail to maintain the Share Reserve as required under the Purchase Agreement; or (xiv) Borrower effectuates a reverse split of its Common Stock without twenty (20) Trading Days prior written notice to Borrower; or (xv) any money judgment, writ or similar process shall be entered or filed against Borrower or any subsidiary of Borrower or any of its property or other assets for more than $100,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) calendar days unless otherwise consented to by Lender and not including any money judgment, writ or similar process filed or entered in connection with any promissory notes issued by Borrower prior to the date hereof in connection with Hawaiian real estate, provided that such notes are not amended following the date hereof; or (xvi) Borrower shall fail to deliver to Lender original signature pages to all Transaction Documents within five (5) Trading Days of the Purchase Price Date. Notwithstanding the foregoing, (A) the occurrence of an event described in Section 4.1(ii) or (iii) shall not be considered an Event of Default if delivery of the applicable Conversion Shares or True-Up Shares is made within five (5) days of the date such shares are required to be delivered; provided, however, that the foregoing right to cure may only be applied with respect to two (2) late deliveries of shares; and (B) the occurrence of an event described in Section 4. I(ix), (x), (xi), (xii), (xiii), (xiv), (xv), or (xvi) shall not be considered an Event of Default if such event is cured within ten (10) days of Lender's delivery of written notice to Borrower informing Borrower of the occurrence of such event.

4.2.              Remedies . Upon the occurrence of any Event of Default, Borrower shall within one (l) Trading Day deliver written notice thereof via facsimile, email or reputable overnight courier (with next day delivery specified) (an "Event of Default Notice") to Lender. At any time and from time to time after the earlier of Lender's receipt of an Event of Default Notice and Lender becoming aware of the occurrence of any Event of Default, Lender may accelerate this Note by written notice to Borrower, with the Outstanding Balance becoming immediately due and payable in cash at the Mandatory Default Amount (as defined hereafter). Notwithstanding the föregoing, at any time following the occurrence of any Event of Default, Lender may, at its option, elect to increase the Outstanding Balance by applying the Default Effect (as defined below) (subject to the limitation set forth below) via written notice to Borrower without accelerating the Outstanding Balance, in which event the Outstanding Balance shall be increased

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as of the date of the occurrence of the applicable Event Of Default pursuant to the Default Effect, but the Outstanding Balance shall not be immediately due and payable unless so declared by Lender (for the avoidance of doubt, if Lender elects to apply the Default Effect pursuant to this sentence, it shall reserve the right to declare the Outstanding Balance immediately due and payable at any time and no such election by Lender shall be deemed to be a waiver of its right to declare the Outstanding Balance immediately due and payable as set forth herein unless otherwise agreed to by Lender in writing). For purposes hereof, the "Default Effect" is calculated by multiplying the Outstanding Balance as of the date the applicable Event of Default occurred by (i) 15% for each occurrence of any Major Default, or (ii) 5% for each occurrence of any Minor Default, and then adding the resulting product to the Outstanding Balance as of the date the applicable Event of Default occurred, with the sum Of the foregoing then becoming the Outstanding Balance under this Note as of the date the applicable Event of Default occurred; provided that the Default Effect may only be applied three (3) times hereunder with respect to Major Defaults and three (3) times hereunder with respect to Minor Defaults; and provided further that the Default Effect shall not apply to any Event Of Default pursuant to Section 4. I(ii) hereof. Notwithstanding the foregoing, upon the occurrence of any Event of Default described in clauses (iv), (v), (vii), (vii) or (viii) of Section 4.1, the Outstanding Balance as of the date of acceleration shall become immediately and automatically due and payable in cash at the Mandatory Default Amount, without any written notice required by Lender. The "Mandatory Default Amount" means the greater of (i) the Outstanding Balance divided by the Installment Conversion Price (as defined below) on the date the Mandatory Default Amount is demanded, multiplied by the volume weighted average price (the "VWAP") on the date the Mandatory Default Amount is demanded, or (ii) the Default Effect. At any time following the occurrence of any Event of Default, upon written notice given by Lender to Borrower, interest shall accrue on the Outstanding Balance beginning on the date the applicable Event of Default occurred at an interest rate equal to the lesser of 22% per annum or the maximum rate permitted under applicable law ("Default Interest"); provided, however, that no Default Interest shall accrue during the Fundamental Default Measuring Period (as defined below). Additionally, following the occurrence of any Event Of Default, Borrower may, at its option, pay any Lender Conversion in cash instead of Lender Conversion Shares by paying to Lender on or before the applicable Delivery Date (as defined below) a cash amount equal to the number of Lender Conversion Shares set forth in the applicable Lender Conversion Notice multiplied by the highest intra-day trading price of the Common Stock that occurs during the period beginning on the date the applicable Event of Default occurred and ending on the date of the applicable Lender Conversion Notice. In connection with acceleration described herein, Lender need not provide, and Borrower hereby waives, any presentment, demand, protest or other notice of any kind, and Lender may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Lender at any time prior to payment hereunder and Lender shall have all rights as a holder of the Note until such time, if any, as Lender receives full payment pursuant to this Section 4.2. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. Nothing herein shall limit Lender's right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Borrower's failure to timely deliver Conversion Shares upon Conversion of the Notes as required pursuant to the terms hereof.

4.3.              Fundamental Default Remedies . Notwithstanding anything to the contrary herein, in addition to all other remedies set forth herein, the Fundamental Liquidated Damages Amount shall be added to the Outstanding Balance upon Lender's delivery to Borrower of a notice (which notice Lender may deliver to Borrower at any time following the occurrence of a Fundamental Default) setting forth its election to declare a Fundamental Default and the Fundamental Liquidated Damages Amount that will be added to the Outstanding Balance.

4.4.              C ertain Additional Rights . Notwithstanding anything to the contrary herein, in the event Borrower fails to make any payment or otherwise to deliver any Conversion Shares as and when required under this Note, then (i) the Lender Conversion Price for all Lender Conversions occurring after the date of such failure to pay shall equal the lower of the Lender Conversion Price applicable to any Lender Conversion and the Market Price as of any applicable date of Conversion, and (ii) the true-up provisions Of Section 1 1 below shall apply to all Lender Conversions that occur after the date of such failure to pay, provided that all references to the "Installment Notice" in Section I I shall be replaced with references to a "Lender Conversion Notice" for purposes Of this Section 4.4, all references to "Installment Conversion Shares" in Section 11 shall be replaced with references to "Lender Conversion Shares" for purposes of this Section 4.4, and all references to the "Installment Conversion Price" in Section 11 shall be replaced with references to the "Lender Conversion Price" for purposes of this Section 4.4.

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4.5.              Cross Default . A breach or default by Borrower of any covenant or other term or condition contained in any Other Agreements (as defined below) shall, at the option of Lender, be considered an Event of Default under this Note, in which event Lender shall be entitled (but in no event required) to apply all rights and remedies of Lender under the terms of this Note. "Other Agreements" means, collectively, (a) all existing and future agreements and instruments between, among or by Borrower (or an affiliate), on the one hand, and Lender (or an affiliate), on the other hand, and (b) any financing agreement or a material agreement that affects Borrower's ongoing business operations. For the avoidance of doubt, all existing and future loan transactions between Borrower and Lender and their respective affiliates will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to Lender.

5.                    Unconditional Obligation: NP Offset . Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or conversions called for herein in accordance with the terms of this Note.

6.                    Waiver . No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar, No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

Rights Upon Issuance Securities .

7.1. Subsequent Equity Sales . Except with respect to Excluded Securities, if Borrower or any subsidiary thereof, as applicable, at any time this Note is outstanding, shall sell or issue any Common Stock to Lender or any third party for a price that is less than the then effective Lender Conversion Price, then such Lender Conversion Price shall be automatically reduced and only reduced to equal such lower issuance price. Except with respect to Excluded Securities, if Borrower or any subsidiary thereof, as applicable, at any time this Note is outstanding, shall sell or grant any option to any party to purchase, or sell or grant any right to reprice, or issue any Common Stock, preferred shares convertible into Common Stock, or debt, warrants, options or other instruments or securities to Lender or any third party which are convertible into or exercisable for shares of Common Stock (together herein referred to as "Equity Securities"), including without limitation any Deemed Issuance (as defined herein), at an effective price per share less than the then effective Lender Conversion Price (such issuance, together with any sale of Common Stock, is referred to herein as a "Dilutive Issuance"), then, the Lender Conversion Price shall be automatically reduced and only reduced to equal such lower effective price per share. For the avoidance of doubt, the Lender Conversion Price shall not be reduced pursuant to this Section 7.1 as the result of the issuance of any shares of Common Stock issued in connection with a financing transaction unless such shares of Common Stock are issued pursuant to a convertible debt instrument, warrant or any other variable price security or instrument. If the holder of any Equity Securities so issued shall at any time, whether by operation of purchase price adjustments,

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reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options, or rights per share which are issued in connection with such Dilutive Issuance, be entitled to receive shares of Common Stock at an effective price per share that is less than the Lender Conversion Price, such issuance shall be deemed to have occurred for less than the Lender Conversion Price on the date Of such Dilutive Issuance, and the then effective Lender Conversion Price shall be reduced and only reduced to equal such lower effective price per share. Such adjustments described above to the Lender Conversion Price shall be permanent (subject to additional adjustments under this section), and shall be made whenever such Common Stock or Equity Securities are issued. Borrower shall notify Lender, in writing, no later than the Trading Day following the issuance of any Common Stock or Equity Securities subject to this Section 7.1, indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price, or other pricing terms (such notice, the "Dilutive Issuance Notice"). For purposes of clarification, whether or not Borrower provides a Dilutive Issuance Notice pursuant to this Section 7.1, upon the occurrence of any Dilutive Issuance, on the date of such Dilutive Issuance the Lender Conversion Price shall be lowered to equal the applicable effective price per share regardless of whether Borrower or Lender accurately refers to such lower effective price per share in any Installment Notice or Lender Conversion Notice.

7.2. Adjustment of Lender Conversion Price upon Subdivision or Combination of

Common Stock . Without limiting any provision hereof, if Borrower at any time on or after the Effective Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Lender Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. Without Limiting any provision hereof, if Borrower at any time on or after the Effective Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Lender Conversion Price in effect immediately prior to such combination will be proportionately increased. Any adjustment pursuant to this Section 7.2 shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section 7.2 occurs during the period that a Lender Conversion Price is calculated hereunder, then the calculation of such Lender Conversion Price shall be adjusted appropriately to reflect such event.

7.3. Other Events . [n the event that Borrower (or any subsidiary) shall take any action to which the provisions hereof are not strictly applicable, or, if applicable, would not operate to protect Lender from dilution or if any event occurs of the type contemplated by the provisions Of this Section 7 but not expressly provided for by such provisions (including, without limitation, the granting Of stock appreciation rights, phantom stock rights or other rights with equity features), then Borrower's board of directors shall in good faith determine and implement an appropriate adjustment in the Lender Conversion price so as to protect the rights of Lender, provided that no such adjustment pursuant to this Section 7.3 will increase the Lender Conversion Price as otherwise determined pursuant to this Section 7, provided further that if Lender does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then Borrower's board of directors and Lender shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be final and binding and whose fees and expenses shall be borne by Borrower.

8.      Borrower Installments .

8.1. Installment Conversion Price . Subject to the adjustments set forth herein, the conversion price for each Installment Conversion (the "Installment Conversion Price") shall be the lesser of (i) the Lender Conversion Price, and (ii) 70% (the "Conversion Factor") of the average of the three (3) lowest VWAPs in the twenty (20) Trading Days immediately preceding the applicable Conversion (the "Market provided that if at any time the average of the three (3) lowest V WAPs in the twenty (20) Trading Days immediately preceding any date of measurement is below SO, 10, then in such event the then-current Conversion Factor shall be reduced to 65% for all future Conversions. In

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addition to the Default Effect, if any Major Default occurs after the Effective Date and the Conversion Factor has not previously been reduced, the Conversion Factor shall automatically be reduced for all future Conversions by 5% for the first Major Default that occurs after the Effective Date. For example, the first time the average of the three (3) lowest VWAPs in the preceding twenty (20) Trading Days is below $0.10, then the Conversion Factor would be reduced from 70% to 65%. Alternatively, if the average of the three (3) lowest VWAPs in the preceding twenty (20) Trading Days is not below $0.10 but a Major Default pursuant to Section 4. I(iii) has occurred, then for purposes of this example the Conversion Factor would be reduced from 70% to 65%. Notwithstanding the foregoing, the Conversion Factor may not be reduced below 65%.

8.2. Installment Conversions . Beginning on the date that is six (6) months after the Purchase Price Date and on the same day of each month thereafter until the Maturity Date (each, an "Installment Date"), Borrower shall pay to Lender the applicable Installment Amount due on such date, subject to the provisions of this Section 8. Payments of each Installment Amount may be made (a) in cash, or (b) by converting such Installment Amount into shares of Common Stock ("Installment Conversion Shares", and together with the Lender Conversion Shares, the "Conversion Shares") in accordance with this Section 8 (each an "Installment Conversion", and together with Lender Conversions, a "Conversion") per the following formula: the number of Installment Conversion Shares equals the portion of the applicable Installment Amount being converted divided by the Installment Conversion Price, or (c) by any combination of the foregoing, so long as the cash is delivered to Lender on the applicable Installment Date and the Installment Conversion Shares are delivered to Lender on or before the applicable Delivery Date. Notwithstanding the foregoing, Borrower will not be entitled to elect an Installment Conversion with respect to any portion of any applicable Installment Amount and shall be required to pay the entire amount of such Installment Amount in cash if on the applicable Installment Notice Due Date (defined below) there is an Equity Conditions Failure (as defined below), and such failure is not waived in writing by Lender. Moreover, in the event Borrower desires to pay all or any portion of any Installment Amount in cash, it must notify Lender in writing of such election and the portion of the applicable Installment Amount it elects to pay in cash not more than twenty-five (25) or less than fifteen (15) Trading Days prior to the applicable Installment Date. If Borrower fails to so notify Lender, it shall not be permitted to elect to pay any portion of such Installment Amount in cash unless otherwise agreed to by Lender in writing or proposed by Lender in an Installment Notice delivered by Lender to Borrower. Notwithstanding that failure to repay this Note in full by the Maturity Date is an Event of Default, the Installment Dates shall continue after the Maturity Date pursuant to this Section 8 until the Outstanding Balance is repaid in full, provided that Lender shall, in Lender's sole discretion, determine the Installment Amount for each Installment Date after the Maturity Date.

8.3.            Allocation of Installment Amounts . Subject to Section 8.2 regarding an Equity Conditions Failure, for each Installment Date (each, an "Installment Notice Due Date"), Borrower may elect to allocate the amount of the applicable Installment Amount between cash and via an Installment Conversion, by email or fax delivery of a notice to Lender substantially in the form attached hereto as Exhibit B (each, an "Installment Notice"), provided, that to be effective, each applicable Installment Notice must be received by Lender not more than twenty-five (25) or less than fifteen (15) Trading Days prior to the applicable Installment Notice Due Date. If Lender has not received an Installment Notice within such time period, then Lender may prepare the Installment Notice and deliver the same to Borrower by fax or email. Following its receipt of such Installment Notice, Borrower may either ratify Lender's proposed allocation in the applicable Installment Notice or elect to change the allocation by written notice to Lender by email or fax on or before 12:00 p.m. New York time on the applicable Installment Date, so long as the sum of the cash payments and the amount of Installment Conversions equal the applicable Installment Amount, provided that Lender must approve any increase to the portion of the Installment Amount payable in cash. If Borrower fails to notify Lender of its election to change the allocation prior to the deadline set forth in the

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previous sentence (and seek approval to increase the amount payable in cash), it shall be deemed to have ratified and accepted the allocation set forth in the applicable Installment Notice prepared by Lender. If neither Borrower nor Lender prepare and deliver to the other party an Installment Notice as outlined above, then Borrower shall be deemed to have elected that the entire Installment Amount be converted via an Installment Conversion. Borrower acknowledges and agrees that regardless of which party prepares the applicable Installment Notice, the amounts and calculations set forth thereon are subject to correction or adjustment because of error, mistake, or any adjustment resulting from an Event of Default or other adjustment permitted under the Transaction Documents (an "Adjustment"). Furthermore, no error or mistake in the preparation of such notices, or failure to apply any Adjustment that could have been applied prior to the preparation of an Installment Notice may be deemed a waiver of Lender's right to enforce the terms of any Note, even if such error, mistake, or failure to include an Adjustment arises from Lender's own calculation, Borrower shall de liver the Installment Conversion Shares from any Installment Conversion to Lender in accordance with Section 9 below on or before each applicable Installment Date.

9.      Method of Conversion Share Delivery . On or before the close of business on the fifth (5 th ) Trading Day following the Installment Date or the fifth (5 th ) Trading Day following the date of delivery of a Lender Conversion Notice, as applicable (the "Delivery Date"), Borrower shall deliver or cause to be delivered to Lender or its broker (as designated in the Lender Conversion Notice), via reputable overnight courier, a certificate or certificates representing the aggregate number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender or its designee. For the avoidance of doubt, Borrower has not met its obligation to deliver Conversion Shares by the Delivery Date unless Lender or its broker, as applicable, has actually received the certificate representing the applicable Conversion Shares no later than the close of business on the relevant Delivery Date pursuant to the terms set forth above.

10, Conversion Delays . If Borrower fails to deliver Conversion Shares or True-Up Shares in accordance with the timeframes stated in Sections 3, 8, 9, or I I, as applicable, Lender, at any time prior to selling all of those Conversion Shares or Title-Up Shares, as applicable, may rescind in whole or in part that particular Conversion attributable to the unsold Conversion Shares or True-Up Shares, with a corresponding increase to the Outstanding Balance (any returned Conversion Amount will tack back to the Purchase Price Date for purposes of determining the holding period under Rule 144), In addition, tor each Lender Conversion, in the event that Lender Conversion Shares are not delivered by the fourth Trading Day (inclusive of the day of the Lender Conversion), a late fee equal to the greater of (a) $500.00 per day and (b) 2% of the applicable Lender Conversion Share Value rounded to the nearest multiple of $100.00 (but in any event the cumulative amount of such late fees for each Lender Conversion shall not exceed 200% of the applicable Lender Conversion Share Value) will be assessed for each day after the fifth Trading Day (inclusive of the day of the Lender Conversion) until Lender Conversion Share delivery is made; and such late fee will be added to the Outstanding Balance (such fees, the "Conversion Delay Late Fees"). For illustration purposes only, if Lender delivers a Lender Conversion Notice to Borrower pursuant to which Borrower is required to deliver 100,000 Lender Conversion Shares to Lender and on the Delivery Date such Lender Conversion Shares have a Lender Conversion Share Value of $20,000.00 (assuming a Closing Sale Price on the Delivery Date of $0.20 per share of Common Stock), then in such event a Conversion Delay Late Fee in the amount of $500.00 per day (the greater of $500.00 per day and $20,000.00 multiplied by 2%, which is $400.00) would be added to the Outstanding Balance of the Note until such Lender Conversion Shares are delivered to Lender. For purposes of this example, if the Lender Conversion Shares are delivered to Lender twenty (20) days after the applicable Delivery Date, the total Conversion Delay Late Fees that would be added to the Outstanding Balance would be $10,000.00 (20 days multiplied by $500.00 per day). If the Lender Conversion Shares are delivered to Lender one hundred (100) days after the applicable Delivery Date, the total Conversion Delay Late Fees that would be added to the Outstanding Balance would be $40,000.00 (100 days multiplied by $500.00 per day, but capped at 200% of the Lender Conversion Share Value).

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l l . True-Up . On the date that is twenty (20) Trading Days (a "True-Up Date") from each date Borrower delivers Free Trading (as defined below) Installment Conversion Shares to Lender, there shall be a true-up where Borrower shall deliver to Lender additional Installment Conversion Shares

("True-Up Shares") if the Installment Conversion Price as of the True-Up Date is less than the Installment Conversion Price used in the applicable Installment Notice. In such event, Borrower shall deliver to Lender Within five (5) Trading Days of the True-Up Date (the "True-Up Share Delivery Date") a number of True-Up Shares equal to the difference between the number of Installment Conversion Shares that would have been delivered to Lender on the True-Up Date based on the Installment Conversion Price as of the True-Up Date and the number of Installment Conversion Shares originally delivered to Lender pursuant to the applicable Installment Notice. [f the Installment Conversion Price as of the True-Up Date is higher than the Installment Conversion Price set forth in the applicable Installment Notice and the number of Installment Conversion Shares delivered exceeds the number of True-Up Shares, then the excess will be applied toward the next Installment Conversion Shares to be issued by Borrower hereunder (unless the Outstanding Balance has been reduced to zero, in which case Lender will return such excess shares to Borrower). For the convenience of Borrower only, Lender may, in its sole discretion, deliver to Borrower a notice (pursuant to a form of notice substantially in the form attached hereto as C ) informing Borrower of the number of True-Up Shares it is obligated to deliver to Lender as of any given True-Up Date, provided that if Lender does not deliver any such notice Borrower shall not be relieved of its obligation to deliver True-Up Shares pursuant to this Section I I. Notwithstanding the foregoing, if Borrower fails to deliver any required True-Up Shares on or before any applicable True-Up Share Delivery Date, then in such event the Outstanding Balance of this Note will automatically increase (under Lender's and Borrower's expectations that any such increase will tack back to the Purchase Price Date 'for purposes of determining the holding period under Rule 144) by a sum equal to the number of True-Up Shares deliverable as of the applicable True-Up Date multiplied by the Market Price for the Common Stock as of the applicable True-Up Date.

 

12.             Ownership Limitation . Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents, if at any time Lender shall or would be issued shares of Common Stock under any of the Transaction Documents, but such issuance would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the "Maximum Percentage"), then Borrower must not issue to Lender shares of the Common Stock which would exceed the Maximum Percentage. For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d) of the 1934 Act. The shares of Common Stock issuable to Lender that would cause the Maximum Percentage to be exceeded are referred to herein as the "Ownership Limitation Shares". Borrower will reserve the Ownership Limitation Shares for the exclusive benefit of Lender. From time to time, Lender may notify Borrower in writing of the number of the Ownership Limitation Shares that may be issued to Lender without causing Lender to exceed the Maximum Percentage. Upon receipt of such notice, Borrower shall be unconditionally obligated to immediately issue such designated shares to Lender, with a corresponding reduction in the number of the Ownership Limitation Shares. Notwithstanding the forgoing, the term "4.99%" above shall be replaced with "9.99%" at such time as the Market Capitalization of the Common Stock is less than $1. Notwithstanding any other provision contained herein, if the term G '4.99%" is replaced with "9.99%" pursuant to the preceding sentence, such increase to "9.99%" shall remain at 9.99% until increased, decreased or waived by Lender as set forth below. By written notice to Borrower, Lender may increase, decrease or waive the Maximum Percentage as to itself but any such waiver will not be effective until the 61st day after delivery thereof The foregoing 61 -day notice requirement is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.

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13.             Payment of Collection Costs . If this Note is placed in the hands of an attorney for collection or enforcement prior to commencing arbitration or legal proceedings, or is collected or enforced through any arbitration or legal proceeding, or Lender otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note, then Borrower shall pay the costs incurred by Lender for such collection, enforcement or action including, without limitation, attorneys' fees and disbursements. Borrower also agrees to pay for any costs, fees or charges of its transfer agent that are charged to Lender pursuant to any Conversion or issuance of shares pursuant to this Note.

14.             Opini on of Counsel . In the event that an opinion of counsel is needed for any matter related to this Note, Lender shall have such opinion provided by its counsel.

15.             Governing This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Utah, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Utah. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.

16.   Resolution of Disputes

16.1.         Arbitration of Disputes . By its acceptance of this Note, each party agrees to be bound by the Arbitration Provisions set forth as an Exhibit to the Purchase Agreement.

16.2.         Calculation of Disputes . Notwithstanding the Arbitration Provisions, in the case of a dispute as to any Calculations (as defined in the Purchase Agreement), such dispute will be resolved in the manner set forth in the Purchase Agreement.

17.    Cancellation After repayment or conversion of the entire Outstanding Balance (including without limitation delivery of True-Up Shares pursuant to the payment of the final Installment Amount, if applicable), this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.

18.             Amendments . The prior written consent of both parties hereto shall be required for any change or amendment to this Note.

19, Assignments . Borrower may not assign this Note without the prior written consent of Lender. This Note and any shares of Common Stock issued upon conversion of this Note may be offered, sold, assigned or transferred by Lender without the consent Of Borrower.

20.             Time of the Essence . Time is expressly made of the essence with respect to each and every provision of this Note and the documents and instruments entered into in connection herewith.

21.             Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with the subsection of the Purchase Agreement titled "Notices."

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22.             Liquidated Damages . Lender and Borrower agree that in the event Borrower fails to comply with any of the terms or provisions of this Note, Lender's damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties' inability to predict future interest rates, future share prices, future trading volumes and other relevant factors. Accordingly, Lender and Borrower agree that any fees, balance adjustments, default interest or other charges assessed under this Note are not penalties but instead are intended by the parties to be, and shall be deemed, liquidated damages (under Lender's and Borrower's expectations that any such liquidated damages will tack back to the Closing Date for purposes of determining the holding period under Rule 144).

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IN WITNESS WHEREOF, Borrower has caused thig Note to be duly executed as of the Effective Date.

BORROWER:

UMED HOLDINGS, INC.

ACKNQW LEGED. ACCEPTED AND AGREED.

LENDER:

[Signature Page to Convertible Promissory Note]

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Exhibit 10.21

 

 

THIS WARRANT AND THE COMMON STOCK [SSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED [N THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO LIMED HOLDINGS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

UMED HOLDINGS, INC.

WARRANT TO PURCHASE SHARES OF COMMON STOCK

1. Issuance . In consideration of good and valuable consideration as set forth in the Purchase Agreement (defined below), including without limitation the Purchase Price (as defined in the Purchase Agreement), the receipt and sufficiency of which are hereby acknowledged by UMED HOLDINGS, INC., a Texas corporation ("Company"); TONAQUINT, INC., a Utah corporation, its successors and/or registered assigns ("Investor"), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until the date which is the last calendar day of the month in which the fifth anniversary of the Issue Date occurs (the "Expiration Date"), a number of fully paid and non-assessable shares (the "Warrant Shares") of Company's common stock, par value per share (the "Common Stock"), equal to $47,400.00 divided by the Market Price (as defined in the Note, as of the Issue Date), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this "Warrant"). This Warrant is being issued pursuant to the terms of that certain Securities Purchase Agreement dated September 18, 2014, to which Company and Investor are parties (as the same may be amended from time to time, the "Purchase Agreement").

