UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: June 30, 2016

 

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____________ to ____________

 

Commission file number: 000-55346

 

CÜR MEDIA, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

99-0375741

(State or other jurisdiction of incorporation or organization)

 

(IRS Employer Identification No.)

 

c/o CKR Law LLP

1330 Avenue of the Americas, 14th Floor

New York, NY 10019

(Address of principal executive offices)

 

(212) 259-7300

(Registrant’s telephone number, including area code)

 

2217 New London Turnpike

South Glastonbury, CT 06073

(Former name, former address and former fiscal year, if changed since last report)

 

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

 

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

 

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

 

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting company

x

(Do not check if a smaller reporting company)

 

Emerging growth company

x

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ¨

 

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

 

As of both June 30, 2016 and October 31, 2017, there were 2,526,663 shares of the registrant’s common stock, par value $0.0001 per share (“Common Stock”), outstanding, 20,174 of which had not yet been issued.

 

 
 
 
 

 

CÜR MEDIA, INC.

 

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2016

 

TABLE OF CONTENTS

 

 

PAGE

 

PART I - FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

4

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

36

 

Item 4.

Controls and Procedures

36

 

PART II - OTHER INFORMATION

 

Item 1.

Legal Proceedings

38

 

Item 1A.

Risk Factors

38

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

38

 

Item 3.

Defaults Upon Senior Securities

39

 

Item 4.

Mine Safety Disclosures

39

 

Item 5.

Other Information

40

 

Item 6.

Exhibits

41

 

SIGNATURES

43

 

 
2
 
 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements include, among others, those statements including the words “believes”, “anticipates”, “expects”, “intends”, “estimates”, “plans” and words of similar import. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

 

Forward-looking statements are based on our current expectations and assumptions regarding our business, potential target businesses, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore that you should not rely on any of these forward-looking statements as statements of historical fact or as guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include changes in local, regional, national or global political, economic, business, competitive, market (supply and demand) and regulatory conditions and the following:

 

 

· Our ability to attract and retain management with experience in digital media including digital music streaming, and similar emerging technologies;

 

 

 

 

· Our ability to negotiate and maintain economically feasible agreements with the major and independent music labels, publishers and publisher rights organizations;

 

 

 

 

· Our expectations regarding market acceptance of our products in general, and our ability to penetrate the digital music streaming market in particular;

 

 

 

 

· Our ability to raise capital when needed and on acceptable terms and conditions;

 

 

 

 

· The scope, validity and enforceability of our third party intellectual property rights;

 

 

 

 

· Our ability to comply with governmental regulation; and

 

 

 

 

· The intensity of competition.

 

A description of these and other risks and uncertainties that could affect our business appears in the section captioned “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, which we filed with the Securities and Exchange Commission on April 14, 2016 (“Annual Report”), as updated in subsequent filings we have made with the SEC. The risks and uncertainties described under “Risk Factors” are not exhaustive.

 

Given these uncertainties, readers of this Quarterly Report on Form 10-Q (“Quarterly Report”) are cautioned not to place undue reliance on such forward-looking statements. We disclaim any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

 

All references in this Quarterly Report to the “Company”, “CÜR Media”, “we”, “us”, or “our”, are to CÜR Media, Inc., and its consolidated subsidiary, CÜR Media, LLC.

 
 
3
 
Table of Contents

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States and the rules of the SEC, and should be read in conjunction with the audited financial statements and notes thereto contained in our Annual Report, as updated in subsequent filings we have made with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.

 

CÜR MEDIA, INC.

 

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

TABLE OF CONTENTS

 

 

Page

 

 

 

 

 

Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015 (unaudited)

 

5

 

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2016 and 2015 (unaudited)

 

6

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015 (unaudited)

 

7

 

Notes to Unaudited Condensed Consolidated Financial Statements

8

 
 
4
 
 

 

CÜR MEDIA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

 

 

 

June 30,
2016

 

 

December 31,
2015

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$ 144

 

 

$ 734

 

Prepaid expenses

 

 

12,811

 

 

 

10,611

 

Other current assets

 

 

3,000

 

 

 

3,000

 

TOTAL CURRENT ASSETS

 

 

15,955

 

 

 

14,345

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

24,959

 

 

 

36,445

 

TOTAL ASSETS

 

$ 40,914

 

 

$ 50,790

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIENCY

 

 

 

 

 

 

 

 

 

CURRENT LIABILITES

 

 

 

 

 

 

 

 

Accounts payable

 

$ 2,650,379

 

 

$ 1,878,591

 

Accrued liabilities and other current liabilities

 

 

1,733,768

 

 

 

345,079

 

Note payable, short-term

 

 

33,550

 

 

 

26,270

 

Convertible promissory notes, net

 

 

1,434,677

 

 

 

 

 

Derivative liabilities

 

 

3,422,108

 

 

 

2,052,893

 

TOTAL CURRENT LIABILITIES

 

 

9,274,482

 

 

 

4,302,833

 

 

 

 

 

 

 

 

 

 

Convertible promissory notes, net

 

 

284,920

 

 

 

74,707

 

Note payable, long-term

 

 

-

 

 

 

13,113

 

TOTAL LONG TERM LIABILITIES

 

 

284,920

 

 

 

87,820

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

9,559,402

 

 

 

4,390,653

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ DEFICIENCY

 

 

 

 

 

 

 

 

Preferred Stock (0.0001 par value, 10,000,000 shares authorized, none issued or outstanding as of June 30, 2016 or December 31, 2015)

 

 

-

 

 

 

-

 

Common Stock (0.0001 par value, 300,000,000 shares authorized, 2,526,663 and 2,440,336 issued at June 30, 2016 and December 31, 2015, respectively, and 2,550,998 and 2,464,671 outstanding at June 30, 2016 and December 31, 2015, respectively)

 

 

253

 

 

 

244

 

Additional Paid-In-Capital

 

 

11,151,900

 

 

 

10,361,183

 

Accumulated Deficit

 

 

(20,670,641 )

 

 

(14,701,290 )

TOTAL STOCKHOLDERS’ DEFICIENCY

 

 

(9,518,488 )

 

 

(4,339,863 )

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY

 

$ 40,914

 

 

$ 50,790

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 
 
5
 
Table of Contents

 

CÜR MEDIA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

 

 

For the Three Months

Ended June 30,

 

 

For the Six Months

Ended June 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

$ 723

 

 

$ -

 

 

$ 723

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

1,223,466

 

 

 

2,156,198

 

 

 

2,889,067

 

 

 

3,566,169

 

General and administrative

 

 

1,408,924

 

 

 

454,953

 

 

 

1,934,006

 

 

 

824,023

 

Stock based compensation

 

 

71,000

 

 

 

160,579

 

 

 

147,966

 

 

 

173,805

 

Depreciation and amortization

 

 

4,939

 

 

 

6,970

 

 

 

10,063

 

 

 

17,060

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL OPERATING EXPENSES

 

 

2,708,329

 

 

 

2,778,700

 

 

 

4,981,102

 

 

 

4,581,057

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(1,279,074 )

 

 

(1,490 )

 

 

(1,409,788 )

 

 

(1,890 )

Interest income

 

 

118

 

 

 

2,657

 

 

 

122

 

 

 

4,844

 

Loss on disposal of assets

 

 

(717 )

 

 

-

 

 

 

(717 )

 

 

-

 

Loss on issuance of convertible debt

 

 

(120,266 )

 

 

 

 

 

 

(120,266 )

 

 

 

 

Extinguishment of derivative liabilities

 

 

-

 

 

 

(464,686 )

 

 

-

 

 

 

(464,686 )

Change in fair value of derivative liabilities

 

 

(855,587 )

 

 

(611,577 )

 

 

541,677

 

 

 

1,734,574

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL OTHER INCOME (EXPENSE)

 

 

(2,255,526 )

 

 

(1,075,096 )

 

 

988,972

 

 

 

1,272,842

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

$ (4,963,132 )

 

$ (3,853,796 )

 

$ (5,969,351 )

 

$ (3,308,215 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per share

 

$ (1.97 )

 

$ (1.59 )

 

$ (2.40 )

 

$ (1.51 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding basic and diluted

 

 

2,518,328

 

 

 

2,430,031

 

 

 

2,491,351

 

 

 

2,184,831

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 
 
6
 
Table of Contents

 

CÜR MEDIA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2016

 

 

2015

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net Loss

 

$ (5,969,351 )

 

$ (3,308,215 )

Adjustments to reconcile net loss to net cash used in operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

10,063

 

 

 

17,060

 

Non-cash stock compensation expense

 

 

147,966

 

 

 

173,805

 

Non-cash interest expense

 

 

1,220,931

 

 

 

-

 

Share based consulting services

 

 

118,347

 

 

 

53,250

 

Non-cash label warrant expense

 

 

232,998

 

 

 

 

 

Change in fair value of derivative liabilities

 

 

(541,677 )

 

 

(1,734,574 )

Loss on extinguishment of derivative liabilities

 

 

-

 

 

 

464,686

 

Loss on issuance of convertible debt

 

 

120,266

 

 

 

-

 

Changes in assets and liabilities

 

 

 

 

 

 

 

 

Prepaid expenses

 

 

(2,200 )

 

 

80,943

 

Disposal of property and equipment

 

 

1,423

 

 

 

-

 

Accounts payable

 

 

771,788

 

 

 

270,615

 

Accrued liabilities and other current liabilities

 

 

1,388,689

 

 

 

(52,915 )

Net cash used in operating activities

 

 

(2,500,757 )

 

 

(4,035,345 )

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

-

 

 

 

(17,598 )

Net cash used in investing activities

 

 

-

 

 

 

(17,598 )

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Repayment of note payable

 

 

(5,833 )

 

 

(14,846 )

Proceeds from issuance of convertible promissory notes

 

 

2,506,000

 

 

 

2,819,366

 

Net cash provided by financing activities

 

 

2,500,167

 

 

 

2,804,520

 

 

 

 

 

 

 

 

 

 

NET DECREASE IN CASH

 

 

(590 )

 

 

(1,248,423 )

 

 

 

 

 

 

 

 

 

CASH, BEGINNING OF PERIOD

 

 

734

 

 

 

3,228,938

 

 

 

 

 

 

 

 

 

 

CASH, END OF THE PERIOD

 

$ 144

 

 

$ 1,980,515

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 
 
7
 
Table of Contents

 

CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2016 and 2015

(Unaudited)

 

Note 1 – Summary of Business and Basis of Presentation

 

Organization and Business

 

CÜR Media, LLC (formerly known as Raditaz, LLC) (“Raditaz”) was formed in Connecticut on February 15, 2008. On January 28, 2014, the members of Raditaz contributed their Raditaz membership interests (the “Contribution”) to CÜR Media, Inc. (formerly known as Duane Street Corp.) (the “Company”) in exchange for approximately 769,231 shares of the Company’s common stock, $0.0001 par value per share (“Common Stock”), which resulted in Raditaz being a wholly owned subsidiary of the Company. Each membership interest of Raditaz, at the time of the Contribution was automatically converted into shares of the Company’s Common Stock, with the result that the 39,249,885 membership interests outstanding immediately prior to the Contribution were converted into approximately 769,231 shares of the Company’s Common Stock outstanding immediately thereafter. The Contribution is considered to be a recapitalization of the Company which has been retrospectively applied to these financial statements for all periods presented. In connection with the recapitalization, the accumulated deficit of $5,536,144 from the period from February 15, 2008 (inception) through the date of the Contribution was reclassified to additional paid-in-capital.

 

As a result of the Contribution, the Company changed its business focus to the business of Raditaz, which is to develop and commercialize a streaming music experience for listening on the web and mobile devices. The Company is currently developing CÜR Music, a hybrid internet radio and on-demand music streaming service.

 

Basis of Presentation

 

The accompanying condensed consolidated financial statements include the activities of CÜR Media, Inc. and its wholly owned subsidiary, CÜR Media, LLC. All intercompany transactions have been eliminated in these consolidated financial statements.

 

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. In the opinion of the Company’s management, the financial statements include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s consolidated financial position for the periods presented.

 

Certain information in footnote disclosures normally included in the financial statements were prepared in conformity with accounting principles generally accepted in the United States of America and have been condensed or omitted pursuant to such principles and the financial results for the periods presented may not be indicative of the full year’s results. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s audited financial statements in its Annual Report on Form 10-K for the fiscal year ended December 31, 2015, which the Company filed with the Securities and Exchange Commission (“SEC”) on April 14, 2016 (“Annual Report”), as updated in subsequent filings the Company has made with the SEC.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company’s management evaluates its estimates, which include, but are not limited to, estimates related to accruals, stock-based compensation expense, warrants to purchase securities, and reported amounts of revenues and expenses during the reported period. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions.

 
 
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Table of Contents

 

CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2016 and 2015

(Unaudited)

 

Significant Accounting Policies

 

Other than as disclosed below, there have been no material changes in the Company’s significant accounting policies to those previously disclosed in the Company’s Annual Report.

 

Earnings Per Share

 

Basic earnings per share (“EPS”) is computed based on the weighted average number of shares of Common Stock outstanding during the period. Diluted EPS is computed based on the weighted average number of shares of Common Stock, plus the effect of dilutive potential common shares from outstanding stock options during the period using the treasury stock method. At June 30, 2016 and 2015, the number of shares underlying options and warrants that were anti-dilutive was approximately 4,250,158 shares and 684,851 shares, respectively.

