Nevada
|
88-0203182
|
(State or Other Jurisdiction of Incorporation or Organization)
|
(I.R.S. Employer Identification Number)
|
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [ X ]
|
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [X ] No [ ]
|
PART I
|
|
PAGE
|
|
|
|
Item 1.
|
Business
|
4
|
|
|
|
Item 1A.
|
Risk Factors
|
8
|
|
|
|
Item 1B.
|
Unresolved Staff Comments
|
16
|
|
|
|
Item 2
|
Properties
|
16
|
|
|
|
Item 3.
|
Legal Proceedings
|
16
|
|
|
|
Item 4.
|
Mine Safety Disclosures
|
16
|
|
|
|
PART II
|
|
16
|
|
|
|
Item 5.
|
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
16
|
|
|
|
Item 6.
|
Selected Financial Data
|
17
|
|
|
|
Item 7.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
18
|
|
|
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
20
|
|
|
|
Item 8.
|
Financial Statements and Supplementary Data
|
21
|
|
|
|
Item 9.
|
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
|
38
|
|
|
|
Item 9A.
|
Controls and Procedures
|
38
|
|
|
|
Item 9B.
|
Other Information
|
39
|
|
|
|
PART III
|
|
39
|
|
|
|
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
39
|
|
|
|
Item 11.
|
Executive Compensation
|
43
|
|
|
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
44
|
|
|
|
Item 13.
|
Certain Relationships and Related Transactions and Director Independence.
|
43
|
|
|
|
Item 14.
|
Principal Accountant Fees and Services
|
43
|
|
|
|
PART IV
|
|
44
|
|
|
|
Item 15.
|
Exhibits and Financial Statement Schedules
|
46
|
|
|
|
SIGNATURES
|
48
|
● |
being permitted to present two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosure;
|
● |
reduced disclosure about our executive compensation arrangements;
|
● |
exemptions from the requirements of holding non-binding advisory votes on executive compensation or golden parachute arrangements; and
|
● |
exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.
|
|
Amtrak for haulage agreement; and
|
|
Union Pacific for access to their railroad;
|
Common Shares
|
||||||||
Year Ended December 31, 2017:
|
High
|
Low
|
||||||
Quarter Ended March 31, 2017
|
$
|
5.85
|
$
|
3.00
|
||||
Quarter Ended June 30, 2017
|
$
|
3.91
|
$
|
0.12
|
||||
Quarter Ended September 30, 2017
|
$
|
0.25
|
$
|
0.04
|
||||
Quarter Ended December 31, 2017
|
$
|
0.05
|
$
|
0.01
|
||||
Year Ended December 31, 2016:
|
High
|
Low
|
||||||
Quarter Ended March 31, 2016
|
$
|
6.30
|
$
|
1.75
|
||||
Quarter Ended June 30, 2016
|
$
|
6.30
|
$
|
1.20
|
||||
Quarter Ended September 30, 2016
|
$
|
2.10
|
$
|
2.10
|
||||
Quarter Ended December 31, 2016
|
$
|
5.00
|
$
|
1.00
|
Years ended
|
||||||||||||||||
|
December 31,
|
December 31,
|
||||||||||||||
|
2017
|
2016
|
$ Change
|
% Change
|
||||||||||||
Revenues
|
$
|
52,354
|
$
|
-
|
$
|
52,354
|
100.0
|
%
|
||||||||
Cost of sales
|
(61,638
|
)
|
-
|
(61,638
|
)
|
100.0
|
%
|
|||||||||
Gross profit (loss)
|
(9,284
|
)
|
-
|
(9,284
|
)
|
100.0
|
%
|
|||||||||
|
||||||||||||||||
Operating Expenses:
|
||||||||||||||||
Compensation and payroll taxes
|
$
|
3,578,749
|
$
|
1,912,125
|
$
|
1,666,624
|
87.2
|
%
|
||||||||
Selling, general and administrative
|
374,970
|
243,784
|
131,186
|
53.8
|
%
|
|||||||||||
Professional fees
|
899,983
|
265,335
|
634,648
|
239.2
|
%
|
|||||||||||
Total expenses
|
4,853,702
|
2,421,244
|
2,432,458
|
100.5
|
%
|
|||||||||||
Loss from operations
|
(4,862,986
|
)
|
(2,421,244
|
)
|
(2,441,742
|
)
|
100.8
|
%
|
||||||||
Other income (expense)
|
||||||||||||||||
Interest expense
|
(1,185,989
|
)
|
(146,225
|
)
|
(1,039,764
|
)
|
711.1
|
%
|
||||||||
Derivative expense
|
(707,127
|
)
|
-
|
(707,127
|
)
|
-100.0
|
%
|
|||||||||
Loss on disposition of assets
|
(629,270
|
)
|
-
|
(629,270
|
)
|
-100.0
|
%
|
|||||||||
Total other income (expense)
|
(2,522,386
|
)
|
(146,225
|
)
|
(2,376,161
|
)
|
1625.0
|
%
|
||||||||
Net income (loss) from operations before provision for income taxes
|
(7,385,372
|
)
|
(2,567,469
|
)
|
(4,817,903
|
)
|
187.7
|
%
|
||||||||
Provision for income taxes
|
-
|
-
|
-
|
0.0
|
%
|
|||||||||||
Net income (loss)
|
$
|
(7,385,372
|
)
|
$
|
(2,567,469
|
)
|
$
|
(4,817,903
|
)
|
187.7
|
%
|
·
|
obtain adequate sources of debt or equity financing to pay unfunded operating expenses and fund long-term business operations; and
|
·
|
manage or control working capital requirements by controlling operating expenses.
|
December 31,
|
December 31,
|
|||||||
2017
|
2016
|
|||||||
Assets
|
||||||||
Current assets
|
||||||||
Cash
|
$
|
56,983
|
$
|
202,169
|
||||
Deposits
|
235
|
-
|
||||||
Total current assets
|
57,218
|
202,169
|
||||||
Property and equipment, net of accumulated depreciation
|
125,000
|
833,160
|
||||||
Total assets
|
$
|
182,218
|
$
|
1,035,329
|
||||
Liabilities and Stockholders' Equity (Deficit)
|
||||||||
Current liabilities
|
||||||||
Accounts payable
|
$
|
44,117
|
$
|
78,890
|
||||
Accrued expenses
|
305,961
|
76,234
|
||||||
Unearned revenue
|
3,042
|
-
|
||||||
Notes payable to related parties
|
379,153
|
348,825
|
||||||
Current portion of convertible notes payable, net of debt discount
|
45,779
|
210,946
|
||||||
Derivative liability
|
1,787,063
|
-
|
||||||
Total current liabilities
|
2,565,115
|
714,895
|
||||||
Long-term portion of convertible debt, net of current portion
|
-
|
-
|
||||||
Total liabilities
|
2,565,115
|
714,895
|
||||||
Commitments and contingencies
|
||||||||
Stockholders' equity (deficit)
|
||||||||
Preferred stock, $0.00001 par value, 2,011,000 shares authorized, 98,800 and 98,798 shares issued and outstanding as of December 31, 2017 and December 31, 2016, respectively
|
1
|
1
|
||||||
Common stock, $0.00001 par value, 5,000,000,000 shares authorized, 590,244,905 and 208,353,303 shares issued and outstanding as of December 31, 2017 and December 31, 2016, respectively
|
5,903
|
2,084
|
||||||
Additional paid-in capital
|
12,962,732
|
8,284,510
|
||||||
Accumulated (deficit)
|
(15,351,533
|
)
|
(7,966,161
|
)
|
||||
Total stockholders' equity (deficit)
|
(2,382,897
|
)
|
320,434
|
|||||
Total liabilities and stockholders' equity (deficit)
|
$
|
182,218
|
$
|
1,035,329
|
|
December 31,
|
December 31,
|
||||||
|
2017
|
2016
|
||||||
Revenues
|
$
|
52,354
|
$
|
-
|
||||
Cost of sales
|
(61,638
|
)
|
-
|
|||||
Gross loss
|
(9,284
|
)
|
-
|
|||||
|
||||||||
Operating Expenses:
|
||||||||
Compensation and payroll taxes
|
3,578,749
|
$
|
1,912,125
|
|||||
Selling, general and administrative
|
374,970
|
243,784
|
||||||
Professional fees
|
899,983
|
265,335
|
||||||
Total expenses
|
4,853,702
|
2,421,244
|
||||||
Loss from operations
|
(4,862,986
|
)
|
(2,421,244
|
)
|
||||
Other income (expense)
|
||||||||
Interest expense
|
(1,185,989
|
)
|
(146,225
|
)
|
||||
Derivative gain (expense)
|
(707,127
|
)
|
-
|
|||||
Loss on disposition of assets
|
(629,270
|
)
|
-
|
|||||
Total other income (expense)
|
(2,522,386
|
)
|
(146,225
|
)
|
||||
Net income (loss) from operations before provision for income taxes
|
(7,385,372
|
)
|
(2,567,469
|
)
|
||||
Provision for income taxes
|
-
|
-
|
||||||
Net income (loss)
|
$
|
(7,385,372
|
)
|
$
|
(2,567,469
|
)
|
||
Net income (loss) per share, basic and dilluted
|
(0.03
|
)
|
(0.02
|
)
|
||||
Weghted average number of common shares outstanding, basic and dilluted
|
292,282,791
|
170,650,346
|
Additional
|
||||||||||||||||||||||||||||
Common Stock
|
Preferred Stock
|
Paid-in
|
Accumulated
|
|||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Total
|
||||||||||||||||||||||
Balance December 31, 2015
|
4,557,784
|
$
|
46
|
98,798
|
$
|
1
|
$
|
5,835,346
|
$
|
(5,398,691
|
)
|
$
|
436,702
|
|||||||||||||||
Stock issued for employees compensation
|
16,791,611
|
168
|
-
|
-
|
1,185,243
|
-
|
1,185,411
|
|||||||||||||||||||||
Stock issued for notes conversion
|
200,000
|
2
|
-
|
-
|
4,998
|
-
|
5,000
|
|||||||||||||||||||||
Stock issued per Share Exchange Agreement
|
151,885,189
|
1,519
|
-
|
-
|
(1,519
|
)
|
-
|
0
|
||||||||||||||||||||
Stock issued for cash
|
33,894,719
|
339
|
-
|
-
|
738,772
|
-
|
739,111
|
|||||||||||||||||||||
Stock issued for services
|
1,024,000
|
10
|
-
|
-
|
71,670
|
-
|
71,680
|
|||||||||||||||||||||
Value of warrants allocated to notes
|
-
|
-
|
-
|
-
|
450,000
|
-
|
450,000
|
|||||||||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
-
|
(2,567,470
|
)
|
(2,567,470
|
)
|
|||||||||||||||||||
Balance December 31, 2016
|
208,353,303
|
$
|
2,084
|
98,798
|
$
|
1
|
$
|
8,284,510
|
$
|
(7,966,161
|
)
|
$
|
320,434
|
|||||||||||||||
Stock issued for services
|
16,460,000
|
165
|
-
|
-
|
279,985
|
-
|
280,150
|
|||||||||||||||||||||
Stock issued for notes and interest conversion
|
80,183,500
|
802
|
-
|
-
|
672,150
|
-
|
672,952
|
|||||||||||||||||||||
Stock issued for cash and warrants
|
17,178,800
|
172
|
-
|
-
|
498,768
|
-
|
498,940
|
|||||||||||||||||||||
Stock issued for compensation
|
265,000,000
|
2,650
|
4
|
-
|
3,047,350
|
3,050,000
|
||||||||||||||||||||||
Stock issued for warrant exercise
|
1,200,000
|
12
|
-
|
-
|
179,988
|
-
|
180,000
|
|||||||||||||||||||||
Stock issued for shares exchange
|
1,885,302
|
19
|
-
|
-
|
(19
|
)
|
-
|
|||||||||||||||||||||
Stock cancelled
|
(16,000
|
)
|
(0
|
)
|
(2
|
)
|
-
|
(0
|
)
|
-
|
-
|
|||||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
-
|
(7,385,372
|
)
|
(7,385,372
|
)
|
|||||||||||||||||||
Balance December 31, 2017
|
590,244,905
|
$
|
5,903
|
98,800
|
$
|
1
|
$
|
12,962,732
|
$
|
(15,351,533
|
)
|
$
|
(2,382,897
|
)
|
Year ended
|
Year ended
|
|||||||
December 31,
|
December 31,
|
|||||||
2017
|
2016
|
|||||||
Cash flows from operating activities
|
||||||||
Net loss
|
$
|
(7,385,372
|
)
|
$
|
(2,567,469
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Amortization of debt discount interest expense on notes payable
|
37,433
|
88,448
|
||||||
Conversion of notes payable and accrued interest to capital
|
672,952
|
-
|
||||||
Common stock issued for services
|
280,150
|
-
|
||||||
Common stock issued for compensation
|
3,050,000
|
1,257,091
|
||||||
Derivative expense related to convertible note payable
|
1,787,063
|
-
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts payable and accrued expenses
|
273,844
|
136,669
|
||||||
Unearned revenue
|
3,042
|
-
|
||||||
Loss on impairment of assets
|
629,270
|
-
|
||||||
Deposits
|
(235
|
)
|
-
|
|||||
Net cash used in operating activities
|
(651,853
|
)
|
(1,085,261
|
)
|
||||
Cash flows from investing activities
|
||||||||
Purchases of property and equipment
|
-
|
(83,160
|
)
|
|||||
Net cash used in investing activities
|
-
|
(83,160
|
)
|
|||||
Cash flows from financing activities
|
||||||||
Repayments on convertible notes payable
|
(572,500
|
)
|
-
|
|||||
Proceeds from convertible notes payable
|
369,900
|
490,000
|
||||||
Repayments on related party notes payable
|
(53,344
|
)
|
(183,576
|
)
|
||||
Proceeds from related party notes payable
|
83,672
|
-
|
||||||
Proceeds from stock and warrant purchases
|
498,940
|
739,109
|
||||||
Proceeds from exercise of warrant
|
180,000
|
-
|
||||||
Net cash provided by financing activities
|
506,668
|
1,045,533
|
||||||
Net change in cash
|
(145,186
|
)
|
(122,888
|
)
|
||||
Cash, beginning of the period
|
202,169
|
325,057
|
||||||
Cash, end of the period
|
$
|
56,983
|
$
|
202,169
|
||||
Supplemental disclosure of cash flow information:
|
||||||||
Income taxes paid
|
$
|
-
|
$
|
-
|
||||
Supplemental disclosure of non-cash investing and financing transactions:
|
||||||||
Conversion of related party debt to capital
|
$
|
-
|
$
|
-
|
||||
Conversion of notes payable and accrued interest to capital
|
672,952
|
5,000
|
||||||
Debt discount on convertible notes
|
324,121
|
450,000
|
December 31,
|
December 31,
|
|||||||
2017
|
2016
|
|||||||
Rail cars (not in service)
|
$
|
125,000
|
$
|
833,160
|
||||
Less: accumulated depreciation
|
-
|
-
|
||||||
$
|
125,000
|
$
|
833,160
|
December 31,
|
December 31,
|
|||||||
2017
|
2016
|
|||||||
Promissory note, dated December 15, 2015, bearing interest at 10% annually, payable on demand
|
$
|
49,910
|
$
|
55,994
|
||||
Promissory note, dated December 15, 2015, bearing interest at 10% annually, payable on demand
|
39,101
|
52,240
|
||||||
Promissory note, dated December 15, 2015, bearing interest at 10% annually, payable on demand
|
74,044
|
78,359
|
||||||
Promissory note, dated September 30, 2015, bearing no interest, payable on demand
|
154,998
|
162,232
|
||||||
Promissory note, dated September 30, 2017, bearing 10% interest, payable on demand
|
53,700
|
-
|
||||||
Promissory note, dated September 30, 2017, bearing 10% interest, payable on demand
|
7,400
|
-
|
||||||
$
|
$ 379,153
|
$
|
348,825
|
December 31,
|
December 31,
|
|||||||
2017
|
2016
|
|||||||
Promissory note, dated April 30, 2008, bearing interest at 10% annually, payable on demand, convertible to shares of common stock at $.05 per share
|
$
|
-
|
$
|
82,500
|
||||
Promissory note, dated May 12, 2016, bearing interest at 10% annually, payable within a year, convertible to shares of common stock at $.05 per share
|
-
|
60,000
|
||||||
Promissory note, dated May 19, 2016, bearing interest at 10% annually, payable within a year, convertible to shares of common stock at $.05 per share
|
-
|
20,000
|
||||||
Promissory note, dated May 20, 2016, bearing interest at 10% annually, payable within a year, convertible to shares of common stock at $.05 per share
|
-
|
20,000
|
||||||
Promissory note, dated May 31, 2016, bearing interest at 10% annually, payable within a year, convertible to shares of common stock at $.05 per share
|
-
|
40,000
|
||||||
Promissory note, dated June 3, 2016, bearing interest at 10% annually, payable within a year, convertible to shares of common stock at $.05 per share
|
-
|
350,000
|
||||||
Promissory note, dated June 2, 2017, bearing interest of 4% annually, payable within a year, convertible to common stock at a discount of 40% of the lowest traded price of the common stock during 45 trading daysprior the conversion date.
|
19,100
|
-
|
||||||
Promissory note, dated September 30, 2017, bearing 10% interest, payable on demand, convertible to common stock at the discount of 35% of the lowest traded price of the common stock during 20 trading days prior conversion
|
40,800
|
|||||||
Promissory note, dated November 1, 2017, bearing interest of 12% annually, payable on August 10, 2018, convertible to common stock at a discount of 42% of the lowest two traded prices of the common stock during the 15 trading days prior the conversion date.
|
45,000
|
-
|
||||||
Promissory note, dated November 27, 2017, with principal amount of $85,000 and aggregate puchase price of $79,900, bearing interest of 12% annually, payable within a year, convertible to common stock at the conversion price equal to the lower of (i) the closing sale price of the common stock on the principal market on the trading day immediately preceding the closing date, and (ii) 50% of either the lowest sale price for the common stock during the 20 consecutive trading days including and immediately preceding the conversion date
|
85,000
|
-
|
||||||
Promissory note, dated December 18, 2017, bearing interest of 12% annually, payable within a year convertible at a conversion rate equal to 50% of the lowest of: (i) the lowest trading price during the twenty trading days prior to the conversion, or (ii) the lowest trading price during the twenty trading days preceding the date of this note
|
40,000
|
-
|
||||||
Promissory note, dated December 20, 2017, bearing interest of 12% annually, payable on September 20, 2018, convertible to common stock at a discount of 50% of the lowest two traded prices of the common stock during the 25 trading days prior the conversion date.
|
112,000
|
-
|
||||||
Promissory note, dated December 21, 2017, bearing interest of 12% annually, payable on September 30, 2018, convertible to common stock at a discount of 49% of the lowest two traded prices of the common stock during the 30 trading days prior the conversion date.