Unless otherwise indicated herein, capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Purchase Agreement.

This Warrant was originally issued to Investor on September 18, 2014 (the "Issue Date"). For the avoidance of doubt, the Purchase Price constitutes payment in full for this Warrant.

2. Exercise of Warrant .

2. I. General .

(a)                  This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending on the Expiration Date, such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email or facsimile transmission) a completed and duly executed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the "Notice of Exercise"). The date such Notice of Exercise is either faxed, emailed or delivered to Company shall be the "Exercise Date," provided that, if such exercise represents the full exercise of the outstanding balance of the Warrant, Investor shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the Warrant Shares to be delivered pursuant to the Notice of Exercise have been delivered to Investor as of such date. The Notice of Exercise shall be executed by Investor and shall indicate (i) the number of Delivery Shares (as defined below) to be issued Pursuant to such exercise, and (ii) if applicable (as provided below), whether the exercise is a cashless exercise.

For purposes of this Warrant, the term "Trading Day" means any day during which the principal market on which the Common Stock is traded (the "Principal Market") shall be open for business.

   

 

 

(b)                  Notwithstanding any Other provision contained herein or in any other

Transaction Document to the contrary, at any time prior to the Expiration Date, Investor may elect a "cashless" exercise of this Warrant for any Warrant Shares whereby Investor shall be entitled to receive a number of shares of Common Stock equal to (i) the excess of the Current Market Value (as defined below) over the aggregate Exercise Price of the Exercise Shares (as defined below), divided by (ii) the Adjusted Price of the Common Stock (as defined below).

For the purposes of this Warrant, the following terms shall have the following meanings:

Adjusted Price of the Common Stock" shall mean the lower of (i) the Conversion Price (as defined in the Note), as such Conversion Price may be adjusted from time to time pursuant to the terms of the Note (solely for the purpose of determining the then-current Conversion Price under this definition of "Adjusted Price of the Common Stock," each cashless exercise of this Warrant shall be deemed a conversion under the Note), and (ii) the Market Price (as defined in the Note), without regard to whether the Note remains outstanding or has been fully repaid, cancelled or otherwise retired, on any relevant Exercise Date.

"Current Market Value" shall mean an amount equal to the Market Price of the Common Stock (as defined below), multiplied by the number of Exercise Shares specified in the applicable Notice of Exercise.

"Closing Price" shall mean the 4:00 P.M. last sale price of the Common Stock on the Principal Market on the relevant Trading Day(s), as reported by Bloomberg LP (or if that service is not then reporting the relevant information regarding the Common Stock, a comparable reporting service of national reputation selected by Investor and reasonably acceptable to Company) ("Bloomberg") for the relevant date.

"Delivery Shares" means those shares of Common Stock issuable and deliverable upon the exercise of this Warrant.

”Exercise Price" shall mean $0.45 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

"Exercise Shares" shall mean those Warrant Shares subject to an exercise of the Warrant by Investor. By way of illustration only and without limiting the foregoing, if (i) the Warrant is initially exercisable for 4, 1 80,000 Warrant Shares and Investor has not previously exercised the Warrant, and (ii) Investor were to make a cashless exercise with respect to 5,000 Warrant Shares pursuant to which 6,000 Delivery Shares would be issuable to Investor, then (l) the Warrant shall be deemed to have been exercised with respect to 5,000 Exercise Shares, (2) the Warrant would remain exercisable for 4, 1 75,000 Warrant Shares, and (3) the Warrant shall be deemed to have been exercised with respect to 6,000 Delivery Shares.

”Market Price of the Common Stock" shall mean the higher of: (i) the Closing Price of the Common Stock on the Issue Date; and (ii) the VWAP (as defined below) of the Common Stock for the Trading Day that is two (2) Trading Days prior to the Exercise Date.

 

"Note" shall mean that certain Convertible Promissory Note issued by Company to Investor pursuant to the Purchase Agreement, as the same may be amended from time to time, and including any promissory note(s) that replace or are exchanged for such referenced promissory note.

”Transaction Documents" or "Transaction Document" shall have the meaning set forth in the Purchase Agreement.

"VWAP" shall mean the volume-weighted average price of the Common Stock on the Principal Market for a particular Trading Day or set of Trading Days, as the case may be, as reported by Bloomberg.

(c)                   If the Notice of Exercise form elects a "cash" exercise (or if the cashless exercise referred to in the immediately preceding subsection (b) is not available in accordance with the terms hereof), the Exercise Price per share of Common Stock for the Delivery Shares shall be payable, at the election of Investor, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by Company at the request of Investor.

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(d)                  Upon the appropriate payment to Company, if any, of the Exercise

Price for the Delivery Shares, Company shall promptly, but in no case later than the date that is five (S) Trading Days following the date the Exercise Price is paid to Company (or with respect to a "cashless exercise," the date that is five (5) Trading Days following the Exercise Date) (the "Delivery Date"), issue and deliver to Investor or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee, representing the applicable number of Delivery Shares. For the avoidance of doubt, Company has not met its obligation to deliver Delivery Shares within the required timeframe set forth above unless Investor or its broker, as applicable, has actually received the certificate representing the applicable Delivery Shares no later than the close of business on the latest possible delivery date pursuant to the terms set forth above.

(e)                   If Delivery Shares are delivered later than as required under subsection (d) immediately above, Company agrees to pay, in addition to all other remedies available to Investor in the Transaction Documents, a late charge equal to the greater of (i) $500.00 and (ii) 2% of the product of (I) the sum of the number of shares of Common Stock not issued to Investor on a timely basis and to which Investor is entitled multiplied by (2) the V WAP of the Common Stock on the Trading Day immediately preceding the last possible date which Company could have issued such shares of Common Stock to Investor without violating this Warrant, per Trading Day until such Delivery Shares are delivered (the "Late Fees"). Company shall pay any Late Fees incurred under this subsection in immediately available funds upon demand; provided, however, that, at the option of Investor (without notice to Company), such amount owed may be added to the principal amount of the Note. Furthermore, in addition to any other remedies which may be available to Investor, in the event that Company fails for any reason to effect delivery of the Delivery Shares as required under subsection (d) immediately above, Investor may revoke all or part of the relevant Warrant exercise by delivery of a notice to such effect to Company, whereupon Company and Investor shall each be restored to their respective positions immediately prior to the exercise of the relevant portion of this Warrant, except that the Late Fees described above shall be payable through the date notice of revocation or rescission is given to Company. Finally, as liquidated damages in the event Company fails to deliver any Delivery Shares to Investor for a period of ninety (90) days from the Delivery Date, Investor may elect, in its sole discretion, to stop the accumulation of the Late Fees as of such date and require Company to pay to Investor a cash amount equal to (i) the total amount of ail Late Fees that have accumulated prior to the date of Investor's election, plus (ii) the product of the number of Delivery Shares deliverable to Investor on such date if it were to exercise this Warrant with respect to the remaining number of Exercise Shares as of such date multiplied by the closing price of the Common Stock on the Delivery Date (the "Cash Settlement Amount"). At such time that Investor makes an election to require Company to pay to it the Cash Settlement Amount, such obligation of Company shall be a valid and binding obligation of Company and shall for all purposes be deemed to be a debt obligation of Company owed to Investor as of the date it makes such election. Upon Company's payment of the Cash Settlement Amount to Investor, the Warrant shall be deemed to have been satisfied and Investor shall return the original Warrant to Company for cancellation. In additions and for the avoidance of doubt, even if Company could not deliver the number of Delivery Shares deliverable to Investor if it were to exercise this Warrant with respect to the remaining number Of Exercise Shares on the date of repayment due to the provisions of Section 2.2, the provisions Of Section 2.2 Will not apply with respect to Company's payment of the Cash Settlement Amount.

Investor shall be deemed to be the holder of the Delivery Shares issuable to it in accordance with the provisions of this Section 2.1 on the Exercise Date,

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2.2. Qwnership. Limitation . Notwithstanding anything to the contrary contained in this Warrant or the other Transaction Documents, if at any time Investor shall or would be issued shares of Common Stock under any of the Transaction Documents, but such issuance would cause Investor (together with its affiliates) to own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (the "Maximum Percentage"), Company must not issue to Investor shares of the Common Stock which would exceed the Maximum Percentage. The shares of Common Stock issuable to Investor that would cause the Maximum Percentage to be exceeded are referred to herein as the "Ownership Limitation Shares". Company will reserve the Ownership Limitation Shares for the exclusive benefit of Investor. From time to time, Investor may notify Company in writing of the number of the Ownership Limitation Shares that may be issued to Investor without causing Investor to exceed the Maximum Percentage. Upon receipt of such notice, Company shall be unconditionally obligated to immediately issue such designated shares to Investor, with a corresponding reduction in the number of the Ownership Limitation Shares, Notwithstanding the forgoing, the term "4.99%" above shall be replaced with "9.99%" at such time as the Market Capitalization of the Common Stock is less than $10,000,000.00. Notwithstanding any other provision contained herein, if the term "4.99%" is replaced with "9.99 0 /0" pursuant to the preceding sentence, such change to "9.99%" shall be permanent. For purposes of this Warrant, the term "Market Capitalization of the Common Stock" shall mean the product equal to (A) the average V WAP (as defined in the Note) of the Common Stock for the immediately preceding fifteen (15) Trading Days, multiplied by (B) the aggregate number of outstanding shares of Common Stock as reported on Company's most recently filed Form 10-Q or Form 10-K. By written notice to Company, Investor may increase, decrease or waive the Maximum Percentage as to itself but any such waiver will not be effective until the 61 st day after delivery thereof. The foregoing 61 -day notice requirement is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of investor,

3. Mutilation or Loss Of Warrant . Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Investor a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

Rights of Investor . Investor shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in Company, either at law or in equity, and the rights of Investor with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not: enforceable against Company except to the extent set forth herein.

 

Protection Against Dilution and Other Adjustments.

5.1. Capital Adjustments . If Company shall at any time prior to the expiration of this Warrant subdivide the Common Stock, by split-up or stock split, or otherwise, or combine its Common Stock, or issue additional shares of its Common Stock as a dividend, the number of Warrant Shares issuable upon the exercise of this Warrant shall forthwith be automatically increased proportionately in the case of a subdivision, split or stock dividend, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the Exercise Price, Conversion Price (in the event of a cashless exercise), and other applicable amounts, but the aggregate purchase price payable for the total number of Warrant Shares purchasable under this Warrant (as adjusted) shall remain the same, Any adjustment under this Section 5.1 shall become effective automatically at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend.

5.2. Reclassification. Reorganization and Consolidation . In case of any reclassification, capital reorganization, or change in the capital stock of Company (other than as a result of a subdivision, combination, or stock dividend provided for in Section 5.1 above), then Company shall make appropriate provision so that Investor shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a holder of the same number of shares of Common Stock as were purchasable by Investor immediately prior to such reclassification, reorganization, or change. In any such case appropriate provisions shall be made with respect to the rights and interest of Investor so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per Warrant Share payable hereunder, provided the aggregate purchase price shall remain the same.

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5.3. Subsequent equity Sales . Except with respect to Excluded Securities (as defined in the Note), if Company or any subsidiary thereof, as applicable, at any time and from time to time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of, sell or issue (or announce any offer, sale, grant or any option to purchase or other disposition 00 any Common Stock (including any Common Stock issued under the Note, whether upon any type of conversion or any Deemed Issuance (as defined in the Note)), preferred shares convertible into Common Stock, or debt, warrants, options or other instruments or securities which are convertible into or exercisable for shares of Common Stock (together herein referred to as "Equity Securities"), at an effective price per share less than the Exercise Price (such lower price, the "Base Share Price" and such issuance collectively, a "Dilutive Issuance") (if the holder of the Common Stock or Equity Securities so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options, or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance), then (a) the Exercise Price shall be reduced and only reduced to equal the Base Share Price, and (b) the number of Warrant Shares issuable upon the exercise of this Warrant shall be increased to an amount equal to the number of Warrant Shares Investor could purchase hereunder for an aggregate Exercise Price, as reduced

pursuant to subsection (a) above, equal to the aggregate Exercise Price payable immediately prior to such reduction in Exercise Price, provided that the increase in the number of Exercise Shares issuable under to this Warrant made pursuant to this Section 5.3 shall not at any time exceed a number equal to three (3) times the number of Exercise Shares issuable under this Warrant as of the Issue Date (for the avoidance of doubt, the foregoing cap on the number of Exercise Shares issuable hereunder shall only apply to adjustments made pursuant to this Section 5.3 and shall not apply to adjustments made pursuant to Sections 5.1, 5.2 or any other section of this Warrant). Such adjustments shall be made whenever such Common Stock or Equity Securities are issued. Company shall notify Investor, in writing, no later than the Trading Day following the issuance of any Common Stock or Equity Securities subject to this Section 5.3, indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price, or other pricing terms (such notice, the "Dilutive Issuance Notice"). For purposes of clarification, whether or not Company provides a Dilutive Issuance Notice pursuant to this Section 5.3, upon the occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance, Investor is entitled to receive the increased number of Warrant Shares provided for in subsection (b) above at an Exercise Price equal to the Base Share Price regardless of whether Investor accurately refers to the Base Share Price in the Notice of Exercise. Additionally, following the occurrence of a Dilutive Issuance, all references in this Warrant to "Warrant Shares" shall be a reference to the Warrant Shares as increased pursuant to subsection (b) above, and all references in this Warrant to "Exercise Price" shall be a reference to the Exercise Price as reduced pursuant to subsection (a) above, as the same may occur from time to time hereunder.

5.4. Notice of Adjustment . Without limiting any other provision contained herein, when any adjustment is required to be made in the number or kind of shares purchasable upon exercise of this Warrant, or in the Exercise Price, pursuant to the terms hereof, Company shall promptly notify Investor of such event and of the number of Warrant Shares or other securities or property thereafter purchasable upon exercise of this Warrant.

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5.5. Exceptions to Adjustment . Notwithstanding the provisions of Sections 5.3 and 5.4, no adjustment to the Exercise Price shall be effected as a result of an Excepted Issuance. "Excepted Issuances" shall mean, collectively, (a) Company's issuance of securities in connection with strategic license agreements and other partnering arrangements so long as any such issuances are not for the purpose of raising capital and in which holders of such securities or debt are not at any time granted registration rights, and (b) Company's issuance of Common Stock or the issuance or grant of options to purchase Common Stock to employees, directors, officers and consultants, authorized by Company's board of directors pursuant to plans or agreements which are authorized, constituted or in effect as of the Issue Date.

6, Certificate as to Adjustments . In each case of any adjustment or readjustment in the shares of Common Stock issuable on the exercise of this Warrant, Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms Of this Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by Company for any additional shares of Common Stock issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock outstanding or deemed to be outstanding, and (c) the Exercise Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Warrant. Company will forthwith mail a copy of each such certificate to Investor and any Warrant Agent (as defined below) appointed pursuant to Section 8 hereof Nothing in this Section 6 shall be deemed to limit any other provision contained herein.

7.                   Transfer to Comply with the Securities Act . This Warrant, and the Warrant Shares. have not been registered under the 1933 Act. None of the Warrant Shares may be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act; provided, however, that the foregoing restrictions on transfer shall not apply to the transfer of any security to an affiliate of Investor. Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained in this Section 7. Any such transfer shall be accompanied by a transferor assignment substantially in the form attached to this Warrant as Exhibit B (the "Transferor Assignment"), executed by the transferor and the transferee and submitted to Company. Upon receipt of the duly executed Transferor Assignment, Company shall register the transferee thereon as the new holder on the books and records of Company and such transferee shall be deemed a "registered holder" or "registered assign" for all purposes hereunder, and shall have all the rights of Investor.

8.                   Warrant Agent . Company may, by written notice to Investor, appoint an agent (a "Warrant Agent") for the purpose of issuing shares of Common Stock on the exercise of this Warrant pursuant hereto, exchanging this Warrant pursuant hereto, and replacing this Warrant pursuant hereto, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such Warrant Agent.

9.                   Transfer on Company's Books . Until this Warrant is transferred on the books of Company, Company may treat Investor as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

10.                Not ices . Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled "Notices" in the Purchase Agreement, the terms of which are incorporated herein by reference.

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l l. Supplements and Amendments: Whole Agreement . This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement and all the other Transaction Documents, taken together, contain the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.

12.                Governing Law . This Warrant shall be governed by and interpreted in accordance with the laws of the State of Utah, without giving effect to the principles thereof regarding the conflict of laws.

13.                Waiver of Jury Trial . COMPANY IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.

14.                Purchase Agreement: Arbitration of Disputes . This Warrant is subject to the terms, conditions and general provisions of the Purchase Agreement and the other Transaction Documents, including without limitation the Arbitration Provisions set forth as an Exhibit to the Purchase Agreement.

15.                Remedies . The remedies at law of Investor under this Warrant in the event of any default or threatened default by Company in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate and, without limiting any other remedies available to Investor in the Transaction Documents, at law or equity, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise.

16.                Counterparts . This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Signatures delivered via facsimile or email shall be considered original signatures for all purposes hereof.

17.                Attorneys' Fees . In the event of any arbitration, litigation or dispute arising from this Warrant, the parties agree that the party who is awarded the most money shall be deemed the prevailing party for all purposes and shall therefore be entitled to an additional award of the full amount of the attorneys' fees and expenses paid by said prevailing party in connection with arbitration or litigation without reduction or apportionment based upon the individual claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict or impair an arbitrator's or a court's power to award fees and expenses for frivolous or bad faith pleading.

18.                Severability . Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant in any other jurisdiction.

19.                Time of the Essence . Time is expressly made of the essence with respect to each and every provision of this Warrant.

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20.                Descriptive Headings . Descriptive headings of the sections of this Warrant are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.

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IN WITNESS WHEREOF, Company has caused this Warrant to be duly executed by an officer thereunto duly authorized as of the Issue Date.

COMPANY:

 

 

 [Signature Page to Warrant]

 

Exhibit 10.22

 

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building, such as columns and other structural portions of the Building, conference rooms, break rooms, and the building lobby shall be included within the Rentable Area for such floor.

For a floor of the Building on which space is or will be lea sed to more than one tenant, the term "Rentable Area" means the area that is the total of (i) the entire area included within the Leased Premises covered by such lease, being the area bounded by the interior of the exterior wall or walls of the Building bounding such Leased Premises, the exterior of all walls separating such Leased Premises, from any public corridors or other public areas on such floor, and the centerline of all walls separating such Leased Premises from other areas leased or to be leased to other tenants on such floor, and (ii) a prorata portion of the area covered by the elevator lobbies, corridors, restrooms, mechanical rooms, electrical rooms and telephone closets situated on such floor, and (iii) a prorata portion of the area common to all tenants in the building, such as conference rooms, break rooms, and the building lobby.

The Rentable Area contained within the Leased Premises shall be deemed for all purposes of the Lease to be the number of square feet set forth at the beginning of the first paragraph of this 'Premises" section.

   
Rentable Area for the Building The Rentable Area for the entire Building shall be deemed to be 50,686 square feet for the purposes of this Lease.
   
Term:

Twenty-four (24) months commencing on the Commencement Date and subject to adjustment as provided in this Lease. As used herein, the term "Commencement Date" means the earlier to occur of: (a) November 9th, 2015 or (b) the date on which the Premises is substantially complete and ready for the Permitted Use.

Provided that Tenant executes and delivers to Landlord this Lease on or before October 30, 2015 (Tenant Signing deadline), Landlord agrees to use commercially reasonable efforts to complete the Landlord Improvements set forth in Exhibit "C" attached hereto on or before November 9 th , 2015 (Construction

Deadline.

Base Rental:   Monthly Base Rental    Annual Base Re ntal
1-12 13-24

$2,417.00 + Electricity

$2,495.00 + Electricity

$15-50 + Elect $16.00 + Elect
Security Deposit: $2,495.00 payable contemporaneously with Tenant's execution of this Lease.

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prepaid Rent: $2,417.00 payable contemporaneously with Tenant's execu tion of this Lease, to be applied to the first full month's rent d ue and a able to Landlord.
   
Rent: "Rent" is defined as Base Rental, Tenant's Proportionate S hare of Electrical Costs, Tenant's Proportionate Share of Excess, and all other sums that Tenant ma owe to Landlord under this Lease.
Late Char e: of ast due Rent
   
Permitted Use: General Office Use for holdin s com an .
   
Tenant's Proportionate Share:

3-7% which is the percentage obtained by dividing the 1,871 rentable square feet in the Premises by the 50,686 rentable square feet in the Building.

Tenant's Prorata Share is subject to adjustment by Landlord based on the foregoing formula if the leasable area of the building is diminished by casualty, condemnation or similar takings, or other events reducing the leasable area or if the leasable area is increased b additions to the buildin

   
Parkin   Unreserved use of 8 surface arkin s aces
   
Base Year: The Calendar ear 201
   
Landlord Improvements: See attached hereto
   
Landlord's Broker:

Coldwell Banker Commercial Alliance

255 N. Center St., Suite 200

Arlington, TX 76011

Tenant's Broker:  
   
Number of Keys and Access Cards to be Issued:

Keys

Access Cards

     

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Exhibits and Attachments: All exhibits and attachments attached hereto are incorporated herein by this reference:
Exhibit "A-I" Legal Description
Exhibit "A-2" Location of Premises
Exhibit "B" Rules and Regulations
Exhibit "C" Tenant Improvements
   
The foregoing Lease Information is incorporated into and made a part of the Lease identified above. If any conflict exists between anything contained in this Lease Information and the full text of the Lease, then the Lease shall control.  
   

The Atrium Remains the Same, LLC

By:

Gary Walker,

Manager

UMED Holdings, Inc.

 

   
   

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THIS LEASE AGREEMENT (this '(Lease") is entered into as of October, 2015, between The Atrium Remains the Same, LLC, ("Landlord"), and UMED Holdings, Inc. ("Tenant").

1. BASICPROVISIONS. The definitions and basic provisions set forth in the Lease Information (the “Lease Information") executed by Landlord and Tenant contemporaneously herewith and attached hereto are incorporated herein by reference for all purposes.

2. LEASE GRANT; TERM . Landlord hereby grants Tenant the right TO HAVE AND TO HOLD the Premises for term specified in the lease Information (the "Term") to be continuously used and occupied during the term of this Lease by Tenant only for the purpose specified in the Lease Information and not otherwise. If this Lease is executed before the Premises become vacant, or any improvements that are the obligation of Landlord as described herein are not completed, or if any present tenant or occupant of the premises holds over, and Landlord cannot acquire possession of the Premises prior to the Commencement Date, Landlord shall not be deemed to be in default hereunder, and Tenant agrees to accept possession of the Premises at such time as Landlord is able to tender same. Landlord hereby waives the payment of rent covering any period prior to tender of possession of the Premises to Tenant hereunder. Except to the extent modified by Landlord's express assumption of construction obligations, if any, in an exhibit attached to this Lease, the Premises are being leased AS IS and WITH ALL FAULTS, and Tenant hereby expressly accepts the Premises in present condition, and Landlord makes no warranty of any kind, express or implied, with respect to the Premises (without limitation, Landlord makes no warranty as to the habitability or suitability or fitness for a particular use or purpose). Tenant has not relied, and hereby waives any claims or defenses of reliance, on any oral representations or statements made by Landlord about the Premises or this Lease.

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(a)                  Payment. Tenant shall timely pay to Landlord Rent, without deduction or set Off, at Landlord's Address (or such other address as Landlord may from time to time designate in writing to Tenant). Base Rental shall be payable monthly in advance. Base Rental for any fractional month at the beginning of the Term shall be prorated based on 1/365 of the current annual Base Rental for each day of the partial month this Lease is in effect, and shall be due on the Commencement Date. Tenant's covenant to pay rent is an independent covenant. If Landlord shall at any time or times accept rent to which Landlord is entitled hereunder after the same shall become due and payable, such acceptance shall not excuse or delay upon subsequent occasions, or constitute, or be construed as, a waiver of any or all of Landlord's rights hereunder. Tenant's obligation for the payment of rent shall survive the expiration or sooner termination of this Lease.

(b)                  The parties acknowledge that Tenant's failure to promptly pay sums due under this lease may cause Landlord to incur unanticipated costs. The exact amount of such costs are impractical or extremely difficult to ascertain. Such costs may include, but are not limited to, processing and accounting charges which may be imposed on Landlord by any ground lease, deed of trust, or mortgage encumbering the Premises. Therefore, if any sum due under this lease is not received by Landlord within ten days of its due date, Tenant shall be assessed and agrees to pay a Late Charge equal to of the past due amount. If any check tendered in payment of any sum due from Tenant under this lease is returned for any reason, Tenant shall pay Landlord an administrative fee of $100 in addition to any charges levied or assessed by the banking institution as restitution for handling the returned check. In the event more than one check is returned per calendar year, Landlord may require payment to be made by cashier's check, money order, or wire transfer.

(c)                  Electrical. Tenant shall timely pay to Landlord an amount equal to the product of (i) the cost of all electricity used by the Building ("Electrical Costs"), multiplied by (ii) Tenant's Proportionate Share, as specified in Lease Information . Such amount shall be payable in monthly installments due on the first (1st) day of each calendar month. Each installment shall be based either on actual billings paid by Landlord, or

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Landlord's estimate of the amount due for each month. From time to time during any calendar year, Landlord may estimate and re-estimate the Electrical Costs to be due by Tenant for that calendar year and deliver a copy of the estimate or re-estimate to Tenant. Thereafter, the monthly installments of Electrical Costs payable by Tenant shall be appropriately adjusted in accordance with the estimations so that, by the end of the calendar year in question, Tenant shall have paid all of Tenant's Proportionate Share of the Electrical costs as estimated by Landlord.

(c)                Base Rental Amount. The Base Rental payable under Section 3(a) shall be adjusted from time to time in accordance with the following provisions (any such adjustment is hereinafter referred to as "Base Rental Adjustment. Base Rental includes the Basic Cost Component, the Tax Component, and the Utilities Component for the Base Year as defined in the I ease Information .