 

Note 2 - Going Concern Uncertainty

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of the liabilities in the normal course of business and does not include any adjustments that might result from uncertainty about the Company’s ability to continue as a going concern.

 

The Company incurred net losses since inception, including a net loss of $5,969,351 in the six months ending June 30, 2016. The Company has developed CÜR Music, a hybrid internet radio and on-demand music streaming service and has not generated material revenue from operations and anticipates needing additional capital prior to launching CÜR Music to execute the current operating plan. These factors raise substantial doubt about the ability of the Company to continue as a going concern.

 

On October 20, 2015, October 26, 2015, November 13, 2015, November 24, 2015, November 30, 2015, December 30, 2015 and January 14, 2016 the Company closed on Securities Purchase Agreements (the “Unsecured Note Purchase Agreements”) with certain “accredited investors” (the “Unsecured Note Buyers”), pursuant to which the Unsecured Note Buyers purchased 12% Unsecured Convertible Promissory Notes of the Company (the “2015 Unsecured Convertible Promissory Notes” or “Unsecured Notes”) in the aggregate principal amount of $2,113,500 (the “Unsecured Convertible Note Offering”). The aggregate gross proceeds to the Company from the 2015 Unsecured Convertible Note Offering were $2,113,500 (before deducting expenses related to the purchase and sale of the 2015 Unsecured Notes of approximately $45,000), of which $586,000 in proceeds were from members of the Board of Directors (the “Board”).

 

On April 12, 2016, April 15, 2016, May 26, 2016, June 7, 2016 and July 20, 2016, the Company closed on Securities Purchase Agreements (the “Secured Note Purchase Agreements”) with certain “accredited investors” (the “Secured Note Buyers”), pursuant to which the Secured Note Buyers purchased 12% Secured Convertible Promissory Notes of the Company (the “2016 Secured Convertible Promissory Notes” of “Secured Notes”) in the aggregate principal amount of $2,515,000. The aggregate gross proceeds to the Company from the 2016 Secured Convertible Note Offering were $2,515,000 (before deducting expenses related to the purchase and sale of the Secured Notes of $282,454), of which $255,060 of the proceeds were from members of the Board.

 

The Company is actively seeking sources of equity or debt financing in order to support its operations. Fundraising discussions have started, however no specific terms have been set. The Company cannot launch its CÜR Music streaming product until appropriate capital has been secured. However, no assurances can be provided that the Company will secure additional financing or achieve and sustain a profitable level of operations. To the extent that the Company is unsuccessful in its plans, the Company may find it necessary to contemplate the sale of its assets, or other similar transactions.

 
 
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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2016 and 2015

(Unaudited)

 

Note 3 – Risks and Uncertainties

 

The Company operates in an industry that is subject to rapid technological change and intense competition. The Company’s operations are subject to significant risk and uncertainties including financial, operational, technological, content licensing, regulatory and other risks including the potential for business failure.

 

A description of some of the risks and uncertainties that could affect our business appears in the section captioned “Risk Factors” in the Company’s Annual Report as updated in subsequent filings we have made with the SEC. The risks and uncertainties described under “Risk Factors” are not exhaustive.

 

Note 4 - Debt Instruments

 

Note Payable

 

On June 19, 2012, the Company entered into a promissory note (“State of CT Note”) with State of Connecticut Department of Economic and Community Development (“CT DECD”) for up to $100,000. The State of CT Note bears interest at 2.5% per annum. Commencing on the thirteenth (13 th ) month following the loan date and continuing on the first (1 st ) day of each month thereafter principal and interest is payable in forty-eight (48) equal, consecutive monthly installments. The full principal and all accrued interest are due and payable on June 19, 2017. The Company and CT DECD also entered into a security agreement whereby the State of CT Note is secured by all properties, assets and rights of the Company. As of June 30, 2016 and December 31, 2015, the Company had $0 and $13,113 in principal recorded as Note Payable in the long-term sections of the Company’s balance sheet, respectively, and $35,550 and $26,270 in notes payable short-term, respectively.

 

Convertible Promissory Notes, net

 

On October 20, 2015, October 26, 2015, November 13, 2015, November 24, 2015, November 30, 2015, December 30, 2015 and January 14, 2016, the Company entered into Unsecured Note Purchase Agreements with certain Unsecured Note Buyers, pursuant to which the Unsecured Note Buyers purchased Unsecured Notes in the aggregate principal amount of $2,113,500. The aggregate gross proceeds to the Company from the 2015 Unsecured Convertible Note Offering were $2,113,500 (before deducting expenses related to the purchase and sale of the Unsecured Notes of $45,000), of which $586,000 of the proceeds were from members of the Board.

 

The Unsecured Notes have an aggregate principal balance of $2,113,500 and a stated maturity date of 5 years from the date of issuance. The principal on the Unsecured Notes bears interest at a rate of 12% per annum, which is also payable on maturity. On April 12, 2016, with the closing of the 2016 Secured Convertible Note Offering, certain terms of the Unsecured Notes were amended. Under the new terms of the Unsecured Notes, upon the closing of $15,000,000 in equity securities (“Equity Financing Securities”) by the Company (a “Qualified Offering “) all of the outstanding principal amount of the Unsecured Notes, together with accrued and unpaid interest due thereon, will automatically convert (in this case, a “Mandatory Conversion”) into units of the Company’s securities (the “Unsecured Note Conversion Units”) at a conversion price per Unsecured Note Conversion Unit equal to the lesser of (i) $5.60 or (ii) a 20% discount to the price per share of the Equity Financing Securities. Each Unsecured Note Conversion Unit will consist of one share (the “ Unsecured Note Conversion Unit Shares”) of the Company’s Common Stock, and one five-year warrant (the “Unsecured Note Conversion Unit Warrants”) to purchase one additional share (the “Unsecured Note Conversion Unit Warrant Shares”) of the Company’s Common Stock at an exercise price of 125% of the Qualified Offering unit price. The terms of the amendment were in exchange for the Unsecured Note holders’ subordination to the Secured Note holders.

 

The embedded conversion feature was bifurcated to a derivative liability as it was not considered to be clearly and closely related to the host agreement. The Company recorded a derivative liability and debt discount of $2,034,037 upon issuance. The debt discount is being amortized to interest expense over the term of the loan. Refer to Note 5 for discussion of the derivative liability.

 
 
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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2016 and 2015

(Unaudited)

 

The Unsecured Note Conversion Unit Warrants, to be received upon conversion of the Unsecured Notes, provide for the purchase of shares of the Company’s Common Stock at an exercise price equal to (a) 125% of the price at which the Company’s Equity Financing Securities are sold in a Qualified Offering. The Unsecured Note Conversion Unit Warrants are exercisable for cash only, for a term of 5 years from the date of issuance. The number of shares of Common Stock to be deliverable upon exercise of the Unsecured Note Conversion Unit Warrants is subject to adjustment for subdivision or consolidation of shares and other standard dilutive events.

 

The Company agreed to use its commercially reasonable efforts to file a registration statement (“Registration Statement”) to register the Unsecured Note Conversion Unit Shares and Unsecured Note Conversion Unit Warrant Shares no later than (i) the date that is ninety (90) calendar days after the final closing under the Qualified Offering, or (ii) the date which is ninety (90) calendar days after the first optional conversion of the Unsecured Notes. The Company has agreed to use its commercially reasonable efforts to make the Registration Statement declared effective no later than one hundred and eighty (180) calendar days after the Registration Statement is first filed with the SEC.

 

Convertible Secured Promissory Notes, net

 

On April 12, 2016, April 15, 2016, May 26, 2016 and June 7, 2016 the Company entered into Secured Note Purchase Agreements with certain Secured Note Buyers, pursuant to which the Secured Note Buyers purchased Secured Notes in the aggregate principal amount of $2,365,000 (before deducting placement agent fees and expenses of $265,849) of which $255,060 of the proceeds were from members of the Board.

 

The Secured Notes are secured by a security interest in and lien on all now owned or hereafter acquired assets and property, real and personal, of the Company and its subsidiaries, including the Company’s intellectual and technology property pursuant to the terms of a security agreement (the “Security Agreement”) among the Company and the Secured Note Buyers. The security interest in and liens on all assets and property of the Company will be a first priority security interest.

 

The Secured Notes have an aggregate principal balance of $2,365,000, and a stated maturity date of 6 months from the date of issuance. The principal on the Secured Notes bears interest at a rate of 12% per annum, which is also payable on maturity. The Secured Notes will rank senior to all existing indebtedness of the Company, except as otherwise set forth in the Secured Notes. Upon the closing of a Qualified Offering by the Company during the term of the Secured Notes involving the sale of at least $15,000,000 in Equity Financing Securities, all of the outstanding principal amount of the Secured Notes, together with accrued and unpaid interest due thereon, will automatically convert (in this case, a “Mandatory Conversion”) into units of the Company’s securities (the “Secured Note Conversion Units”) at a conversion price per Secured Note Conversion Unit equal to the lesser of (a) 80% of the price per share of the Equity Financing Securities sold in the Qualified Offering, or (b) $2.00. At any time prior to a Mandatory Conversion, the holders of the Secured Notes may convert all or part of the outstanding principal amount of the Secured Notes, together with accrued and unpaid interest due thereon, into Second Units at a conversion price of $2.00 per Unit (in this case, an “Optional Conversion”). Each Secured Note Conversion Unit will consists of one share (the “Secured Note Conversion Unit Shares”) of the Company’s Common Stock, and one five-year warrant (the “Secured Note Conversion Unit Warrants”) to purchase one additional share (the “Secured Note Conversion Unit Warrant Shares”) of the Company’s Common Stock at an exercise price equal to (a) 125% of the price at which the Company’s Equity Financing Securities are sold in a Qualified Offering in the event of a Mandatory Conversion, or (b) 125% of $2.00 in the event of an Optional Conversion. Upon failure by the Company to pay any principal amount or interest due under the Secured Notes within 5 days of the date such payment is due, or the occurrence of other event of default under the terms of the Secured Notes, the entire unpaid principal balance of the Secured Notes, together with any accrued and unpaid interest thereon, will become due and payable, without presentment, demand, protest or notice of any kind. In the event of any liquidation, dissolution or winding up of the Company, each holder of a Secured Note will be entitled to receive, pari passu with the other holders of the Secured Notes, and in preference to the holders of the Company’s other outstanding securities, an amount equal to two times the principal amount of, and any accrued and unpaid interest on, such holder’s Secured Note. The conversion price and number of Secured Note Conversion Units issuable upon conversion of the Secured Notes will be subject to adjustment from time to time for subdivision or consolidation of shares and other standard dilutive events.

 
 
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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2016 and 2015

(Unaudited)

 

Pursuant to the terms of a Placement Agency Agreement (in this case, the “Placement Agency Agreement”) between the Company and the placement agent for the Secured Convertible Note Offering (in this case, the “Placement Agent”), in connection with the closing of the Secured Convertible Note Offering, the Placement Agent was paid a commission of an aggregate of $236,500. In addition, the Placement Agent, or its designees, received warrants to purchase a number of shares of Common Stock equal to 10% of the number of Secured Note Conversion Unit Shares into which Secured Notes sold in the Secured Convertible Note Offering to Secured Note Buyers introduced to the Secured Convertible Note Offering by the Placement Agent, and 8% of the number of Secured Note Conversion Unit Shares into which Secured Notes sold in the Secured Convertible Note Offering to Secured Note Buyers introduced to the Secured Convertible Note Offering by the Company or its representatives. The Placement Agent’s warrants have a term of 5 years and an exercise price per share equal to the exercise price of the Secured Note Conversion Unit Warrant Shares issued to Secured Buyers introduced to the Secured Convertible Note Offering by the Placement Agent upon conversion (“Placement Agent Warrants”).

 

The embedded conversion feature was bifurcated to a derivative liability as it was not considered to be clearly and closely related to the host agreement. The Company recorded a derivative liability and debt discount of $1,980,757 upon issuance. The debt discount is being amortized to interest expense over the term of the loan. Refer to Note 5 for discussion of the derivative liability.

 

The Secured Note Conversion Unit Warrants, to be received upon conversion of the Secured Notes, provide for the purchase of shares of the Company’s Common Stock at an exercise price equal to (a) 125% of the price at which the Company’s Equity Financing Securities are sold in a Qualified Offering in the event of a Mandatory Conversion, or (b) 125% of $2.00 in the event of an Optional Conversion. The Secured Note Conversion Unit Warrants are exercisable for cash only, for a term of 5 years from the date of issuance. The number of shares of Common Stock to be deliverable upon exercise of the Secured Note Conversion Unit Warrants is subject to adjustment for subdivision or consolidation of shares and other standard dilutive events.

 

The Company granted registration rights to each Secured Note Buyer with respect to the Secured Note Conversion Unit Shares and Secured Note Conversion Unit Warrant Shares, and to the Placement Agent, with respect to the Common Stock issuable upon exercise of the Placement Agent Warrants, in each case on a pari passu basis with, and upon substantially the same terms as the registration rights granted to, the investors in a Qualified Offering.

