UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 16, 2018
PARALLAX HEALTH SCIENCES, INC.
(Exact name of Company as specified in its charter)
Nevada |
000-52534 |
46-4733512 |
(State or other jurisdiction |
(Commission File Number) |
(IRS Employer |
of Incorporation) |
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Identification Number) |
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1327 Ocean Avenue, Suite B Santa Monica, CA 90401 (Address of principal executive offices)
310-899-4442 (Registrant’s Telephone Number) |
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Copy of all Communications to : Peter V. Hogan Buchalter 1000 Wilshire Boulevard, Suite 1500 Los Angeles, CA 90017 (213) 891-0700
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Company under any of the following provisions: |
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
As used in this current report and unless otherwise indicated, the terms "we", "us", "our", “Company”, and “Parallax” mean Parallax Health Sciences, Inc., a Nevada corporation, and its subsidiaries, unless otherwise indicated.
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
The disclosures set forth in Item 2.03 are incorporated by into this Item 1.01 by reference.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT
On November 16, 2018, Parallax Health Sciences, Inc., a Nevada corporation (“Parallax” or the “Company”), closed on a financing where the Company issued two convertible debentures (the “Debentures”) to two accredited investors (the “Holders”) in the aggregate principal amount of $250,000 pursuant to certain securities purchase agreements (the “Securities Purchase Agreement”) with a discounted purchase price of $225,000. The Debentures accrue no interest and mature on November 14, 2021 (the “Maturity Date”) The Holders shall have the right, at its option, to convert the principal sum and any accrued interest, in whole or part, into shares of the Company’s common stock at any time on or before the Maturity Date. The conversion price shall be $0.12 per share and after 180 days becomes the lower of $0.12 or 70% of the second lowest traded price for the twenty (20) trading days preceding the date of conversion. The Debentures may be redeemed at any time at an amount equal to 110% of the outstanding principal amount for ninety days, 120% if between 91 and 120 days, 130% if between 121 and 180 days and any time after 180 days at 140%. The Holders were also issued a five-year warrant to purchase Common Stock (the “Warrant Agreements”) at a purchase price of $0.15 per share. The Holders received a $5,000 fee to cover the legal and due diligence expenses. Any time after sixty days from the signing of the Debentures, upon mutual agreement of the Holders and the Company, the Holders will purchase additional Debentures in the amount of $325,000 on the same terms.
The Debentures, the Warrant and the Securities Purchase Agreement are attached to this Current Report on Form 8-K as exhibits 4.1, 4.2, 4.3, 10.1, respectively, and incorporated herein by reference. The disclosure set forth in this Section 2.03 is intended to be a summary only and is qualified in its entirety by reference to the exhibits.
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES
On November 16, 2018, the Company entered into an Equity Purchase Agreement (the “EPA”) with Peak One Opportunity Fund, L.P. (“Peak”).
The EPA establishes what is sometimes termed an equity line of credit or an equity draw-down facility. The $10,000,000 facility may be drawn-down upon by the Company in installments, the maximum amount of each of which is limited to lesser of $250,000 or 200% of the average daily traded volume of the Company’s common stock during the ten (10) trading days immediately prior to the drawdown notice. For each share of common stock purchased under the EPA, Peak will pay 88% of the of the closing bid price of the Company's shares during the seven trading days following the clearing date associated with the drawdown notice or on the trading day immediately prior to the drawdown notice. Peak will not engage in any short sales of the Company’s common stock.
In connection with the EPA, the Company has issued to Peak 800,000 shares of common stock as a commitment fee (the “Commitment Shares”).
Pursuant to a registration rights agreement (the “Registration Rights Agreement”), the Company has agreed to prepare and file a registration statement under the Securities Act of 1933, as amended, that includes the shares of common stock issuable pursuant to the EPA. Parallax cannot sell shares of common stock to Peak under the EPA until such registration statement is declared effective by the Securities and Exchange Commission.
The disclosures set forth in Item 2.03 are incorporated by into this Item 3.02 by reference. The issuance of the Debentures, the Warrants and the Commitment Shares were made in reliance on exemption from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.
The Registration Rights Agreement and Equity Purchase Agreement are attached to this Current Report on Form 8-K as exhibits 4.4 and 10.2, respectively, and incorporated herein by reference. The disclosure set forth in this Section 2.03 is intended to be a summary only and is qualified in its entirety by reference to the exhibits.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits
Exhibit Number |
Description of Exhibit |
Filing Reference |
Filed herewith |
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Filed herewith |
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Filed herewith |
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Filed herewith |
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Filed herewith |
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Filed herewith |
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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PARALLAX HEALTH SCIENCES, INC. |
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Dated: November 23, 2018 |
/s/ Calli R. Bucci |
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Calli R. Bucci |
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Chief Financial Officer |
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SIGNING DEBENTURE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES ARE
RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED
EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION
REQUIREMENTS THEREOF OR EXEMPTION THEREFROM.
PARALLAX HEALTH SCIENCES, INC.
CONVERTIBLE DEBENTURE DUE NOVEMBER 14, 2021
Issuance Date: November 14, 2018
Principal Amount: $125,000.00
FOR VALUE RECEIVED, PARALLAX HEALTH SCIENCES, INC. , a
corporation organized and existing under the laws of the State of Nevada (the “ Company ” ),
hereby promises to pay to PEAK ONE OPPORTUNITY FUND, L.P. , having its address at
333 South Hibiscus Drive, Miami Beach, FL 33139, or its assigns (the “ Holder ” and together
with the other holders of Debentures issued pursuant to the Securities Purchase Agreement (as
defined below), the “ Holders ” ), the initial principal sum of One Hundred Twenty Five Thousand
and 00/100 Dollars ($125,000.00) (subject to adjustment as provided herein, the “ Principal
Amount ” ) on November 14, 2021 (the “ Maturity Date ” ). The Company has the option to redeem
this Debenture prior to the Maturity Date pursuant to Section 2(b). All unpaid principal due and
payable on the Maturity Date shall be paid in the form of Common Stock of the Company, par
value $0.001 per share ( “ Common Stock ” ) pursuant to Section 3. The Holder has the option to
cause any outstanding principal and accrued interest, if any, on this Debenture to be converted
into Common Stock at any time prior to the Redemption Date (as defined below) or the Maturity
Date pursuant to Section 2(a).
This Debenture is one of the Debentures referred to in the Securities Purchase
Agreement (the “ Securities Purchase Agreement ” ) dated as of November 14, 2018, between the
Company and the Holder. Capitalized terms used but not defined herein shall have the meanings
set forth in the Securities Purchase Agreement. This Debenture is subject to the provisions of the
Securities Purchase Agreement and further is subject to the following additional provisions:
1.
This Debenture has been issued subject to investment representations of the
original purchaser hereof and may be transferred or exchanged only in compliance with the
Securities Act and other applicable state and foreign securities laws. The Holder may transfer or
assign this Debenture (or any part thereof) without the prior consent of the Company, and the
Company shall cooperate with any such transfer. In the event of any proposed transfer of this
Debenture, the Company may require, prior to issuance of a new Debenture in the name of such
other Person, that it receive reasonable transfer documentation including legal opinions that the
issuance of the Debenture in such other name does not and will not cause a violation of the
Securities Act or any applicable state or foreign securities laws or is exempt from the registration
requirements of the Securities Act. Prior to due presentment for transfer of this Debenture to
which the Company has consented, the Company and any agent of the Company may treat the
Person in whose name this Debenture is duly registered on the Company's books and records of
outstanding debt securities and obligations ( “ Debenture Register ” ) as the owner hereof for the
purpose of receiving payment as herein provided and for all other purposes, whether or not this
Debenture be overdue, and neither the Company nor any such agent shall be affected by notice to
the contrary.
2.
Conversion at Holder ’ s Option; Redemption at Company ’ s Option.
a.
The Holder is entitled to, at any time or from time to time, convert the
Conversion Amount (as defined below) into Conversion Shares, at a conversion price for each
share of Common Stock (the “ Conversion Price ” ) equal to either: (i) if no Event of Default (as
defined herein) has occurred and the date of conversion is prior to the date that is one hundred
eighty (180) calendar days after the Issuance Date, $0.12, or (ii) if an Event of Default has
occurred or the date of conversion is on or after the date that is one hundred eighty (180)
calendar days after the Issuance Date, the lesser of (a) $0.12 or (b) Seventy percent (70%) of the
second lowest traded price (as reported by Bloomberg LP) of the Common Stock for the twenty
(20) Trading Days immediately preceding the date of the date of conversion of the Debentures
(for clarification purposes, if the lowest traded price during the applicable period is equal to the
second lowest traded price during the applicable period, then such lowest traded price shall still
be utilized for purposes of this calculation), provided, further, that if either the Company is not
DWAC Operational at the time of conversion or the Common Stock is traded on the OTC Pink
( “ OTCP ” ) at the time of conversion, then Seventy percent (70%) shall automatically adjust to
Sixty percent (60%) of the second lowest traded price (as reported by Bloomberg LP) of the
Common Stock for the twenty (20) Trading Days immediately preceding the date of conversion
of the Debentures (for clarification purposes, if the lowest traded price during the applicable
period is equal to the second lowest traded price during the applicable period, then such lowest
traded price shall still be utilized for purposes of this calculation), subject in each case to
equitable adjustments resulting from any stock splits, stock dividends, recapitalizations or similar
events. The Company shall issue irrevocable instructions to its Transfer Agent regarding
conversions such that the transfer agent shall be authorized and instructed to issue Conversion
Shares upon its receipt of a Notice of Conversion without further approval or authorization from
the Company. For purposes of this Debenture, the “ Conversion Amount ” shall mean the sum of
(A) all or any portion of the outstanding Principal Amount of this Debenture, as designated by
the Holder upon exercise of its right of conversion plus (B) any interest, pursuant to Section 10
or otherwise, that has accrued on the portion of the Principal Amount that has been designated
for payment pursuant to (A).
Conversion shall be effectuated by delivering by facsimile, email or other delivery
method to the Transfer Agent of the completed form of conversion notice attached hereto as
Annex A (the “ Notice of Conversion ” ), executed by the Holder of the Debenture evidencing
such Holder's intention to convert this Debenture or a specified portion hereof. No fractional
shares of Common Stock or scrip representing fractions of shares will be issued on conversion,
but the number of shares issuable shall be rounded to the nearest whole share. The Holder may,
at its election, deliver a Notice of Conversion to either the Company or the Transfer Agent. The
date on which notice of conversion is given (the “ Conversion Date ” ) shall be deemed to be the
date on which the Company or the Transfer Agent, as the case may be, receives by fax, email or
other means of delivery used by the Holder the Notice of Conversion (such receipt being
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evidenced by electronic confirmation of delivery by facsimile or email or confirmation of
delivery by such other delivery method used by the Holder). Delivery of a Notice of Conversion
to the Transfer Agent may be given by the Holder by facsimile, or by delivery to the Transfer
Agent at the address set forth in the Transfer Agent Instruction Letter (or such other contact
facsimile number, email or street address as may be designated by the Transfer Agent to the
Holder). Delivery of a Notice of Conversion to the Company shall be given by the Holder
pursuant to the notice provisions set forth in Section 10 of the Agreement. The Conversion
Shares must be delivered to the Holder within two (2) business days from the date of delivery of
the Notice of Conversion to the Transfer Agent or Company, as the case may be. Conversion
shares shall be delivered by DWAC so long as the Company is then DWAC Operational, unless
the Holder expressly requests delivery in certificated form or the Conversion Shares are in the
form of Restricted Stock and are required to bear a restrictive legended. Conversion Shares shall
be deemed delivered (i) if delivered by DWAC, upon deposit into the Holder ’ s brokerage
account, or (ii) if delivered in certificated form, upon the Holder ’ s actual receipt of the
Conversion Shares in certificated form at the address specified by the Holder in the Notice of
Conversion, as confirmed by written receipt. All expenses incurred by Holder, for the issuance
and clearing of the Common Stock into which this Debenture is convertible into, shall
immediately and automatically be added to the balance of the Debenture at such time as the
expenses are incurred by Holder.
If at any time the Conversion Price as determined hereunder for any conversion
would be less than the par value of the Common Stock, then at the sole discretion of the Holder,
the Conversion Price hereunder may equal such par value for such conversion and the
Conversion Amount for such conversion may be increased to include Additional Principal,
where “ Additional Principal ” means such additional amount to be added to the Conversion
Amount to the extent necessary to cause the number of conversion shares issuable upon such
conversion to equal the same number of conversion shares as would have been issued had the
Conversion Price not been adjusted by the Holder to the par value price.
Notwithstanding the foregoing, unless the Holder delivers to the Company written
notice at least sixty-one (61) days prior to the effective date of such notice that the provisions of
this paragraph (the “ Limitation on Ownership ” ) shall be adjusted to 9.99% with respect to the
Holder, in no event shall a holder of Debentures have the right to convert Debentures into, nor
shall the Company issue to such Holder, shares of Common Stock to the extent that such
conversion would result in the Holder and its affiliates together beneficially owning more than
4.99% of the then issued and outstanding shares of Common Stock. For purposes hereof,
beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act
and Regulation 13D-G under the Exchange Act.
b.
So long as no Event of Default (as defined in Section 10) shall have
occurred and be continuing (whether such Event of Default has been declared by the Holder)
(unless the Holder consents to such redemption notwithstanding such Event of Default, as
described in clause (v), below), the Company may at its option call for redemption all or part of
the Debentures, with the exception of any portion thereof which is the subject of a previously-
delivered Notice of Conversion, prior to the Maturity Date, as follows:
(i)
The Debentures called for redemption shall be redeemable by the
Company, upon not more than two (2) days written notice, for an amount (the “ Redemption
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Price ” ) equal to: (i) if the Redemption Date (as defined below) is ninety (90) calendar days or
less from the date of issuance of this Debenture, One Hundred Ten percent (110%) of the sum of
the Principal Amount so redeemed plus accrued interest, if any; (ii) if the Redemption Date is
greater than or equal to ninety-one (91) calendar days from the date of issuance of this Debenture
and less than or equal to one hundred twenty (120) calendar days from the date of issuance of
this Debenture, One Hundred Twenty percent (120%) of the sum of the Principal Amount so
redeemed plus accrued interest, if any; (iii) if the Redemption Date is greater than or equal to one
hundred twenty one (121) calendar days from the date of issuance of this Debenture and less than
or equal to one hundred eighty (180) calendar days from the date of issuance of this Debenture,
One Hundred Thirty percent (130%) of the sum of the Principal Amount so redeemed plus
accrued interest, if any; and (iv) if either (1) the Debentures are in default but the Holder
consents to the redemption notwithstanding such default or (2) the Redemption Date is greater
than or equal to one hundred eighty one (181) calendar days from the date of issuance of this
Debenture, One Hundred Forty percent (140%) of the sum of the Principal Amount so redeemed
plus accrued interest, if any. The date upon which the Debentures are redeemed and paid shall
be referred to as the “ Redemption Date ” (and, in the case of multiple redemptions of less than the
entire outstanding Principal Amount, each such date shall be a Redemption Date with respect to
the corresponding redemption).
(ii)
If fewer than all outstanding Debentures are to be redeemed and are held
by different investors, then all Debentures shall be partially redeemed on a pro rata basis.
(iii) [Reserved]
(iv)
On the Redemption Date, the Company shall cause the Holders whose
Debentures have been presented for redemption to be issued payment of the Redemption Price.
In the case of a partial redemption, the Company shall also issue new Debentures to the Holders
for the Principal Amount remaining outstanding after the Redemption Date promptly after the
Holders ’ presentation of the Debentures called for redemption.
(v)
To effect a redemption the Company shall provide a written notice to the
Holder(s) not more than two (2) days prior to the Redemption Date (the “ Redemption Notice ” ),
setting forth the following:
1.
the Redemption Date;
2.
the Redemption Price;
3.
the aggregate Principal Amount of the Debentures being called for
redemption;
4.
a statement instructing the Holders to surrender their Debentures
for redemption and payment of the Redemption Price, including
the name and address of the Company or, if applicable, the paying
agent of the Company, where Debentures are to be surrendered for
redemption;
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5.
a statement advising the Holders that the Debentures (or, in the
case of a partial redemption, that portion of the Principal Amount
being called for redemption) as of the Redemption Date will cease
to be convertible into Common Stock as of the Redemption Date;
and
6.
in the case of a partial redemption, a statement advising the
Holders that after the Redemption Date a substitute Debenture will
be issued by the Company after deduction the portion thereof
called for redemption, at no cost to the Holder, if the Holder so
requests.
Notwithstanding the foregoing, in the event the Company issues a Redemption Notice but fails to
fund the redemption on the Redemption Date, then such Redemption Notice shall be null and
void, and (i) the Holder(s) shall be entitled to convert the Debentures previously the subject of
the Redemption Notice, and (ii) the Company may not redeem such Debentures for at least thirty
(30) days following the intended Redemption Date that was voided, and the Company shall be
required to pay to the Holder(s) the Redemption Price simultaneously with the issuance of a
Redemption Notice in connection with any subsequent redemption pursued by the Company.
3.
Unless demand has otherwise been made by the Holder in writing for payment in
cash as provided hereunder, and so long as no Event of Default shall exist (whether or not notice
thereof has been delivered by the Holder to the Company), any Debentures not previously
tendered to the Company for conversion as of the Maturity Date shall be deemed to have been
surrendered for conversion, without further action of any kind by the Company or any of its
agents, employees or representatives, as of the Maturity Date at the Conversion Price applicable
on the Maturity Date ( “ Mandatory Conversion ” ).
4.
No provision of this Debenture shall alter or impair the obligation of the
Company, which is absolute and unconditional to convert this Debenture into Common Stock, at
the time, place, and rate herein prescribed. This Debenture is a direct obligation of the
Company.
5.
If the Company (a) merges or consolidates with another corporation or business
entity and the Company is not the surviving entity or (b) sells or transfers all or substantially all
of its assets to another Person and the holders of the Common Stock are entitled to receive stock,
securities or property in respect of or in exchange for Common Stock, then as a condition of such
merger, consolidation, sale or transfer, the Company and any such successor, purchaser or
transferee will agree that this Debenture may thereafter be converted on the terms and subject to
the conditions set forth above into the kind and amount of stock, securities or property receivable
upon such merger, consolidation, sale or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before such merger,
consolidation, sale or transfer, subject to adjustments which shall be as nearly equivalent as may
be practicable. In the event of any (i) proposed merger or consolidation where the Company is
not the surviving entity or (ii) sale or transfer of all or substantially all of the assets of the
Company (in either such case, a “ Sale ” ), the Holder shall have the right to convert by delivering
a Notice of Conversion to the Company within fifteen (15) days of receipt of notice of such Sale
from the Company.
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6.
If, at any time while any portion of this Debenture remains outstanding, the
Company effectuates a stock split or reverse stock split of its Common Stock or issues a dividend
on its Common Stock consisting of shares of Common Stock or otherwise recapitalizes its
Common Stock, the Conversion Price shall be equitably adjusted to reflect such action. By way
of illustration, and not in limitation, of the foregoing (i) if the Company effectuates a 2:1 split of
its Common Stock, thereafter, with respect to any conversion for which the Company issues the
shares after the record date of such split, the Conversion Price shall be deemed to be one-half of
what it had been calculated to be immediately prior to such split; (ii) if the Company effectuates
a 1:10 reverse split of its Common Stock, thereafter, with respect to any conversion for which the
Company issues the shares after the record date of such reverse split, the Conversion Price shall
be deemed to be the amount of such Conversion Price calculated immediately prior to the record
date multiplied by 10; and (iii) if the Company declares a stock dividend of one share of
Common Stock for every 10 shares outstanding, thereafter, with respect to any conversion for
which the Company issues the shares after the record date of such dividend, the Conversion Price
shall be deemed to be the amount of such Conversion Price calculated immediately prior to such
record date multiplied by a fraction, of which the numerator is the number of shares for which a
dividend share will be issued and the denominator is such number of shares plus the dividend
share(s) issuable or issued thereon.
7.
All payments contemplated hereby to be made “ in cash ” shall be made by wire
transfer of immediately available funds in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private debts. All payments
of cash and each delivery of shares of Common Stock issuable to the Holder as contemplated
hereby shall be made to the Holder to an account designated by the Holder to the Company and
if the Holder has not designated any such accounts at the address last appearing on the Debenture
Register of the Company as designated in writing by the Holder from time to time; except that
the Holder may designate, by notice to the Company, a different delivery address for any one or
more specific payments or deliveries.
8.
The Holder of the Debenture, by acceptance hereof, agrees that this Debenture is
being acquired for investment and that such Holder will not offer, sell or otherwise dispose of
this Debenture or the Shares of Common Stock issuable upon conversion thereof except in
compliance with the terms of the Securities Purchase Agreement and under circumstances which
will not result in a violation of the Securities Act or any applicable state Blue Sky or foreign laws
or similar laws relating to the sale of securities.
9.
This Debenture shall be governed by and construed in accordance with the laws
of the State of Nevada. Each of the parties consents to the exclusive jurisdiction and venue of
the state and/or federal courts located in Miami-Dade County, Florida in connection with any
dispute arising under this Agreement, and each waives any objection based on forum non
conveniens. This provision is intended to be a “ mandatory ” forum selection clause and
governed by and interpreted consistent with Florida law (Nevada law governing all other,
substantive matters). Each of the parties hereby consents to the exclusive jurisdiction and venue
of any state or federal court having its situs in Miami-Dade County, Florida, and each waives
any objection based on forum non conveniens . To the extent determined by such court, the
Company shall reimburse the Holder for any reasonable legal fees and disbursements incurred by
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the Holder in enforcement of or protection of any of its rights under this Debenture or the
Securities Purchase Agreement.
10.
The following shall constitute an “ Event of Default ” :
a.
The Company fails in the payment of principal or interest (to the extent
that interest is imposed under this Section 10) on this Debenture as required to be paid in cash
hereunder, and payment shall not have been made for a period of five (5) business days
following the payment due date (as to which no further cure period shall apply); or
b.
Any of the representations or warranties made by the Company herein, in
the Securities Purchase Agreement or in any certificate or financial or other written statements
heretofore or hereafter furnished by the Company to the Holder in connection with the issuance
of this Debenture, shall be false or misleading (including without limitation by way of the
misstatement of a material fact or the omission of a material fact) in any material respect at the
time made (as to which no cure period shall apply); or
c.
The Company fails to remain listed on OTCP, OTCQB, or OTCQX, or a
more senior stock exchange any time from the date hereof to the Maturity Date for a period in
excess of five (5) Trading Days (as to which no further cure period shall apply); or
d.
The Company (i) fails to timely file required SEC reports when due
(including extensions), becomes, is deemed to be or asserts that it is a “ shell company ” at any
time for purposes of the 1933 Act, and Rule 144 promulgated thereunder or otherwise takes any
action, or refrains from taking any action, the result of which makes Rule 144 under the 1933
unavailable to the Holder for the sale of their Securities, (ii) fails to issue shares of Common
Stock to the Holder or to cause its Transfer Agent to issue shares of Common Stock upon
exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this
Debenture, (iii) fails to transfer or to cause its Transfer Agent to transfer any certificate for
shares of Common Stock issued to the Holder upon conversion of this Debenture as and when
required by this Debenture and such transfer is otherwise lawful, (iv) fails to remove any
restrictive legend or to cause its Transfer Agent to transfer any certificate or any shares of
Common Stock issued to the Holder upon conversion of this Debenture as and when required by
the relevant Transaction Document(s) and such legend removal is otherwise lawful, or (v) the
Company fails to perform or observe any of its obligations under the Section 5 of the Agreement
or under the Transfer Agent Instruction Letter (no cure period shall apply in the case of clauses
(i) through (v) above, inclusive); or
e.
The Company fails to perform or observe, in any material respect (i) any
other covenant, term, provision, condition, agreement or obligation set forth in the Debenture,
(subject to a cure period of five (5) days other than in the case of a failure under Section 5
hereof, as to which no cure period shall apply), or (ii) any other covenant, term, provision,
condition, agreement or obligation of the Company set forth in the Securities Purchase
Agreement and such failure shall continue uncured for a period of either (1) three (3) days after
the occurrence of the Company ’ s failure under Section 4(d), (e) (except as described in Section
10(c) hereof, as to which Section 10(c) hereof shall control), (f), (g) or (h) of the Securities
Purchase Agreement, or (2) ten (10) days after the occurrence of the Company ’ s failure under
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any other provision of the Securities Purchase Agreement not otherwise specifically addressed in
the Events of Default set forth in this Section 10; or
f.
The Company shall (1) admit in writing its inability to pay its debts
generally as they mature; (2) make an assignment for the benefit of creditors or commence
proceedings for its dissolution; or (3) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its property or business (as to which no
cure period shall apply); or
g.
A trustee, liquidator or receiver shall be appointed for the Company or for
a substantial part of its property or business without its consent and shall not be discharged
within sixty (60) days after such appointment (as to which no cure period shall apply); or
h.
Any governmental agency or any court of competent jurisdiction at the
instance of any governmental agency shall assume custody or control of the whole or any
substantial portion of the properties or assets of the Company and shall not be dismissed within
sixty (60) days thereafter (as to which no cure period shall apply); or
i.
Any money judgment, writ or warrant of attachment, or similar process
(including an arbitral determination), in excess of Fifty Thousand Dollars ($50,000) in the
aggregate shall be entered or filed against the Company or any of its properties or other assets (as
to which no cure period shall apply); or
j.
The occurrence of a breach or an event of default under the terms of any
indebtedness or financial instrument of the Company or any subsidiary (including but not limited
to any Subsidiary) of the Company in an aggregate amount in excess of Fifty Thousand Dollars
($50,000) or more which is not waived by the creditors under such indebtedness (as to which no
cure period shall apply); or
k.
Bankruptcy, reorganization, insolvency or liquidation proceedings or other
proceedings for relief under any bankruptcy law or any law for the relief of debtors shall be
instituted by or against the Company and, if instituted against the Company, shall not be
dismissed within sixty (60) days after such institution or the Company shall by any action or
answer approve of, consent to, or acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in any such proceeding (as to which no
further cure period shall apply); or
l.
The issuance of an order, ruling, finding or similar adverse determination
the SEC, the Secretary of State of the State of Nevada or other applicable state of incorporatin of
the Company, the National Association of Securities Dealers, Inc. or any other securities
regulatory body (whether in the United States, Canada or elsewhere) having proper jurisdiction
that the Company and/or any of its past or present directors or officers have committed a material
violation of applicable securities laws or regulations (as to which no cure period shall apply); or
m.
The Company shall have its Common Stock suspended or delisted from a
national securities exchange or an electronic quotation service such as the OTCP, OTCQB, or
OTCQX for a period in excess of five (5) Trading Days (as to which no further cure period shall
apply); or
8
n.
Any of the following shall occur and be continuing: a breach or default by
any party under (a) any agreement identified by the Company in its SEC filings as a material
agreement or (b) any note or other form of indebtedness in favor of the Company representing
indebtedness of at least Fifty Thousand Dollars ($50,000.00), irrespective of whether such
breach or default was waived (as to which no cure period shall apply); or
o.
Notice of a Material Adverse Effect is provided by the Company or the
determination in good faith by the Holder that a Material Adverse Effect has occurred (as to
which no cure period shall apply); or
p.
The Company attempts to modify, amend, withdraw, rescind, disavow or
repudiate any part of the Irrevocable Instructions (as to which no cure period shall apply).
q.
Any attempt by the Company or its officers, directors, and/or affiliates to
transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure by the Company
or its officers, directors, and/or affiliates of, material non-public information concerning the
Company, to the Holder or its successors and assigns, which is not immediately cured by
Company ’ s filing of a Form 8-K pursuant to Regulation FD on that same date.
r.
At any time while this Debenture is outstanding, the lowest traded price on
the OTCP, OTCQB, or OTCQX, or other applicable principal trading market for the Common
Stock, is equal to or less than $0.0001.