 

Prior to January 1 of each calendar year during the term Of this Lease, or as soon thereafter as reasonably practical, Landlord shall provide an estimate of Tenant's share of increases in Basic Costs, Tax Costs, and Utilities Costs for the forthcoming calendar year, (calculated separately for each of Basic Costs, Tax Cost, and Utilities Costs), equal to the product of (A) the difference between the Base Year Basic Costs, Tax Costs, and Utilities Costs, and the coming calendar year's Basic Costs, Tax Costs, and Utilities Costs multiplied by (B) the Tenant's Proportionate Share of the property as specified in læase Info rmation and further adjusted in accordance with Section 3(h). Tenant shall pay to Landlord, on the first day of each calendar month thereafter, the amount Landlord estimates to be Tenant's share of increases in costs. Any amounts paid based on such an estimate shall be subject to adjustment when actual Basic Costs, Tax Costs, and Utilities Costs are available for each calendar year.

(d)                Basic Costs. "Basic Costs" as that term is used herein, shall consist of all Operating Expenses (defined below) of the Property as reasonably allocated by Landlord, computed on a cash basis and determined in accordance with generally accepted accounting principles consistently applied. "Operating Expenses," as that term is used herein means all expenses and disbursements of every kind, but excluding charges separately paid by other Tenants of the Property, or other third parties, and any Tax Costs and Utilities Costs (subject to the limitations set forth below) which Landlord incurs, pays or becomes obligated to pay in connection with the ownership, operation, and maintenance of the Project, determined in accordance with generally accepted federal income tax basis accounting principles consistently applied, including but not limited to the following:

1. Management fees and wages and salaries of all employees engaged in the operation, repair, replacement, maintenance, and, if provided by Landlord, security of the Project, including employment taxes, insurance and benefits relating thereto;

(2)                    All supplies, tools equipment, and materials used in the operation, maintenance, repair, replacement, and security of the Property;

(3)                    Costs of all maintenance and service agreements for the Property, including, but not limited to, telephone service, access control service, window cleaning, parking, sidewalk, and landscape maintenance, janitorial service, and elevator maintenance;

(4)                    Annual cost of all capital improvements made to the Project which although capital in nature can reasonably be expected to reduce the normal operating costs of the Project as well as all capital improvements made to comply with any Law (defined below) currently in effect or hereafter promulgated by any governmental or regulatory authority, as amortized over the useful economic life of such improvements as determined by Landlord in its reasonable discretion (without regard to the period over which such improvements may be depreciated or amortized for federal income tax purposes);

(5)                    Costs of licenses, permits, and inspection fees related to the Property;

(6)                    Cost of any insurance or insurance related expense applicable to the Property and Landlord's personal property used in connection therewith;

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  (7)                    Cost of dues, assessments, and other charges applicable to the Project payable to any property or community owner association under restrictive covenants or deed restrictions to which the Project is subject or under any easement agreement granting rights for the benefit of the Project;

(8)                    Cost of professional services rendered for the general benefit of the Project (including engineers, accountants and attorneys).

Basic Costs shall not include costs (A) for capital improvements made to the Property, Other than capital improvements described in Section 3(d)(4) except for items which, though capital for accounting purposes, are properly considered maintenance and repair items, such as painting of common areas, replacement of carpet in elevator lobbies, and the like; (B) for repair, replacements and general maintenance paid by proceeds of insurance or by Tenant or other third parties, and alterations attributable solely to ten ants of the Building other than Tenant; (C) for interest, amortization or other payments on loans to Landlord; (D) for depreciation of the Building; (E) for leasing commissions; (F) for renovating or otherwise improving space for occupants of the Building or vacant space in the Building; and (G) for federal income taxes imposed on or measured by the income of Landlord from the operation of the Project.

(e)                 Tax Costs "Tax Costs" as that term is used herein, means all taxes, assessments and governmental charges, whether or not directly paid by Landlord, whether federal, state, county, or municipal and whether they be by taxing districts or any Governmental Authority presently taxing the Property or by others subsequently created, attributed to the property, or its operation, and an allocation to the Property of taxes assessments and governmental charges for the service roads which service the Property, but excluding, however, taxes and assessments attributable to the personal property of Tenants or imposed in connection with any change of ownership of the Property, provided, however, if the taxing authorities do not separately assess the Property, Landlord may make a reasonable allocation of the taxes, assessment or charges to give effect to this sentence. If the present method of taxation changes so that in lieu of the whole or any part of any Taxes levied on the Project, there is levied on Landlord a capital tax directly on the rents received therefrom or a franchise tax, assessment, or charge based, in whole or in part, upon such rents for the Project, then all such taxes, assessments, or charges, or the part thereof so based, shall be deemed to be included within the term "Tax Costs" for the purposes hereof. Reasonable consultation, accounting, and legal fees and Other reasonable fees and costs resulting from any challenge of tax assessments reasonably allocated by Landlord shall be included in Tax Costs. It is agreed that Tenant will be responsible for ad valorem taxes on its personal property and on the value of the leasehold improvements in the Premises to the extent that the same exceed Building Standard Improvements (and if the taxing authorities do not separately assess Tenant's leasehold improvements, Landlord may make a reasonable allocation of the ad valorem taxes allocated to the Property to give effect to this sentence). All taxes, assessments and governmental charges shall be included in Tax Costs in the calendar year in which such taxes, assessments or governmental charges are payable; provided, however, in the case of special taxes and assessments which may be payable in installments, only the amount Of each installment accruing during a calendar year shall be included in the Tax Costs for such year. Tenant hereby agrees that any and all protests before the applicable Appraisal Review Board shall be conducted, if at all, solely by Landlord, and Tenant shall have no right to any such protest. Tenant hereby waives any rights and privileges which it may have pursuant to Texas Property Code Sections 41.413 and 42.015 (as amended from time to time) to conduct any such protest.

(f)                   Utilities Costs "Utilities Costs" as that term is used herein, means the cost of all utilities, including, but not limited to, water, steam, sewer, waste disposal, gas and electricity, and power for heating, lighting, and air conditioning (including all Common Area, General Common Areas and Service Areas). But excluding any utility charges actually reimbursed to Landlord by the Property's tenants (including Tenant) under Section 6(b). For purposes hereof, "Utilities Costs" shall also include amortization of the cost, together with reasonable financing charges, of furnishing and installing capital investment items which are primarily for the purpose of (i) reducing Utilities Costs or avoiding increases in Utilities Costs in Landlord's good faith estimate or (ii) promoting safety or (iii) may be required by City Code or Legal Requirements. All such costs shall be amortized over the useful life of the capital investment items with the useful life and amortization schedule being determined in accordance with generally accepted accounting principles (in no event to extend beyond the remaining useful life of the property).

(g)Annual Cost Statement . By June 1 of each calendar year, or as soon thereafter as practical, Landlord shall furnish to Tenant a statement of Landlord's actual Basic Costs, Tax Costs, and Utilities Costs, (the "Annual Cost Statement") for the previous calendar year, adjusted as provided in Section-3(h). If the Annual Cost Statement reveals that Tenant paid more than Tenant's Proportionate Share of actual costs thereof in the year for which such statement was prepared, then Landlord shall credit such excess to future Rent obligations; likewise, if Tenant paid less than Tenant's Proportionate Share of increases, then Tenant shall pay Landlord such deficiency within thirty (30) days after delivery of the Annual Cost Statement.

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  (h)                   Adju stments to Basic Costs and Ut ilities Costs . With respect to any calendar year or partial calendar year in which the Building is not occupied to the extent of the rentable area thereof, the Basic Costs and Utilities Costs for such period shall, for the purposes hereof, be increased to the amount which would have been incurred had the Building been occupied to the extent of 95X of the rentable area thereof.

(i)                   Calculat ion of Charges. Landlord and Tenant agree that each provision of this Lease for determining charges, amounts and expenses, including, but not limited to, Electrical Costs and Tenant's Proportionate Share of Excess Operating Costs, to be paid by Tenant, is commercially reasonable, and as to each such charge, expense or amount, constitutes a "method by which the charge is to be computed" for purposes of Section 93.012 (Assessment of Charges) of the Texas Property Code, as such section now exists or as it may be hereafter amended or succeeded.

4.                    DELINQUENT PAYMENT; HANDLING CHARGES . All payments required of Tenant hereunder shall bear interest from the date due until paid at the maximum lawful rate. Alternatively, Landlord may charge Tenant a fee equal to of the delinquent payment to reimburse Landlord for its cost and inconvenience incurred as a consequence of Tenant's delinquency. In no event, however, shall the charges permitted under this Section_4 or elsewhere in this Lease, to the extent they are considered to be interest under applicable Law, exceed the maximum lawful rate of interest.

5.                    SECU R ITY DEPOS IT. If Tenant at any time delivers a Security Deposit to Landlord, such Security Deposit shall be held by Landlord without liability for interest and as security for the performance by Tenant of its obligations under this Lease. The Security Deposit is not an advance payment of Rent or a measure or limit of Landlord's damages upon an Event of Default (defined below). Landlord may, from time to time and without prejudice to any other remedy, use all or a part of the Security Deposit to perform any obligation which Tenant was obligated, but failed, to perform hereunder. Following any such application of the Security Deposit, Tenant shall pay to Landlord on demand the amount so applied in order to restore the Security Deposit to its original amount. Tenant hereby expressly waives the requirements and applicability of TEX. PROP. CODE 93.005 — 93.011, and agrees that Landlord shall return to Tenant the balance Of the Security Deposit not applied to satisfy Tenant's obligations within a reasonable time after the Term ends, provided Tenant has performed all of its obligations hereunder. If such waiver is not effective under applicable Law, Landlord shall, within the time required by applicable Law, return to Tenant the portion of the Security Deposit remaining after deducting all damages, charges and other amounts permitted by Law. Landlord and Tenant agree that such deductions shall include, without limitation, all damages and losses that Landlord has suffered or that Landlord reasonably estimates that it will suffer as a result of any breach of this Lease by Tenant. If Landlord transfers its interest in the Premises, then Landlord may assign the Security Deposit to the transferee and Landlord thereafter shall have no further liability for the return of the Security Deposit.

 

6.                    LANDLORD'S OBLIGATIONS .

(a)                  Services. Landlord will provide engineering and building management staff for the Project as determined by Landlord from time to time. Landlord shall use all reasonable efforts to furnish to Tenant (1) water (hot and cold) at those points of supply provided for general use of tenants of the Building in the common areas thereof; (2) heated, ventilated, and refrigerated air conditioning ("HVAC") as appropriate, during normal business hours, at such temperatures and in such amounts as are reasonably considered by Landlord to be standard; (3) janitorial service to the Premises on weekdays other than holidays for Building-standard installations (Landlord may bill Tenant separately for extra janitorial service required for non-standard installations) and such window washing as may from time to time in Landlord's judgment be reasonably required; (4) elevators for ingress and egress to the floor on which the Premises are located, in common with other tenants; provided, that Landlord may reasonably limit the number of elevators to be in operation at times other than during normal business hours and on holidays; (5) replacement of Building-standard light bulbs and fluorescent tubes; provided, that Landlord's standard charge for such bulbs and tubes and the labor therefore shall be paid by Tenant; and (6) electrical current during normal business h ours other than for computers, electronic data processing equipment, special lighting, equipment that requires more than 110 volts, or other equipment whose electrical energy consumption exceeds normal office usage. Land lord shall maintain the common areas of the Building in reasonably good order and condition, except for damage caused by a Tenant Party (as defined below). As used herein, the term "normal business hours" means -7:00 a.m. - 7:00 p.m. on Monday through Friday and 8:00 a.m. to 1:00 p.m. on Saturday. As used herein, the term "holidays" means Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day, and New Year’s Day. If Tenant desires any of the services specified in this Section 6(a) at any time other than times herein designated, such services shall be supplied to Tenant upon the written request of Tenant delivered to Landlord before 3:00 p.m. on the business day preceding such extra usage, and Tenant shall pay to Landlord the cost of such services within ten (to) days after Landlord has delivered to Tenant an invoice therefore, The after hours HVAC charge shall be $35.00 per hour.

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(b)                  Excess Utility Use. Landlord shall use reasonable efforts to furnish electrical current for computers, electronic data processing equipment, special lighting, equipment that requires more than 110 volts, or other equipment whose electrical energy consumption exceeds normal office usage through the then-existing feeders and risers serving the Building and the Premises, and Tenant shall pay to Landlord the cost of such service within ten (10) days after Landlord has delivered to Tenant an invoice therefore. Landlord I-nay determine the amount of such additional consumption and potential consumption by either or both: (i) a survey of standard or average tenant usage of electricity in the Building performed by a reputable consultant selected by Landlord and paid for by Tenant; or (ii) a separate meter in the Premises installed, maintained, and read by Landlord, at Tenant's expense. Tenant shall not install any electrical equipment requiring special wiring or requiring voltage in excess of 110 volts or otherwise exceeding Building capacity unless approved in writing in advance by Landlord. The use of electricity in the Premises shall not exceed the capacity of existing feeders and risers to or wiring in the Premises. Any risers or wiring required to meet Tenant's excess electrical requirements shall, upon Tenant's written request, be installed by Landlord, at Tenant's cost, if they are necessary and shall not cause permanent damage or injury to the Building or the Premises, cause or create a dangerous or hazardous condition, entail excessive or unreasonable alterations, repairs, or expenses, or interfere with or disturb other tenants Of the Building. If Tenant uses machines or equipment (other than general office machines, excluding computers and electronic data processing equipment) in the Premises which affect the temperature Otherwise maintained by the air conditioning system or otherwise overload any utility, Landlord may install supplemental air conditioning units or other supplemental equipment in the Premises, and the cost thereof, including the cost of installation, operation, use, and maintenance, shall be paid by Tenant to Landlord within ten (10) days after Landlord has delivered to Tenant an invoice therefore.

(c)                  Discontinuance. Landlord's obligation to furnish services under Section6(a) shall be subject to the rules and regulations of the supplier of such services and governmental rules and regulations.

(d)                  Restoration of Services; Abate ment. Landlord shall use reasonable efforts to restore any service that becomes unavailable; however, such unavailability shall not render Landlord liable for any damages caused thereby, be a constructive eviction of Tenant, constitute a breach of any implied warranty, or, except as provided in the next sentence, entitle Tenant to any abatement of Tenant's obligations hereunder. However, if Tenant is prevented from making reasonable use of the Premises for more than fifteen (15) consecutive days because of the unavailability of any such service and such unavailability was not caused by a Tenant Party, Tenant shall, as its exclusive remedy therefore, be entitled to a reasonable abatement Of Ren t for each consecutive day (immediately following such 15-day period) that Tenant is so prevented from ma king reasonable use of the Premises.

7. IMPROVEMENTS; ALTERAT IO NS; REPAI RS; MAI NTENAN CE.

(a)                  Improvements; Alterations . Improvements to the Premises shall be installed at the expense of Tenant only in accordance with plans and specifications which have been previously submitted to and approved in writing by Landlord. No alterations or physical additions in or to the Premises may be made without Landlord's prior written consent. Tenant shall not paint or install lighting or decorations, signs, window or door lettering, or advertising media of any type on or about the Premises without the prior written consent of Landlord. All alterations, additions, or improvements (whether temporary or permanent in character, and including all air-conditioning equipment and all other equipment that is in any manner connected to the Building's plumbing system) made in or upon the Premises, either by Landlord or Tenant, shall be Landlord's property at the end of the Term and shall remain on the Premises without compensation to Tenant. Approval by Landlord of any of Tenant's drawings and plans and specifications prepared in connection with any improvements in the Premises shall not constitute a representation or warranty Of Landlord as to the adequacy or sufficiency of such drawings, plans and specifications, or the improvements to which they relate, for any use, purpose, or condition, but such approval shall merely be the consent of Landlord as required hereunder. Notwithstanding anything in this Lease to the contrary, as between Landlord and Tenant: (1) Tenant shall bear the risk of complying with Title Ill of the Americans With Disabilities Act of 1990, the Texas Elimination of Architectural Barriers Act, and all rules, regulations, and guidelines promulgated under either Of such acts, as amended from time to time (the "Disabilities Acts") in the Premises, and (2) Landlord shall bear the risk of complying with the Disabilities Acts in the common areas of the Building, other than compliance that is necessitated by Tenant's particular use of the Premises or improvements or alterations made by Tenant to the Premises (which risk and responsibility shall be borne by Tenant).

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(b)                  Tenant_Repairs; Maintenance. Tenant, at its expense shall keep and maintain the Premises in a clean, safe, and operable condition, and shall keep and maintain Premises in good order, condition and repair and in accordance with all Laws and Environmental Laws. Tenant shall not permit waste and shall promptly and adequately repair all damages to the Premises and replace or repair all damaged or broken glass in the interior of the Premises, fixtures or appurtenances. Any repairs or maintenance shall be completed with materials of similar quality to the original materials, all such work to be completed under the supervision of Landlord.

Tenant shall repair or replace, subject to Landlord's direction and supervision, any damage to the Project caused by a Tenant Party. If Tenant fails to make such repairs or replacements within fifteen (15) days after the occurrence of such damage, then Landlord may perform such work. If any such damage affects any area outside of the Premises or the HVAC, plumbing, electrical, life-safety, fire/sprinkler system or other mechanical or utility transmission facility of the Building or is visible in the elevator lobby areas of the Building or from outside of the Premises, then Landlord may repair such damage without delivering to Tenant prior written notice thereof. The cost of any repair or replacement work performed by Landlord under this Section_7 shall be paid by Tenant to Landlord within ten (10) days after Landlord has delivered to Tenant an invoice therefore.

 

 

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(c)                  Performance of Work . All work described in this Section 7 shall be performed only by Landlord or by contractors and subcontractors approved in advance in writing by Landlord (which approval will not be unreasonably withheld or delayed). Tenant shall cause all contractors and subcontractors to procure and maintain insurance coverage against such risks, in such amounts, and with such companies as Landlord may reasonably require, and to procure payment and performance bonds reasonably satisfactory to Landlord covering the cost of the work. All such work shall be performed in accordance with all Laws and in a good and workmanlike manner so as not to damage the Building (including the Premises, the roof, the structural elements, and the plumbing, electrical lines, or other utility transmission facility). All such work which may affect the Building's HVAC, electrical; plumbing, other mechanical systems, the roof, or structural elements must be approved in advance in writing by the Building's engineer of record, at Tenant's expense.

(d)                  Mechanic's.Liens. Tenant shall not permit any mechanic's liens to be filed against any portion of the Project for any work performed, materials furnished, or obligation incurred by or at the request of Tenant. If such a lien is filed, then Tenant shall, within ten days after Landlord has delivered notice of the filing to Tenant, either pay the amount of the lien or diligently contest such lien and deliver to Landlord a bond or other security reasonably satisfactory to Landlord. If Tenant fails to timely take either such action, Tenant will be in default, and Landlord may pay the lien claim without inquiry as to the validity thereof, and any amounts so paid, including expenses and interest, shall be paid by Tenant to Landlord within ten (to) days after Landlord has delivered to Tenant an invoice therefor, or take any other action specified in Section_l7.

(e) Landlord's Repairs; Maintenance . Landlord shall maintain and make necessary repairs to the foundations, roofs, exterior walls, and the structural elements of the Building, the electrical, plumbing, heating, ventilating, and air conditioning, mechanical, communication, security and the fire and life safety systems of the Building and those corridors, washrooms and lobbies which are Common Areas of the Building, except that: (i) Landlord shall not be responsible for the maintenance or repair of any floor or wall coverings in the Premises or any of such systems which are located within the Premises and are supplemental or special to the Building's standard systems unless damage to same is caused by Landlord's breach of the foregoing obligations, and (ii) the cost of performing any of said maintenance or repairs whether to the Premises or to the building caused by the negligence of Tenant, its employees, agents, servants, licensees, subtenants, contractors or invitees, shall not be liable to Tenant for any expense, injury, loss or damage resulting from work done in or upon, or in connection with the use of, any adjacent or nearby building, land, street or alley.

8.         VSE. Tenant may use the Premises only for the Permitted use and shall comply with all Laws relating to the use, condition, and occupancy of the Premises. The Premises shall not be used for any use which is disreputable or creates extraordinary fire hazards or results in an increased rate of insurance on the Building or its contents or the storage of any hazardous materials or substances. If, because of a Tenant Party's acts, the rate of insurance on the Building or its contents increases, Tenant shall pay to Landlord the amount of such increase on demand, and acceptance of such payment shall not constitute a waiver of any of Landlord's other rights. Tenant shall conduct its business and control each Other Tenant Party, so as not to create any nuisance or interfere with other tenants or Landlord in its management and use of the Building. Subject to Landlord's reasonable security measures and the Rules and Regulations described in Section 12. Tenant and its agents and employees will have access to the Premises 24 hours a day, 7 days a week.

9.         ASSIGNMEN T A ND SUBLETTING .

(a) Tr ansfers; Consent . Except as provided in Se ction_9Cd), Tenant shall not, without the prior written consent of Landlord: (1) advertise that any portion of the Premises is available for lease, (2) assign, transfer, or encumber this Lease or any estate or interest herein, whether directly or by operation of law, (3) permit any Other entity to become Tenant hereunder by merger, consolidation, or other reorganization, (4) if Tenant is an entity other than a corporation whose stock is publicly traded, permit the transfer of an ownership interest in Tenant so as to result in a change in the current control of Tenant, (5) sublet any portion of the Premises, (6) grant any license, concession, or other right of occupancy of any portion of the Premises, or (7) permit the use of the Premises by any parties other than Tenant (any Of the events listed in Sections 9(a)(2) through being a "Transfer"). Provided that the per rentable square foot rental rate to be paid by such party for such subletting or assignment is not less than the per rentable square foot rate at which Landlord is then offering similar space in the Building to prospective tenants, taking into account all terms of the subl ease or assignment in question, Landlord shall not unreasonably withhold its consent to any assignment or subletting of the Premises to a party which (A) has a good credit standing, (B) is, in the

 

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reasonable judgment of Landlord, of a character and reputation or is engaged in a business which would not be harmful to the image and reputation of the Building and can reasonably be expected to perform the obligations of Tenant hereunder, (c) will not use the Premises in any manner that would conflict with any exclusive use agreement or other similar agreement entered into by Landlord with any other tenant of the Building, (D) is not a party engaged in a business which competes with Landlord or any business of another tenant in the Building, (E) is not a tenant in the Building or a prospective tenant of the Building and (F) has been approved by Landlord's Mortgagee (as defined below). If Tenant requests Landlord's consent to a Transfer, then Tenant shall provide Landlord with a written description of all terms and conditions of the proposed Transfer, copies of the proposed documentation, and the following information about the proposed transferee: name and address; reasonably satisfactory information about its business and business history; its proposed use of the Premises; banking, financial, and other credit information; and general references sufficient to enable Landlord to determine the proposed transferee's creditworthiness and character. Tenant shall reimburse Landlord for its attorneys' fees and other expenses incurred in connection with considering any request for its consent to a Transfer. If Landlord consents to a proposed Transfer, then the proposed transferee shall deliver to Landlord a written agreement whereby it expressly assumes the Tenant's obligations hereunder; however, any transferee of less than all of the space in the Premises shall be liable only for obligations under this Lease that are properly allocable to the space subject to the Transfer, and only to the extent of the rent it has agreed to pay Tenant therefor. No Transfer shall release Tenant from performing the obligations of the Tenant under this Lease, rather Tenant and its transferee shall be jointly and severally liable therefor. Landlord's consent to any Transfer shall not waive Landlord's rights as to any subsequent Transfers. If an Event of Default occurs while the Premises or any part thereof are subject to a Transfer, then Landlord, in addition to its Other remedies, may collect directly from such transferee all rents becoming due to Tenant and apply such rents against Rent. Tenant authorizes its transferees to make payments of rent directly to Landlord upon receipt of notice from Landlord to do so.

 

(b)        Canc ellation. Landlord may, within thirty (30) days after submission of Tenant's written request for Landlord's consent to a Transfer, cancel this Lease (or, as to a subletting or assignment, cancel this Lease as to the portion of the Premises proposed to be sublet or assigned) as of the date the proposed Transfer was to be effective. If Landlord cancels this Lease as to any portion of the Premises, then this Lease shall cease for such portion of the Premises and Tenant shall pay to Landlord all Rent accrued through the cancellation date relating to the portion of the Premises covered by the proposed Transfer and all brokerage commissions paid or payable by Landlord in connection with this Lease that are allocable to such portion of the Premises. Thereafter, Landlord may lease such portion of the Premises to the prospective transferee (or to any other person) without liability to Tenant.

(c)        Additional Compensation. Tenant shall pay to Landlord, immediately upon receipt thereof, all compensation received by Tenant for a Transfer that exceeds the Base Rental, Electrical Costs and Base Rental Adjustment allocable to the portion of the Premises covered thereby.

(d)        Transfer to Affiliate or Subsidiary. Notwithstanding the provisions of Section 9(a) requiring Landlord's consent to a proposed Transfer, no such consent shall be required if such Transfer is made to an entity which controls, is controlled by, or is under common control with Tenant, provided (1) the remaining terms and provisions of this Lease (including the remaining terms of Section 9(a) shall be applicable to the Transfer and the transferee, (2) Tenant furnishes Landlord with evidence, reasonably satisfactory to Landlord, which indicates that such affiliate will, following any such transfer, have the same or better tangible net worth as Tenant did on the date of this Lease, (3) provide a guarantor acceptable to Landlord, in Landlord's sole discretion, and (4) Tenant shall notify Landlord of such Transfer within thirty (30) days after the date such Transfer occurs. until Tenant furnishes the evidence required under clause (2), the Transfer will re quire Landlord's consent.

10. INSURANCE; WAIVERS; SUBROGATION; INDEMNITY

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(a)                  Insurance. Tenant shall procure and maintain throughout the Term the following insurance policies with insurers reasonably acceptable to Landlord: (1) commercial liability insurance in amounts of not less than a combined single limit of $2,000,000 (the "Initial Liability Insurance Amount") or such Other amounts as Landlord may from time to time reasonably require, insuring Tenant, Landlord, Landlord's agents and their respective Affiliates against all liability for injury to or death of a person or persons or damage to property arising from the use and occupancy Of the Premises, (2) contractual liability insurance coverage sufficient to cover Tenant's indemnity obligations hereunder, (3) insurance covering the full value of the leasehold improvements in the Premises and other property of Tenant and of others in the Premises, (4) workman's compensation insurance or equivalent, containing a waiver of subrogation endorsement reasonably acceptable to Landlord, and (5) business interruption insurance. Tenant's insurance shall provide primary coverage to Landlord when any policy issued to Landlord provides duplicate or similar coverage, and in such circumstance Landlord's policy will be excess over Tenant's policy. Tenant shall furnish certificates of such insurance and such other evidence satisfactory to Landlord Of the maintenance of all insurance coverages required hereunder, and Tenant shall obtain a written obligation on the part of each insurance company to notify Landlord at least thirty (30) days before cancellation or a material change of any such insurance. All such insurance policies shall be in form, and issued by companies, reasonably satisfactory to Landlord.