|
28,000
|
-
|
||||||
Convertible notes before debt discount
|
369,900
|
572,500
|
||||||
Less debt discount
|
(324,121
|
)
|
(361,554
|
)
|
||||
Total outstanding convertible notes payable
|
$
|
45,779
|
210,946
|
Years ended
|
||||
December 31, 2018
|
67,704
|
|||
December 31, 2019
|
11,284
|
|||
Total
|
$
|
78,988
|
|
Year Ended
December 31,
2017
|
|||
|
Conversion
Feature
|
|||
|
of
|
|||
|
Notes Payable
|
|||
|
||||
Beginning balance, January 1
|
$
|
-
|
||
Additional issuances
|
1,079,942
|
|||
Exercised/converted
|
-
|
|||
Reclassification to equity
|
-
|
|||
Change in value of derivative liability
|
707,121
|
|||
Ending balance, December 31
|
$
|
1,787,063
|
|
Year Ended
|
Year Ended
|
|
|
December 31, 2017
|
December 31, 2016
|
|
|
|
|
|
Expected life in years
|
0.4 - 0.96 years
|
N/A
|
|
Stock price volatility
|
283.6% - 343.6%
|
N/A
|
|
Discount rate
|
0.12%
|
N/A
|
|
Expected dividends
|
None
|
N/A
|
|
Forfeiture rate
|
0%
|
0%
|
Warrants
|
||||
Outstanding - December 31, 2015
|
-
|
|||
Granted
|
9,000,000
|
|||
Exercised
|
-
|
|||
Cancelled
|
-
|
|||
Outstanding - December 31, 2016
|
9,000,000
|
|||
Granted
|
7,178,000
|
|||
Exercised
|
(1,200,000
|
)
|
||
Cancelled
|
-
|
|||
Outstanding - December 31, 2017
|
14,978,000
|
Variables
|
Values
|
|||
Exercise Price
|
$
|
0.15
|
||
Risk Free Rate
|
.92% to 1.07%
|
|||
Discount rate
|
0.25
|
%
|
||
Volatility
|
580.29% - 669.15
|
%
|
2017
|
2016
|
|||||||
Net operating loss carry forward
|
$
|
1,346,000
|
$
|
870,000
|
||||
Derivative expense
|
375,000
|
-
|
||||||
Total
|
1,721,000
|
870,000
|
||||||
Valuation allowance
|
(1,721,000
|
)
|
(870,000
|
)
|
||||
Total Deferred tax asset
|
$
|
0
|
$
|
0
|
Pretax loss at Federal Statutory rate of 35%
|
$
|
2,585,000
|
||
Non-deductible differences (stock-based compensation)
|
(1,166,000
|
) | ||
Change in valuation allowance
|
(851,000
|
)
|
||
Effect of change in federal tax rates due to newly enacted tax statues
|
(568,000
|
)
|
||
Net tax expense (benefit)
|
$
|
0
|
Pretax loss at Federal Statutory rate of 35%
|
$
|
899,000
|
||
Non-deductible differences (stock based compensation)
|
(439,000
|
)
|
||
Change in valuation allowance
|
(277,000
|
)
|
||
Effect of change in federal tax rates due to newly enacted statutes
|
(183,000
|
)
|
||
Net income tax expense (benefit)
|
$
|
0
|
Name
|
Age
|
Office
|
|
|
|
Michael A. Barron
|
67
|
Chairman of the Board of Directors, Chief Executive Officer
|
Hualiang Teng
|
58
|
Director
|
Louis M. Schillinger
|
68
|
Director
|
Donald Adams
|
75
|
Director
|
Wanda Witoslawski
|
53
|
Chief Financial Officer
|
Joseph Cosio-Barron
|
69
|
President
|
·
|
Had a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time.
|
·
|
Been convicted in a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and other minor offenses.
|
·
|
Been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities.
|
·
|
Been found by a court of competent jurisdiction (in a civil action), the SEC, or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
|
·
|
Been the subject to, or a party to, any sanction or order, not subsequently reverse, suspended or vacated, of any self-regulatory organization, any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
|
●
|
any breach of their duty of loyalty to our company or our stockholders;
|
●
|
acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
|
●
|
unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; and
|
●
|
any transaction from which the director derived an improper personal benefit.
|
Name and
|
Share
|
All Other
|
|||||||||||||||||||||
Principal Position
|
Year
|
Salary
|
Bonus
|
Awards
|
Compensation
|
Total
|
|||||||||||||||||
Michael A. Barron
|
2017
|
$
|
27,500
|
$
|
-
|
$
|
55,000
|
(2
|
)
|
$
|
-
|
$
|
82,500
|
||||||||||
CEO and Chairman
|
2016
|
$
|
110,427
|
$
|
-
|
$
|
175,000
|
(1
|
)
|
$
|
-
|
$
|
285,427
|
||||||||||
Wanda Witoslawski
|
2017
|
$
|
55,917
|
$
|
-
|
$
|
50,000
|
(2
|
)
|
$
|
-
|
$
|
105,917
|
||||||||||
CFO and Treasurer
|
2016
|
$
|
94,292
|
$
|
-
|
$
|
0
|
(1
|
)
|
$
|
-
|
$
|
94,292
|
||||||||||
Joseph Cosio-Barron
|
2017
|
$
|
59,208
|
$
|
-
|
$
|
50,000
|
(2
|
)
|
$
|
-
|
$
|
109,208
|
||||||||||
President
|
2016
|
$
|
143,039
|
$
|
-
|
$
|
286,413
|
(1
|
)
|
$
|
-
|
$
|
429,452
|
Name
|
Fees earned
or paid in
cash ($)
|
Stock
awards ($)
|
Option
Awards ($)
|
All
other
compensation ($)
|
Total ($)
|
|||||||||||||||||
Hualiang Teng
|
-
|
5,000
|
(1
|
)
|
-
|
-
|
5,000
|
|||||||||||||||
Don Adams
|
-
|
5,000
|
(1
|
)
|
-
|
-
|
5,000
|
|||||||||||||||
Lou Schillinger
|
-
|
5,000
|
(1
|
)
|
-
|
-
|
5,000
|
Amount of Beneficial
|
Percent of
|
|||||||
Directors and Officers (1)
|
Ownership (2)
|
Class (3)
|
||||||
Michael Barron
|
97,416,021
|
16.5
|
%
|
|||||
Wanda Witoslawski
|
71,367,832
|
12.1
|
%
|
|||||
Joseph Cosio-Barron
|
63,037,548
|
10.7
|
%
|
|||||
Hualiang Teng
|
5,107,407
|
0.9
|
%
|
|||||
Don Adams
|
5,174,068
|
0.9
|
%
|
|||||
Louis Schillinger
|
5,660,665
|
1.0
|
%
|
|||||
|
||||||||
All directors and officers as a group
|
247,763,541
|
42.0
|
%
|
|||||
5% of greater beneficial owners:
|
||||||||
Gilbert H. Lamphere
|
129,135,847
|
21.9
|
%
|
|||||
Wayne Bailey
|
69,669,829
|
11.8
|
%
|
|
(1)
|
The address of each of the beneficial owners is 9480 South Eastern Ave, Suite 205, Las Vegas, Nevada 89123.
|
|
|
|
|
(2)
|
In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options held by that person that are currently exercisable, or become exercisable within 60 days are deemed outstanding. However, such shares are not deemed outstanding for purposes of computing the percentage ownership of any other person.
|
|
|
|
|
(3)
|
Based on 590,244,905 shares outstanding as of December 31, 2017.
|
|
|
|
Exhibit No.
|
Description
|
|
|
3.1
|
Articles of Incorporation (incorporated by reference to Registration Statement on Form S-1 filed on June 14, 2017)
|
3.2
|
|
3.3
|
|
10.1
|
License Agreement between the Company and Las Vegas Railway Express, Inc.
|
10.2
|
|
10.3
|
|
10.4
|
Convertible note with East Shore Equities, LLC, dated June 2, 2017
|
10.5
|
Convertible note with Cardio Infrared Technologies, Inc., dated September 30, 2017
|
10.6
|
Convertible note with Power Up Lending Group LTD, dated November 1, 2017
|
10.7
|
Convertible note with EMA Financial, LLC, dated November 27, 2017
|
10.8
|
Convertible note with Adar Bays, LLC, dated December 18, 2017
|
10.9
|
Convertible note with Auctus Fund, LLC, dated December 20, 2017
|
10.10
|
Convertible note with Power Up Lending Group LTD, dated December 21, 2017
|
10.11
|
Employment agreement with Michael Barron dated December 15, 2017
|
10.12
|
Employment agreement with Wanda Witoslawski dated December 15, 2017
|
10.13
|
Employment agreement with Joseph Cosio-Barron dated December 15, 2017
|
21
|
Subsidiaries (incorporated by reference to Registration Statement on Form S-1 filed June 14, 2017)
|
31.1
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
31.2
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101 INS
|
XBRL Instance Document*
|
101 SCH
|
XBRL Schema Document*
|
101 CAL
|
XBRL Calculation Linkbase Document*
|
101 DEF
|
XBRL Definition Linkbase Document*
|
101 LAB
|
XBRL Labels Linkbase Document*
|
101 PRE
|
XBRL Presentation Linkbase Document*
|
X RAIL ENTERTAINMENT, INC.
|
|
|
|
By:
|
/
s/Michael A. Barron
|
|
Michael A. Barron, Chief Executive Officer
Principal Executive Officer
|
Name
|
|
Title
|
|
Date
|
/
s/Michael A. Barron
Michael A. Barron
|
|
Chief Executive Officer, President and Chairman (principal executive officer)
|
|
April 2, 2018
|
|
|
|
|
|
|
|
|
|
|
/s/Wanda Witoslawski
Wanda Witoslawski
|
|
Chief Financial Officer (principal financial and accounting officer)
|
|
April 2, 2018
|
|
|
|
|
|
|
|
|
|
|
/s/Hualiang Teng
|
|
Director
|
April 2, 2018
|
|
Hualiang Teng
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/
s/Louis M. Schillinger
|
|
Director
|
|
April 2, 2018
|
Louis M. Schillinger
|
|
|
|
|
|
|
|
|
|
/s/
Donald Adams
|
Director
|
April 2, 2018
|
||
Donald Adams
|
|
|
|
|
1.
|
Definitions
|
(a)
|
·'
Lessee and Lessor
"
shall have the meaning set forth
in
the first paragraph of this Agreement.
|
(b)
|
"
Mobilization Services
"
shall mean those services described in Section 3 of this Agreement.
|
(c)
|
"
Host Railroad"
National Railroad Passenger Corporation (AMTRAK).
|
(d)
|
"
LVRE
"
shall have the meaning set forth in the first paragraph of
this
Agreement.
|
(e)
|
"
LVRE Equipment
"
shall mean the rolling stock used in the operation of Service,
inc
luding
all different classes of passenger cars (which may
in
clude business, corporate cars), all of which is l
i
sted
in
Exhibit A hereto
.
|
(f)
|
"
FELA
"
shall mean the
Federal
Employers Liability Act. 45 U.S.C. §51
,
et seq.
|
(g)
|
"
FRA
"
shall mean the
Federa
l
Railroad Administration.
|
(h)
|
"
Mobilization Schedule
"
shall mean that schedule set forth in Exhibit B.
|
(i)
|
"
Party
"
shall mean either XREE or LVRE
.
|
(j)
|
"
Parties
"
shall mean XREE and LVRE collectively.
|
(k)
|
"
Qualified
"
shall mean that a person has satisfied all legally
required
training and certification requirements fo
r
a position and possesses the background
,
skills and experience necessary to fulfill the duties of a
job
to which that person is assigned
in
the Service
.
|
(I)
|
"
T&E
Crew
"
shall mean one (1)
locomotive
engineer and one
(1)
conductor prov
i
ded by Amtrak for operation of Service trains
i
f the scheduled operating
time
from the departure at the initial stat
i
on of Los Angeles, Ca
.
to the arr
i
val at the final station
of
Las Vegas
,
NV
(or
v
i
ce versa).
|
2.
|
Grant of
License
|
2.1
|
The
Inte
llectual
Property
R
i
ghts under the Agreement.
|
2.2
|
Scope
|
2.2.1
|
XREE shall only use the
Intellectual
Property Rights
under the
Agreement
in i
ts own
normal business
operations
.
Without LVRE's consent
,
XREE shall
not
use the
Intellectual Property
Rights
under
the Agreement for any other purpose or when provid
in
g services
to
any third party
.
|
2.2.2
|
The License in this
Agreement
i
s effective in the United States
o
f
Amer
i
ca
territory
where LVRE has
granted
XREE a specific territory ("Licensed Territory")
.
XREE agrees that
i
t will
not
make, or authorize
,
any direct or ind
ir
ect
use
of the Intellectual
Property
Rights under
the
Agreement in any regions other than the
Licensed
Territory.
|
2.3
|
XREE's confirmation
|
2.4
|
Prohibitions
|
2.4.1
|
commit any act which affects
the rights
of LVRE
in relation
to any of the
In
tellectual
Property Rights Under
the
Agreement; or
|
2.4.2
|
apply for
the
registration of any of the
Intellectua
l
Property Rights under
the
Agreement or any similar
intellec
tua
l
property
right
in any country or region in the world.
|
3.
|
XREE Services to be provided and
responsibilities
undertaken
|
(a)
|
Coordinate
Train
and
Engine
Crews.
|
(b)
|
Mobilization Services.
|
(c)
|
Managerial Control
|
(d)
|
Conduct of Employees
|
(e)
|
Control of Alcohol and
Drug Use
|
4.
|
Obligations of
LVRE
|
(a)
|
Equipment for Operation of Service
|
(i)
|
LVRE shall be solely
r
esponsible for the provision of the LVRE Equipment for the Service.
|
(ii)
|
Throughout the term of this Agreement, LVRE shall be solely responsible for:
|
a.
|
Complying with FRA and Amtrak Standard Maintenance Procedures
i
n order to assu
r
e that the passenger coaches to be used in Service wil
l
comply with private car mechanical standards, including compliance with the requirement that the passenger coaches have a current PC-1 annual inspection and PC-5 clearance
i
nspection
.
|
b.
|
Obtaining any required FRA approvals of the LVRE Equipment to be used in Service
,
and for the performance of all FRA inspect
i
ons (except for the "set and release test
"
and the
"
running brake test" which will be performed by the T&E Crew)
,
test tra
i
ns, and completion of operat
i
ng, maintenance and safety plans,
i
nclud
i
ng but not
l
imited to
,
those requirements mandated by 49 CFR Parts 223
,
229
,
238 and 239.
|
c.
|
Inspecting and maintaining the LVRE Equipment incompliance w
i
th a
ll
applicable federal, state and local
l
aws
,
rules and regulations
,
i
ncluding
,
but not limited to, the Americans w
i
th Disabilities Act.
|
d.
|
LVRE Equipment familiarity, inspect
i
on and maintenance train
i
ng in compliance with all applicable federal
,
state or
l
ocal laws
,
ru
l
es and regulations
,
inc
l
ud
i
ng emergency evacuat
i
on training
,
of all personnel assigned to the Serv
i
ce
,
inc
l
uding
,
as applicable
,
the Amtrak T&E Crews
.
|
(iii)
|
In the event an applicable federal
,
state or loca
l
law or regu
l
ation
i
s enacted or promulgated after the effective date of th
i
s Agreement that requires modifications or upgrades to the LVRE Equipment
,
LVRE shall be solely respo
n
s
i
ble for complying w
i
th such requirements
.
|
(iv)
|
XREE and LVRE shall each have the un
i
lateral r
i
ght to remove from service any unit of LVRE Equipment for safety-related defects
.
|
(b)
|
Tra
i
n Pe
r
sonnel Other than T&E Crews
|
(i)
|
XREE shall be so
l
ely responsible for providing qua
l
ified train personnel other than the T&E Crews
.
|
(ii)
|
XREE shall be solely responsible for baggage handling
,
passenger announcements
,
passenge
r
boa
r
ding and detraining
,
and deployment of ADA
r
amps and stairs as may be required at all stations served by Service.
|
(c)
|
Train Movements Other Than Scheduled Movements
|
(d)
|
Maintenance of Equipment
|
(i)
|
XREE shall retain all records and reports concerning inspection
,
maintenance and cleaning of the LVRE Equipment for a period of three (3) years following term
i
nation of th
i
s Agreement (except for those records that may require longer retention periods for regulatory compliance, in which case LVRE shall retain such records in accordance with such regulatory requirements) and shall make those available upon request.
|
(ii)
|
XREE shall ensure that all personnel assigned to the maintenance function are Qualified.
|
(iii)
|
XREE shall assure that all LVRE Equipment operated on trains in Service
i
s maintained in a safe and reliable condition
,
that such LVRE Equipment complies at all times with Standard Maintenance Procedures and all app
l
icable FRA, Association of American Railroads, a
n
d accepted industry standards
,
and that any LVRE Equipment not compliant with these standards will not be used in Service
.
|
(e)
|
Storage of Equipment
|
(i)
|
XREE shall be solely responsible for providing safe storage of the LVRE Equipment (including ADA ramps and stairs) when not in use in Service.
|
(ii)
|
LVRE shall be solely responsible for securing the LVRE Equipment (including ADA ramps and stairs) when not in use in Service.
|
(f)
|
Coordination with Host Railroad
|
(g)
|
Provision of Food and Beverage Service
|
(h)
|
Substitute Service
|
(i)
|
Stations and/or Infrastructure Improvements
|
5.
|
Schedule of Service Operations
|
(a)
|
The
i
nitial
schedules
for
the operation of
the
Service are attached hereto as Exhibit
|
6.
|
Risk of Liability
|
(a)
|
LVRE agrees to defend, indemnify and hold
harmless
XREE
,
including
their
respective officers, agents
,
employees, and subsidiaries and other third parties to the extent XREE is obligated
to
indemnify or
hold
harmless such third parties
,
irrespective
of negligence or fault
of LVRE
.
or
such
third
parties, for all damage or liability for personal
inj
ury
or
death
to any person, or damage
to
any property (including property of
LVRE
and
los
s
of use or revenue)
which
would
not
have been incurred but for the
existence
of Service; provided, however, that
LVRE
shall have no
responsib
ility to indemnify
XREE for XREE's liability under the Employers
'
Liability
Act
(FELA) for injury or death to LVRE employees engaged directly in the operation of Service.
The
risk of injury or death and of FELA claims by such XREE employees is assumed by LVRE and LVRE agrees
to
defend, indemnify and hold
harm
less
XREE against any
FELA claims
with
respect
to injury or death of such employees to the extent such
claims
are not
covered
by LVRE's railroad
l
iability ins
urance
coverage
.
Compensation for such risk
is
inc
luded
in
the
amounts and rates agreed upon by the Parties in this Agreement.
|
(b)
|
Where claims are made against XREE and LVRE
arising
out of the same incident
,
the
Parties shall cooperate fully and shall make all of the
inves
t
i
gative
and claims
information available
to
each other. Any claim for
i
ndemnification by XREE or
LVRE
shall not be made a part of any litigation brought by a third party arising out of any claim against XREE and/or
LVRE. If
a dispute arises concerning the scope of XREE
'
s or LVRE's
indemnity
obligations pursuant to this Section 6
,
such dispute shall be resolved separately pursuant to Section
11
of this Agreement.
|
(c)
|
LVRE agrees to defend, indemnify and hold harmless XREE
i
ncluding t
he
ir
respective officers, agents, employees, and subs
i
diaries and other
th
ird
parties to the extent XREE
is
obligated
to indemnify
or ho
l
d harmless such third parties
,
irrespective of negligence or fault of
L
VRE
,
any third parties, from and against any action
,
suit or other proceed
i
ng based
upon
a claim that the Service infringes
any patent,
copyright
,
royalty,
trademark or service mark or other third party proprietary
r
ight
,
or involves the wrongful use of any trade secret or confidential
information
.
|
(d)
|
Neither Party shall be
liable to
the other Party, whether by way of
indemnity or restitution
or
in
contract or in tort
(including
negligence). for any
indirect
or consequential
loss
or damages
or
loss
of
revenue,
loss of profit, loss of
use,
loss
of
production, or loss of contract.
|
(e)
|
The indemni
ty
provisions set forth above shall survive termina
t
ion of this Agreement
for
any
reason
.
|
7.
|
Insurance
and
Payment
|
(a)
|
Liability
Ins
urance
|
(b)
|
Property Insurance
|
(c)
|
LVRE
shall procure and maintain for the duration of this Agreement
workers
'
compensation
insura
nce
in compliance with applicable statutory requirement and Employer
'
s Liability Coverage in
the
amount of $2
,
000
,
000
per
occurrence.