Then, or at any time thereafter, the Company shall immediately give
written notice of the occurrence of such Event of Default to the Holders of all Debentures then
outstanding, and in each and every such case, unless such Event of Default shall have been
waived in writing by a majority in interest of the Holders of the Debentures (which waiver shall
not be deemed to be a waiver of any subsequent default), then at the option of a majority in
interest of the Holders and in the discretion of a majority in interest of the Holders, take any or
all of the following actions: (i) pursue remedies against the Company in accordance with any of
the Holder ’ s rights, (ii) increase the interest rate applicable to the Debentures to the lesser of
eighteen percent (18%) per annum and the maximum interest rate allowable under applicable
law, (iii) in the case of an Event of Default under Section 10(e)(ii)(1) based on the Company ’ s
failure to be DWAC Operational, increase the Principal Amount to an amount equal to one
hundred ten percent (110%) of the then-outstanding Principal Amount, (iv) in the case of an
Event of Default under Section 10(d)(i), increase the Principal Amount to an amount equal to
one hundred twenty percent (120%) of the then-outstanding Principal Amount and an additional
ten percent (10%) discount shall be factored into the Conversion Price until this Debenture is no
longer outstanding, (v) in the case of an Event of Default under Section 10(d)(i) through (v),
increase the Principal Amount of the relevant Holder ’ s Debenture by One Thousand Dollars and
00/100 ($1,000.00) for each day the related failure continues, (vi) in the case of an Event of
Default under Section 10(d)(ii) through (v) arising from an untimely delivery to the Holder of
Conversion Shares or shares of Common Stock in de-legended form, if the lowest traded price of
the Common Stock on the Trading Day immediately prior to the actual date of delivery of
Conversion Shares or de-legended shares, as the case may be, is less than the lowest traded price
on the Trading Day immediately prior to the date when Conversion Shares or de-legended shares
were required to be delivered, increase the Principal Amount of the relevant Holder ’ s Debenture
9
by an amount per share equal to such difference, and (vii) following the expiration of the
applicable grace period (if any), at the option and discretion of the Holder, accelerate the full
indebtedness under this Debenture, in an amount equal to one hundred forty percent (140%) of
the outstanding Principal Amount and accrued and unpaid interest (the “ Acceleration Amount ” ),
whereupon the Acceleration Amount shall be immediately due and payable, without
presentment, demand, protest or notice of any kinds, all of which are hereby expressly waived,
anything contained herein, in the Securities Purchase Agreement or in any other note or
instruments to the contrary notwithstanding. In the case of an Event of Default under Section
10(d)(ii), the Holder may either (i) declare the Acceleration Amount to exclude the Conversion
Amount that is the subject of the Event of Default, in which case the Acceleration Amount shall
be based on the remaining Principal Amount and accrued interest (if any), in which case the
Company shall continue to be obligated to issue the Conversion Shares, or (ii) declare the
Acceleration Amount to include the Conversion Amount that is the subject of the Event of
Default, in which case the Acceleration Amount shall be based on the full Principal Amount,
including the Conversion Amount, and accrued interest (if any), whereupon the Notice of
Conversion shall be deemed withdrawn. At its option, the Holder may elect to convert the
Debenture pursuant to Section 2 notwithstanding the prior declaration of a default and
acceleration, in the sole discretion of such Holder. A majority in interest of the Holders may
immediately enforce any and all of the Holder's rights and remedies provided herein or any other
rights or remedies afforded by applicable law. Notwithstanding the foregoing, in the case of a
default under Section 10(d)(ii) through (iv), the Holder of the Debenture sought to be converted,
transferred or de-legended, as the case may be, acting singly, shall have the sole and absolute
discretion to increase the applicable interest rate on the Debentures held by such Holder and/or to
accelerate the Debenture(s) held by such Holder. The Company expressly acknowledges and
agrees that the Holder ’ s exercise of any or all of the remedies provided herein or under
applicable law, including without limitation the increase(s) in the Principal Amount and the
Acceleration Amount as may be declared in the case of a default, is reasonable and appropriate
due to the inability to define the financial hardship that the Company ’ s default would impose on
the Holders. To the extent that the Holder ’ s exercise of any of its remedies in the case of an
Event of Default shall be construed to exceed the maximum interest rate allowable under
applicable law, then such remedies shall be reduced to equal the maximum interest rate
allowable under applicable law
11.
Nothing contained in this Debenture shall be construed as conferring upon the
Holder the right to vote or to receive dividends or to consent or receive notice as a shareholder in
respect of any meeting of shareholders or any rights whatsoever as a shareholder of the
Company, unless and to the extent converted in accordance with the terms hereof.
12.
So long as this Debenture is outstanding, upon any issuance by the Company or
any of its subsidiaries of any security with any term more favorable to the holder of such security
or with a term in favor of the holder of such security that was not similarly provided to the
Holder in this Debenture, then the Company shall notify the Holder of such additional or more
favorable term and such term, at Holder ’ s option, shall become a part of the transaction
documents with the Holder. The types of terms contained in another security that may be more
favorable to the holder of such security include, but are not limited to, terms addressing
conversion discounts, prepayment rate, conversion lookback periods, interest rates, original issue
discounts, stock sale price, private placement price per share, and warrant coverage.
10
13.
This Debenture may be amended only by the written consent of the parties hereto.
Notwithstanding the foregoing, the Principal Amount of this Debenture shall automatically be
reduced by any and all Conversion Amounts (to the extent that the same relate to principal
hereof). In the absence of manifest error, the outstanding Principal Amount of the Debenture on
the Holder ’ s book and records shall be the correct amount.
14.
In the event of any inconsistency between the provisions of this Debenture and
the provisions of any other Transaction Document, the provisions of this Debenture shall prevail.
Without limiting the generality of the foregoing, in the event the Transfer Agent is not required
to transfer any Common Stock, issue Conversion Shares or de-legended shares of Restricted
Stock pursuant to the Transfer Agent Instruction Letter, this shall not operate as an excuse,
extension or waiver of the Company ’ s obligation to issue and deliver Conversion Shares or de-
legended Restricted Stock.
15.
The Company specifically acknowledges and agrees that in the event of a breach
or threatened breach by the Company of any provision hereof or of any other Transaction
Document, the Holder will be irreparably damaged, and that damages at law would be an
inadequate remedy if this Debenture or such other Transaction Document were not specifically
enforced. Therefore, in the event of a breach or threatened breach by the Company, the Holder
shall be entitled, in addition to all other rights and remedies, to an injunction restraining such
breach, without being required to show any actual damage or to post any bond or other security,
and/or to a decree for a specific performance of the provisions of this Debenture and the other
Transaction Documents.
16.
No waivers or consents in regard to any provision of this Debenture may be given
other than by an instrument in writing signed by the Holder.
17.
Each time, while this Debenture is outstanding, the Company enters into a Section
3(a)(9) transaction (including but not limited to the issuance of new promissory notes or
debentures, or of a replacement promissory note or debenture), or Section 3(a)(10) transaction, in
which any 3rd party has the right to convert monies owed to that 3rd party (or receive shares
pursuant to a settlement or otherwise) at a discount to market greater than the Conversion Price
in effect at that time (prior to all other applicable adjustments in this Debenture), then the
Conversion Price shall be automatically adjusted to such greater discount percentage (prior to all
applicable adjustments in this Debenture) until this Debenture is no longer outstanding. Each
time, while this Debenture is outstanding, the Company enters into a Section 3(a)(9) transaction
(including but not limited to the issuance of new promissory notes or debentures, or of a
replacement promissory note or debenture), or Section 3(a)(10) transaction, in which any 3rd
party has a look back period greater than the look back period in effect under this Debenture at
that time, then the Holder ’ s look back period shall automatically be adjusted to such greater
number of days until this Debenture is no longer outstanding. The Company shall give written
notice to the Holder, with the adjusted Conversion Price and/or adjusted look back period (each
adjustment that is applicable due to the triggering event), within one (1) business day of an event
that requires any adjustment described in this section. So long as this Note is outstanding, the
Company shall not enter into any transaction or arrangement structured in accordance with,
based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9) of the Securities
Act (a “ 3(a)(9) Transaction ” ) or Section 3(a)(l0) of the Securities Act (a “ 3(a)(l0) Transaction ” ).
In the event that the Company does enter into, or makes any issuance of Common Stock related
11
to a 3(a)(9) Transaction or a 3(a)(l0) Transaction while this note is outstanding, a liquidated
damages charge of 20% of the outstanding principal balance of this Note, but not less than
Fifteen Thousand Dollars, will be assessed and will become immediately due and payable to the
Holder at its election in the form of cash payment or addition to the balance of this Note.
18.
So long as this Debenture is outstanding, upon any issuance by the Company or
any of its subsidiaries of any security with any term more favorable to the holder of such security
or with a term in favor of the holder of such security that was not similarly provided to the
Holder in this Debenture, then the Company shall notify the Holder of such additional or more
favorable term and such term, at Holder ’ s option, shall become a part of the transaction
documents with the Holder (regardless of whether the Company notifies the Holder or not). The
types of terms contained in another security that may be more favorable to the holder of such
security include, but are not limited to, terms addressing conversion discounts, prepayment rate,
conversion lookback periods, interest rates, original issue discounts, stock sale price, private
placement price per share, and warrant coverage.
19.
If the Company fails to redeem (i) this Debenture or (ii) the entirety of the
$600,000.00 in convertible promissory notes issued by the Company between April and June of
2018, on or before the date which is 180 calendar days after the Issuance Date, then the principal
amount of this Debenture shall increase by $18,750.00 (under Holder ’ s and the Company ’ s
expectation that any principal amount increase will tack back to the Issuance Date).
[Signature Page Follows]
12
IN WITNESS WHEREOF , the Company has caused this Debenture to be duly executed
by an officer thereunto duly authorized as of the date of issuance set forth above.
PARALLAX HEALTH SCIENCES, INC.
By: ______________________________________
Name: Paul Arena
Title: Chief Executive Officer
[Signature Page to Convertible Debenture]
13
ANNEX A
PARALLAX HEALTH SCIENCES, INC.
NOTICE OF CONVERSION
(To Be Executed by the Registered Holder in Order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $ ________________ of the Principal
Amount of the above Debenture into Shares of Common Stock of Parallax Health Sciences, Inc.,
a Nevada corporation (the “ Company ” ), according to the conditions hereof, as of the date written
below. After giving effect to the conversion requested hereby, the outstanding Principal Amount
of such debenture is $ ____________________, absent manifest error.
Pursuant to the Debenture, certificates representing Common Stock upon conversion must be
delivered (including delivery by DWAC or DRS) to the undersigned within two (2) business
days from the date of delivery of the Notice of Conversion to the Transfer Agent.
Conversion Date
____________________________________________________________________________
Applicable Conversion Price
____________________________________________________________________________
Signature
____________________________________________________________________________
Print Name
____________________________________________________________________________
Address
____________________________________________________________________________
____________________________________________________________________________
14
SIGNING DEBENTURE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES ARE
RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED
EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION
REQUIREMENTS THEREOF OR EXEMPTION THEREFROM.
PARALLAX HEALTH SCIENCES, INC.
CONVERTIBLE DEBENTURE DUE NOVEMBER 14, 2021
Issuance Date: November 14, 2018
Principal Amount: $125,000.00
FOR VALUE RECEIVED, PARALLAX HEALTH SCIENCES, INC. , a
corporation organized and existing under the laws of the State of Nevada (the “ Company ” ),
hereby promises to pay to TFK INVESTMENTS, LLC , having its address at 1500 NW 10 th
Ave., Suite 101, Boca Raton, FL 33486, or its assigns (the “ Holder ” and together with the other
holders of Debentures issued pursuant to the Securities Purchase Agreement (as defined below),
the “ Holders ” ), the initial principal sum of One Hundred Twenty Five Thousand and 00/100
Dollars ($125,000.00) (subject to adjustment as provided herein, the “ Principal Amount ” ) on
November 14, 2021 (the “ Maturity Date ” ). The Company has the option to redeem this
Debenture prior to the Maturity Date pursuant to Section 2(b). All unpaid principal due and
payable on the Maturity Date shall be paid in the form of Common Stock of the Company, par
value $0.001 per share ( “ Common Stock ” ) pursuant to Section 3. The Holder has the option to
cause any outstanding principal and accrued interest, if any, on this Debenture to be converted
into Common Stock at any time prior to the Redemption Date (as defined below) or the Maturity
Date pursuant to Section 2(a).
This Debenture is one of the Debentures referred to in the Securities Purchase
Agreement (the “ Securities Purchase Agreement ” ) dated as of November 14, 2018, between the
Company and the Holder. Capitalized terms used but not defined herein shall have the meanings
set forth in the Securities Purchase Agreement. This Debenture is subject to the provisions of the
Securities Purchase Agreement and further is subject to the following additional provisions:
1.
This Debenture has been issued subject to investment representations of the
original purchaser hereof and may be transferred or exchanged only in compliance with the
Securities Act and other applicable state and foreign securities laws. The Holder may transfer or
assign this Debenture (or any part thereof) without the prior consent of the Company, and the
Company shall cooperate with any such transfer. In the event of any proposed transfer of this
Debenture, the Company may require, prior to issuance of a new Debenture in the name of such
other Person, that it receive reasonable transfer documentation including legal opinions that the
issuance of the Debenture in such other name does not and will not cause a violation of the
Securities Act or any applicable state or foreign securities laws or is exempt from the registration
requirements of the Securities Act. Prior to due presentment for transfer of this Debenture to
which the Company has consented, the Company and any agent of the Company may treat the
Person in whose name this Debenture is duly registered on the Company's books and records of
outstanding debt securities and obligations ( “ Debenture Register ” ) as the owner hereof for the
purpose of receiving payment as herein provided and for all other purposes, whether or not this
Debenture be overdue, and neither the Company nor any such agent shall be affected by notice to
the contrary.
2.
Conversion at Holder ’ s Option; Redemption at Company ’ s Option.
a.
The Holder is entitled to, at any time or from time to time, convert the
Conversion Amount (as defined below) into Conversion Shares, at a conversion price for each
share of Common Stock (the “ Conversion Price ” ) equal to either: (i) if no Event of Default (as
defined herein) has occurred and the date of conversion is prior to the date that is one hundred
eighty (180) calendar days after the Issuance Date, $0.12, or (ii) if an Event of Default has
occurred or the date of conversion is on or after the date that is one hundred eighty (180)
calendar days after the Issuance Date, the lesser of (a) $0.12 or (b) Seventy percent (70%) of the
second lowest traded price (as reported by Bloomberg LP) of the Common Stock for the twenty
(20) Trading Days immediately preceding the date of the date of conversion of the Debentures
(for clarification purposes, if the lowest traded price during the applicable period is equal to the
second lowest traded price during the applicable period, then such lowest traded price shall still
be utilized for purposes of this calculation), provided, further, that if either the Company is not
DWAC Operational at the time of conversion or the Common Stock is traded on the OTC Pink
( “ OTCP ” ) at the time of conversion, then Seventy percent (70%) shall automatically adjust to
Sixty percent (60%) of the second lowest traded price (as reported by Bloomberg LP) of the
Common Stock for the twenty (20) Trading Days immediately preceding the date of conversion
of the Debentures (for clarification purposes, if the lowest traded price during the applicable
period is equal to the second lowest traded price during the applicable period, then such lowest
traded price shall still be utilized for purposes of this calculation), subject in each case to
equitable adjustments resulting from any stock splits, stock dividends, recapitalizations or similar
events. The Company shall issue irrevocable instructions to its Transfer Agent regarding
conversions such that the transfer agent shall be authorized and instructed to issue Conversion
Shares upon its receipt of a Notice of Conversion without further approval or authorization from
the Company. For purposes of this Debenture, the “ Conversion Amount ” shall mean the sum of
(A) all or any portion of the outstanding Principal Amount of this Debenture, as designated by
the Holder upon exercise of its right of conversion plus (B) any interest, pursuant to Section 10
or otherwise, that has accrued on the portion of the Principal Amount that has been designated
for payment pursuant to (A).
Conversion shall be effectuated by delivering by facsimile, email or other delivery
method to the Transfer Agent of the completed form of conversion notice attached hereto as
Annex A (the “ Notice of Conversion ” ), executed by the Holder of the Debenture evidencing
such Holder's intention to convert this Debenture or a specified portion hereof. No fractional
shares of Common Stock or scrip representing fractions of shares will be issued on conversion,
but the number of shares issuable shall be rounded to the nearest whole share. The Holder may,
at its election, deliver a Notice of Conversion to either the Company or the Transfer Agent. The
date on which notice of conversion is given (the “ Conversion Date ” ) shall be deemed to be the
date on which the Company or the Transfer Agent, as the case may be, receives by fax, email or
other means of delivery used by the Holder the Notice of Conversion (such receipt being
2
evidenced by electronic confirmation of delivery by facsimile or email or confirmation of
delivery by such other delivery method used by the Holder). Delivery of a Notice of Conversion
to the Transfer Agent may be given by the Holder by facsimile, or by delivery to the Transfer
Agent at the address set forth in the Transfer Agent Instruction Letter (or such other contact
facsimile number, email or street address as may be designated by the Transfer Agent to the
Holder). Delivery of a Notice of Conversion to the Company shall be given by the Holder
pursuant to the notice provisions set forth in Section 10 of the Agreement. The Conversion
Shares must be delivered to the Holder within two (2) business days from the date of delivery of
the Notice of Conversion to the Transfer Agent or Company, as the case may be. Conversion
shares shall be delivered by DWAC so long as the Company is then DWAC Operational, unless
the Holder expressly requests delivery in certificated form or the Conversion Shares are in the
form of Restricted Stock and are required to bear a restrictive legended. Conversion Shares shall
be deemed delivered (i) if delivered by DWAC, upon deposit into the Holder ’ s brokerage
account, or (ii) if delivered in certificated form, upon the Holder ’ s actual receipt of the
Conversion Shares in certificated form at the address specified by the Holder in the Notice of
Conversion, as confirmed by written receipt. All expenses incurred by Holder, for the issuance
and clearing of the Common Stock into which this Debenture is convertible into, shall
immediately and automatically be added to the balance of the Debenture at such time as the
expenses are incurred by Holder.
If at any time the Conversion Price as determined hereunder for any conversion
would be less than the par value of the Common Stock, then at the sole discretion of the Holder,
the Conversion Price hereunder may equal such par value for such conversion and the
Conversion Amount for such conversion may be increased to include Additional Principal,
where “ Additional Principal ” means such additional amount to be added to the Conversion
Amount to the extent necessary to cause the number of conversion shares issuable upon such
conversion to equal the same number of conversion shares as would have been issued had the
Conversion Price not been adjusted by the Holder to the par value price.
Notwithstanding the foregoing, unless the Holder delivers to the Company written
notice at least sixty-one (61) days prior to the effective date of such notice that the provisions of
this paragraph (the “ Limitation on Ownership ” ) shall be adjusted to 9.99% with respect to the
Holder, in no event shall a holder of Debentures have the right to convert Debentures into, nor
shall the Company issue to such Holder, shares of Common Stock to the extent that such
conversion would result in the Holder and its affiliates together beneficially owning more than
4.99% of the then issued and outstanding shares of Common Stock. For purposes hereof,
beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act
and Regulation 13D-G under the Exchange Act.
b.
So long as no Event of Default (as defined in Section 10) shall have
occurred and be continuing (whether such Event of Default has been declared by the Holder)
(unless the Holder consents to such redemption notwithstanding such Event of Default, as
described in clause (v), below), the Company may at its option call for redemption all or part of
the Debentures, with the exception of any portion thereof which is the subject of a previously-
delivered Notice of Conversion, prior to the Maturity Date, as follows:
(i)
The Debentures called for redemption shall be redeemable by the
Company, upon not more than two (2) days written notice, for an amount (the “ Redemption
3
Price ” ) equal to: (i) if the Redemption Date (as defined below) is ninety (90) calendar days or
less from the date of issuance of this Debenture, One Hundred Ten percent (110%) of the sum of
the Principal Amount so redeemed plus accrued interest, if any; (ii) if the Redemption Date is
greater than or equal to ninety-one (91) calendar days from the date of issuance of this Debenture
and less than or equal to one hundred twenty (120) calendar days from the date of issuance of
this Debenture, One Hundred Twenty percent (120%) of the sum of the Principal Amount so
redeemed plus accrued interest, if any; (iii) if the Redemption Date is greater than or equal to one
hundred twenty one (121) calendar days from the date of issuance of this Debenture and less than
or equal to one hundred eighty (180) calendar days from the date of issuance of this Debenture,
One Hundred Thirty percent (130%) of the sum of the Principal Amount so redeemed plus
accrued interest, if any; and (iv) if either (1) the Debentures are in default but the Holder
consents to the redemption notwithstanding such default or (2) the Redemption Date is greater
than or equal to one hundred eighty one (181) calendar days from the date of issuance of this
Debenture, One Hundred Forty percent (140%) of the sum of the Principal Amount so redeemed
plus accrued interest, if any. The date upon which the Debentures are redeemed and paid shall
be referred to as the “ Redemption Date ” (and, in the case of multiple redemptions of less than the
entire outstanding Principal Amount, each such date shall be a Redemption Date with respect to
the corresponding redemption).
(ii)
If fewer than all outstanding Debentures are to be redeemed and are held
by different investors, then all Debentures shall be partially redeemed on a pro rata basis.
(iii) [Reserved]
(iv)
On the Redemption Date, the Company shall cause the Holders whose
Debentures have been presented for redemption to be issued payment of the Redemption Price.
In the case of a partial redemption, the Company shall also issue new Debentures to the Holders
for the Principal Amount remaining outstanding after the Redemption Date promptly after the
Holders ’ presentation of the Debentures called for redemption.
(v)
To effect a redemption the Company shall provide a written notice to the
Holder(s) not more than two (2) days prior to the Redemption Date (the “ Redemption Notice ” ),
setting forth the following:
1.
the Redemption Date;
2.
the Redemption Price;
3.
the aggregate Principal Amount of the Debentures being called for
redemption;
4.
a statement instructing the Holders to surrender their Debentures
for redemption and payment of the Redemption Price, including
the name and address of the Company or, if applicable, the paying
agent of the Company, where Debentures are to be surrendered for
redemption;
4
5.
a statement advising the Holders that the Debentures (or, in the
case of a partial redemption, that portion of the Principal Amount
being called for redemption) as of the Redemption Date will cease
to be convertible into Common Stock as of the Redemption Date;
and
6.
in the case of a partial redemption, a statement advising the
Holders that after the Redemption Date a substitute Debenture will
be issued by the Company after deduction the portion thereof
called for redemption, at no cost to the Holder, if the Holder so
requests.
Notwithstanding the foregoing, in the event the Company issues a Redemption Notice but fails to
fund the redemption on the Redemption Date, then such Redemption Notice shall be null and
void, and (i) the Holder(s) shall be entitled to convert the Debentures previously the subject of
the Redemption Notice, and (ii) the Company may not redeem such Debentures for at least thirty
(30) days following the intended Redemption Date that was voided, and the Company shall be
required to pay to the Holder(s) the Redemption Price simultaneously with the issuance of a
Redemption Notice in connection with any subsequent redemption pursued by the Company.
3.
Unless demand has otherwise been made by the Holder in writing for payment in
cash as provided hereunder, and so long as no Event of Default shall exist (whether or not notice
thereof has been delivered by the Holder to the Company), any Debentures not previously
tendered to the Company for conversion as of the Maturity Date shall be deemed to have been
surrendered for conversion, without further action of any kind by the Company or any of its
agents, employees or representatives, as of the Maturity Date at the Conversion Price applicable
on the Maturity Date ( “ Mandatory Conversion ” ).
4.
No provision of this Debenture shall alter or impair the obligation of the
Company, which is absolute and unconditional to convert this Debenture into Common Stock, at
the time, place, and rate herein prescribed. This Debenture is a direct obligation of the
Company.
5.
If the Company (a) merges or consolidates with another corporation or business
entity and the Company is not the surviving entity or (b) sells or transfers all or substantially all
of its assets to another Person and the holders of the Common Stock are entitled to receive stock,
securities or property in respect of or in exchange for Common Stock, then as a condition of such
merger, consolidation, sale or transfer, the Company and any such successor, purchaser or
transferee will agree that this Debenture may thereafter be converted on the terms and subject to
the conditions set forth above into the kind and amount of stock, securities or property receivable
upon such merger, consolidation, sale or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before such merger,
consolidation, sale or transfer, subject to adjustments which shall be as nearly equivalent as may
be practicable. In the event of any (i) proposed merger or consolidation where the Company is
not the surviving entity or (ii) sale or transfer of all or substantially all of the assets of the
Company (in either such case, a “ Sale ” ), the Holder shall have the right to convert by delivering
a Notice of Conversion to the Company within fifteen (15) days of receipt of notice of such Sale
from the Company.
5
6.
If, at any time while any portion of this Debenture remains outstanding, the
Company effectuates a stock split or reverse stock split of its Common Stock or issues a dividend
on its Common Stock consisting of shares of Common Stock or otherwise recapitalizes its
Common Stock, the Conversion Price shall be equitably adjusted to reflect such action. By way
of illustration, and not in limitation, of the foregoing (i) if the Company effectuates a 2:1 split of
its Common Stock, thereafter, with respect to any conversion for which the Company issues the
shares after the record date of such split, the Conversion Price shall be deemed to be one-half of
what it had been calculated to be immediately prior to such split; (ii) if the Company effectuates
a 1:10 reverse split of its Common Stock, thereafter, with respect to any conversion for which the
Company issues the shares after the record date of such reverse split, the Conversion Price shall
be deemed to be the amount of such Conversion Price calculated immediately prior to the record
date multiplied by 10; and (iii) if the Company declares a stock dividend of one share of
Common Stock for every 10 shares outstanding, thereafter, with respect to any conversion for
which the Company issues the shares after the record date of such dividend, the Conversion Price
shall be deemed to be the amount of such Conversion Price calculated immediately prior to such
record date multiplied by a fraction, of which the numerator is the number of shares for which a
dividend share will be issued and the denominator is such number of shares plus the dividend
share(s) issuable or issued thereon.
7.
All payments contemplated hereby to be made “ in cash ” shall be made by wire
transfer of immediately available funds in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private debts. All payments
of cash and each delivery of shares of Common Stock issuable to the Holder as contemplated
hereby shall be made to the Holder to an account designated by the Holder to the Company and
if the Holder has not designated any such accounts at the address last appearing on the Debenture
Register of the Company as designated in writing by the Holder from time to time; except that
the Holder may designate, by notice to the Company, a different delivery address for any one or
more specific payments or deliveries.
8.
The Holder of the Debenture, by acceptance hereof, agrees that this Debenture is
being acquired for investment and that such Holder will not offer, sell or otherwise dispose of
this Debenture or the Shares of Common Stock issuable upon conversion thereof except in
compliance with the terms of the Securities Purchase Agreement and under circumstances which
will not result in a violation of the Securities Act or any applicable state Blue Sky or foreign laws
or similar laws relating to the sale of securities.
9.
This Debenture shall be governed by and construed in accordance with the laws
of the State of Nevada. Each of the parties consents to the exclusive jurisdiction and venue of
the state and/or federal courts located in Palm Beach County, Florida in connection with any
dispute arising under this Agreement, and each waives any objection based on forum non
conveniens. This provision is intended to be a “ mandatory ” forum selection clause and
governed by and interpreted consistent with Florida law (Nevada law governing all other,
substantive matters). Each of the parties hereby consents to the exclusive jurisdiction and venue
of any state or federal court having its situs in Palm Beach County, Florida, and each waives
any objection based on forum non conveniens . To the extent determined by such court, the
Company shall reimburse the Holder for any reasonable legal fees and disbursements incurred by
6
the Holder in enforcement of or protection of any of its rights under this Debenture or the
Securities Purchase Agreement.
10.
The following shall constitute an “ Event of Default ” :
a.
The Company fails in the payment of principal or interest (to the extent
that interest is imposed under this Section 10) on this Debenture as required to be paid in cash
hereunder, and payment shall not have been made for a period of five (5) business days
following the payment due date (as to which no further cure period shall apply); or
b.
Any of the representations or warranties made by the Company herein, in
the Securities Purchase Agreement or in any certificate or financial or other written statements
heretofore or hereafter furnished by the Company to the Holder in connection with the issuance
of this Debenture, shall be false or misleading (including without limitation by way of the
misstatement of a material fact or the omission of a material fact) in any material respect at the
time made (as to which no cure period shall apply); or
c.
The Company fails to remain listed on OTCP, OTCQB, or OTCQX, or a
more senior stock exchange any time from the date hereof to the Maturity Date for a period in
excess of five (5) Trading Days (as to which no further cure period shall apply); or
d.