 

Note 5 – Derivative Liabilities

 

The PPO and agent warrants described in Note 7 qualified for derivative classification upon issuance due to the price protection provisions on the exercise price. The initial fair value of these liabilities was recorded as an increase to derivative liabilities and a decrease in additional paid in capital as the warrants were issued in connection with the closings under the private placement offerings. The embedded conversion feature of the Unsecured Notes and the Secured Notes described in Note 4 also qualify for derivative classification. The initial fair value of these liabilities was recorded as an increase to derivative liabilities with a corresponding debt discount. The fair value of these liabilities will be re-measured at the end of every reporting period and the change in fair value will be reported in the statement of operations as a gain or loss on derivative financial instruments included in other income or expenses.

 

Certain securities the Company issued in the private placement offering it conducted in 2014 (the “2014 PPO”) had price-based anti-dilution protection, if, within twenty-four (24) months after the final closing of the 2014 PPO, March 28, 2016, the Company issued additional shares of Common Stock or Common Stock equivalents (subject to customary exceptions) for a consideration per share less than $13.00. Of the 744,756 original warrants issued in the 2014 PPO (the “PPO Warrants”), 133,739 still remained with these priced-based anti-dilution rights. As of March 28, 2016, the price-based anti-dilution protection provisions expired. The Company re-measured the fair value of the warrants at March 28, 2016 and reclassified them to equity.

 
 
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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2016 and 2015

(Unaudited)

 

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities for the period ended June 30, 2016.

 

 

 

June 30,
2016

 

 

 

 

 

Balance at the beginning of year

 

$ 2,052,893

 

 

 

 

 

 

Addition of new derivative liabilities (conversion features)

 

 

2,202,307

 

 

 

 

 

 

Change in fair value of the embedded conversion features

 

 

(285,527 )

 

 

 

 

 

Addition of new derivative liabilities (warrants)

 

 

4,444

 

 

 

 

 

 

Change in fair value of warrants

 

 

(260,599 )

 

 

 

 

 

Reclassification of derivative liabilities to equity

 

 

(291,410 )

 

 

 

 

 

Balance at the end of the period

 

$ 3,422,108

 

 

The Company uses Level 3 inputs for its valuation methodology for the derivative liabilities as their fair values were determined using the Black-Scholes option pricing model based on various assumptions. The model incorporates the price of a share of the Company’s Common Stock, volatility, risk free rate, dividend rate and estimated life. Significant changes in any of these inputs in isolation would result in a significant change in the fair value measurement. The expected stock price volatility for the Company’s derivatives is based on the historical volatility since the date of the Company’s 2014 PPO. As required, these are classified based on the lowest level of input that is significant to the fair value measurement.

 

The weighted average per-share fair value of each Common Stock warrant derivative liability of $4.147 and $1.91 was determined December 31, 2015, and March 28, 2016, respectively using the Black-Scholes pricing model using the following weighted average assumptions:

 

 

 

Expected

Volatility

 

 

Risk-free Interest Rate

 

 

Expected Dividend Yield

 

 

Expected Life
(in years)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2015

 

 

113.83 %

 

 

1.76 %

 

 

0 %

 

 

3.45

 

At March 28, 2016

 

 

158.84 %

 

 

1.37 %

 

 

0 %

 

 

3.21

 

 

The weighted average per-share fair value of the derivative liabilities associated with the embedded conversion features on the Unsecured Notes of $4.96, $4.66 and $2.16 determined at December 31, 2015, January 14, 2016 and June 30, 2016, respectively, using the Black-Scholes pricing model using the following weighted average assumptions:

 

 

 

Expected

Volatility

 

 

Risk-free Interest Rate

 

 

Expected Dividend Yield

 

 

Expected Life
(in years)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2015

 

 

111.72 %

 

 

1.61 %

 

 

0 %

 

 

5.00

 

January 14, 2016

 

 

114.48 %

 

 

1.52 %

 

 

0 %

 

 

5.00

 

June 30, 2016

 

 

165.85 %

 

 

1.01 %

 

 

0 %

 

 

4.40

 

 
 
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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2016 and 2015

(Unaudited)

 

The weighted average per-share fair value of the derivative liabilities associated with the embedded conversion features on the Secured Notes of $1.62, $2.69, $2.80 and $2.07 determined at April 12. 2016, April 15, 2016, May 26, 2016 and June 7, 2016, respectively using the Black-Scholes pricing model using the following weighted average assumptions:

 

 

 

Expected

Volatility

 

 

Risk-free Interest Rate

 

 

Expected Dividend Yield

 

 

Expected Life
(in years)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance on April 12, 2016

 

 

159.81 %

 

 

1.22 %

 

 

0 %

 

 

5.00

 

Issuance on April 15, 2016

 

 

161.16 %

 

 

1.22 %

 

 

0 %

 

 

5.00

 

Issuance on May 26, 2016

 

 

165.03 %

 

 

1.35 %

 

 

0 %

 

 

5.00

 

Issuance on June 7, 2016

 

 

165.72 %

 

 

1.23 %

 

 

0 %

 

 

5.00

 

June 30, 2016

 

 

165.85 %

 

 

1.01 %

 

 

0 %

 

 

4.81

 

 

Note 6 – Common Stock

 

On May 26, 2015, the Board approved and authorized the Company to effect a reverse stock split (the “Reverse Stock Split”) at a ratio of not less than 1-for-5 and not more than 1-for-15 (the “Reverse Split Ratio”). On February 9, 2016, the Company filed a certificate of amendment (“Certificate of Amendment”) to its Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, pursuant to which, effective as of February 16, 2016, the Company effected the Reverse Stock Split at a rate of 1-for-13. Throughout this report the Reverse Stock Split was retroactively applied to all periods presented.

 

Note 7 - Common Stock Warrants

 

Concurrent with the closings of the Contribution and the 2014 PPO, discussed above, the Company issued the PPO warrants with respect to an aggregate of 744,756 underlying common shares to the investors in the 2014 PPO. Each PPO Warrant has a term of five years to purchase one share of Common Stock at $26.00 per share. The PPO Warrants have weighted average anti-dilution and price protection, and a cashless exercise provision, which were subject to customary exceptions.

 

In addition, the placement agent in the 2014 PPO, and its sub-agents, received warrants exercisable for a period of five years to purchase a number of shares of common stock equal to 10% of the number of shares of Common Stock sold to investors it introduced to the 2014 PPO, with a per share exercise price of $13.00 (the “2014 Broker Warrants”). As a result of the foregoing, the placement agent in the 2014 PPO, and its sub-agents, were issued 2014 Broker Warrants with respect to an aggregate of 74,483 underlying shares of the Company’s Common Stock.

 

On April 6, 2015, the Company consummated an offer to amend and exercise the PPO Warrants (the “Offer to Amend and Exercise”). Pursuant to the Offer to Amend and Exercise, PPO Warrants to purchase an aggregate of 497,548 shares of Common Stock were tendered by their holders and were amended and exercised at an exercise price of $6.50 per share for gross proceeds to the Company of $3,233,502 (before deducting placement agent fees and expenses of the Offer to Amend and Exercise of approximately $417,000).

 
 
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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2016 and 2015

(Unaudited)

 

Effective on or prior to April 6, 2015, the Company and the holders of (a) 113,469 PPO Warrants, that chose not to participate in the Offer to Amend and Exercise (“Non-Participating Original Warrants”), and (b) all 74,483 2014 Broker Warrants, approved an amendment to remove the price-based anti-dilution provisions in their warrants. As a result, the price-based anti-dilution provisions contained in these Non-Participating Original Warrants and 2014 Broker Warrants have been removed and were of no further force or effect as of April 6, 2015.

 

The warrant agent for the Offer to Amend and Exercise (the “Warrant Agent”) was paid an aggregate commission of approximately $323,350 and was issued warrants to purchase an aggregate of 49,752 shares of the Company’s Common Stock at an exercise price of $6.50 per share for a term of five (5) years (the “Warrant Agent Warrants”).

 

As discussed in Note 5, certain securities the Company issued in the 2014 PPO had price-based anti-dilution protection, if, within twenty-four (24) months after the final closing of the 2014 PPO, March 28, 2016, the Company issues additional shares of Common Stock or common stock equivalents (subject to customary exceptions) for a consideration per share less than $13.00. Of the 744,756 original PPO Warrants, 133,739 still remained with these priced-based anti-dilution rights. Upon consummation of the Offer to Amend and Exercise the PPO Warrants, and the issuance of the Warrant Agent Warrants to the Warrant Agent, the anti-dilution provisions were triggered and the non-participating warrant holders received, or are entitled to receive (i) a reduction in the price of their PPO Warrants from $26.00 per share to $23.01 per share, (ii) an aggregate of 17,180 additional shares of Common Stock, and (iii) and aggregate of 17,180 additional warrants to purchase shares of Common Stock of the Company at an exercise price of $23.01 per share.

 

In addition, as discussed in Note 4, with the issuance of the Unsecured Notes, the anti-dilution provisions were triggered and the non-participating warrant holders are now entitled to receive (i) a reduction in the price of their PPO Warrants from $23.01 per share to $20.50 per share, (ii) an aggregate of 18,674 additional shares of Common Stock, and (iii) an aggregate of 18,674 additional warrants to purchase shares of Common Stock of the Company at an exercise price of $20.50 per share.

 

On January 12, 2016, the Company issued warrants to certain content providers (“Content Provider Warrants”) to purchase an aggregate of 215,279 shares (the “Content Provider Warrant Shares”) of the Company’s Common Stock, at a weighted average exercise price of $6.41 per share. The Content Provider Warrants have a weighted average contractual term of 6.45 years. The exercise price and number of Content Provider Warrant Shares are subject to adjustment for any stock dividend, stock split, stock combination, recapitalization, reclassification, reorganization or other similar event.

 

Common Stock warrant activity during the six months ended June 30, 2016 was as follows:

 

 

 

Common Stock Warrants Outstanding

 

 

 

Warrants
Outstanding

 

 

Weighted-
Average
Exercise
Price

 

 

 

 

 

 

 

 

Balance as of December 31, 2015

 

 

406,147

 

 

$ 19.01

 

Granted

 

 

216,429

 

 

 

6.49

 

Cancelled/Forfeited

 

 

-

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

Balance as of June 30, 2016

 

 

622,576

 

 

$ 14.66

 

 
 
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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2016 and 2015

(Unaudited)

 

The Company uses Level 3 inputs for its valuation methodology for the warrants issued, as their fair values were determined using the Black-Scholes option pricing model based on various assumptions. The model incorporates the price of a share of the Company’s Common Stock, volatility, risk free rate, dividend rate and estimated life. Significant changes in any of these inputs in isolation would result in a significant change in the fair value measurement. Refer to Note 5 for the weighted average assumptions used to determine the fair value of the derivative liabilities using the Black-Scholes pricing model. As required, these are classified based on the lowest level of input that is significant to the fair value measurement. The weighted average per-share fair value of each Common Stock warrant that qualified to be recorded as permanent equity of $4.49 was determined on the date of grant using the Black-Scholes pricing model using the following weighted average assumptions:

 

 

 

Expected

Volatility

 

 

Risk-free Interest Rate

 

 

Expected Dividend Yield

 

 

Expected Life
(in years)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At issuance

 

 

114.03 %

 

 

1.79 %

 

 

0 %

 

 

6.45

 

 

Note 8 – Equity Incentive Awards

 

Stock Compensation Plans

 

In November 2008, the Board adopted the 2008 Restricted Stock Plan, as amended (the “2008 Plan”). The 2008 Plan provided for the issuance of restricted common shares (“options”).

 

Under the 2008 Plan, the Company determined various terms and conditions of awards including option expiration dates (no more than ten years from the date of grant), vesting terms (generally over a four-year period), exercise price, and payment terms.

 

Certain of the Company’s option grants included a right to repurchase a terminated individual’s options at a repurchase price equal to the lower of the exercise price or the fair value of the restricted common stock at the termination date, during the eighteen (18) months following the termination of an individual’s service with the Company, for any reason.

 

Upon closing of the Contribution (discussed above), the Board adopted, and the stockholders approved, the 2014 Equity Incentive Plan (the “2014 Plan”) which provides for the issuance of equity awards of up to 307,693 shares of Common Stock to officers, key employees, consultants and directors. Upon effectiveness of the Contribution, 500,000 options outstanding under the 2008 Plan were exchanged for an aggregate of (i) approximately 102,681 non-statutory stock options to purchase shares of the Company’s Common Stock at an average exercise price of approximately $2.86 per share, and (ii) approximately 24,335 restricted stock awards (of which approximately 17,068 were fully vested and represented approximately 17,068 issued and outstanding shares of the Company’s Common Stock).

 

On September 25, 2015, the Board adopted the 2015 Equity Incentive Plan (the “2015 Plan”) to provide the Company with flexibility in its ability to motivate, attract, and retain the services of members of the Board, key employees and consultants. The 2015 Plan provides for the issuance of equity awards of up to 307,693 shares of Common Stock. The 2015 Plan is subject to approval by the Company’s stockholders within 12 months after its effective date. In the event that stockholder approval is not obtained within 12 months after the effective date, all incentive stock options granted under the 2015 Plan shall be treated as non-qualified stock options.