(b)               Waiver-of_Negligence Claims; No Subrogation. Landlord shall not be liable to Tenant or those claiming by, through, or under Tenant for any injury to or death of any person or the damage to or theft, destruction, loss, or loss of use of any property or inconvenience (a ' 'Loss") caused by casualty, theft, fire, third parties, or any other matter (including Losses arising through repair or alteration of any part of the Project or failure to make repairs, or from any other cause), regardless of whether the negligence of any party caused such Loss in whole or in part . Landlord and Tenant each waives any claim it might have against the other for any damage to or theft, destruction, loss, or loss of use of any property, to the extent the same is insured against under any insurance policy maintained by it that covers the Project, the Premises, Landlord's or Tenant's fixtures, personal property, leasehold improvements, or business, or is required to be insured against by it under the terms hereof, regardless of whether the negligence or fault of the other party caused such loss however, Landlord’s waiver shall not include any deductible amounts on insurance policies carried by Landlord. Each party shall cause its insurance carrier to endorse all applicable policies waiving the carrier's rights of recovery under subrogation or otherwise against the other party.

 

(c)               Indemnity. Subject to Section-IQ(b), Tenant shall defend, indemnify, and hold harmless Landlord and its agents from and against all claims, demands, liabilities, causes of action, suits, judgments, and expenses (including attorneys' fees) for any Loss arising from any occurrence on the Premises or from Tenant's failure to perform its obligations under this Lease (other than a Loss arising from the sole or gross negligence of Landlord or its agents), comparative, or concu r ren t negligence or fault of Landlord or it s agents, and even though any such claim. caus e of action, or suit is ba sed negligent Wi th Tenant This indemnity provision shall survive termination or expiration of this Lease.

11. SUBORDINATION; ATTORNMENT; NOTICE TO LANDLORD’S MORGAGEE

(a)                  Subordination. This Lease shall be subordinate to any deed of trust, mortgage, or other security instrument (a "Mortgage"), or any ground lease, master lease, or primary lease (a "Primary Lease"), that now or hereafter covers all or any part of the Premises (the mortgagee under any Mortgage or the lessor under any Primary Lease is referred to herein as "Landlord's Mortgagee") without the necessity of any further instrument or act on the part of Tenant. Any Landlord's Mortgagee may subordinate its Mortgage or Primary Lease (as the case may be) to this Lease. Within ten (10) days of Landlord's or Landlord's Mortgagee's written request, Tenant shall execute such documentation in a recordable form as Landlord or Landlord's Mortgagee may reasonably request to evidence the subordination of this Lease to such Landlord's Mortgagee's Mortgage or Primary Lease _or„if the Landlord's Mortgagee so elects, the_ subordination of such Landlord's Mortgagee's Mortgage or Primary Lease to this Lease. The timely delivery of said documentation is a material provision of this Lease.

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(b)                  Attornment. Tenant shall attorn to any party succeeding to Landlord's interest in the Premises, whether by purchase, foreclosure, deed in lieu of foreclosure, power of sale, termination of lease, or otherwise, and shall execute such agreements confirming such attornment as such party may reasonably request.

(c)     Notice to Landlord' s Mortgagee. If requested by Landlord's mortgagee, Tenant shall, contemporaneously with the delivery of any default notice to Landlord, deliver to each Landlord's Mortgagee a copy thereof. Tenant shall not seek to enforce any remedy it may have for any default on the part of the Landlord without first giving written notice by certified mail, return receipt requested, specifying the default in reasonable detail, to any Landlord's Mortgagee whose address has been given to Tenant, and affording such Landlord's Mortgagee a reasonable opportunity to perform Landlord's obligations hereunder after Landlord's cure period to perform such obligation, if any, has expired.

(d)                  Landlord's Mortgagee's Liability . Each Landlord's Mortgagee (or any other successor to Landlord acquiring the Premises by foreclosure, deed in lieu of foreclosure or otherwise in connection with the enforcement of the Mortgage or Primary Lease, as applicable) shall not be: (1) liable for any previous act or omission of Landlord; (2) subject to any credit, demand, claim, counterclaim, offset or defense Tenant may have against Landlord; (3) unless consented to by Landlord's Mortgagee, bound by any modification of this Lease, or by any prepayment of more than one month's Rent; (4) bound by any covenant or obligation of Landlord to perform, undertake or complete any work in the Premises or to prepare it for occupancy; (5) required to account for any security deposit of Tenant other than any security deposit actually delivered to Landlord's Mortgagee; (6) bound by any obligation to make any payment to Tenant or grant any credits, except for services, repairs, maintenance and restoration provided for under this Lease to be performed by Landlord after the date of attornment; or (7) responsible for any monies owing by Landlord to Tenant.

(e)                  Amendment. Notwithstanding anything to the contrary expressed in this Lease, Tenant agrees to amend or modify this Lease in any particulars as may be reasonably required by any Landlord, Mortgagee or beneficiary of Landlord so long as any such amendments or modifications do not materially alter the substantive rights of Tenant herein and so long as Landlord has agreed to the same.

12. RULES AND REGULATIONS. Tenant shall comply with the rules and regulations of the Building which are attached hereto as Exhibit_”B." Landlord may, from time to time, change such rules and regulations for the safety, care, or cleanliness of the Building and related facilities, provided that such changes are applicable to all tenants of the Building and will not unreasonably interfere with Tenant's use of the Premises. Tenant shall be responsible for the compliance with such rules and regulations by each Tenant Party.

13. CONDEMNATION .

(a)                   Taking - Tenant's Rig hts. If all or a material portion of the Building is taken by right of eminent domain, condemnation, or conveyed in lieu thereof (a "Taking"), and such Taking prevents Tenant from conducting its business in the Premises in a manner reasonably comparable to conducted immediately before such Taking in Landlord's judgment, then Tenant may terminate this Lease as of the date of such Ta king by giving written notice to Landlord within thirty (30) days after the Taking, and Rent shall be apportioned as of the date of such Taking. If Tenant does not terminate this Lease, then Base Rental shall be abated on a reasonable basis as to that portion of the Premises rendered untenantable by the Taking as of the date of such Taking. Taking of parking areas does not affect this Lease.

(b)                   Taking-Landlord’s Rights. If all or any material portion of the Project becomes subject to a Taking, or if Landlord is required to pay any of the proceeds received for a Taking to Landlord's Mortga gee, then this Lease, at the option of Landlord, exercised by written notice to Tenant within sixty (60) days after such Taking, shall terminate and Rent shall be apportioned as of the date of such Taking. If Landlord does not so terminate this Lease, then this Lease will continue, but if any portion of the Premises has been taken, Base Rental shall abate as provided in the last sentence of Section 13(a) .

(c)                   Award. If any Taking occurs, then Landlord shall receive the entire award or other compensation for the Project and other improvements taken, and Tenant may separately pursue a claim against the condemnor but not Landlord for the value of Tenant's personal property which Tenant is entitled to remove under this Lease, moving costs, loss of business, and other claims it may have.

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14. FIRE OR OTHER CASUALTY

(a) Repair Estimate . If the Project is damaged by fire, tornado or other casualty (a ' 'Casualty"), Landlord shall, within 60 days after such Casualty, deliver to Tenant a good faith estimate (the "Damage Notice") of the time needed to repair the damage caused by such Casualty.

(b)                  Landlord's and Tenant's Rights . If all or a material portion of the Premises is damaged by Casualty such that Tenant is prevented from conducting its business in the Premises in a manner reasonably comparable to that conducted immediately before such Casualty and Landlord estimates that the damage caused thereby cannot be repaired within 180 days after the commencement of repair and a Tenant Party did not cause such Casualty, then Tenant may terminate this Lease by delivering written notice to Landlord of its election to terminate within thirty (30) days after the Damage Notice has been delivered to Tenant. Notwithstanding anything to the contrary herein set forth, Tenant shall not have the right to terminate this Lease pursuant to this Section if any damage or destruction was caused by the act or neglect of Tenant, its agents or employees. If Tenant does not terminate this Lease, then (subject to Landlord's rights under section_14C)) Landlord shall repair the Premises as provided below, and Base Rental for the portion Of the Premises rendered untenantable by the damage shall be abated on a reasonable basis from the date of Casualty until the completion of the repair.

(c)                  Landlord's Rights . If a Casualty damages all or a material portion of the Project, and Landlord makes a good faith determination that restoring the Building would be uneconomical, or if Landlord is required to pay any insurance proceeds arising out of the Casualty to Landlord's Mortgagee, then Landlord may terminate this Lease by giving written notice to Tenant of its election to terminate within thirty (30) days after the Damage Notice has been delivered to Tenant, and Base Rental hereunder shall be abated as of the date of the Casualty Tenant acknowledges that Landlord shall be entitled to the full proceeds of any insurance coverage whether carried by Landlord or Tenant for damages to the Premises. All such insurance proceeds shall be payable to Landlord whether or not the Premises are to be repaired and restored.

(d)                  Repair Obligation . If neither party elects to terminate this Lease following a Casualty, then Landlord shall, within a reasonable time after such Casualty, commence to repair the Project and the Premises and shall proceed with reasonable diligence to restore the Project to substantially the same condition as it existed immediately before such Casualty; however, Landlord shall not be required to repair or replace any part Of the furniture, equipment, fixtures, and other leasehold improvements in the Premises or in the premises of other occupants in the Building, and Landlord's obligation to repair or restore the Project shall be limited to the extent of the insurance proceeds actually received by Landlord for the Casualty in question.

15.                  TAXES. Tenant shall be liable for all taxes levied or assessed against personal property, income, furniture, or fixtures placed by Tenant in the Premises. If any taxes for which Tenant is liable are levied or assessed against Landlord or Landlord's property and Landlord elects to pay the same, or if the assessed value of Landlord's property is increased by inclusion of such personal property, furniture or fixtures and Landlord elects to pay the taxes based on such increase, then Tenant shall pay to Landlord, upon demand, that pa rt of such taxes for which Tenant is primarily liable hereunder.

16.                  EVENTSOF.DEEAULT. Each Of the following occurrences shall constitute an "Event of Default":

(a) Tenant's failure to pay Rent or any other sum required to be paid under this Lease when due;

(b) Tenant's failure to observe or perform any other provision, covenant or condition of this Lease to be observed or performed by Tenant where such failure continues for ten (10) days after written notice thereof from Landlord to Tenant; provided, that if the nature of such default is such that the same cannot reasonably be cured within a ten (10) day period, Tenant shall not be deemed to be in default if it shall commence such cure within such period and thereafter rectify and cure said default with due diligence; abandonment of the Premises;

 

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(d)                   filing of a mechanic's lien against any part of the Premises

(e)                   the filing of a petition by or against Tenant (the term "Tenant" shall include, for the purpose of this Section16(e), any guarantor Of the Tenant's obligations hereunder) (1) in any bankruptcy or other insolvency proceeding; (2) seeking any relief under any state or federal debtor relief Law; (3) for the appointment of a liquidator or receiver for all or substantially all of Tenant's property or for Tenant's interest in this Lease; or (4) for the reorganization or modification of Tenant's capital structure;

(d)                  Tenant shall attempt to remove all or any part of Tenant's furniture, fixtures, files or equipment from the Premises without prior written notice to Landlord, or Tenant shall desert or vacate any portion of the Premises and Landlord notifies Tenant in writing that Landlord has elected to treat such event as an Event of Default; and

(e)                  the admission by Tenant that it cannot meet its obligations as they become due or the making by Tenant of an assignment for the benefit of its creditors.

If within any twelve (12) month period during the Term hereof, Tenant has failed to perform or has been in default under the same section more than two (2) times and Landlord because of such failures or defaults has served upon Tenant within said twelve (12) month period two (2) or more notices of any such failure or default, then any third or subsequent default under said section within said twelve (12) month period will be deemed a noncurable Event of Default and Landlord, in addition to all Other rights and remedies it may have hereunder, will be entitled to immediate possession of the Premises without notice to Tenant.

17.                  REMEDIES. Upon any Event of Default, Landlord may, in addition to all other rights and remedies afforded Landlord hereunder or by law or equity, take any of the following actions:

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(a)                  Terminate this Lease by giving Tenant written notice thereof, in which event, Tenant shall pay to Landlord the sum of (i) all Rent accrued hereunder through the date of termination, (ii) all amounts due under Section 18(a) and (iii) an amount equal to (A) the total Rent that Tenant would have been required to pay for the remainder of the Term discounted to present value at a per annum rate equal to the "Discount Rate" as published on the date this Lease is terminated by The Wall Street Journal, Southwest Edition, in its listing of "Money Rates," minus (B) the then present fair rental value of the Premises for such period, Similarly discounted; or

(b)              Terminate Tenant's right to possession of the Premises without terminating this Lease by giving written notice thereof to Tenant, in which event Tenant shall pay to Landlord (1) all Rent and o ther amounts accrued hereunder to the date of termination of possession, (2) all amounts due from time to time under Section-18(a), and (3) all Rent and other sums required hereunder to be paid by Tenant during the remainder of the Term, diminished by any net sums thereafter received by Landlord through reletting the Premises during such period. Landlord shall use reasonable efforts to relet the Premises on such terms and conditions as Landlord in its discretion may determine (including a term different from the Term, rental concessions, and alterations to, and improvement of, the Premises); however, Landlord shall not be obligated to relet the Premises before leasing other portions of the Building. Landlord shall not be liable for, nor shall Tenant's obligations hereunder be diminished because of, Landlord's failure to relet the Premises or to collect rent due for such reletting. Tenant shall not be entitled to the excess of any consideration obtained by reletting over the Rent due hereunder. Reentry by Landlord in the Premises shall not affect Tenant's obligations hereunder for the unexpired Term; rather, Landlord may, from time to time, bring action against Tenant to collect amounts due by Tenant, without the necessity of Landlord's waiting until the expiration of the Term. Unless Landlord delivers written notice to Tenant expressly stating that it has elected to terminate this Lease, all actions taken by Landlord to exclude or dispossess Tenant of the Premises shall be deemed to be taken under this Section-Il(b). If Landlord elects to proceed under this Section.-17(b), it may at any time elect to terminate this Lease under Section 17(a).

Additionally, without notice, Landlord may enter upon the Premises to perform any of Tenant's unperformed obligations hereunder and alter locks or other security devices at the Premises to deprive Tenant of access thereto, and Landlord shall not be required to provide a new key or right of access to Tenant.

18.                  PAYMENT BY TENANT; NON-WAIVER .

(a)                  Payment by Tenant. upon any Event of Default, Tenant shall pay to Landlord all costs incurred by Landlord (including court costs and reasonable attorneys' fees and expenses) in (i) obtaining possession of the Premises, (ii) removing and storing Tenant's or any Other occupant's property, (iii) repairing, restoring, altering, remodeling, or otherwise putting the Premises into condition acceptable to a new tenant; provided, however, the cost of any remodeling shall not exceed the unamortized cost of the Work completed by Landlord to the Premises pursuant to Exhibit_”C" attached hereto, (iv) if Tenant is dispossessed of the Premises and this Lease is not terminated, reletting all or any part of the Premises (including brokerage commissions, cost of tenant finish work, and other costs incidental to such reletting), (v) performing Tenant's obligations which Tenant failed to perform, and (vi) enforcing, or advising Landlord of, its rights, remedies, and recourses arising out of the Event of Default.

(b)                  No Waiver. Landlord's acceptance of Rent following an Event of Default shall not waive Landlord's rights regarding such Event of Default. No waiver by Landlord of any violation or breach of any of the terms contained herein shall waive Landlord's rights regarding any future violation of such term or violation of any other term.

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(c)                  Reletting. Tenant acknowledges that Landlord has entered into this Lease in reliance upon, among other matters, Tenant's agreement and continuing obligation to pay all Rent due throughout the Term. As a result, Tenant hereby knowingly and voluntarily waives, after advice of competent counsel, any duty of Landlord (and any affirmative defense based upon such duty) following any Event of Default to relet the Premises or otherwise mitigate Landlord's damages arising from such Event of Default. If such waiver is not effective under then applicable Law or Landlord otherwise elects, at Landlord's sole option, to attempt to relet all or any part of the Premises, Tenant agrees that Landlord has no obligation to: (i) relet the Premises prior to leasing any other space within the Building; (ii) relet the Premises (A) at a rental rate or otherwise on terms below market, as then determined by Landlord in its sole discretion; (B) to any entity not satisfying Landlord's then standard financial credit risk criteria; and/or (C) for a use (1) not consistent with Tenant's use prior to the Event Of Default; (2) which would violate then applicable Law or any restrictive covenant or Other lease affecting the Building; (3) which would impose a greater burden upon the Building's parking, HVAC or other facilities; and/or (4) which would involve any use of Hazardous Materials; (iii) divide the Premises, install new demising walls or otherwise reconfigure the Premises to make same more marketable; (iv) pay any leasing or Other commissions arising from such reletting, unless Tenant unconditionally delivers Landlord, in good and sufficient funds, the full amount thereof in advance; (v) pay, and/or grant any allowance for, tenant finish or other costs associated with any new lease, even though same may be amortized over the applicable lease term, unless Tenant unconditionally delivers Landlord, in good and sufficient funds, the full amount thereof in advance; and/or (vi) relet the Premises, if to do so, Landlord would be required to alter Other portions of the Building, make ADA-type modifications or otherwise install or replace any sprinkler, security, safety, HVAC or other Building operating systems. To the extent required by law to mitigate damages, Landlord will be deemed mitigating its damages when it lists the Premises "For Lease" with a commercial real estate broker and lists the Premises for lease on at least one commercial real estate website, such as CoStar or LoopNet.

19.                  LANDLORD'S LIEN. In addition to the statutory landlord's lien, Tenant grants to Landlord, to secure performance of Tenant's obligations hereunder, a security interest in all equipment, fixtures, furniture, improvements, and other personal property of Tenant now or hereafter situated on the Premises, and all proceeds therefrom (the "Collateral"), and the Collateral shall not be removed from the Premises without the consent of Landlord until all obligations of Tenant have been fully performed. Upon the occurrence of an Event of Default, Landlord may, in addition to all other remedies, without notice or demand except as provided below, exercise the rights afforded a secured party under the Uniform Commercial Code of the State in which the Building is located (the "UCC"). In connection with any public or private sale under the UCC, Landlord shall give Tenant five (5) days' prior written notice of the time and place of any public sale of the Collateral or of the time after which any private sale or other intended disposition thereof is to be made, which is agreed to be a reasonable notice of such sale or other disposition. All proceeds of any such sale may be applied first to the payment of expenses incurred by Landlord in enforcing the security interests herein granted (including reasonable attorneys' fees and expenses). Tenant shall execute such financing statements and Other instruments reasonably requested by Landlord to perfect or continue the perfection of Landlord's security interests under this Sectiom19, Additionally, Tenant grants to Landlord a power of attorney to execute and file any financing statement or other instrument necessary to perfect Landlord's security interest under this section 19, which power is coupled with an interest and shall be irrevocable during the Term. Landlord may also file a copy of this Lease as a financing statement to perfect its security interest in the Collateral.

20.                  SURRENDER OF_PREMISES. NO act by Landlord shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept a surrender of the Premises shall be valid unless the same is made in writing and signed by Landlord. When Tenant's right to possess the Premises ends, Tenant shall deliver to Landlord the Premises with all improvements located thereon in good repair and condition, reasonable wear and tear (and condemnation and fire or other casualty damage not caused by a Tenant Party, as to which Section s_13 and_14 shall control) excepted, and shall deliver to Landlord all keys to the Premises. Provided that Tenant has performed all of its obligations hereunder, Tenant may remove all unattached trade fixtures, furniture, and personal property placed in the Premises by Tenant (but Tenant may not remove any such item which was paid for, in whole or in part, by Landlord or any wiring or cabling unless Landlord requires such removal). Additionally, except for the initial Work which Landlord is responsible for completing under Exhibit C, if any, Tenant shall remove such alterations, additions, improvements, trade fixtures, equipment, cabling, and furniture unless Landlord agrees in writing for Tenant to leave specific items. Tenant shall repair all damage caused by such removal. All items not so removed shall, at Landlord's option, be deemed to have been abandoned by Tenant and may be appropriated, sold, stored, destroyed, or otherwise disposed of by Landlord without notice to Tenant and without any Obligation to account for such items; any such disposition shall not be considered a Strict foreclosure or other exercise of Landlord's rights in respect of the security interest granted under Secti0 R19 . The provisions of this Sectiom2Q shall survive the end of the Term.

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2 1 . HOLDING OVER . If Tenant fails to vacate the Premises at the end of the Term, then Tenant shall be a tenant at will that Landlord can terminate and require Tenant to vacate at any time, and, in addition to all other damages and remedies to which Landlord may be entitled for such holding over, Tenant shall pay, in addition to the other Rent, a daily Base Rental equal to the greater of (a) 150% of the daily Base Rental payable during the last month of the Term or (b) the prevailing rental rate (calculated on a daily basis) in the Building for similar space.

22.                  CERTAIN RIGHTS RESERVED BY LANDLORD. Provided that the exercise of such rights does not unreasonably interfere with Tenant's occupancy of the Premises, Landlord shall have the following rights:

(a)                  to decorate and to make inspections, repairs, alterations, additions, changes, or improvements, whether Structural or otherwise, in and about the Project, or any part thereof; for such purposes, to enter upon the Premises and, during the continuance of any such work, to temporarily close doors, entryways, public space, and corridors in the Building; to interrupt or temporarily suspend Building services and facilities; and to change the arrangement and location of entrances or passageways, doors, and doorways, corridors, elevators, stairs, restrooms, or other public parts of the Building;

(b)                 to take such reasonable measures as Landlord deems advisable for the security Of the Project and Building occupants, including without limitation searching all persons entering or leaving the Building; evacuating the Building for cause, suspected cause, or for drill purposes; temporarily denying access to the Building; and closing the Building after normal business hours and on Saturdays, Sundays, and holidays, subject, however, to Tenant's right to enter when the Building is closed after normal business hours under such reasonable regulations as Landlord may prescribe from time to time which may include by way of example, but not Of limitation, that persons entering or leaving the Building, whether or not during normal business hours, identify themselves to a security officer by registration or otherwise and that such persons establish their right to enter or leave the Building;

(c)                  to change the name by which the Building is designated; and

(d)                  to enter the Premises at all reasonable hours to inspect, perform Landlord's obligations and to show the Premises to prospective purchasers, lenders, or tenants.

23.                  SUBSTITUTION SPAC E. Landlord may, at Landlord's expense, relocate Tenant within the Building in space which is comparable in size to the Premises and is reasonable suited to Tenant's use. If Landlord relocates Tenant, Landlord shall reimburse Tenant for Tenant's reasonable out-of pocket expenses for moving Tenant's furniture, equipment, supplies and telephone equipment from the Premises to the relocation space. Upon such relocation, the relocation space shall be deemed to be the Premises and the terms of this Lease shall remain in full force and shall apply to the relocation space.

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24.                  ENVIRONMENTAL REQUIREMENTS .

(a)                  General. Except for such incidental cleaning agents and solutions or maintenance materials used in the ordinary course or materials and goods stored as part of Tenant's business operations (but such use and storage shall be in compliance with all Environmental Requirements), Tenant shall not permit or cause any party to bring any Hazardous Materials (as defined below) upon the Premises or store or use any Hazardous Materials in or about the Premises without Landlord's prior written consent. Tenant, at its sole cost and expense, shall operate its business in the Premises in compliance with all Environmental Requirements, and will obtain, comply with, and properly maintain all permits and licenses, or applications required by Environmental Requirements for its operations. The term "Environmental Requirements" means all applicable present and future statutes, regulations, ordinances, rules, codes, or other similar enactments of any governmental authority of agency, and any applicable judicial, administrative or regulatory decrees, judgments, orders, or policies regulating or relating to any Hazardous Materials or pertaining to health, safety, industrial hygiene, or the environmental conditions on, under, or about the Premises or the environment, including, without limitation, the following: the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"); the Resource Conservation and Recovery Act; the Toxic Substances Control Act; the Clean Air Act; the Federal Water Pollution Control Act; the Federal Hazardous Materials Transportation Act; and all state and local counterparts, supplements or additions thereto, and any regulations or policies promulgated or issued thereunder. The term "Hazardous Materials" means and includes petroleum (as defined in CERCLA), asbestos and any substance, material, waste, pollutant, or contaminant listed or defined as hazardous or toxic, under any Environmental Requirements.

(b)                 Indemnity. Tenant shall indemnify, defend, and hold Landlord and its partners, officers, directors, agents and employees harmless from and against any and all manner of losses (including, without limitation, diminution in value of the Premises or the Building and loss of rental income from the Building), claims, demands, actions, suits, damages (including, without limitation, punitive damages), fines, penalties, administrative and judicial proceedings, judgments, settlements, expenses (including, without limitation, consultant fees, attorneys' fees, or expert fees) which arise during or after the Lease Term which are brought or recoverable against, or suffered or incurred by Landlord or such parties as a result of any breach of the obligations under this Section_24 or noncompliance with any Environmental Requirement by Tenant, its agents, employees, contractors, subtenants, or invitees, regardless of whether Tenant had knowledge of such noncompliance. Tenant shall bear the burden of proof by a preponderance of the evidence that the foregoing indemnification is inapplicable to any claim for indemnification by Landlord. The indemnification and hold harmless obligations of Tenant shall survive any termination of this Lease, any renewal, expansion or amendment of this Lease and/or the execution and delivery of any new lease with Tenant covering all or any portion of the Project.

(c)                  Assess m ents . Landlord shall have access to, and a right to perform inspections and tests of, the Premises as it may require to determine Tenant's compliance with Environmental Requirements and Tenant's obligations under this Sectiom24 . Access shall be granted to Landlord upon Landlord's prior notice to Tenant and at such times so as to minimize, so far as may be reasonable under the circumstances, any disturbance to Tenant's operations. Such inspections and tests shall be conducted at Landlord's expense, unless such inspections or tests reveal the presence of Hazardous Material or reveal, based on Landlord's reasonable determination, that Tenant has not complied with all Environmental Requirements, in which case Tenant shall immediately, upon demand, reimburse Landlord for the cost of such inspection and tests. At the expiration or earlier termination of this Lease, Landlord shall have the right, at its option, to undertake an environmental assessment of the Premises to determine Tenant's compliance with all Environmental Requirements. Landlord will bear the cost of such assessment, provided that, if such assessment indicates any non-compliance by Tenant, the cost of the assessment as well as any required remediation, must be paid for by Tenant. Landlord and Tenant agree that Landlord's receipt of or satisfaction with any environmental assessment in no way waives any rights that Landlord holds against Tenant.