The Company (i) fails to timely file required SEC reports when due
(including extensions), becomes, is deemed to be or asserts that it is a “ shell company ” at any
time for purposes of the 1933 Act, and Rule 144 promulgated thereunder or otherwise takes any
action, or refrains from taking any action, the result of which makes Rule 144 under the 1933
unavailable to the Holder for the sale of their Securities, (ii) fails to issue shares of Common
Stock to the Holder or to cause its Transfer Agent to issue shares of Common Stock upon
exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this
Debenture, (iii) fails to transfer or to cause its Transfer Agent to transfer any certificate for
shares of Common Stock issued to the Holder upon conversion of this Debenture as and when
required by this Debenture and such transfer is otherwise lawful, (iv) fails to remove any
restrictive legend or to cause its Transfer Agent to transfer any certificate or any shares of
Common Stock issued to the Holder upon conversion of this Debenture as and when required by
the relevant Transaction Document(s) and such legend removal is otherwise lawful, or (v) the
Company fails to perform or observe any of its obligations under the Section 5 of the Agreement
or under the Transfer Agent Instruction Letter (no cure period shall apply in the case of clauses
(i) through (v) above, inclusive); or
e.
The Company fails to perform or observe, in any material respect (i) any
other covenant, term, provision, condition, agreement or obligation set forth in the Debenture,
(subject to a cure period of five (5) days other than in the case of a failure under Section 5
hereof, as to which no cure period shall apply), or (ii) any other covenant, term, provision,
condition, agreement or obligation of the Company set forth in the Securities Purchase
Agreement and such failure shall continue uncured for a period of either (1) three (3) days after
the occurrence of the Company ’ s failure under Section 4(d), (e) (except as described in Section
10(c) hereof, as to which Section 10(c) hereof shall control), (f), (g) or (h) of the Securities
Purchase Agreement, or (2) ten (10) days after the occurrence of the Company ’ s failure under
7
any other provision of the Securities Purchase Agreement not otherwise specifically addressed in
the Events of Default set forth in this Section 10; or
f.
The Company shall (1) admit in writing its inability to pay its debts
generally as they mature; (2) make an assignment for the benefit of creditors or commence
proceedings for its dissolution; or (3) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its property or business (as to which no
cure period shall apply); or
g.
A trustee, liquidator or receiver shall be appointed for the Company or for
a substantial part of its property or business without its consent and shall not be discharged
within sixty (60) days after such appointment (as to which no cure period shall apply); or
h.
Any governmental agency or any court of competent jurisdiction at the
instance of any governmental agency shall assume custody or control of the whole or any
substantial portion of the properties or assets of the Company and shall not be dismissed within
sixty (60) days thereafter (as to which no cure period shall apply); or
i.
Any money judgment, writ or warrant of attachment, or similar process
(including an arbitral determination), in excess of Fifty Thousand Dollars ($50,000) in the
aggregate shall be entered or filed against the Company or any of its properties or other assets (as
to which no cure period shall apply); or
j.
The occurrence of a breach or an event of default under the terms of any
indebtedness or financial instrument of the Company or any subsidiary (including but not limited
to any Subsidiary) of the Company in an aggregate amount in excess of Fifty Thousand Dollars
($50,000) or more which is not waived by the creditors under such indebtedness (as to which no
cure period shall apply); or
k.
Bankruptcy, reorganization, insolvency or liquidation proceedings or other
proceedings for relief under any bankruptcy law or any law for the relief of debtors shall be
instituted by or against the Company and, if instituted against the Company, shall not be
dismissed within sixty (60) days after such institution or the Company shall by any action or
answer approve of, consent to, or acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in any such proceeding (as to which no
further cure period shall apply); or
l.
The issuance of an order, ruling, finding or similar adverse determination
the SEC, the Secretary of State of the State of Nevada or other applicable state of incorporatin of
the Company, the National Association of Securities Dealers, Inc. or any other securities
regulatory body (whether in the United States, Canada or elsewhere) having proper jurisdiction
that the Company and/or any of its past or present directors or officers have committed a material
violation of applicable securities laws or regulations (as to which no cure period shall apply); or
m.
The Company shall have its Common Stock suspended or delisted from a
national securities exchange or an electronic quotation service such as the OTCP, OTCQB, or
OTCQX for a period in excess of five (5) Trading Days (as to which no further cure period shall
apply); or
8
n.
Any of the following shall occur and be continuing: a breach or default by
any party under (a) any agreement identified by the Company in its SEC filings as a material
agreement or (b) any note or other form of indebtedness in favor of the Company representing
indebtedness of at least Fifty Thousand Dollars ($50,000.00), irrespective of whether such
breach or default was waived (as to which no cure period shall apply); or
o.
Notice of a Material Adverse Effect is provided by the Company or the
determination in good faith by the Holder that a Material Adverse Effect has occurred (as to
which no cure period shall apply); or
p.
The Company attempts to modify, amend, withdraw, rescind, disavow or
repudiate any part of the Irrevocable Instructions (as to which no cure period shall apply).
q.
Any attempt by the Company or its officers, directors, and/or affiliates to
transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure by the Company
or its officers, directors, and/or affiliates of, material non-public information concerning the
Company, to the Holder or its successors and assigns, which is not immediately cured by
Company ’ s filing of a Form 8-K pursuant to Regulation FD on that same date.
r.
At any time while this Debenture is outstanding, the lowest traded price on
the OTCP, OTCQB, or OTCQX, or other applicable principal trading market for the Common
Stock, is equal to or less than $0.0001.
Then, or at any time thereafter, the Company shall immediately give
written notice of the occurrence of such Event of Default to the Holders of all Debentures then
outstanding, and in each and every such case, unless such Event of Default shall have been
waived in writing by a majority in interest of the Holders of the Debentures (which waiver shall
not be deemed to be a waiver of any subsequent default), then at the option of a majority in
interest of the Holders and in the discretion of a majority in interest of the Holders, take any or
all of the following actions: (i) pursue remedies against the Company in accordance with any of
the Holder ’ s rights, (ii) increase the interest rate applicable to the Debentures to the lesser of
eighteen percent (18%) per annum and the maximum interest rate allowable under applicable
law, (iii) in the case of an Event of Default under Section 10(e)(ii)(1) based on the Company ’ s
failure to be DWAC Operational, increase the Principal Amount to an amount equal to one
hundred ten percent (110%) of the then-outstanding Principal Amount, (iv) in the case of an
Event of Default under Section 10(d)(i), increase the Principal Amount to an amount equal to
one hundred twenty percent (120%) of the then-outstanding Principal Amount and an additional
ten percent (10%) discount shall be factored into the Conversion Price until this Debenture is no
longer outstanding, (v) in the case of an Event of Default under Section 10(d)(i) through (v),
increase the Principal Amount of the relevant Holder ’ s Debenture by One Thousand Dollars and
00/100 ($1,000.00) for each day the related failure continues, (vi) in the case of an Event of
Default under Section 10(d)(ii) through (v) arising from an untimely delivery to the Holder of
Conversion Shares or shares of Common Stock in de-legended form, if the lowest traded price of
the Common Stock on the Trading Day immediately prior to the actual date of delivery of
Conversion Shares or de-legended shares, as the case may be, is less than the lowest traded price
on the Trading Day immediately prior to the date when Conversion Shares or de-legended shares
were required to be delivered, increase the Principal Amount of the relevant Holder ’ s Debenture
9
by an amount per share equal to such difference, and (vii) following the expiration of the
applicable grace period (if any), at the option and discretion of the Holder, accelerate the full
indebtedness under this Debenture, in an amount equal to one hundred forty percent (140%) of
the outstanding Principal Amount and accrued and unpaid interest (the “ Acceleration Amount ” ),
whereupon the Acceleration Amount shall be immediately due and payable, without
presentment, demand, protest or notice of any kinds, all of which are hereby expressly waived,
anything contained herein, in the Securities Purchase Agreement or in any other note or
instruments to the contrary notwithstanding. In the case of an Event of Default under Section
10(d)(ii), the Holder may either (i) declare the Acceleration Amount to exclude the Conversion
Amount that is the subject of the Event of Default, in which case the Acceleration Amount shall
be based on the remaining Principal Amount and accrued interest (if any), in which case the
Company shall continue to be obligated to issue the Conversion Shares, or (ii) declare the
Acceleration Amount to include the Conversion Amount that is the subject of the Event of
Default, in which case the Acceleration Amount shall be based on the full Principal Amount,
including the Conversion Amount, and accrued interest (if any), whereupon the Notice of
Conversion shall be deemed withdrawn. At its option, the Holder may elect to convert the
Debenture pursuant to Section 2 notwithstanding the prior declaration of a default and
acceleration, in the sole discretion of such Holder. A majority in interest of the Holders may
immediately enforce any and all of the Holder's rights and remedies provided herein or any other
rights or remedies afforded by applicable law. Notwithstanding the foregoing, in the case of a
default under Section 10(d)(ii) through (iv), the Holder of the Debenture sought to be converted,
transferred or de-legended, as the case may be, acting singly, shall have the sole and absolute
discretion to increase the applicable interest rate on the Debentures held by such Holder and/or to
accelerate the Debenture(s) held by such Holder. The Company expressly acknowledges and
agrees that the Holder ’ s exercise of any or all of the remedies provided herein or under
applicable law, including without limitation the increase(s) in the Principal Amount and the
Acceleration Amount as may be declared in the case of a default, is reasonable and appropriate
due to the inability to define the financial hardship that the Company ’ s default would impose on
the Holders. To the extent that the Holder ’ s exercise of any of its remedies in the case of an
Event of Default shall be construed to exceed the maximum interest rate allowable under
applicable law, then such remedies shall be reduced to equal the maximum interest rate
allowable under applicable law
11.
Nothing contained in this Debenture shall be construed as conferring upon the
Holder the right to vote or to receive dividends or to consent or receive notice as a shareholder in
respect of any meeting of shareholders or any rights whatsoever as a shareholder of the
Company, unless and to the extent converted in accordance with the terms hereof.
12.
So long as this Debenture is outstanding, upon any issuance by the Company or
any of its subsidiaries of any security with any term more favorable to the holder of such security
or with a term in favor of the holder of such security that was not similarly provided to the
Holder in this Debenture, then the Company shall notify the Holder of such additional or more
favorable term and such term, at Holder ’ s option, shall become a part of the transaction
documents with the Holder. The types of terms contained in another security that may be more
favorable to the holder of such security include, but are not limited to, terms addressing
conversion discounts, prepayment rate, conversion lookback periods, interest rates, original issue
discounts, stock sale price, private placement price per share, and warrant coverage.
10
13.
This Debenture may be amended only by the written consent of the parties hereto.
Notwithstanding the foregoing, the Principal Amount of this Debenture shall automatically be
reduced by any and all Conversion Amounts (to the extent that the same relate to principal
hereof). In the absence of manifest error, the outstanding Principal Amount of the Debenture on
the Holder ’ s book and records shall be the correct amount.
14.
In the event of any inconsistency between the provisions of this Debenture and
the provisions of any other Transaction Document, the provisions of this Debenture shall prevail.
Without limiting the generality of the foregoing, in the event the Transfer Agent is not required
to transfer any Common Stock, issue Conversion Shares or de-legended shares of Restricted
Stock pursuant to the Transfer Agent Instruction Letter, this shall not operate as an excuse,
extension or waiver of the Company ’ s obligation to issue and deliver Conversion Shares or de-
legended Restricted Stock.
15.
The Company specifically acknowledges and agrees that in the event of a breach
or threatened breach by the Company of any provision hereof or of any other Transaction
Document, the Holder will be irreparably damaged, and that damages at law would be an
inadequate remedy if this Debenture or such other Transaction Document were not specifically
enforced. Therefore, in the event of a breach or threatened breach by the Company, the Holder
shall be entitled, in addition to all other rights and remedies, to an injunction restraining such
breach, without being required to show any actual damage or to post any bond or other security,
and/or to a decree for a specific performance of the provisions of this Debenture and the other
Transaction Documents.
16.
No waivers or consents in regard to any provision of this Debenture may be given
other than by an instrument in writing signed by the Holder.
17.
Each time, while this Debenture is outstanding, the Company enters into a Section
3(a)(9) transaction (including but not limited to the issuance of new promissory notes or
debentures, or of a replacement promissory note or debenture), or Section 3(a)(10) transaction, in
which any 3rd party has the right to convert monies owed to that 3rd party (or receive shares
pursuant to a settlement or otherwise) at a discount to market greater than the Conversion Price
in effect at that time (prior to all other applicable adjustments in this Debenture), then the
Conversion Price shall be automatically adjusted to such greater discount percentage (prior to all
applicable adjustments in this Debenture) until this Debenture is no longer outstanding. Each
time, while this Debenture is outstanding, the Company enters into a Section 3(a)(9) transaction
(including but not limited to the issuance of new promissory notes or debentures, or of a
replacement promissory note or debenture), or Section 3(a)(10) transaction, in which any 3rd
party has a look back period greater than the look back period in effect under this Debenture at
that time, then the Holder ’ s look back period shall automatically be adjusted to such greater
number of days until this Debenture is no longer outstanding. The Company shall give written
notice to the Holder, with the adjusted Conversion Price and/or adjusted look back period (each
adjustment that is applicable due to the triggering event), within one (1) business day of an event
that requires any adjustment described in this section. So long as this Note is outstanding, the
Company shall not enter into any transaction or arrangement structured in accordance with,
based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9) of the Securities
Act (a “ 3(a)(9) Transaction ” ) or Section 3(a)(l0) of the Securities Act (a “ 3(a)(l0) Transaction ” ).
In the event that the Company does enter into, or makes any issuance of Common Stock related
11
to a 3(a)(9) Transaction or a 3(a)(l0) Transaction while this note is outstanding, a liquidated
damages charge of 20% of the outstanding principal balance of this Note, but not less than
Fifteen Thousand Dollars, will be assessed and will become immediately due and payable to the
Holder at its election in the form of cash payment or addition to the balance of this Note.
18.
So long as this Debenture is outstanding, upon any issuance by the Company or
any of its subsidiaries of any security with any term more favorable to the holder of such security
or with a term in favor of the holder of such security that was not similarly provided to the
Holder in this Debenture, then the Company shall notify the Holder of such additional or more
favorable term and such term, at Holder ’ s option, shall become a part of the transaction
documents with the Holder (regardless of whether the Company notifies the Holder or not). The
types of terms contained in another security that may be more favorable to the holder of such
security include, but are not limited to, terms addressing conversion discounts, prepayment rate,
conversion lookback periods, interest rates, original issue discounts, stock sale price, private
placement price per share, and warrant coverage.
19.
If the Company fails to redeem (i) this Debenture or (ii) the entirety of the
$600,000.00 in convertible promissory notes issued by the Company between April and June of
2018, on or before the date which is 180 calendar days after the Issuance Date, then the principal
amount of this Debenture shall increase by $18,750.00 (under Holder ’ s and the Company ’ s
expectation that any principal amount increase will tack back to the Issuance Date).
[Signature Page Follows]
12
IN WITNESS WHEREOF , the Company has caused this Debenture to be duly executed
by an officer thereunto duly authorized as of the date of issuance set forth above.
PARALLAX HEALTH SCIENCES, INC.
By: ______________________________________
Name: Paul Arena
Title: Chief Executive Officer
[Signature Page to Convertible Debenture]
13
ANNEX A
PARALLAX HEALTH SCIENCES, INC.
NOTICE OF CONVERSION
(To Be Executed by the Registered Holder in Order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $ ________________ of the Principal
Amount of the above Debenture into Shares of Common Stock of Parallax Health Sciences, Inc.,
a Nevada corporation (the “ Company ” ), according to the conditions hereof, as of the date written
below. After giving effect to the conversion requested hereby, the outstanding Principal Amount
of such debenture is $ ____________________, absent manifest error.
Pursuant to the Debenture, certificates representing Common Stock upon conversion must be
delivered (including delivery by DWAC or DRS) to the undersigned within two (2) business
days from the date of delivery of the Notice of Conversion to the Transfer Agent.
Conversion Date
____________________________________________________________________________
Applicable Conversion Price
____________________________________________________________________________
Signature
____________________________________________________________________________
Print Name
____________________________________________________________________________
Address
____________________________________________________________________________
____________________________________________________________________________
14
NEITHER THIS SECURITY NOR THE SECURITIES AS TO WHICH THIS SECURITY MAY BE EXERCISED
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ” ), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE
OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
PARALLAX HEALTH SCIENCES, INC.
Warrant Shares: 300,000
Date of Issuance: November 14, 2018 ( “ Issuance Date ” )
This COMMON STOCK PURCHASE WARRANT (the “ Warrant ” ) certifies that, for value received (in
connection with the issuance of the $125,000.00 convertible debenture to Peak One Opportunity Fund, L.P., a
Delaware limited partnership (the “ Fund ” ) on or around November 14, 2018 (the “ Debenture ” ), Peak One Investments,
LLC, a Delaware limited liability company (including any permitted and registered assigns, the “ Holder ” ), is entitled,
upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after
the date of issuance hereof, to purchase from Parallax Health Sciences, Inc., a Nevada corporation (the “ Company ” ), up
to 300,000 shares of Common Stock (as defined below) (the “ Warrant Shares ” ) (whereby such number may be adjusted
from time to time pursuant to the terms and conditions of this Warrant) at the Exercise Price per share then in effect.
This Warrant is issued by the Company as of the date hereof in connection with that certain securities purchase
agreement dated November 14, 2018, by and among the Company and the Fund (the “ Purchase Agreement ” ).
Capitalized terms used in this Warrant shall have the meanings set forth in the Purchase Agreement unless
otherwise defined in the body of this Warrant or in Section 12 below. For purposes of this Warrant, the term “ Exercise
Price ” shall mean $0.15, subject to adjustment as provided herein (including but not limited to cashless exercise), and
the term “ Exercise Period ” shall mean the period commencing on the Issuance Date and ending on 5:00 p.m. eastern
standard time on the five-year anniversary thereof.
1.
EXERCISE OF WARRANT .
(a)
Mechanics of Exercise . Subject to the terms and conditions hereof, the rights represented by
this Warrant may be exercised in whole or in part at any time or times during the Exercise Period by delivery of a
written notice, in the form attached hereto as Exhibit A ( the “ Exercise Notice ” ), of the Holder ’ s election to exercise this
Warrant. The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder.
Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available
hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares purchased. On or before the third Trading Day (the “ Warrant
Share Delivery Date ” ) following the date on which the Company shall have received the Exercise Notice, and upon
receipt by the Company of payment to the Company of an amount equal to the applicable Exercise Price multiplied by
the number of Warrant Shares as to which all or a portion of this Warrant is being exercised (the “ Aggregate Exercise
Price ” and together with the Exercise Notice, the “ Exercise Delivery Documents ” ) in cash or by wire transfer of
immediately available funds (or by cashless exercise, in which case there shall be no Aggregate Exercise Price
provided), the Company shall (or direct its transfer agent to) issue and dispatch by overnight courier to the address as
specified in the Exercise Notice, a certificate, registered in the Company ’ s share register in the name of the Holder or
its designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise.
Upon delivery of the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have
become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective
of the date of delivery of the certificates evidencing such Warrant Shares. If this Warrant is submitted in connection
with any exercise and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than
the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in
no event later than three Business Days after any exercise and at its own expense, issue a new Warrant (in accordance
with Section 6) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such
exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised.
If the Company fails to cause its transfer agent to transmit to the Holder the respective shares of Common
Stock by the respective Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise in
Holder ’ s sole discretion, and such failure shall be deemed an event of default under the Debenture.
If the Market Price of one share of Common Stock is greater than the Exercise Price, the Holder may elect to
receive Warrant Shares pursuant to a cashless exercise, in lieu of a cash exercise, equal to the value of this Warrant
determined in the manner described below (or of any portion thereof remaining unexercised) by surrender of this
Warrant and a Notice of Exercise, in which event the Company shall issue to Holder a number of Common Stock
computed using the following formula:
X = Y (A-B)
A
Where X =
the number of Shares to be issued to Holder.
Y =
the number of Warrant Shares that the Holder elects to purchase under this Warrant
(at the date of such calculation).
A =
the Market Price (at the date of such calculation).
B =
Exercise Price (as adjusted to the date of such calculation).
(b)
No Fractional Shares . No fractional shares shall be issued upon the exercise of this Warrant
as a consequence of any adjustment pursuant hereto. All Warrant Shares (including fractions) issuable upon exercise of
this Warrant may be aggregated for purposes of determining whether the exercise would result in the issuance of any
fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall,
in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the
product resulting from multiplying the then-current fair market value of a Warrant Share by such fraction.
(c)
Holder ’ s Exercise Limitations . The Company shall not effect any exercise of this Warrant,
and a Holder shall not have the right to exercise any portion of this Warrant, to the extent that after giving effect to
issuance of Warrant Shares upon exercise as set forth on the applicable Notice of Exercise, the Holder (together with
the Holder ’ s Affiliates, and any other persons acting as a group together with the Holder or any of the Holder ’ s
Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation, as defined below. For purposes
of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates
shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such
determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon
(i) exercise of the remaining, non-exercised portion of this Warrant beneficially owned by the Holder or any of its
Affiliates and (ii) exercise or conversion of the unexercised or non-converted portion of any other securities of the
Company (including without limitation any other Common Stock Equivalents) subject to a limitation on conversion or
2
exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates. Except
as set forth in the preceding sentence, for purposes of this paragraph (d), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act, it being acknowledged by the Holder that the Company is not
representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the
Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the
limitation contained in this paragraph applies, the determination of whether this Warrant is exercisable (in relation to
other securities owned by the Holder together with any affiliates) and of which portion of this Warrant is exercisable
shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the
Holder ’ s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder
together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial
Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such
determination.
For purposes of this paragraph, in determining the number of outstanding shares of Common Stock, a Holder
may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company ’ s most recent
periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the
Company or (C) a more recent written notice by the Company or its transfer agent setting forth the number of shares of
Common Stock outstanding. Upon the request of a Holder, the Company shall within two Trading Days confirm to the
Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. The “ Beneficial Ownership Limitation ” shall be 4.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant. Upon no fewer than 61 days ’ prior notice to the Company, a Holder may increase or decrease
the Beneficial Ownership Limitation provisions of this paragraph, provided that the Beneficial Ownership Limitation in
no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to
the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this
paragraph shall continue to apply. Any such increase or decrease will not be effective until the 61st day after such
notice is delivered to the Company and shall only apply to such Holder and no other Holder. The limitations contained
in this paragraph shall apply to a successor Holder of this Warrant.
2.
ADJUSTMENTS. The Exercise Price and the number of Warrant Shares shall be adjusted from time
to time as follows:
(a)
Distribution of Assets . If the Company shall declare or make any dividend or other
distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of
capital or otherwise (including without limitation any distribution of cash, stock or other securities, property or options
by way of a dividend, spin off, reclassification, corporate rearrangement or other similar transaction) (a “ Distribution ” ),
at any time after the issuance of this Warrant, then, in each such case:
(i)
any Exercise Price in effect immediately prior to the close of business on the record
date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution shall
be reduced, effective as of the close of business on such record date, to a price determined by multiplying such
Exercise Price by a fraction (i) the numerator of which shall be the Closing Sale Price of the shares of
Common Stock on the Trading Day immediately preceding such record date minus the value of the
Distribution (as determined in good faith by the Company ’ s Board of Directors) applicable to one share of
Common Stock, and (ii) the denominator of which shall be the Closing Sale Price of the shares of Common
Stock on the Trading Day immediately preceding such record date; and
(ii)
the number of Warrant Shares shall be increased to a number of shares equal to the
number of shares of Common Stock obtainable immediately prior to the close of business on the record date
fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution
multiplied by the reciprocal of the fraction set forth in the immediately preceding clause (i); provided,
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however, that in the event that the Distribution is of shares of common stock of a company (other than the
Company) whose common stock is traded on a national securities exchange or a national automated quotation
system ( “ Other Shares of Common Stock ” ), then the Holder may elect to receive a warrant to purchase Other
Shares of Common Stock in lieu of an increase in the number of Warrant Shares, the terms of which shall be
identical to those of this Warrant, except that such warrant shall be exercisable into the number of shares of
Other Shares of Common Stock that would have been payable to the Holder pursuant to the Distribution had
the Holder exercised this Warrant immediately prior to such record date and with an aggregate exercise price
equal to the product of the amount by which the exercise price of this Warrant was decreased with respect to
the Distribution pursuant to the terms of the immediately preceding clause (i) and the number of Warrant
Shares calculated in accordance with the first part of this clause (ii).
(iii)
For the avoidance of doubt, no adjustment shall occur when shares of outstanding
Common Stock are merged proportionally across all stockholders to form a smaller number of outstanding
shares of Common Stock.
(b)
Anti-Dilution Adjustments to Exercise Price . If the Company or any Subsidiary thereof, as
applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any
right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other
disposition) any Common Stock or securities entitling any person or entity to acquire shares of Common Stock (upon
conversion, exercise or otherwise) (including but not limited to under the Debenture), at an effective price per share
less than the then Exercise Price (such lower price, the “ Base Share Price ” and such issuances collectively, a “ Dilutive
Issuance ” ) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise,
or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive
shares of Common Stock at an effective price per share which is less than the Exercise Price, such issuance shall be
deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance), then the Exercise Price
shall be reduced at the option of the Holder and only reduced to equal the Base Share Price, and the number of Warrant
Shares issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after taking into
account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment.
Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. The
Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common
Stock or Common Stock Equivalents subject to this Section 2(b), indicating therein the applicable issuance price, or
applicable reset price, exchange price, conversion price and other pricing terms (such notice the “ Dilutive Issuance
Notice ” ). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to
this Section 2(b), upon the occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
entitled to receive a number of Warrant Shares based upon the Base Share Price regardless of whether the Holder
accurately refers to the Base Share Price in the Notice of Exercise.
3.
FUNDAMENTAL TRANSACTIONS . If, at any time while this Warrant is outstanding, (i) the
Company effects any merger of the Company with or into another entity and the Company is not the surviving entity
(such surviving entity, the “ Successor Entity ” ), (ii) the Company effects any sale of all or substantially all of its assets
in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or by
another individual or entity, and approved by the Company) is completed pursuant to which holders of Common Stock
are permitted to tender or exchange their shares of Common Stock for other securities, cash or property and the holders
of at least 50% of the Common Stock accept such offer, or (iv) the Company effects any reclassification of the
Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of
Common Stock) (in any such case, a “ Fundamental Transaction ” ), then, upon any subsequent exercise of this Warrant,
the Holder shall have the right to receive the number of shares of Common Stock of the Successor Entity or of the
Company and any additional consideration (the “ Alternate Consideration ” ) receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such event (disregarding any limitation on
exercise contained herein solely for the purpose of such determination). For purposes of any such exercise, the
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determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on
the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the
Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant
following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any
Successor Entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing
provisions and evidencing the Holder ’ s right to exercise such warrant into Alternate Consideration.
4.
NON-CIRCUMVENTION. The Company covenants and agrees that it will not, by amendment of its
certificate of incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the
provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting
the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as
may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable
shares of Common Stock upon the exercise of this Warrant, and (iii) shall, for so long as this Warrant is outstanding,
have authorized and reserved, free from preemptive rights, ten (10) times the number of shares of Common Stock into
which the Warrants are then exercisable into to provide for the exercise of the rights represented by this Warrant
(without regard to any limitations on exercise).
5.
WARRANT HOLDER NOT DEEMED A STOCKHOLDER . Except as otherwise specifically
provided herein, this Warrant, in and of itself, shall not entitle the Holder to any voting rights or other rights as a
stockholder of the Company. In addition, nothing contained in this Warrant shall be construed as imposing any
liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of
the Company, whether such liabilities are asserted by the Company or by creditors of the Company.
6.
REISSUANCE.
(a)
Lost, Stolen or Mutilated Warrant . If this Warrant is lost, stolen, mutilated or destroyed, the
Company will, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a
mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as this Warrant
so lost, stolen, mutilated or destroyed.
(b)
Issuance of New Warrants . Whenever the Company is required to issue a new Warrant
pursuant to the terms of this Warrant, such new Warrant shall be of like tenor with this Warrant, and shall have an
issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date.
7.
TRANSFER .
(a)
Notice of Transfer . The Holder agrees to give written notice to the Company before
transferring this Warrant or transferring any Warrant Shares of such Holder ’ s intention to do so, describing briefly the
manner of any proposed transfer. Promptly upon receiving such written notice, the Company shall present copies
thereof to the Company ’ s counsel. If the proposed transfer may be effected without registration or qualification (under
any federal or state securities laws), the Company, as promptly as practicable, shall notify the Holder thereof,
whereupon the Holder shall be entitled to transfer this Warrant or to dispose of Warrant Shares received upon the
previous exercise of this Warrant, all in accordance with the terms of the notice delivered by the Holder to the
Company; provided, however, that an appropriate legend may be endorsed on this Warrant or the certificates for such
Warrant Shares respecting restrictions upon transfer thereof necessary or advisable in the opinion of counsel and
satisfactory to the Company to prevent further transfers which would be in violation of Section 5 of the Securities Act
and applicable state securities laws; and provided further that the prospective transferee or purchaser shall execute the
5
Assignment of Warrant attached hereto as Exhibit B and such other documents and make such representations,
warranties, and agreements as may be required solely to comply with the exemptions relied upon by the Company for
the transfer or disposition of the Warrant or Warrant Shares.