Such
insurance
shall contain a waiver of subrogation
in
favor of XREE
.
LVRE
shall provide satisfactory proof that
it
has taken out for
the
period covered by
this
Agreement full compensation insurance for all persons employed directly by LVRE
to
carry
out
the work contemplated
under
this Agreement
all in
accordance
with
applicable law
s,
rul
es
and
regulations.
Further,
LV
R
E shall require all subcontractors to
obtain and ma
inta
in
,
for the duration
of
this Agreement, workers
'
compensation
of the same
type
and
lim
its as
specified
herein.
|
8.
|
Compensation
|
(a)
|
Payment
to
LVRE
.
In
cons
ideration for
th
e rights and licenses granted by
L
VRE to XREE under this Agreement
XREE
shall
pay
to LVRE
a
non
-
refundable
,
creditab
l
e fee in
the
su
m
of $1,000 due and
payable
no
later
than
7
bus
iness
days after the execution
of
said Agreement.
|
(b)
|
Royalties
to
LVRE
.
XREE shall
pay
LVRE royalties based on
each
train run
from
Las Vegas
to Lo
s
Angeles roundtrip
.
Said
r
oya
l
ties shall be
a
sum
equal to
5%
of the
operating
income from the train operations which
shall
be calculated
pre
corporate
overhead.
|
9.
|
Disruption
of
Service
|
10.
|
Te
rm
and
Termin
a
tion
|
(a)
|
T
he term of
this Agreement shall be from January 15, 2016 through January
14
,
2046
.
|
(b)
|
In
case
of a material
breach
by either Party of its
obligation
s
pur
suant
t
o
th
is
Agreement, and unless the Party
in
breach
remedies
such
non-compliance wi
thi
n
ten (
10) days of receipt
of
a written notice
from
th
e
non-breaching Party,
th
e
other
Party may
immediat
e
ly
terminate this Agreement. No delay or omission by a
Party
in the
exercise of any
right
to
terminate this Agreement
or
to
submit an
issue
fo
r resolution
as
prov
id
ed
in Section
11will
impa
i
r
any
such
po
wer
or
rem
edy,
nor
will
it
alter or affect the
r
ights of
e
ither
Party.
|
(c)
|
Upon
termination
of this Agreement
,
all rights and
obligations of th
e
Parties
hereunde
r
will
terminat
e e
xcept as otherw
ise
st
ate
d herein and except for
right
s
and obligat
i
ons
,
whether
de
t
ermined
,
contingent
or
otherwise
,
which
arose
prior to
or
as
a
result
of
such
termination.
|
11.
|
Dispute Resolution
|
(a)
|
In the event of a dispute by the Parties over any issue arising under or related to this Agreement. either Party may proceed with binding arbitration
in
the following manner:
|
(i)
|
The Party wishing to initiate arbitration shall notify the other
in
writing of its desire to submit the matter to arbitration. Such notice shall contain a statement of the issues and shall designate one arbitrator.
|
(ii)
|
Within fifteen
(15)
days of such notice, the other Party shall respond in writing by designating a second arbitrator.
|
(iii)
|
Within fifteen (15) days of designation of the second arbitrator, the
two
arbitrators designated as aforesaid shall appoint a third arbitrator to serve as chairman.
If
the
two arbitrators so designated fail
to
appoint a third arbitrator within the time provided herein, or if a Party fails to appoint
an
arbitrator within the time provided for herein, either
Party
may request the Chief Judge of the United States District Court for the
district
in which the said Party's principal office
is located
to appoint an
additional a
rb
itrator.
|
(iv)
|
The arbitrators shall promptly hear and decide the issues submitted to
them
in accordance with
the
rules for commercial arbitration of the American Arbitration Association, giving
to
both Parties reasonable notice of
the
time and place of hearing.
|
(v)
|
The
arbitrators,
or
a
majority
of them, shall promptly render
their
decision and award in writing to the Parties.
|
(vi)
|
Any arbitration award rendered hereunder shall
be
final and binding upon the Parties. Judgment upon any such
arbitration
award may be entered
in
any United States District Court
having
jurisdiction over the Parties
.
|
(vii)
|
Each Party shall bear its own costs and expenses of arbitration including the
cost
of any expenses of the arbitrator designated by or
for
it. The
fees
of
the chairman
and any other
remaining
expenses
of
the arbitrators shall be borne
equally
by the Parties.
|
(viii)
|
The
Parties
agree that
every
reasonable effort shall be made
to
obtain
the
prompt
resolution
of disputes which are submitted to arbitration
pursuant
to this Agreement. The Parties
further
specifically agree that
neither
Party shall be entitled
to
delay the arbitration process significantly by
insisting
on the application of extensive procedural steps or
ot
her
actions
which
cannot clearly be expected to
improve the
ability of the arbitrators
to
render
a
prompt, reasonable and fair decision
and agree
further
that reasonable discovery requests shall not
be
barred by
the
foregoing.
|
(b)
|
In
the event of a dispute arising under or related
to an invoice
or request seeking
payment
of any
kind
under this Agreement the Party disputing
that
amount
shal
l
timely pay any undisputed amount of the
invoice
or requested fee, charge or cost.
|
(i)
|
In t
he event of such a dispute only
the disputed portion of the invoice and/or
request for
payment shall be subject to the dispute resolution process under this Agreement.
|
(ii)
|
The Party
disputing
an amount
set
forth
in
an
invoice
shall not be
required
to pay the
d
isputed
amount pending resolution of the process described
in
this Section; however, the undisputed amount shall be paid
in
accordance
with the
ordinary payment terms of
this
Agreement.
Payment
of or receipt of
the
undisputed amount may
not
be construed to be any admission by either Party
regarding
any matter arising from the disputed amount. Further, payment of or receipt of the undisputed amount does not preclude recovery of any or the entire amount paid
if
it is subsequently determined that a dispute exists as to the paid portion.
|
(c)
|
Pending resolution of a dispute as set
forth
under this Section 11, the Parties shall proceed diligently with the performance of this Agreement
in
accordance with
its
terms.
|
13.
|
Compliance with Laws
|
(a)
|
It
is
qualified
to do
business
in
the
States of Delaware and Nevada and that
it
will take such action
as
,
from time
to
time hereafter, may be necessary
to remain
so qualified;
|
(b)
|
It shall comply with all federal, state and
l
ocal laws regulations and ordinances applicable
to
its
activities and obligations under this Agreement and for operation of the Service; and
|
(c)
|
It shall
obtain
,
at
its
expense
,
all
lice
nses
,
permits,
insurance
,
and governmental approvals, if any, necessary to the performance of its obligations under this Agreement and for operation of the Service.
|
14.
|
Notices
|
If to XREE: |
X Rail Enterprises, Inc. 3651 Lindell
Road,
0482 Las Vegas, NV 89103 Attention: Wayne
Bailey
|
15.
|
Confidential
Information
|
16.
|
Assignment
|
18.
|
Governing Law
|
19.
|
Amendments
|
a.
|
All payments shall be app lied first to interest, then to principal and shall be credited to the Maker's account on the date that such payment is physically received by the Holder.
|
b.
|
All principal and accrued interest then outstanding shall be due and payable by the Maker to the Holder on or before June 2 2018 (the "Maturity Date").
|
c.
|
Absent the occurrence of an event of default (unless such event of default is waived in writing by the payee) the Company may prepay this note in full without any prepayment penalty.
|
d.
|
This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Maker and will not impose personal liability upon the holder thereof.
|
1.
|
INTEREST RATE.
|
2.
|
PAYMENTS.
|
3.
|
VOLUNTARY PREPAYMENT.
|
4.
|
CONVERSION OPTION.
|
5.
|
WAIVERS.
|
6.
|
DEFAULT.
|
6.1
|
The nonpayment of the Principal Amount or the Maturity Payment under the Note or any accrued interest thereon by Maker within five business days of when the same shall have become due and payable.
|
6.2
|
The entry of a decree or order by a court having appropriate jurisdiction adjudging Maker bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of Maker under the federal Bankruptcy Act or any other applicable federal or state law, or appointing a receiver, liquidator, assignee or trustee of Maker, or any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) consecutive days.
|
6.3
|
The
institution by Maker of proceedings to be adjudicated bankrupt or insolvent, or the consent by
it
to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under the federal Bankruptcy Act or any other applicable federal or state law, or the consent by it to the filing of any such petition or to the appointment of
a
receiver, liquidator, assignee or trustee of the Company, or of any substantial part of its property,
shall
become
subject
to the jurisdiction of a federal bankruptcy court or similar state court, or if Maker shall make an assignment for the benefit of its creditors, or if there is a receivership, execution or other material judicial seizure, or if there is an admission in writing by
Maker
of its inability to pay its debts generally as they become due, or the taking of corporate action by Maker in furtherance of any such action.
|
6.4
|
Default in the obligation of Maker for borrowed money, other than this Note
,
which shall
continue
for a period of sixty (60) days, or any event that results in acceleration of the maturity of any material indebtedness of Maker under any note,
indenture
,
contract, or agreement.
|
6.5
|
Maker's failure to comply with any material term, obligation, covenant, or condition contained in this Note, within 10 days after the expiration of all cure periods and receipt of written notice from the Lender demanding such compliance.
|
6.6
|
Any warranty, covenant, or representation made to the Lender by Maker under this Agreement, proves to have been false in any material respect when made or furnished.
|
7.
|
ACCELERATION.
|
8.
|
SECURITY INTERESTS.
|
9.
|
ATTORNEYS' FEES.
|
10.
|
SECTION HEADINGS.
|
12.
|
CHOICE OF LAW
|
13.
|
ARBITRATION.
|
14.
|
TRANSFERABILITY.
|
Principal Amount: $45,000.00
|
Issue Date: November 1, 2017 Purchase Price: $45,000.00
|
1.1
|
Conversion Right
. The Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III), each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the "Conversion Price") determined as provided herein (a "Conversion");
provided
,
however
, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso.
The beneficial ownership
limitations on conversion as set forth in the section may NOT be waived by the Holder
. The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the "Notice of Conversion"), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the "Conversion Date"); however, if the Notice of Conversion is sent after 6:00pm, New York, New York time the Conversion Date shall be the next business day. The term "Conversion Amount" means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion
plus
(2) at the Holder's option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date,
plus
(3) at the Holder's option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2)
plus
(4) at the Holder's option, any amounts owed to the Holder pursuant to Sections 1.4 hereof.
|
1.2
|
Conversion Price
. The conversion price (the "Conversion Price") shall equal the Variable Conversion Price (as defined herein) (subject to equitable adjustments by the Borrower relating to the Borrower's securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 58% multiplied by the Market Price (as defined herein) (representing a discount rate of 42%). "Market Price" means the average of the lowest two (2) Trading Prices (as defined below) for the Common Stock during the fifteen (15) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means, for any security as of any date, the closing bid price on the OTCQB, OTCQX, Pink Sheets electronic quotation system or applicable trading market (the "OTC") as reported by a reliable reporting service ("Reporting Service") designated by the Holder (i.e. Bloomberg) or, if the OTC is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the "pink sheets". If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as reasonably determined by the Borrower. "Trading Day" shall mean any day on which the Common Stock is tradable for any period on the OTC, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.
|
1.3
|
Authorized Shares
. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved seven times the number of shares that would be issuable upon full conversion of the Note (assuming that the 4.99% limitation set forth in Section 1.1 is not in effect)(based on the respective Conversion Price of the Note (as defined in Section 1.2) in effect from time to time, initially
25,586,206
)(the "Reserved Amount"). The Reserved Amount shall be increased (or decreased with the written consent of the Holder) from time to time in accordance with the Borrower's obligations hereunder. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Note. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.
|
1.4
|
Method of Conversion
.
|
(a)
|
Mechanics of Conversion
.
As set forth in Section 1.1 hereof, from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower (upon payment in full of any amounts owed hereunder).
|
(b)
|
Surrender of Note Upon Conversion
. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion.
|
(c)
|
Delivery of Common Stock Upon Conversion
. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within two (2) business days after such receipt (the "Deadline") (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations hereunder, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower's obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion.
|
(d)
|
Delivery of Common Stock by Electronic Transfer
. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the Holder and its compliance with the provisions set forth herein, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder's Prime Broker with DTC through its Deposit and Withdrawal at Custodian ("DWAC") system.
|
(e)
|
Failure to Deliver Common Stock Prior to Deadline
. Without in any way limiting the Holder's right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline due to action and/or inaction of the Borrower, the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock (the "Fail to Deliver Fee"); provided; however that the Fail to Deliver Fee shall not be due if the failure is a result of a third party (i.e., transfer agent; and not the result of any failure to pay such transfer agent) despite the best efforts of the Borrower to effect delivery of such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section 1.4(e) are justified.
|
1.5
|
Concerning the Shares
. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless: (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration (such as Rule 144 or a successor rule) ("Rule 144"); or (iii) such shares are transferred to an "affiliate" (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement).
|
1.6
|
Effect of Certain Events
.
|
(a)
|
Effect of Merger, Consolidation, Etc
.
At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III). "Person" shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.
|
(b)
|
Adjustment Due to Merger, Consolidation, Etc
. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Note, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, ten (10) days prior written notice (but in any event at least five (5) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Note. The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.
|
(c)
|
Adjustment Due to Distribution
. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower's shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a "Distribution"), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.
|
1.7
|
Prepayment
. Notwithstanding anything to the contrary contained in this Note, at any time during the periods set forth on the table immediately following this paragraph (the "Prepayment Periods"), the Borrower shall have the right, exercisable on not more than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.7. Any notice of prepayment hereunder (an "Optional Prepayment Notice") shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the "Optional Prepayment Date"), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to Holder, or upon the direction of the Holder as specified by the Holder in a writing to the Borrower (which direction shall to be sent to Borrower by the Holder at least one (1) business day prior to the Optional Prepayment Date). If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash equal to the percentage ("Prepayment Percentage") as set forth in the table immediately following this paragraph opposite the applicable Prepayment Period, multiplied by the sum of: (w) the then outstanding principal amount of this Note
plus
(x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date
plus
(y) Default Interest, if any, on the amounts referred to in clauses (w) and (x)
plus
(z) any amounts owed to the Holder pursuant to Section 1.4 hereof (the "Optional Prepayment Amount"). If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.7.
|
Prepayment Period
|
Prepayment Percentage
|
|||
1. The period beginning on the Issue Date and ending on the date which is thirty (30) days following the Issue Date.
|
120
|
%
|
||
2. The period beginning on the date which is thirty-one (31) days following the Issue Date and ending on the date which is sixty (60) days following the Issue Date.
|
125
|
%
|
3. The period beginning on the date which is sixty-one (61) days following the Issue Date and ending on the date which is ninety (90) days following the Issue Date.
|
130
|
%
|
||
4. The period beginning on the date that is ninety-one (91) day from the Issue Date and ending one hundred twenty (120) days following the Issue Date.
|
135
|
%
|
||
5. The period beginning on the date that is one hundred twenty-one (121) day from the Issue Date and ending one hundred fifty (150) days following the Issue Date.
|
140
|
%
|
||
6. The period beginning on the date that is one hundred fifty-one (151) day from the Issue Date and ending one hundred eighty (180) days following the Issue Date.
|
145
|
%
|
3.1
|
Failure to Pay Principal and Interest
. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity or upon acceleration and such breach continues for a period of five (5) days after written notice from the Holder.
|
3.2
|
Conversion and the Shares
. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for two (2) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower's transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty-eight (48) hours of a demand from the Holder.
|
3.3
|
Breach of Covenants
. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of twenty (20) days after written notice thereof to the Borrower from the Holder.
|
3.4
|
Breach of Representations and Warranties
. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
|
3.5
|
Receiver or Trustee
. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
|
3.6
|
Bankruptcy
.
Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.
|
3.7
|
Delisting of Common Stock
. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTC (which specifically includes the quotation platforms maintained by the OTC Markets Group) or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.
|
3.8
|
Failure to Comply with the Exchange Act
. The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.
|
3.9
|
Liquidation
. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.
|
3.10
|
Cessation of Operations
. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower's ability to continue as a "going concern" shall not be an admission that the Borrower cannot pay its debts as they become due.
|
3.11
|
Financial Statement Restatement
.
The restatement of any financial statements filed by the Borrower with the SEC at any time after 180 days after the Issuance Date for any date or period until this Note is no longer outstanding, if the result of such restatement would, by comparison to the un-restated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
|
3.12
|
Replacement of Transfer Agent
. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.
|
3.13
|
Cross-Default
. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. "Other Agreements" means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term "Other Agreements" shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.
|
4.1
|
Failure or Indulgence Not Waiver
.
No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
|
4.2
|
Notices
. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
|
4.3
|
Amendments
. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term "Note" and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.
|
4.4
|
Most Favored Nation
. During the period where any monies are owed to the Holder pursuant to this Note, if the Borrower engages in any future financing transactions with a third party investor, the Borrower will provide the Holder with written notice (the "MFN Notice") thereof promptly but in no event less than 10 days prior to closing any financing transactions. Included with the MFN Notice shall be a copy of all documentation relating to such financing transaction and shall include, upon written request of the Holder, any additional information related to such subsequent investment as may be reasonably requested by the Holder. In the event the Holder determines that the terms of the subsequent investment are preferable to the terms of the securities of the Borrower issued to the Holder pursuant to the terms of the Purchase Agreement, the Holder will notify the Borrower in writing. Promptly after receipt of such written notice from the Holder, the Borrower agrees to amend and restate the Securities (which may include the conversion terms of this Note), to be identical to the instruments evidencing the subsequent investment. Notwithstanding the foregoing, this Section 4.4 shall not apply in respect of (i) an Exempt Issuance, or (ii) an underwritten public offering of Common Stock.
"Exempt Issuance
" means the issuance of: (a) shares of Common Stock or options to employees, officers, consultants, advisors or directors of the Borrower pursuant to any stock or option plan duly adopted for such purpose by a majority of the members of the Board of Directors or a majority of the members of a committee of directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of this Note and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date hereof, and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Borrower, provided that any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Borrower and in which the Borrower receives benefits in addition to the investment of funds, but shall not include a transaction in which the Borrower is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.
|
4.5
|
Assignability
. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an "accredited investor" (as defined in Rule 501(a) of the Securities and Exchange Commission). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a
bona
fide
margin account or other lending arrangement; and may be assigned by the Holder without the consent of the Borrower.
|
4.6
|
Cost of Collection
. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys' fees.
|
4.7
|
Governing Law
.