 
 
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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2016 and 2015

(Unaudited)

 

Stock Options

 

Option activity during the six months ended June 30, 2016 was as follows:

 

 

 

Options Outstanding

 

 

 

Outstanding
Options

 

 

Weighted-
Average
Exercise
Price

 

 

Weighted-
Average
Remaining
Contractual
Term

 

 

 

 

 

 

 

 

 

 

 

Balance as of January 1, 2016

 

 

310,558

 

 

$ 8.64

 

 

 

7.9

 

Granted

 

 

124,160

 

 

$ 3.98

 

 

 

 

 

Cancelled/Forfeited

 

 

(61,345 )

 

$ 10.62

 

 

 

 

 

Exercised

 

 

-

 

 

$ -

 

 

 

 

 

Balance as of June 30, 2016

 

 

373,373

 

 

$ 6.78

 

 

 

7.9

 

Exercisable June 30, 2016

 

 

232,406

 

 

$ 7.00

 

 

 

 

 

 

Valuation of Awards

 

Under ASC 718, the weighted average grant date fair value of options granted was $3.79 for options granted for the six months ended June 30, 2016. The per-share fair value of each stock option was determined on the date of grant using the Black-Scholes model using the following weighted average assumptions:

 

 

 

Six Months
Ended
June 30,
2016

 

Exercise Price

 

$ 3.98

 

Expected life (years)

 

 

6.00

 

Risk-free interest rate

 

 

1.10 %

Expected volatility

 

 

162.66 %

Expected dividend yield

 

 

0 %

 

The expected life of options granted represents the weighted average period that the options are expected to remain outstanding. The Company determined the expected life assumption based on the Company’s historical exercise behavior combined with estimates of the post-vesting holding period. Prior to May 2015, the expected volatility used in the valuation of the stock options was based on historical volatility of publicly traded peer companies due to the limited trading history of the Company’s Common Stock. During the second quarter of 2015, the expected stock price volatility for the Company’s stock options was based on the historical volatility since the date of the Company’s 2014 PPO. The risk free interest rate is based on the implied yield currently available on U.S. Treasury issues with terms approximately equal to the expected life of the option. The Company currently has no history or expectation of paying cash dividends on its stock options.

 

Stock-based Compensation Expense

 

As of June 30, 2016, total compensation cost related to stock options granted, but not yet recognized, was $550,499, which the Company expects to recognize over a weighted-average period of approximately 2.31 years. Stock-based compensation expenses related to all employee and non-employee stock-based awards for the six months ended June 30, 2016 and 2015 were $147,966 and $173,805, respectively.

 

Restricted Stock Awards

 

The Company issued restricted stock awards with respect to 24,335 underlying shares under the 2008 Plan. The restricted stock awards vested over a term of four years with 25% per year. As of December 31, 2015 and June 30, 2016, 24,335 restricted common shares were outstanding but not yet issued under these awards. The Company is obligated to issue these awards upon request by the holder of the award. During each of the six month periods ended June 30, 2016 and 2015, the Company recorded stock based compensation of $0 and $559, respectively. As of June 30, 2016, there was no unrecognized stock based compensation expense related to restricted stock awards granted.

 
 
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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2016 and 2015

(Unaudited)

 

Note 9 - Commitments and Contingencies

 

Data License and Service Agreement with Rovi

 

On July 1, 2014, the Company entered into a data license and service agreement (the “Data License and Services Agreement”) with Rovi Data Solutions, Inc. and Veveo, Inc. (collectively, “Rovi”), acquiring the limited, non-exclusive, non- transferable right to use, display, communicate, reproduce and transmit data owned or controlled by Rovi. On September 8 and September 18, a first amendment and second amendment to the Data License and Service Agreement, respectively, were executed which expanded the original license to include custom development of search and voice capabilities. The Data License and Service Agreement remains in effect through and including March 14, 2017. The Company has the option to extend the term of this agreement for additional one-year periods.

 

During the term of the Data License and Service Agreement and as consideration for the grant of rights and license of Rovi’s data, the Company agreed to pay Rovi a monthly minimum charge during the development period which is the period where data will be used for internal, non-public, non-commercial uses. In addition, the Company has agreed to pay a minimum per month during the first initial term, subsequent to launch date until March 14, 2016. For each subsequent term, consideration paid will depend on the number of subscribers to CÜR Music.

 

As of September 27, 2016, the Data License and Services Agreement with Rovi terminated as a result of our failure to pay Rovi past due balances for the services they provided under the Agreement.

 

As of June 30, 2016, the Company has paid Rovi $44,701.

 

Zuora

 

On July 31, 2014, the Company entered into a limited license agreement (the “Master Subscription Agreement”) with Zuora, Inc. (“Zuora”) that provides the Company with a non-exclusive, non-transferable worldwide limited license to use Zoura’s online integrated subscription management, billing, and data analysis services. The initial order form covered the implementation and development period ending October 31, 2014. In addition, the Company has agreed to an initial 36-month service term, subsequent to implementation.

 

On October 12, 2016, CÜR Media received a notice of default from Zuora confirming that the Company is in default under the Master Subscription Agreement with Zuora as a result of the Company’s failure to pay Zuora past due balances for the services they provided under the Master Subscription Agreement. The Company intends to cure the default once it is adequately funded.

 

As of June 30, 2016, the Company has paid Zuora $29,038.

 

MediaNet Digital, Inc.

 

On November 10, 2014, the Company entered into a Distribution Agreement (the “MediaNet Agreement”) with MediaNet Digital, Inc. (“MediaNet”) which provides the Company with a catalog of sound recordings and metadata which enables and provides for the delivery of sound recordings to end users of CÜR Music. The agreement remains in effect for a period of three years following the effective date of November 7, 2014. The agreement will automatically renew for successive one-year terms unless terminated by MediaNet or the Company.

 

Pursuant to the agreement, the Company is required to pay a set-up fee. In addition, the Company will pay a monthly technology licensing fee during the initial term, a monthly usage fee and will pay for any additional professional services and technical assistance or customization.

 

As of June 30, 2016, the Company has paid MediaNet $35,826.

 
 
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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2016 and 2015

(Unaudited)

 

Content Licenses

 

The Company has entered into agreements with certain music labels (“Music Label Agreements”), pursuant to which the Company has been provided limited, non-exclusive licenses to digitally distribute certain sound recordings and related materials owned or controlled by the music labels (“Music Labels”) in connection with CÜR Music. The Company has also entered into agreements with certain music publishing companies (“Publishing Agreements”), pursuant to which the Company has been provided the non-exclusive right and license to use certain musical works owned, controlled and/or administered by the music publishers (“Music Publishers”) in connection with CÜR Music, within the United States and its territories, commonwealths, and possessions. The Music Label Agreements and Publishing Agreements may be collectively referred to herein as the “Content Agreements,” the Music Labels and Music Publishers may be collectively referred to herein as the “Content Providers,” and the Label Materials and Publisher Materials may be collectively referred to herein as the “Licensed Materials.”

 

Pursuant to the Content Agreements, the Company is required to pay certain minimum content fees over the term of the Content Agreements as follows: $14,000,000 in the first year of the agreements, of which approximately $8,000,000 was due on January 31, 2016, $25,500,000 in the second year of the agreements, and $18,500,000 in the third year of the agreements. The Company was not able to make the initial payments due on January 31, 2016. Each of the applicable Content Agreements provides that, upon the Company’s failure to make the required initial payment, the applicable Content Provider will provide the Company with written notice, and an opportunity to cure. The cure periods in the Content Agreements range from 10 to 30 days.

 

On September 20, 2016, the Company received notice from Sony Music Entertainment (“SME”) confirming that its Framework Distribution Agreement with SME, as amended (the “Sony Agreement”), automatically terminated effective June 14, 2016, as a result of the Company’s failure to pay SME the advance due pursuant to the Sony Agreement on that date.

 

On September 20, 2016, the Company received notice from UMG Recordings, Inc. (“UMG”) confirming that its Audio Streaming and Conditional Download Agreement with UMG (the “UMG Agreement”) automatically terminated effective September 20, 2016, as a result of the Company’s failure to pay UMG the advance due pursuant to the UMG Agreement on that date.

 

The Company is in default of its Subscription Streaming and Enhanced Radio Services Agreement (the “Warner Agreement”) with Warner Music, Inc. (“Warner”) as a result of the Company’s failure to pay Warner the advance due pursuant to the Warner Agreement on that date.

 

Minimum payments related to the previously described contracts is summarized as follows:

 

Six Months Ended June 30,

 

Total

 

 

 

 

 

2017

 

 

25,830,364 *

 

 

 

 

 

2018

 

 

23,957,182 *

 

 

 

 

 

2019

 

 

9,010,000 *

___________________

*

Additional contract terms include per subscriber, stream or percentage of revenue charges.

 
 
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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2016 and 2015

(Unaudited)

 

Note 10 - Subsequent Events

 

Sale of Secured Convertible Promissory Notes

 

On July 20, 2016, the Company entered into Secured Note Purchase Agreements with certain additional Secured Note Buyers (the “Additional Secured Note Buyers”), pursuant to which the Additional Secured Note Buyers purchased Secured Notes of the Company (the “Additional Secured Notes”) in the aggregate principal amount of $150,000 (before deducting placement agent fees and expenses of $16,605) (the “Third Secured Convertible Note Offering”).

 

The Company used the net proceeds from the Third Secured Convertible Note Offering for working capital and general corporate purposes.

 

The Additional Secured Notes will be secured by a security interest in and lien on all now owned or hereafter acquired assets and property, real and personal, of the Company and its subsidiaries, including the Company’s intellectual and technology property pursuant to the terms of a security agreement (in this case, the “Security Agreement”) among the Company and the Additional Secured Note Buyers. The security interest in and liens on all assets and property of the Company will be a first priority security interest pari passu with the holders of the Secured Notes.

 

The Additional Secured Notes have an aggregate principal balance of $150,000, and a stated maturity date of 6 months from the date of issuance. The principal on the Additional Secured Notes bears interest at a rate of 12% per annum, which is also payable on maturity. The Additional Secured Notes will rank senior to all existing indebtedness of the Company, except as otherwise set forth in the Additional Secured Notes. Upon the closing of a Qualified Offering by the Company during the term of the Additional Secured Notes involving the sale of at least $15,000,000 in Equity Financing Securities, all of the outstanding principal amount of the Additional Secured Notes, together with accrued and unpaid interest due thereon, will automatically convert (in this case, a “Mandatory Conversion”) into units of the Company’s securities (the “Third Units”) at a conversion price per Third Unit equal to the lesser of (a) 80% of the price per share of the Equity Financing Securities sold in the Qualified Offering, or (b) $2.00. At any time prior to a Mandatory Conversion, the holders of the Additional Secured Notes may convert all or part of the outstanding principal amount of the Additional Secured Notes, together with accrued and unpaid interest due thereon, into Third Units at a conversion price of $2.00 per Unit (in this case, an “Optional Conversion”). Each Third Unit will consists of one share (the “Third Unit Shares”) of the Company’s Common Stock, and one five-year warrant (the “Third Unit Warrants”) to purchase one additional share (the “Third Unit Warrant Shares”) of the Company’s Common Stock at an exercise price equal to (a) 125% of the price at which the Company’s Equity Financing Securities are sold in a Qualified Offering in the event of a Mandatory Conversion, or (b) 125% of $2.00 in the event of an Optional Conversion. Upon failure by the Company to pay any principal amount or interest due under the Additional Secured Notes within five (5) days of the date such payment is due, or the occurrence of other event of default under the terms of the Additional Secured Notes, the entire unpaid principal balance of the Additional Secured Notes, together with any accrued and unpaid interest thereon, will become due and payable, without presentment, demand, protest or notice of any kind. In the event of any liquidation, dissolution or winding up of the Company, each holder of an Additional Secured Note will be entitled to receive, pari passu with the other holders of the Secured Notes and Additional Secured Notes, and in preference to the holders of the Company’s other outstanding securities, an amount equal to two times the principal amount of, and any accrued and unpaid interest on, such holder’s Additional Secured Note. The conversion price and number of Third Units issuable upon conversion of the Additional Secured Notes will be subject to adjustment from time to time for subdivision or consolidation of shares and other standard dilutive events.

 
 
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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2016 and 2015

(Unaudited)

 

Pursuant to the terms of a Placement Agency Agreement (in this case, the “Placement Agency Agreement”) between the Company and the placement agent for the Third Secured Convertible Note Offering (in this case, the “Placement Agent”), in connection with the closing of the Third Secured Convertible Note Offering, the Placement Agent was paid a commission of an aggregate of $15,000. In addition, the Placement Agent, or its designees, received warrants to purchase a number of shares of Common Stock equal to 10% of the number of Third Unit Shares into which Additional Secured Notes sold in the Third Secured Convertible Note Offering to Additional Secured Buyers introduced to the Third Secured Convertible Note Offering by the Placement Agent, and 8% of the number of Third Unit Shares into which Additional Secured Notes sold in the Third Secured Convertible Note Offering to Additional Secured Buyers introduced to the Third Secured Convertible Note Offering by the Company or its representatives, are converted upon a Mandatory Conversion, with a term of five (5) years and an exercise price per share equal to the exercise price of the Third Unit Warrant Shares issued to Additional Secured Buyers introduced to the Third Secured Convertible Note Offering by the Placement Agent upon a Mandatory Conversion (“Additional Placement Agent Warrants”).