(b)
If the proposed transfer or disposition of this Warrant or such Warrant Shares described in the
written notice given pursuant to this Section 7 may not be effected without registration or qualification of this Warrant
or such Warrant Shares, the Holder will limit its activities in respect to such transfer or disposition as are permitted by
law.
(c)
Any transferee of all or a portion of this Warrant shall succeed to the rights and benefits of the
initial Holder of this Warrant.
8.
NOTICES. Whenever notice is required to be given under this Warrant, unless otherwise provided
herein, such notice shall be given in accordance with the notice provisions contained in the Purchase Agreement. The
Company shall provide the Holder with prompt written notice (i) immediately upon any adjustment of the Exercise
Price, setting forth in reasonable detail, the calculation of such adjustment and (ii) at least 20 days prior to the date on
which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares
of Common Stock, (B) with respect to any grants, issuances or sales of any stock or other securities directly or
indirectly convertible into or exercisable or exchangeable for shares of Common Stock or other property, pro rata to the
holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction,
dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in
conjunction with such notice being provided to the Holder.
9.
AMENDMENT AND WAIVER. The terms of this Warrant may be amended or waived (either
generally or in a particular instance and either retroactively or prospectively) only with the written consent of the
Company and the Holder.
10.
GOVERNING LAW . This Warrant shall be governed by and construed in accordance with the laws
of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the
other concerning the transactions contemplated by this Warrant shall be brought only in the state courts or federal
courts located in the State of Florida, County of Miami-Dade. The parties to this Warrant hereby irrevocably waive
any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack
of jurisdiction or venue or based upon forum non conveniens . EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER TRANSACTION
DOCUMENT ENTERED INTO IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT, ANY
OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR
THEREBY . The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and
costs. In the event that any provision of this Warrant or any other agreement delivered in connection herewith is
invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to
the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any
such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of
any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents
to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction
Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any other manner permitted by law.
11.
ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement
to all of the terms and conditions contained herein.
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12.
CERTAIN DEFINITIONS . For purposes of this Warrant, the following terms shall have the
following meanings:
(a)
“ Nasdaq ” means www.Nasdaq.com.
(b)
“ Closing Sale Price ” means, for any security as of any date, (i) the last closing trade price for
such security on the Principal Market, as reported by Nasdaq, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing trade price, then the last trade price of such security prior to
4:00 p.m., New York time, as reported by Nasdaq, or (ii) if the foregoing does not apply, the last trade price of such
security in the over-the-counter market for such security as reported by Nasdaq, or (iii) if no last trade price is reported
for such security by Nasdaq, the average of the bid and ask prices of any market makers for such security as reported
by the OTC Markets. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the
foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually
determined by the Company and the Holder. All such determinations to be appropriately adjusted for any stock
dividend, stock split, stock combination or other similar transaction during the applicable calculation period.
(c)
“ Common Stock ” means the Company ’ s common stock, and any other class of securities into
which such securities may hereafter be reclassified or changed.
(d)
“ Common Stock Equivalents ” means any securities of the Company that would entitle the
holder thereof to acquire at any time Common Stock, including without limitation any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock.
(e)
“ Dilutive Issuance ” is any issuance of Common Stock or Common Stock Equivalents
described in Section 2(b) above; provided, however, that a Dilutive Issuance shall not include any Exempt Issuance.
(f)
“ Exempt Issuance ” means the issuance of (i) shares of Common Stock or options to officers
or directors of the Company pursuant to any stock or option plan duly adopted by a majority of the non-employee
members of the Board of Directors of the Company or a majority of the members of a committee of non-employee
directors established for such purpose, (ii) securities issued pursuant to acquisitions approved by a majority of the
disinterested directors of the Company, and (iii) shares of Common Stock issued pursuant to any real property leasing
arrangement or financing from a national bank approved by the Board of Directors of the Company.
(g)
“ Principal Market ” means the primary national securities exchange on which the Common
Stock is then traded.
(h)
“ Market Price ” means the highest traded price of the Common Stock during the thirty Trading
Days prior to the date of the respective Exercise Notice.
(i)
“ Trading Day ” means (i) any day on which the Common Stock is listed or quoted and traded
on its Principal Market, (ii) if the Common Stock is not then listed or quoted and traded on any national securities
exchange, then a day on which trading occurs on any over-the-counter markets, or (iii) if trading does not occur on the
over-the-counter markets, any Business Day.
* * * * * * *
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the Issuance Date
set forth above.
PARALLAX HEALTH SCIENCES, INC.
Name: Paul Arena
Title: Chief Executive Officer
EXHIBIT A
EXERCISE NOTICE
(To be executed by the registered holder to exercise this Common Stock Purchase Warrant)
T HE U NDERSIGNED holder hereby exercises the right to purchase _________________ of the shares of
Common Stock ( “ Warrant Shares ” ) of Parallax Health Sciences, Inc., a Nevada corporation (the “ Company ” ),
evidenced by the attached copy of the Common Stock Purchase Warrant (the “ Warrant ” ). Capitalized terms used
herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as (check one):
☐ a cash exercise with respect to _________________ Warrant Shares; or
☐ by cashless exercise pursuant to the Warrant.
2. Payment of Exercise Price. If cash exercise is selected above, the holder shall pay the applicable Aggregate
Exercise Price in the sum of $___________________ to the Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares . The Company shall deliver to the holder __________________ Warrant Shares in
accordance with the terms of the Warrant.
Date:
(Print Name of Registered Holder)
By:
Name:
Title:
EXHIBIT B
ASSIGNMENT OF WARRANT
(To be signed only upon authorized transfer of the Warrant)
F OR V ALUE R ECEIVED , the undersigned hereby sells, assigns, and transfers unto ____________________ the
right to purchase _______________ shares of common stock of Parallax Health Sciences, Inc., to which the within
Common Stock Purchase Warrant relates and appoints ____________________, as attorney-in-fact, to transfer said
right on the books of Parallax Health Sciences, Inc. with full power of substitution and re-substitution in the premises.
By accepting such transfer, the transferee has agreed to be bound in all respects by the terms and conditions of the
within Warrant.
Dated: __________________
(Signature) *
(Name)
(Address)
(Social Security or Tax Identification No.)
* The signature on this Assignment of Warrant must correspond to the name as written upon the face of the Common
Stock Purchase Warrant in every particular without alteration or enlargement or any change whatsoever. When signing
on behalf of a corporation, partnership, trust or other entity, please indicate your position(s) and title(s) with such
entity.
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this " Agreement" ), dated as of November 14,
2018, by and between PARALLAX HEALTH SCIENCES, INC., a Nevada corporation (the
" Company "), and PEAK ONE OPPORTUNITY FUND, L.P., a Delaware limited partnership (together
with it permitted assigns, the “ Buyer ” ). Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the equity purchase agreement by and between the parties
hereto, dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time
to time, the " Purchase Agreement" ).
WHEREAS:
The Company has agreed, upon the terms and subject to the conditions of the Purchase
Agreement, to sell to the Buyer up to Ten Million Dollars ($10,000,000.00) of Put Shares and to induce
the Buyer to enter into the Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the " Securities Act" ), and applicable state securities laws.
NOW, THEREFORE, in consideration of the promises and the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Buyer hereby agree as follows:
1.
DEFINITIONS.
As used in this Agreement, the following terms shall have the following meanings:
a.
" Investor " means the Buyer, any transferee or assignee thereof to whom a Buyer
assigns its rights under this Agreement in accordance with Section 9 and who agrees to become bound by
the provisions of this Agreement, and any transferee or assignee thereof to whom a transferee or assignee
assigns its rights under this Agreement in accordance with Section 9 and who agrees to become bound by
the provisions of this Agreement.
b.
" Person " means any individual or entity including but not limited to any
corporation, a limited liability company, an association, a partnership, an organization, a business, an
individual, a governmental or political subdivision thereof or a governmental agency.
c.
" Register, " " registered ," and " registration " refer to a registration effected by
preparing and filing one or more registration statements of the Company in compliance with the
Securities Act and/or pursuant to Rule 415 under the Securities Act or any successor rule providing for
offering securities on a continuous basis (" Rule 415" ), and the declaration or ordering of effectiveness of
such registration statement(s) by the United States Securities and Exchange Commission (the " SEC ").
d.
" Registrable Securities " means all of the Put Shares which have been, or which
may, from time to time be issued, including without limitation all of the shares of common stock which
have been issued or will be issued to the Investor under the Purchase Agreement (without regard to any
limitation or restriction on purchases), and any and all shares of capital stock issued or issuable with
respect to the Put Shares, 800,000 shares of common stock (400,000 of which shall be issued to the
Investor and 400,000 of which shall be issued to Peak One Investments, LLC ( “ Investments ” )) for its
commitment to enter into the Purchase Agreement (the “ Commitment Shares ” ), and shares of common
stock issued to the Investor as a result of any stock split, stock dividend, recapitalization, exchange or
similar event or otherwise, without regard to any limitation on purchases under the Purchase Agreement.
1
e.
" Registration Statement " means one or more registration statements of the
Company covering only the sale of the Registrable Securities.
2.
REGISTRATION.
a.
Mandatory Registration. T he Company shall, within thirty (30) calendar days
from the date hereof, file with the SEC an initial Registration Statement covering the maximum number
of Registrable Securities (beginning with the Commitment Shares with respect to Investor and
Investments) as shall be permitted to be included thereon in accordance with applicable SEC rules,
regulations and interpretations so as to permit the resale of such Registrable Securities by the Investor,
including but not limited to under Rule 415 under the Securities Act at then prevailing market prices (and
not fixed prices), subject to the aggregate number of authorized shares of the Company ’ s Common Stock
then available for issuance in its Certificate of Incorporation. The initial Registration Statement shall
register only the Registrable Securities . The Investor and its counsel shall have a reasonable opportunity
to review and comment upon such Registration Statement and any amendment or supplement to such
Registration Statement and any related prospectus prior to its filing with the SEC, and the Company shall
give due consideration to all reasonable comments. The Investor shall furnish all information reasonably
requested by the Company for inclusion therein. The Company shall use its reasonable best efforts to
have the Registration Statement declared effective by the SEC within ninety (90) calendar days from the
date hereof (or at the earliest possible date if prior to ninety (90) calendar days from the date hereof), and
any amendment declared effective by the SEC at the earliest possible date. The Company shall use
reasonable best efforts to keep the Registration Statement effective, including but not limited to pursuant
to Rule 415 promulgated under the Securities Act and available for the resale by the Investor of all of the
Registrable Securities covered thereby at all times until the earlier of (i) the date as of which the Investor
may sell all of the Registrable Securities without restriction pursuant to Rule 144 promulgated under the
Securities and (ii) the date on which the Investor shall have sold all the Registrable Securities covered
thereby and no Available Amount remains under the Purchase Agreement (the " Registration Period ").
The Registration Statement (including any amendments or supplements thereto and prospectuses
contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading.
b.
Rule 424 Prospectus. The Company shall, as required by applicable securities
regulations, from time to time file with the SEC, pursuant to Rule 424 promulgated under the Securities
Act, the prospectus and prospectus supplements, if any, to be used in connection with sales of the
Registrable Securities under the Registration Statement. The Investor and its counsel shall have a
reasonable opportunity to review and comment upon such prospectus prior to its filing with the SEC, and
the Company shall give due consideration to all such comments. The Investor shall use its reasonable
best efforts to comment upon such prospectus within one (1) Business Day from the date the Investor
receives the final pre-filing version of such prospectus.
c.
Sufficient Number of Shares Registered . In the event the number of shares
available under the Registration Statement is insufficient to cover all of the Registrable Securities, the
Company shall amend the Registration Statement or file a new Registration Statement (a “ New
Registration Statement ” ), so as to cover all of such Registrable Securities (subject to the limitations set
forth in Section 2(a)) as soon as practicable, but in any event not later than ten (10) Business Days after
the necessity therefor arises, subject to any limits that may be imposed by the SEC pursuant to Rule 415
under the Securities Act. The Company shall use it reasonable best efforts to cause such amendment
and/or New Registration Statement to become effective as soon as practicable following the filing thereof.
In the event that any of the Put Shares or Commitment Shares are not included in the Registration
2
Statement, or have not been included in any New Registration Statement and the Company files any other
registration statement under the Securities Act (other than on Form S-4, Form S-8, or with respect to other
employee related plans or rights offerings) ( “ Other Registration Statement ” ) then the Company shall
include in such Other Registration Statement first all of such Put Shares that have not been previously
registered, second all of such Commitment Shares that not have been previously registered, and third any
other securities the Company wishes to include in such Other Registration Statement. The Company
agrees that it shall not file any such Other Registration Statement unless all of the Put Shares and
Commitment Shares have been included in such Other Registration Statement or otherwise have been
registered for resale as described above.
d.
Offering . If the staff of the SEC (the “ Staff ” ) or the SEC seeks to characterize
any offering pursuant to a Registration Statement filed pursuant to this Agreement as constituting an
offering of securities that does not permit such Registration Statement to become effective and be used for
resales by the Investor under Rule 415 at then-prevailing market prices (and not fixed prices), or if after
the filing of the initial Registration Statement with the SEC pursuant to Section 2(a), the Company is
otherwise required by the Staff or the SEC to reduce the number of Registrable Securities included in
such initial Registration Statement, then the Company shall reduce the number of Registrable Securities
to be included in such initial Registration Statement (with the prior consent, which shall not be
unreasonably withheld, of the Investor and its legal counsel as to the specific Registrable Securities to be
removed therefrom) until such time as the Staff and the SEC shall so permit such Registration Statement
to become effective and be used as aforesaid. In the event of any reduction in Registrable Securities
pursuant to this paragraph, the Company shall file one or more New Registration Statements in
accordance with Section 2(c) until such time as all Registrable Securities have been included in
Registration Statements that have been declared effective and the prospectus contained therein is
available for use by the Investor. Notwithstanding any provision herein or in the Purchase Agreement to
the contrary, the Company ’ s obligations to register Registrable Securities (and any related conditions to
the Investor ’ s obligations) shall be qualified as necessary to comport with any requirement of the SEC or
the Staff as addressed in this Section 2(d).
3.
RELATED OBLIGATIONS.
With respect to the Registration Statement and whenever any Registrable Securities are to be
registered pursuant to Section 2 including on any New Registration Statement, the Company shall use its
reasonable best efforts to effect the registration of the Registrable Securities in accordance with the
intended method of disposition thereof and, pursuant thereto, the Company shall have the following
obligations:
a.
The Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to any registration statement and the prospectus used in
connection with such registration statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the Securities Act, as may be necessary to keep the Registration Statement or any New
Registration Statement effective at all times during the Registration Period, and, during such period,
comply with the provisions of the Securities Act with respect to the disposition of all Registrable
Securities of the Company covered by the Registration Statement or any New Registration Statement
until such time as all of such Registrable Securities shall have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth in such registration statement.
b.
The Company shall permit the Investor to review and comment upon the
Registration Statement or any New Registration Statement and all amendments and supplements thereto
at least two (2) Business Days prior to their filing with the SEC, and not file any document in a form to
which Investor reasonably objects. The Investor shall use its reasonable best efforts to comment upon the
3
Registration Statement or any New Registration Statement and any amendments or supplements thereto
within two (2) Business Days from the date the Investor receives the final version thereof. The Company
shall furnish to the Investor, without charge any correspondence from the SEC or the staff of the SEC to
the Company or its representatives relating to the Registration Statement or any New Registration
Statement.
c.
Upon request of the Investor, the Company shall furnish to the Investor, (i)
promptly after the same is prepared and filed with the SEC, at least one copy of such registration
statement and any amendment(s) thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits, (ii) upon the effectiveness of any registration statement,
a copy of the prospectus included in such registration statement and all amendments and supplements
thereto (or such other number of copies as the Investor may reasonably request) and (iii) such other
documents, including copies of any preliminary or final prospectus, as the Investor may reasonably
request from time to time in order to facilitate the disposition of the Registrable Securities owned by the
Investor. For the avoidance of doubt, any filing available to the Investor via the SEC ’ s live EDGAR
system shall be deemed “ furnished to the Investor ” hereunder.
d.
The Company shall use reasonable best efforts to (i) register and qualify the
Registrable Securities covered by a registration statement under such other securities or "blue sky" laws
of such jurisdictions in the United States as the Investor reasonably requests, (ii) prepare and file in those
jurisdictions, such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the effectiveness thereof during the
Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv) take all other actions
reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (y) subject itself to general taxation in any such jurisdiction, or (z) file a
general consent to service of process in any such jurisdiction. The Company shall promptly notify the
Investor who holds Registrable Securities of the receipt by the Company of any notification with respect
to the suspension of the registration or qualification of any of the Registrable Securities for sale under the
securities or "blue sky" laws of any jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.
e.
As promptly as practicable after becoming aware of such event or facts, the
Company shall notify the Investor in writing of the happening of any event or existence of such facts as a
result of which the prospectus included in any registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were made, not misleading,
and promptly prepare a supplement or amendment to such registration statement to correct such untrue
statement or omission, and deliver a copy of such supplement or amendment to the Investor (or such other
number of copies as the Investor may reasonably request). The Company shall also promptly notify the
Investor in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has
been filed, and when a registration statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to the Investor by email or facsimile on the same day
of such effectiveness and by overnight mail), (ii) of any request by the SEC for amendments or
supplements to any registration statement or related prospectus or related information, and (iii) of the
Company's reasonable determination that a post-effective amendment to a registration statement would be
appropriate.
4
f.
The Company shall use its reasonable best efforts to prevent the issuance of any
stop order or other suspension of effectiveness of any registration statement, or the suspension of the
qualification of any Registrable Securities for sale in any jurisdiction and, if such an order or suspension
is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to
notify the Investor of the issuance of such order and the resolution thereof or its receipt of actual notice of
the initiation or threat of any proceeding for such purpose.
g.
The Company shall (i) cause all the Registrable Securities to be listed on each
securities exchange on which securities of the same class or series issued by the Company are then listed,
if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all the Registrable Securities on the principal exchange or
recognized quotation system for the Company ’ s common stock. The Company shall pay all fees and
expenses in connection with satisfying its obligation under this Section.
h.
The Company shall cooperate with the Investor to facilitate the timely
preparation and delivery of the Registrable Securities (not bearing any restrictive legend) either by
DWAC, DRS, or in certificated form if DWAC or DRS is unavailable, to be offered pursuant to any
registration statement and enable such Registrable Securities to be in such denominations or amounts as
the Investor may reasonably request and registered in such names as the Investor may request.
i.
The Company shall at all times provide a transfer agent and registrar with respect
to its Common Stock.
j.
If reasonably requested by the Investor, the Company shall (i) immediately
incorporate in a prospectus supplement or post-effective amendment such information as the Investor
believes should be included therein relating to the sale and distribution of Registrable Securities,
including, without limitation, information with respect to the number of Registrable Securities being sold,
the purchase price being paid therefor and any other terms of the offering of the Registrable Securities;
(ii) make all required filings of such prospectus supplement or post-effective amendment as soon as
practicable upon notification of the matters to be incorporated in such prospectus supplement or post-
effective amendment; and (iii) supplement or make amendments to any registration statement.
k.
The Company shall use its reasonable best efforts to cause the Registrable
Securities covered by any registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to consummate the disposition of such
Registrable Securities.
l.
Within one (1) Business Day after any registration statement which includes the
Registrable Securities is ordered effective by the SEC, the Company shall deliver, and shall cause legal
counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to
the Investor) confirmation that such registration statement has been declared effective by the SEC in the
form attached hereto as Exhibit A . Thereafter, if requested by the Buyer at any time, the Company shall
require its counsel to deliver to the Buyer a written confirmation whether or not the effectiveness of such
registration statement has lapsed at any time for any reason (including, without limitation, the issuance of
a stop order) and whether or not the registration statement is current and available to the Buyer for sale of
all of the Registrable Securities.
m.
The Company shall take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of Registrable Securities pursuant to any registration statement.
5
4.
OBLIGATIONS OF THE INVESTOR.
a.
The Company shall notify the Investor in writing of the information the
Company reasonably requires from the Investor in connection with any registration statement hereunder.
The Investor shall furnish to the Company such information regarding itself, the Registrable Securities
held by it and the intended method of disposition of the Registrable Securities held by it as shall be
reasonably required to effect the registration of such Registrable Securities and shall execute such
documents in connection with such registration as the Company may reasonably request.
b.
The Investor agrees to cooperate with the Company as reasonably requested by
the Company in connection with the preparation and filing of any registration statement hereunder.
c.
The Investor agrees that, upon receipt of any notice from the Company of the
happening of any event or existence of facts of the kind described in Section 3(f) or the first sentence of
3(e), the Investor will immediately discontinue disposition of Registrable Securities pursuant to any
registration statement(s) covering such Registrable Securities until the Investor's receipt of the copies of
the supplemented or amended prospectus contemplated by Section 3(f) or the first sentence of 3(e).
Notwithstanding anything to the contrary, the Company shall cause its transfer agent to promptly deliver
shares of Common Stock without any restrictive legend in accordance with the terms of the Purchase
Agreement in connection with any sale of Registrable Securities with respect to which an Investor has
entered into a contract for sale prior to the Investor's receipt of a notice from the Company of the
happening of any event of the kind described in Section 3(f) or the first sentence of Section 3(e) and for
which the Investor has not yet settled.
5.
EXPENSES OF REGISTRATION.
All reasonable expenses, other than sales or brokerage commissions, incurred in
connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without
limitation, all registration, listing and qualifications fees, printers and accounting fees, and fees and
disbursements of counsel for the Company, shall be paid by the Company.
6.
INDEMNIFICATION.
a.
To the fullest extent permitted by law, the Company will, and hereby does,
indemnify, hold harmless and defend the Investor, each Person, if any, who controls the Investor, the
members, the directors, officers, partners, employees, agents, representatives of the Investor and each
Person, if any, who controls the Investor within the meaning of the Securities Act or the Securities
Exchange Act of 1934, as amended (the " Exchange Act" ) (each, an " Indemnified Person "), against any
losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, attorneys' fees, amounts
paid in settlement or expenses, joint or several, (collectively, " Claims ") incurred in investigating,
preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto
(" Indemnified Damages "), to which any of them may become subject insofar as such Claims (or actions
or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of a material fact in the Registration Statement, any New
Registration Statement or any post-effective amendment thereto or in any filing made in connection with
the qualification of the offering under the securities or other "blue sky" laws of any jurisdiction in which
Registrable Securities are offered (" Blue Sky Filing "), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in the final prospectus (as
6
amended or supplemented, if the Company files any amendment thereof or supplement thereto with the
SEC) or the omission or alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the statements therein were made, not
misleading, (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange
Act, any other law, including, without limitation, any state securities law, or any rule or regulation
thereunder relating to the offer or sale of the Registrable Securities pursuant to the Registration Statement
or any New Registration Statement or (iv) any material violation by the Company of this Agreement (the
matters in the foregoing clauses (i) through (iv) being, collectively, " Violations "). The Company shall
reimburse each Indemnified Person promptly as such expenses are incurred and are due and payable, for
any reasonable legal fees or other reasonable expenses incurred by them in connection with investigating
or defending any such Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified
Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with
information about the Investor furnished in writing to the Company by such Indemnified Person expressly
for use in connection with the preparation of the Registration Statement, any New Registration Statement
or any such amendment thereof or supplement thereto, if such prospectus was timely made available by
the Company pursuant to Section 3(c) or Section 3(e); (ii) with respect to any superseded prospectus,
shall not inure to the benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the benefit of any person
controlling such person) if the untrue statement or omission of material fact contained in the superseded
prospectus was corrected in the revised prospectus, as then amended or supplemented, if such revised
prospectus was timely made available by the Company pursuant to Section 3(c) or Section 3(e), and the
Indemnified Person was promptly advised in writing not to use the incorrect prospectus prior to the use
giving rise to a violation and such Indemnified Person, notwithstanding such advice, used it; (iii) shall not
be available to the extent such Claim is based on a failure of the Investor to deliver or to cause to be
delivered the prospectus made available by the Company, if such prospectus was timely made available
by the Company pursuant to Section 3(c) or Section 3(e); and (iv) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the
transfer of the Registrable Securities by the Investor pursuant to Section 9.
b.
Promptly after receipt by an Indemnified Person or Indemnified Party under this
Section 6 of notice of the commencement of any action or proceeding (including any governmental action
or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually
satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case
may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain
its own counsel with the fees and expenses to be paid by the indemnifying party, if, in the reasonable
opinion of counsel retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual
or potential differing interests between such Indemnified Person or Indemnified Party and any other party
represented by such counsel in such proceeding. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which relates to such action or claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times
as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party
7
shall be liable for any settlement of any action, claim or proceeding effected without its written consent,
provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the consent of the Indemnified Party or Indemnified
Person, consent to entry of any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party
or Indemnified Person of a release from all liability in respect to such claim or litigation. Following
indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to
the matter for which indemnification has been made. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such action shall not relieve
such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such
action.
c.
The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or defense, as and when bills are
received or Indemnified Damages are incurred.
d.
The indemnity agreements contained herein shall be in addition to (i) any cause
of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party
or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.
7.
CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited or limited by
law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for
which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided,
however, that: (i) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any seller of
Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such
seller from the sale of such Registrable Securities.
8.
REPORTS AND DISCLOSURE UNDER THE SECURITIES ACTS.
With a view to making available to the Investor the benefits of Rule 144 promulgated
under the Securities Act or any other similar rule or regulation of the SEC that may at any time permit the
Investor to sell securities of the Company to the public without registration (" Rule 144 "), the Company
agrees, at the Company ’ s sole expense, to:
a.
make and keep public information available, as those terms are understood and
defined in Rule 144;
b.
file with the SEC in a timely manner all reports and other documents required of
the Company under the Securities Act and the Exchange Act so long as the Company remains subject to
such requirements and the filing of such reports and other documents is required for the applicable
provisions of Rule 144;
c.
furnish to the Investor so long as the Investor owns Registrable Securities,
promptly upon request, (i) a written statement by the Company that it has complied with the reporting and
or disclosure provisions of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most
8
recent annual or quarterly report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to permit the Investor to sell
such securities pursuant to Rule 144 without registration; and
d.
take such additional action as is requested by the Investor to enable the Investor
to sell the Registrable Securities pursuant to Rule 144, including, without limitation, delivering all such
legal opinions, consents, certificates, resolutions and instructions to the Company ’ s Transfer Agent as
may be requested from time to time by the Investor and otherwise fully cooperate with Investor and
Investor ’ s broker to effect such sale of securities pursuant to Rule 144.
The Company agrees that damages may be an inadequate remedy for any breach of the
terms and provisions of this Section 8 and that Investor shall, whether or not it is pursuing any remedies
at law, be entitled to equitable relief in the form of a preliminary or permanent injunctions, without
having to post any bond or other security, upon any breach or threatened breach of any such terms or
provisions.
9.
ASSIGNMENT OF REGISTRATION RIGHTS.
The Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investor. The Investor may not assign its rights under this
Agreement (except with respect to the Commitment Shares) without the written consent of the Company.
10.
AMENDMENT OF REGISTRATION RIGHTS.
No provision of this Agreement may be amended or waived by the parties from and after
the date that is one Business Day immediately preceding the initial filing of the Registration Statement
with the SEC. Subject to the immediately preceding sentence, no provision of this Agreement may be (i)
amended other than by a written instrument signed by both parties hereto or (ii) waived other than in a
written instrument signed by the party against whom enforcement of such waiver is sought. Failure of any
party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising
such right or remedy, shall not operate as a waiver thereof.
11.
MISCELLANEOUS .
a.
A Person is deemed to be a holder of Registrable Securities whenever such
Person owns or is deemed to own of record such Registrable Securities. If the Company receives
conflicting instructions, notices or elections from two or more Persons with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
b.
Any notices, consents, waivers or other communications required or permitted to
be given under the terms of this Agreement must be in writing and will be deemed to have been delivered:
(i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile or email (provided
confirmation of transmission is mechanically or electronically generated and kept on file by the sending
party); or (iii) one (1) Business Day after deposit with a nationally recognized overnight delivery service,
in each case properly addressed to the party to receive the same. The addresses for such communications
shall be:
9
If to the Company:
Parallax Health Sciences, Inc.