This Note shall be governed by and construed in accordance with the laws of the State of Virginia without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of New York or in the federal courts located in the Eastern District of New York.
|
4.8
|
Purchase Agreement
. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.
|
4.9
|
Remedies
. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.
|
[ ] |
The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system ("DWAC Transfer").
|
Principal
A
mount
:
$85
,
000.00
|
I
s
sue D
a
te: November 2
7,
201
7
|
a)
|
Calculation of
Conversio
n
Price
. The conversion price hereunder
(the
"
Convers
i
on
Price")
sha
ll
equal
t
h
e
l
ower
of: (i) the closing
sa
l
e
price
of t
he
Co
mm
on Stock
on the Principal Market on the Trading
Day
immediately preceding the Closing Date
,
and (ii) 50%
of e
i
ther
the
l
owest sale
price for the Common Stock on the Principal Market during the
twenty (20) consecut
i
ve
Trading Days including and
imm
ediately
preceding the
Co
nversion
Date, or the closing
b
id
price
,
wh
i
chever
is lower,
provided
if
the
Registration Statement (as defined in the registration rights agreement
entere
d
into by
an
d
between the Company
a
nd Holder
dated
on
or about the date hereof
(" Registrat
ion
Rights Agreement''),
i
s
not filed within thirty (30) days of
C
l
os
ing
,
or
if
w
ithin
ninety (90) days of
C
l
osi
n
g
,
t
h
e
Registration Statement registering
the shares of Co
mm
on Stock of
this
Note
is
not
effect
iv
e
in accordance with
Section
4(
o)
of
the
Purchase
Agreement
then
the
conversion price hereunder ("Default
Co
nver
sio
n
Price")
s
hall
while this
Note
remains
outsta
ndin
g
equal the
l
owe
r
of: (i)
the closing sa
l
e
price of
Common
Stock on the Principal Market on the Trading Day including and immediately preceding the Conversion Date, and (ii) 40%
of either
the
l
owest sa
le
price for the Common
S
t
ock on
the Principal Market during the twenty
(20) consecutive Trading
Da
ys
including and
imm
edia
tel
y
preceding the Conversion Date or
t
h
e closing
bid
price, w
hich
ever
is lower,
provided, however
,
if the
Compa
n
y' s s
h
are
pri
ce at
any time loses the bid (ex: 0.0001
on
the ask
w
i
th zero
market makers on the bid
on
l
eve
l
2), then
t
h
e
Conversion
Pri
ce
may
,
in
the Holder
'
s so
l
e
and absolute discretion, be reduced to a fixed
conversio
n
price of 0.00001
(if
l
ower
than the
conversion
price otherwise)
,
and provided,
that if on the date
of
delivery of the
Convers
i
on S
har
es
to the Holder, or any date thereafter
wh
il
e Conve
rsion
Shares
are held by the Holder
,
the
closing
bid price per
s
har
e of Com
m
o
n
Stock
on the
Princip
al
Market on
t
h
e
Trading Day
on wh
ich
t
he
Common
S
hare
s
are traded is
les
s
than the
sale
price per
s
h
are
of Common
Stock on
the Principal Market
on
the Trading Day used to
calcu
late
the Conversion Price
h
ereunder
,
then
such Co
n
vers
i
on
Price shall be automatically
reduced
suc
h
that the Conversion
Pric
e shall
be recalculated
usin
g t
h
e
new low closing bid price ("Adjusted Conversion Price") and
s
hall
replace
th
e Conversion
Price above,
a
nd
Holder
sha
ll
be
issu
ed
a number of additional
s
ha
res
such that the
aggregate
number of
sha
re
s
Holder receives is based upon the Adjusted
Co
n
versio
n
Price, and
provided
,
further,
that the Conversion Price
s
hall
be
subject
to
Sect
ion
1.2(b) below.For
t
h
e
purpose of clarity, any
s
h
ares
required to be
i
ssued
as
a resu
lt
of an Adjusted
Conve
r
sio
n
Price
sha
ll
be deemed to be
"Convers
ion
Shares"
under this Note.
I
f
an
Event of
D
efau
lt
under Section 3.9
of the
Note
has occurred,
Hold
er,
in
i
ts sole
discr
etion,
may elect to use a Conversion Price
w
hich
shall equal
the
l
owe
r
of: (i) the closing
sa
le
price of the Common
Stock
on the Principal Market
o
n
the Trading Day immediately preceding
the
Closing Date;
(ii)
50% of
eit
h
er t
h
e
lowest
sale
price
or
the closing bid price,
whic
h
ever
i
s
lower
for the Common Stock on the Principal Market during any
Tradin
g
Day
in
which the
Event
of
D
efau
l
t
ha
s
not been
cured.
I
f such
Common
Stock
is not
traded o
n
the
OTCBB
,
OTCQB
,
OTC
Pink
,
NAS
DAQ
or
NYSE, then
s
uch
sa
le
price
s
h
a
ll
be the
sa
le
price
of s
u
c
h
sec
urit
y
on
the
principal
sec
uriti
es exchange
or trading market where
s
uch
sec
uri
ty
is listed or traded
o
r
,
if
no
sa
le
price of
such security
is available in any
of
the
forego
in
g
manners,
the average
of
t
h
e
closing bid prices
of
any
m
a
rk
et
makers for
s
uch
secur
it
y
that are
li
sted
in
the
"pink sheets"
by the
Nationa
l
Quotation Bureau
,
Inc. I
f s
uch
sa
le
price cannot be calculated
for such sec
urit
y on such
date in the manner provided above,
such
price
sha
ll
be the fair market value
as
mutua
ll
y deter
m
ined by the Borrower a
n
d t
h
e
H
o
l
der.
I
f the Borrower
'
s Common stock
i
s chi
ll
ed for deposit at
OT
C, becomes chi
ll
ed at any point wh
il
e t
h
is Note remains outstanding o
r
de
p
osit o
r
other additio
n
a
l
fees are payab
l
e due to a Y
i
e
l
d Sig
n
,
Stop Sign or other tra
d
ing restrict
i
ons
,
or if the clos
i
ng sale price at any time falls be
l
ow $0.0
1
2 (as appropriate
l
y an
d
equitably adj
u
sted fo
r
stock sp
l
its
,
stock divide
n
ds
,
stock cont
ri
butions and sim
il
ar events)
,
t
h
en such 50% figure specified i
n
c
l
ause 1
.
2(a)(
i
i) above sha
ll
be
r
e
d
uced to 35%
provided however
,
in t
h
e event that th
e
Default Convers
i
on Price is app
l
icab
l
e then s
u
ch 40% figure spec
i
fied i
n
cla
u
se
1
.2(a)(
i
i) above shall b
e
r
educed to 25%.
I
n the event t
h
at the s
h
a
r
es of t
h
e Borrower
'
s Common Stock are
n
ot del
i
verable via
D
WAC following the co
n
version of a
n
y amo
u
nt
h
ere
u
nder
,
an additiona
l
5% disco
un
t w
ill
be attrib
u
ted to the Conversion Price. Additio
n
a
ll
y
,
the Borrower acknowledges t
h
at it will take all reasonable steps necessary or appropriate
,
i
n
c
l
uding prov
i
d
i
ng a board o
f
directors r
e
solution aut
h
oriz
in
g t
h
e iss
u
a
n
ce of co
m
mon stock to
H
older. So
l
ong as the re
q
uested sa
l
e may b
e
made p
ur
s
uant t
o
R
u
le
1
44, t
h
e Company agree
s
to: (
1
) accept a
n
opinion of cou
n
se
l
to the
H
o
l
de
r
confirming the rig
h
ts of t
h
e
H
older to se
ll
shares of Co
mm
on Stock issuable or iss
u
e
d
to
H
o
l
der o
n
conversion of this Note pursuant to R
ul
e 144 as pro
mul
gated by t
h
e SEC (" Ru
l
e
1
44
"
)
,
a
n
d
/
or (2)
i
n the eve
n
t that Ho
l
der
,
acting in its so
l
e discretion, requests that Compa
n
y
'
s cou
n
se
l
provide an opi
n
io
n
of co
u
nsel (which opin
i
o
n
of co
un
se
l
shall be provided to the Holder w
i
th
i
n 24 hours of Ho
l
der
'
s req
u
est) confirming th
e
r
i
ghts of the Ho
l
der to se
ll
s
h
ares of Common Stock issuab
l
e or is
s
u
ed to
H
o
l
der on convers
i
on of t
h
is Note pursuant to R
ul
e
1
44
,
as suc
h
Ru
l
e
1
44 may be
in
effect from time to time
,
whic
h
o p
ini
o
n
will be iss
u
ed at the Com
p
a
n
y' s ex
p
ense a
n
d the convers
i
o
n
dollar a
m
ount will
b
e reduced by $750
.
00 to cove
r
t
h
e cos
t
of such lega
l
opinio
n
.
"
Trading
D
ay
'
· s
h
a
ll m
ean any day o
n
whic
h
the Commo
n
Stock is tra
d
able for any p
e
riod on t
h
e O
T
C
P
ink
,
or on the principal securit
i
es excha
n
ge or other securities market on wh
i
ch t
h
e Commo
n
Stock is t
h
en being traded
.
Additio
n
ally
,
if the Co
m
pany ceases to be a report
in
g compa
n
y pursuant t
o
the 1934 Act or if the Note ca
n
not be converted into free trading s
h
ares after 1
8 1
days from t
h
e issuance
d
ate
,
an addit
i
onal 15% discount w
ill
be attributed to the Co
n
ve
r
sio
n
Price for any a
n
d a
ll
Co
n
ve
r
sions
s
ubmitted
t
hereafter.
|
b)
|
If at any time the Conversion Price as deter
min
ed here
un
der for any Conversion would be less t
h
an the par va
l
ue of the Co
m
mo
n
Stock
,
t
h
e
n
t
h
e Conver
s
io
n
Pr
i
ce
h
ereunder sha
ll
eq
u
al such par value for suc
h
Conversion an
d
the Conversio
n
Amo
un
t for such Conversion shall be increased to
i
nclude A
d
ditio
n
al
P
rincipa
l
,
w
h
e
r
e
"
Add
i
tiona
l P
r
in
cipal'' means suc
h
additional amount to be added to the Conversion A
m
o
u
nt to
t
he extent necessary to cause the number of Conve
r
sion Shares issuab
l
e upon such Conversion to eq
u
a
l
t
h
e same numbe
r
o
f Convers
i
o
n
Shares as wou
l
d have been issued had the Conversio
n
Price not bee
n
s
u
bject to the m
in
im
u
m price set forth in this Sect
i
o
n I
.2(b).
|
c)
|
Without i
n
a
n
y way
l
i
m
iti
n
g t
h
e
H
o
l
der
'
s
r
ight to pursue other
r
emedies
,
i
n
cl
u
di
n
g actua
l
damages a
n
d
/
or equ
i
tab
l
e re
l
ief
,
t
h
e part
i
es agree t
h
at if de
l
ivery of the Common Stock
i
ssuable upon conve
r
sion of th
i
s Note is
n
ot de
l
ivered by the Dea
dl
i
n
e (as defined bel
o
w) the Borrowe
r
s
h
a
ll
pay to t
h
e
H
olde
r
$
1
,
000.00 per day i
n
cas
h
,
for eac
h
day beyo
n
d the
D
eadli
n
e t
h
at t
h
e Borrower fai
l
s to de
l
ive
r
such Co
m
mo
n
Stock. S
u
ch cash amount shall be paid to Holde
r
by the fifth
d
ay of the
m
onth fo
ll
owing t
h
e mo
n
th i
n
w
h
ich it
h
as accrued or
,
at the option of the
H
older
,
s
h
all be added to the pri
n
cipal amo
u
nt of th
i
s Note
,
i
n wh
i
c
h
eve
n
t interest sha
ll
accrue thereon in accorda
n
ce w
i
th
th
e te
r
ms of t
hi
s Note and such addit
i
onal principa
l
amount sha
ll
be co
n
vertible
i
nto Com
m
on Stock in accorda
n
ce w
i
th the terms of t
h
is Note. T
h
e B
orrower agrees that t
h
e right to convert this Note is a va
lu
ab
l
e r
i
ght to the Ho
l
der. T
h
e damages
r
esu
l
t
i
ng from a fa
i
lu
r
e
,
attempt to frustrate
,
or interference w
i
t
h
suc
h
conversion right are d
i
fficu
l
t if not impossib
l
e
to quantify. Accordingly
,
the parties acknowledge that the
liquidated
damages provision
conta
in
ed
in this Section are justified.
|
1.3.
|
Authorized
Shares
. The Borrower
covenants
that the Borrower
w
ill
at all
times
whi
le
this Note
i
s outs
tanding
reserve from its
autho
ri
zed
and unissued Common
Stock a suffic
i
ent
number
of shares, free from preemptive
ri
ghts,
to provide for the issuance
of Co
mm
o
n
Stock
up
on t
h
e
full conversion or adjustment
of
this Note.
Th
e
Borrower is
r
e
quir
ed
a
t
a
ll
times to have authoriz
e
d
a
nd
reserved
seven
(7)
t
imes
t
h
e
number of
shares
that is
act
u
a
lly
issuable upon full
conversion or
adjustment of
th
i
s
Note (based
o
n
the Conversion
Pric
e
of
the Notes
in
effect
from time to time)(the
"
Reserved Amount").
Initi
a
lly
,
the Company will
in
struct
the
Tran
sfer Agent
to reserve fifty four million one
hundr
ed
thousand (54, I 00,000) shares of common
stock
in the name
of
the Holder
for
issuance
up
on
conversion
hereof. Th
e
Borrower represents that upon issuance,
such shares wi
ll
be duly and
va
lidl
y
is
s
ued, fully paid and non-assessable.
In
addi
t
ion
,
if
the Borrower
sha
ll i
ssue any sec
uritie
s
or make any change to its
capita
l
st
ructur
e
which would change the number
of shares
of Common Stock
in
to
which this
Note s
hall
be co
nverti
b
l
e
at the
t
h
en c
urr
ent Conversion
Price
,
t
h
e
Borrower
s
h
a
ll
at the same time make proper provision so that thereafter there
s
hall
be
a
sufficient number of
shares of
Common Stock authorized and reserved
,
free from preemptive rights, for conversion
of
this Note in full.
The
Borrower (i) acknowledges that
it
has irrevocably instructed its transfer agent
to
issue certificates for th
e
Common
Stock
issuable up
o
n
co
nv
ersion of
this Note,
and
(ii) agrees that
it
s
issuance of
thi
s
Note
sha
ll
const
itute
full authority
to
its officers and
agents
who are charged with the duty of executing
stock
ce1tificates
to execute
and
i
ssue
the nece
ssary
certificates
for
shares
of Common Stock in accordance with the terms and
cond
ition
s
of
t
hi
s
Note.
|
1.4.
|
Method
of
Conversion.
|
a)
|
Mecha
nic
s
of
Conversion.
S
ubjec
t
to Section
I
.
I
,
this
Note
may be c
o
nverted by the
Holder in
whole or in part at any time
and
from
time
to time after the
Is
sue
Da
te
,
by
s
ubmi
tting
to the Borrower a
Notice of
Conversion
(by
facsimile
,
e-mail or
other
reasonable means of communication dispatched
on
the Conversion Date prior to
11
:59
p.m., New York
,
New York
time).
|
b)
|
Book
Entry
upon
Conversion.
Notwithstanding anything to
the contrary se
t
forth
here in
,
upon conversion of
th
is
Note in accordance
with
the terms hereof, the Holder
s
hall
not be required to physically
surrende
r
this
Note
to
the
Borrower un les
s
the
entire
unp
aid
principal
amo
unt
of this
Note
is
so converted.
The Holder and the Borrower
s
hall
maintain records
showing the
principal amount so converted and the dates of
s
u
c
h
conversions
or
shall
u
se suc
h
other method
,
reasonably satisfactory
to
th
e
H
o
lder
and
the Borrower
,
so as
not to require physical
surrender
of
t
hi
s
Note
upon
each
suc
h
conversion.
In
the
event
of any dispute
or
discrepancy
,
suc
h
records of the Borrower
s
hall
,
prima facie
,
be controlling and determinative in
t
he
absence of
manifest
error.
Notwithstanding the foregoing, if any portion of
t
hi
s
Note is converted as aforesaid
,
the
Holder may not transfer this
Not
e
unle
ss
the Holder first physically
surrenders
this Note to the Borrower
,
where upo
n
the Borrower will forthwith
i
ssue
and deliver upon the
orde
r
of
the Holder a new
Note of
like t
enor,
registered
as
the Holder
(upo
n
payment by the Holder
of
any
applicab
le
transfer taxes) may
request,
r
eprese
ntin
g
in
the
aggregate
t
h
e
remaining unpaid principal
amount of t
h
is No
t
e. T
h
e Ho
l
der and a
n
y assig
n
ee
,
by acceptance of
t
hi
s
Note
,
ack
n
owledge and ag
r
ee t
h
at
,
by reaso
n
of t
h
e prov
i
sions of t
h
is paragrap
h
,
fo
ll
owing co
n
ve
r
sio
n
of a
p
ortio
n
of t
h
i
s N
ote
,
the u
n
paid and u
n
conve
rt
ed
p
r
i
nc
i
pa
l
amo
un
t of
t
h
i
s Note
r
eprese
n
ted by th
i
s Note may be
l
ess tha
n
the amo
u
n
t
stated on t
h
e face
h
ereof.
|
c)
|
Pav
m
ent of Taxes
.
Th
e Borrower s
h
a
ll
not be req
uir
ed to pay any tax w
h
ich may be payab
l
e
i
n res
p
ect of any tra
n
sfe
r
i
n
volved
i
n the iss
u
e and del
i
very of sha
r
es of Commo
n
Stock or ot
h
e
r
securit
i
es or prope
r
ty on co
n
vers
i
on of this Note
i
n a
n
ame other tha
n
that of the Ho
l
der (or in street
n
a
m
e), a
n
d the Borrower s
h
a
ll
not be requ
i
red to
i
ssue or de
l
iver any such shar
e
s or other sec
u
rit
i
es or property un
l
ess and
u
nt
i
l the
p
erson or persons (ot
h
er than the H
o
l
der or t
h
e c
u
s
t
odian in w
h
ose street na
m
e s
u
c
h
s
h
ares are
t
o be
h
e
l
d for the
H
older
'
s accou
n
t) re
q
uesting
t
he
i
ssua
n
ce t
h
ereof sha
ll
have pa
i
d to t
h
e Borrower t
h
e a
m
o
u
nt of any s
u
ch tax or s
h
a
ll
have e
s
tab
l
ished to the satisfaction of t
h
e Borrower that such
t
ax has
b
ee
n
pa
i
d.
|
d)
|
D
el
i
very of Co
mm
on Stock
up
o
n
Conversio
n
. Upon receip
t
by t
h
e Borrower from the Ho
l
der of a facsim
il
e trans
m
ission or e-ma
i
l (or o
th
er reasona
bl
e mea
n
s of communication) of a Not
i
ce of Co
n
version meeti
n
g
t
he re
qui
rements fo
r
conversion as provided
i
n t
h
is Section
1
.4 o
r u
po
n
an eve
n
t trigger
i
ng the calcu
l
at
i
on of an Adjusted Conversio
n Pr
ice
,
the Borrowe
r
sha
ll
issue and de
l
iver or ca
u
se to be issued and de
li
vered to o
r u
pon the order
o
f the
H
o
l
der certificates for t
h
e Com
m
o
n
Stock
i
ss
u
able
up
on such co
n
ve
r
sio
n
w
i
t
hi
n three (3) business days after s
u
c
h
receipt or such an event (the " Dead
li
ne
"
) (a
n
d
,
sole
l
y in the case of conve
r
s
ion of t
h
e e
n
t
ir
e
u
npaid pri
n
ci
p
a
l
amo
u
nt hereof
,
s
u
r
r
e
n
der of t
hi
s Note) in accordance w
i
th t
h
e terms
h
e
r
eof a
n
d the P
u
rc
h
ase Agreement.
|
e)
|
Obl
i
gat
i
on of Borrower to
D
e
l
iver Com
m
on Stock
.