 

The Third Unit Warrants, to be received upon conversion of the Additional Secured Notes, provide for the purchase of shares of the Company’s Common Stock an exercise price equal to (a) 125% of the price at which the Company’s Equity Financing Securities are sold in a Qualified Offering in the event of a Mandatory Conversion, or (b) 125% of $2.00 in the event of an Optional Conversion. The Third Unit Warrants are exercisable for cash only, for a term of five (5) years from the date of issuance. The number of shares of Common Stock to be deliverable upon exercise of the Third Unit Warrants is subject to adjustment for subdivision or consolidation of shares and other standard dilutive events.

 

The Company granted registration rights to each Additional Secured Buyer with respect to the Third Unit Shares and Third Unit Warrant Shares, and to the Placement Agent, with respect to the Common Stock issuable upon exercise of the Additional Placement Agent Warrants, in each case on a pari passu basis with, and upon substantially the same terms as the registration rights granted to, the investors in a Qualified Offering.

 

Extension of Agreements with Content Providers

 

As previously reported, the Company had entered into Music Label Agreements with certain Music Labels, pursuant to which the Company has been provided limited, non-exclusive licenses to digitally distribute certain sound recordings and related materials owned or controlled by the Music Labels in connection with CÜR Music, to be composed of three progressively priced and increasingly functional tiers, within the United States and its territories, commonwealths, and possessions. The Company had also entered into Publishing Agreements with certain Music Publishers, either directly or through a third party, pursuant to which the Company had been provided the non-exclusive right and license to use certain musical works owned, controlled and/or administered by the Music Publishers in connection with CÜR Music, within the United States and its territories, commonwealths, and possessions.

 

Pursuant to the Content Agreements, the Company was required to pay certain minimum content fees over the term of the Content Agreements as follows: $14,000,000 in the first year of the agreements, of which approximately $8,000,000 was due on January 31, 2016, $25,500,000 in the second year of the agreements, and $18.5 million in the third year of the agreements. The Content Providers previously agreed to provide the Company additional time to make the $8,000,000 in payments through both oral and written agreements. Under those agreements, the Company had until June 15, 2016 to make such payments. The Company paid an aggregate of $500,000 of the proceeds from the closing of the Secured Notes to the Content Providers.

 

Major Label Content Agreements

 

On September 20, 2016, the Company received notice from SME confirming that the Sony Agreement automatically terminated effective June 14, 2016, as a result of the Company’s failure to pay SME the advance due pursuant to the Sony Agreement on that date.

 
 
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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2016 and 2015

(Unaudited)

 

On September 20, 2016, the Company received notice from UMG that the UMG Agreement automatically terminated effective September 20, 2016, as a result of the Company’s failure to pay UMG the advance due pursuant to the UMG Agreement on that date.

 

The Company is in default of the Warner Agreement as a result of the Company’s failure to pay UMG the advance due pursuant to the Warner Agreement on that date.

 

Resignations and Terminations

 

On April 28, 2016, Jay Samit resigned as a member of the Company’s Board, thereby reducing the Board from five to four members. As a result of his resignation, Mr. Samit relinquished his roles as a member of the Company’s Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee.

 

On August 11, 2016, Sanjan Dhody resigned as a member of the Company’s Board, thereby reducing the Board from four to three members. As a result of his resignation, Mr. Dhody relinquished his roles as a member of the Company’s Compensation Committee, Nominating and Corporate Governance Committee and Audit Committee, including as the Company’s “audit committee financial expert.” Following his resignation, the Company had no directors that would qualify as “independent” as that term is defined by Nasdaq Listing Rule 5605(a)(2), or that meet the independence requirements contemplated by Rule 10A-3 under the Securities Exchange Act of 1934, as amended.

 

On August 12, 2016, James Urie resigned as Executive Chairman of the Company’s Board, thereby reducing the Board from three to two members. He also resigned as the Company’s Interim President and Interim Chief Executive Officer as of such date. As a result of his resignation, Mr. Urie has relinquished his role as the Company’s “Principal Executive Officer” for SEC reporting purposes.

 

On August 16, 2016, the Company terminated Kelly Sardo as its Chief Financial Officer and Treasurer. As a result of her termination as Chief Financial Officer and Treasurer, Ms. Sardo no longer serves as the Company’s “Principal Financial and Accounting Officer” for SEC reporting purposes. At this time, Ms. Sardo continues to serve as the Company’s Secretary.

 

On August 16, 2016, the Company terminated John Egazarian as its Chief Operating Officer, Michael Betts as its Chief Technology Officer, J.P. Lespinasse as its Chief Marketing Officer, Joseph LaPlante as its Chief Content Officer and William Campbell as its Chief Strategy Officer.

 

On August 16, 2016, the Company was forced to lay off all of its employees and cease significant operations. The Company continues to seek sources of equity or debt financing in order to support its operations. However, no assurances can be provided that the Company will secure additional financing.

 

On August 20, 2016, William Campbell resigned as a member of the Board, thereby reducing the Company’s Board from two to one member.

 

Other Events

 

On September 23, 2016, the Company amended its 2015 Plan to make certain clarifications with respect to the grant of incentive stock options under the 2015 Plan.

 

As of September 27, 2016, the Company’s Data License and Services Agreement with Rovi terminated as a result of the Company’s failure to pay Rovi past due balances for the services they provided under the Data License and Services Agreement.

The Company received notice from the OTC Markets Group that, if it did not file the Form 10-Q for the fiscal quarter ended June 30, 2016 by September 29, 2016, the Company’s Common Stock would be downgraded to the OTC Pink marketplace. Since the Company did not make this filing on a timely basis, the Company’s Common Stock was downgraded to the OTC Pink marketplace on September 30, 2016.

 

 
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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2016 and 2015

(Unaudited)

 

Default: 12% Senior Secured Convertible Promissory Notes

 

On October 12, 2016, October 15, 2016, November 26, 2016, December 7, 2016, December 20, 2016 and January 20, 2017, the principal and any accrued and unpaid interest on the Company’s outstanding Secured Notes in the principal amount of $2,515,000 became due and payable. The Company was unable to repay the noteholders at that time. Pursuant to the terms of the Secured Notes, the Company’s failure to pay any principal or interest within 5 days of the date such payment is due will constitute an event of default. Following the occurrence of an event of default, among other things, the interest rate on the Secured Notes will increase to 15%. In addition to other remedies available to the noteholders, the Company’s obligation to repay amounts due under the Secured Notes is secured by a first priority security interest in and lien on all of the Company’s assets and property, including the Company’s intellectual property. The security interest is held pari passu with the holders of the Company’s Additional Secured Notes.

 

SEC Wells Notice

 

On July 19, 2017, the Company received a “Wells Notice” from the staff (the “Staff”) of the SEC. The Wells Notice provides notification to the Company that the Staff has made a preliminary determination to recommend that the SEC institute administrative proceedings against the Company pursuant to Sections 12(j) and 12(k) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), based solely upon the Company’s failure to comply with its reporting obligations under Section 13(a) of the Exchange Act. Sections 12(j) grants the SEC the right, after notice and opportunity for a hearing, to revoke the registration of a security. Section 12(k) grants the SEC the right to suspend trading in a security.

 

In accordance with SEC rules, on August 25, 2017, the Company made a written submission to the SEC in response to the Wells Notice, in which, among other things, it conveyed the Company’s present intention to file the delinquent reports and become current with its SEC filing requirements and, as such, set forth the reasons why the proposed enforcement action should not be filed. While no assurances can be made, the Company believes that, as a result of making these filings, the SEC will have no further reason to institute the proposed administrative proceedings, or, if instituted, to continue such proceedings. However, there can be no assurance that the SEC will not bring an enforcement action against the Company, which could result in a trading suspension of the Company’s Common Stock and the de-registration of the Company’s securities under the Exchange Act. Administrative proceedings, if instituted, will be held before an administrative law judge.

 

In order to file the delinquent reports, the Company needs to obtain adequate financing.

 

Vendor Defaults

 

The Company is in default under its MediaNet Agreement with MediaNet” as a result of the Company’s failure to pay MediaNet past due balances for the services they provided under the MediaNet Agreement. To date, the Company has not received a notice of default from MediaNet. The Company intends to cure the default once it is adequately funded.

 

On October 12, 2016, the Company received a notice of default from Zuora confirming that the Company is in default under its Master Subscription Agreement with Zuora, as a result of its failure to pay Zuora past due balances for the services they provided under the Master Subscription Agreement. The Company intends to cure the default once it is adequately funded.

 

The Company is in default under its Sponsorship Agreement (the “Live Nation Agreement”) with Live Nation Marketing, Inc. (“Live Nation”) as a result of the Company’s failure to pay Live Nation past due balances for the services they provided under the Live Nation Agreement. To date, the Company has not received a notice of default from Live Nation. The Company intends to cure the default once it is adequately funded.

 

As of this date, the Company is in default of all of its vendor agreements as a result of not making the required payments.

 

The Company is actively seeking sources of equity or debt financing in order to support its operations. If the Company is able to secure adequate financing, the Company intends to attempt to negotiate certain amendments to the Secured Notes with the noteholders. However, if adequate funds are not available to the Company on acceptable terms, or at all, the Company will be unable to restart operations.

 
 
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward-Looking Statements

 

The following management’s discussion and analysis should be read in conjunction with our historical financial statements and the related notes thereto. The management’s discussion and analysis contains forward-looking statements, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including those under “Risk Factors” in our Annual Report, as updated in subsequent filings we have made with the SEC, that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report.

 

Basis of Presentation

 

The following discussion highlights our results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on our unaudited financial statements contained in this Quarterly Report, which we have prepared in accordance with United States generally accepted accounting principles. You should read the discussion and analysis together with such financial statements and the related notes thereto.

 

As a result of the Contribution (as defined below) and the related change in our business and operations, a discussion of our past financial results is not pertinent, and under applicable accounting principles the historical financial results of CÜR Media, LLC (formerly Raditaz, LLC), the accounting acquirer, prior to the Contribution, are considered the historical financial results of the Company.

 

The audited financial statements for our fiscal year ended December 31, 2015, contained in our Annual Report, include a summary of our significant accounting policies and should be read in conjunction with the discussion below. In the opinion of management, all material adjustments necessary to present fairly the results of operations for such periods have been included in these audited financial statements. All such adjustments are of a normal recurring nature.

 

References in this section to “CÜR Media,” “we,” “us,” “our,” “the Company” and “our Company” refer to CÜR Media, Inc., and its consolidated subsidiary, CÜR Media, LLC.

 

General Overview

 

We were incorporated in the State of Delaware as Duane Street Corp. on November 17, 2011. Our original business was manufacturing and marketing baby products. Prior to the Contribution (as defined below), our Board determined to discontinue operations in this area and to seek a new business opportunity.

 
 
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On January 28, 2014, we consummated a contribution transaction with CÜR Media, LLC, a limited liability company organized in the State of Connecticut on February 15, 2008 (the “Contribution”), pursuant to a Contribution Agreement by and among the Company, CÜR Media, LLC, and the holders of a majority of CÜR Media, LLC’s limited liability company membership interests (the “Contribution Agreement”). In connection with the Contribution, and in accordance with the terms and conditions of the Contribution Agreement, all outstanding securities of CÜR Media, LLC were exchanged for securities of ours.

 

Prior to the Contribution, CÜR Media, LLC’s activities since inception had been devoted primarily to the development and commercialization of Raditaz, a DMCA compliant internet radio product. Raditaz was launched in early 2012 and the platform was continually developed and improved through November 2013 when its iOS, Android and web products were removed from the market, to allow us to focus on the further development of our CÜR Music product.

 

The Raditaz music streaming platform and products were under development since 2010 and, prior to the 2014 PPO (as defined below), were financed primarily from angel investments in the aggregate amount of approximately $4,858,000, $150,000 of financing from a promissory note from CT Innovations, Incorporated, and a $100,000 promissory note and a $100,000 grant from the State of Connecticut Department of Economic Development.

 

As a result of the Contribution, CÜR Media, LLC became our wholly owned subsidiary, and we adopted the business of CÜR Media, LLC, which is to develop and commercialize a streaming music experience for listening on the web and mobile devices, as our sole line of business.

 

On January 31, 2014, we changed our name to CÜR Media, Inc., a name that more accurately represents our new business focus. In connection with the name change, we changed our OTC trading symbol to “CURM.”

 

In addition, on January 31, 2014, we increased our number of authorized shares to 310,000,000 shares, consisting of (i) 300,000,000 shares of Common Stock, and (ii) 10,000,000 shares of preferred stock, par value $0.0001 per share (“Preferred Stock”).

 

Further, on January 31, 2014, our Board of Directors (“Board”) authorized a 1.26953123-for-1 forward split of our Common Stock, in the form of a dividend, pursuant to which each shareholder of our Common Stock as of the record date received 1.19260815 additional shares of Common Stock for each one share owned.

 

In a private placement financing we conducted with respect to which closings occurred on January 28, 2014, March 14, 2014 and March 28, 2014 (the “2014 PPO”), we sold an aggregate of 744,756 shares of our Common Stock, and warrants to purchase an aggregate of 744,756 shares of our Common Stock at an exercise price of $26.00 per share for a term of five (5) years (“PPO Warrants”), for gross proceeds of approximately $9,680,000 (before deducting placement agent fees and expenses of the 2014 PPO estimated at approximately $1,529,000).