1327 Ocean Avenue, Suite B
Santa Monica, CA 90401
Email: info@parallaxhealthsciences.com
Attention: Paul Arena
If to the Investor:
Peak One Opportunity Fund, L.P.
333 South Hibiscus Drive
Miami Beach, FL 33139
E-mail: JGoldstein@PeakOneInvestments.com
Attention: Jason Goldstein
or at such other address and/or facsimile number and/or to the attention of such other person as the
recipient party has specified by written notice given to each other party three (3) Business Days prior to
the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or electronically generated by the
sender's facsimile machine or email account containing the time, date, recipient facsimile number or
email address, as applicable, and an image of the first page of such transmission or (C) provided by a
nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt
by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause
(i), (ii) or (iii) above, respectively.
c.
The corporate laws of the State of Nevada shall govern all issues concerning this
Agreement. All other questions concerning the construction, validity, enforcement and interpretation of
this Agreement shall be governed by the internal laws of the State of Nevada, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of Nevada or any other
jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of
Nevada. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting the State of Florida, County of Miami-Dade, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in
an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this
Agreement and agrees that such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
d.
This Agreement and the Purchase Agreement constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to herein and therein. This
10
Agreement and the Purchase Agreement supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof and thereof.
e.
Subject to the requirements of Section 9, this Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the parties hereto.
f.
The headings in this Agreement are for convenience of reference only and shall
not limit or otherwise affect the meaning hereof.
g.
This Agreement may be executed in identical counterparts, each of which shall
be deemed an original but all of which shall constitute one and the same agreement. This Agreement,
once executed by a party, may be delivered to the other party hereto by facsimile transmission or by e-
mail in a “ .pdf ” format data file of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
h.
Each party shall do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all such other agreements, certificates, instruments
and documents, as the other party may reasonably request in order to carry out the intent and accomplish
the purposes of this Agreement and the consummation of the transactions contemplated hereby.
i.
The language used in this Agreement will be deemed to be the language chosen
by the parties to express their mutual intent and no rules of strict construction will be applied against any
party.
j.
This Agreement is intended for the benefit of the parties hereto and their
respective successors and permitted assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.
* * * * * *
11
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of
day and year first above written.
THE COMPANY:
PARALLAX HEALTH SCIENCES, INC.
By:______________________
Name: Paul Arena
Title: Chief Executive Officer
INVESTOR:
PEAK ONE OPPORTUNITY FUND, L.P.
By: Peak One Investments, LLC,
General Partner
By: ___________________________________
Name: Jason Goldstein
Title: Managing Member
[Signature Page to registration rights agreement]
12
EXHIBIT A
TO REGISTRATION RIGHTS AGREEMENT
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
______, 2018
Action Stock Transfer Corporation
2469 E. Fort Union Blvd., Suite 214
Salt Lake City, UT 84121
Re: Effectiveness of Registration Statement
Ladies and Gentlemen:
We are counsel to PARALLAX HEALTH SCIENCES, INC. , a Nevada corporation (the “ Company ” ),
and have represented the Company in connection with that certain Purchase Agreement, dated as of November 14,
2018 (the “ Purchase Agreement ” ), entered into by and between the Company and Peak One Opportunity Fund, L.P.
(the “ Buyer ” ) pursuant to which the Company has agreed to issue to the Buyer shares of the Company's Common
Stock, $0.001 par value (the “ Common Stock ” ), in an amount up to Ten Million Dollars ($10,000,000.00) (the “ Put
Shares ” ), in accordance with the terms of the Purchase Agreement. In connection with the transactions
contemplated by the Purchase Agreement, the Company has registered with the U.S. Securities & Exchange
Commission the following shares of Common Stock:
(1) __________ Put Shares to be issued to the Buyer upon purchase from the Company by the Buyer from
time to time in accordance with the Purchase Agreement; and
(2) __________Commitment Shares issued to the Buyer and Investments pursuant to the Purchase
Agreement.
Pursuant to the Purchase Agreement, the Company also has entered into a Registration Rights Agreement,
of even date with the Purchase Agreement with the Buyer (the “ Registration Rights Agreement ” ) pursuant to which
the Company agreed, among other things, to register the Put Shares and Commitment Shares under the Securities
Act of 1933, as amended (the “ Securities Act ” ). In connection with the Company's obligations under the Purchase
Agreement and the Registration Rights Agreement, on [_____], 2018, the Company filed a Registration Statement
(File No. 333-[_________]) (the “ Registration Statement ” ) with the Securities and Exchange Commission (the
“ SEC ” ) relating to the resale of the Put Shares and/or the Commitment Shares.
In connection with the foregoing, we advise you that a member of the SEC's staff has advised us by
telephone that the SEC has entered an order declaring the Registration Statement effective under the Securities Act
at [_____] [A.M./P.M.] on [__________], 2018 and we have no knowledge, after telephonic inquiry of a member of
the SEC's staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Put Shares and Commitment Shares are available for
resale under the Securities Act pursuant to the Registration Statement and may be issued without any restrictive
legend.
Very truly yours,
[Company Counsel]
By:____________________
cc:
Peak One Opportunity Fund, L.P.
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the “ Agreement ” ), dated as of
November 14, 2018, is entered into by and between PARALLAX HEALTH SCIENCES, INC., a
Nevada corporation, (the “ Company ” ) and PEAK ONE OPPORTUNITY FUND, L.P., a
Delaware limited partnership (the “ Buyer ” ).
WITNESSETH:
WHEREAS , the Company and the Buyer are executing and delivering this Agreement in
accordance with and in reliance upon the exemption from securities registration afforded, inter
alia , by Rule 506 under Regulation D ( “ Regulation D ” ) as promulgated by the United States
Securities and Exchange Commission (the “ SEC ” ) under the Securities Act of 1933, as amended
(the “ 1933 Act ” ), and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase from the Company, and the Company wishes
to sell the Buyer, upon the terms and subject to the conditions of this Agreement, securities
consisting of the Company ’ s Convertible Debentures due three years from the respective dates of
issuance (the “ Debentures ” ), each of which are in the form of Exhibit A hereto, which will be
convertible into shares of the Company ’ s common stock, par value $0.001 per share (the
“ Common Stock ” ), in the aggregate principal amount of up to Two Hundred Eighty Seven
Thousand Five Hundred and 00/100 Dollars ($287,500.00), for an aggregate Purchase Price of
up to Two Hundred Fifty Eight Thousand Seven Hundred Fifty and 00/100 Dollars
($258,750.00), as well as that certain Warrant (as defined herein), all upon the terms and subject
to the conditions of this Agreement, the Debentures, and other related documents;
NOW THEREFORE , in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1.
DEFINITIONS; AGREEMENT TO PURCHASE.
a.
Certain Definitions. As used herein, each of the following terms has the
meaning set forth below, unless the context otherwise requires:
(i)
“ Affiliate ” means, with respect to a specific Person referred to in the
relevant provision, another Person who or which controls or is controlled by or is under common
control with such specified Person.
(ii)
“ Certificates ” means certificates representing the Conversion Shares
issuable hereunder, each duly executed on behalf of the Company and issued hereunder.
(iii) “ Closing Date ” means the date on which one of the two (2) Closings are
held, which are the Signing Closing Date and the Second Closing Date.
(iv)
[Reserved]
(v)
“ Commitment Fee ” shall have the meaning ascribed to such term in
Section 12(a).
(vi)
“ Common Stock ” shall have the meaning ascribed to such term in the
Recitals.
(vii) “ Conversion Amount ” shall mean the Conversion Amount as defined in
the Debentures, provided, however that for purposes of the foregoing calculation, the full
indebtedness under the Debentures shall be deemed immediately convertible, notwithstanding
the 4.99% limitation on ownership set forth in the Debentures.
(viii) “ Conversion Price ” means the Conversion Price as defined in the
Debentures.
(ix)
“ Conversion Shares ” means the shares of Common Stock issuable upon
conversion of the Debentures.
(x)
“ DWAC Operational ” means that the Common Stock is eligible for
clearing through the Depository Trust Company ( “ DTC ” ) via the DTC ’ s Deposit Withdrawal
Agent Commission or “ DWAC ” system and active and in good standing for DWAC issuance by
the Transfer Agent (as defined herein).
(xi)
“ Dollars ” or “ $ ” means United States Dollars.
(xii) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.
(xiii) “ Investments ” means Peak One Investments, LLC, the general partner of
the Buyer.
(xiv) “ Irrevocable Resolutions ” has the meaning set forth in Section 8(i).
(xv) “ Market Price of the Common Stock ” means (x) the lowest traded price of
the Common Stock for the period indicated in the relevant provision hereof (unless a different
relevant period is specified in the relevant provision), as reported by Bloomberg, LP or, if not so
reported, as reported on the OTCQB, OTCQX or OTC Pink or (y) if the Common Stock is listed
on a stock exchange, the closing price on such exchange, as reported by Bloomberg LP.
(xvi) “ Material Adverse Effect ” means a material adverse effect on the
business, operations or condition (financial or otherwise) or results of operation of the Company
and its Subsidiaries taken as a whole, in the reasonable commercial discretion of the Buyer,
irrespective of any finding of fault, magnitude of liability (or lack of financial liability). Without
limiting the generality of the foregoing, the occurrence of any of the following, in the reasonable
commercial discretion of the Buyer, shall be considered a Material Adverse Effect: (i) any final
money, judgment, writ or warrant of attachment, or similar process (including an arbitral
determination) in excess of Fifty Thousand Dollars ($50,000) shall be entered or filed against the
Company or any of its Subsidiaries (including, in any event, products liability claims against the
2
Company or its Subsidiaries) other than what is previously disclosed in public filings, (ii) the
suspension or withdrawal of any governmental authority or permit pertaining to a material
amount of the Company ’ s or any Subsidiary ’ s products or services, (iii) the loss of any material
insurance coverage (including, in any case, comprehensive general liability coverage, products
liability coverage or directors and officers coverage, in each case in effect at the time of
execution and delivery of this Agreement), (iv) an action by a regulatory agency or governmental
body affecting the Common Stock (including, without limitation, (1) the commencement of any
regulatory investigation of which the Company is aware, the suspension of trading of the
Common Stock by the Financial Industry Regulation Authority ( “ FINRA ” ), the SEC, the OTC
Bulletin Board ( “ OTCBB ” ) or the OTC Markets Group, Inc., the failure of the Common Stock to
be DTC eligible or the placing of the Common Stock on the DTC “ chill list ” or (2) the engaging
in any market manipulation or other unlawful or improper trading or other activity by any
Affiliate), (v) the Company ’ s independent registered accountants shall resign under
circumstances where a disagreement exists between the Company and its independent registered
accountants, (vi) the Company shall fail to timely file any disclosure document as required by
applicable federal or state securities laws and regulations or by the rules and regulations of any
exchange, trading market or quotation system to which the Company or the Common Stock is
subject, or (vii) the Chief Executive Officer of the Company or any other key full-time officer or
director of the Company, shall, for any reason (including, without limitation, termination,
resignation, retirement, death or disability) cease to act on behalf of the Company in the same
role and to the same extent as his or her involvement as of the date of execution and delivery of
this Agreement.
(xvii) “ Person ” means any living person or any entity, such as, but not
necessarily limited to, a corporation, partnership or trust.
(xviii) “ Purchase Price ” means the price that the Buyer pays for the Debentures at
each respective Closing, which are the Signing Purchase Price and the Second Purchase Price, as
the case may be.
(xix) “ Registrable Securities ” shall mean the Conversion Shares, and, to the
extent applicable, and any other shares of capital stock or other securities of the Company or any
successor to the Company that are issued upon exchange of Conversion Shares and/or such
Restricted Stock.
(xx) “ Registration Statement ” shall mean a registration statement on Form S-1
(or any successor thereto) filed or contemplated to be filed by the Company with the SEC under
the Securities Act.
(xxi) “ Restricted Stock ” shall mean shares of Common Stock which are not
freely trading shares when issued.
(xxii) “ Securities ” means the Debentures and the Shares.
(xxiii) “ Shares ” means the Conversion Shares.
3
(xxiv) “ Second Closing Date ” shall have the meaning ascribed to such term in
Section 6(b).
(xxv) “ Second Debenture ” means the second of the two (2) Debentures, in the
principal amount of One Hundred Sixty Two Thousand Five Hundred and 00/100 Dollars
($162,500.00), which is issued by the Company to the Buyer on the Second Closing Date.
(xxvi) “ Second Purchase Price ” shall be One Hundred Forty Six Thousand Two
Hundred Fifty and 00/100 Dollars ($146,250.00)
(xxvii) “ Signing Closing Date ” shall have the meaning ascribed to such term in
Section 6(a).
(xxviii) “ Signing Debenture ” means the first of the two (2) Debentures, in the
principal amount of One Hundred Twenty Five Thousand and 00/100 Dollars ($125,000.00), to
be issued by the Company to the Buyer on the Signing Closing Date.
(xxix) “ Signing Purchase Price ” shall be One Hundred Twelve Thousand Five
Hundred and 00/100 Dollars ($112,500.00).
(xxx) “ Subsidiary ” shall have the meaning ascribed to such term in Section 3(b).
(xxxi) “ Transaction Documents ” means, collectively, this Agreement, the
Debentures, the Transfer Agent Instruction Letter, the Irrevocable Resolutions and the other
agreements, documents and instruments contemplated hereby or thereby.
(xxxii) “ Transfer Agent ” shall have the meaning ascribed to such term in Section
4(a).
(xxxiii) “ Transfer Agent Instruction Letter ” shall have the meaning ascribed to
such term in Section 5(a).
b.
Purchase and Sale of Debentures .
(i)
The Buyer agrees to purchase from the Company, and the Company
agrees to sell to the Buyer, the Debentures and Warrant on the terms and conditions set forth
below in this Agreement and the other Transaction Documents. The Warrant shall be earned in
full as an inducement fee as of the Signing Closing Date.
(ii)
Subject to the terms and conditions of this Agreement and the other
Transaction Documents, the Buyer will purchase the Debentures and Warrant at certain closings
(each, a “ Closing ” ) to be held on certain respective Closing Dates.
c.
[Reserved]
(i)
[Reserved]
4
(ii)
[Reserved]
2. BUYER ’ S REPRESENTATIONS, WARRANTIES, ETC.
The Buyer represents and warrants to, and covenants and agrees with, the Company as
follows:
a. Investment Purpose. Without limiting the Buyer ’ s right to sell the Shares
pursuant to a Registration Statement, Buyer is purchasing the Debentures, and will be acquiring
the Conversion Shares, for its own account for investment only and not with a view towards the
public sale or distribution thereof and not with a view to or for sale in connection with any
distribution thereof.
b. Accredited Investor Status. Buyer is (i) an “ accredited investor ” as that
term is defined in Rule 501 of the General Rules and Regulations under the 1933 Act by reason
of Rule 501(a)(3), (ii) experienced in making investments of the kind described in this
Agreement and the related documents, (iii) able, by reason of the business and financial
experience of its officers (if an entity) and professional advisors (who are not affiliated with or
compensated in any way by the Company or any of its affiliates or selling agents), to protect its
own interests in connection with the transactions described in this Agreement, and the related
documents, and (iv) able to afford the entire loss of its investment in the Securities.
c. Subsequent Offers and Sales. All subsequent offers and sales of the
Securities by the Buyer shall be made pursuant to registration of the Shares under the 1933 Act
or pursuant to an exemption from registration and compliance with applicable states ’ securities
laws.
d. Reliance on Exemptions. Buyer understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying upon the truth and
accuracy of, and the Buyer ’ s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the Securities.
e. Information. Buyer and its advisors have been furnished with all materials
relating to the business, finances and operations of the Company and materials relating to the
offer and sale of the Securities which have been requested by the Buyer. Buyer and its advisors
have been afforded the opportunity to ask questions of the Company and have received complete
and satisfactory answers to any such inquiries. Without limiting the generality of the foregoing,
Buyer has also had the opportunity to obtain and to review the Company ’ s Annual Report on
Form 10-K for the fiscal year ended December 31, 2017, and Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 2018 (collectively, the “ SEC Documents ” ).
f. Investment Risk. Buyer understands that its investment in the securities
constitutes high risk investment, its investment in the Securities involves a high degree of risk,
including the risk of loss of the Buyer ’ s entire investment.
5
g. Governmental Review. Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities.
h. Organization; Authorization. Buyer is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization. This Agreement and the
other Transaction Documents have been duly and validly authorized, executed and delivered on
behalf of the Buyer and create a valid and binding agreement of the Buyer enforceable in
accordance with its terms, subject as to enforceability to general principles of equity and to
bankruptcy, insolvency, moratorium and other similar laws affecting the enforcement of
creditors ’ rights generally.
i. Residency. The state in which any offer to sell Securities hereunder was
made to or accepted by the Buyer is the state shown as the Buyer ’ s address contained herein, and
Buyer is a resident of such state only.
3. COMPANY REPRESENTATIONS AND WARRANTIES, ETC.
The Company represents and warrants to the Buyer that:
a. Concerning the Debentures and the Shares. There are no preemptive rights
of any stockholder of the Company to acquire the Debentures or the Shares.
b. Organization; Subsidiaries; Reporting Company Status. Attached hereto
as Schedule 3(b) is an organizational chart describing all of the Company ’ s wholly-owned and
majority-owned subsidiaries (the “ Subsidiaries ” ) and other Affiliates, including the relationships
among the Company and such Subsidiaries, including as to each Subsidiary its jurisdiction of
organization and the percentage of ownership held by the Company, and the parent company of
the Subsidiary, including the percentage of ownership of the Company held by it. The Company
and each Subsidiary is a corporation or other form of businesses entity duly organized, validly
existing and in good standing under the laws its respective jurisdiction of organization (except
that RoxSan Pharmacy Inc. is not in good standing as of the date of this Agreement), and each of
them has the requisite corporate or other power to own its properties and to carry on its business
as now being conducted. The Company and each Subsidiary is duly qualified as a foreign
corporation or other entity to do business and is in good standing in each jurisdiction where the
nature of the business conducted or property owned by it makes such qualification necessary,
other than those jurisdictions in which the failure to so qualify would not have a Material
Adverse Effect. The Common Stock is listed and traded on the OTCM (as defined below)
(trading symbol: PRLX). The Company has received no notice, either oral or written, from
FINRA, the SEC, or any other organization, with respect to the continued eligibility of the
Common Stock for such listing, and the Company has maintained all requirements for the
continuation of such listing. The Company is an operating company in that, among other things
(A) it primarily engages, wholly or substantially, directly or indirectly through a majority owned
Subsidiary or Subsidiaries, in the production or sale, or the research or development, of a product
or service other than the investment of capital, (B) it is not an individual or sole proprietorship,
6
(C) it is not an entity with no specific business plan or purpose and its business plan is not to
engage in a merger or acquisition with an unidentified company or companies or other entity or
person, and (D) it intends to use the proceeds from the sale of the Debentures solely for the
operation of the Company ’ s business and uses other than personal, family, or household
purposes.
c. Authorized Shares. Schedule 3(c) sets forth all capital stock and derivative
securities of the Company that are authorized for issuance and that are issued and outstanding.
All issued and outstanding shares of Common Stock have been duly authorized and validly
issued and are fully paid and nonassessable. The Company has sufficient authorized and
unissued shares of Common Stock as may be necessary to effect the issuance of the Shares,
assuming the prior issuance and exercise, exchange or conversion, as the case may be, of all
derivative securities authorized, as indicated in Schedule 3(c). The Shares have been duly
authorized and, when issued upon conversion of, or as interest on, the Debentures, the Shares
will be duly and validly issued, fully paid and non-assessable and will not subject the holder
thereof to personal liability by reason of being such holder. At all times, the Company shall keep
available and reserved for issuance to the holders of the Debentures shares of Common Stock
duly authorized for issuance against the Debentures.
d. Authorization. This Agreement, the issuance of the Debentures (including
without limitation the incurrence of indebtedness thereunder), the issuance of the Conversion
Shares under the Debentures, and the other transactions contemplated by the Transaction
Documents, have been duly, validly and irrevocably authorized by the Company, and this
Agreement has been duly executed and delivered by the Company. The Company ’ s board of
directors, in the exercise of its fiduciary duties, has irrevocably approved the entry into and
performance of the Transaction Documents, including, without limitation the sale of the
Debentures and the issuance of Conversion Shares, based upon a reasonable inquiry concerning
the Company ’ s financing objectives and financial situation. Each of the Transaction Documents,
when executed and delivered by the Company, are and will be, valid, legal and binding
agreements of the Company, enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency, moratorium, and
other similar laws affecting the enforcement of creditors ’ rights generally.
e. Non-contravention.
The execution and delivery of the Transaction
Documents, the issuance of the Securities and the consummation by the Company of the other
transactions contemplated by this Agreement and the Debentures (including without limitation
the incurrence of indebtedness thereunder) do not and will not conflict with or result in a breach
by the Company of any of the terms or provisions of, or constitute a default under (i) the articles
of incorporation or by-laws of the Company, each as currently in effect, (ii) any indenture,
mortgage, deed of trust, or other material agreement or instrument to which the Company is a
party or by which it or any of its properties or assets are bound, including any listing agreement
for the Common Stock, except as herein set forth or an event which results in the creation of any
lien, charge or encumbrance upon any assets of the Company or the triggering of any anti-
dilution rights, rights of first refusal or first offer on the part of holders of the Company ’ s
securities, (iii) to its knowledge, any existing applicable law, rule, or regulation or any applicable
decree, judgment, or order of any court, United States federal or state regulatory body,
7
administrative agency, or other governmental body having jurisdiction over the Company or any
of its properties or assets, or (iv) the Company ’ s listing agreement for its Common Stock (if
applicable).
f. Approvals. No authorization, approval or consent of any court, governmental
body, regulatory agency, self-regulatory organization, or stock exchange or market or the
stockholders of the Company is required to be obtained by the Company for the entering into and
performing this Agreement and the other Transaction Documents (including without limitation
the issuance and sale of the Securities to the Buyer as contemplated by this Agreement) except
such authorizations, approvals and consents that have been obtained, or such authorizations,
approvals and consents, the failure of which to obtain would not have a Material Adverse Effect.
g. SEC Filings; Rule 144 Status. None of the SEC Documents contained, at
the time they were filed, any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the statements made therein in light of the
circumstances under which they were made, not misleading. The Company timely filed all
requisite forms, reports and exhibits thereto with the SEC as required. The Company is not
aware of any event occurring on or prior to the execution and delivery of this Agreement that
would require the filing of, or with respect to which the Company intends to file, a Form 8-K
after such time. The Company satisfies the requirements of Rule 144(i)(2), and the Company
shall continue to satisfy all applicable requirements of Rule 144 (or any successor thereto) for so
long as any Securities are outstanding and not registered pursuant to an effective registration
statement filed with the SEC.
h. Absence of Certain Changes. Since June 30, 2018, when viewed from the
perspective of the Company and its Subsidiaries taken as a whole, there has been no material
adverse change and no material adverse development in the business, properties, operations,
condition (financial or otherwise), or results of operations of the Company and its Subsidiaries
(including, without limitation, a change or development which constitutes, or with the passage of
time is reasonably likely to become, a Material Adverse Effect), except as disclosed in the SEC
Documents. Since June 30, 2018, except as provided in the SEC Documents, the Company has
not (i) incurred or become subject to any material liabilities (absolute or contingent) except
liabilities incurred in the ordinary course of business consistent with past practices; (ii)
discharged or satisfied any material lien or encumbrance or paid any material obligation or
liability (absolute or contingent), other than current liabilities paid in the ordinary course of
business consistent with past practices; (iii) declared or made any payment or distribution of cash
or other property to stockholders with respect to its capital stock, or purchased or redeemed, or
made any agreements to purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts or claims, except in the ordinary
course of business consistent with past practices; (v) suffered any substantial losses or waived
any rights of material value, whether or not in the ordinary course of business, or suffered the
loss of any material amount of existing business; (vi) made any changes in employee
compensation, except in the ordinary course of business consistent with past practices; or (vii)
experienced any material problems with labor or management in connection with the terms and
conditions of their employment.
8
i. Full Disclosure. There is no fact known to the Company (other than general
economic conditions known to the public generally or as disclosed in the SEC Documents) that
has not been disclosed in writing to the Buyer that (i) would reasonably be expected to have a
Material Adverse Effect, (ii) would reasonably be expected to materially and adversely affect the
ability of the Company to perform its obligations pursuant to the Transaction Documents, or (iii)
would reasonably be expected to materially and adversely affect the value of the rights granted to
the Buyer in the Transaction Documents.
j. Absence of Litigation. Except as described in the SEC Documents, there is
no action, suit, proceeding, inquiry or investigation before or by any court, public board or body
pending or, to the knowledge of the Company, threatened against or affecting the Company,
wherein an unfavorable decision, ruling or finding would have a Material Adverse Effect or
which would adversely affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, any of the Transaction Documents. The Company is
not a party to or subject to the provisions of, any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality which could reasonably be expected to have a
Material Adverse Effect.
k. Absence of Liens. The Company ’ s assets are not encumbered by any liens or
mortgages except as described in the SEC Documents.
l. Absence of Events of Default. No event of default (or its equivalent term),
as defined in the respective agreement, indenture, mortgage, deed of trust or other instrument, to
which the Company is a party, and no event which, with the giving of notice or the passage of
time or both, would become an event of default (or its equivalent term) (as so defined in such
document), has occurred and is continuing, which would have a Material Adverse Effect.
m. No Undisclosed Liabilities or Events. The Company has no liabilities or
obligations other than those disclosed in the SEC Documents or those incurred in the ordinary
course of the Company ’ s business since June 30, 2018, and which individually or in the
aggregate, do not or would not have a Material Adverse Effect. No event or circumstances has
occurred or exists with respect to the Company or its properties, business, condition (financial or
otherwise), or results of operations, which, under applicable law, rule or regulation, requires
public disclosure or announcement prior to the date hereof by the Company but which has not
been so publicly announced or disclosed. There are no proposals currently under consideration
or currently anticipated to be under consideration by the Board of Directors or the executive
officers of the Company which proposal would (x) change the articles of incorporation, by-laws
or any other charter document of the Company, each as currently in effect, with or without
shareholder approval, which change would reduce or otherwise adversely affect the rights and
powers of the shareholders of the Common Stock or (y) materially or substantially change the
business, assets or capital of the Company.
n. No Integrated Offering. Neither the Company nor any of its affiliates nor
any Person acting on its or their behalf has, directly or indirectly, at any time during the six
month period immediately prior to the date of this Agreement made any offer or sales of any
security or solicited any offers to buy any security under circumstances that would eliminate the
9
availability of the exemption from registration under Rule 506 of Regulation D in connection
with the offer and sale of the Securities as contemplated hereby. The issuance of the Securities
to the Buyer will not be integrated with any other issuance of the Company ’ s securities (past,
current or future) for purposes of any shareholder approval provisions applicable to the Company
or its securities.
o. Dilution. The number of Shares issuable upon conversion of the Debentures
may increase substantially in certain circumstances, including, but not necessarily limited to, the
circumstance wherein the Market Price of the Common Stock declines prior to the conversion of
the Debentures. The Company ’ s executive officers and directors have studied and fully
understand the nature of the securities being sold hereby and recognize that they have a potential
dilutive effect and further that the conversion of the Debentures and/or sale of the Conversion
Shares may have an adverse effect on the Market Price of the Common Stock. The Board of
Directors of the Company has concluded, in its good faith business judgment that such issuance
is in the best interests of the Company. The Company specifically acknowledges that its
obligation to issue the Conversion Shares upon conversion of the Debentures is binding upon the
Company and enforceable regardless of the dilution such issuance may have on the ownership
%s of other shareholders of the Company.
p. Regulatory Permits. The Company has all such permits, easements,
consents, licenses, franchises and other governmental and regulatory authorizations from all
appropriate federal, state, local or other public authorities ( “ Permits ” ) as are necessary to own
and lease its properties and conduct its businesses in all material respects in the manner
described in the SEC Documents and as currently being conducted. All such Permits are in full
force and effect and the Company has fulfilled and performed all of its material obligations with
respect to such Permits, and no event has occurred that allows, or after notice or lapse of time
would allow, revocation or termination thereof or will result in any other material impairment of
the rights of the holder of any such Permit, subject in each case to such qualification as may be
disclosed in the SEC Documents. Such Permits contain no restrictions that would materially
impair the ability of the Company to conduct businesses in the manner consistent with its past
practices. The Company has not received notice or otherwise has knowledge of any proceeding
or action relating to the revocation or modification of any such Permit.
q. Residency. The state in which any offer to sell Securities hereunder was
made or accepted by the Seller is the state shown as the Seller ’ s address contained herein, and
Seller is a resident of such state only.
r. Hazardous Materials. The Company is in compliance with all applicable
Environmental Laws in all respects except where the failure to comply does not have and could
not reasonably be expected to have a Material Adverse Effect. For purposes of the foregoing:
“ Environmental Laws ” means, collectively, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Superfund Amendments
and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the Toxic
Substances Control Act, as amended, the Clean Air Act, as amended, the Clean Water Act, as
amended, any other “ Superfund ” or “ Superlien ” law or any other applicable federal, state or local
10
statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing
liability or standards of conduct concerning, the environment or any Hazardous Material.