Upon receipt by the Borrower of a d
ul
y and properly exec
u
ted Notice of Co
n
versio
n
or
u
pon an event trigger
i
ng t
h
e calcu
l
at
i
on o
f
an Ad
j
usted Conversion Pr
i
ce
,
t
h
e Ho
ld
er s
h
a
ll
be deemed to be t
h
e holder of record of the Co
m
mon Stock
i
ssuable
u
pon suc
h
co
n
vers
i
on or as a resu
l
t of an Ad
ju
sted Conversion
P
rice
,
t
h
e o
u
tstan
d
ing princ
i
pa
l
amo
un
t a
n
d t
h
e amount of accrued a
n
d
u
npaid
in
terest o
n
th
i
s Note s
h
a
ll
be
r
educed to reflec
t
such co
n
ve
r
s
i
on or ad
j
us
tm
ent, a
n
d,
u
n
l
ess t
h
e Borrower defau
lt
s o
n
it
s
ob
l
igat
i
ons
u
nde
r
t
h
is Article
I
,
a
ll
rig
h
ts wit
h r
espect to t
h
e port
i
on of t
hi
s
N
ote be
i
ng so converted sha
ll
forthwit
h
term
in
a
t
e except t
h
e r
i
ght to receive t
h
e Co
m
mo
n
Stock or other securities, cash or other assets
,
as herein prov
i
ded
,
on such convers
i
o
n
. If
t
he
H
o
ld
er s
h
a
ll h
ave given a Not
i
ce of Conversio
n
as prov
i
ded
h
ere
i
n or
u
po
n
a
n
eve
n
t triggeri
n
g t
h
e ca
l
c
ul
ation of an Adjusted Co
n
version Price
,
t
h
e
B
orrower' s ob
li
gatio
n
to
i
ssue and del
i
ver the cert
ifi
ca
t
es fo
r
Common Stock s
h
a
ll
be absolute a
n
d uncon
d
itiona
l
,
i
rres
p
ective of
th
e abse
n
ce of any actio
n
by t
h
e Holder
t
o enforc
e
the same
,
a
n
y waiver or consent with respect to a
n
y prov
i
s
i
on thereof
,
t
h
e
r
ecovery of any judgment aga
i
nst any person or any action to e
n
force the sa
m
e
,
any failu
r
e o
r
de
l
ay in t
h
e
enforcement of any ot
h
er ob
l
igat
i
on of t
h
e Bo
r
rower to t
h
e
h
o
l
de
r
of
r
ecord
,
or any setoff
,
c
o
unter
cl
a
im
,
reco
u
pment,
l
im
i
tation or te
r
mina
t
io
n
,
or a
n
y breac
h
or a
ll
eged breach
b
y the
H
o
l
der of any ob
li
gatio
n
to t
h
e Borrower
,
a
n
d
i
rrespective of a
n
y other c
i
rc
u
msta
n
ce w
h
ic
h
m
i
ght othe
r
w
i
se
l
imit s
u
c
h
ob
l
igat
i
o
n
of the Bor
r
ower to t
h
e Ho
l
de
r
in co
n
nectio
n
with suc
h
conversion. The Conversio
n
Date specified in t
h
e Not
i
ce of Conversion s
h
a
ll
be t
h
e Convers
i
on
D
ate so
l
o ng as the Not
i
ce of Conversion is received by the Borrower before
11:
59 p.m.
,
New York
,
New Yo
r
k time
,
on such date.
|
f)
|
D e l ivery of Common Stock b y E l ec t ro ni c Tra n sfe r . In l i eu of de l iver i ng physica l certificates represe n ti n g the Common Stock iss u ab l e u pon co n vers i on , p r ovided the Borrower is participating i n the Depository T ru st Company ( " OTC " ) Fast Automated Secu r i ti es Transfer ( " FAST " ) progra m , upon request of the Ho l der a n d its comp li a n ce wi t h t h e provisions contai n ed i n Sectio n I. l and in this Sect i on 1 .4 , th e Borrower s h all u se i ts best efforts to ca u se it s tra n sfe r agent to elec t ron i ca ll y transmit the Common Stock iss u able upo n conversio n or upon an event triggering t h e ca l cu l ation of a n Adjusted Conversio n Pr i ce to t h e H o l der by credit i ng the ac co u n t of Ho l der ' s P r im e Broker w i t h OTC throug h its Depo s it Withdrawa l Agent Commission (" DWAC'") syst e m. |
g)
|
Fa
il
ure to De
li
ver Com
m
on Stock P
ri
or to
D
ead
li
ne.
Witho
u
t in a
n
y way
l
imiting the
H
o
l
der
'
s right to purs
u
e other remed
i
es
,
includ
i
ng ac
t
ual damages a
n
d
/
or eq
u
itab
l
e re
l
ief
,
t
h
e part
i
es agree that if
d
e
li
v
e
ry of the Commo
n
Stock issuable upon conve
r
sion o
r
adjustment of t
h
is Note
i
s
n
ot de
l
ivered
b
y the
D
eadline
,
t
h
e Borrowe
r
sha
ll
pay to the
H
older
$
1
,
000.00 per day i
n
cash
,
for eac
h
day beyond the
D
ea
dl
ine that t
h
e Borrower fai
l
s
t
o de
l
iver such Commo
n
Stock to the
H
o
l
der. S
u
c
h
cash amount sha
l
l be paid to
H
o
l
der by the fifth day of the month fo
ll
ow
i
ng the month
i
n wh
i
ch it has acc
ru
ed or
,
at t
h
e option o
f
t
h
e Ho
l
der, s
h
a
ll
be adde
d
to t
h
e p
r
incipa
l
amount of th
i
s Note,
in
which event interest sha
l
l accr
u
e t
h
ereon in acco
r
da
n
ce wit
h
the terms of
t
h
i
s Note and such addit
i
ona
l
p
r
inc
i
pa
l
amou
n
t s
h
a
ll
be convertib
l
e
in
to Common Stock
i
n accorda
n
ce w
i
th the terms of t
h
is Note
. T
he Borrower agrees that the rig
h
t to convert and
/
or receive shares in the event of a
n
adjus
t
ment is a valuable rig
h
t to the H
o
l
der. T
h
e
d
amages resu
lt
ing from a fa
i
lu
r
e, attempt to frustrate, o
r
interfere
n
ce wit
h
such co
n
versio
n
or adjustment
r
ight a
r
e d
i
fficu
lt i
f not imposs
i
b
l
e to q
u
a
l
ify
.
According
l
y the parties acknowledge that t
h
e liquidated da
m
ages provis
i
on co
n
tained in this Sect
i
on
I
.4(g) are justified
.
|
h)
|
The Borrower acknow
l
edges t
h
at
i
t wi
ll
take a
ll
reaso
n
able steps necessary or appropriate,
in
clud
in
g accepting an opinion of co
un
se
l
to
H
o
ld
er co
n
fi
r
mi
n
g the rights of Holder to se
l
l shares of Common Stock issued to Holder on co
n
vers
i
o
n
or ad
j
ust
m
ent of t
h
e
N
ote pursuant to Ru
l
e 144 as promulgated by t
h
e SEC ("Rul
e
1
44
"
), as such R
ul
e
m
ay be
i
n effect fro
m
time to ti
m
e. So
l
ong as t
h
e re
q
uested sale may
b
e made p
u
rsuant to Ru
l
e
1
44 the Borrower agrees to acc
e
pt a
n
opin
i
on of cou
n
se
l
to the
H
o
ld
er w
hi
ch opi
n
io
n
wi
ll
be issue
d
at the Borrower
'
s expense.
|
i)
|
Charges an
d
Expenses.
I
ssuance of Common Stock to Holder or any
of
i
ts assignees
,
upon the convers
i
on of t
h
is Note sha
ll
be made wit
h
out c
h
arge to the
H
o
l
der for an
y
i
ssuance fee
,
transfe
r
tax
,
l
ega
l
o p
i
nion and re
l
ated charges
,
p
ostage/mai
li
ng charg
e
or any ot
h
er expense w
i
th respect to the
i
ssua
n
ce of suc
h
Com
m
on Stock. Compa
n
y sha
ll
pay a
ll
Tra
n
sfer Agent fee
s
i
n
curred from the issua
n
ce of the Common Stock to Ho
l
der
,
as we
ll
as any and a
ll
other fe
e
s and c
h
arge
s
required by the Transfer Age
n
t as a condit
i
on to effectuate such
i
ssuance. That notw
i
thstanding
,
the Ho
l
d
e
r
m
ay
in
t
h
e interest of sec
u
ring is
s
uance and/or del
i
very of Common Stock before t
h
e
D
ead
l
i
n
e
,
at any t
i
me from time to time
,
in its sole d
i
scretio
n
e
l
ect to pay any such fees o
r
charges upfront, and Company ag
r
ees that any such fees or charges as noted in this Sectio
n
that are paid by the Ho
l
der (whet
h
er from the Company's de
l
ays
,
outr
i
g
h
t re
fu
sa
l
to pay
,
H
older
'
s interest in sec
u
ri
n
g
i
ssuance and
/
or de
l
ivery of Commo
n
Stock before the Dead
li
ne
,
or otherwise), will be at Compa
n
y
'
s expense
,
and the conve
r
sio
n
a mo
u
nt wi
ll
automatica
ll
y be red
u
ced by t
h
at dollar amo
u
nt to cover the cost of the fees or c
h
arges as noted
in
t
hi
s Sect
i
o
n
.
|
1.6.
|
Effect of Certa
i
n Events
.
|
a)
|
Effect of Merger. Co
n
so
li
datio
n
, Etc
. A
t
the opt
i
on o
f
the Ho
l
der
,
t
h
e sa
l
e
,
co
n
veya
n
ce o
r
disposit
i
on of a
ll
or su
b
sta
n
t
i
ally a
ll
of t
h
e assets of
t
he Borrower
,
t
h
e effectua
t
ion by
t
he Bo
r
rowe
r
of a transact
i
on o
r
series of
r
e
l
ated
t
ransact
i
ons
in
wh
i
ch more than 50% of the vot
i
ng
p
ower of
th
e Borrower
i
s d
i
s
p
ose
d
of
,
or the co
n
so
l
i
d
at
i
on
,
m
e
r
ger or other bus
in
ess com
bin
a
t
io
n
of t
h
e Bo
r
rower wit
h
or
in
to a
n
y ot
h
er
P
e
r
so
n
(as defined
b
elow) or Pe
r
so
n
s w
h
e
n
the Bo
r
rowe
r i
s
n
ot t
h
e survivor sha
ll
e
i
t
h
er: (i) be deemed to be a
n
Even
t
of
D
efau
l
t (as defi
n
ed
in
Artic
l
e
Ill
)
p
u
rsua
n
t to w
h
ic
h
the
B
o
r
rower s
h
a
ll
be req
uir
ed to
p
ay to t
h
e
H
o
ld
er upon t
h
e consu
m
mat
i
on of and as a co
n
d
i
tion to suc
h
transact
i
on an a
m
ou
n
t e
q
ua
l
to t
h
e
D
efa
ul
t A
m
o
u
nt (as defined i
n
Art
i
c
l
e
III
) or (ii) be treate
d
purs
u
a
n
t
t
o Sect
i
o
n l.
6(b)
h
ereof.
"
P
e
r
son
'
' shall mea
n
any
i
nd
i
vidua
l
,
co
r
porat
i
on
,
limi
ted
l
iab
i
lity com
p
any, partners
h
ip
,
assoc
i
ation
,
trust or ot
h
er e
n
t
i
ty or o
r
ga
n
izatio n.
|
b)
|
A
dju
st
m
ent D
u
e
t
o Me
r
ger. Conso
l
i
d
atio
n.
E
t
c.
I
f
,
at any
t
i
m
e w
h
e
n
th
i
s Note is
i
ss
u
ed and outsta
n
d
i
ng a
n
d prior to convers
i
o
n
o
f
a
ll
of the Notes, t
h
ere s
h
a
l
l be any merger, conso
l
ida
t
ion
,
excha
n
ge of shares,
r
ecap
it
a
l
izatio
n
,
r
eorga
ni
zation
,
o
r
o
th
e
r
si
mil
a
r
event, as a
r
esu
l
t of w
h
ic
h
shares of Co
m
mon Stock of t
h
e Borrower s
h
a
ll
be c
h
a
n
ged into the same o
r
a different nu
m
ber of s
h
ares of anot
h
e
r
class or
cl
asses of s
t
oc
k
or sec
uri
t
i
es of
th
e Borrower or another ent
it
y
,
or
in
case of a
n
y sa
l
e o
r
co
n
veya
n
ce o
f
a
ll
o
r
s
u
bsta
n
tia
ll
y a
ll
of t
h
e assets of t
h
e Bo
rr
ower ot
h
er t
ha
n
in
connectio
n
wit
h
a
p
lan of complete
l
iq
u
i
d
at
i
o
n
of t
h
e Borrower
,
th
en t
h
e
H
older of t
h
is Note s
h
a
ll
thereafte
r h
ave t
h
e
ri
g
h
t to rece
i
ve
u
pon convers
i
on of t
h
is Note, upon t
h
e basis and
up
on t
h
e terms and co
n
d
i
tio
n
s specified here
i
n and in lie
u
of the s
h
ares of Co
m
mo
n
Stock i
mm
ediate
l
y t
h
eretofore issuab
l
e
up
o
n
co
n
version
,
s
u
c
h
stock
,
sec
urit
ies or assets w
h
ich the
Hol
der wou
l
d
h
ave been e
n
t
i
t
l
ed to receive
in
suc
h
tra
n
sactio
n h
ad th
i
s Note bee
n
converted in
full
im
m
ed
i
ate
l
y p
r
ior
t
o s
u
c
h
tra
n
saction ( w
i
t
h
o
u
t
r
egar
d
to any
l
im
i
ta
t
io
n
s on co
n
version set forth he rei
n
)
,
a
n
d
i
n a
n
y suc
h
case appropr
i
ate prov
i
sio
n
s sha
ll
be made w
i
t
h
respect to t
h
e rights and interests of t
h
e
H
o
l
der of t
h
is Note to t
h
e end t
h
at t
h
e prov
i
sions he
r
eof (
in
cl
u
d
in
g, w
i
tho
u
t l
im
itat
i
o
n
, provis
i
ons for ad
j
us
t
ment of t
h
e Co
n
versio
n P
rice a
n
d of t
h
e
nu
mber of shares
i
ss
u
ab
l
e upon co
n
vers
i
on of the Note) sha
ll
t
h
e
r
eafter be appl
i
cab
l
e
,
as
n
ea
rl
y as
m
ay be practicab
l
e in
relation to
any securities or assets thereafter
deliverable upon the conversion hereof.
The
Borrower
shall not affect any
transaction described
in
this Section l.6(b) unless
(a) it
first
gives, to
the
extent
practicable, thi1ty
(30)
days
prior written
notice
(but
in
any event at
least fifteen
(
15) days
prior written
notice)
of
the record date
of
the
special
meeting of
shareholders
to approve,
or if
there is no
such
record date, the consummation of,
such
merger
,
consolidation, exchange of shares
,
recapitalization,
reorganization or other similar event or sale of
assets
(during which
time
,
for
clarification, the Holder
shall
be
entitled
to
convert
this Note)
and (b)
the resulting
successor or acquiring entity assumes
by
written
instrument the
obligations
of this
Section
l.6(b). The
above
provisions
shall similarly apply
to
successive consolidations,
mergers
,
sales, transfers or share exchanges.
|
c)
|
Adjustment
Due to Distribution.
If the Borrower
shall
declare
or
make
any
distribution
of
its
assets (or
rights to
acquire
its assets) to holders
of
Common
Stock
as
a
dividend,
stock
repurchase
,
by way
of
return
of
capital
or otherwise (including
any dividend
or
distribution to the Borrower's
shareholders
in cash
or shares (or
rights to
acquire shares)
of capital
stock of a subsidiary
(i.e.
,
a spin-off)) (a "Distribution'"),
then the Holder
of
this Note
shall
be
entitled,
upon any conversion of this Note after the date
of
record
for
determining
shareholders entitled
to
such
Distribution, to receive the
amount of such assets which would
have been payable to the Holder
with
respect to the
shares of Common Stock
issuable upon
such
conversion had
such
Holder been
the
holder
of such shares of
Common
Stock
on the record date
for
the determination
of shareholders entitled to such
Distribution. Such assets shall be held in
escrow by
the
Company pending any such conversion
|
d)
|
Purchase
Rights.
If, at any
time when
any Notes
are issued and outstanding, the
Borrower
issues
any convertible
securities or
rights to purchase
stock, warrants, securities or
other property
(the "Purchase
Rights'') pro
rata
to
the
record holders
of any class of Common
Stock
,
then
the
Holder
of
this
Note will
be
entitled to acquire,
upon
the
terms applicable to
such
Purchase Rights, the aggregate Purchase Rights
which such
Holder could have
acquired
if
such
Holder had held the number
of shares
of Common
Stock
acquirable upon
complete conversion of this Note (without
regard to
any
limitations
on
conversion
contained
herein) immediately before the date
on which
a record is taken for
the grant
,
issuance
or sale of such
Purchase Rights
or
,
if no
such
record is
taken,
the date as of
which
the record holders
of
Common
Stock
are to be determined
for
the
grant,
issue or
sale
of
such
Purchase Rights.
|
e)
|
Stock
Dividends and
Stock
Splits
. If the Company,
at any time while
this Note is
outstanding: (A)
pays a
stock
dividend or otherwise makes a distribution
or
distributions payable in shares
of Common Stock
on
shares of Common Stock or
any
securities convertible
into
or exercisable for Common
Stock;
(B) subdivides
outstanding
shares of Common
Stock into
a
larger number
of shares; (C) combines
(including by
way
of a reverse
stock split) outstanding shares of Common Stock into a smaller
number
of
shares; or
(0)
issues, in the
event
of a reclassification
of shares of
the
Common
Stock,
any shares
of capital
stock
of the
Company, then
the
Conversion
Price
(and each sale or
bid price used in determining the
Conversion
Price)
shall
be multiplied by
a
fraction,
of which the
numerator
shall
be the number of
shares of Common
Stock
outstanding immediately
before
such
event and
of which
the denominator
shall
be the number
of shares of Common
Stock
outstanding
immediately
after such
event. Any
adjustment
made pursuant to
this Section shall
become
effective
immediately after the record date for
the
determination
of stockholders entitled to
receive
such
dividend
or
distribution and
shall
become
effective
immediately
after
the effective date in
the case of a subdivision,
combination
or
re-classification.
|
f)
|
Notice of Adjustments.
Upon the occurrence
of each
adjustment
or
readjustm
e
nt
of the Conversion
Price
as a result of the
eve
nts described in
this
Section
1.6
,
th
e
Borrower
,
at its expense
,
shall
promptly
compute such
adjus
tm
ent
or
readjustm
ent
and prepare and furnish
to
the Holder
a
certifi
cate
setti
ng
forth such adjustment or readjustment and showing
in
detail
t
h
e
facts upon which
suc
h
adjustment
or
readjustment
i
s
based.