 

The placement agent for the 2014 PPO and its sub-agent were paid an aggregate commission of approximately $968,000 and were issued warrants to purchase an aggregate of 74,483 shares of our Common Stock at an exercise price of $13.00 per share for a term of five (5) years (“Broker Warrants”).

 
 
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On April 6, 2015, we consummated an offer to amend and exercise the PPO Warrants (the “Offer to Amend and Exercise Warrants”). The PPO Warrants of holders who elected to participate in the Offer to Amend and Exercise Warrants were amended to, among other things, remove the price-based anti-dilution provisions contained therein and reduce the exercise price from $26.00 to $6.50 per share of Common Stock. Pursuant to the Offer to Amend and Exercise Warrants, an aggregate of 497,548 PPO Warrants were amended and exercised by their holders, for gross proceeds of approximately $3,234,000 (before deducting warrant agent fees and expenses of the Offer to Amend and Exercise estimated at approximately $417,000).

 

Effective on or prior to April 6, 2015, the Company and the holders of (a) 113,469 PPO Warrants, that chose not to participate in the Offer to Amend and Exercise Warrants (“Non-Participating Original Warrants”), and (b) all 74,483 Broker Warrants, approved an amendment to remove the price-based anti-dilution provisions in their warrants. As a result, the price-based anti-dilution provisions contained in these Non-Participating Original Warrants and Broker Warrants have been removed and are of no further force or effect as of April 6, 2015.

 

The warrant agent for the offer to Amend and Exercise Warrants was paid an aggregate commission of approximately $323,350 and was issued warrants to purchase an aggregate of 49,752 shares of our Common Stock at an exercise price of $6.50 per share for a term of five (5) years (“Warrant Agent Warrants”).

 

Certain securities we issued in the 2014 PPO had price-based anti-dilution protection (“Anti-Dilution Rights”), if, within twenty-four (24) months after the final closing of the 2014 PPO, we issue additional shares of Common Stock or Common Stock equivalents (subject to customary exceptions) for a consideration per share less than $13.00. Of the 744,756 PPO Warrants, 133,739 still remained with these priced-based anti-dilution rights. With the consummation of the exercise and amendment of the PPO Warrants and the issuance of the Warrant Agent Warrants to the Warrant Agent, the anti-dilution provisions were triggered and the non-participating warrant holders received (i) an aggregate of 17,180 additional shares of Common Stock (ii) a reduction in the price of their PPO Warrants from $26.00 per share to $23.01 per share, and (iii) an aggregate of 17,180 additional warrants to purchase shares of Common Stock of the company at an exercise price of $23.01 per share.

 

On October 20, 2015, October 26, 2015, November 13, 2015, November 24, 2015, November 30, 2015, December 30, 2015 and January 14, 2016 we entered into Securities Purchase Agreements (in this case, the “Purchase Agreements”) with certain “accredited investors (the “Unsecured Buyers”), pursuant to which the Unsecured Buyers purchased 12% Unsecured Convertible Promissory Notes of the Company (the “Unsecured Notes”) in the aggregate principal amount of $2,113,500 (the “First Convertible Note Offering”). The aggregate gross proceeds to the Company were $2,113,500 (before deducting expenses related to the purchase and sale of the Unsecured Notes of approximately $45,000), of which $586,000 in proceeds were from members of the Board.

 

With the issuance of Unsecured Notes, the Anti-Dilution Rights were triggered and the holders of the Non-Participating Original Warrants received, or are entitled to receive (i) an aggregate of 18,674 additional shares of Common Stock, (ii) a reduction in the price of their PPO Warrants from $23.01 per share to $20.50 per share, and (iii) an aggregate of 18,674 additional warrants to purchase shares of Common Stock of the Company at an exercise price of $20.50 per share.

 

On February 16, 2016, we effected a 1-for-13 reverse stock split (the “Reverse Stock Split”). Upon effectiveness of the Reverse Stock Split, every thirteen (13) outstanding shares of our Common Stock (“Old Common Stock”) were, without any further action by us, or any holder thereof, combined into and automatically became one share of our Common Stock. Any fractional shares have been rounded up to one whole common share. All shares of Common Stock eliminated as a result of the Reverse Stock Split have been cancelled such that they were returned to our authorized and unissued capital stock, and our capital has been reduced by an amount equal to the par value of the Old Common Stock so retired.

 
 
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On April 12, 2016, April 15, 2016, May 26, 2016 and June 7, 2016 the Company entered into Securities Purchase Agreements (in this case, the “Purchase Agreements”) with certain “accredited investors” (the “Secured Buyers”), pursuant to which the Secured Buyers purchased 12% Senior Secured Convertible Promissory Notes of the Company (the “Secured Notes”) in the aggregate principal amount of $2,365,000 (before deducting placement agent fees and expenses of $265,849) (the “Second Convertible Note Offering”).

 

The Company used the net proceeds from the Second Convertible Note Offering for certain payments to content owners, and working capital and general corporate purposes.

 

The Secured Notes are secured by a security interest in and lien on all now owned or hereafter acquired assets and property, real and personal, of the Company and its subsidiaries, including the Company’s intellectual and technology property pursuant to the terms of a security agreement (in this case, the “Security Agreement”) among the Company and the Secured Buyers. The security interest in and liens on all assets and property of the Company will be a first priority security interest.

 

The Secured Notes have an aggregate principal balance of $2,365,000, and a stated maturity date of 6 months from the date of issuance. The principal on the Secured Notes bears interest at a rate of 12% per annum, which is also payable on maturity. The Secured Notes will rank senior to all existing indebtedness of the Company, except as otherwise set forth in the Secured Notes. Upon the closing of a financing (in this case, a “Qualified Offering”) by the Company during the term of the Secured Notes involving the sale of at least $15,000,000 in Equity Financing Securities, all of the outstanding principal amount of the Secured Notes, together with accrued and unpaid interest due thereon, will automatically convert (in this case, a “Mandatory Conversion”) into units of the Company’s securities (the “Second Units”) at a conversion price per Second Unit equal to the lesser of (a) 80% of the price per share of the Equity Financing Securities sold in the Qualified Offering, or (b) $2.00. At any time prior to a Mandatory Conversion, the holders of the Secured Notes may convert all or part of the outstanding principal amount of the Secured Notes, together with accrued and unpaid interest due thereon, into Second Units at a conversion price of $2.00 per Unit (in this case, an “Optional Conversion”). Each Second Unit will consists of one share (the “Second Unit Shares”) of the Company’s Common Stock, and one five-year warrant (the “Second Unit Warrants”) to purchase one additional share (the “Second Unit Warrant Shares”) of the Company’s Common Stock at an exercise price equal to (a) 125% of the price at which the Company’s equity securities (or securities convertible into or exercisable for equity securities) are sold in a Qualified Offering in the event of a Mandatory Conversion, or (b) 125% of $2.00 in the event of an Optional Conversion. Upon failure by the Company to pay any principal amount or interest due under the Secured Notes within 5 days of the date such payment is due, or the occurrence of other event of default under the terms of the Secured Notes, the entire unpaid principal balance of the Secured Notes, together with any accrued and unpaid interest thereon, will become due and payable, without presentment, demand, protest or notice of any kind. In the event of any liquidation, dissolution or winding up of the Company, each holder of a Secured Note will be entitled to receive, pari passu with the other holders of the Secured Notes, and in preference to the holders of the Company’s other outstanding securities, an amount equal to two times the principal amount of, and any accrued and unpaid interest on, such holder’s Secured Note. The conversion price and number of Second Units issuable upon conversion of the Secured Notes will be subject to adjustment from time to time for subdivision or consolidation of shares and other standard dilutive events.

 
 
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Pursuant to the terms of a Placement Agency Agreement (in this case, the “Placement Agency Agreement”) between the Company and the placement agent for the Second Convertible Note Offering (in this case, the “Placement Agent”), in connection with the closing of the Second Convertible Note Offering, the Placement Agent was paid a commission of an aggregate of $236,500. In addition, the Placement Agent, or its designees, received warrants to purchase a number of shares of Common Stock equal to 10% of the number of Second Unit Shares into which Secured Notes sold in the Second Convertible Note Offering to Secured Buyers introduced to the Second Convertible Note Offering by the Placement Agent, and 8% of the number of Second Unit Shares into which Secured Notes sold in the Second Convertible Note Offering to Secured Buyers introduced to the Second Convertible Note Offering by the Company or its representatives, are converted upon a Mandatory Conversion, with a term of 5 years and an exercise price per share equal to the exercise price of the Second Unit Warrant Shares issued to Secured Buyers introduced to the Second Convertible Note Offering by the Placement Agent upon a Mandatory Conversion (“Placement Agent Warrants”).

 

The Second Unit Warrants, to be received upon conversion of the Secured Notes, provide for the purchase of shares of the Company’s Common Stock an exercise price equal to (a) 125% of the price at which the Company’s Equity Financing Securities are sold in a Qualified Offering in the event of a Mandatory Conversion, or (b) 125% of $2.00 in the event of an Optional Conversion. The Second Unit Warrants are exercisable for cash only, for a term of 5 years from the date of issuance. The number of shares of Common Stock to be deliverable upon exercise of the Second Unit Warrants is subject to adjustment for subdivision or consolidation of shares and other standard dilutive events.

 

The Company granted registration rights to each Secured Buyer with respect to the Second Unit Shares and Second Unit Warrant Shares, and to the Placement Agent, with respect to the Common Stock issuable upon exercise of the Placement Agent Warrants, in each case on a pari passu basis with, and upon substantially the same terms as the registration rights granted to, the investors in a Qualified Offering.

 

As of June 30, 2016, we had devoted substantially all of our efforts to product development, raising capital and building our technology infrastructure. As of that date, we did not receive any material revenues from our planned principal operations.

 

Our Strategy

 

Our CÜR Music product is a new streaming music experience that combines the listening experience of free internet radio products with an on-demand listening experience for listening on web and mobile devices, beginning at $1.99 per month. CÜR Music will target consumers who are seeking a more comprehensive music streaming service than current free, ad-supported music streaming products. We believe that the CÜR Music product will include a hybrid model that includes many features that free, ad-supported internet radio products provide, without interruptive advertising, with a limited on-demand offering, and will include a social toolset that enables consumers to curate certain aspects their playlists.

 

In addition to revenue from subscriptions, our business plan includes a second revenue stream of personalized advertising, which will not interrupt a stream, but will target a user’s listening habits. The advertising may be in the form of display ads, email and text messages. Our business plan further includes a third revenue stream from the sale of music, concert tickets and merchandise through our music streaming service, to be tailored to each listeners taste based on prior listening trends. We plan to sell advertising, music downloads and concert tickets and merchandise in the future subsequent to launch.

 

In addition, our business plan includes distributing our music streaming service through Apple’s iTunes App Store to iOS devices, Google’s Google Play Store to Android devices and the internet, among other distribution channels and platforms. At launch, we plan to have an iOS application, Android application and a CÜR website.

 

We plan to source our music from MusicNet, Inc. d/b/a Media Net Digital, Inc. We also plan to use Amazon web services to support certain of the technological needs of the business.

As of June 30, 2016, we continued to pursue sources of equity and/or debt financing to support our operations. We were not successful in raising the necessary funds as of June 30, 2016. We cannot launch our music streaming product and platform until we have raised the necessary funds.

 

 
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Recent Developments

 

Extension of Agreements with Content Providers

 

As previously reported, the Company had entered into agreements (“Music Label Agreements”) with certain music labels (“Music Labels”), pursuant to which the Company has been provided limited, non-exclusive licenses to digitally distribute certain sound recordings and related materials owned or controlled by the Music Labels in connection with the Company’s CÜR-branded Internet music service, CÜR Music, to be composed of three progressively priced and increasingly functional tiers, within the United States and its territories, commonwealths, and possessions. The Company had also entered into agreements (“Publishing Agreements”) with certain music publishing companies (“Music Publishers”) either directly or through a third party, pursuant to which the Company had been provided the non-exclusive right and license to use certain musical works owned, controlled and/or administered by the Music Publishers in connection with CÜR Music, within the United States and its territories, commonwealths, and possessions. The Music Label Agreements and Publishing Agreements may be collectively referred to herein as the “Content Agreements,” and the Music Labels and Music Publishers may be collectively referred to herein as the “Content Providers.”

 

Pursuant to the Content Agreements, the Company was required to pay certain minimum content fees over the term of the Content Agreements as follows: $14,000,000 in the first year of the agreements, of which approximately $8,000,000 million was due on January 31, 2016, $25,000,000 million in the second year of the agreements, and $18,500,000 million in the third year of the agreements. The Content Providers previously agreed to provide the Company additional time to make the $8,000,000 in payments through both oral and written agreements. Under those agreements, the Company had until June 15, 2016 to make such payments. The Company paid an aggregate of $500,000 of the proceeds from the closing of the Secured Notes to the Content Providers.

 

On September 20, 2016, we received notice from Sony Music Entertainment (“SME”) confirming that our Framework Distribution Agreement with SME, as amended (the “Sony Agreement”), automatically terminated effective June 14, 2016 as a result of our failure to pay SME the advance due pursuant to the Sony Agreement on that date.