“ Hazardous Material ” means and includes any hazardous, toxic or dangerous
waste, substance or material, the generation, handling, storage, disposal, treatment or emission of
which is subject to any Environmental Law.
s. Independent Public Accountants.
The Company ’ s auditor is an
independent registered public accounting firm with respect to the Company, as required by the
1933 Act, the Exchange Act and the rules and regulations promulgated thereunder.
t. Internal Accounting Controls. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (1) transactions are executed
in accordance with management ’ s general or specific authorization; (2) transactions are recorded
as necessary to permit preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (3) access to assets is permitted
only in accordance with management ’ s general or specific authorization; and (4) the recorded
accountability for assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
u. Brokers. No Person (other than the Buyer and its principals, employees and
agents) is entitled to receive any consideration from the Company or the Buyer arising from any
finder ’ s agreement, brokerage agreement or other agreement to which the Company is a party.
v. DWAC Operational; DRS. The Company is currently and shall remain
DWAC Operational and eligible for DRS
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The parties acknowledge and agree that (1) the
Debentures have not been registered under the provisions of the 1933 Act and the Shares have
not been registered under the 1933 Act, and may not be transferred unless (A) subsequently
registered thereunder or (B) the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration; (2) any sale of the Securities made in reliance
on Rule 144 promulgated under the 1933 Act ( “ Rule 144 ” ) may be made only in accordance with
the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of such Securities
under circumstances in which the seller, or the Person through whom the sale is made, may be
deemed to be an underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder, (3)
at the request of the Buyer, the Company shall, from time to time, within two (2) business days
of such request, at the sole cost and expense of the Company, either (i) deliver to its transfer
agent and registrar for the Common Stock (the “ Transfer Agent ” ) a written letter instructing and
authorizing the Transfer Agent to process transfers of the Shares at such time as the Buyer has
held the Securities for the minimum holding period permitted under Rule 144, subject to the
Buyer ’ s providing to the Transfer Agent certain customary representations contemporaneously
with any requested transfer, or (ii) at the Buyer ’ s option or if the Transfer Agent requires further
11
confirmation of the availability of an exemption from registration, furnish to the Buyer an
opinion of the Company ’ s counsel in favor of the Buyer (and, at the request of the Buyer, any
agent of the Buyer, including but not limited to the Buyer ’ s broker or clearing firm) and the
Transfer Agent, reasonably satisfactory in form, scope and substance to the Buyer and the
Transfer Agent, to the effect that a contemporaneously requested transfer of shares does not
require registration under the 1933 Act, pursuant to the 1933 Act, Rule 144 or other regulations
promulgated under the 1933 Act and (4) neither the Company nor any other Person is under any
obligation to register the Securities (other than pursuant to this Agreement) under the 1933 Act
or to comply with the terms and conditions of any exemption thereunder.
b. Restrictive Legend.
The Buyer acknowledges and agrees that the
Debentures, and, until such time as the Shares have been registered under the 1933 Act as
contemplated hereby and sold in accordance with an effective Registration Statement, certificates
and other instruments representing any of the Securities shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed against transfer of any
such Securities):
THIS SECURITY HAS NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ” ), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,
THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.
c. [Intentionally Omitted].
d. Securities Filings. The Company undertakes and agrees to make all
necessary filings (including, without limitation, a Form D) in connection with the sale of the
Securities to the Buyer required under any United States laws and regulations applicable to the
Company (including without limitation state “ blue sky ” laws), or by any domestic securities
exchange or trading market, and to provide a copy thereof to the Buyer promptly after such
filing.
e. Reporting Status; Public Trading Market; DTC Eligibility. So long as the
Buyer and/or Investments beneficially own any Securities, (i) the Company shall timely file,
prior to or on the date when due, all reports that would be required to be filed with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act if the Company had securities registered
12
under Section 12(b) or 12(g) of the Exchange Act; (ii) the Company shall not be operated as, or
report, to the SEC or any other Person, that the Company is a “ shell company ” or indicate to the
contrary to the SEC or any other Person; (iii) the Company shall take all other action under its
control necessary to ensure the availability of Rule 144 under the 1933 Act for the sale of Shares
by the Buyer at the earliest possible date; and (iv) the Company shall at all times while any
Securities are outstanding maintain its engagement of an independent registered public
accounting firm. Except as otherwise set forth in Transaction Documents, the Company shall
take all action under its control necessary to obtain and to continue the listing and trading of its
Common Stock (including, without limitation, all Registrable Securities) on the OTC Markets,
Inc. ( “ OTCM ” ) on the OTC Pink ( “ OTCP ” ), OTCQB ( “ OTCQB ” ), or OTCQX ( “ OTCQX ” ), and
will comply in all material respects with the Company ’ s reporting, filing and other obligations
under the by-laws or rules of the Financial Industry Regulatory Authority ( “ FINRA ” ). If, so
long as the Buyer and/or Investments beneficially own any of the Securities, the Company
receives any written notice from the OTCM, FINRA, or the SEC with respect to either any
alleged deficiency in the Company ’ s compliance with applicable rules and regulations (including
without limitation any comments from the SEC on any of the Company ’ s documents filed (or the
failure to have made any such filing) under the 1933 Act or the Exchange Act) (each, a
“ Regulatory Notice ” ), then the Company shall promptly, and in any event within two (2)
business days, provide copies of the Regulatory Notice to the Buyer, and shall promptly, and in
any event within five (5) business days of receipt of the Regulatory Notice (a “ Regulatory
Response ” ), respond in writing to the OTCM, FIRNA and/or SEC (as the case may be), setting
forth the Company ’ s explanation and/or response to the issues raised in the Regulatory Notice,
with a view towards maintaining and/or regaining full compliance with the applicable rules and
regulations of the OTCM, FIRNA and/or SEC and maintaining or regaining good standing of the
Company with the OTCM, FINRA and/or SEC, as the case may be, the intent being to ensure
that the Company maintain its reporting company status with the SEC and that its Common
Stock be and remain available for trading on the OTCP, OTCQB, or OTCQX. Further, at all
times after the 30th calendar day after the date of this Agreement, the Common Stock shall be
DWAC Operational, and the Common Stock shall not be subject to any DTC “ chill ” designation
or similar restriction on the clearing of the Common Stock through DTC.
f. Use of Proceeds. The Company shall use the proceeds from the sale of the
Debentures for working capital purposes only subject to customary restrictions. Absent the prior
written approval of a majority of the principal amount of the Debentures then outstanding, the
Company shall not use any portion of the proceeds of the sale of the Debentures to (i) repay any
indebtedness or other obligation of the Company incurred prior to the date of this Agreement
outside the normal course of business, (ii) pay any dividends or redemption amount on any of the
Company ’ s equity or equity equivalents, (iii) pay any amounts, whether on account of debt
obligations of the Company or otherwise, except for compensation, to any officer, director or
other related party of the Company or (iv) pay deferred compensation or any compensation to
any of the directors or officers of the Company in excess of the rate or amount paid or accrued
during the fiscal year ended December, 2017 (as base compensation and excluding any
discretionary amounts), other than modest increases consistent with prior practice that are
approved by the Company ’ s Board of Directors.
13
g. Available Shares. Commencing on the date of execution and delivery of this
Agreement, the Company shall have and maintain authorized and reserved for issuance, free
from preemptive rights, that number of shares equal to Seven Hundred percent (700%) (with the
understanding that Six Hundred percent (600%) shall be deemed satisfactory for the initial 45
calendar days after the date of this Agreement) of the number of shares of Common Stock (1)
issuable based upon the conversion of the then-outstanding Debentures (including accrued
interest thereon) as may be required to satisfy the conversion rights of the Buyer pursuant to the
terms and conditions of the Debenture (for the avoidance of doubt, this shall be calculated based
on the applicable conversion price that would result on or after the date that is 180 calendar days
after the issuance date of the respective Debenture(s) regardless of the date of calculation)
(without giving effect to the 4.99% limitation on ownership as set forth in the Debentures),
provided, however that for purposes of the foregoing calculation, the full indebtedness under the
Debentures shall be deemed immediately convertible and (2) issuable to the Buyer on future
Closing Dates, based upon the lowest traded price per share of the Common Stock on the date
before the most recent Closing Date (as reported by Bloomberg LP) (collectively in the
aggregate the “ Required Reserve Amount ” ). The Company shall monitor its compliance with the
foregoing requirements on an ongoing basis. If at any time the Company does not have available
an amount of authorized and non-issued Shares required to be reserved pursuant to this Section,
then the Company shall, without notice or demand by the Buyer, call within thirty (30) days of
such occurrence and hold within sixty (60) days of such occurrence a special meeting of
shareholders, for the sole purpose of increasing the number of shares authorized. Management
of the Company shall recommend to shareholders to vote in favor of increasing the number of
Common Stock authorized at the meeting. Members of the Company ’ s management shall also
vote all of their own shares in favor of increasing the number of Common Stock authorized at the
meeting. If the increase in authorized shares is approved by the stockholders at the meeting, the
Company shall implement the increase in authorized shares within one (1) business day
following approval at such meeting. Alternatively, to the extent permitted by applicable law, in
lieu of calling and holding a meeting as described above, the Company may, within thirty (30)
days of the date when the Company does not have available an amount of authorized and non-
issued Shares required to be reserved as described above, procure the written consent of
stockholders to increase the number of shares authorized, and provide the stockholders with
notice thereof as may be required under applicable law (including without limitation Section
14(c) of the Exchange Act and Regulation 14C thereunder). Upon obtaining stockholder
approval as aforesaid, the Company shall cause the appropriate increase in its authorized shares
of Common Stock within one (1) business day (or as soon thereafter as permitted by applicable
law). Company ’ s failure to comply with these provisions will be an Event of Default (as defined
in the Debentures).
h. Reimbursement. If (i) Buyer and/or Investments becomes a party defendant
in any capacity in any action or proceeding brought by any stockholder of the Company, in
connection with or as a result of the consummation of the transactions contemplated by the
Transaction Documents, or if the Buyer and/or Investments is impleaded in any such action,
proceeding or investigation by any Person, or (ii) the Buyer and/or Investments, other than by
reason of its own gross negligence, willful misconduct or breach of law (as adjudicated by a
court of law having proper jurisdiction and such adjudication is not subject to appeal), becomes a
party defendant in any capacity in any action or proceeding brought by the SEC against or
14
involving the Company or in connection with or as a result of the consummation of the
transactions contemplated by the Transaction Documents, or if the Buyer or Investments is
impleaded in any such action, proceeding or investigation by any Person, then in any such case,
the Company shall promptly reimburse the Buyer and/or Investments for its or their reasonable
legal and other expenses (including the cost of any investigation and preparation) incurred in
connection therewith. The reimbursement obligations of the Company under this paragraph shall
be in addition to any liability which the Company may otherwise have, shall extend upon the
same terms and conditions to any affiliates of the Buyer and/or Investments who are actually
named in such action, proceeding or investigation, and partners, directors, agents, employees and
controlling Persons (if any), as the case may be, of the Buyer, Investments and any such
Affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Company, the Buyer, Investments and any such Affiliate and any
such Person. Except as otherwise set forth in the Transaction Documents, the Company also
agrees that neither any Buyer, Investments nor any such Affiliate, partners, directors, agents,
employees or controlling Persons shall have any liability to the Company or any Person asserting
claims on behalf of or in right of the Company in connection with or as a result of the
consummation of the Transaction Documents.
i. The Company shall provide the Transfer Agent and/or the Buyer, Investments
or their respective brokerage and/or clearing firm with all relevant legal opinions and other
documentation requested by the Buyer or Investments in connection with the issuance of the
Conversion Shares or the Restricted Stock, or the sale thereof, to confirm the share issuance(s)
such that the Conversion Shares and/or Restricted Stock may be deposited with the applicable
brokerage and/or clearing firm.
j. No Payments to Affiliates or Related Parties. So long as any of the
Debentures remain outstanding, if the Debentures are in default, the Company shall not, absent
the prior written consent of the holders of all Debentures then outstanding, make any payments
to any of the Company ’ s or the Subsidiaries ’ respective affiliates or related parties, including
without limitation payments or prepayments of principal or interest accrued on any indebtedness
or obligation in favor of affiliates or related parties. Notwithstanding anything to the contrary
contained herein, the provisions of this Section 4(j) shall not apply to payments to the
Subsidiaries, or other businesses in which affiliates have an interest, made in the ordinary course
of business and consistent with past practice as disclosed in the SEC Documents.
k. Notice of Material Adverse Effect. The Company shall notify the Buyer
(and any subsequent holder of the Debentures), as soon as practicable and in no event later than
three (3) business days of the Company ’ s knowledge of any Material Adverse Effect on the
Company. For purposes of the foregoing, “ knowledge ” means the earlier of the Company ’ s
actual knowledge or the Company ’ s constructive knowledge upon due inquiry.
l. Public Disclosure. Except to the extent required by applicable law, absent
the Buyer ’ s prior written consent, the Company shall not reference the name of the Buyer in any
press release, securities disclosure, business plan, marketing or funding proposal.
m. Nature of Transaction; Savings Clause. It is the parties ’ express
understanding and agreement that the transactions contemplated by the Transaction Documents
15
constitute an investment and not a loan. If nonetheless such transactions are deemed to be a loan
(as adjudicated by a court of law having proper jurisdiction and such adjudication is not subject
to appeal), the Company shall not be obligated or required to pay interest at a rate that could
subject Buyer to either civil or criminal liability as a result of such rate exceeding the maximum
rate that the Buyer is permitted to charge under applicable law, and the Company ’ s obligations
under the Transaction Documents shall not be void or voidable on the basis of the Buyer ’ s lack
of any license or registration as a lender with any governmental authority. It is expressly
understood and agreed by the parties that neither the amounts payable pursuant to Section 12,
any redemption premium, remedy upon an Event of Default (as defined in the Debentures) or
any Acceleration Amount (as defined in the Debentures), original issue discount nor any
investment returns of the Buyer on the sale of the Debentures or the sale of any Conversion
Shares (whether unrealized or realized) shall be construed as interest. If, by the terms of the
Debentures, any other Transaction Document or any other instrument, Buyer is at any time
required or obligated to pay interest at a rate exceeding such maximum rate, interest payable
under the Debenture and/or such other Transaction Documents or other instrument shall be
computed (or recomputed) at such maximum rate, and the portion of all prior interest payments
(if any) exceeding such maximum shall be applied to payment of the outstanding principal of the
Debentures.
5. TRANSFER AGENT INSTRUCTIONS.
a. Transfer Agent Instruction Letter. On or before the Signing Closing Date,
the Company shall irrevocably instruct its Transfer Agent in writing using the letter substantially
in the form of Exhibit B annexed hereto, with only such modifications as the Buyer agrees to,
executed by the Company, the Buyer and the Transfer Agent (the “ Transfer Agent Instruction
Letter ” ), to (i) reserve that number of shares of Common Stock as is required under Section 4(g)
hereof, and (ii) issue Common Stock from time to time upon conversion of the Debentures in
such amounts as specified from time to time by the Buyer to the Transfer Agent in a Notice of
Conversion, in such denominations to be specified by the Buyer in connection with each
conversion of the Debentures. The Transfer Agent shall not be restricted from issuing shares
from only the allotment reserved hereunder for the Conversion Amount (as defined in the
Debentures), but instead may, to the extent necessary to satisfy the amount of shares issuable
upon conversion, issue shares above and beyond the amount reserved on account of the
Conversion Amount, without any additional instructions or authorization from the Company, and
the Company shall not provide the Transfer Agent with any instructions or documentation
contrary to the foregoing. As of the date of this Agreement, the Transfer Agent is Action Stock
Transfer Corporation. The Company shall at all times while any Debentures are outstanding
engage a Transfer Agent which is a party to the Transfer Agent Instruction Letter. If for any
reason the Company ’ s Transfer Agent is not a signatory of the Transfer Agent Instruction Letter
while any Debentures or Restricted Stock are outstanding and held by the Buyer and/or
Investments, then such Transfer Agent shall nonetheless be deemed bound by the Transfer Agent
Instruction Letter, and the Company shall neither (i) permit the Transfer Agent to disclaim,
disregard or refuse to abide by the Transfer Agent ’ s obligations, terms and agreements set forth
in the Transfer Agent Instruction Letter, nor (ii) issue any instructions to the Transfer Agent
contrary to the obligations, terms and agreements set forth in the Transfer Agent Instruction
Letter . The Company shall not terminate the Transfer Agent or otherwise change Transfer
16
Agents without at least fifteen (15) days prior written notice to the Buyer and with the Buyer ’ s
prior written consent to such change, which the Buyer may grant or withhold in its sole
discretion. The Company shall continuously monitor its compliance with the share reservation
requirements and, if and to the extent necessary to increase the number of reserved shares to
remain and be at least the Required Reserve Amount to account for any decrease in the Market
Price of the Common Stock, the Company shall immediately (and in any event within one (1)
business day) notify the Transfer Agent in writing of the reservation of such additional shares,
provided that in the event that the number of shares reserved for conversion of the Debentures is
less than the Required Reserve Amount, the Buyer may also directly instruct the Transfer Agent
to increase the reserved shares as necessary to satisfy the minimum reserved share requirement,
and the Transfer Agent shall act accordingly, provided, further, that the Company shall within
one (1) business day provide any written confirmation, assent or documentation thereof as the
Transfer Agent may request to act upon a share increase instruction delivered by the Buyer. The
Company shall provide the Buyer with a copy of all written instructions to the Company ’ s
Transfer Agent with respect to the reservation of shares simultaneously with the issuance of such
instructions to the Transfer Agent. The Company covenants that no instruction other than such
instructions referred to in this Section 5 and stop transfer instructions to give effect to Section
4(a) hereof prior to registration and sale of the Conversion Shares under the 1933 Act will be
given by the Company to the Transfer Agent and that the Conversion Shares shall otherwise be
freely transferable on the books and records of the Company as and to the extent provided in this
Agreement and applicable law. If the Buyer provides the Company and/or the Transfer Agent
with an opinion of counsel reasonably satisfactory to the Company that registration of a resale by
the Buyer of any of the Securities in accordance with clause (1)(B) of Section 4(a) of this
Agreement is not required under the 1933 Act, the Company shall (except as provided in clause
(2) of Section 4(a) of this Agreement) permit the de-legending or transfer of the Securities and,
in the case of the Conversion Shares, instruct the Company ’ s Transfer Agent to issue one or
more certificates for Common Stock without legend in such name and in such denominations as
specified by the Buyer.
b. Conversion. (i) The Company shall permit the Buyer to exercise the right to
convert the Debentures by faxing, emailing or delivering overnight an executed and completed
Notice of Conversion to the Company or the Transfer Agent. If so requested by the Buyer or the
Transfer Agent, the Company shall within one (1) business day respond with its endorsement so
as to confirm the outstanding principal amount of any Debenture submitted for conversion or
shall reconcile any difference with the Buyer promptly after receiving such Notice of
Conversion.
(ii)
The term “ Conversion Date ” means, with respect to any conversion
elected by the holder of the Debentures, the date specified in the Notice of Conversion, provided
the copy of the Notice of Conversion is given either via mail or facsimile to or otherwise
delivered to the Transfer Agent and/or the Company in accordance with the provisions hereof so
that it is received by the Transfer Agent and/or the Company on or before such specified date.
(iii) The Company shall deliver (or will cause the Transfer Agent to deliver)
the Conversion Shares issuable upon conversion as follows: (1) if the Company is then DWAC
Operational, via DWAC, (2) if the Common Stock is then eligible for the Depository Trust
Company ’ s Direct Registration System ( “ DRS ” ), if so requested by the Buyer, or (3) if the
17
Company is not then DWAC Operational or the Common Stock is not then eligible for DRS, in
certificated form, to the Buyer at the address specified in the Notice of Conversion (which may
be the Buyer ’ s address for notices as contemplated by Section 10 hereof or a different address)
via express courier, in each case within two (2) business days (the “ Delivery Date ” ) after (A) the
business day on which the Company or the Transfer Agent has received the Notice of
Conversion (by facsimile, email or other delivery) or (B) the date on which payment of interest
and principal on the Debentures, which the Company has elected to pay by the issuance of
Common Stock, as contemplated by the Debentures, was due, as the case may be.
c. Failure to Timely Issue Conversion Shares or De-Legended Shares. The
Company ’ s failure to issue and deliver Conversion Shares to the Buyer (either by DWAC, DRS
or in certificated form, as required by Section 5(b)) on or before the Delivery Date shall be
considered an Event of Default, which shall entitle the Buyer to certain remedies set forth in the
Debentures and provided by applicable law . Similarly, the Company ’ s failure to issue and
deliver Common Stock in unrestricted form without a restrictive legend when required under the
Transaction Documents shall entitle the Buyer to damages for the diminution in value (if any) of
the relevant shares between the date delivery was due versus the date ultimately delivered in
unrestricted form. The Company acknowledges that its failure to timely honor a Notice of
Conversion (or the occurrence of any other Event of Default) shall cause definable financial
hardship on the Buyer(s) and that the remedies set forth herein and in the Debentures are
reasonable and appropriate.
d. Duties of Company; Authorization. The Company shall inform the Transfer
Agent of the reservation of shares contemplated by Section 4(g) and this Section 5, and shall
keep current in its payment obligations to the Transfer Agent such that the Transfer Agent will
continue to process share transfers and the initial issuance of shares of Common Stock upon the
conversion of Debentures. The Company hereby authorizes and agrees to authorize the Transfer
Agent to correspond and otherwise communicate with the Buyer or their representatives in
connection with the foregoing and other matters related to the Common Stock. Further, the
Company hereby authorizes the Buyer or its representative to provide instructions to the Transfer
Agent that are consistent with the foregoing and instructs the Transfer Agent to honor any such
instructions. Should the Company fail for any reason to keep current in its payment obligations
to the Transfer Agent, the Buyer and/or Investments may pay such amounts as are necessary to
compensate the Transfer Agent for performing its duties with respect to share reservation,
issuance of Conversion Shares and/or de-legending certificates representing Restricted Stock,
and all amounts so paid shall be promptly reimbursed by the Company. If not so reimbursed
within thirty (30) days, such amounts shall, at the option of the Buyer and without prior notice to
or consent of the Company, be added to the principal amount due under the Debenture(s) held by
the Buyer, whereupon interest will begin to accrue on such amounts at the rate specified in the
Debentures.
e. Effect of Bankruptcy. The Buyer shall be entitled to exercise its conversion
privilege with respect to the Debentures notwithstanding the commencement of any case under
11 U.S.C. §101 et seq. ( the “ Bankruptcy Code ” ). In the event the Company is a debtor under the
Bankruptcy Code, the Company hereby waives, to the fullest extent permitted, any rights to
relief it may have under 11 U.S.C. §362 in respect of the Buyer ’ s conversion privilege. The
18
Company hereby waives, to the fullest extent permitted, any rights to relief it may have under 11
U.S.C. §362 in respect of the conversion of the Debentures. The Company agrees, without cost
or expense to the Buyer, to take or to consent to any and all action necessary to effectuate relief
under 11 U.S.C. §362.
6. CLOSINGS.
a. Signing Closing. Promptly upon the execution and delivery of this
Agreement, the Signing Debenture, Warrant, and all conditions in Sections 7 and 8 herein are
met (the “ Signing Closing Date ” ), (A) the Company shall deliver to the Buyer the following: (i)
the Signing Debenture and Warrant; (ii) the Transfer Agent Instruction Letter; (iii) duly executed
counterparts of the Transaction Documents; and (iv) an officer ’ s certificate of the Company
confirming the accuracy of the Company ’ s representations and warranties contained herein, and
(B) the Buyer shall deliver to the Company the following: (i) the Signing Purchase Price and (ii)
duly executed counterparts of the Transaction Documents (as applicable). The Company shall
immediately pay the fees due under Section 12 of this Agreement upon receipt of the Signing
Purchase Price if Buyer does not withhold such amounts from the Signing Purchase Price
pursuant to Section 12.
b. Second Closing. At any time after sixty (60) days following the Signing
Closing Date, subject to the mutual agreement of the Buyer and the Company, for the “ Second
Closing Date ” and subject to satisfaction of the conditions set forth in Sections 7 and 8, (A) the
Company shall deliver to the Buyer the following: (i) the Second Debenture and Warrant; (ii) an
amendment to the Transfer Agent Instruction Letter instructing the Transfer Agent to reserve that
number of shares of Common Stock as is required under Section 4(g) hereof, if necessary; and
(iii) an officer ’ s certificate of the Company confirming, as of the Second Closing Date, the
accuracy of the Company ’ s representations and warranties contained herein and updating
Schedules 3(b), 3(c) and 3(k) as of the Second Closing Date, and (B) the Buyer shall deliver to
the Company the Second Purchase Price.
c. Location and Time of Closings. Each Closing shall be deemed to occur on
the related Closing Date at the office of the Buyer ’ s counsel and shall take place no later than
5:00 P.M., east coast time, on such day or such other time as is mutually agreed upon by the
Company and the Buyer.
7. CONDITIONS TO THE COMPANY ’ S OBLIGATION TO SELL.
The Company ’ s obligation to sell the Debentures to the Buyer pursuant to this Agreement
on each Closing Date is conditioned upon:
a. Purchase Price. Delivery to the Company of good funds as payment in full
of the respective Purchase Price for the Debentures at each Closing in accordance with this
Agreement;
b. Representations and Warranties; Covenants. The accuracy on the Closing
Date of the representations and warranties of the Buyer contained in this Agreement, each as if
19
made on such date, and the performance by the Buyer on or before such date of all covenants and
agreements of the Buyer required to be performed on or before such date; and
c. Laws and Regulations; Consents and Approvals. There shall not be in
effect any law, rule or regulation prohibiting or restricting the transactions contemplated hereby,
or requiring any consent or approval which shall not have been obtained.
8. CONDITIONS TO THE BUYER ’ S OBLIGATION TO PURCHASE.
The Buyer ’ s obligation to purchase the Debentures at each Closing is conditioned upon:
a. Transaction Documents. The execution and delivery of this Agreement by
the Company;
b. Debenture(s). Delivery by the Company to the Buyer of the Debentures to be
purchased in accordance with this Agreement;
c. Section 4(2) Exemption. The Debentures and the Conversion Shares shall be
exempt from registration under the Securities Act of 1933 (as amended), pursuant to Section 4(2)
thereof;
d. DWAC Status . The Common Stock shall be DWAC Operational;
e. Representations and Warranties; Covenants. The accuracy in all material
respects on the Closing Date of the representations and warranties of the Company contained in
this Agreement, each as if made on such date, and the performance by the Company on or before
such date of all covenants and agreements of the Company required to be performed on or before
such date;
f. Good-faith Opinion. It should be Buyer ’ s reasonable belief that (i) no Event
of Default under the terms of any outstanding indebtedness of the Company shall have occurred
or would likely occur with the passage of time and (ii) no material adverse change in the
financial condition or business operations of the Company shall have occurred;
g. Legal Proceedings. There shall be no litigation, criminal or civil, regulatory
impairment or other legal and/or administrative proceedings challenging or seeking to limit the
Company ’ s ability to issue the Securities or the Common Stock;
h. [Reserved];
i. Corporate Resolutions. Delivery by the Company to the Buyer a copy of
resolutions of the Company ’ s board of directors, approving and authorizing the execution,
delivery and performance of the Transaction Documents and the transactions contemplated
thereby in the form attached hereto as Exhibit C ( the “ Irrevocable Resolutions ” );
j. Officer ’ s Certificate. Delivery by the Company to the Buyer of a certificate
of the Chief Executive Officer of the Company in the form attached hereto as Exhibit D ;
20
k. Search Results. Delivery by the Company to the Buyer of copies of UCC
search reports, issued by the Secretary of State of the state of incorporation of the Company and
each Subsidiary, dated such a date as is reasonably acceptable to Buyer, listing all effective
financing statements which name the Company or Subsidiary (as applicable), under its present
name and any previous names, as debtor, together with copies of such financing statements;
l. Certificate of Good Standing. Delivery by the Company to the Buyer of a
copy of a certificate of good standing with respect to the Company, issued by the Secretary of
State of the state of incorporation of the Company, dated such a date as is reasonably acceptable
to Buyer, evidencing the good standing thereof;
m. Laws and Regulations; Consents and Approvals. There shall not be in
effect any law, rule or regulation prohibiting or restricting the transactions contemplated hereby,
or requiring any consent or approval which shall not have been obtained; and
n. Adverse Changes. From and after the date hereof to and including each
Closing Date, (i) the trading of the Common Stock shall not have been suspended by the SEC,
FINRA, or any other governmental or self-regulatory organization, and trading in securities
generally on OTCM shall not have been suspended or limited, nor shall minimum prices been
established for securities traded on the OTCM; (ii) there shall not have occurred any outbreak or
escalation of hostilities involving the United States or any material adverse change in any
financial market that in either case in the reasonable judgment of the Buyer makes it
impracticable or inadvisable to purchase the Debentures.