25. MISCELLANEOUS

(a)                  Landlord Transfer . Landlord may transfer, in whole or in part, the Project and any of its rights under this Lease without notice to or consent from Tenant. If Landlord transfers its rights under this Lease, then Landlord shall thereby be released from any further obligations hereunder from the date of transfer.

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(b)                  Landlord's Liability. The liability of Landlord to Tenant for any default by Landlord under the terms of this Lease shall be limited to Tenant's actual direct, but not consequential, damages therefor and shall be recoverable only from the interest of Landlord in the Project, and Landlord shall not be personally liable for any deficiency. This section shall not be deemed to limit or deny any remedies which Tenant may have in the event Of default by Landlord hereunder which do not involve the personal liability of Landlord. Tenant hereby waives its statutory lien under Section 91.004 of the Texas Property Code.

(c)                  Force-Majeure. Other than for Tenant's monetary obligations under this Lease and obligations which can be cured by the payment of money (e.g., payment of Rent, maintaining insurance), whenever a period of time is herein prescribed for action to be taken by either party hereto, such party shall not be liable or responsible for, and there shall be excluded from the computation for any such period of time, any delays due to strikes, riots, acts of God, shortages of labor or materials, war, or Laws.

(d)                  Brokerage. Landlord and Tenant each warrant to the other that it has not dealt with any broker or agent in connection with the negotiation or execution of this Lease other than those Brokers listed in the Lease Information section for each party. Landlord shall be responsible for payment of all commissions to Landlord's Broker and Tenant's Broker concerning this Lease, and Tenant and Landlord shall each indemnify the other against all costs, expenses, attorneys' fees, and other liability for commissions or other compensation claimed by any other broker or agent claiming the same by, through, or under the indemnifying party.

(e)                  Estoppel Certificates and Other Information . From time to time, Tenant shall furnish to any party designated by Landlord or by Landlord's Mortgagee, within ten (10) days after Landlord or Landlord's Mortgagee has made a request therefor, a certificate signed by Tenant confirming and containing such factual certifications and representations as to this Lease as Landlord or Landlord's Mortgagee may reasonably request. Additionally, within five (5) business days after Landlord's or Landlord's Mortgagee's request therefor, Tenant shall deliver to Landlord or Landlord's Mortgagee financial statements for Tenant and any guarantor of Tenant's obligations hereunder as of the most recently ended calendar quarter.

(f)                   Notices. All notices and other communications given pursuant to this Lease shall be in writing and shall be (1) mailed by first class, United States Mail, postage prepaid, certified, with return receipt requested, and addressed to the parties hereto at the address specified in the Basic Lease Information, (2) hand delivered to the intended address, or (3) sent by prepaid telegram, cable, facsimile transmission, or telex followed by a confirmatory letter. Notice sent by certified mail, postage prepaid, shall be effective three (3) business days after being deposited in the United States Mail; all other notices shall be effective upon delivery to the address of the addressee. The parties hereto may change their addresses by giving notice thereof to the other in conformity with this provision.

(g)                  Separability. If any clause or provision of this Lease is illegal, invalid, or unenforceable under present or future Laws, then the remainder of this Lease shall not be affected thereby and in lieu of such clause or provision, there shall be added as a part of this Lease a clause or provision as similar in terms to such illegal, invalid, or unenforceable clause or provision as may be possible and be legal, valid, and enforceable.

(h)                  Amendments; and Binding Effect . This Lease may not be amended except by instrument in writing signed by Landlord and Tenant. No provision Of this Lease shall be deemed to have been waived by Landlord unless such waiver is in writing signed by Landlord, and no custom or practice which may evolve between the parties in the administration of the terms hereof shall waive or diminish the right of Landlord to insist upon the performance by Tenant in strict accordance with the terms hereof. The terms and conditions contained in this Lease shall inure to the benefit of and be binding upon the parties hereto, and upon their respective successors in interest and legal representatives, except as otherwise herein expressly provided. This Lease is for the sole benefit of Landlord and Tenant, and, Other than Landlord's Mortgagee, no third party shall be deemed a third party beneficiary hereof.

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(i) Quiet E njoy m ent . Provided Tenant has performed all of the terms and conditions of this Lease to be performed by Tenant, Tenant shall peaceably and quietly hold and enjoy the Premises for the Term, without hindrance from Landlord or any party claiming by, through, or under Landlord, subject to the terms and conditions of this Lease.

(j)                   Joint and Several Liability. If there is more than one Tenant, then the obligations hereunder imposed upon Tenant shall be joint and several. If there is a guarantor of Tenant's obligations hereunder, then the obligations hereunder imposed upon Tenant shall be the joint and several Obligations of Tenant and such guarantor, and Landlord need not first proceed against Tenant before proceeding against each such guarantor nor shall any such guarantor be released from its guaranty for any reason whatsoever.

(k)                 Captions; Interpretation; Definitions. The captions in this Lease are for convenience of reference only, and do not limit or enlarge the terms and conditions of this Lease. The normal rule of construction that any ambiguities be resolved against the drafting party shall not apply to the interpretation of this Lease or any Exhibit or amendments hereto. The following terms shall have the following meanings when used in this Lease: "Laws" means all federal, state, and local laws, rules and regulations, all court orders, governmental directives, and governmental orders, and all restrictive covenants affecting the Project (including, without limitation, the covenants and restrictions imposed under any declaration affecting the Building), and "Law" shall mean any of the foregoing; "Affiliate" means any person or entity which, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the party in question; "Tenant Party" means any of the following persons: Tenant; any assignees claiming by, through, or under Tenant; any subtenants claiming by, through, or under Tenant; and any of their respective agents, contractors, employees, and invites; and "including" means including without limitation. Except as otherwise provided herein, if Landlord's determination, consent, or approval is required under this Lease, then such determination, consent or approval may be made in Landlord's sole and absolute discretion.

(l)                   No Merger. There shall be no merger of the leasehold estate hereby created with the fee estate in the Premises or any part thereof if the same person acquires or holds, directly or indirectly, this Lease or any interest in this Lease and the fee estate in the leasehold Premises or any interest in such fee estate.

(m)               No Offer. The submission of this Lease to Tenant shall not be construed as an offer, nor shall Tenant have any rights under this Lease unless Landlord executes a copy of this Lease and delivers it to Tenant.

(n)                 Exhibits. All exhibits and attachments specified in the Lease Information are incorporated herein by this reference.

(o)                 Entire Agreement . This Lease and all exhibits and attachments specified in Lease Information constitutes the entire agreement between Landlord and Tenant regarding the subject matter hereof and supersedes all oral statements and prior writings relating thereto. Except for those set forth in this Lease, no representations, warranties, or agreements have been made by Landlord or Tenant to the other with respect to this Lease or the obligations of Landlord or Tenant in connection therewith.

(p)                 No Implied Warranty . LANDLORD AND TENANT EXPRESSLY DISCLAIM ANY IMPLIED WARRANTY THAT THE PREMISES ARE SUITABLE FOR TENANT'S INTENDED USE, AND TENANT'S OBLIGATION TO PAY RENT HEREUNDER IS NOT DEPENDENT UPON THE CONDITION OF THE PREMISES OR THE PERFORMANCE BY LANDLORD OF ITS OBLIGATIONS HEREUNDER, AND, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, TENANT SHALL CONTINUE TO PAY THE RENT, WITHOUT ABATEMENT, SETOFF DEDUCTION OR DEMAND NOTWITHSTANDING ANY BREACH BY LANDLORD OF ITS DUTIES OR OBLIGATIONS HEREUNDER, WHETHER EXPRESS OR IMPLIED.

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Waiver of Rights un the Deceptive Trade Practices-Consumer-Protectiom Act, Landlord and Tenant waive their respective rights under the Deceptive Trade Practices-Consumer Protection Act, Section 17-41 et. seq., Business & Commerce Code, a law that gives consumers special rights and protections. Each, after consultation (or opportunity to consult) with an attorney of its selection, voluntarily consents to this waiver.

(r)                   Building Name. Landlord may, at any time and without notice to Tenant, change the name or designation of the Building to any other name the Landlord may deem proper. Tenant shall not, and by this Lease does not acquire any proprietary or other right to the name of the Building. Any use of the Building, its name or likeness, by Tenant for advertisement or promotional purposes is strictly prohibited without Landlord's prior written permission.

(s)                   Parking. For and in consideration of the covenants contained in this Lease Agreement Landlord and Tenant agree that Tenant shall have during the Term of this Lease the non-exclusive use with other tenants of the building to up to 8 spots in the common surface parking areas at no charge. Any reduction of parking not caused by Landlord does not constitute a default by Landlord.

(t)                    Counterparts. This lease may be executed by counterparts and by facsimile signature, each of which shall be deemed an original, and together the counterparts shall comprise the Contract.

(u)                  Texas Law. This Lease has been prepared, is being executed and delivered, and it is intended to be performed in the State of Texas, and the substance of Laws of Texas as well as the applicable Federal Laws of the United States of American shall govern the validity, construction and enforceability of this Lease.

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DATED as of the date first written above.

The Atrium Remains the Same, LLC

 

Gary Walker, General Partner

 

 

 

Exhibit 10.23

 

UMED HOLDINGS, INC.

STOCK PURCHASE WARRANT
Expiring October 31, 2020

 

 

4,000,000 Shares Fort Worth, Texas

THIS IS TO CERTIFY that, for value received, NORMAN T. REYNOLDS (the “Holder”) is entitled at any time from the date hereof, but prior to 5:00 p.m., Fort Worth, Texas time on October 31, 2020, subject to and upon the terms and conditions contained herein, to purchase up to 4,000,000 fully paid and non-assessable shares of the common stock, par value $0.0001 per share (the “Common Stock”) of UMED HOLDINGS, INC., a Texas corporation (the “Company”) at a purchase price of $0.20 per share (the “Exercise Price”) of the Common Stock, after taking into account the restricted nature of the shares of the Common Stock as described below (such number of the shares of the Common Stock and the purchase price being subject to adjustment as provided herein). This Warrant shall be void and of no effect and all rights hereunder shall cease at 5:00 p.m., Fort Worth, Texas time on October 31, 2020, except to the extent theretofore exercised; provided that in the case of the earlier dissolution of the Company, this Warrant shall become void on the date fixed for such dissolution.

1.                    Covenants of the Company . The Company covenants that, while this Warrant is exercisable (a) it will reserve from its authorized and unissued shares of the Common Stock a sufficient number of shares of the Common Stock to provide for the delivery of the shares of the Common Stock pursuant to the exercise of this Warrant, and (b) that all shares of the Common Stock which may be issued upon the exercise of this Warrant will be fully paid and non-assessable.

2.                    Protection Against Dilution, Etc. In any of the following events, occurring after the date of the issuance of this Warrant, appropriate adjustment shall be made in the number of shares of the Common Stock to be deliverable upon the exercise of this Warrant and the purchase price per share of the Common Stock to be paid, so as to maintain the proportionate interest of the Holder as of the date hereof (a) recapitalization of the Company through a split-up or reverse split of the outstanding shares of the Common Stock into a greater or lesser number, as the case may be, or (b) declaration of a dividend on the shares of the Common Stock, payable in shares of the Common Stock or other securities of the Company convertible into shares of the Common Stock, or (c) any of the events described in Paragraph 4 hereof.

3.                    Merger, Etc. In case the Company, or any successor, shall be consolidated or merged with another company, or substantially all of its assets shall be sold to another company in exchange for stock, cash or other property with the view to distributing such stock, cash or other property to its stockholders, each of the shares of the Common Stock purchasable by this Warrant shall be replaced for the purposes hereof by the securities of the Company or cash or property issuable or distributable in respect of one share of the Common Stock of the Company, or its successors, upon such consolidation, merger, or sale, and adequate provision to that effect shall be made at the time thereof. Provided, however, notwithstanding anything herein contained to the contrary, in the event that the terms of any such consolidation, merger or sale call for the distribution of any cash or property to the stockholders of the Company, no such cash or property shall be distributable to the Holder in connection with any unexercised portion of this Warrant, unless the Holder shall have exercised this Warrant pursuant to the terms of Paragraph 6 hereof and all other terms of this Warrant.

4.                    Notice of Certain Events . Upon the happening of any event requiring an adjustment of the Warrant purchase price hereunder, the Company shall forthwith give written notice thereof to the Holder stating the adjusted Warrant purchase price and the adjusted number of shares of the Common Stock purchasable upon the exercise hereof resulting from such event and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. The Board of Directors of the Company shall determine the computation made hereunder. In the case of (a) any consolidation, merger, or sale affecting the Company and calling for the payment of cash or the delivery of property to stockholders of the Company, or (b) any voluntary or involuntary dissolution, liquidation, or winding up of the Company shall at any time be proposed, the Company shall give at least 20 days’ prior written notice thereof to the Holder stating the date on which such event is to take place and the date (which shall be at least 20 days after the giving of such notice) as of which the holders of record of shares of the Common Stock shall be entitled to participate in any such event. If the Holder does not elect to exercise any part of this Warrant as a result of any such notice, the Holder shall have no right with respect to any portion of this Warrant which shall remain unexercised to participate in (x) any such cash or other property resulting from any such consolidation, merger or sale, or (y) any voluntary or involuntary dissolution, liquidation, or winding up of the Company.

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5.                    Stockholders’ Rights . Until the valid exercise of this Warrant, the Holder shall not be entitled to any rights of a stockholder with respect to the shares of the Common Stock covered by this Warrant; but immediately upon the exercise of this Warrant and upon payment as provided herein, the Holder shall be deemed a record holder of the shares of the Common Stock.

6.                    Manner of Exercise . In order to exercise this Warrant, the Holder shall surrender this Warrant, duly endorsed or assigned to the Company or, in blank, at the office of the Company, accompanied by (a) written Form of Election to Purchase attached hereto (the “Exercise Notice”) that the Holder elects to exercise this Warrant or, if less than the entire amount thereof is to be exercised, the portion thereof to be exercised, and (b) payment of the purchase price of the shares of the Common Stock to be purchased on such exercise, in cash or by cashier’s or certified check.

This Warrant shall be deemed to have been exercised immediately prior to the close of business on the day of surrender of this Warrant for exercise in accordance with the foregoing provisions, and at such time the person or persons entitled to receive the shares of the Common Stock issuable upon exercise shall be treated for all purposes as the record holder or holders of the shares of the Common Stock at such time. As promptly as practicable on or after the exercise date, but in no event later than three business days, the Company shall issue and shall deliver to the Holder a certificate or certificates for the number of full shares of the Common Stock issuable upon exercise.

In case this Warrant is exercised in part only, upon such exercise the Company shall execute and deliver to the Holder thereof, at the expense of the Company, a new Warrant to purchase, in the aggregate, in the number of shares of the Common Stock covered by the unexercised portion of this Warrant.

7.                    Cashless Exercise . Notwithstanding anything contained herein to the contrary, the Holder may, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Exercise Price, elect instead to receive upon such exercise the “Net Number” of the shares of the Common Stock determined according to the following formula (a “Cashless Exercise”):

Net Number = (A x B) - (A x C)

B

For purposes of the foregoing formula:

A = The total number of the shares of the Common Stock with respect to which this Warrant is then being exercised.

B = The average of the closing sale price of the shares of the Common Stock (as reported by Bloomberg) on the five trading days immediately preceding the date of the Exercise Notice.

C = The Exercise Price then in effect for the applicable shares of the Common Stock at the time of such exercise.

8.                    Limitation on Exercise . The Holder (including any successor, transferee or assignee) shall not have the right to convert any portion of this Warrant to the extent that after giving effect to such exercise, the Holder (together with the Holder’s affiliates) would beneficially own in excess of 9.99% (the “Maximum Percentage”) of the number of shares of the Common Stock of the Company outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the number of shares of the Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of the Common Stock issuable upon conversion of this Warrant with respect to which the determination of such sentence is being made, but shall exclude the number of shares of the Common Stock which would be issuable upon (i) exercise of the remaining, non-exercised portion of this Warrant beneficially owned by the Holder or any of its affiliates and

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(ii) exercise of the unexercised or non-converted portion of any other securities of the Company (including, without limitation, any other notes or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this paragraph, in determining the number of outstanding shares of the Common Stock, the Holder may rely on the number of outstanding shares of the Common Stock as reflected in (x) the Company’s most recent Form 10-K, Form 10-Q or Form 8-K, as the case may be, (y) a more recent public announcement by the Company, or (z) any other notice by the Company or the Transfer Agent setting forth the number of shares of the Common Stock outstanding. For any reason at any time, during regular business hours of the Company and upon the written request of the Holder, the Company shall within two business days confirm in writing to the Holder the number of shares of the Common Stock then outstanding. In any case, the number of outstanding shares of the Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its affiliates since the date as of which such number of outstanding shares of the Common Stock was reported. By written notice to the Company, the Holder may increase or decrease the Maximum Percentage to any other percentage specified in such notice; provided that (A) any such increase will not be effective until the 61st day after such notice is delivered to the Company, (B) any such increase or decrease will apply only to the Holder and not to any other holder of warrants, and (C) and in no case shall the Holder or its Affiliates acquire in excess of 9.999% of the outstanding shares of the Common Stock or the voting power of the Company.

9.                    Representations and Covenants of the Holder . The Holder represents and covenants that this Warrant has not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any other applicable securities law. This Warrant has been purchased for investment only and not with a view to distribution or resale, and may not be sold, pledged, hypothecated or otherwise transferred unless this Warrant or the shares of the Common Stock represented hereby are registered under the Securities Act, and any other applicable securities law, or the Company has received an opinion of counsel satisfactory to it that registration is not required. A legend in substantially the following form will be placed on any certificates or other documents evidencing the shares of the Common Stock to be issued upon any exercise of this Warrant:

THE SECURITIES REPRESENTED BY THIS INSTRUMENT OR DOCUMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER OR THE SUBMISSION TO THE COMPANY OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, THE SECURITIES LAW OF ANY STATE, OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.

Further, stop transfer instructions to the transfer agent of the shares of the Common Stock have been or will be placed with respect to the shares of the Common Stock so as to restrict the resale, pledge, hypothecation or other transfer thereof, subject to the further items hereof, including the provisions of the legend set forth in this paragraph.

10.                 Fractional Warrants . Upon the exercise of this Warrant, no fractions of shares of the Common Stock shall be issued; but fractional Warrants shall be delivered, entitling the Holder, upon surrender with other fractional Warrants aggregating one or more full shares of the Common Stock, to purchase such full shares of the Common Stock.

11.                 Registration Obligation . The Company has not agreed to file and the Company does not anticipate the filing of a registration statement under the Securities Act to allow a public resale of this Warrant or the resale of any shares of the Common Stock issued upon the exercise of this Warrant.

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12.                 Loss, Theft, Destruction of Warrant . Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant and, in the case of any such loss, theft, or destruction, upon receipt of indemnity reasonably satisfactory to the Company, or, in the case of any such mutilation, upon surrender and cancellation of this Warrant, the Company will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor.

13.                 Arbitration . Any controversy or claim arising out of or relating to this Warrant, or the breach, termination, or validity thereof, shall be settled by final and binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association (“AAA Rules”) in effect as of the effective date of this Warrant. The American Arbitration Association shall be responsible for (a) appointing a sole arbitrator, and (b) administering the case in accordance with the AAA Rules. The situs of the arbitration shall be Houston, Texas. Upon the application of either party to this Warrant, and whether or not an arbitration proceeding has yet been initiated, all courts having jurisdiction hereby are authorized to (x) issue and enforce in any lawful manner, such temporary restraining orders, preliminary injunctions and other interim measures of relief as may be necessary to prevent harm to a party’s interest or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Warrant, and (y) enter and enforce in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party’s interest or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Warrant. Any order or judgment rendered by the arbitrator may be entered and enforced by any court having competent jurisdiction.

14.                 Benefit . All the terms and provisions of this Warrant shall be binding upon and inure to the benefit of and be enforceable by the parties hereto, and their respective successors and permitted assigns.

15.                 Notices . All notices and other communications hereunder shall be in writing and shall be deemed to have been given (a) on the date they are delivered if delivered in person; (b) on the date initially received if delivered by facsimile transmission or email followed by registered or certified mail confirmation; (c) on the date delivered by an overnight courier service; or (d) on the third business day after it is mailed by registered or certified mail, return receipt requested with postage and other fees prepaid, if to the Company addressed to Mr. Richard D. Halden at ___________, Suite ____, Fort Worth, Texas ______, telephone (___) ________, and email rhalden@umedholdings.com; and if to the Holder addressed to Norman T. Reynolds, Esq. at Three Riverway, Suite 1800, Houston, Texas 77056, telecopy (713) 456-2509, and email nreynolds@ntrlawfirm.com. Any party hereto may change its address upon 10 days’ written notice to any other party hereto.

16.                 Construction . Words of any gender used in this Warrant shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, and vice versa, unless the context requires otherwise. In addition, the pronouns used in this Warrant shall be understood and construed to apply whether the party referred to is an individual, partnership, joint venture, corporation or an individual or individuals doing business under a firm or trade name, and the masculine, feminine and neuter pronouns shall each include the other and may be used interchangeably with the same meaning.

17.                 Headings . The headings used in this Warrant are for convenience and reference only and in no way define, limit, simplify or describe the scope or intent of this Warrant, and in no way effect or constitute a part of this Warrant.

18.                 Invalidity . In the event any one or more of the provisions contained in this Warrant shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect the other provisions of this Warrant.

19.                 Law Governing . This Warrant shall be construed and governed by the laws of the State of Texas, and all obligations hereunder shall be deemed performable in Tarrant County, Texas.

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IN WITNESS WHEREOF, this Warrant has been issued on October 31, 2015.

UMED HOLDINGS, INC.




By
Richard D. Halden, Chief Executive Officer  

 

 

 

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FORM OF ELECTION TO PURCHASE

(To be executed by the Holder to exercise the right to purchase shares of the Common Stock under the foregoing Warrant)

To: UMED HOLDINGS, INC.

In accordance with the Warrant enclosed with this Form of Election to Purchase, the undersigned hereby irrevocably elects to purchase ______________ shares of the Common Stock (the “Common Stock”), $0.0001 par value, of UMED Holdings, Inc. and encloses one Warrant and $0.___ for each share of the Common Stock being purchased or an aggregate of $________________ as a credit on amounts owed by the Company to the undersigned, or in cash or certified or official bank check or checks, which sum represents the aggregate exercise price together with any applicable taxes payable by the undersigned pursuant to the Warrant. Provided, however, in lieu of making the cash payment otherwise contemplated in payment of the Exercise Price, the undersigned hereby elects to receive upon such exercise the “Net Number” of the shares of the Common Stock pursuant to the Cashless Exercise provisions of the Warrant.

The undersigned requests that certificates for the shares of the Common Stock issuable upon this exercise be issued in the name of:

 

 

______________________________________________

 

______________________________________________

 

(Please print name and address)

 ______________________________________________

(Please insert Social Security or Tax Identification Number)

If the number of shares of the Common Stock issuable upon this exercise shall not be all of the shares of the Common Stock which the undersigned is entitled to purchase in accordance with the enclosed Warrant, the undersigned requests that a new Warrant evidencing the right to purchase the shares of the Common Stock not issuable pursuant to the exercise evidenced hereby be issued in the name of and delivered to: 

 

______________________________________________

 

 

 

(Please print name and address)

 

Dated Name of Holder:
   
(Print)
   
(By)
   
   
(Name)
   
(Title)
  Signature must conform in all respects to name of the Holder as specified on the face of the Warrant.

 

 

Exhibit 10.24

 

PROMISSORY NOTE

$36,000.00 March 8, 2016

After date, without grace, for value received, UMED HOLDINGS, INC., a Texas corporation having its principal office and place of business in Tarrant County, Texas (the “Maker”) hereby promises to pay to the order of PETER C. WILSON a resident of Tarrant County, Texas (the “Payee”) the original principal amount of THIRTY-SIX THOUSAND AND NO/100 DOLLARS ($36,000.00), with interest on the unpaid principal of this Note, from the date hereof, at the rate of five percent (5%) per annum. All payments hereunder are payable in lawful money of the United States of America at Maker’s office, 8851 Camp Bowie West, Suite 240, Fort Worth, TX 76116, or such other place as the Payee may designate in writing to the Maker.

Interest on this Note shall be computed for the actual number of days elapsed and on the basis of a year consisting of 360 days, unless the maximum legal interest rate would thereby be exceeded, in which event, to the extent necessary to avoid exceeding such maximum rate, interest shall be computed on the basis of the actual number of days elapsed in the applicable calendar year in which it accrued. It is the intention of the Maker and the Payee to conform strictly to applicable usury laws. It is therefore agreed that (i) the aggregate of all interest and other charges constituting interest under applicable law and contracted for, chargeable or receivable under this Note or otherwise in connection with this loan transaction, shall never exceed the maximum amount of interest, nor produce a rate in excess of the maximum contract rate of interest the Payee may charge the Maker under applicable law and in regard to which the Maker may not successfully assert the claim or defense of usury, and (ii) if any excess interest is provided for, it shall be deemed a mistake and the same shall be refunded to the Maker or credited on the unpaid principal balance hereof and this Note shall be automatically deemed reformed so as to permit only the collection of the maximum legal contract rate and amount of interest.

. Interest, computed upon the unpaid principal balance hereof, shall be due and payable prior to payment of any principal. The Maker shall only be obligated to make payments of interest and principal hereunder from time to time, as cash flow of the Maker is sufficient to make any payments hereunder, as determined by the Maker.

The Payee has the right, at any time after the date hereof, at its election, to convert all or part of the outstanding and unpaid principal and accrued interest of this Note into fully paid and non-assessable shares of the common stock of the Payee at a price per share equal to $0.15.

This Note may be prepaid in whole or in part at any time without premium or penalty by the Maker. Prepayments shall be applied first to accrued interest and then to principal. Any interest on any prepaid installment of principal shall immediately cease to accrue.

Any check, draft, money order or other instrument given in payment of all or any portion of this Note may be accepted by the Payee or any other holder hereof and handled in collection in the customary manner, but the same shall not constitute payment hereunder or diminish any rights of the Payee or any other holder hereof, except to the extent that actual cash proceeds of such instrument are unconditionally received by the Payee or any other holder hereof and applied to the indebtedness as herein provided.