The
Borrower shall
,
upon
the
writte
n
request at any time of the
Holder
,
furnish
to
such
Hold
er
a
like
certificate setting forth
(i) such
adjustment or
readjustment
,
(i
i)
the Conversion Price at
the
time in effect and (iii) the
numb
e r of shares
of
Com
mon
Stock
and the amount, if any
,
of
ot
her
securities
or
pr
operty
which at
the
time
woul
d
be
received upon
conversion of the Note.
|
2.1.
|
Distributi
ons
on Capital Stock
. So
lon
g
as the Borrower
sha
ll have
any
ob
li
gation
und
er
thi
s Note,
the Borrower shall not without
t
h
e
Holder's written consent
(a)
pay
,
declare or set apa1t fo
r
such payment, any divi
d
e
n
d or ot
h
er distr
i
b
u
t
i
o
n
(w
h
e
th
er in cash
,
property or other secur
i
ties) o
n
shares of ca
p
ital stock ot
h
er than div
i
de
n
ds on sha
r
es of Co
m
mo
n
Stock solely
in
t
h
e fo
r
m of a
dd
it
i
ona
l
s
h
a res of Co
mm
on Stock or (b) d
i
rect
l
y or
i
ndi
r
ec
tl
y or throug
h
a
n
y s
u
bsidiary make a
n
y ot
h
er payme
n
t or d
i
strib
u
tion in respect of
i
ts capita
l
stock except for distr
i
butions p
u
rsuant to any share
h
o
ld
er
s'
r
i
g
h
ts p
l
a
n
wh
i
c
h
is approved by a majority of the Borrower
'
s dis
i
nterested directo
r
s.
|
2.2.
|
R
estric
t
ion o
n
Stock
R
epurc
h
ases.
So
l
o
n
g as
th
e Borrower sha
ll h
ave any obl
i
gation
u
nder th
i
s Note, the Borrower sha
ll
no
t
witho
u
t the
H
o
l
de
r
's writte
n
consent redeem
,
repurchase or otherwise acquire (whet
h
er for cas
h
or
in
exchange for property or ot
h
er secur
i
ties or othe
r
w
i
se) in a
n
y one transact
i
o
n
or series of re
l
ated tra
n
sactio
n
s a
n
y s
h
ares o
f
cap
i
tal stock of the Borrower or any warra
n
ts, r
i
g
h
ts or opt
i
ons to p
u
rchase or ac
q
uire any s
u
c
h
shares
.
|
2.3.
|
B
o
r
rowings; Lie
n
s.
Notwi
th
s
t
a
n
d
i
ng sect
i
on 4
(1
) of t
h
e P
ur
c
h
ase Agreement
,
so
l
ong as t
h
e Borrower s
h
a
ll h
ave any ob
li
gation u
n
de
r
th
i
s Note
,
t
h
e Borrower sha
ll n
ot (i) create
,
incur
,
assume guara
n
tee
,
endo
r
se
,
co
n
tingent
l
y agree to p
u
rchase or ot
h
erwise become
l
iable
u
pon t
h
e
o
b
l
i
gation of a
n
y person, fir
m
,
partners
hi
p, jo
i
nt ve
n
ture or cor
p
orat
i
o
n
,
except by the endo
r
sement of negot
i
able inst
ru
ments for deposit or co
ll
ect
i
on
,
or suffer to ex
i
s
t
any
li
ab
ili
ty fo
r
borrowed
m
o
n
ey
,
except (a) borrowings in existe
n
ce o
r
comm
i
tte
d
o
n
the date he
r
eof and of w
h
ich t
h
e Bor
r
ower has
i
nfor
m
e
d Hol
der
in
writing pr
i
or
t
o the date hereof
,
or (b) in
d
ebted
n
ess to trade cred
i
tors or fi
n
a
n
cial
in
stitut
i
ons i
n
curred in the o
rd
i
n
ary cou
r
se of business
,
or (ii) ente
r in
to, create or incur any l
i
ens
,
claims or encumbrances of any k
in
d
,
o
n
or with
r
espect to any of its property or assets now owned or hereafter acq
u
ired or any interest therei
n
or any
i
nco
m
e or p
r
ofits t
h
ere from
,
secu
r
ing any
i
ndebte
d
ness occurring after the date
h
ereof.
|
2.4.
|
Sale of Assets.
So lo
n
g as t
h
e Borrower sha
ll h
ave any ob
li
ga
t
io
n u
nder th
i
s Note
,
the Borrower sha
ll n
ot
,
witho
u
t t
h
e
H
o
l
der
'
s writte
n
consent, se
ll
,
lease or otherw
i
se dispose of any sign
i
fica
n
t
p
ort
i
o
n
of
i
ts asse
t
s o
u
tside the or
d
ina
r
y co
u
rse of busi
n
ess. A
n
y co
n
se
n
t t
o
the d
i
sposition of any assets may be co
n
ditioned o
n
a s
p
ec
i
fied
u
se of t
h
e proceeds of disposit
i
on.
|
2.5.
|
A
d
vances and
L
oans.
So lo
n
g as the Bor
r
ower sha
ll h
ave a
n
y ob
l
igat
i
o
n
under t
h
is Note, the Borrowe
r
shall not
,
w
i
t
h
o
u
t
th
e Ho
ld
er
'
s written consent,
l
end mo
n
ey
,
give cred
i
t o
r
make advances to any person
,
fi
r
m
,
j
o
in
t venture o
r
corporat
i
on
,
i
ncl
u
d
i
ng
,
w
i
thout
l
i
m
itatio
n
,
officer
s,
d
i
rectors
,
emp
l
oyees
,
subs
idi
aries a
n
d affi
li
ates of t
h
e
B
o
r
rowe
r
,
except loa
n
s
,
credits or advances in ex
i
stence or co
mm
itted on t
h
e date
h
ereof a
n
d w
hi
ch the Borrower has
i
nformed Ho
l
der in writing pr
i
or to the date
h
ereof.
|
2.6.
|
Charter.
So
l
ong as the Borrower sha
ll h
ave a
n
y o
bli
gat
i
o
n
s under t
hi
s Note
,
t
h
e Borrower s
h
a
ll n
ot ame
n
d
i
ts charter docume
nt
s
,
i
nc
lu
ding w
it
hout li
mi
tat
i
on
i
ts cert
i
ficate of
in
corporation and by
l
aws, in any manner that materia
ll
y and adversely affects a
n
y r
i
g
h
ts of the Holder.
|
2.7.
|
Transfer Agent
. T
h
e Bor
r
ower sha
ll
not c
h
ange
i
ts tra
n
sfer agen
t
without t
h
e
p
rior w
r
itte
n
co
n
sent of t
h
e
H
o
ld
er. Any resig
n
atio
n
by t
h
e tra
n
sfe
r
agent wit
h
o
u
t a rep
l
aceme
n
t transfer agent conse
n
ted to by t
h
e
H
older p
r
io
r
to such rep
l
aceme
n
t tak
in
g effect sha
ll
con
s
tit
u
te an Event
o
f Defa
u
lt
h
ereu
n
der.
|
3.1.
|
Failure to Pay Principal or Interest.
The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise.
|
3.2.
|
Conversion and
the
Shares
.
The
Borrower fails to
issue
shares of Common
Stock to the
Holder
(or announces or threatens
in
writing
that
it will
not
honor its obligation to do so at any time following the execution
hereof
or) upon exercise
by
the Holder of
the
conversion rights of the
Holder in
accordance with the terms of this
Note
,
fails to
transfer
or cause
its
transfer agent to transfer (issue) (electronically or
in
certificated form) any
certificate
for shares of Common Stock issued to the Holder
upon
conversion of or otherwise pursuant to this Note as and when
required
by this Note, the Borrower directs
its
transfer agent
not
to
transfer
or delays,
impairs
,
and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to
be
issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required
by
this Note
,
or fails to remove (or
directs its
transfer agent not to
remove
or impairs, delays
,
and/or
hinders its
transfer agent from removing) any restrictive
legend
(or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to
the Holder upon
conversion of or
otherwise
pursuant to this Note as and when required by
this
Note (or makes any written announcement, statement or
threat
that it does
not
intend to honor the obligations
described in this paragraph)
and any such failure shall continue uncured (or any written announcement
,
statement or threat
not
to honor
its
obligations shall
not
be
rescinded in
writing) for five (5) business days after the Holder shall
have
delivered a Notice of Conversion.
It
is an obligation of
the Borrower
to
remain
current
in its
obligations to
its
transfer agent.
It
shall be an event of default of this Note
,
if
a conversion of this Note
is delayed
,
hindered
or frustrated due to a balance owed by the Borrower to
its
transfer agent.
If
at the option of the
Holder, the Holder
advances any funds to
the Borrower's
transfer agent
in
order
to process
a conversion
,
such advanced
funds
shall be paid
by
the
Borrower
to the
Holder
within forty eight (48)
hours
of a demand from the Holder.
|
3.3.
|
Breach
of Covenants.
The Borrower breaches any
material
covenant or other material term or
condition
contained
in
this
Note
and any collateral
documents
including
but
not
limited
to the
Purchase
Agreement and such breach continues for a period of three (3) days after written notice thereof to the
Borrower
from the
Holder.
|
3.4.
|
Breach of
Representations
and Warranties.
Any representation or warranty of the Borrower made
herein
or
in
any agreement
,
statement or certificate given
in
writing
pursuant
hereto or
in
connection
herewith
(including
,
without
limitation,
the
Purchase
Agreement)
,
shall be false or
misleading
in any
material
respect when
made
and the breach of which
has
(or with
the
passage of time will have) a
material
adverse effect on the
rights
of the
Holder
with respect to this Note or the Purchase Agreement.
|
3.5.
|
Receiver or
Trustee
.
The
Borrower
or any subsidiary of the Borrower shall
make
an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or
trustee
for
it
or for a substantial part of its property or business, or such a receiver or
trustee
shall otherwise be appointed.
|
3.6.
|
Judgments.
Any
money judgment,
writ
or
similar process shall
be
entered or
filed
against the
Borrower
or
any
subsidiary of
the Borrower
or
any
of
its prope11y
or other assets for
more
than $50,000.00, and shall
remain unvacated, unbonded
or
unstayed
for a
period
of twenty
(20)
days
unless otherwise
consented to
by
the Holder, which
consent will not be
unreasonably
withheld.
|
3.7.
|
Bankruptcy.
Bankruptcy, insolvency
,
reorganization
or
liquidation
proceedings or other
proceedings,
voluntary or
involuntary
,
for
relief under
any
bankruptcy law
or any
law
for
the
relief of debtors shall
be instituted
by or
against
the
Borrower
or any subsidiary of the
Borrower.
|
3.8.
|
Delisting
of Common Stock
.
The Borrower
shall
fail to maintain
the
listing
of the Common Stock on at
least
one of
the OTCBB
,
or OTCQB,
OTC Pink
or an equivalent replacement exchange
,
NASDAQ
,
the NYSE
or AMEX.
|
3.9.
|
Failure to Complv with
the
Exchange Act
. The
Borrower
shall
fail to
comply
in
any
material
respect with
the reporting requirements
of the Exchange Act; and/or
the
Borrower shall cease to be subject to the reporting
requirements
of the Exchange Act.
|
3.10.
|
Liquidation.
Any
dissolution
,
liquidation
,
or winding
up
of
Borrower
or any substantial portion of
its
business.
|
3.11.
|
Cessation
of
Operations.
Any cessation of operations
by Borrower
or Borrower admits it is otherwise generally
unable
to
pay
its
debts as such debts
become
due, provided
,
however
,
that
any
disclosure
of
the Borrower
'
s ability
to
continue as a "going concern" shall not
be
an admission that
the
Borrower cannot
pay its
debts as they become due.
|
3.12.
|
Maintenance
of Assets.
The
failure
by Borrower
,
during
the term of
this
Note
,
to maintain any material intellectual
property
rights,
personal
,
real
property or other assets which are
necessary
to conduct
its business
(whether now or
in the
future).
|
3.13.
|
Financial
Statement
Restatement.
The
restatement of any
financial
statements
filed by
the
Borrower
with the SEC for any
date
or
period
from
two
years prior to
the Issue Date
of
this
Note and
until
this
Note
is
no
longer outstanding,
if
the
result
of such
restatement
would
,
by comparison to the
unrestated
financial statement
,
have
constituted a
material
adverse effect
o
n the rights
of
the Holder
with
respect
to this Note or the
Purchase
Agreement.
|
3.14.
|
Reverse Splits
.
The
Borrower effectuates a
reverse
split of
its
Common Stock without twenty (20)
days prior
written
notice
to
the Holder.
|
3.15.
|
Replacement of
Transfer
Agent
.
In
the event
that the Borrower proposes
to
replace
its
transfer
agent,
the
Borrower fails to
provide, prior
to the effective date of such
replacement
,
a fully executed
Irrevocable
Transfer Agent
Instructions
in a form as initially delivered
pursuant
to the Purchase Agreement (including
but not limited
to
the provision
to
irrevocably reserve
shares of Common Stock
in the Reserved
Amount) signed
by the
successor
transfer
agent
to Borrower
and the Borrower.
|
3.16.
|
Cross-Default
. Notwithstanding anything to the contrary contained
in
this Note or the other related or companion documents, a
breach
or default by
the
Borrower of any covenant or other term or condition contained
in any
of
the
Other Agreements
,
after the
passage
of all applicable
notice
and cure or grace periods
,
shall, at
the
option of
the Holder
,
be
considered a default under
this
Note and the Other Agreements,
in
which event the
Holder
shall be entitled (but
in no
event required)
to
apply all
rights
and remedies of the
Holder under
the terms of this Note and
the Other Agreements by reason of a default
under
said
Other
Agreement
or
h
ereu
nder.
"Other
Agreements" means
,
collectively, all agreements and instruments
between
,
among or
b
y:
(1)
the
Borrower
,
and, or
for the benefit
of, (2)
the Holder
and any affiliate of the Holder, including
,
without
limitat
ion,
promissory notes; provided,
however
,
the term ''Other Agreements''
s ha
ll
not
inc
lud
e
the
r
e
lat
ed
or companion
document
s to this
Note. Each
of
the
l
oan
transactions will be
cross-defa
ult
ed wit
h
each other
loan
transaction and
with
all
other existing
and future debt
of
Borrower to the
Hold
er.
|
3.17.
|
Inside Information.
The
Borrower
or its officers, directors, and/or affiliates attempt to transmit
,
convey,
dis close
,
or any actual transmittal, conveyance
,
or
disclosure by
the Borrower or its officers, directors, and/or affiliates of
,
material non-public
information concerning the
Borrower
,
to
the Holder
or
its
successors and assigns, which is
not immediately
cured by Borrower's filing of a Form
8
-
K
pursuant
to
Regulation FD on that same date
.
|
3.18.
|
Bid Price
.
The
Borrower shall
lose
the "bid
"
price for
its
Common Stock ($0.000 I on the "Ask" with zero market
makers
on the
"
Bid
'
' per
Level
2) and
/
or a
market
(including the OTC
Pink
,
OTCQB or an equivalent replacement exchange).
|
4.1.
|
Failure or
Indulgence
Not Waiver.
No failure or delay on the
part
of
the
Holder
in
the exercise of any
power
,
right
or privilege
hereunder
shall operate as a waiver thereof
,
nor shall any single or
partial
exercise of any such power
,
right
or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights
and
remedies existing hereunder are cumulative to, and
not
exclusive of
,
any rights or
remedies
otherwise available.
|
4.2.
|
Notices.
All notices,
demands
,
requests
,
consents
,
approvals
,
and other communications
required
or permitted
hereunder
shall be
in
writing and
,
unless
otherwise specified
here in
,
shall be (i) personally served
,
(ii)
deposited in
the mail
,
registered or certified
,
return receipt
requested,
postage prepaid
,
(iii)
delivered
by reputable air courier service with charges prepaid
,
or
(iv) transmitted by hand delivery, telegram, email or facsimile, addressed as set forth below or to such other address as such party shall
have
specified
most
recently by written
notice.
Any
notice
or other communication required or
permitted
to
be
given
hereunder
shall be deemed effective (a) upon
hand
delivery or delivery
by
facsimile or email
,
with accurate confirmation generated by the transmitting facsimile
machine
or computer
,
at the address
,
email or
number
designated in
the Purchase
Agreement (if delivered on a
business
day during
normal
business
hours
where such notice is to
be
received), or the first business day following such
delivery
(if delivered other than on a business day during
normal
business
hours
where such
notice
is to
be
received) or (b) on the second business day following the date of
mailing
by express courier service
,
fully prepaid, addressed to such address
,
or upon actual receipt of such
mailing,
whichever shall first occur.
|
4.3.
|
Amendments.
This
Note
and any
provision hereof may
only
be
amended by an
instrument in
writing signed by the Borrower and the Holder. The term' 'Note
"
and all reference
thereto
,
as used
throughout
this
instrument
,
shall
mean
this
instrument
(and the other Notes
issued
pursuant to
the Purchase
Agreement) as originally executed, or
if
later
amended or supplemented, then as so amended or supplemented.
|
4.4.
|
Assignability
.
This Note
shall be binding
upon
the Borrower and
its
successors and assigns
,
and shall inure
to be
the benefit of the
Holder
and its successors and assigns. Each transferee of this Note
must
be an "accredited
investor
"
(as
defined
in Rule 50l(a) of the
1933
Act). Notwithstanding anything
in
this Note
to
the contrary, this Note may be pledged as collateral in connection with a bona fide
margin
account or other
lending
arrangement.
|
4.5.
|
Cost of Collection
.
If
default is made
in
the
payment
of this
Note
,
the
Borrower
s
hall
pay the Holder
hereof
costs of
co
lle
ct
ion
,
including
reasonable attorneys' fees.
|
4.6.
|
Governing
Law
.
Thi
s
Note shall be governed by and construed
in
accordance
with
the
law
s
of the State of
Nevada
without regard to conflicts of
law
s
principles
that
would result in the application
of
the
substa
ntive
laws of another jurisdiction.
Any
action brought by
either
party against
t
h
e
other concerning the transactions
contemp
lat
ed
by
th
i
s
Agreement must be brought
on
ly
in
the civ
il
or s
tate
courts of
New
York or
in th
e federa
l
courts
l
oca
ted
in
the
State
and county
of
New York. Both parties and the
individua
l
signing this Agreement on behalf of
t
he Borrow
e
r
agree to
submit to
the
jurisdiction
of
such
courts. The
prevailin
g
party
sha
ll
be
enti
tl
ed
to
r
ecove
r
from
the ot
her
party its reasonable attorney's fees and
costs. In
the
event
that any provision
of
thi
s
Note is invalid
or
unenforceable under any applicable
statute
or rule
of
l
aw,
then
s
u
c
h provision
shall be deemed inoperative to
t
h
e exte
nt
t
hat
it may conflict therewith and
s
hall
be deemed
modifi
ed to
conform
wit
h
s
u
ch statute
or
rul
e
of
la
w.
Any
s
uch
provision which
may prove
invalid
or
unenforceable
under
any law shall
not
affect the validity or unenforceability of any other provision of this
Not
e.