9. GOVERNING LAW; MISCELLANEOUS.
a. MANDATORY FORUM SELECTION.
ANY DISPUTE ARISING
UNDER, RELATING TO, OR IN CONNECTION WITH THE AGREEMENT OR RELATED
TO ANY MATTER WHICH IS THE SUBJECT OF OR INCIDENTAL TO THE
AGREEMENT (WHETHER OR NOT SUCH CLAIM IS BASED UPON BREACH OF
CONTRACT OR TORT) SHALL BE SUBJECT TO THE EXCLUSIVE JURISDICTION AND
VENUE OF THE STATE AND/OR FEDERAL COURTS LOCATED IN MIAMI-DADE
COUNTY, FLORIDA. THIS PROVISION IS INTENDED TO BE A “ MANDATORY ”
FORUM SELECTION CLAUSE AND GOVERNED BY AND INTERPRETED
CONSISTENTLY WITH FLORIDA LAW.
b. Governing Law. Except in the case of the Mandatory Forum Selection
clause above, this Agreement shall be delivered and accepted in and shall be deemed to be
contracts made under and governed by the internal laws of the State of Nevada, and for all
purposes shall be construed in accordance with the laws of the State of Nevada, without giving
effect to the choice of law provisions. To the extent determined by the applicable court
described above, the Company shall reimburse the Buyer for any reasonable legal fees and
disbursements incurred by the Buyer in enforcement of or protection of any of its rights under
any of the Transaction Documents.
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c. Waivers. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate
as a waiver thereof.
d. Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties hereto.
e. Construction. All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
f. Facsimiles; E-mails. A facsimile or email transmission of this signed
Agreement or a Notice of Conversion under the Debentures shall be legal and binding on all
parties hereto. Such electronic signatures shall be the equivalent of original signatures.
g. Counterparts. This Agreement may be signed in one or more counterparts,
each of which shall be deemed an original.
h. Headings. The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.
i. Enforceability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction.
j. Amendment. This Agreement may be amended only by the written consent
of a majority in interest of the holders of the Debentures and an instrument in writing signed by
the Company.
k. Entire Agreement. This Agreement, together with the other Transaction
Documents, supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
l. No Strict Construction. This Agreement shall be construed as if both Parties
had equal say in its drafting, and thus shall not be construed against the drafter.
m. Further Assurances. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may reasonably request
in order to carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
10. NOTICES.
Any notice required or permitted hereunder shall be given in writing (unless otherwise
specified herein) and shall be deemed effectively given on the earliest of:
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a. the date delivered, if delivered by personal delivery as against written receipt
therefor or by confirmed facsimile or email transmission,
b. the third (3 rd ) business day after deposit, postage prepaid, in the United States
Postal Service by registered or certified mail, or
c. the first (1 st ) business day after deposit with a recognized courier service (e.g.
FedEx, UPS, DHL, US Postal Service) for delivery by next-day express courier, with delivery
costs and fees prepaid,
in each case, addressed to each of the other parties thereunto entitled at the following addresses
(or at such other addresses as such party may designate by ten (10) days ’ advance written notice
similarly given to each of the other parties hereto):
COMPANY :
Parallax Health Sciences, Inc.
1327 Ocean Avenue, Suite B
Santa Monica, CA 90401
Attention: Paul Arena, Chief Executive Officer
Email: Paul@ParallaxCare.com
With copies to (which shall not constitute notice):
_______________________________
_______________________________
_______________________________
Attention: ______________________
Email: _________________________
BUYER:
Peak One Opportunity Fund, L.P.
333 South Hibiscus Drive
Miami Beach, FL 33139
Attention: Jason Goldstein
Email: jgoldstein@peakoneinvestments.com
With copies to (which shall not constitute notice):
Anthony L.G., PLLC
330 Clematis Street, Suite 217
West Palm Beach, FL 33401
Attention: Chad Friend, Esq., LL.M.
Email: CFriend@AnthonyPLLC.com
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11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company ’ s
representations and warranties herein shall survive for so long as any Debentures are
outstanding, and shall inure to the benefit of the Buyer, its successors and assigns.
12. FEES; EXPENSES.
a. Commitment Fee . A non-accountable fee (the “ Commitment Fee ” ) of (i)
Five Thousand and 00/100 Dollars ($5,000.00) on the Signing Closing Date (with respect to the
Signing Debenture), and Five Thousand and 00/100 Dollars ($5,000.00) on the Second Closing
Date (with respect to the Second Debenture), shall be withheld from the purchase price of the
respective debenture to cover the Buyer ’ s accounting fees, legal fees, and other transactional
costs incurred in connection with the transactions contemplated by this Agreement. The
Commitment Fee shall be paid on the respective closing dates if Buyer does not withhold such
amounts from the respective purchase price pursuant to Section 12(b). In addition, at the time of
Buyer ’ s funding of each Debenture, the Company shall issue to Investments as a commitment
fee, a common stock purchase warrant to purchase 300,000 shares of the Company ’ s common
stock pursuant to the terms of the Warrant (all common stock purchase warrants issuable
hereunder, including now and in the future, shall be referred to, in the aggregate, as the
“ Warrant ” ).
b. Disbursements. In furtherance of the foregoing, the Company hereby
authorizes the Buyer to deduct the cash portion of the Commitment Fee from the Signing
Purchase Price and Second Purchase Price, and transmit same to the respective payee.
[Signature Page Follows]
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IN WITNESS WHEREOF , this Agreement has been duly executed by the Buyer and
the Company as of the date first set forth above.
COMPANY:
PARALLAX HEALTH SCIENCES, INC.
By: ______________________________________
Name: Paul Arena
Title: Chief Executive Officer
BUYER:
PEAK ONE OPPORTUNITY FUND, L.P.
By: Peak One Investments, LLC,
General Partner
By: ___________________________________
Name: Jason Goldstein
Title: Managing Member
[Signature Page to Securities Purchase Agreement]
SCHEDULE 3(b)
COMPANY ORGANIZATION CHART
Subsidiary / Affiliate
Jurisdiction of Incorporation
Percentage of Ownership
Name and Relationship
SCHEDULE 3(c)
COMPANY CAPITALIZATION TABLE
COMMON STOCK AND COMMON STOCK EQUIVALENTS
ISSUED, OUTSTANDING AND RESERVED
DESCRIPTION
AMOUNT
Authorized Common Stock
Authorized Capital Stock
Authorized Common Stock
Issued Common Stock
Outstanding Common Stock
Treasury Stock
Authorized, but unissued
Authorized Preferred Stock
Issued Preferred Stock
Reserved for Equity Incentive Plans
Reserved for Convertible Debt
Reserved for Options and Warrants
Reserved for Other Purposes
TOTAL COMMON STOCK AND COMMON
STOCK EQUIVALENTS OUTSTANDING
EXHIBITS
Exhibit A
FORM OF DEBENTURE
Exhibit B
FORM OF TRANSFER AGENT INSTRUCTION LETTER
Exhibit C
FORM OF RESOLUTIONS OF THE BOARD OF DIRECTORS
Exhibit D
FORM OF OFFICER ’ S CERTIFICATE
EXHIBIT B
PARALLAX HEALTH SCIENCES, INC.
IRREVOCABLE TRANSFER AGENT INSTRUCTION LETTER
(see attached)
EQUITY PURCHASE AGREEMENT
This equity purchase agreement is entered into as of November 14, 2018 (this
" Agreement" ), by and between Parallax Health Sciences, Inc., a Nevada corporation (the
" Company "), and Peak One Opportunity Fund, L.P., a Delaware limited partnership (the
" Investor ").
WHEREAS , the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to the Investor, from time to time as
provided herein, and the Investor shall purchase up to Ten Million Dollars ($10,000,000.00) of
the Company ’ s Common Stock (as defined below);
NOW, THEREFORE , the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 DEFINED TERMS. As used in this Agreement, the following terms shall
have the following meanings specified or indicated (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
" Agreement" shall have the meaning specified in the preamble hereof.
“ Average Daily Trading Value ” shall mean the average trading volume of the
Company ’ s Common Stock in the ten (10) Trading Days immediately preceding the respective
Put Date multiplied by the lowest closing bid price of the Company ’ s Common Stock in the
ten (10) Trading Days immediately preceding the respective Put Date.
“ Bankruptcy Law ” means Title 11, U.S. Code, or any similar federal or state law for
the relief of debtors.
" Claim Notice" shall have the meaning specified in Section 9.3(a).
“ Clearing Costs ” shall mean all of the Investor ’ s brokerage firm, clearing firm,
Transfer Agent fees, and attorney fees, with respect to the deposit of the Put Shares.
“ Clearing Date ” shall be the date on which the Investor receives the Put Shares in its
brokerage account.
" Closing" shall mean one of the closings of a purchase and sale of shares of
Common Stock pursuant to Section 2.3.
" Closing Certificate" shall mean the closing certificate of the Company in the form
of Exhibit B hereto.
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“ Closing Date ” shall mean the date of any Closing hereunder.
“ Commitment Shares ” shall mean the 800,000 shares of the Company ’ s common
stock as a commitment fee hereunder (400,000 of which shall be issued to the Investor and
400,000 of which shall be issued to Peak One Investments, LLC ( “ Investments ” )).
" Commitment Period " shall mean the period commencing on the Execution Date,
and ending on the earlier of (i) the date on which the Investor shall have purchased Put Shares
pursuant to this Agreement equal to the Maximum Commitment Amount, (ii) 24 months after
the initial effectiveness of the Registration Statement, (iii) written notice of termination by the
Company to the Investor (which shall not occur during any Valuation Period or at any time
that the Investor holds any of the Put Shares), (iv) the Registration Statement is no longer
effective, or (v) the date that, pursuant to or within the meaning of any Bankruptcy Law, the
Company commences a voluntary case or any Person commences a proceeding against the
Company, a Custodian is appointed for the Company or for all or substantially all of its
property or the Company makes a general assignment for the benefit of its creditors; provided,
however, that the provisions of Articles III, IV, V, VI, IX and the agreements and covenants of
the Company and the Investor set forth in Article X shall survive the termination of this
Agreement.
" Common Stock" shall mean the Company's common stock, $0.001 par value per
share, and any shares of any other class of common stock whether now or hereafter
authorized, having the right to participate in the distribution of dividends (as and when
declared) and assets (upon liquidation of the Company).
“ Common Stock Equivalents ” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, right, option, warrant or other
instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
" Company " shall have the meaning specified in the preamble to this Agreement.
“ Custodian ” means any receiver, trustee, assignee, liquidator or similar official
under any Bankruptcy Law.
" Damages" shall mean any loss, claim, damage, liability, cost and expense
(including, without limitation, reasonable attorneys' fees and disbursements and costs and
expenses of expert witnesses and investigation).
" Dispute Period" shall have the meaning specified in Section 9.3(a).
“ DTC ” shall mean The Depository Trust Company, or any successor performing
substantially the same function for the Company.
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“ DTC/FAST Program ” shall mean the DTC ’ s Fast Automated Securities Transfer
Program.
“ DWAC ” shall mean Deposit Withdrawal at Custodian as defined by the DTC.
“ DWAC Eligible ” shall mean that (a) the Common Stock is eligible at DTC for full
services pursuant to DTC ’ s Operational Arrangements, including, without limitation, transfer
through DTC ’ s DWAC system, (b) the Company has been approved (without revocation) by
the DTC ’ s underwriting department, (c) the Transfer Agent is approved as an agent in the
DTC/FAST Program, (d) the Commitment Shares or Put Shares, as applicable, are otherwise
eligible for delivery via DWAC, and (e) the Transfer Agent does not have a policy prohibiting
or limiting delivery of the Commitment Shares or Put Shares, as applicable, via DWAC.
“ DWAC Shares ” means shares of Common Stock that are (i) issued in electronic
form, (ii) freely tradable and transferable and without restriction on resale and (iii) timely
credited by the Company to the Investor ’ s or its designee ’ s specified DWAC account with
DTC under the DTC/FAST Program, or any similar program hereafter adopted by DTC
performing substantially the same function.
" Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
“ Exchange Cap ” shall have the meaning set forth in Section 7.1(c).
" Execution Date" shall mean the date of this Agreement.
" FINRA" shall mean the Financial Industry Regulatory Authority, Inc.
" Investment Amount" shall mean the Put Shares referenced in the Put Notice
multiplied by the Purchase Price minus the Clearing Costs.
" Indemnified Party " shall have the meaning specified in Section 9.2.
" Indemnifying Party " shall have the meaning specified in Section 9.2.
" Indemnity Notice" shall have the meaning specified in Section 9.3(e).
“ Initial Purchase Price ” shall mean 88% of the lowest closing bid price of the
Company ’ s Common Stock on the Trading Day immediately preceding the respective Put
Date.
" Investor " shall have the meaning specified in the preamble to this Agreement.
“ Lien ” means a lien, charge, pledge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
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" Market Price" shall mean the lesser of the (i) lowest closing bid price of the
Common Stock on the Principal Market on the Trading Day immediately preceding the
respective Put Date, or (ii) lowest closing bid price of the Common Stock on the Principal
Market for any Trading Day during the Valuation Period.
" Material Adverse Effect" shall mean any effect on the business, operations,
properties, or financial condition of the Company and the Subsidiaries that is material and
adverse to the Company and the Subsidiaries and/or any condition, circumstance, or situation
that would prohibit or otherwise materially interfere with the ability of the Company to enter
into and perform its obligations under any Transaction Document.
" Maximum Commitment Amount" shall mean Ten Million Dollars
($10,000,000.00).
" Person" shall mean an individual, a corporation, a partnership, an association, a
trust or other entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
" Principal Market" shall mean any of the national exchanges (i.e. NYSE, NYSE
AMEX, Nasdaq), or principal quotation systems (i.e. OTCQX, OTCQB, OTC Pink, the OTC
Bulletin Board), or other principal exchange or recognized quotation system which is at the
time the principal trading platform or market for the Common Stock.
" Purchase Price" shall mean 88% of the Market Price on such date on which the
Purchase Price is calculated in accordance with the terms and conditions of this Agreement.
" Put" shall mean the right of the Company to require the Investor to purchase shares
of Common Stock, subject to the terms and conditions of this Agreement.
" Put Date" shall mean any Trading Day during the Commitment Period that a Put
Notice is deemed delivered pursuant to Section 2.2(b).
" Put Notice " shall mean a written notice, substantially in the form of Exhibit A
hereto, to Investor setting forth the Put Shares which the Company intends to require Investor
to purchase pursuant to the terms of this Agreement.
" Put Shares" shall mean all shares of Common Stock issued, or that the Company
shall be entitled to issue, per any applicable Put Notice in accordance with the terms and
conditions of this Agreement.
" Registration Statement " shall have the meaning specified in Section 6.4.
" Regulation D" shall mean Regulation D promulgated under the Securities Act.
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“ Required Minimum ” shall mean, as of any date, the maximum aggregate number of
shares of Common Stock then issued or potentially issuable in the future pursuant to the
Transaction Documents, including any Commitment Shares.
" Rule 144" shall mean Rule 144 under the Securities Act or any similar provision
then in force under the Securities Act.
" SEC" shall mean the United States Securities and Exchange Commission.
“ SEC Documents ” shall have the meaning specified in Section 4.5.
“ Securities" means, collectively, the Put Shares and Commitment Shares.
" Securities Act" shall mean the Securities Act of 1933, as amended.
“ Short Sales ” shall mean all “ short sales ” as defined in Rule 200 of Regulation
SHO under the Exchange Act.
“ Subsidiary ” means any Person the Company wholly-owns or controls, or in which
the Company, directly or indirectly, owns a majority of the voting stock or similar voting
interest, in each case that would be disclosable pursuant to Item 601(b)(21) of Regulation S-K
promulgated under the Securities Act.
" Third Party Claim " shall have the meaning specified in Section 9.3(a).
“ Trading Day ” shall mean a day on which the Principal Market shall be open for
business.
“ Transaction Documents ” shall mean this Agreement, the registration rights
agreement of even date, and all schedules and exhibits hereto and thereto.
" Transfer Agent" shall mean Action Stock Transfer Corporation, the current transfer
agent of the Company, with a mailing address of 2469 E. Fort Union Blvd., Suite 214, Salt
Lake City, UT 84121, and any successor transfer agent of the Company.
" Valuation Period " shall mean the period of seven (7) Trading Days immediately
following the Clearing Date associated with the applicable Put Notice during which the
Purchase Price of the Common Stock is valued. The Valuation Period shall begin on the first
Trading Day following the Clearing Date.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1
PUTS. Upon the terms and conditions set forth herein (including,
without limitation, the provisions of Article VII), the Company shall have the right, but not the
obligation, to direct the Investor, by its delivery to the Investor of a Put Notice from time to time,
5
to purchase Put Shares (i) in a minimum amount not less than $20,000.00 and (ii) in a maximum
amount up to the lesser of (a) $250,000.00 or (b) 200% of the Average Daily Trading Value.
Section 2.2 MECHANICS.
(a)
PUT NOTICE. At any time and from time to time during the
Commitment Period, except as provided in this Agreement, the Company may deliver a Put
Notice to Investor, subject to satisfaction of the conditions set forth in Section 7.2 and
otherwise provided herein. The initial price per share identified in the respective Put Notice
shall be equal to the Initial Purchase Price, subject to adjustment during the Valuation Period
as provided in this Agreement. The Company shall deliver, or cause to be delivered, the Put
Shares as DWAC Shares to the Investor within two (2) Trading Days following the Put Date.
(b)
DATE OF DELIVERY OF PUT NOTICE. A Put Notice shall be
deemed delivered on (i) the Trading Day it is received by email by the Investor if such notice
is received on or prior to 9:00 a.m. New York time or (ii) the immediately succeeding Trading
Day if it is received by email after 9:00 a.m. New York time on a Trading Day or at any time
on a day which is not a Trading Day. The Company shall not deliver another Put Notice to the
Investor within ten (10) Trading Days of a prior Put Notice.
Section 2.3
CLOSINGS. At the end of the Valuation Period, the Purchase Price for
the respective Put Shares shall be established as provided in this Agreement. If the value of the
Put Shares delivered to the Investor causes the Company to exceed the Maximum Commitment
Amount, then immediately after the Valuation Period the Investor shall return to the Company
the surplus amount of Put Shares associated with such Put and the Purchase Price with respect to
such Put shall be reduced by any Clearing Costs related to the return of such Put Shares. The
Closing of a Put shall occur within three (3) Trading Days following the end of the Valuation
Period, whereby the Investor shall deliver the Investment Amount by wire transfer of
immediately available funds to an account designated by the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Company that:
Section 3.1
INTENT. The Investor is entering into this Agreement for its own
account and the Investor has no present arrangement (whether or not legally binding) at any
time to sell the Securities to or through any Person in violation of the Securities Act or any
applicable state securities laws; provided, however, that the Investor reserves the right to
dispose of the Securities at any time in accordance with federal and state securities laws
applicable to such disposition.
Section 3.2
NO LEGAL ADVICE FROM THE COMPANY . The Investor
acknowledges that it has had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with its own legal counsel and investment and tax advisors.
The Investor is relying solely on such counsel and advisors and not on any statements or
6
representations of the Company or any of its representatives or agents for legal, tax or
investment advice with respect to this investment, the transactions contemplated by this
Agreement or the securities laws of any jurisdiction.
Section 3.3
ACCREDITED INVESTOR. The Investor is an accredited investor
as defined in Rule 501(a)(3) of Regulation D, and the Investor has such experience in business
and financial matters that it is capable of evaluating the merits and risks of an investment in
the Securities. The Investor acknowledges that an investment in the Securities is speculative
and involves a high degree of risk.
Section 3.4
AUTHORITY. The Investor has the requisite power and authority to
enter into and perform its obligations under this Agreement and the other Transaction
Documents and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the other Transaction Documents and the
consummation by it of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action and no further consent or authorization of the Investor is
required. Each Transaction Document to which it is a party has been duly executed by the
Investor, and when delivered by the Investor in accordance with the terms hereof, will
constitute the valid and binding obligation of the Investor enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by other equitable
principles of general application.
Section 3.5
NOT AN AFFILIATE. The Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the Company.
Section 3.6
ORGANIZATION AND STANDING. The Investor is an entity duly
incorporated or formed, validly existing and in good standing under the laws of the jurisdiction
of its incorporation or formation with full right, corporate, partnership, limited liability
company or similar power and authority to enter into and to consummate the transactions
contemplated by this Agreement and the other Transaction Documents.
Section 3.7
ABSENCE OF CONFLICTS. The execution and delivery of this
Agreement and the other Transaction Documents, and the consummation of the transactions
contemplated hereby and thereby and compliance with the requirements hereof and thereof,
will not (a) violate any law, rule, regulation, order, writ, judgment, injunction, decree or award
binding on the Investor, (b) violate any provision of any indenture, instrument or agreement to
which the Investor is a party or is subject, or by which the Investor or any of its assets is
bound, or conflict with or constitute a material default thereunder, (c) result in the creation or
imposition of any lien pursuant to the terms of any such indenture, instrument or agreement, or
constitute a breach of any fiduciary duty owed by the Investor to any third party, or (d) require
the approval of any third-party (that has not been obtained) pursuant to any material contract,
instrument, agreement, relationship or legal obligation to which the Investor is subject or to
which any of its assets, operations or management may be subject.
7
Section 3.8
DISCLOSURE; ACCESS TO INFORMATION . The Investor had
an opportunity to review copies of the SEC Documents filed on behalf of the Company and
has had access to all publicly available information with respect to the Company.
Section 3.9
MANNER OF SALE. At no time was the Investor presented with or
solicited by or through any leaflet, public promotional meeting, television advertisement or
any other form of general solicitation or advertising.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor that, except as disclosed in the
SEC Documents or except as set forth in the disclosure schedules hereto:
Section 4.1
ORGANIZATION OF THE COMPANY. The Company and each
of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or organization, with
the requisite power and authority to own and use its properties and assets and to carry on its
business as currently conducted. Neither the Company nor any Subsidiary is in violation nor
default of any of the provisions of its respective certificate or articles of incorporation, bylaws
or other organizational or charter documents. Each of the Company and the Subsidiaries is
duly qualified to conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not have or reasonably be expected to result in a Material
Adverse Effect and no proceeding has been instituted in any such jurisdiction revoking,
limiting or curtailing or seeking to revoke, limit or curtail such power and authority or
qualification.
Section 4.2
AUTHORITY. The Company has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement and the other
Transaction Documents. The execution and delivery of this Agreement and the other
Transaction Documents by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary corporate action
and no further consent or authorization of the Company or its Board of Directors or
stockholders is required. Each of this Agreement and the other Transaction Documents has
been duly executed and delivered by the Company and constitutes a valid and binding
obligation of the Company enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
Section 4.3
CAPITALIZATION. Except as set forth on Schedule 4.3, the
Company has not issued any capital stock since its most recently filed periodic report under
the Exchange Act, other than pursuant to the exercise of employee stock options under the
Company ’ s stock option plans, the issuance of shares of Common Stock to employees
8
pursuant to the Company ’ s employee stock purchase plans and pursuant to the conversion
and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently
filed periodic report under the Exchange Act. No Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as set forth on Schedule 4.3 a nd except
as a result of the purchase and sale of the Securities, there are no outstanding options,
warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or exercisable or exchangeable
for, or giving any Person any right to subscribe for or acquire any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock or Common
Stock Equivalents. The issuance and sale of the Securities will not obligate the Company to
issue shares of Common Stock or other securities to any Person (other than the Investor) and
will not result in a right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under any of such securities. There are no stockholders
agreements, voting agreements or other similar agreements with respect to the Company ’ s
capital stock to which the Company is a party or, to the knowledge of the Company, between
or among any of the Company ’ s stockholders.
Section 4.4
LISTING AND MAINTENANCE REQUIREMENTS.
The
Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is likely to have the
effect of, terminating the registration of the Common Stock under the Exchange Act nor has
the Company received any notification that the SEC is contemplating terminating such
registration. The Company has not, in the twelve (12) months preceding the date hereof,
received notice from the Principal Market on which the Common Stock is or has been listed or
quoted to the effect that the Company is not in compliance with the listing or maintenance
requirements of such Principal Market. The Company is, and has no reason to believe that it
will not in the foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.
Section 4.5
SEC DOCUMENTS; DISCLOSURE. Except as set forth on
Schedule 4.5 , the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by the Company under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the one (1) year preceding the
date hereof (or such shorter period as the Company was required by law or regulation to file
such material) (the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein as the “ SEC
Documents ” ) on a timely basis or has received a valid extension of such time of filing and has
filed any such SEC Documents prior to the expiration of any such extension. As of their
respective dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act and the Exchange Act, as applicable, and other federal laws, rules and
regulations applicable to such SEC Documents, and none of the SEC Documents when filed
contained any untrue statement of a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial statements of the
9
Company included in the SEC Documents comply as to form and substance in all material
respects with applicable accounting requirements and the published rules and regulations of
the SEC or other applicable rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except (a) as may be otherwise
indicated in such financial statements or the notes thereto or (b) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial position of the
Company as of the dates thereof and the results of operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal, immaterial, year-end audit
adjustments). Except with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms that neither it nor any
other Person acting on its behalf has provided the Investor or its agents or counsel with any
information that it believes constitutes or might constitute material, non-public information.
The Company understands and confirms that the Investor will rely on the foregoing
representation in effecting transactions in securities of the Company.
Section 4.6
VALID ISSUANCES. The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents, will be duly and
validly issued, fully paid, and non-assessable, free and clear of all Liens imposed by the
Company other than restrictions on transfer provided for in the Transaction Documents.
Section 4.7
NO CONFLICTS. The execution, delivery and performance of this
Agreement and the other Transaction Documents by the Company and the consummation by
the Company of the transactions contemplated hereby and thereby, including, without
limitation, the issuance of the Put Shares and the Commitment Shares, do not and will not: (a)
result in a violation of the Company ’ s or any Subsidiary ’ s certificate or articles of
incorporation, by-laws or other organizational or charter documents, (b) conflict with, or
constitute a material default (or an event that with notice or lapse of time or both would
become a material default) under, result in the creation of any Lien upon any of the properties
or assets of the Company or any Subsidiary, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture, instrument or any
"lock-up" or similar provision of any underwriting or similar agreement to which the
Company or any Subsidiary is a party, or (c) result in a violation of any federal, state or local
law, rule, regulation, order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any Subsidiary or by which any property or asset of
the Company or any Subsidiary is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect) nor is the Company
otherwise in violation of, conflict with or in default under any of the foregoing. The business
of the Company is not being conducted in violation of any law, ordinance or regulation of any
governmental entity, except for possible violations that either singly or in the aggregate do not
and will not have a Material Adverse Effect. The Company is not required under federal, state
or local law, rule or regulation to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to execute, deliver
or perform any of its obligations under this Agreement or the other Transaction Documents
10
(other than any SEC, FINRA or state securities filings that may be required to be made by the
Company subsequent to any Closing or any registration statement that may be filed pursuant
hereto); provided that, for purposes of the representation made in this sentence, the Company
is assuming and relying upon the accuracy of the relevant representations and agreements of
Investor herein.
Section 4.8
NO MATERIAL ADVERSE CHANGE. No event has occurred that
would have a Material Adverse Effect on the Company that has not been disclosed in
subsequent SEC filings.
Section 4.9
LITIGATION AND OTHER PROCEEDINGS. Except as disclosed
in the SEC Documents or as set forth on Schedule 4.9, there are no actions, suits,
investigations, inquiries or proceedings pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their respective
properties, nor has the Company received any written or oral notice of any such action, suit,
proceeding, inquiry or investigation, which would have a Material Adverse Effect. No
judgment, order, writ, injunction or decree or award has been issued by or, to the knowledge
of the Company, requested of any court, arbitrator or governmental agency which would have
a Material Adverse Effect. There has not been, and to the knowledge of the Company, there is
not pending or contemplated, any investigation by the SEC involving the Company, any
Subsidiary or any current or former director or officer of the Company or any Subsidiary.