This Note shall be governed by and construed in accordance with the laws of the State of Texas and applicable federal law.

UMED HOLDINGS, INC.
   
   
   
By
Ransom Jones, Chief Executive Officer

 

 

 

Exhibit 10.25

 

CONVERTIBLE PROMISSORY NOTE

Effective Date: April 1, 2016 U.S. $224,000.00

 

FOR VALUE RECEIVED, UMED Holdings, Inc. , a Texas corporation (“ Borrower ”), promises to pay to Tonaquint, Inc. , a Utah corporation, or its successors or assigns (“ Lender ”), $224,000.00 and any interest, fees, charges, and late fees on the date that is ten (10) months after the Purchase Price Date (as defined below) (the “ Maturity Date ”) in accordance with the terms set forth herein and to pay interest on the Outstanding Balance (as defined below) at the rate of ten percent (10%) per annum from the Purchase Price Date until the same is paid in full. This Convertible Promissory Note (this “ Note ”) is issued and made effective as of April 1, 2016 (the “ Effective Date ”). For purposes hereof, the “ Outstanding Balance ” of this Note means, as of any date of determination, the Purchase Price (as defined below), as reduced or increased, as the case may be, pursuant to the terms hereof for redemption, conversion, offset, or otherwise, plus any original issue discount (“ OID ”), the Transaction Expense Amount (as defined below), accrued but unpaid interest, collection and enforcements costs (including attorneys’ fees) incurred by Lender, transfer, stamp, issuance and similar taxes and fees related to Conversions (as defined below), and any other fees or charges (including without limitation late charges) incurred under this Note. This Note is issued pursuant to that certain Securities Purchase Agreement dated April 1, 2016, as the same may be amended from time to time (the “ Purchase Agreement ”), by and between Borrower and Lender. All interest calculations hereunder shall be computed on the basis of a 360-day year comprised of twelve (12) thirty (30) day months, shall compound daily and shall be payable in accordance with the terms of this Note. Certain capitalized terms used herein but not otherwise defined shall have the meaning ascribed thereto in the Purchase Agreement. Certain other capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

This Note carries an OID of $20,000.00. In addition, Borrower agrees to pay $4,000.00 to Lender to cover Lender’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of this Note (the “ Transaction Expense Amount ”), all of which amount is included in the initial principal balance of this Note. The purchase price for this Note and the Warrant (as defined in the Purchase Agreement) shall be $200,000.00 (the “ Purchase Price ”), computed as follows: $224,000.00 original principal balance, less the OID, less the Transaction Expense Amount. The Purchase Price shall be payable by Lender by wire transfer of immediately available funds. For purposes hereof, the term “ Purchase Price Date ” means the date the Purchase Price is delivered by Lender to Borrower.

1.                    Payment; Prepayment . Provided there is an Outstanding Balance, on each Installment Date (as defined below), Borrower shall pay to Lender an amount equal to the Installment Amount (as defined below) due on such Installment Date in accordance with Section 8. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal. Notwithstanding the foregoing, so long as Borrower has not received a Lender Conversion Notice (as defined below) or an Installment Notice (as defined below) from Lender where the applicable Conversion Shares have not yet been delivered and so long as no Event of Default has occurred since the Effective Date (whether declared by Lender or undeclared), then Borrower shall have the right, exercisable on not less than five (5) Trading Days prior written notice to Lender to prepay the Outstanding Balance of this Note, in full, in accordance with this Section 1. Any notice of prepayment hereunder (an “ Optional Prepayment Notice ”) shall be delivered to Lender at its 

   

 

registered address and shall state: (y) that Borrower is exercising its right to prepay this Note, and (z) the date of prepayment, which shall be not less than five (5) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “ Optional Prepayment Date ”), Borrower shall make payment of the Optional Prepayment Amount (as defined below) to or upon the order of Lender as may be specified by Lender in writing to Borrower. If Borrower exercises its right to prepay this Note, Borrower shall make payment to Lender of an amount in cash (the “ Optional Prepayment Amount ”) equal to 125% multiplied by the then Outstanding Balance of this Note. In the event Borrower delivers the Optional Prepayment Amount to Lender prior to the Optional Prepayment Date or without delivering an Optional Prepayment Notice to Lender as set forth herein without Lender’s prior written consent, the Optional Prepayment Amount shall not be deemed to have been paid to Lender until the Optional Prepayment Date. Moreover, in such event the Optional Prepayment Liquidated Damages Amount will automatically be added to the Outstanding Balance of this Note on the day Borrower delivers the Optional Prepayment Amount to Lender. In the event Borrower delivers the Optional Prepayment Amount without an Optional Prepayment Notice, then the Optional Prepayment Date will be deemed to be the date that is five (5) Trading Days from the date that the Optional Prepayment Amount was delivered to Lender. In addition, if Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to Lender within two (2) Trading Days following the Optional Prepayment Date, Borrower shall forever forfeit its right to prepay this Note.

2.                    Security . This Note is unsecured.

3.                    Lender Optional Conversion .

3.1.               Lender Conversion Price . Subject to adjustment as set forth in this Note, the conversion price for each Lender Conversion (as defined below) shall be $0.15 (the “ Lender Conversion Price ”).

3.2.               Lender Conversions . Lender has the right at any time on or after the date that is six (6) months from the Purchase Price Date until the Outstanding Balance has been paid in full, including without limitation (i) until any Optional Prepayment Date (even if Lender has received an Optional Prepayment Notice) or at any time thereafter with respect to any amount that is not prepaid, and (ii) during or after any Fundamental Default Measuring Period, at its election, to convert (each instance of conversion is referred to herein as a “ Lender Conversion ”) all or any part of the Outstanding Balance into shares (“ Lender Conversion Shares ”) of fully paid and non-assessable common stock, $0.0001 par value per share (“ Common Stock ”), of Borrower as per the following conversion formula: the number of Lender Conversion Shares equals the amount being converted (the “ Conversion Amount ”) divided by the Lender Conversion Price. Conversion notices in the form attached hereto as Exhibit A (each, a “ Lender Conversion Notice ”) may be effectively delivered to Borrower by any method of Lender’s choice (including but not limited to facsimile, email, mail, overnight courier, or personal delivery), and all Lender Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Lender Conversion Shares from any Lender Conversion to Lender in accordance with Section 9 below within five (5) Trading Days of Lender’s delivery of the Lender Conversion Notice to Borrower.

3.3.               Application to Installments . Notwithstanding anything to the contrary herein, including without limitation Section 8 hereof, Lender may, in its sole discretion, apply all or any portion of any Lender Conversion toward any Installment Conversion (as defined below), even if such Installment Conversion is pending, as determined in Lender’s sole discretion, by delivering written notice of such election (which notice may be included as part of the applicable Lender Conversion Notice) to Borrower at any date on or prior to the applicable Installment Date. In such event, Borrower may not elect to allocate such portion of the Installment Amount being paid pursuant to this Section 3.3 in the manner prescribed in Section 8.3; rather, Borrower must reduce the applicable Installment Amount by the Conversion Amount described in this Section 3.3.

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4.                    Defaults and Remedies .

4.1.               Defaults . The following are events of default under this Note (each, an “ Event of Default ”): (i) Borrower shall fail to pay any principal, interest, fees, charges, or any other amount when due and payable (or payable by Conversion) hereunder; or (ii) Borrower shall fail to deliver any Lender Conversion Shares in accordance with the terms hereof; or (iii) Borrower shall fail to deliver any Installment Conversion Shares (as defined below) or True-Up Shares (as defined below) in accordance with the terms hereof; or (iv) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; or (v) Borrower shall become insolvent or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any; or (vi) Borrower shall make a general assignment for the benefit of creditors; or (vii) Borrower shall file a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (viii) an involuntary proceeding shall be commenced or filed against Borrower; or (ix) Borrower shall default or otherwise fail to observe or perform any covenant, obligation, condition or agreement of Borrower contained herein or in any other Transaction Document, other than those specifically set forth in this Section 4.1; or (x) Borrower shall become delinquent in its filing requirements as a fully-reporting issuer registered with the SEC or shall fail to timely file all required quarterly and annual reports and any other filings that are necessary to enable Lender to sell Conversion Shares or True-Up Shares pursuant to Rule 144; or (xi) any representation, warranty or other statement made or furnished by or on behalf of Borrower to Lender herein, in any Transaction Document, or otherwise in connection with the issuance of this Note shall be false, incorrect, incomplete or misleading in any material respect when made or furnished; or (xii) the occurrence of a Fundamental Transaction without Lender’s prior written consent; provided, however, that if Borrower has repaid the entire Outstanding Balance prior to such Fundamental Transaction, then Lender’s consent shall not be required; or (xiii) Borrower shall fail to maintain the Share Reserve as required under the Purchase Agreement; or (xiv) Borrower effectuates a reverse split of its Common Stock without twenty (20) Trading Days prior written notice to Borrower; or (xv) any money judgment, writ or similar process shall be entered or filed against Borrower or any subsidiary of Borrower or any of its property or other assets for more than $100,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) calendar days unless otherwise consented to by Lender and not including any money judgment, writ or similar process filed or entered in connection with any promissory notes issued by Borrower prior to the date hereof in connection with Hawaiian real estate, provided that such notes are not amended following the date hereof; or (xvi) Borrower shall fail to deliver to Lender original signature pages to all Transaction Documents within five (5) Trading Days of the Purchase Price Date. Notwithstanding the foregoing, (A) the occurrence of an event described in Section 4.1(ii) or (iii) shall not be considered an Event of Default if delivery of the applicable Conversion Shares or True-Up Shares is made within five (5) days of the date such shares are required to be delivered; provided, however , that the foregoing right to cure may only be applied with respect to two (2) late deliveries of shares; and (B) the occurrence of an event described in Section 4.1(ix), (x), (xi), (xii), (xiii), (xiv), (xv), or (xvi) shall not be considered an Event of Default if such event is cured within ten (10) days of Lender’s delivery of written notice to Borrower informing Borrower of the occurrence of such event.

4.2.               Remedies . Upon the occurrence of any Event of Default, Borrower shall within one (1) Trading Day deliver written notice thereof via facsimile, email or reputable overnight courier (with next day delivery specified) (an “ Event of Default Notice ”) to Lender. At any time and from time to time after the earlier of Lender’s receipt of an Event of Default Notice and Lender becoming aware of the occurrence of any Event of Default, Lender may accelerate this Note by written notice to Borrower, with the Outstanding Balance becoming immediately due and payable in cash at the Mandatory Default Amount (as defined hereafter). Notwithstanding the foregoing, at any time following the occurrence of any Event of Default, Lender may, at its option, elect to increase the Outstanding Balance by applying the Default Effect (as defined below) (subject to the limitation set forth below) via written notice to Borrower without accelerating the Outstanding Balance, in which event the Outstanding Balance shall be increased as of the date of the occurrence of the applicable Event of Default pursuant to the Default Effect, but the Outstanding Balance shall not be immediately due and payable unless so declared by Lender (for the

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avoidance of doubt, if Lender elects to apply the Default Effect pursuant to this sentence, it shall reserve the right to declare the Outstanding Balance immediately due and payable at any time and no such election by Lender shall be deemed to be a waiver of its right to declare the Outstanding Balance immediately due and payable as set forth herein unless otherwise agreed to by Lender in writing). For purposes hereof, the “ Default Effect ” is calculated by multiplying the Outstanding Balance as of the date the applicable Event of Default occurred by (i) 15% for each occurrence of any Major Default, or (ii) 5% for each occurrence of any Minor Default, and then adding the resulting product to the Outstanding Balance as of the date the applicable Event of Default occurred, with the sum of the foregoing then becoming the Outstanding Balance under this Note as of the date the applicable Event of Default occurred; provided that the Default Effect may only be applied three (3) times hereunder with respect to Major Defaults and three (3) times hereunder with respect to Minor Defaults; and provided further that the Default Effect shall not apply to any Event of Default pursuant to Section 4.1(ii) hereof. Notwithstanding the foregoing, upon the occurrence of any Event of Default described in clauses (iv), (v), (vii), (vii) or (viii) of Section 4.1, the Outstanding Balance as of the date of acceleration shall become immediately and automatically due and payable in cash at the Mandatory Default Amount, without any written notice required by Lender. The “ Mandatory Default Amount ” means the greater of (i) the Outstanding Balance divided by the Installment Conversion Price (as defined below) on the date the Mandatory Default Amount is demanded, multiplied by the volume weighted average price (the “ VWAP ”) on the date the Mandatory Default Amount is demanded, or (ii) the Default Effect. At any time following the occurrence of any Event of Default, upon written notice given by Lender to Borrower, interest shall accrue on the Outstanding Balance beginning on the date the applicable Event of Default occurred at an interest rate equal to the lesser of 22% per annum or the maximum rate permitted under applicable law (“ Default Interest ”); provided, however , that no Default Interest shall accrue during the Fundamental Default Measuring Period (as defined below). Additionally, following the occurrence of any Event of Default, Borrower may, at its option, pay any Lender Conversion in cash instead of Lender Conversion Shares by paying to Lender on or before the applicable Delivery Date (as defined below) a cash amount equal to the number of Lender Conversion Shares set forth in the applicable Lender Conversion Notice multiplied by the highest intra-day trading price of the Common Stock that occurs during the period beginning on the date the applicable Event of Default occurred and ending on the date of the applicable Lender Conversion Notice. In connection with acceleration described herein, Lender need not provide, and Borrower hereby waives, any presentment, demand, protest or other notice of any kind, and Lender may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Lender at any time prior to payment hereunder and Lender shall have all rights as a holder of the Note until such time, if any, as Lender receives full payment pursuant to this Section 4.2. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. Nothing herein shall limit Lender’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Borrower’s failure to timely deliver Conversion Shares upon Conversion of the Notes as required pursuant to the terms hereof.

4.3.               Fundamental Default Remedies . Notwithstanding anything to the contrary herein, in addition to all other remedies set forth herein, the Fundamental Liquidated Damages Amount shall be added to the Outstanding Balance upon Lender’s delivery to Borrower of a notice (which notice Lender may deliver to Borrower at any time following the occurrence of a Fundamental Default) setting forth its election to declare a Fundamental Default and the Fundamental Liquidated Damages Amount that will be added to the Outstanding Balance.

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4.4.               Certain Additional Rights . Notwithstanding anything to the contrary herein, in the event Borrower fails to make any payment or otherwise to deliver any Conversion Shares as and when required under this Note, then (i) the Lender Conversion Price for all Lender Conversions occurring after the date of such failure to pay shall equal the lower of the Lender Conversion Price applicable to any Lender Conversion and the Market Price as of any applicable date of Conversion, and (ii) the true-up provisions of Section 11 below shall apply to all Lender Conversions that occur after the date of such failure to pay, provided that all references to the “Installment Notice” in Section 11 shall be replaced with references to a “Lender Conversion Notice” for purposes of this Section 4.4, all references to “Installment Conversion Shares” in Section 11 shall be replaced with references to “Lender Conversion Shares” for purposes of this Section 4.4, and all references to the “Installment Conversion Price” in Section 11 shall be replaced with references to the “Lender Conversion Price” for purposes of this Section 4.4.

4.5.               Cross Default . A breach or default by Borrower of any covenant or other term or condition contained in any Other Agreements (as defined below) shall, at the option of Lender, be considered an Event of Default under this Note, in which event Lender shall be entitled (but in no event required) to apply all rights and remedies of Lender under the terms of this Note. “ Other Agreements ” means, collectively, (a) all existing and future agreements and instruments between, among or by Borrower (or an affiliate), on the one hand, and Lender (or an affiliate), on the other hand, and (b) any financing agreement or a material agreement that affects Borrower’s ongoing business operations. For the avoidance of doubt, all existing and future loan transactions between Borrower and Lender and their respective affiliates will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to Lender.

5.                    Unconditional Obligation; No Offset . Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or conversions called for herein in accordance with the terms of this Note.

6.                    Waiver . No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

7.                    Rights Upon Issuance of Securities .

7.1.               Subsequent Equity Sales . Except with respect to Excluded Securities, if Borrower or any subsidiary thereof, as applicable, at any time this Note is outstanding, shall sell or issue any Common Stock to Lender or any third party for a price that is less than the then effective Lender Conversion Price, then such Lender Conversion Price shall be automatically reduced and only reduced to equal such lower issuance price. Except with respect to Excluded Securities, if Borrower or any subsidiary thereof, as applicable, at any time this Note is outstanding, shall sell or grant any option to any party to purchase, or sell or grant any right to reprice, or issue any Common Stock, preferred shares convertible into Common Stock, or debt, warrants, options or other instruments or securities to Lender or any third party which are convertible into or exercisable for shares of Common Stock (together herein referred to as “ Equity Securities ”), including without limitation any Deemed Issuance (as defined herein), at an effective price per share less than the then effective Lender Conversion Price (such issuance, together with any sale of Common Stock, is referred to herein as a “ Dilutive Issuance ”), then, the Lender Conversion Price shall be automatically reduced and only reduced to equal such lower effective price per share. For the

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avoidance of doubt, the Lender Conversion Price shall not be reduced pursuant to this Section 7.1 as the result of the issuance of any shares of Common Stock issued in connection with a financing transaction unless such shares of Common Stock are issued pursuant to a convertible debt instrument, warrant or any other variable price security or instrument. If the holder of any Equity Securities so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options, or rights per share which are issued in connection with such Dilutive Issuance, be entitled to receive shares of Common Stock at an effective price per share that is less than the Lender Conversion Price, such issuance shall be deemed to have occurred for less than the Lender Conversion Price on the date of such Dilutive Issuance, and the then effective Lender Conversion Price shall be reduced and only reduced to equal such lower effective price per share. Such adjustments described above to the Lender Conversion Price shall be permanent (subject to additional adjustments under this section), and shall be made whenever such Common Stock or Equity Securities are issued. Borrower shall notify Lender, in writing, no later than the Trading Day following the issuance of any Common Stock or Equity Securities subject to this Section 7.1, indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price, or other pricing terms (such notice, the “ Dilutive Issuance Notice ”). For purposes of clarification, whether or not Borrower provides a Dilutive Issuance Notice pursuant to this Section 7.1, upon the occurrence of any Dilutive Issuance, on the date of such Dilutive Issuance the Lender Conversion Price shall be lowered to equal the applicable effective price per share regardless of whether Borrower or Lender accurately refers to such lower effective price per share in any Installment Notice or Lender Conversion Notice.

7.2.               Adjustment of Lender Conversion Price upon Subdivision or Combination of Common Stock . Without limiting any provision hereof, if Borrower at any time on or after the Effective Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Lender Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. Without limiting any provision hereof, if Borrower at any time on or after the Effective Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Lender Conversion Price in effect immediately prior to such combination will be proportionately increased. Any adjustment pursuant to this Section 7.2 shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section 7.2 occurs during the period that a Lender Conversion Price is calculated hereunder, then the calculation of such Lender Conversion Price shall be adjusted appropriately to reflect such event.

7.3.               Other Events . In the event that Borrower (or any subsidiary) shall take any action to which the provisions hereof are not strictly applicable, or, if applicable, would not operate to protect Lender from dilution or if any event occurs of the type contemplated by the provisions of this Section 7 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then Borrower’s board of directors shall in good faith determine and implement an appropriate adjustment in the Lender Conversion Price so as to protect the rights of Lender, provided that no such adjustment pursuant to this Section 7.3 will increase the Lender Conversion Price as otherwise determined pursuant to this Section 7, provided further that if Lender does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then Borrower’s board of directors and Lender shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be final and binding and whose fees and expenses shall be borne by Borrower.

8.                    Borrower Installments .

8.1.               Installment Conversion Price . Subject to the adjustments set forth herein, the conversion price for each Installment Conversion (the “ Installment Conversion Price ”) shall be the lesser of (i) the Lender Conversion Price, and (ii) 70% (the “ Conversion Factor ”) of the average of the three (3) lowest VWAPs in the twenty (20) Trading Days immediately

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preceding the applicable Conversion (the “ Market Price ”), provided that if at any time the average of the three (3) lowest VWAPs in the twenty (20) Trading Days immediately preceding any date of measurement is below $0.05, then in such event the then-current Conversion Factor shall be reduced by 10% for all future Conversions. In addition to the Default Effect, if any Major Default occurs after the Effective Date and the Conversion Factor has not previously been reduced, the Conversion Factor shall automatically be reduced for all future Conversions by 5% for the first Major Default that occurs after the Effective Date. For example, the first time the average of the three (3) lowest VWAPs in the preceding twenty (20) Trading Days is below $0.05, then the Conversion Factor would be reduced from 70% to 60%. Alternatively, if the average of the three (3) lowest VWAPs in the preceding twenty (20) Trading Days is not below $0.05 but a Major Default pursuant to Section 4.1(iii) has occurred, then for purposes of this example the Conversion Factor would be reduced from 70% to 65%. Notwithstanding the foregoing, the Conversion Factor may not be reduced below 60%.

8.2.               Installment Conversions . Beginning on the date that is six (6) months after the Purchase Price Date and on the same day of each month thereafter until the Maturity Date (each, an “ Installment Date ”), Borrower shall pay to Lender the applicable Installment Amount due on such date, subject to the provisions of this Section 8. Payments of each Installment Amount may be made (a) in cash, or (b) by converting such Installment Amount into shares of Common Stock (“ Installment Conversion Shares ”, and together with the Lender Conversion Shares, the “ Conversion Shares ”) in accordance with this Section 8 (each an “ Installment Conversion ”, and together with Lender Conversions, a “ Conversion ”) per the following formula: the number of Installment Conversion Shares equals the portion of the applicable Installment Amount being converted divided by the Installment Conversion Price, or (c) by any combination of the foregoing, so long as the cash is delivered to Lender on the applicable Installment Date and the Installment Conversion Shares are delivered to Lender on or before the applicable Delivery Date. Notwithstanding the foregoing, Borrower will not be entitled to elect an Installment Conversion with respect to any portion of any applicable Installment Amount and shall be required to pay the entire amount of such Installment Amount in cash if on the applicable Installment Notice Due Date (defined below) there is an Equity Conditions Failure (as defined below), and such failure is not waived in writing by Lender. Moreover, in the event Borrower desires to pay all or any portion of any Installment Amount in cash, it must notify Lender in writing of such election and the portion of the applicable Installment Amount it elects to pay in cash not more than twenty-five (25) or less than fifteen (15) Trading Days prior to the applicable Installment Date. If Borrower fails to so notify Lender, it shall not be permitted to elect to pay any portion of such Installment Amount in cash unless otherwise agreed to by Lender in writing or proposed by Lender in an Installment Notice delivered by Lender to Borrower. Notwithstanding that failure to repay this Note in full by the Maturity Date is an Event of Default, the Installment Dates shall continue after the Maturity Date pursuant to this Section 8 until the Outstanding Balance is repaid in full, provided that Lender shall, in Lender’s sole discretion, determine the Installment Amount for each Installment Date after the Maturity Date.

8.3.               Allocation of Installment Amounts . Subject to Section 8.2 regarding an Equity Conditions Failure, for each Installment Date (each, an “ Installment Notice Due Date ”), Borrower may elect to allocate the amount of the applicable Installment Amount between cash and via an Installment Conversion, by email or fax delivery of a notice to Lender substantially in the form attached hereto as Exhibit B (each, an “ Installment Notice ”), provided, that to be effective, each applicable Installment Notice must be received by Lender not more than twenty-five (25) or less than fifteen (15) Trading Days prior to the applicable Installment Notice Due Date. If Lender has not received an Installment Notice within such time period, then Lender may prepare the Installment Notice and deliver the same to Borrower by fax or email. Following its receipt of such Installment Notice, Borrower may either ratify Lender’s proposed allocation in the applicable Installment Notice or elect to change the allocation by written notice to Lender by email or fax on or before 12:00 p.m. New York time on the applicable

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Installment Date, so long as the sum of the cash payments and the amount of Installment Conversions equal the applicable Installment Amount, provided that Lender must approve any increase to the portion of the Installment Amount payable in cash. If Borrower fails to notify Lender of its election to change the allocation prior to the deadline set forth in the previous sentence (and seek approval to increase the amount payable in cash), it shall be deemed to have ratified and accepted the allocation set forth in the applicable Installment Notice prepared by Lender. If neither Borrower nor Lender prepare and deliver to the other party an Installment Notice as outlined above, then Borrower shall be deemed to have elected that the entire Installment Amount be converted via an Installment Conversion. Borrower acknowledges and agrees that regardless of which party prepares the applicable Installment Notice, the amounts and calculations set forth thereon are subject to correction or adjustment because of error, mistake, or any adjustment resulting from an Event of Default or other adjustment permitted under the Transaction Documents (an “ Adjustment ”). Furthermore, no error or mistake in the preparation of such notices, or failure to apply any Adjustment that could have been applied prior to the preparation of an Installment Notice may be deemed a waiver of Lender’s right to enforce the terms of any Note, even if such error, mistake, or failure to include an Adjustment arises from Lender’s own calculation. Borrower shall deliver the Installment Conversion Shares from any Installment Conversion to Lender in accordance with Section 9 below on or before each applicable Installment Date.

9.                    Method of Conversion Share Delivery . On or before the close of business on the fifth (5 th ) Trading Day following the Installment Date or the fifth (5 th ) Trading Day following the date of delivery of a Lender Conversion Notice, as applicable (the “ Delivery Date ”), Borrower shall deliver or cause to be delivered to Lender or its broker (as designated in the Lender Conversion Notice), via reputable overnight courier, a certificate or certificates representing the aggregate number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender or its designee. For the avoidance of doubt, Borrower has not met its obligation to deliver Conversion Shares by the Delivery Date unless Lender or its broker, as applicable, has actually received the certificate representing the applicable Conversion Shares no later than the close of business on the relevant Delivery Date pursuant to the terms set forth above.