Nothing contained
h
erei
n
sha
ll
be deemed
or
operate to preclude the
Holder from brin
ging suit o
r
taking
o
ther legal
action
against
the Borrower in any
o
ther juri
sd
iction
to collect on the Borrower's
ob
li
gatio
ns to Holder
,
to realize
on
any collateral or any other security for
s
uch
obligations, or to enforce a judgment or other
deci
sio
n in
favor of the
Hold
e
r.
This Note shall be deemed an
unconditional obligation
of Borrower for
the payment
of
money
and, without
limitation
to any
other
remedies
of Holder
,
may be
enforced against Borrower
by summary proceeding pursuant
to
New
York Civil Procedure
Law and Rules Section 3213
or any similar rule or statute in
the jurisdiction where
enforcement
is sought.
For
purposes of
such rule
or statute
,
any other
document
or
agreement
to which
Holder
and Borrower are
parties
or
which
Borrower delivered
to Holder
,
which ma
y
be
convenient or
necessary
to
determine
Holder's
rights
hereunder or Borrower's
obligations
to Holder are deemed a part of
this
Note, whether or not such
other document or
agreement
was delivered
together
herewith
or
was
executed apart from
this Note.
|
4.7.
|
Certain Amounts.
Whenever
pursuant
to
this Note the
Borro
wer
i
s
required to pay an amount in
excess
of the outstanding principal amount (or the portion thereof
r
eq
uir
e
d
to
be
paid
at
that time) plus
accr
u
ed
and
unpaid int
erest
plu
s
Default Interest on
such
interest, the
Borro
wer
and the Holder agree that the actual damages
to
the
Holder
from the receipt
of cash
payment
on
this
Note
may be difficult to determine and
the
amount to be
so
paid
by the Borrower represents
st
ipulat
ed
damages and
no
t
a penalty and is intended to compensate the Holder
in
part for loss
of t
h
e
opportunity to
convert
this Note and to earn a return from
th
e sa
l
e
of
s
h
ares of
Common
Stock
acquired
upon
conversion
of
this Note
at
a price in
excess
of
the
price paid for
such s
har
es
pursuant to this Note.
The
Borrower
and the Holder hereby
agree
that
such
amount of
stipulated
damages is not plainly
disproportionat
e
to
th
e
possible
lo
ss
to the Holder from the
r
ece
ipt
of a cash payment without the opportunity to convert this Note
into
s
hare
s
of
Commo
n
Stock.
|
4.8.
|
Disclosure.
Upon receipt or delivery by the Company of any notice in accordance with the terms
of
this Note,
unle
ss
the Company has
in
good faith determined that the matters relating to such notice do
n
ot constitute
material
,
non-public
information
relating to the
Company or
any of its Subsidiaries
,
the Company
sha
ll
with
in
o
n
e
(I) Trading
Day
after any
suc
h r
ece
ip
t or
delivery, publicly disclose
such
material, non-public information on a Current
R
eport
on Form 8-K
or
otherwise.
In
the
event that t
h
e
Company believes that a
notice
contains
mate
ria
l
,
non- public information
r
e
latin
g
to
the
Company or any of
it
s
Subsidiaries,
the Company so s
hall
indicate
to such
Holder
contemporaneously with delivery of
suc
h
notice, and in the absence of any
suc
h indication
,
the Holder
shall be allowed
to
presume that all matters relating to such
notice do
not
const
it ut
e
mat
eria
l
,
non-public information relatin
g
to the Company or its Subsidiaries.
|
4.9.
|
Notice of Corporate Even
ts.
Exce
pt
as
otherwise
pr
ovided
b
e
low,
the
Holder
of
this Note
sha
ll h
ave
no rights as a
Holder
of Common Stock unless and only
to t
he
extent that it converts
thi
s
Note into Common Stock.
The
Borrower
shall
provide
the
Holder
with prior
notification
of any
meetin
g of
the B
orrower' s
shareholders (and copies of proxy
mat
er
ial
s a
nd
other information
sent
to
s
hareholders). In
the
eve
nt
of any taking by
the
Borrower
of
a
r
ecord
of its
share
h
o
lder
s fo
r
the purpose of determining shareholders who are entitled to
receive paym
ent of
any dividend
or ot
h
er
distribution
,
any right to subscribe for,
purchase
or otherwise acquire (including by
way of
m
e
r
ger,
consolidation
,
r
ec
la
ssifica
tion
or
recapitalization) any
s
h
are
of any class or
a
ny
other
securit
ies
or
property
, or
to receive any other right, or for the purpose
of
determining
shareholders w
h
o
are entitled to vote
in
connection with any proposed
sa
l
e,
lease or conveyance of all or
s
ub
stantially a
ll
of
the
assets of the
Borrower
or any proposed
liquidation
,
dissolution
or w
indin
g
up
of the Borrower
,
t
h
e
Borrower
sha
ll
mail
a
noti
ce
to the
Holder
,
at least twenty
(20)
days prior to the record date specified therein (or
thirt
y
(30) days prior
to the
consummation of the transaction
or event,
whichever
is
earlier)
,
of
t
he
date on which any such record
is
to
be
taken for the purpose
of such
dividend, distribution
,
right
or
other
eve
nt,
and
a
brief statement regarding the amount and character of
such
dividend
,
di
str
ibution
,
right or
ot
h
e
r
event to the extent known at
such
time.
The
Borrower
sha
ll make
a public announcement of any event requiring
notification
to
the Holder hereunder
substant
ially
s
imultaneou
s
ly
with the
notificati
o
n
to the Holder
in
accordance with the
ter
ms
of this Section 4.9.
|
4.10.
|
Remedies.
The
Borrower
acknowledges
that
a breach
b
y
it
of its
ob
li
gat
ion
s
h
ere
und
er
will
cause
irreparable
harm
to the
Holder
,
by
vitiating the
intent
and purpose of the transaction
co
nt
e
mplate d
hereby.
Accor
dingly
,
the
Borrower
acknowledges that the
remedy
at
law
for a
breach
of
its obligations under this Note will be
inadequate
and agrees
,
in
the
event of a breach
or
thr
eatened
breach by the Borrower of the provisions of this
Note,
that
the Holder
shall
be entitled, in addition to all other
ava
ilable
remedies at
law
or
in
equity
,
and
in
addition to
the
penalties assessable herein
,
t
o
an injunction or injunctions restraining
,
preventing
or cu
rin
g
any breach of this Note
a
nd
to enforce
specifically
the terms
and provisions thereof,
w
ithout
the necessity of showing economic
los
s
and without any bond or other
sec
urit
y
being
required.
|
4.11.
|
Usury.
T
hi
s
No
te
s
h
all
be
su
bj
ect
to
th
e
anti-usury
limitati
ons
contained
in
the
Purcha
se Agreement.
|
PREPAY DATE
|
PREPAY AMOUNT
|
≤ 90 days
|
125% of principal plus accrued interest
|
91-180 days
|
150% of principal plus accrued interest
|
X RAIL ENTERTAINMENT, INC.
|
|
By: /s/ Michael Barron
|
|
Title: CEO
|
Principal Amount: US$112,000.00
|
Issue Date: December 20, 2017
|
Purchase Price: US$112,000.00
|
X RAIL ENTERTAINMENT, INC. | |
/s/ Michael Barron | |
Name: Michael Barron
|
|
Title: Chief Executive Officer
|
[ ] |
The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal At Custodian system ("DWAC Transfer").
|
[ ] |
The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder's calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:
|
Date of Conversion:
|
_____________
|
Applicable Conversion Price:
|
$____________
|
Number of Shares of Common Stock to be IssuedPursuant to Conversion of the Notes:
|
______________
|
Amount of Principal Balance Due remaining Under the Note after this conversion:
|
______________
|
Accrued and unpaid interest remaining:
|
______________
|
Principal Amount: $28,000.00
|
Issue Date: December 21, 2017 Purchase Price: $28,000.00
|
Prepayment Period
|
Prepayment Percentage
|
|||
175
|
%
|
3.1
|
3.6
|
3.8
|
3.9
|
4.6
|
4.8
|
[ ] |
The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system ("DWAC Transfer").
|
1.
|
Term:
The Company agrees to employ the Executive and the Executive hereby accepts such employment, in accordance with the terms of this Agreement, commencing as December 15, 2017 and ending on the fifth anniversary of the date hereof unless this Agreement is earlier terminated as provided herein. Notwithstanding any other provision of this Agreement, the Company shall have an obligation to make any payments to the Executive for Base Salary and Bonuses, as defined below and as required by this Agreement.
|
2.
|
Services:
So long as this Agreement shall continue in effect, the Executive shall perform duties as assigned by the Board of Directors of the Company (the "Board"). The Executive shall use Executive's best efforts and abilities to promote the Company's interests and shall perform the services contemplated by this Agreement in accordance with policies established by and under the direction of the Board. The Executive agrees to serve in such other executive capacities for one or more direct or indirect Affiliates of the Company as the Board may from time to time request, subject to appropriate authorization by the Affiliate or Affiliates involved and any limitations under applicable law. The Executive agrees to faithfully and diligently promote the
business, affairs and interests of the Company and its Affiliates. Executive may engage in other outside interests or companies so long as the outside interests are not directly competitive with the X Rail Entertainment, Inc. Executive will be required to work from the corporate main office at 9480 S. Eastern Ave., Las Vegas, Nevada 89123 as his principal place of business for the company for not less than four days per week unless company travel or authorized vacation time is in effect.
|
3. |
Duties and Responsibilities:
In addition to his duties as an employee as discussed herein, the Executive shall serve as Chief Executive Officer of the
Company for the duration of this Agreement. Executive's duties as an Executive shall be overall responsibility and authority, subject to authorities and limitations as established by the Board of Directors, to implement and continue to develop the business strategies of the Company. In the performance of Executive's duties, the Executive shall report directly to the Board of Directors.
|
6. |
Buy Out Provision:
If the Employer terminates the Executive's employment because the business is sold, the Employer will pay to the Executive (1) the Executive's accrued salary and vacation, including the then unused accrued vacation, up to and including the date of termination and (2) the equivalent of two (2) years of the Executive's Base Salary, less applicable deductions and withholdings, pursuant
to the Employer's standard pay periods and practices; provided, however, that such payments shall be deemed severance pay and not wages. Such payment shall be made to the Executive as soon as administratively practicable after the termination of the Executive's employment, but no later than two weeks from the date the Executive's employment is so terminated. The Executive shall execute a release of all current or future claims, known or unknown, arising on or before the date of the release, against the Employer and its subsidiaries and the directors, officers, employees and affiliates of any of them, in a form approved by the Employer and (3) the Executive shall be entitled to all stock grants on section 4 which shall be issued upon termination.
|
7.
|
Golden Parachute Limitation:
The payments and benefits payable to the Executive under this Agreement and all other contracts, arrangements, or programs with the Company shall not, in the aggregate exceed the maximum amount that may be paid to the Executive without triggering golden parachute penalties under Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), as determined in good faith by the Company's independent auditors. The Executive agrees that, to the extent payments or benefits under this Agreement would not be deductible under Code Section 162(m) if made or provided when otherwise due under this Agreement, such payments and benefits shall be made or provided later, immediately after Section 162(m) ceases to preclude their deduction, with interest thereon at the rate provided in Code Section 1274(b) (2) (B). If even after such deferral the payments and benefits otherwise payable to the Executive must be reduced to avoid triggering such penalties, the payments and benefits will be reduced in the priority order designated by the Executive, or, if the Executive fails promptly to designate an order, in the priority order designated by the Company. If an amount in excess of the
limit set forth in this Section 7 is paid to the Executive, the Executive shall repay the excess amount to the Company upon demand. The Executive and the Company agree to cooperate with each other in connection with any administrative or judicial proceedings concerning the existence or amount of golden parachute penalties on payments or benefits received by the Executive.
|
8.
|
Business Expenses:
During the term of this Agreement, the Company shall reimburse the Executive promptly for business expenditures made and substantiated in accordance with policies, practices and procedures established from time to time by the Company generally with respect to other employees and incurred in the pursuit and furtherance of the Company's business and good will.
|
9.
|
Confidential Information
:
The Executive acknowledges that the nature of the Executive's engagement by the Company is such that the Executive shall have access to information of a confidential and/or trade secret nature which has great value to the Company and which constitutes a
substantial basis and foundation upon which the business of the Company is based. Such information includes financial, marketing data, techniques, processes, formulas, developmental or experimental work, work in process, methods, trade secrets (including, without limitation, customer lists and lists of customer sources), or any other
secret or confidential information relating to the products, services, customers, sales or business affairs of the Company or its Affiliates (the "Confidential Information"). The Executive shall keep all such Confidential Information in confidence during the term of this Agreement and at any time thereafter and shall not disclose any of such Confidential Information to any other person, except to the extend such disclosure is (i) required by applicable law, (ii) lawfully obtainable from other sources, or (iii) authorized in writing by the Company. Upon termination of the Executive's employment with the Company, the Executive shall deliver to the Company all documents, records, notebooks, work papers, and all similar material containing any of the foregoing information, whether prepared by the Executive, the Company or anyone else.
|
10.
|
Non-Competition
:
In order to protect the Confidential Information, the Executive agrees that during the term of the Executive's employment, and for a period of one years thereafter if the Executive employment is terminated by the Company with Cause or by the Executive without Good Reason, Executive shall not, directly or indirectly, whether as an owner, partner, shareholder, agent, employee, creditor or otherwise, promote, participate or engage in any activity or other business competitive with the Company's business or the business of any present Affiliate of the Company in
the state of Nevada if such activity or other business involves any use by the Executive of any of the Confidential Information. The Company shall notify the Executive of any perceived violation of this Section 10, and the Executive shall have 30 days to cure such violation.
|
11.
|
Non-Solicitation of Customers
:
The Executive agrees that for a period of two (2) year after
the
termination of employment with the Company, the Executive will not, on behalf of himself or any other individual, association or entity, whether or not affiliated with the Executive call on any of the customers of the Company or any Affiliate of the Company for the purpose of soliciting or inducing any of such customers to acquire (or providing to any of such customers) any product or service provided by the Company or any Affiliate of the Company, nor will the Executive in any way, directly or indirectly, as agent or otherwise, in any other manner solicit, influence
or encourage such customers to take away or to divert or direct their business to the Executive or any other person or entity by or with which the Executive is employed, associated, affiliated or otherwise related if such business is competitive with the Company.
|
12.
|
Noninterference with Executives
:
In order to protect the Confidential Information, the Executive agrees that during the term hereof and for a period of two (2) years thereafter, the Executive will not, directly or indirectly, induce or entice any employee of the Company or its Affiliates to leave such employment or cause anyone else to leave such employment.
|
13.
|
Indemnity
:
To the fullest extend permitted by applicable law and the bylaws of the Company, as from time to time in effect, the Company shall indemnify the Executive and hold the Executive harmless for any acts or decisions made in good faith while performing services for the Company, and the Company shall use commercially reasonable efforts to obtain coverage for the Executive (provided the same may be obtained at reasonable cost) under any liability insurance policy or policies now in force or hereafter obtained during the term of this Agreement that cover other officers of the Company having comparable or lesser status and responsibility. The Company will pay and, subject to any legal limitations, advance all reasonable expenses, including reasonable attorneys' fees and costs of
court approved settlements, actually and necessarily incurred by the Executive in connection with the defense of any action, suit or proceeding and in connection with any appeal thereon, which has been brought against the Executive by reason of the Executive's service as an officer, employee or agent of the Company, except if shown that the Executive has breached his duties and obligations to the Company.
|
14.
|
Severability:
If any provision of this Agreement is held to be unenforceable for any reason, it shall be adjusted rather than voided, if possible, to achieve the intent of the parties to the extent possible. In any event, all other provisions of this Agreement shall be deemed valid and enforceable to the extent possible.
|
15.
|
Succession:
This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns and any such successor or assignee shall be deemed substituted for the Company under the terms of this Agreement for all purposes. As used herein, "successor" and "assignee" shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires the stock of the Company or to which the Company assigns this Agreement by operation of law or otherwise. The obligations and duties of the Executive hereunder are personal and otherwise not assignable. The Executive's obligations and representations under this Agreement will survive the termination of the Executive's employment, regardless of the manner of such termination.
|
16.
|
Notices:
Any notice or other communication provided for in this Agreement shall be in writing and sent if to the Company to its office at:
|
17.
|
Entire Agreement
:
This Agreement contains the entire agreement of the parties relating to the subject matter hereof and supersedes agreements, undertakings, commitments and practices relating to the Executive's employment by the Company.
|
18.
|
Amendments
:
No amendment or modification of the terms of this Agreement shall be valid unless made in writing and duly executed by both parties. All previous Agreement's shall be null and void.
|
19.
|
Waiver
:
No failure on the part of any party to exercise or delay in exercising any right hereunder shall be deemed a waiver thereof or of any other right, nor shall any single or partial exercise preclude any further or other exercise of such right or any other right.
|
20.
|
Governing Law
:
This Agreement, and the legal relations between the parties, shall be governed by and construed in accordance with the laws of the State of Nevada without regard to conflicts of law doctrines, and any court action arising out of this Agreement shall be brought in any court of competent jurisdiction within the State of Nevada.
|
21.
|
Arbitration:
The parties may, if they so desire and elect, submit any claim for payment under this
Agreement or any dispute regarding the interpretation of this Agreement to arbitration upon such terms and provisions to which they agree.
|
22.
|
Withholding:
All compensation payable hereunder, including salary and other benefits, and amounts payable under Section 4 above, shall be subject to applicable taxes, withholding and other required, normal or elected employee deductions.
|
23.
|
Counterparts
:
This Agreement and any amendment hereto may be executed in one or more counterparts. All of such counterparts shall constitute one and the same agreement and shall become effective when
a
copy signed by each party has been delivered to the other party.
|
24.
|
Headings
:
Section and other headings contained in this Agreement arc for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.
|
25.
|
Representation by Counsel; Interpretation
:
The Company and the Executive each acknowledges that each party to this Agreement has been represented by counsel in connection with this Agreement and the matters contemplated by this Agreement. Accordingly, any rule of law, including but not limited to Section 1654 of the California civil Code, or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived. The provision of this Agreement shall be interpreted in a reasonable manner to affect the intent of the parties.
|
1.
|
Term:
The Company agrees to employ the Executive and the Executive hereby accepts such employment, in accordance with the terms of this Agreement, commencing as December 15, 2017 and ending on the fifth anniversary of the date hereof unless this Agreement is earlier terminated as provided herein. Notwithstanding any other provision of this Agreement, the Company shall have an obligation to make any payments to the Executive for Base Salary and Bonuses, as defined below and as required by this Agreement.
|
2.
|
Services:
So long as this Agreement shall continue in effect, the Executive shall perform duties as assigned by the Chief Executive Officer of the Company (the "CEO").The Executive shall use Executive's best efforts and abilities to promote the Company's interests and shall perform the services contemplated by this Agreement in accordance with policies established by and under the direction of the Board. The Executive agrees to serve in such other executive capacities for one or more direct or indirect Affiliates of the Company as the CEO may from time to time request, subject to appropriate authorization by the Affiliate or Affiliates involved and any limitations under applicable law. The Executive agrees to faithfully and diligently promote the
business, affairs and interests of the Company and its Affiliates. Executive may engage in other outside interests or companies so long as the outside interests are not directly competitive with the X Rail Entertainment, Inc. Executive will be required to work from the corporate main office at 9480 S. Eastern Ave., Las Vegas, Nevada 89123 as his principal place of business for the company for not less than four days per week unless company travel or authorized vacation time is in effect.