Section 4.10
REGISTRATION RIGHTS. Except as set forth on Schedule 4.10,
no Person (other than the Investor) has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company or any Subsidiary.
ARTICLE V
COVENANTS OF INVESTOR
Section 5.1
COMPLIANCE WITH LAW; TRADING IN SECURITIES. The
Investor's trading activities with respect to shares of Common Stock will be in compliance
with all applicable state and federal securities laws and regulations and the rules and
regulations of FINRA and the Principal Market.
Section 5.2
SHORT SALES AND CONFIDENTIALITY. Neither the Investor,
nor any affiliate of the Investor acting on its behalf or pursuant to any understanding with it,
will execute any Short Sales during the period from the date hereof to the end of the
Commitment Period. For the purposes hereof, and in accordance with Regulation SHO, the
sale after delivery of a Put Notice of such number of shares of Common Stock reasonably
expected to be purchased under a Put Notice shall not be deemed a Short Sale. The Investor
shall, until such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company in accordance with the terms of this Agreement, maintain the
confidentiality of the existence and terms of this transaction and the information included in
the Transaction Documents.
11
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1
[Intentionally Omitted.]
Section 6.2
LISTING OF COMMON STOCK . The Company shall promptly
secure the listing of all of the Put Shares and Commitment Shares to be issued to the Investor
hereunder on the Principal Market (subject to official notice of issuance) and shall use
commercially reasonable best efforts to maintain, so long as any shares of Common Stock
shall be so listed, the listing of all such Put Shares and Commitment Shares from time to time
issuable hereunder. The Company shall use its commercially reasonable efforts to continue
the listing and trading of the Common Stock on the Principal Market (including, without
limitation, maintaining sufficient net tangible assets) and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of FINRA and the
Principal Market.
Section 6.3
OTHER EQUITY LINES. So long as this Agreement remains in
effect, the Company covenants and agrees that it will not, without the prior written consent of
the Investor, enter into any other equity line of credit agreement with any other party. For the
avoidance of doubt, nothing contained in the Transaction Documents shall restrict, or require
the Investor's consent for, any agreement providing for the issuance or distribution of any
equity securities of the Company pursuant to any agreement or arrangement that is not covered
in this Section 6.3.
Section 6.4
FILING OF CURRENT REPORT AND REGISTRATION
STATEMENT . The Company agrees that it shall file a Current Report on Form 8-K, including
the Transaction Documents as exhibits thereto, with the SEC within the time required by the
Exchange Act, relating to the transactions contemplated by, and describing the material terms
and conditions of, the Transaction Documents (the “ Current Report ” ). The Company shall
permit the Investor to review and comment upon the final pre-filing draft version of the
Current Report at least one (1) Trading Day prior to its filing with the SEC, and the Company
shall give reasonable consideration to all such comments. The Investor shall use its reasonable
best efforts to comment upon the final pre-filing draft version of the Current Report within one
(1) Trading Day from the date the Investor receives it from the Company. The Company shall
also file with the SEC, within thirty (30) calendar days from the date hereof, a new registration
statement (the “ Registration Statement ” ) covering only the resale of the Put Shares and the
Commitment Shares. The Company shall use its reasonable best efforts to have the
Registration Statement declared effective by the SEC within ninety (90) calendar days from
the date hereof (or at the earliest possible date if prior to ninety (90) calendar days from the
date hereof).
ARTICLE VII
CONDITIONS TO DELIVERY OF
PUT NOTICES AND CONDITIONS TO CLOSING
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Section 7.1
CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY
TO ISSUE AND SELL PUT SHARES. The right of the Company to issue and sell the Put
Shares to the Investor is subject to the satisfaction of each of the conditions set forth below:
(a)
ACCURACY OF INVESTOR'S REPRESENTATIONS AND
WARRANTIES. The representations and warranties of the Investor shall be true and correct in
all material respects as of the date of this Agreement and as of the date of each Closing as
though made at each such time.
(b)
PERFORMANCE BY INVESTOR. Investor shall have performed,
satisfied and complied in all respects with all covenants, agreements and conditions required
by this Agreement to be performed, satisfied or complied with by the Investor at or prior to
such Closing.
(c)
PRINCIPAL MARKET REGULATION. The Company shall not issue
any Put Shares, and the Investor shall not have the right to receive any Put Shares, if the
issuance of such Put Shares would exceed the aggregate number of shares of Common Stock
which the Company may issue without breaching the Company ’ s obligations under the rules
or regulations of the Principal Market (the “ Exchange Cap ” ).
Section 7.2
CONDITIONS PRECEDENT TO THE OBLIGATION OF
INVESTOR TO PURCHASE PUT SHARES. The obligation of the Investor hereunder to
purchase Put Shares is subject to the satisfaction of each of the following conditions:
(a)
EFFECTIVE REGISTRATION STATEMENT . The Registration
Statement, and any amendment or supplement thereto, shall remain effective for the resale by
the Investor of the Put Shares and the Commitment Shares and (i) neither the Company nor the
Investor shall have received notice that the SEC has issued or intends to issue a stop order with
respect to such Registration Statement or that the SEC otherwise has suspended or withdrawn
the effectiveness of such Registration Statement, either temporarily or permanently, or intends
or has threatened to do so and (ii) no other suspension of the use of, or withdrawal of the
effectiveness of, such Registration Statement or related prospectus shall exist.
(b)
ACCURACY OF THE COMPANY'S REPRESENTATIONS AND
WARRANTIES. The representations and warranties of the Company shall be true and correct
in all material respects as of the date of this Agreement and as of the date of each Closing
(except for representations and warranties specifically made as of a particular date).
(c)
PERFORMANCE BY THE COMPANY. The Company shall have
performed, satisfied and complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied with by the
Company.
(d)
NO INJUNCTION . No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or adopted by any
court or governmental authority of competent jurisdiction that prohibits or directly and
13
materially adversely affects any of the transactions contemplated by the Transaction
Documents, and no proceeding shall have been commenced that may have the effect of
prohibiting or materially adversely affecting any of the transactions contemplated by the
Transaction Documents.
(e)
ADVERSE CHANGES. Since the date of filing of the Company's most
recent SEC Document, no event that had or is reasonably likely to have a Material Adverse
Effect has occurred.
(f)
NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON
STOCK. The trading of the Common Stock shall not have been suspended by the SEC, the
Principal Market or FINRA, or otherwise halted for any reason, and the Common Stock shall
have been approved for listing or quotation on and shall not have been delisted from the
Principal Market. In the event of a suspension, delisting, or halting for any reason, of the
trading of the Common Stock, as contemplated by this Section 7.2(f), the Investor shall have
the right to return to the Company any remaining amount of Put Shares associated with such
Put, and the Purchase Price with respect to such Put shall be reduced accordingly.
(g)
BENEFICIAL OWNERSHIP LIMITATION . The number of Put
Shares then to be purchased by the Investor shall not exceed the number of such shares that,
when aggregated with all other shares of Common Stock then owned by the Investor
beneficially or deemed beneficially owned by the Investor, would result in the Investor
owning more than the Beneficial Ownership Limitation (as defined below), as determined in
accordance with Section 16 of the Exchange Act and the regulations promulgated thereunder.
For purposes of this Section 7.2(g), in the event that the amount of Common Stock
outstanding, as determined in accordance with Section 16 of the Exchange Act and the
regulations promulgated thereunder, is greater on a Closing Date than on the date upon which
the Put Notice associated with such Closing Date is given, the amount of Common Stock
outstanding on such Closing Date shall govern for purposes of determining whether the
Investor, when aggregating all purchases of Common Stock made pursuant to this Agreement,
would own more than the Beneficial Ownership Limitation following such Closing Date. The
“ Beneficial Ownership Limitation ” shall be 4.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance of shares of Common Stock
issuable pursuant to a Put Notice.
(h)
PRINCIPAL MARKET REGULATION. The issuance of the Put
Shares shall not exceed the Exchange Cap.
(i)
NO KNOWLEDGE. The Company shall have no knowledge of any
event more likely than not to have the effect of causing the Registration Statement to be
suspended or otherwise ineffective (which event is more likely than not to occur within the
fifteen (15) Trading Days following the Trading Day on which such Put Notice is deemed
delivered).
14
(j)
NO
VIOLATION
OF
SHAREHOLDER
APPROVAL
REQUIREMENT. The issuance of the Put Shares shall not violate the shareholder approval
requirements of the Principal Market.
(k)
OFFICER ’ S CERTIFICATE . On the date of delivery of each Put Notice,
the Investor shall have received the Closing Certificate executed by an executive officer of the
Company and to the effect that all the conditions to such Closing shall have been satisfied as
of the date of each such certificate.
(l)
DWAC ELIGIBLE. The Common Stock must be DWAC Eligible and
not subject to a “ DTC chill. ”
(m)
SEC DOCUMENTS. All reports, schedules, registrations, forms,
statements, information and other documents required to have been filed by the Company with
the SEC pursuant to the reporting requirements of the Exchange Act shall have been filed with
the SEC within the applicable time periods prescribed for such filings under the Exchange
Act.
(n)
RESERVE . The Company shall have reserved 300% of the Required
Minimum for the Investor ’ s benefit under this Agreement, and satisfied the reserve
requirements with respect to all other contracts between the Company and Investor.
(o)
MINIMUM PRICING. The lowest traded price of the Common Stock in
the ten (10) Trading Days immediately preceding the respective Put Date must exceed $0.01
per share (the “ Minimum Pricing ” ).
ARTICLE VIII
LEGENDS
Section 8.1
NO RESTRICTIVE STOCK LEGEND. No restrictive stock legend
shall be placed on the share certificates representing the Put Shares.
Section 8.2
INVESTOR'S COMPLIANCE. Nothing in this Article VIII shall
affect in any way the Investor's obligations hereunder to comply with all applicable securities
laws upon the sale of the Common Stock.
ARTICLE IX
NOTICES; INDEMNIFICATION
Section 9.1
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 (a) personally served, (b) deposited in the mail, registered
or certified, return receipt requested, postage prepaid, (c) delivered by reputable air courier
service with charges prepaid, or (d) transmitted by hand delivery, telegram, or email as a PDF,
addressed as set forth below or to such other address as such party shall have specified most
15
recently by written notice given in accordance herewith. Any notice or other communication
required or permitted to be given hereunder shall be deemed effective (i) upon hand delivery
or delivery by email at the address 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 (ii) on the second business day following the date of mailing
by express courier service or on the fifth business day after deposited in the mail, in each case,
fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur.
The addresses for such communications shall be:
If to the Company:
Parallax Health Sciences, Inc.
1327 Ocean Avenue, Suite B
Santa Monica, CA 90401
Email: info@parallaxhealthsciences.com
Attention: Paul Arena
If to the Investor:
Peak One Opportunity Fund, L.P.
333 South Hibiscus Drive
Miami Beach, FL 33139
E-mail: JGoldstein@PeakOneInvestments.com
Attention: Jason Goldstein
Either party hereto may from time to time change its address or email for notices under this
Section 9.1 by giving at least ten (10) days' prior written notice of such changed address to the
other party hereto.
Section 9.2
INDEMNIFICATION. Each party (an “ Indemnifying Party ” ) agrees
to indemnify and hold harmless the other party along with its officers, directors, employees,
and authorized agents, and each Person or entity, if any, who controls such party within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (an
“ Indemnified Party ” ) from and against any Damages, joint or several, and any action in
respect thereof to which the Indemnified Party becomes subject to, resulting from, arising out
of or relating to (i) any misrepresentation, breach of warranty or nonfulfillment of or failure to
perform any covenant or agreement on the part of the Indemnifying Party contained in this
Agreement, (ii) any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or any post-effective amendment thereof or supplement thereto,
or the omission or alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading, (iii) any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus or contained in the
16
final prospectus (as amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in the light of the circumstances
under which the statements therein were made, not misleading, or (iv) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state securities law or
any rule or regulation under the Securities Act, the Exchange Act or any state securities law,
as such Damages are incurred, except to the extent such Damages result primarily from the
Indemnified Party's failure to perform any covenant or agreement contained in this Agreement
or the Indemnified Party's negligence, recklessness or bad faith in performing its obligations
under this Agreement; provided , however, that the foregoing indemnity agreement shall not
apply to any Damages of an Indemnified Party to the extent, but only to the extent, arising out
of or based upon any untrue statement or alleged untrue statement or omission or alleged
omission made by an Indemnifying Party in reliance upon and in conformity with written
information furnished to the Indemnifying Party by the Indemnified Party expressly for use in
the Registration Statement, any post-effective amendment thereof or supplement thereto, or
any preliminary prospectus or final prospectus (as amended or supplemented).
Section 9.3
METHOD OF ASSERTING INDEMNIFICATION CLAIMS. All
claims for indemnification by any Indemnified Party under Section 9.2 shall be asserted and
resolved as follows:
(a)
In the event any claim or demand in respect of which an Indemnified
Party might seek indemnity under Section 9.2 is asserted against or sought to be collected
from such Indemnified Party by a Person other than a party hereto or an affiliate thereof (a
" Third Party Claim" ), the Indemnified Party shall deliver a written notification, enclosing a
copy of all papers served, if any, and specifying the nature of and basis for such Third Party
Claim and for the Indemnified Party's claim for indemnification that is being asserted under
any provision of Section 9.2 against an Indemnifying Party, together with the amount or, if not
then reasonably ascertainable, the estimated amount, determined in good faith, of such Third
Party Claim (a "Claim Notice") with reasonable promptness to the Indemnifying Party. If the
Indemnified Party fails to provide the Claim Notice with reasonable promptness after the
Indemnified Party receives notice of such Third Party Claim, the Indemnifying Party shall not
be obligated to indemnify the Indemnified Party with respect to such Third Party Claim to the
extent that the Indemnifying Party's ability to defend has been prejudiced by such failure of
the Indemnified Party. The Indemnifying Party shall notify the Indemnified Party as soon as
practicable within the period ending thirty (30) calendar days following receipt by the
Indemnifying Party of either a Claim Notice or an Indemnity Notice (as defined below) (the
"Dispute Period") whether the Indemnifying Party disputes its liability or the amount of its
liability to the Indemnified Party under Section 9.2 and whether the Indemnifying Party
desires, at its sole cost and expense, to defend the Indemnified Party against such Third Party
Claim.
(i)
If the Indemnifying Party notifies the Indemnified Party within the
Dispute Period that the Indemnifying Party desires to defend the Indemnified Party with
respect to the Third Party Claim pursuant to this Section 9.3(a), then the Indemnifying Party
shall have the right to defend, with counsel reasonably satisfactory to the Indemnified Party, at
17
the sole cost and expense of the Indemnifying Party, such Third Party Claim by all appropriate
proceedings, which proceedings shall be vigorously and diligently prosecuted by the
Indemnifying Party to a final conclusion or will be settled at the discretion of the Indemnifying
Party (but only with the consent of the Indemnified Party in the case of any settlement that
provides for any relief other than the payment of monetary damages or that provides for the
payment of monetary damages as to which the Indemnified Party shall not be indemnified in
full pursuant to Section 9.2). The Indemnifying Party shall have full control of such defense
and proceedings, including any compromise or settlement thereof; provided , however , that the
Indemnified Party may, at the sole cost and expense of the Indemnified Party, at any time prior
to the Indemnifying Party's delivery of the notice referred to in the first sentence of this clause
(i), file any motion, answer or other pleadings or take any other action that the Indemnified
Party reasonably believes to be necessary or appropriate to protect its interests; and provided,
further, that if requested by the Indemnifying Party, the Indemnified Party will, at the sole cost
and expense of the Indemnifying Party, provide reasonable cooperation to the Indemnifying
Party in contesting any Third Party Claim that the Indemnifying Party elects to contest. The
Indemnified Party may participate in, but not control, any defense or settlement of any Third
Party Claim controlled by the Indemnifying Party pursuant to this clause (i), and except as
provided in the preceding sentence, the Indemnified Party shall bear its own costs and
expenses with respect to such participation. Notwithstanding the foregoing, the Indemnified
Party may takeover the control of the defense or settlement of a Third Party Claim at any time
if it irrevocably waives its right to indemnity under Section 9.2 with respect to such Third
Party Claim.
(ii)
If the Indemnifying Party fails to notify the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend the Third Party Claim
pursuant to Section 9.3(a), or if the Indemnifying Party gives such notice but fails to prosecute
vigorously and diligently or settle the Third Party Claim, or if the Indemnifying Party fails to
give any notice whatsoever within the Dispute Period, then the Indemnified Party shall have
the right to defend, at the sole cost and expense of the Indemnifying Party, the Third Party
Claim by all appropriate proceedings, which proceedings shall be prosecuted by the
Indemnified Party in a reasonable manner and in good faith or will be settled at the discretion
of the Indemnified Party(with the consent of the Indemnifying Party, which consent will not
be unreasonably withheld). The Indemnified Party will have full control of such defense and
proceedings, including any compromise or settlement thereof; provided, however, that if
requested by the Indemnified Party, the Indemnifying Party will, at the sole cost and expense
of the Indemnifying Party, provide reasonable cooperation to the Indemnified Party and its
counsel in contesting any Third Party Claim which the Indemnified Party is contesting.
Notwithstanding the foregoing provisions of this clause (ii), if the Indemnifying Party has
notified the Indemnified Party within the Dispute Period that the Indemnifying Party disputes
its liability or the amount of its liability hereunder to the Indemnified Party with respect to
such Third Party Claim and if such dispute is resolved in favor of the Indemnifying Party in
the manner provided in clause (iii) below, the Indemnifying Party will not be required to bear
the costs and expenses of the Indemnified Party's defense pursuant to this clause (ii) or of the
Indemnifying Party's participation therein at the Indemnified Party's request, and the
Indemnified Party shall reimburse the Indemnifying Party in full for all reasonable costs and
expenses incurred by the Indemnifying Party in connection with such litigation. The
18
Indemnifying Party may participate in, but not control, any defense or settlement controlled by
the Indemnified Party pursuant to this clause (ii), and the Indemnifying Party shall bear its
own costs and expenses with respect to such participation.
(iii)
If the Indemnifying Party notifies the Indemnified Party that it does
not dispute its liability or the amount of its liability to the Indemnified Party with respect to
the Third Party Claim under Section 9.2 or fails to notify the Indemnified Party within the
Dispute Period whether the Indemnifying Party disputes its liability or the amount of its
liability to the Indemnified Party with respect to such Third Party Claim, the amount of
Damages specified in the Claim Notice shall be conclusively deemed a liability of the
Indemnifying Party under Section 9.2 and the Indemnifying Party shall pay the amount of
such Damages to the Indemnified Party on demand. If the Indemnifying Party has timely
disputed its liability or the amount of its liability with respect to such claim, the Indemnifying
Party and the Indemnified Party shall proceed in good faith to negotiate a resolution of such
dispute; provided, however, that if the dispute is not resolved within thirty (30) days after the
Claim Notice, the Indemnifying Party shall be entitled to institute such legal action as it deems
appropriate.
(b)
In the event any Indemnified Party should have a claim under Section
9.2 against the Indemnifying Party that does not involve a Third Party Claim, the Indemnified
Party shall deliver a written notification of a claim for indemnity under Section 9.2 specifying
the nature of and basis for such claim, together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such claim (an " Indemnity
Notice ") with reasonable promptness to the Indemnifying Party. The failure by any
Indemnified Party to give the Indemnity Notice shall not impair such party's rights hereunder
except to the extent that the Indemnifying Party demonstrates that it has been irreparably
prejudiced thereby. If the Indemnifying Party notifies the Indemnified Party that it does not
dispute the claim or the amount of the claim described in such Indemnity Notice or fails to
notify the Indemnified Party within the Dispute Period whether the Indemnifying Party
disputes the claim or the amount of the claim described in such Indemnity Notice, the amount
of Damages specified in the Indemnity Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 9.2 and the Indemnifying Party shall pay the amount of such
Damages to the Indemnified Party on demand. If the Indemnifying Party has timely disputed
its liability or the amount of its liability with respect to such claim, the Indemnifying Party and
the Indemnified Party shall proceed in good faith to negotiate a resolution of such dispute;
provided, however, that if the dispute is not resolved within thirty (30) days after the Claim
Notice, the Indemnifying Party shall be entitled to institute such legal action as it deems
appropriate.
(c)
The Indemnifying Party agrees to pay the Indemnified Party, promptly
as such expenses are incurred and are due and payable, for any reasonable legal fees or other
reasonable expenses incurred by them in connection with investigating or defending any such
Claim.
19
(d)
The indemnity provisions contained herein shall be in addition to (i)
any cause of action or similar rights of the Indemnified Party against the Indemnifying Party
or others, and (ii) any liabilities the Indemnifying Party may be subject to.
ARTICLE X
MISCELLANEOUS
Section 10.1
GOVERNING LAW; JURISDICTION . This Agreement shall be
governed by and interpreted in accordance with the laws of the State of Nevada without regard
to the principles of conflicts of law. Each of the Company and the Investor hereby submits to
the exclusive jurisdiction of the United States federal and state courts located in Florida,
County of Miami-Dade, with respect to any dispute arising under the Transaction Documents
or the transactions contemplated thereby.
Section 10.2
[Intentionally Omitted.]
Section 10.3
ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of the Company and the Investor and their respective successors. Neither this
Agreement nor any rights of the Investor or the Company hereunder may be assigned by either
party to any other Person.
Section 10.4
NO THIRD PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the Company and the Investor and their respective successors, and is not for
the benefit of, nor may any provision hereof be enforced by, any other Person, except as set
forth in Section 9.3.
Section 10.5
TERMINATION . The Company may terminate this Agreement at
any time by written notice to the Investor, except during any Valuation Period or at any time
that the Investor holds any of the Put Shares. In addition, this Agreement shall automatically
terminate at the end of the Commitment Period.
Section 10.6
ENTIRE AGREEMENT . The Transaction Documents, together
with the exhibits and schedules thereto, contain the entire understanding of the Company and
the Investor with respect to the matters covered herein and therein and supersede all prior
agreements and understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
Section 10.7
FEES AND EXPENSES. Except as expressly set forth in the
Transaction Documents or any other writing to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all Transfer Agent fees (including,
without limitation, any fees required for same-day processing of any instruction letter
delivered by the Company), stamp taxes and other taxes and duties levied in connection with
the delivery of any Securities to the Investor. Upon execution of this Agreement, the
Company shall issue the Commitment Shares (400,000 of which shall be issued to Investor
20
and 400,000 of which shall be issued to Investments) for its commitment to enter into this
Agreement. The Commitment Shares shall be earned in full upon the execution of this
Agreement, and the Commitment Shares are not contingent upon any other event or condition,
including but not limited to the effectiveness of the Registration Statement or the Company ’ s
submission of a Put Notice to the Investor.
Section 10.8
COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which may be executed by less than all of the parties and shall be
deemed to be an original instrument which shall be enforceable against the parties actually
executing such counterparts and all of which together shall constitute one and the same
instrument. This Agreement may be delivered to the other parties hereto by email of a copy of
this Agreement bearing the signature of the parties so delivering this Agreement.
Section 10.9
SEVERABILITY . In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially changes the
economic benefit of this Agreement to any party.
Section 10.10
FURTHER ASSURANCES . Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby.
Section 10.11
NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
Section 10.12
EQUITABLE RELIEF . The Company recognizes that in the event
that it fails to perform, observe, or discharge any or all of its obligations under this Agreement,
any remedy at law may prove to be inadequate relief to the Investor. The Company therefore
agrees that the Investor shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages.
Section 10.13
TITLE AND SUBTITLES . The titles and subtitles used in this
Agreement are used for the convenience of reference and are not to be considered in
construing or interpreting this Agreement.
Section 10.14
AMENDMENTS; WAIVERS. No provision of this Agreement may
be amended or waived by the parties from and after the date that is one (1) Trading Day
immediately preceding the initial filing of the Registration Statement with the SEC. Subject to
the immediately preceding sentence, (i) no provision of this Agreement may be amended other
than by a written instrument signed by both parties hereto and (ii) no provision of this Agreement
may be waived other than in a written instrument signed by the party against whom enforcement
of such waiver is sought. No failure or delay in the exercise of any power, right or privilege
21
hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such
power, right or privilege preclude other or further exercise thereof or of any other right, power or
privilege.
Section 10.15
PUBLICITY. The Company and the Investor shall consult with
each other in issuing any press releases or otherwise making public statements with respect to
the transactions contemplated hereby and no party shall issue any such press release or
otherwise make any such public statement, other than as required by law, without the prior
written consent of the other parties, which consent shall not be unreasonably withheld or
delayed, except that no prior consent shall be required if such disclosure is required by law, in
which such case the disclosing party shall provide the other party with prior notice of such
public statement. Notwithstanding the foregoing, the Company shall not publicly disclose the
name of the Investor without the prior written consent of the Investor, except to the extent
required by law. The Investor acknowledges that this Agreement and all or part of the
Transaction Documents may be deemed to be "material contracts," as that term is defined by
Item 601(b)(10) of Regulation S-K, and that the Company may therefore be required to file
such documents as exhibits to reports or registration statements filed under the Securities Act
or the Exchange Act. The Investor further agrees that the status of such documents and
materials as material contracts shall be determined solely by the Company, in consultation
with its counsel.
[Signature Page Follows]
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IN WITNESS WHEREOF , the parties have caused this Agreement to be duly executed
by their respective officers thereunto duly authorized as of the day and year first above written.
THE COMPANY:
PARALLAX HEALTH SCIENCES, INC.
By:______________________
Name: Paul Arena
Title: Chief Executive Officer
INVESTOR:
PEAK ONE OPPORTUNITY FUND, L.P.
By: Peak One Investments, LLC,
General Partner
By: ___________________________________
Name: Jason Goldstein
Title: Managing Member
[Signature Page to equity purchase agreement]
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DISCLOSURE SCHEDULES TO
EQUITY PURCHASE AGREEMENT
Schedule 4.3 – Capitalization
None.
Schedule 4.5 – SEC Documents
None.
Schedule 4.9 – Litigation
None.
Schedule 4.10 – Registration Rights
None.
EXHIBIT A
FORM OF PUT NOTICE
TO: PEAK ONE OPPORTUNITY FUND, L.P.
DATE: ____________________
We refer to the equity purchase agreement, dated November 14, 2018 (the
“ Agreement ” ), entered into by and between Parallax Health Sciences, Inc. and you.
Capitalized terms defined in the Agreement shall, unless otherwise defined herein, have the
same meaning when used herein.
We hereby:
1) Give you notice that we require you to purchase
Put Shares at an initial
purchase price per share of ____________; and
2) Certify that, as of the date hereof, the conditions set forth in Section 7.2 of the Agreement
are satisfied.
PARALLAX HEALTH SCIENCES, INC.
By: _______________________
Name: Paul Arena
Title: Chief Executive Officer
EXHIBIT B
FORM OF OFFICER ’ S CERTIFICATE
OF PARALLAX HEALTH SCIENCES, INC.
Pursuant to Section 7.2(k) of that certain equity purchase agreement, dated
November 14, 2018 (the “ Agreement ” ), by and between Parallax Health Sciences, Inc. (the
“ Company ” ) and Peak One Opportunity Fund, L.P. (the “ Investor ” ), the undersigned, in his
capacity as Chief Executive Officer of the Company, and not in his individual capacity, hereby
certifies, as of the date hereof (such date, the “ Condition Satisfaction Date ” ), the following:
1.
The representations and warranties of the Company are true and correct in
all material respects as of the Condition Satisfaction Date as though made on the Condition
Satisfaction Date (except for representations and warranties specifically made as of a
particular date) with respect to all periods, and as to all events and circumstances occurring or
existing to and including the Condition Satisfaction Date, except for any conditions which
have temporarily caused any representations or warranties of the Company set forth in the
Agreement to be incorrect and which have been corrected with no continuing impairment to
the Company or the Investor; and
2.
All of the conditions precedent to the obligation of the Investor to
purchase Put Shares set forth in the Agreement, including but not limited to Section 7.2 of the
Agreement, have been satisfied as of the Condition Satisfaction Date.
Capitalized terms used herein shall have the meanings set forth in the Agreement
unless otherwise defined herein.
IN WITNESS WHEREOF , the undersigned has hereunto affixed his hand as of the
________, 20__.
By: _______________________
Name: Paul Arena
Title: Chief Executive Officer