 

On September 20, 2016, we received notice from UMG Recordings, Inc. (“UMG”) that our Audio Streaming and Conditional Download Agreement with UMG (the “UMG Agreement”) automatically terminated effective September 20, 2016 as a result of our failure to pay UMG the advance due pursuant to the UMG Agreement on that date.

 

The Company is in default of its Subscription Streaming and Enhanced Radio Services Agreement (the “Warner Agreement”) with Warner Music, Inc. (“Warner”) as a result of our failure to pay Warner the advance due pursuant to the Warner Agreement on that date.

 

The Company issued the Content Providers warrants (“Content Provider Warrants”) to purchase an aggregate of 215,279 shares (the “Content Provider Warrant Shares”) of the Company’s Common Stock at a weighted average exercise price of $6.41 per share. The Content Provider Warrants have a weighted average contractual term of 6.45 years. The exercise price and number of Content Provider Warrant Shares are subject to adjustment for any stock dividend, stock split, stock combination, recapitalization, reclassification, reorganization or other similar event.

 
 
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Sale of Additional 12% Senior Secured Convertible Notes

 

On July 20, 2016, the Company entered into Purchase Agreements with certain additional purchasers (the “Additional Secured Buyers”), pursuant to which the Additional Secured Buyers purchased Secured Notes of the Company (the “Additional Secured Notes”) in the aggregate principal amount of $150,000 (before deducting placement agent fees and expenses of $16,605) (the “Third Convertible Note Offering”).

 

The Company used the net proceeds from the Third Convertible Note Offering for working capital and general corporate purposes.

 

The Additional Secured Notes will be secured by a security interest in and lien on all now owned or hereafter acquired assets and property, real and personal, of the Company and its subsidiaries, including the Company’s intellectual and technology property pursuant to the terms of a security agreement (in this case, the “Security Agreement”) among the Company and the Additional Secured Buyers. The security interest in and liens on all assets and property of the Company will be a first priority security interest pari passu with the holders of the Secured Notes.

 

The Additional Secured Notes have an aggregate principal balance of $150,000, and a stated maturity date of 6 months from the date of issuance. The principal on the Additional Secured Notes bears interest at a rate of 12% per annum, which is also payable on maturity. The Additional Secured Notes will rank senior to all existing indebtedness of the Company, except as otherwise set forth in the Additional Secured Notes. Upon the closing of a financing (in this case, a “Qualified Offering”) by the Company during the term of the Additional Secured Notes involving the sale of at least $15,000,000 in Equity Financing Securities, all of the outstanding principal amount of the Additional Secured Notes, together with accrued and unpaid interest due thereon, will automatically convert (in this case, a “Mandatory Conversion”) into units of the Company’s securities (the “Third Units”) at a conversion price per Third Unit equal to the lesser of (a) 80% of the price per share of the Equity Financing Securities sold in the Qualified Offering, or (b) $2.00. At any time prior to a Mandatory Conversion, the holders of the Additional Secured Notes may convert all or part of the outstanding principal amount of the Additional Secured Notes, together with accrued and unpaid interest due thereon, into Third Units at a conversion price of $2.00 per Unit (in this case, an “Optional Conversion”). Each Third Unit will consists of one share (the “Third Unit Shares”) of the Company’s Common Stock, and one five-year warrant (the “Third Unit Warrants”) to purchase one additional share (the “Third Unit Warrant Shares”) of the Company’s Common Stock at an exercise price equal to (a) 125% of the price at which the Company’s Equity Financing Securities are sold in a Qualified Offering in the event of a Mandatory Conversion, or (b) 125% of $2.00 in the event of an Optional Conversion. Upon failure by the Company to pay any principal amount or interest due under the Additional Secured Notes within 5 days of the date such payment is due, or the occurrence of other event of default under the terms of the Additional Secured Notes, the entire unpaid principal balance of the Additional Secured Notes, together with any accrued and unpaid interest thereon, will become due and payable, without presentment, demand, protest or notice of any kind. In the event of any liquidation, dissolution or winding up of the Company, each holder of an Additional Secured Note will be entitled to receive, pari passu with the other holders of the Secured Notes and Additional Secured Notes, and in preference to the holders of the Company’s other outstanding securities, an amount equal to two times the principal amount of, and any accrued and unpaid interest on, such holder’s Additional Secured Note. The conversion price and number of Third Units issuable upon conversion of the Additional Secured Notes will be subject to adjustment from time to time for subdivision or consolidation of shares and other standard dilutive events.

 
 
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Pursuant to the terms of a Placement Agency Agreement (in this case, the “Placement Agency Agreement”) between the Company and the placement agent for the Third Convertible Note Offering (in this case, the “Placement Agent”), in connection with the closing of the Third Convertible Note Offering, the Placement Agent was paid a commission of an aggregate of $15,000. In addition, the Placement Agent, or its designees, will receive warrants to purchase a number of shares of Common Stock equal to 10% of the number of Third Unit Shares into which Additional Secured Notes sold in the Third Convertible Note Offering to Additional Secured Buyers introduced to the Third Convertible Note Offering by the Placement Agent, and 8% of the number of Third Unit Shares into which Additional Secured Notes sold in the Third Convertible Note Offering to Additional Secured Buyers introduced to the Third Convertible Note Offering by the Company or its representatives, are converted upon a Mandatory Conversion, with a term of 5 years and an exercise price per share equal to the exercise price of the Third Unit Warrant Shares issued to Additional Secured Buyers introduced to the Third Convertible Note Offering by the Placement Agent upon a Mandatory Conversion (“Additional Placement Agent Warrants”).

 

The Third Unit Warrants, to be received upon conversion of the Additional Secured Notes, provide for the purchase of shares of the Company’s Common Stock an exercise price equal to (a) 125% of the price at which the Company’s Equity Financing Securities are sold in a Qualified Offering in the event of a Mandatory Conversion, or (b) 125% of $2.00 in the event of an Optional Conversion. The Third Unit Warrants are exercisable for cash only, for a term of 5 years from the date of issuance. The number of shares of Common Stock to be deliverable upon exercise of the Third Unit Warrants is subject to adjustment for subdivision or consolidation of shares and other standard dilutive events.

 

The Company granted registration rights to each Additional Secured Buyer with respect to the Third Unit Shares and Third Unit Warrant Shares, and to the Placement Agent, with respect to the Common Stock issuable upon exercise of the Additional Placement Agent Warrants, in each case on a pari passu basis with, and upon substantially the same terms as the registration rights granted to, the investors in a Qualified Offering.

 

Default on Secured Notes

 

On October 12, 2016, October 15, 2016, November 26, 2016, December 7, 2016, December 20, 2016 and January 20, 2017, the principal and any accrued and unpaid interest on our outstanding Secured Notes and Additional Secured Notes in the principal amount of an aggregate of $2,515,000 became due and payable. We were unable to repay the noteholders at that time. Pursuant to the terms of the Secured Notes and Additional Secured Notes, our failure to pay any principal or interest within five (5) days of the date such payment was due constituted an event of default. Following the occurrence of an event of default, among other things, the interest rate on the Secured Notes and Additional Secured Notes increased to 15%. In addition to other remedies available to the noteholders, our obligation to repay amounts due under the Secured Notes and Additional Secured Notes is secured by a first priority security interest in and lien on all of our assets and property, including our intellectual property.

 

We are actively seeking sources of equity or debt financing in order to support our operations. If we are able to secure adequate financing, we intend to attempt to negotiate certain amendments to the Secured Notes with the noteholders. However, if adequate funds are not available to us on acceptable terms, or at all, we will be unable to restart operations.

 
 
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Receipt of Wells Notice

 

On July 19, 2017, we received a “Wells Notice” from the staff (the “Staff”) of the SEC. The Wells Notice provides notification to the Company that the Staff has made a preliminary determination to recommend that the SEC institute administrative proceedings against the Company pursuant to Sections 12(j) and 12(k) of the Exchange Act, based solely upon the Company’s failure to comply with its reporting obligations under Section 13(a) of the Exchange Act. Sections 12(j) grants the SEC the right, after notice and opportunity for a hearing, to revoke the registration of a security. Section 12(k) grants the SEC the right to suspend trading in a security.

 

In accordance with SEC rules, on August 25, 2017, the Company made a written submission to the SEC in response to the Wells Notice, in which, among other things, it conveyed the Company’s present intention to file the delinquent reports and become current with its SEC filing requirements and, as such, set forth the reasons why the proposed enforcement action should not be filed. While no assurances can be made, the Company believes that, as a result of making these filings, the SEC will have no further reason to institute the proposed administrative proceedings, or, if instituted, to continue such proceedings. However, there can be no assurance that the SEC will not bring an enforcement action against the Company, which could result in a trading suspension of the Company’s common stock and the de-registration of the Company’s securities under the Exchange Act. Administrative proceedings, if instituted, will be held before an administrative law judge.

 

In order to file the delinquent reports, the Company needs to obtain adequate financing.

 

Defaults on Vendor Agreements

 

As of September 27, 2016, our Data License and Services Agreement (the “Rovi Agreement”) with Rovi Data Solutions, Inc. and Veveo, Inc. (collectively, “Rovi”) terminated as a result of our failure to pay Rovi past due balances for the services they provided under the Rovi Agreement.

 

We are in default under our Distribution Agreement (the “MediaNet Agreement”) with MusicNet, Inc., d/b/a MediaNet Digital, Inc. (“MediaNet”) as a result of our failure to pay MediaNet past due balances for the services they provided under the MediaNet Agreement. To date, we have not received a notice of default from MediaNet. The Company intends to cure the default once it is adequately funded.

 

On October 12, 2016, we received a notice of default from Zuora, Inc. (“Zuora”) confirming that the Company is in default under its Master Subscription Agreement with Zuora (the “Zuora Agreement”) as a result of our failure to pay Zuora past due balances for the services they provided under the Zuora Agreement. The Company intends to cure the default once it is adequately funded.

 

We are in default under our Sponsorship Agreement (the “Live Nation Agreement”) with Live Nation Marketing, Inc. (“Live Nation”) as a result of the Company’s failure to pay Live Nation past due balances for the services they provided under the Live Nation Agreement. To date, we have not received a notice of default from Live Nation. The Company intends to cure the default once it is adequately funded.

 

As of this date, we are in default of all of our vendor agreements as a result of not making the required payments.

 
 
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Results of Operations

 

Three Month Period Ended June 30, 2016 Compared to Three Month Period Ended June 30, 2015

 

Revenues

 

We have not generated any material revenues for the three months ended June 30, 2016 or 2015.

 

Operating Expenses

 

Overview

 

Total operating expenses for the three month periods ended June 30, 2016 and 2015 were $2,708,329 and $2,778,700, respectively. The decrease in total operating expenses of $70,371, or approximately 2.5%, was primarily related to a decrease in research and development costs. The aforementioned decrease was partially offset by an increase in general and administrative costs.

 

Research and Development Expenses

 

For the three month periods ended June 30, 2016 and 2015, research and development expenses were $1,223,466 and $2,156,198, respectively. Research and development expenses decreased by $932,732, or approximately 43%, primarily due to a decrease in compensation costs related to our employee base as we experienced financial difficulties in 2016 and had to decrease our staffing and technical spending.

 

General and Administrative Expenses

 

For the three month periods ended June 30, 2016 and 2015, general and administrative expenses were $1,408,924 and $454,953 respectively. General and administrative expenses increased by $953,971, or approximately 210%, primarily due to an increase in legal costs related to raising capital for a financing that didn’t close, non-cash expense for Content Provider Warrants issued to the three major music labels and an increase in compensation costs relate to the hiring of James Urie as Interim Chief Executive Officer.

 

Stock based Compensation Expenses

 

For the three month periods ended June 30, 2016 and 2015, stock based compensation expenses were $71,000 and $160,579, respectively, a decrease of $89,579 or 56%. The decrease was primarily due to the issuance of stock options to employees.

 

Other Income (Expense)

 

For the three month periods ended June 30, 2016 and 2015, other expense was $2,255,526 and $1,075,096, respectively. Other expense increased due to a change in the fair value of derivative liabilities and interest expense related to amortization of the debt discount, partially offset by a decrease in the extinguishment of derivative liabilities.

 

Six Month Period Ended June 30, 2016 Compared to Six Month Period Ended June 30, 2015

 

Revenues

 

We have not generated any material revenues for the six months ended June 30, 2016 or 2015.

 
 
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Operating Expenses

 

Overview

 

Total operating expenses for the six month periods ended June 30, 2016 and 2015 were $4,981,102 and $4,581,057, respectively. The increase in total operating expenses of $400,045, or approximately 8.7%, was primarily related to an increase in general and administrative expenses offset by a decrease in research and development.

 

Research and Development Expenses

 

For the six month periods ended June 30, 2016 and 2015, research and development expenses were $2,889,067 and $3,566,169, respectively. Research and development expenses decreased by $677,102, or approximately 19%, primarily due to a decrease in compensation costs related to our employee base as we experienced financial difficulties in 2016 and had to decrease our staffing and technical spending.

 

General and Administrative Expenses

 

For the six month periods ended June 30, 2016 and 2015, general and administrative expenses were $1,934,006 and $824,023, respectively. General and administrative expenses increased by $1,109,983, or approximately 135%, primarily due to payments to the major music labels, an increase in costs related to raising capital for a financing that did not close and an increase in compensation costs.