10.                 Conversion Delays . If Borrower fails to deliver Conversion Shares or True-Up Shares in accordance with the timeframes stated in Sections 3, 8, 9, or 11, as applicable, Lender, at any time prior to selling all of those Conversion Shares or True-Up Shares, as applicable, may rescind in whole or in part that particular Conversion attributable to the unsold Conversion Shares or True-Up Shares, with a corresponding increase to the Outstanding Balance (any returned Conversion Amount will tack back to the Purchase Price Date for purposes of determining the holding period under Rule 144). In addition, for each Lender Conversion, in the event that Lender Conversion Shares are not delivered by the fourth Trading Day (inclusive of the day of the Lender Conversion), a late fee equal to the greater of (a) $500.00 per day and (b) 2% of the applicable Lender Conversion Share Value rounded to the nearest multiple of $100.00 (but in any event the cumulative amount of such late fees for each Lender Conversion shall not exceed 200% of the applicable Lender Conversion Share Value) will be assessed for each day after the fifth Trading Day (inclusive of the day of the Lender Conversion) until Lender Conversion Share delivery is made; and such late fee will be added to the Outstanding Balance (such fees, the “ Conversion Delay Late Fees ”). For illustration purposes only, if Lender delivers a Lender Conversion Notice to Borrower pursuant to which Borrower is required to deliver 100,000 Lender Conversion Shares to Lender and on the Delivery Date such Lender Conversion Shares have a Lender Conversion Share Value of $20,000.00 (assuming a Closing Sale Price on the Delivery Date of $0.20 per share of Common Stock), then in such event a Conversion Delay Late Fee in the amount of $500.00 per day (the greater of $500.00 per day and $20,000.00 multiplied by 2%, which is $400.00) would be added to the Outstanding Balance of the Note until such Lender Conversion Shares are delivered to Lender. For purposes of this example, if the Lender Conversion Shares are delivered to Lender twenty (20) days after the applicable Delivery Date, the total Conversion Delay Late Fees that would be added to the Outstanding Balance would be $10,000.00 (20 days multiplied by $500.00 per day). If the Lender Conversion Shares are delivered to Lender one hundred (100) days after the applicable Delivery Date, the total Conversion Delay Late Fees that would be added to the Outstanding Balance would be $40,000.00 (100 days multiplied by $500.00 per day, but capped at 200% of the Lender Conversion Share Value).

  8  

 

 

11.                 True-Up . On the date that is twenty (20) Trading Days (a “ True-Up Date ”) from each date Borrower delivers Free Trading (as defined below) Installment Conversion Shares to Lender, there shall be a true-up where Borrower shall deliver to Lender additional Installment Conversion Shares (“ True-Up Shares ”) if the Installment Conversion Price as of the True-Up Date is less than the Installment Conversion Price used in the applicable Installment Notice. In such event, Borrower shall deliver to Lender within five (5) Trading Days of the True-Up Date (the “ True-Up Share Delivery Date ”) a number of True-Up Shares equal to the difference between the number of Installment Conversion Shares that would have been delivered to Lender on the True-Up Date based on the Installment Conversion Price as of the True-Up Date and the number of Installment Conversion Shares originally delivered to Lender pursuant to the applicable Installment Notice. If the Installment Conversion Price as of the True-Up Date is higher than the Installment Conversion Price set forth in the applicable Installment Notice and the number of Installment Conversion Shares delivered exceeds the number of True-Up Shares, then the excess will be applied toward the next Installment Conversion Shares to be issued by Borrower hereunder (unless the Outstanding Balance has been reduced to zero, in which case Lender will return such excess shares to Borrower). For the convenience of Borrower only, Lender may, in its sole discretion, deliver to Borrower a notice (pursuant to a form of notice substantially in the form attached hereto as Exhibit C ) informing Borrower of the number of True-Up Shares it is obligated to deliver to Lender as of any given True-Up Date, provided that if Lender does not deliver any such notice Borrower shall not be relieved of its obligation to deliver True-Up Shares pursuant to this Section 11. Notwithstanding the foregoing, if Borrower fails to deliver any required True-Up Shares on or before any applicable True-Up Share Delivery Date, then in such event the Outstanding Balance of this Note will automatically increase (under Lender’s and Borrower’s expectations that any such increase will tack back to the Purchase Price Date for purposes of determining the holding period under Rule 144) by a sum equal to the number of True-Up Shares deliverable as of the applicable True-Up Date multiplied by the Market Price for the Common Stock as of the applicable True-Up Date.

12.                 Ownership Limitation . Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents, if at any time Lender shall or would be issued shares of Common Stock under any of the Transaction Documents, but such issuance would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “ Maximum Percentage ”), then Borrower must not issue to Lender shares of the Common Stock which would exceed the Maximum Percentage. For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d) of the 1934 Act. The shares of Common Stock issuable to Lender that would cause the Maximum Percentage to be exceeded are referred to herein as the “ Ownership Limitation Shares ”. Borrower will reserve the Ownership Limitation Shares for the exclusive benefit of Lender. From time to time, Lender may notify Borrower in writing of the number of the Ownership Limitation Shares that may be issued to Lender without causing Lender to exceed the Maximum Percentage. Upon receipt of such notice, Borrower shall be unconditionally obligated to immediately issue such designated shares to Lender, with a corresponding reduction in the number of the Ownership Limitation Shares. Notwithstanding the forgoing, the term “4.99%” above shall be replaced with “9.99%” at such time as the Market Capitalization of the Common Stock is less than $10,000,000.00. Notwithstanding any other provision contained herein, if the term “4.99%” is replaced with “9.99%” pursuant to the preceding sentence, such increase to “9.99%” shall remain at 9.99% until increased, decreased or waived by Lender as set forth below. By written notice to Borrower, Lender may increase, decrease or waive the Maximum Percentage as to itself but any such waiver will not be effective until the 61st day after delivery thereof. The foregoing 61-day notice requirement is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.

  9  

 

13.                 Payment of Collection Costs . If this Note is placed in the hands of an attorney for collection or enforcement prior to commencing arbitration or legal proceedings, or is collected or enforced through any arbitration or legal proceeding, or Lender otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note, then Borrower shall pay the costs incurred by Lender for such collection, enforcement or action including, without limitation, attorneys’ fees and disbursements. Borrower also agrees to pay for any costs, fees or charges of its transfer agent that are charged to Lender pursuant to any Conversion or issuance of shares pursuant to this Note.

14.                 Opinion of Counsel . In the event that an opinion of counsel is needed for any matter related to this Note, Lender shall have such opinion provided by its counsel.

15.                 Governing Law . This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Utah, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Utah. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.

16.                 Resolution of Disputes .

16.1.            Arbitration of Disputes . By its acceptance of this Note, each party agrees to be bound by the Arbitration Provisions set forth as an Exhibit to the Purchase Agreement.

16.2.            Calculation of Disputes . Notwithstanding the Arbitration Provisions, in the case of a dispute as to any Calculations (as defined in the Purchase Agreement), such dispute will be resolved in the manner set forth in the Purchase Agreement.

17.                 Cancellation . After repayment or conversion of the entire Outstanding Balance (including without limitation delivery of True-Up Shares pursuant to the payment of the final Installment Amount, if applicable), this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.

18.                 Amendments . The prior written consent of both parties hereto shall be required for any change or amendment to this Note.

19.                 Assignments . Borrower may not assign this Note without the prior written consent of Lender. This Note and any shares of Common Stock issued upon conversion of this Note may be offered, sold, assigned or transferred by Lender without the consent of Borrower.

20.                 Time of the Essence . Time is expressly made of the essence with respect to each and every provision of this Note and the documents and instruments entered into in connection herewith.

21.                 Notices . Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with the subsection of the Purchase Agreement titled “Notices.”

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22.                 Liquidated Damages . Lender and Borrower agree that in the event Borrower fails to comply with any of the terms or provisions of this Note, Lender’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to predict future interest rates, future share prices, future trading volumes and other relevant factors. Accordingly, Lender and Borrower agree that any fees, balance adjustments, default interest or other charges assessed under this Note are not penalties but instead are intended by the parties to be, and shall be deemed, liquidated damages (under Lender’s and Borrower’s expectations that any such liquidated damages will tack back to the Closing Date for purposes of determining the holding period under Rule 144).

[ Remainder of page intentionally left blank; signature page follows ]

 

 

 

 

 

 

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IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of the Effective Date.

BORROWER:

UMED Holdings, Inc.

 

 

By: _________________________

Name: _______________________

Title: _______________________

 

ACKNOWLEDGED, ACCEPTED AND AGREED:

LENDER:

Tonaquint, Inc.

 

 

 

By: _________________________

John M. Fife, President

 

 

 

 

[ Signature Page to Convertible Promissory Note ]

   

 

ATTACHMENT 1

DEFINITIONS

 

For purposes of this Note, the following terms shall have the following meanings:

A1.               Adjusted Outstanding Balance ” means the Outstanding Balance of this Note as of the date the applicable Fundamental Default occurred less any Conversion Delay Late Fees included in such Outstanding Balance.

A2.               Approved Stock Plan ” means any stock option plan which has been approved by the board of directors of Borrower, pursuant to which Borrower’s securities may be issued to any employee, officer or director for services provided to Borrower.

A3.               Closing Bid Price ” and “ Closing Sale Price ” means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on its principal market, as reported by Bloomberg, or, if its principal market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if its principal market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in “OTC Pink” by Pink OTC Markets Inc. (formerly Pink Sheets LLC), and any successor thereto. If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutually determined by Lender and Borrower. If Lender and Borrower are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 16.2. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

A4.               Deemed Issuance ” means an issuance of Common Stock that shall be deemed to have occurred on the latest possible permitted date pursuant to the terms hereof or any applicable Warrant in the event Borrower fails to deliver Conversion Shares as and when required pursuant to Sections 3 or 8 of the Note or Warrant Shares (as defined in the Purchase Agreement) as and when required pursuant to the Warrant. For the avoidance of doubt, if Borrower has elected or is deemed under Section 8.3 to have elected to pay an Installment Amount in Installment Conversion Shares and fails to deliver such Installment Conversion Shares, such failure shall be considered a Deemed Issuance hereunder even if an Equity Conditions Failure exists at that time or other relevant date of determination.

A5.               Equity Conditions Failure ” means that any of the following conditions has not been satisfied during any applicable Equity Conditions Measuring Period (as defined below): (i) with respect to the applicable date of determination all of the Conversion Shares are freely tradable under Rule 144 or without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of this Note); (ii) on each day during the period beginning one month prior to the applicable date of determination and ending on and including the applicable date of determination (the “ Equity Conditions Measuring Period ”), the Common Stock is listed or designated for quotation (as applicable) on any of The New York Stock Exchange, NYSE Amex, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, the OTC Bulletin Board, the OTCQX or the OTCQB (each, an “ Eligible Market ”) and shall not have been suspended from trading on any such Eligible Market (other than suspensions of not more than two (2) Trading Days and occurring prior to the applicable date of determination due to business announcements by Borrower); (iii) on each day during the Equity Conditions Measuring Period, Borrower shall have delivered all shares of Common Stock issuable upon conversion of this Note on a timely basis as set forth in Section 9 hereof and all other shares of capital stock required to be delivered by Borrower on a timely basis as set forth in the other Transaction Documents; (iv) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating Section 12 hereof (Lender acknowledges that Borrower shall be entitled to assume that this condition has been met for all purposes hereunder absent written notice from Lender); (v) any shares of Common Stock to be issued in connection with the

   

 

event requiring determination may be issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable); (vi) on each day during the Equity Conditions Measuring Period, no public announcement of a pending, proposed or intended Fundamental Transaction shall have occurred which has not been abandoned, terminated or consummated; (vii) Borrower shall have no knowledge of any fact that would reasonably be expected to cause any of the Conversion Shares to not be freely tradable without the need for registration under any applicable state securities laws (in each case, disregarding any limitation on conversion of this Note); (viii) on each day during the Equity Conditions Measuring Period, Borrower otherwise shall have been in material compliance with each, and shall not have breached any, term, provision, covenant, representation or warranty of any Transaction Document; (ix) without limiting clause (viii) above, on each day during the Equity Conditions Measuring Period, there shall not have occurred an Event of Default or an event that with the passage of time or giving of notice would constitute an Event of Default; (x) on each Installment Notice Due Date and each Installment Date, the average and median daily dollar volume of the Common Stock on its principal market for the previous twenty (20) Trading Days shall be greater than $5,000.00; and (xi) the ten (10) day average VWAP of the Common Stock is greater than $0.05.

A6.               Excluded Securities ” means (i) any shares of Common Stock, options, or convertible securities issued or issuable in connection with any Approved Stock Plan; provided that the option term, exercise price or similar provisions of any issuances pursuant to such Approved Stock Plan are not amended, modified or changed on or after the Purchase Price Date; and (ii) any shares of Common Stock issued in connection with a financing transaction other than shares of Common Stock issued pursuant to a convertible debt instrument, warrant or any other variable price security or instrument.

A7.               Free Trading ” means that (a) the shares or certificate(s) representing the applicable shares of Common Stock have been cleared and approved for public resale by the compliance departments of Lender’s brokerage firm and the clearing firm servicing such brokerage, and (b) such shares are held in the name of the clearing firm servicing Lender’s brokerage firm and have been deposited into such clearing firm’s account for the benefit of Lender.

A8.               Fundamental Default ” means that Borrower either fails to pay the entire Outstanding Balance to Lender on or before the Maturity Date or fails to pay the Mandatory Default Amount within three (3) Trading Days of the date Lender delivers any notice of acceleration to Borrower pursuant to Section 4.2 of this Note.

A9.               Fundamental Default Conversion Value ” means the Adjusted Outstanding Balance multiplied by the highest Fundamental Default Ratio that occurs during the Fundamental Default Measuring Period.

A10.            Fundamental Default Measuring Period ” means a number of months equal to the Outstanding Balance as of the date the Fundamental Default occurred divided by the Installment Amount, with such number being rounded up to the next whole month; provided, however , that if Borrower repays the entire Outstanding Balance prior to the conclusion of the Fundamental Default Measuring Period, the Fundamental Default Measuring Period shall end on the date of repayment. For illustration purposes only, if the Outstanding Balance were equal to $125,000 as of the date a Fundamental Default occurred and if the Installment Amount were $28,500, then the Fundamental Default Measuring Period would equal five (5) months calculated as follows: $125,000/$28,500 equals 4.386, rounded up to five (5).

A11.            Fundamental Default Ratio ” means a ratio that will be calculated on each Trading Day during the Fundamental Default Measuring Period by dividing the Closing Sale Price for the Common Stock on a given Trading Day by the Lender Conversion Price (as adjusted pursuant to the terms hereof) in effect for such Trading Day.

A12.            Fundamental Liquidated Damages Amount ” means the greater of (i) (a) the quotient of the Outstanding Balance on the date the Fundamental Default occurred divided by the then-current Conversion Factor, minus (b) the Outstanding Balance on the date the Fundamental Default occurred, or (ii) the Fundamental Default Conversion Value.

A13.            Fundamental Transaction ” means that (y) (i) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, consolidate or merge with or into (whether or not Borrower or any of its subsidiaries is the surviving corporation) any other person or entity, or (ii) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other person or entity, or (iii) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, allow any other person or entity to make a purchase, tender or exchange offer

   

 

that is accepted by the holders of more than 50% of the outstanding shares of voting stock of Borrower (not including any shares of voting stock of Borrower held by the person or persons making or party to, or associated or affiliated with the persons or entities making or party to, such purchase, tender or exchange offer), or (iv) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other person or entity whereby such other person or entity acquires more than 50% of the outstanding shares of voting stock of Borrower (not including any shares of voting stock of Borrower held by the other persons or entities making or party to, or associated or affiliated with the other persons or entities making or party to, such stock or share purchase agreement or other business combination), or (v) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, reorganize, recapitalize or reclassify the Common Stock, other than an increase in the number of authorized shares of Borrower’s Common Stock, or (z) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding voting stock of Borrower.

A14.            Installment Amount ” means the greater of (i) $44,800.00 ($224,000.00 ÷ 5), plus the sum of any accrued and unpaid interest as of the applicable Installment Date and accrued, and unpaid late charges, if any, under this Note as of the applicable Installment Date, and any other amounts accruing or owing to Lender under this Note as of such Installment Date, and (ii) the then Outstanding Balance divided by the number of Installment Dates remaining prior to the Maturity Date.

A15.            Lender Conversion Share Value ” means the product of the number of Lender Conversion Shares deliverable pursuant to any Lender Conversion multiplied by the Closing Sale Price of the Common Stock on the Delivery Date for such Lender Conversion.

A16.            Major Default ” means any Event of Default occurring under Sections 4.1(i), (iii), (iv), (xi), or (xiv) of this Note.

A17.            Market Capitalization of the Common Stock ” shall mean the product equal to (a) the average VWAP of the Common Stock for the immediately preceding fifteen (15) Trading Days, multiplied by (b) the aggregate number of outstanding shares of Common Stock as reported on Borrower’s most recently filed Form 10-Q or Form 10-K.

A18.            Minor Default ” means any Event of Default that is not a Major Default or a Fundamental Default.

A19.            Optional Prepayment Liquidated Damages Amount ” means an amount equal to the difference between (a) the product of (i) the number of shares of Common Stock obtained by dividing (1) the applicable Optional Prepayment Amount by (2) the Lender Conversion Price as of the date Borrower delivered the applicable Optional Prepayment Amount to Lender, multiplied by (ii) the Closing Sale Price of the Common Stock on the date Borrower delivered the applicable Optional Prepayment Amount to Lender, and (b) the applicable Optional Prepayment Amount paid by Borrower to Lender. For illustration purposes only, if the applicable Optional Prepayment Amount were $50,000.00, the Lender Conversion Price as of the date the Optional Prepayment Amount was paid to Lender was equal to $0.75 per share of Common Stock, and the Closing Sale Price of a share of Common Stock as of such date was equal to $1.00, then the Optional Prepayment Liquidated Damages Amount would equal $16,666.67 computed as follows: (a) $66,666.67 (calculated as (i) (1) $50,000.00 divided by (2) $0.75 multiplied by (ii) $1.00) minus (b) $50,000.00.

A20.            Trading Day ” shall mean any day on which the Common Stock is traded or tradable for any period on the Common Stock’s principal market, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.

 

   

 

EXHIBIT A

Tonaquint, Inc.

303 East Wacker Drive, Suite 1040

Chicago, Illinois 60601

 

UMED Holdings, Inc. Date: __________________

Attn: Kevin Bentley

6628 Bryant Irvin Road, Suite 250

Fort Worth, Texas 76132

 

LENDER CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to UMED Holdings, Inc., a Texas corporation (the “ Borrower ”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on April 1, 2016 (the “ Note ”), that Lender elects to convert the portion of the Note balance set forth below into fully paid and non-assessable shares of Common Stock of Borrower as of the date of conversion specified below. Said conversion shall be based on the Lender Conversion Price set forth below. In the event of a conflict between this Lender Conversion Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Lender Conversion Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

A. Date of Conversion: ____________
B. Lender Conversion #: ____________
C. Conversion Amount: ____________
D. Lender Conversion Price: _______________
E. Lender Conversion Shares: _______________ (C divided by D)
F. Remaining Outstanding Balance of Note: ____________*

* Subject to adjustments for corrections, defaults, interest and other adjustments permitted by the Transaction Documents (as defined in the Purchase Agreement), the terms of which shall control in the event of any dispute between the terms of this Lender Conversion Notice and such Transaction Documents.

 

$_________________ of the Conversion Amount converted hereunder shall be deducted from the Installment Amount(s) relating to the following Installment Date(s): __________________________________________.

 

Please deliver, via reputable overnight courier, a certificate representing Lender Conversion Shares to:

 

Name: _____________________________________

Address: _____________________________________

_____________________________________

 

Sincerely,

 

Lender:

 

Tonaquint, Inc.

 

 

By: _________________________

John M. Fife, President

   

 

EXHIBIT B

UMED Holdings, Inc.

6628 Bryant Irvin Road, Suite 250

Fort Worth, Texas 76132

 



Tonaquint, Inc. Date: _____________

Attn: John Fife

303 East Wacker Dr., Suite 1040

Chicago, Illinois 60601

INSTALLMENT NOTICE

The above-captioned Borrower hereby gives notice to Tonaquint, Inc., a Utah corporation (the “ Lender ”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on April 1, 2016 (the “ Note ”), of certain Borrower elections and certifications related to payment of the Installment Amount of $_________________ due on ___________, 201_ (the “ Installment Date ”). In the event of a conflict between this Installment Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Installment Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

INSTALLMENT CONVERSION AND CERTIFICATIONS

AS OF THE INSTALLMENT DATE

 

A. INSTALLMENT CONVERSION
A. Installment Date: ____________, 201_
B. Installment Amount: ____________
C. Portion of Installment Amount Borrower elected to pay in cash: ____________
D. Portion of Installment Amount to be converted into Common Stock: ____________ (B minus C)
E. Installment Conversion Price: _______________ (lower of (i) Lender Conversion Price in effect and (ii) Market Price as of Installment Date)
F. Installment Conversion Shares: _______________ (D divided by E)
G. Remaining Outstanding Balance of Note: ____________ *

* Subject to adjustments for corrections, defaults, interest and other adjustments permitted by the Transaction Documents (as defined in the Purchase Agreement), the terms of which shall control in the event of any dispute between the terms of this Installment Notice and such Transaction Documents.

 

B. EQUITY CONDITIONS CERTIFICATION
1. Market Capitalization of the Common Stock:________________

(Check One)

2. _________ Borrower herby certifies that no Equity Conditions Failure exists as of the Installment Date.
3. _________ Borrower hereby gives notice that an Equity Conditions Failure has occurred and requests a waiver from Lender with respect thereto. The Equity Conditions Failure is as follows:

   

 

______________________________________________________________________________________________

______________________________________________________________________________________________

______________________________________________________________________________________________

Sincerely,

Borrower:

UMED Holdings, Inc.

 

By: __________________

Name: __________________

Title: __________________

 

 

   

 

EXHIBIT C

 

Tonaquint, Inc.

303 East Wacker Drive, Suite 1040

Chicago, Illinois 60601

 

UMED Holdings, Inc. Date: __________________

Attn: _________________

6628 Bryant Irvin Road, Suite 250

Fort Worth, Texas 76132

TRUE-UP NOTICE

The above-captioned Lender hereby gives notice to UMED Holdings, Inc., a Texas corporation (the “ Borrower ”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on April 1, 2016 (the “ Note ”), of True-Up Conversion Shares related to _____________, 201_ (the “ Installment Date ”). In the event of a conflict between this True-Up Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of True-Up Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

TRUE-UP CONVERSION SHARES AND CERTIFICATIONS

AS OF THE TRUE-UP DATE

 

1. TRUE-UP CONVERSION SHARES
A. Installment Date: ____________, 201_
B. True-Up Date: ____________, 201_
C. Portion of Installment Amount converted into Common Stock: _____________
D. True-Up Conversion Price: _______________ (lower of (i) Lender Conversion Price in effect and (ii) Market Price as of True-Up Date)
E. True-Up Conversion Shares: _______________ (C divided by D)
F. Installment Conversion Shares delivered: ________________
G. True-Up Conversion Shares to be delivered: ________________ (only applicable if E minus F is greater than zero)
2. EQUITY CONDITIONS CERTIFICATION (Section to be completed by Borrower)
A. Market Capitalization of the Common Stock:________________

(Check One)

B. _________ Borrower herby certifies that no Equity Conditions Failure exists as of the applicable True-Up Date.

 

   

 

 

 

 

C. _________ Borrower hereby gives notice that an Equity Conditions Failure has occurred and requests a waiver from Lender with respect thereto. The Equity Conditions Failure is as follows:

______________________________________________________________________________________________

______________________________________________________________________________________________

______________________________________________________________________________________________

Sincerely,

 

Lender:

 

Tonaquint, Inc.

 

 

 

By: _________________________

John M. Fife, President

 

 

ACKNOWLEDGED AND CERTIFIED BY:

Borrower:

UMED Holdings, Inc.

 

By: __________________

Name: __________________

Title: __________________

 

   

 

EXHIBIT D

 

UMED Holdings, Inc.

6628 Bryant Irvin Road, Suite 250

Fort Worth, Texas 76132

 

 

Tonaquint, Inc. Date: _____________

Attn: John Fife

303 East Wacker Dr., Suite 1040

Chicago, Illinois 60601

 

NOTICE OF EXERCISE

OF BORROWER OFFSET RIGHT

 

The above-captioned Borrower hereby gives notice to Tonaquint, Inc., a Utah corporation (the “ Lender ”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on April 1, 2016 (the “ Note ”), of Borrower’s election to exercise the Borrower Offset Right as set forth below. In the event of a conflict between this Notice of Exercise of Borrower Offset Right and the Note, the Note shall govern. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

 

A. Effective Date of Offset: ____________, 201_
B. Amount of Offset: ____________
C. Investor Note(s) Being Offset: _______________

 

* Subject to adjustments for corrections, defaults, interest and other adjustments permitted by the Transaction Documents (as defined in the Purchase Agreement), the terms of which shall control in the event of any dispute between the terms of this Notice of Exercise of Borrower Offset Right and such Transaction Documents.

 

Sincerely,

Borrower:

UMED Holdings, Inc.

 

By: __________________

Name: __________________

Title: __________________

   

 

 

Exhibit 10.26

 

CONFIDENTIAL SEVERANCE AND RELEASE AGREEMENT

THIS CONFIDENTIAL SEVERANCE AND RELEASE AGREEMENT (this "Agreement") is made by and between UMED HOLDINGS, INC. ("UMED" or the "Company") and RANDY MOSELEY ("Mr. Moseley") (each, a "Party" and, collectively, the "Parties") and shall become and be effective and binding as of the expiration of the Revocation Period as defined below (the "Effective Date"). The Parties agree that this Agreement shall be signed by Mr. Mosely by November 1l, 2016. If not executed by Mr. Moseley by November 1l, 2016, this Agreement shall not be binding onto UMED.

1.   Termination of Employment and Separation . UMED and Mr. Moseley mutually acknowledge and agree that his employment with the Company (the "Employment Relationship") will be, has been or is hereby severed and terminated effective as of the date of UMED's filing or its Third Quarter for the year 2016 (the "Separation Date"), and that, as of the Separation Date, Mr. Moseley is not owed or entitled to, and will not make any claim for, and hereby waives any interest in or right to, any payment or compensation from the Company, except as provided hereunder. Mr. Moseley understands and agrees that all compensation, including all bonuses, equity grants (whether direct, restricted, contingent or optional) and all other benefits, including participation in any applicable health insurance plan, have ceased in accordance with the specific terms of the applicable benefit plans, except as provided hereunder. Mr. Moseley represents that as of the date on which he signs this Agreement, he is not or was not aware of any claims that he has, had or might have against the Company. Mr. Moseley acknowledges and agrees that he has relinquished and forfeited any and all right or claim he may have to any equity interest in UMED (whether direct, restricted, contingent or optional) and that any agreement to grant any such rights is hereby' terminated and void. UMED will not be liable for and will not pay for or reimburse to Mr. Moseley any travel or other expenses incurred from and after the Separation Date, unless expressly requested and approved in advance, in writing, by a duly authorized executive or officer of UMED.