|
3. |
Duties and Responsibilities:
In addition to his duties as an employee as discussed herein, the Executive shall serve as Chief Financial Officer of the
Company for the duration of this Agreement. Executive's duties as an Executive shall be overall responsibility and authority, subject to authorities and limitations as established by the Chief Executive Officer, to implement and continue to develop the business strategies of the Company. In the performance of Executive's duties, the Executive shall report directly to the Chief Executive Officer.
|
6. |
Buy Out Provision:
If the Employer terminates the Executive's employment because the business is sold, the Employer will pay to the Executive (1) the Executive's accrued salary and vacation, including the then unused accrued vacation, up to and including the date of termination and (2) the equivalent of two (2) years of the Executive's Base Salary, less applicable deductions and withholdings, pursuant
to the Employer's standard pay periods and practices; provided, however, that such payments shall be deemed severance pay and not wages. Such payment shall be made to the Executive as soon as administratively practicable after the termination of the Executive's employment, but no later than two weeks from the date the Executive's employment is so terminated. The Executive shall execute a release of all current or future claims, known or unknown, arising on or before the date of the release, against the Employer and its subsidiaries and the directors, officers, employees and affiliates of any of them, in a form approved by the Employer and (3) the Executive shall be entitled to all stock grants on section 4 which shall be issued upon termination.
|
7.
|
Golden Parachute Limitation:
The payments and benefits payable to the Executive under this Agreement and all other contracts, arrangements, or programs with the Company shall not, in the aggregate exceed the maximum amount that may be paid to the Executive without triggering golden parachute penalties under Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), as determined in good faith by the Company's independent auditors. The Executive agrees that, to the extent payments or benefits under this Agreement would not be deductible under Code Section 162(m) if made or provided when otherwise due under this Agreement, such payments and benefits shall be made or provided later, immediately after Section 162(m) ceases to preclude their deduction, with interest thereon at the rate provided in Code Section 1274(b) (2) (B). If even after such deferral the payments and benefits otherwise payable to the Executive must be reduced to avoid triggering such penalties, the payments and benefits will be reduced in the priority order designated by the Executive, or, if the Executive fails promptly to designate an order, in the priority order designated by the Company. If an amount in excess of the
limit set forth in this Section 7 is paid to the Executive, the Executive shall repay the excess amount to the Company upon demand. The Executive and the Company agree to cooperate with each other in connection with any administrative or judicial proceedings concerning the existence or amount of golden parachute penalties on payments or benefits received by the Executive.
|
8.
|
Business Expenses:
During the term of this Agreement, the Company shall reimburse the Executive promptly for business expenditures made and substantiated in accordance with policies, practices and procedures established from time to time by the Company generally with respect to other employees and incurred in the pursuit and furtherance of the Company's business and good will.
|
9.
|
Confidential Information
:
The Executive acknowledges that the nature of the Executive's engagement by the Company is such that the Executive shall have access to information of a confidential and/or trade secret nature which has great value to the Company and which constitutes a
substantial basis and foundation upon which the business of the Company is based. Such information includes financial, marketing data, techniques, processes, formulas, developmental or experimental work, work in process, methods, trade secrets (including, without limitation, customer lists and lists of customer sources), or any other
secret or confidential information relating to the products, services, customers, sales or business affairs of the Company or its Affiliates (the "Confidential Information"). The Executive shall keep all such Confidential Information in confidence during the term of this Agreement and at any time thereafter and shall not disclose any of such Confidential Information to any other person, except to the extend such disclosure is (i) required by applicable law, (ii) lawfully obtainable from other sources, or (iii) authorized in writing by the Company. Upon termination of the Executive's employment with the Company, the Executive shall deliver to the Company all documents, records, notebooks, work papers, and all similar material containing any of the foregoing information, whether prepared by the Executive, the Company or anyone else.
|
10.
|
Non-Competition
:
In order to protect the Confidential Information, the Executive agrees that during the term of the Executive's employment, and for a period of one years thereafter if the Executive employment is terminated by the Company with Cause or by the Executive without Good Reason, Executive shall not, directly or indirectly, whether as an owner, partner, shareholder, agent, employee, creditor or otherwise, promote, participate or engage in any activity or other business competitive with the Company's business or the business of any present Affiliate of the Company in
the state of Nevada if such activity or other business involves any use by the Executive of any of the Confidential Information. The Company shall notify the Executive of any perceived violation of this Section 10, and the Executive shall have 30 days to cure such violation.
|
11.
|
Non-Solicitation of Customers
:
The Executive agrees that for a period of two (2) year after
the
termination of employment with the Company, the Executive will not, on behalf of himself or any other individual, association or entity, whether or not affiliated with the Executive call on any of the customers of the Company or any Affiliate of the Company for the purpose of soliciting or inducing any of such customers to acquire (or providing to any of such customers) any product or service provided by the Company or any Affiliate of the Company, nor will the Executive in any way, directly or indirectly, as agent or otherwise, in any other manner solicit, influence
or encourage such customers to take away or to divert or direct their business to the Executive or any other person or entity by or with which the Executive is employed, associated, affiliated or otherwise related if such business is competitive with the Company.
|
12.
|
Noninterference with Executives
:
In order to protect the Confidential Information, the Executive agrees that during the term hereof and for a period of two (2) years thereafter, the Executive will not, directly or indirectly, induce or entice any employee of the Company or its Affiliates to leave such employment or cause anyone else to leave such employment.
|
13.
|
Indemnity
:
To the fullest extend permitted by applicable law and the bylaws of the Company, as from time to time in effect, the Company shall indemnify the Executive and hold the Executive harmless for any acts or decisions made in good faith while performing services for the Company, and the Company shall use commercially reasonable efforts to obtain coverage for the Executive (provided the same may be obtained at reasonable cost) under any liability insurance policy or policies now in force or hereafter obtained during the term of this Agreement that cover other officers of the Company having comparable or lesser status and responsibility. The Company will pay and, subject to any legal limitations, advance all reasonable expenses, including reasonable attorneys' fees and costs of
court approved settlements, actually and necessarily incurred by the Executive in connection with the defense of any action, suit or proceeding and in connection with any appeal thereon, which has been brought against the Executive by reason of the Executive's service as an officer, employee or agent of the Company, except if shown that the Executive has breached his duties and obligations to the Company.
|
14.
|
Severability:
If any provision of this Agreement is held to be unenforceable for any reason, it shall be adjusted rather than voided, if possible, to achieve the intent of the parties to the extent possible. In any event, all other provisions of this Agreement shall be deemed valid and enforceable to the extent possible.
|
15.
|
Succession:
This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns and any such successor or assignee shall be deemed substituted for the Company under the terms of this Agreement for all purposes. As used herein, "successor" and "assignee" shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires the stock of the Company or to which the Company assigns this Agreement by operation of law or otherwise. The obligations and duties of the Executive hereunder are personal and otherwise not assignable. The Executive's obligations and representations under this Agreement will survive the termination of the Executive's employment, regardless of the manner of such termination.
|
16.
|
Notices:
Any notice or other communication provided for in this Agreement shall be in writing and sent if to the Company to its office at:
|
17.
|
Entire Agreement
:
This Agreement contains the entire agreement of the parties relating to the subject matter hereof and supersedes agreements, undertakings, commitments and practices relating to the Executive's employment by the Company.
|
18.
|
Amendments
:
No amendment or modification of the terms of this Agreement shall be valid unless made in writing and duly executed by both parties. All previous Agreement's shall be null and void.
|
19.
|
Waiver
:
No failure on the part of any party to exercise or delay in exercising any right hereunder shall be deemed a waiver thereof or of any other right, nor shall any single or partial exercise preclude any further or other exercise of such right or any other right.
|
20.
|
Governing Law
:
This Agreement, and the legal relations between the parties, shall be governed by and construed in accordance with the laws of the State of Nevada without regard to conflicts of law doctrines, and any court action arising out of this Agreement shall be brought in any court of competent jurisdiction within the State of Nevada.
|
21.
|
Arbitration:
The parties may, if they so desire and elect, submit any claim for payment under this
Agreement or any dispute regarding the interpretation of this Agreement to arbitration upon such terms and provisions to which they agree.
|
22.
|
Withholding:
All compensation payable hereunder, including salary and other benefits, and amounts payable under Section 4 above, shall be subject to applicable taxes, withholding and other required, normal or elected employee deductions.
|
23.
|
Counterparts
:
This Agreement and any amendment hereto may be executed in one or more counterparts. All of such counterparts shall constitute one and the same agreement and shall become effective when
a
copy signed by each party has been delivered to the other party.
|
24.
|
Headings
:
Section and other headings contained in this Agreement arc for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.
|
25.
|
Representation by Counsel; Interpretation
:
The Company and the Executive each acknowledges that each party to this Agreement has been represented by counsel in connection with this Agreement and the matters contemplated by this Agreement. Accordingly, any rule of law, including but not limited to Section 1654 of the California civil Code, or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived. The provision of this Agreement shall be interpreted in a reasonable manner to affect the intent of the parties.
|
1.
|
Term:
The Company agrees to employ the Executive and the Executive hereby accepts such employment, in accordance with the terms of this Agreement, commencing as December 15, 2017 and ending on the fifth anniversary of the date hereof unless this Agreement is earlier terminated as provided herein. Notwithstanding any other provision of this Agreement, the Company shall have an obligation to make any payments to the Executive for Base Salary and Bonuses, as defined below and as required by this Agreement.
|
2.
|
Services:
So long as this Agreement shall continue in effect, the Executive shall perform duties as assigned by the Chief Executive Officer of the Company (the "CEO").The Executive shall use Executive's best efforts and abilities to promote the Company's interests and shall perform the services contemplated by this Agreement in accordance with policies established by and under the direction of the Board. The Executive agrees to serve in such other executive capacities for one or more direct or indirect Affiliates of the Company as the CEO may from time to time request, subject to appropriate authorization by the Affiliate or Affiliates involved and any limitations under applicable law. The Executive agrees to faithfully and diligently promote the
business, affairs and interests of the Company and its Affiliates. Executive may engage in other outside interests or companies so long as the outside interests are not directly competitive with the X Rail Entertainment, Inc. Executive will be required to work from the corporate main office at 9480 S. Eastern Ave., Las Vegas, Nevada 89123 as his principal place of business for the company for not less than four days per week unless company travel or authorized vacation time is in effect.
|
3. |
Duties and Responsibilities:
In addition to his duties as an employee as discussed herein, the Executive shall serve as President of the
Company for the duration of this Agreement. Executive's duties as an Executive shall be overall responsibility and authority, subject to authorities and limitations as established by the Chief Executive Officer, to implement and continue to develop the business strategies of the Company. In the performance of Executive's duties, the Executive shall report directly to the Chief Executive Officer.
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6. |
Buy Out Provision:
If the Employer terminates the Executive's employment because the business is sold, the Employer will pay to the Executive (1) the Executive's accrued salary and vacation, including the then unused accrued vacation, up to and including the date of termination and (2) the equivalent of two (2) years of the Executive's Base Salary, less applicable deductions and withholdings, pursuant
to the Employer's standard pay periods and practices; provided, however, that such payments shall be deemed severance pay and not wages. Such payment shall be made to the Executive as soon as administratively practicable after the termination of the Executive's employment, but no later than two weeks from the date the Executive's employment is so terminated. The Executive shall execute a release of all current or future claims, known or unknown, arising on or before the date of the release, against the Employer and its subsidiaries and the directors, officers, employees and affiliates of any of them, in a form approved by the Employer and (3) the Executive shall be entitled to all stock grants on section 4 which shall be issued upon termination.
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7.
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Golden Parachute Limitation:
The payments and benefits payable to the Executive under this Agreement and all other contracts, arrangements, or programs with the Company shall not, in the aggregate exceed the maximum amount that may be paid to the Executive without triggering golden parachute penalties under Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), as determined in good faith by the Company's independent auditors. The Executive agrees that, to the extent payments or benefits under this Agreement would not be deductible under Code Section 162(m) if made or provided when otherwise due under this Agreement, such payments and benefits shall be made or provided later, immediately after Section 162(m) ceases to preclude their deduction, with interest thereon at the rate provided in Code Section 1274(b) (2) (B). If even after such deferral the payments and benefits otherwise payable to the Executive must be reduced to avoid triggering such penalties, the payments and benefits will be reduced in the priority order designated by the Executive, or, if the Executive fails promptly to designate an order, in the priority order designated by the Company. If an amount in excess of the
limit set forth in this Section 7 is paid to the Executive, the Executive shall repay the excess amount to the Company upon demand. The Executive and the Company agree to cooperate with each other in connection with any administrative or judicial proceedings concerning the existence or amount of golden parachute penalties on payments or benefits received by the Executive.
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8.
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Business Expenses:
During the term of this Agreement, the Company shall reimburse the Executive promptly for business expenditures made and substantiated in accordance with policies, practices and procedures established from time to time by the Company generally with respect to other employees and incurred in the pursuit and furtherance of the Company's business and good will.
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9.
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Confidential Information
:
The Executive acknowledges that the nature of the Executive's engagement by the Company is such that the Executive shall have access to information of a confidential and/or trade secret nature which has great value to the Company and which constitutes a
substantial basis and foundation upon which the business of the Company is based. Such information includes financial, marketing data, techniques, processes, formulas, developmental or experimental work, work in process, methods, trade secrets (including, without limitation, customer lists and lists of customer sources), or any other
secret or confidential information relating to the products, services, customers, sales or business affairs of the Company or its Affiliates (the "Confidential Information"). The Executive shall keep all such Confidential Information in confidence during the term of this Agreement and at any time thereafter and shall not disclose any of such Confidential Information to any other person, except to the extend such disclosure is (i) required by applicable law, (ii) lawfully obtainable from other sources, or (iii) authorized in writing by the Company. Upon termination of the Executive's employment with the Company, the Executive shall deliver to the Company all documents, records, notebooks, work papers, and all similar material containing any of the foregoing information, whether prepared by the Executive, the Company or anyone else.
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10.
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Non-Competition
:
In order to protect the Confidential Information, the Executive agrees that during the term of the Executive's employment, and for a period of one years thereafter if the Executive employment is terminated by the Company with Cause or by the Executive without Good Reason, Executive shall not, directly or indirectly, whether as an owner, partner, shareholder, agent, employee, creditor or otherwise, promote, participate or engage in any activity or other business competitive with the Company's business or the business of any present Affiliate of the Company in
the state of Nevada if such activity or other business involves any use by the Executive of any of the Confidential Information. The Company shall notify the Executive of any perceived violation of this Section 10, and the Executive shall have 30 days to cure such violation.
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11.
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Non-Solicitation of Customers
:
The Executive agrees that for a period of two (2) year after
the
termination of employment with the Company, the Executive will not, on behalf of himself or any other individual, association or entity, whether or not affiliated with the Executive call on any of the customers of the Company or any Affiliate of the Company for the purpose of soliciting or inducing any of such customers to acquire (or providing to any of such customers) any product or service provided by the Company or any Affiliate of the Company, nor will the Executive in any way, directly or indirectly, as agent or otherwise, in any other manner solicit, influence
or encourage such customers to take away or to divert or direct their business to the Executive or any other person or entity by or with which the Executive is employed, associated, affiliated or otherwise related if such business is competitive with the Company.
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12.
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Noninterference with Executives
:
In order to protect the Confidential Information, the Executive agrees that during the term hereof and for a period of two (2) years thereafter, the Executive will not, directly or indirectly, induce or entice any employee of the Company or its Affiliates to leave such employment or cause anyone else to leave such employment.
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13.
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Indemnity
:
To the fullest extend permitted by applicable law and the bylaws of the Company, as from time to time in effect, the Company shall indemnify the Executive and hold the Executive harmless for any acts or decisions made in good faith while performing services for the Company, and the Company shall use commercially reasonable efforts to obtain coverage for the Executive (provided the same may be obtained at reasonable cost) under any liability insurance policy or policies now in force or hereafter obtained during the term of this Agreement that cover other officers of the Company having comparable or lesser status and responsibility. The Company will pay and, subject to any legal limitations, advance all reasonable expenses, including reasonable attorneys' fees and costs of
court approved settlements, actually and necessarily incurred by the Executive in connection with the defense of any action, suit or proceeding and in connection with any appeal thereon, which has been brought against the Executive by reason of the Executive's service as an officer, employee or agent of the Company, except if shown that the Executive has breached his duties and obligations to the Company.
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14.
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Severability:
If any provision of this Agreement is held to be unenforceable for any reason, it shall be adjusted rather than voided, if possible, to achieve the intent of the parties to the extent possible. In any event, all other provisions of this Agreement shall be deemed valid and enforceable to the extent possible.
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15.
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Succession:
This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns and any such successor or assignee shall be deemed substituted for the Company under the terms of this Agreement for all purposes. As used herein, "successor" and "assignee" shall include any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires the stock of the Company or to which the Company assigns this Agreement by operation of law or otherwise. The obligations and duties of the Executive hereunder are personal and otherwise not assignable. The Executive's obligations and representations under this Agreement will survive the termination of the Executive's employment, regardless of the manner of such termination.
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16.
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Notices:
Any notice or other communication provided for in this Agreement shall be in writing and sent if to the Company to its office at:
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17.
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Entire Agreement
:
This Agreement contains the entire agreement of the parties relating to the subject matter hereof and supersedes agreements, undertakings, commitments and practices relating to the Executive's employment by the Company.
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18.
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Amendments
:
No amendment or modification of the terms of this Agreement shall be valid unless made in writing and duly executed by both parties. All previous Agreement's shall be null and void.
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19.
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Waiver
:
No failure on the part of any party to exercise or delay in exercising any right hereunder shall be deemed a waiver thereof or of any other right, nor shall any single or partial exercise preclude any further or other exercise of such right or any other right.
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20.
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Governing Law
:
This Agreement, and the legal relations between the parties, shall be governed by and construed in accordance with the laws of the State of Nevada without regard to conflicts of law doctrines, and any court action arising out of this Agreement shall be brought in any court of competent jurisdiction within the State of Nevada.
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21.
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Arbitration:
The parties may, if they so desire and elect, submit any claim for payment under this
Agreement or any dispute regarding the interpretation of this Agreement to arbitration upon such terms and provisions to which they agree.
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22.
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Withholding:
All compensation payable hereunder, including salary and other benefits, and amounts payable under Section 4 above, shall be subject to applicable taxes, withholding and other required, normal or elected employee deductions.
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23.
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Counterparts
:
This Agreement and any amendment hereto may be executed in one or more counterparts. All of such counterparts shall constitute one and the same agreement and shall become effective when
a
copy signed by each party has been delivered to the other party.
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24.
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Headings
:
Section and other headings contained in this Agreement arc for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.
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25.
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Representation by Counsel; Interpretation
:
The Company and the Executive each acknowledges that each party to this Agreement has been represented by counsel in connection with this Agreement and the matters contemplated by this Agreement. Accordingly, any rule of law, including but not limited to Section 1654 of the California civil Code, or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived. The provision of this Agreement shall be interpreted in a reasonable manner to affect the intent of the parties.
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THE COMPANY
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X Rail Entertainment, Inc.
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By: /s/ Michael Barron
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Its: CEO
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THE EXECUTIVE
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Joseph A. Cosio-Barron
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President | ||||
/s/ Joseph Cosio-Barron
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/s/ Michael A. Barron
Michael A. Barron
Chief Executive Officer
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/s/ Wanda Witoslawski
Wanda Witoslawski
Chief Financial Officer
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