2. Consideration .

(a) UMED shall pay to Mr. Moseley the amount of at least $5,000 per month, or more in the Company's sole discretion, for a period of three years, such payments to begin on or about November 30, 2016, and to be drawn against accrued compensation owed to Moseley, less all applicable taxes, withholdings and deductions (the "Severance Pay"), pursuant to UMED's standard salary payment schedule until fully paid.
(b) Notwithstanding the foregoing, entitlement to and receipt of the foregoing Severance Pay and other benefits is conditioned upon (i) Mr. Moseley complying in all ways with, and remaining in compliance with, all of the terms and conditions of this Agreement, including, without limitation, the provisions and covenants of Section 3 below, and (ii) Mr. Moseley not having revoked or rescinded this Agreement pursuant to Section 5 below. In the event Mr. Moseley revokes this Agreement after having received installments of Severance Pay, Mr. Moseley shall reimburse and repay to UMED the full amount and value of all such installments at the time of and together with such revocation.

 

 

(c) Mr. Moseley acknowledges that he would not be entitled to the Severance Pay in the absence of his entering into and performing under the terms of this Agreement; that the Severance Pay constitute a substantial economic benefit to Mr. Moseley; and that the Severance Pay constitute good and valuable consideration for the various commitments undertaken by Mr. Moseley under this Agreement.

3. Covenants .

(a) Within thirty (30) days of the Effective Date, Mr. Moseley shall return or cause to be returned approximately 6,455,000 UMED shares to the Company.
(b) Not later than the Separation Date, Mr. Moseley shall return to UMED any and all of UMED's property, including all equipment and electronics or communication devices; all UMED confidential, proprietary or trade secret information; and all copies, reproductions and excerpts of the same. If Mr. Moseley should discover any UMED property inadvertently in his possession after the Separation Date, Mr. Moseley shall immediately return the same to UMED care of its CEO, without keeping any copies, reproductions, or excerpts thereof.
(b)

(c) Mr. Moseley shall not make any statements that are disparaging of UMED, any affiliate of UMED, their respective businesses, or any of their affiliates, employees, officers, directors, shareholders, members, partners, managers, agents, customers, or representatives. UMED also agrees to not make any statements that are disparaging of Mr. Moseley.

 

(d) Mr. Moseley shall not disclose to any person, except as compelled by law with notice to and cooperation with UMED, any confidential, proprietary or trade secret information, and shall not disclose the terms or substance of negotiations of this Agreement or the previously executed Term Sheet, to any person or entity except his legal advisor for purposes of seeking counsel concerning this Agreement or the Employment Relationship and to members of his family and his financial advisors having a need to know such terms.

 

(e) During the Severance Period, Mr. Moseley shall reasonably cooperate with UMED, its auditors, attorneys, agents, representatives, directors, officers and employees with respect to financial, legal or other business matters or affairs that have arisen or may arise, whether potential or actual, including participation in attorney conferences, depositions, mediations, interviews and the like, as requested by the Company. Mr. Moseley shall reasonably cooperate with UMED to accomplish a smooth transition of his duties and responsibilities and shall facilitate transitions of all third-party relationships for which Mr. Moseley was responsible as of the Separation Date. Without limiting the generality of the foregoing, Mr. Moseley shall provide reasonable assistance to UMED and/or its designees during the Severance Period in the performance of any audits and/or preparation of periodic filings with the Securities and Exchange Commission.

 

 

(f) On or before November 1l, 2016, Mr. Moseley hereby agrees to resign as a Director of UMED. Contemporaneous with the execution of this Agreement, Mr. Moseley will send a resignation letter to UMED confirming his resignation as Director. Immediately after the Separation Date, Mr. Moseley hereby resigns as an officer, corporate secretary, administrator or other legal representative or responsible person of UMED or any affiliate of UMED and Mr. Moseley shall not, from and after the Separation Date represent or hold himself out in such capacity. To this end, Mr. Moseley hereby so resigns from any and all such positions and agrees not to hold himself out as a representative of UMED.
(g) During the Severance Period, Mr. Moseley shall not, directly or indirectly, as principal, agent, independent contractor, consultant, director, manager, officer, employee, employer, advisor (whether paid or unpaid), stockholder, member, partner or in any other individual or representative capacity whatsoever, either for his own benefit or for the benefit of any other person or entity: (i) engage or invest in, own, manage, operate, control or participate in the ownership, management, operation or control of, be employed by, or render services or advice to, any business or enterprise engaged in the same field of endeavor as that of the Company or any business or enterprise that sells or offers for sale any of the products or services offered for sale by the Company as of the Separation Date; provided, however, that Mr. Moseley may invest in the securities of any enterprise (but without otherwise participating in the activities of such enterprise) if (x) such securities are listed on any national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934 and (y) Mr. Moseley is not the beneficial owner of more than five percent (5%) of the outstanding capital stock of such enterprise; (ii) solicit, divert or take away any suppliers or vendors of products sold for resale by the Company, customers or clients of the Company; or (iii) either (A) hire, attempt to hire, contact or solicit with respect to hiring, any employee of the Company, (B) induce or otherwise counsel, advise or encourage any employee of the Company to leave the employment of the Company, or (C) induce any representative or agent of the Company to terminate or modify its relationship with the Company. Nothing in the foregoing, however, prevents Mr. Moseley from (a) acting as a reference for any employee of the Company or (b) from developing, coordinating, overseeing or managing any job postings for any new employer he may have or (c) otherwise engaging in any routine HR job responsibilities he may have with a new employer that may involve the hiring of any employee of the Company that Mr. Moseley did not directly solicit.l return or cause to be returned approximately 6,455,000 UMED shares to the Company.

 

 

 

 

 

4.                   Release . In exchange for the consideration, promises, and covenants contained in this Agreement, Mr. Moseley, on behalf of himself and his respective agents, representatives, attorneys, assigns, heirs, executors and administrators, hereby releases and forever discharges UMED and all of its past, present and future owners, partners, shareholders, parent companies, subsidiaries, divisions, related entities, affiliates, and insurers, and each of their respective past, present and future directors, officers, shareholders, agents, representatives, employees, insurers, attorneys, predecessors, successors, heirs, and assigns, and any and all of them (collectively, the Released Parties"), from any and all liability, actions, causes of action, claims, charges, complaints, demands, grievances, obligations, losses, damages, injuries and legal responsibilities, of any type whatsoever, whether known or unknown, unforeseen, unanticipated, unsuspected or latent, which Mr. Moseley, now owns or holds, or has at any time heretofore owned or held, or may at any time hereafter own or hold, by reason of any matter arising from any cause whatsoever prior to the Separation Date that are based upon, relate to or arise out of Mr. Moseley's employment with UMED or separation or termination of employment with UMED, whether in law, equity, contract or tort, including, without limitation, under the Fair Labor Standards Act, National Labor Relations Act, Labor Management Relations Act, Employee Retirement Income Security Act, Title V Il of the Civil Rights Act of 1964, as amended, Civil Rights Act of 1991, Americans with Disabilities Act, as amended, Age Discrimination in Employment Act, as amended by the Older Workers Benefit Protection Act of 1990, Rehabilitation Act of 1973, Executive Order 1 1246, Family and Medical Leave Act, SarbanesOxley Act of 2002, Worker Adjustment and Retraining Notification Act, Health Insurance Portability and Accountability Act of 1996, any amendments to any of the foregoing statutes, or under any other federal, state, municipal or other governmental statute, regulation, ordinance or order, including, without limitation, under any and all applicable state and federal laws.

In consideration of Mr. Moseley's promises and obligations under this Agreement, the Released Parties release Mr. Moseley from any and all liability, actions, causes of action, claims, charges, complaints, demands, grievances, obligations, losses, damages, injuries and legal responsibilities, of any type whatsoever, whether known or unknown, unforeseen, unanticipated, unsuspected or latent, which any of the Released Parties, now own or hold, or have at any time heretofore owned or held, or may at any time hereafter own or hold, by reason of any matter arising from any cause whatsoever prior to the Separation Date that are based upon, relate to or arise out of Mr. Moseley's employment with UMED or separation or termination of employment with UMED, whether in law, equity, contract or tort.

 

 

 

 

Notwithstanding the foregoing releases, neither Mr. Moseley nor the Released Parties are releasing each other from any obligations created under the Agreement or from performance of this Agreement. UMED further acknowledges and agrees nothing in this Agreement waives or releases any rights Mr. Moseley may have to unemployment compensation.

5.                   Age Discrimination Claim Waiver . Mr. Moseley expressly waives and relinquishes any and all rights or benefits afforded by the Age Discrimination in Employment Act, 29 U.S.C. section 621 eL seq. ("ADEA"). Mr. Moseley expressly agrees that this Agreement satisfies the requirements of the Older Workers' Benefit Protection Act, 29 U.S.C. SS 626(f), for a valid waiver. In connection with such waiver and relinquishment:

(a) Mr. Moseley acknowledges that, by this writing, he has been advised to seek the guidance and advice of legal counsel in considering the terms and effect of this Agreement, and to the extent desired he has done so, and that he has had a fulland fair opportunity to consult with an attorney prior to executing this Agreement;

(b) Mr. Moseley further acknowledges that he has been afforded the opportunity to consider this Agreement for a reasonable period of twenty-one (21) days, that he has carefully read it, that he understands completely its contents, and that he has executed the same either on or before the 21st day knowingly and voluntarily and of his own free will, act, and deed;

 

(c) For a period of seven (7) days following Mr. Moseley's signature on this Agreement (the "Revocation Period"), he may revoke this Agreement, and this Agreement shall not become effective or enforceable until the Revocation Period has expired. Mr. Moseley's revocation must be in writing and received by UMED within the Revocation Period in order to be effective; and
(d) If Mr. Moseley does not revoke this Agreement within the Revocation Period, Mr. Moseley's acceptance of this Agreement shall become binding and enforceable. Thereafter, Mr. Moseley shall not have any right to revoke his waiver of any claim under the ADEA and it will be binding upon Mr. Moseley and UMED.

6. Notice . Unless otherwise set forth herein, all notices, requests, consents, and other communications required or permitted hereunder shall be in writing and shall be mailed by overnight, registered or certified mail (return receipt requested), addressed as follows:

If to UMED:

UMED Holdings, Inc.

8851 Camp Bowie West

Suite 240

Fort Worth, TX 76116

Attention: Ransom Jones

 

 

 

With a copy to:

Bell Nunnally & Martin

3232 McKinney Ave., Suite 1400

Dallas, Texas 75204

Attention: Jeffrey Ansley

If to Mr. Moseley:

At his home address as reflected in UMED's records as of the Separation Date, or as otherwise provided by Mr. Moseley in accordance with this Section 6.

7.                   Governing Law and Venue . This Agreement shall be governed by the laws of the State of Texas, irrespective of conflict of law provisions. Exclusive venue for any action taken or commenced pursuant to this Agreement shall be in Tarrant County, Texas.

8.                   Waiver . No provision of this Agreement may be waived unless in writing and signed by all Parties. Waiver of any one provision of this Agreement shall not constitute waiver of any other provision.

9.                   Knowledge; Capacity: Authority; No Assignment . Mr. Moseley represents and warrants that he has retained legal counsel of his choosing to negotiate and explain the contents of this Agreement. Mr. Moseley represents that he understands the contents of this Agreement and that he executed it knowingly and voluntarily. The Parties represent and warrant that they have the authority and capacity to execute this Agreement.

10.               Interpretation; Construction . The headings set forth in this Agreement are for convenience only and shall not be used in interpreting this Agreement. This Agreement has been drafted equally by legal counsel for the Parties and, therefore, any ambiguities shall not be resolved against either Party in the interpretation of this Agreement. If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable, in whole or in part, this determination shall not affect any other provision of this Agreement and the provision in question shall, to the extent possible, be modified by the court so as to be rendered enforceable.

11. Counterparts: Electronic Signatures . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and together shall constitute one and the same instrument. The Parties may rely on electronic, facsimile or scanned signatures as originals.

 

 

 

            

12.  Entire Agreement: Modification . This Agreement incorporates the entire understanding between the Parties and recites the whole consideration for the promises exchanged herein. This Agreement fully supersedes any and all prior agreements or understandings, written or oral, between the Parties pertaining to the subject matter of this Agreement, the Employment Relationship and all matters concerning the Employment Relationship or terms thereof. This Agreement may not be amended or modified in any respect whatsoever except by a writing duly executed by the Parties, and the Parties shall make no claims at any time that this Agreement has been orally amended or modified.

 

13.               Reasonableness of Restrictions . Mr. Moseley agrees that all of the restrictions set forth above are reasonable in duration, geographical scope, activity and subject and are necessary to protect the confidential information, trade secrets and goodwill created by, owned by, and used for the benefit of UMED. Moreover, if any one or more of the provisions shall, for any reason, be held to be excessively broad as to duration, geographical scope, activity or subject, that provision shall be reformed by limiting and reducing it to the minimum extent necessary, so as to be enforceable to the maximum extent compatible with the applicable law.

14. Attorneys' Fees and Injunctive Relief . In any the event a lawsuit is brought by Mr. Moseley or any of the Released parties for enforcement of or breach of this Agreement, the party prevailing in such lawsuit shall recover any and all reasonable and necessary attorneys' fees and costs, including in the event of any and all appeals, from the non-prevailing party. Any breach or threatened breach by Mr. Moseley of Section 3 hereof shall cause the Company irreparable harm which cannot be remedied solely by damages. In the event of a breach or threatened breach by Mr. Moseley of such sections, the Company shall be entitled to injunctive relief restraining Mr. Moseley and any business, firm, partnership, individual, corporation or entity participating in such breach or threatened breach. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available at law or in equity för such breach or threatened breach, including the recovery of damages.

15.               Further Assurances . The Parties each agree to cooperate at all times from and after the date hereof with respect to the execution of such further assignments, releases and other such documents as may be reasonably requested and appropriate for the purpose of giving effect to, evidencing or giving notice of, the transactions contemplated herein.

 

[Signatures appear on the following page.]

 

 

 

 

 

 

UMED: MR. MOSELEY:
   
UMED HOLDINGS, INC.  
   

 

 

Exhibit 10.27

 

SETTLEMENT AND MUTUAL RELEASE AGREEMENT

 

 

This Settlement and Mutual Release Agreement (the “Agreement”) is made by and
between UMED Holdings, Inc. (“UMED”), on one hand, and Mamaki Tea, Inc., Mamaki of
Hawaii, Inc., Hawaiian Beverages, Inc. (“HBI”), Curtis Borman, Individually and d/b/a
Hawaiian Beverages, Inc., and Lee Jenison, Individually and d/b/a Hawaiian Beverages, Inc.
(collectively, the “Mamaki Defendants”), on the other hand. UMED and the Mamaki
Defendants are sometimes hereinafter collectively referred to as the “Parties” and may be
referenced singularly as a “Party.”

RECITALS

This Agreement is made by and entered into among the Parties for the following purposes
and with reference to the following facts:

WHEREAS, on or about October 29, 2015, UMED, on one hand, and Mamaki of
Hawaii, Inc. and HBI, on the other hand, entered into a Stock Purchase Agreement (the
“Purchase Agreement”) wherein UMED sold its 100% interest in Mamaki of Hawaii, Inc. to HBI
for $700,000 (along with the assumption of certain liabilities);

WHEREAS, UMED was not paid $450,000 of the payments required imder the Purchase
Agreement;

WHEREAS, UMED filed suit against Mamaki of Hawaii, Inc., Hawaiian Beverages,
Inc., Curtis Borman, Individually and d/b/a Hawaiian Beverages, Inc., and Lee Jenison,
Individually and d/b/a Hawaiian Beverages, Inc. in the lawsuit styled UMED Holdings, Inc. v.
Mamaki of Hawaii, Inc., et. al .; Cause No. DC-16-004718 in the District Court of Dallas County,
Texas, 193^** Judicial District, seeking payment of the obligations required in the Purchase
Agreement (the “UMED Lawsuit”);

SETTLEMENT AND MUTUAL RELEASE AGREEMENT

  Page 1

 

WHEREAS, the Mamaki Defendants deny and any all liability for the claims asserted

against them in the UMED Lawsuit;

WHEREAS, Mamaki Tea, Inc., Mamaki Tea of Hawaii, Inc. and Curt Borman filed
cross-claims against UMED in the Counterclaim/Crossclaim styled Mamaki Tea, Inc., Mamaki
Tea of Hawaii, Inc. and Curt Borman v. Southwest Capital Funding, Ltd and UMED Holdings,
Inc.', Cause No. 16-1-0342, in the Circuit Court of the Third Circuit for the State of Hawaii (the
“Hawaii Lawsuit”);

WHEREAS, UMED denies and any all liability for the claims asserted against it in the
Hawaii Lawsuit; and

WHEREAS, the Parties desire to avoid the uncertainty, inconvenience and expense of
further litigation, and to buy peace and enter into this Agreement upon the terms and conditions
set forth herein.

AGREEMENT

In consideration of the representations and mutual promises contained in this Agreement,
the Parties agree as follows:

 

1.0 Payment Obligations

 

1.1.    If none of the tea inventory that was removed from the Mamaki Defendants’ facility
in April 2016 is returned to the Mamaki Defendants by January 31, 2017, Mamaki Tea, Inc.,
Mamaki of Hawaii, Inc., and Hawaiian Beverages, Inc. shall pay UMED by check made payable
to UMED Holdings, Inc. (a) $400,000 if the payment is made in full by January 31, 2017; (b)
$425,000 if the payment is made in full by February 28, 2017; or (c) $450,000 if the payment is
made in full by March 31, 2017.

1.2.            Should any of the tea inventory that was removed firom the Mamaki Defendants’
facility in April 2016 be returned to the Mamaki Defendants by January 31, 2017, Mamaki Tea,

SETTLEMENT AND MUTUAL RELEASE AGREEMENT
  Page 2

 

Inc., Mamaki of Hawaii, Inc., and Hawaiian Beverages, Inc. shall pay UMED by check made
payable to UMED Holdings, Inc. (a) $475,000 if the payment is made in fall by January 31,
2017; (b) $525,000 if the payment is made in fall by February 28, 2017; or (c) $550,000 if the
payment is made in fall by March 31, 2017. Should the Mamaki Defendants receive some tea
inventory, but less than 8,000 lbs of the tea inventory, UMED shall issue to a party designated by
Mamaki of Hawaii, Inc., upon fall payment of the amounts required under Section 1.1 or 1.2 of
this Agreement, one-hundred-twenty-five (125) shares of UMED stock for every pound of
inventory not returned (i.e., if five-thousand (5,000) lbs are returned, UMED would issue three-
hundred-seventy-five-thousand (375,000) shares).

1.3.    Mamaki Tea, Inc., Mamaki of Hawaii, Inc., and Hawaiian Beverages, Inc. shall pay
off the remaining balance on the note in favor of Michael Wykrent referenced in Section
1.2.(c)(ii)A) of the Purchase Agreement (the “Wykrent Debt”) in the amount of $63,875 (plus
applicable interest) by no later than March 31, 2017. Mamaki Tea, Inc., Mamaki of Hawaii, Inc.,
and Hawaiian Beverages, Inc. also agree to pay Wykrent $250,000 upon receipt of funds from its
primary lender, but not later than March 31,2017.

1.4.    If Mamaki Tea, Inc., Mamaki of Hawaii, Inc., and Hawaiian Beverages, Inc. fail to
pay UMED the entire settlement payment by 5:00 p.m. (central) on January 31, 2017, the
Mamaki Defendants must transfer to an Escrow account as designated by UMED, (a) 1,241,500
shares of unencumbered UMED Stock owned by Cxirt Borman and (b) 1,000,000 shares of
unencumbered UMED stock owned by Lee Jenison (collectively, the “UMED Shares”). Borman
and Jenison will immediately deliver the referenced share certificates, including the
corresponding Stock Power, to the escrow agent. In the event of transfer of shares under this

SETTLEMENT AND MUTUAL RELEASE AGREEMENT
  Page 3

 

section, the Mamaki Defendants agree to provide the documents and do all things necessary to
elfectuate the transaction.

1.5.    If Mamaki Tea, Inc., Mamaki of Hawaii, Inc., and Hawaiian Beverages, Inc. pay the
Settlement Amount as set forth in Section 1.1.or 1.2. of the Agreement by March 31, 2017, the
escrow agent shall release the UMED Shares to Borman and Jenison within seven days of such
payment. Notwithstanding anything to the contrary in the Agreement, if Mamaki Tea, Inc.,
Mamaki of Hawaii, Inc., and Hawaiian Beverages, Inc. fail to pay the Settlement Amoimt as set
forth in Sections 1.1. or 1.2. of the Agreement by 5;00 p.m. on March 31, 2017 (a) the escrow
agent shall transfer the UMED Shares to UMED on April 15, 2015 and UMED will be the owner
of such shares, (b) Mamaki Tea, Inc., Mamaki of Hawaii, Inc., and Hawaiian Beverages, Inc.
'will be in breach of the Agreement and waive all defenses for any claim seeking enforcement of
the Agreement, and (c) each of Mamaki Tea, Inc., Mamaki of Hawaii, Inc., and Hawaiian
Beverages, Inc. will be jointly and severally liable to UMED under the Agreement for either
$475,000 (if no tea inventory was returned to the Mamaki Defendants by January 31, 2017) or
$550,000 (if some tea inventory was returned to the Mamaki Defendants by January 31, 2017)—
with credit or offset given for the transfer of the UMED shares to UMED at the value of
$370,000.

2.0 Mutual Release

2.1. Upon execution of this Agreement, UMED and its owners, partners, officers,
directors, representatives, agents, servants, employees, attorneys, and all parent, sister, related,
and affiliated corporations, subsidiaries, divisions, joint ventures, predecessors, successors,
beneficiaries, and assigns, in their respective capacities as such, hereby fully and forever release
and discharge the Mamaki Defendants and their owners, partners, officers, directors.

SETTLEMENT AND MUTUAL RELEASE AGREEMENT
  Page 4

 

representatives, agents, servants, employees, attorneys, and all parent, sister, related and
affiliated corporations, subsidiaries, divisions, joint ventures, predecessors, successors,
beneficiaries, and assigns, in their respective capacities as such, from any and all rights, claims,
demands, actions, causes of action, losses, damages and expenses, whether based on tort,
contract, statute or equity, known or unknown, foreseen or unforeseen, arising out of or relating
to (a) Mamaki, (b) the Purchase Agreement, (c) the UMED Lawsuit, including those claims
asserted or that could have been asserted in the UMED Lawsuit, and (d) the Hawaii Lawsuit,
including those claims asserted or that could have been asserted in the Hawaii Lawsuit.
Notwithstanding the foregoing, UMED does not release the Mamaki Defendants from their
obligations under this Agreement.

2.2. Upon execution of this Agreement, the Mamaki Defendants and their owners,
partners, officers, directors, representatives, agents, servants, employees, attorneys, and all
parent, sister, related, and affiliated corporations, subsidiaries, divisions, joint ventures,
predecessors, successors, beneficiaries, and assigns, in their respective capacities as such, hereby
fully and forever release and discharge UMED and their owners, partners, officers, directors,
representatives, agents, servants, employees, attorneys, and all parent, sister, related and
affiliated corporations, subsidiaries, divisions, joint ventures, predecessors, successors,
beneficiaries, and assigns, in their respective capacities as such, from any and all rights, claims,
demands, actions, causes of action, losses, damages and expenses, whether based on tort,
contract, statute or equity, known or unknown, foreseen or unforeseen, arising out of or relating
to (a) Mamaki, (b) the Purchase Agreement, (c) the UMED Lawsuit, including those claims
asserted or that could have been asserted in the UMED Lawsuit, and (d) the Hawaii Lawsuit,
including those claims asserted or that eould have been asserted in the Hawaii Lawsuit.

SETTLEMENT AND MUTUAL RELEASE AGREEMENT
  Page 5

 

Notwithstanding the foregoing, the Mamaki Defendants do not release UMED from its
obligations under this Agreement.

3.0 Dismissal of Action

 

Within ten (10) days following execution of the Agreement, the Parties will execute and
file an agreed order dismissing (a) all claims in the UMED Lawsuit and (b) all claims asserted
against UMED in the Hawaii Lawsuit with prejudice.

4.0 Unlocking of UMED Shares

Within 7 days of execution of the Agreement, UMED will release the restrictions on all
shares of UMED stock specified in the Purchase Agreement. However, relative to the shares
owned by Jenison and Borman, UMED will release the “lock-up” on 200,000 shares owned by
Jenison and 200,000 shares owned by Borman within 15 days of satisfaction of the payment
amounts required imder Section 1.1. or 1.2. of this Agreement. UMED will release an additional
100,000 shares owned by Jenison and 100,000 shares owned by Borman every three months
(starting three months after the initial unlocking of shares) until all such shares have become
“unlocked”.

5.0 Indemnification

Mamaki Tea, Inc., Mamaki of Hawaii, Inc., and Hawaiian Beverages, Inc. shall defend,
indemnify and hold harmless UMED, its officers, employees, and agents, from and against any
damages, attorney’s fees, judgments, liabilities and losses of every kind based upon any claims,
demands, or action related to or arising from (a) any loan between any of the Mamaki
Defendants and Michael Wykrent, including the Wykrent Debt, and (b) Mamaki, if the action
relates to or arises out of the conduct of the Mamaki Defendants.

SETTLEMENT AND MUTUAL RELEASE AGREEMENT
  Page 6

 

6.0 No Admission of Liability

The Parties agree that the execution of this Agreement and any action taken pursuant to
this Agreement are not an admission of liability or fault on the part of any Party for any claim or
lawsuit, including the UMED Lawsuit or Hawaii Lawsuit.

7.0 Representation of Capacity to Execute

The xindersigned represent and warrant that they are authorized to execute this
Agreement, competent to execute this Agreement, have carefully read and fully understand the
terms of this Agreement, and agree to be bound by its terms.

8.0 Binding Effect

This Agreement shall be binding upon and shall inure to the benefit of the Parties to this
Agreement, their respective heirs, beneficiaries, personal representatives, successors, and
assigns.

9.0 No Assignment of Claims

The Parties respectively represent and warrant that none of the claims, defenses,
demands, actions, and causes of action herein released has been, or will be, sold, assigned,
conveyed or transferred, in