 

Stock based Compensation Expenses

 

For the six month periods ended June 30, 2016 and 2015, stock based compensation expense were $147,966 and $173,805, respectively. Stock based compensation expenses decreased by approximately $25,839, or 15%, due to a year over year decrease in options granted and the associated expense to be recognized on those grants.

 

Other Income (Expense)

 

For the six month periods ended June 30, 2016 and 2015, other income (expense) was $988,972 and $1,272,842, respectively. Other income decreased by $283,870 primarily due to a lower increase in the fair value of derivative liabilities, an increase in interest expense and a loss on issuance of convertible debt.

 

Liquidity and Capital Resources

 

Sources of Liquidity

 

As of June 30, 2016, cash and cash equivalents were approximately $144, as compared to $734 at December 31, 2015.

 

As of June 30, 2016, we had a working capital deficit of $9,258,527. As of December 31, 2015, we had a working capital deficit of $4,288,488. The increase of $4,970,039, or approximately 116%, in working capital was attributable to an increase in accounts payable, accrued and other current liabilities, and accrued derivative liabilities.

 

In January 2014, warrants to purchase 14,315 shares of Common Stock were exercised resulting in gross proceeds of $99,695.

 

We raised aggregate gross proceeds of approximately $9,680,000 in our 2014 PPO (before deducting placement agent fees and expenses of the 2014 PPO of approximately $1,529,000).

 
 
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On April 6, 2015, we raised aggregate gross proceeds of approximately $3,234,000 in our Offer to Amend and Exercise Warrants (before deducting placement agent fees and expenses of the Offer to Amend and Exercise Warrants of approximately $417,000).

 

On October 20, 2015, October 26, 2015, November 13, 2015, November 24, 2015, November 30, 2015, December 30, 2015 and January 14, 2016 we entered into Purchase Agreements with certain Unsecured Note Buyers, pursuant to which the Unsecured Note Buyers purchased Unsecured Notes in the aggregate principal amount of $2,113,500 (before deducting fees and expenses of approximately $45,000).

 

On April 12, 2016, April 15, 2016, May 26, 2016 and June 7, 2016, we entered into Purchase Agreements with certain Secured Note Buyers, pursuant to which the Secured Buyers purchased Secured Notes in the aggregate principal amount of $2,365,000 (before deducting placement agent fees and expenses of approximately $265,849).

 

On July 20, 2016, we entered into Purchase Agreements with certain Additional Secured Note Buyers, pursuant to which the Additional Secured Note Buyers purchased Additional Secured Notes in the aggregate principal amount of $150,000 (before deducting placement agent fees and expenses of approximately $16,605).

 

Our agreements with UMG and SME have been terminated and we are in default of our agreement with Warner. If we are able to secure adequate financing, we intend to enter into revised agreements with UMG, SME and Warner. We also plan to enter into content licensing agreements with certain independent music labels, music publishers and publisher rights organizations. The cost of entering into our previous content licensing agreements with major music labels, publisher rights organizations and publishers including legal and consulting fees was approximately $9,000,000, the majority of which was initial prepayments to content providers. If we are able to secure adequate financing, we expect the initial prepayments to content providers to be significantly lower than the previous $9,000,000. If we are able to secure adequate financing, we intend to have a dedicated team of software engineers, led by our Chief Technology Officer and Chief Operating Officer, working on enhancing the technology platform, as well as the iOS and Android applications and the CÜR Music website.

 

Not including non-cash expenses, we have spent approximately $19,700,000 on research and development, sales and marketing and general and administrative costs to complete the development of the CÜR Music, for the time period since the Contribution in January 2014 through the second quarter of 2016. Of the total $19,700,000, a total of approximately $14,700,000 is related to research and development and approximately $5,000,000 is related to general and administrative costs. In addition to the aforementioned costs, we expect to pay approximately $3,000,000 as prepayments in connection with the agreements that we plan to have with the major music labels, independent labels and publishers

 

In order to bring CÜR Music to market, we need to raise a substantial amount of capital to implement our business plan, market CÜR Music, pay content license costs, and for general working capital. There can be no assurance that financing will be available when required in sufficient amounts, on acceptable terms or at all. If we are unsuccessful at raising sufficient funds, for whatever reason, to fund our operations, we may be forced to seek a buyer for our business, or seek a similar transaction. If all of these alternatives fail, we expect that we will be required to seek protection from creditors under applicable bankruptcy laws.

 
 
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Net Cash Used in Operating Activities

 

Net cash used in operating activities was $2,500,757 for the six month period ended June 30, 2016, as compared to net cash used of $4,035,345 for the six month period ended June 30, 2015. The decrease of $1,534,588, or approximately 38%, in net cash used in operations was primarily due to an increase in accrued and other current liabilities of $1,388,689, and an increase in accounts payable of $771,788, an increase in non-cash interest expense of $1,220,931, offset by an increase in net loss of $2,661,136.

 

Net Cash Provided by (Used in) Investing Activities

 

During the six month periods ended June 30, 2016 and 2015, net cash provided by and used in investing activities was $0 and $17,598, respectively. The current year decrease was due to the company not spending any funds on equipment.

 

Net Cash Provided by Financing Activities

 

During the six month period ended June 30, 2016 and 2015, we received $2,506,000 and $2,819,366, respectively, in proceeds from the sale of convertible notes. In the six months ended June 30, 2016 and 2015, payments on notes payable were $5,833 and $14,846, respectively.

 

Off-Balance Sheet Arrangements

 

We have not entered into any off-balance sheet financing arrangements and have not formed any special purpose entities. We have not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.

 

Contractual Obligations

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Exchange Act that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our senior management, currently consisting of Thomas Brophy, our President, Chief Executive Officer, Interim Chief Financial Officer and Treasurer (Principal Executive Officer and Principal Financial Officer) as appropriate to allow timely decisions regarding required disclosure.

 

In connection with the preparation of this Quarterly Report, we carried out an evaluation, under the supervision and with the participation of our senior management, currently consisting of Thomas Brophy, our President, Chief Executive Officer, Interim Chief Financial Officer and Treasurer (Principal Executive Officer and Principal Financial Officer) of the effectiveness of the design and operation of our disclosure controls and procedures existing as of June 30, 2016. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting, Thomas Brophy, our President, Chief Executive Officer, Interim Chief Financial Officer and Treasurer (Principal Executive Officer and Principal Financial Officer) concluded that our disclosure controls and procedures were not effective as of such date.

 
 
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Changes in Internal Control over Financial Reporting

 

During our second fiscal quarter, and through the date hereof, the following changes occurred in our internal control over financial reporting:

 

 

· On April 28, 2016, Jay Samit resigned as a member of our Board. As a result of his resignation, Mr. Samit relinquished his roles as a member of our Audit Committee, our Compensation Committee and our Nominating and Corporate Governance Committee.

 

 

 

 

· On April 29, 2016, the title of our President, Chief Executive Officer and Chairman of the Board, Thomas Brophy, changed to Founder, and the duties of President, Chief Executive Officer and Chairman of the Board were assumed by James Urie (as further described below). Mr. Brophy continues as a member of our Board.

 

 

 

 

· On April 29, 2016, our Board appointed James Urie as our Executive Chairman of the Board and as our Interim President and Interim Chief Executive Officer, to assume the duties previously performed by Mr. Brophy, to serve until his successor shall be duly appointed, unless he resigns, is removed from office, or is otherwise disqualified from serving as an officer and a director of the Company.

 

 

 

 

· On April 29, 2016, our Board appointed William Campbell, a director of ours, to serve as our Chief Strategy Officer.

 

 

 

 

· On August 11, 2016, Sanjan Dhody resigned as a member of the Board. As a result of his resignation, Mr. Dhody relinquished his roles as a member of our Compensation Committee, our Nominating and Corporate Governance Committee and our Audit Committee, including as our “audit committee financial expert.” Following Mr. Dhody’s resignation, we had no directors that would qualify as “independent” as that term is defined by Nasdaq Listing Rule 5605(a)(2), or that meet the independence requirements contemplated by Rule 10A-3 under the Securities Exchange Act of 1934, as amended.

 

 

 

 

· On August 12, 2016, James Urie resigned as Executive Chairman of the Board. He also resigned as our Interim President and Interim Chief Executive Officer as of such date. As a result of his resignation, Mr. Urie has relinquished his role as the Company’s “Principal Executive Officer” for Securities and Exchange Commission (“SEC”) reporting purposes.

 

 

 

 

· On August 16, 2016, we terminated Kelly Sardo as our Chief Financial Officer and Treasurer. As a result of her termination as Chief Financial Officer and Treasurer, Ms. Sardo no longer serves as the Company’s “Principal Financial Officer” for SEC reporting purposes. At this time, Ms. Sardo continues to serve as our Secretary.

 

 

·

On August 16, 2016, we terminated William Campbell as our Chief Strategy Officer, John Egazarian as our Chief Operating Officer, Michael Betts as our Chief Technology Officer, J.P. Lespinasse as our Chief Marketing Officer and Joseph LaPlante as our Chief Content Officer.

 

 

 

 

· On August 16, 2016, we were forced to lay off all of our employees and cease significant operations.

 

 

 

 

· On August 20, 2016, William Campbell resigned as a member of the Board.

 

 

 

 

· On October 31, 2017, Thomas Brophy was appointed as our President, Chief Executive Officer, Interim Chief Financial Officer and Treasurer, and our “Principal Executive Officer and Principal Financial Officer” for SEC reporting purposes.

 

As a result of the foregoing changes in management, we now have only one director, Thomas Brophy, on our Board. In addition, we no longer have a properly constituted Audit Committee, Compensation Committee or Nominating and Corporate Governance Committee.

 

These changes, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, were identified in connection with the evaluation we conducted of the effectiveness of our internal control over financial reporting as of June 30, 2016.

 
 
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PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We are in default under our Master Multiple Services Agreement (the “Digitas Agreement “) with Digitas, Inc. (“Digitas”) as a result of the Company’s failure to pay Digitas past due balances for the services they provided under the Digitas Agreement. Digitas has filed a claim against us for an aggregate of $650,000. We are in the process of negotiating a settlement with Digitas.

 

Certain of our former employees have filed claims against the Company for payment of unpaid wages totaling $50,000. In addition, the Company has agreed to settlements on claims totaling $237,343. The Company expects to pay these claims and settlements once adequate financing has been secured.

 

Cybercoders, Inc. (“Cybercoders”), a recruiter we used in connection with certain employee placements, has filed a claim against the Company for failure to pay Cybercoders past due balances for the services they provided. The Company and Cybercoders have agreed to a settlement amount of $5,000.

 

24G, LLC (“24G”), a consultant that provided us with marketing services, has filed a claim against the Company for failure to pay 24G past due balances in the amount of $71,898 for the services they provided. The Company intends to settle once it is adequately funded.

 

A consultant that provided us with software development services, has filed a claim against the Company for failure to pay past due balances for the services provided. A judgment was entered and recorded in the Circuit Court for Montgomery County, Maryland for $60,000.

 

An attorney for iTexico LLC (“iTexico”), a software developer we used, has contacted the Company in an effort to collect $53,750 of past due balances iTexico claims it is owed for the services they provided.

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Other than as reported in our Current Reports on Form 8-K, or prior periodic reports, we have not sold any of our equity securities during the period covered by this Quarterly Report, or subsequent period through the date hereof, except as follows:

 

Issuance of Shares to Outside Legal Counsel

 

On April 18, 2016, we issued 66,153 shares of our Common Stock to our outside legal counsel as payment of $118,347 of the Company’s outstanding legal fees.

 

The issuances of the securities in connection with this transaction were exempt from registration under Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving any public offering.

 

Closing of Third Convertible Note Offering

 

On July 20, 2016, the Company entered into Purchase Agreements with the Additional Secured Note Buyers, pursuant to which the Additional Secured Note Buyers purchased Additional Secured Notes in the aggregate principal amount of $150,000 (before deducting placement agent fees and expenses of $16,605). See the disclosure under “ Part II – Other Information -- Item 5. Other Information -- Third Convertible Note Offering ” below, which disclosure is incorporated herein by reference.

The issuances of the securities in connection with this transaction were exempt from registration under Section 4(a)(2) and/or Rule 506(b) of Regulation D and/or Regulation S as promulgated by the SEC under of the Securities Act of 1933, as amended, as transactions by an issuer not involving any public offering.

 

 
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Issuance of Additional Anti-Dilution Shares

 

With the issuance of the Unsecured Notes, the Anti-Dilution Rights of certain of our shareholders were triggered and the holders of the Non-Participating Original Warrants were due to receive, as of May 24, 2016, (i) an aggregate of 20,174 additional shares of Common Stock, (ii) a reduction in the price of their PPO Warrants from $23.01 per share to $20.50 per share, and (iii) an aggregate of 20,174 additional warrants to purchase shares of Common Stock of the Company at an exercise price of $20.50 per share. These shares are considered to be outstanding, but have not yet been physically issued.

 

The issuances of the securities in connection with this transaction were exempt from registration under Section 4(a)(2) and/or Rule 506(b) of Regulation D and/or Regulation S as promulgated by the SEC under of the Securities Act of 1933, as amended, as transactions by an issuer not involving any public offering.

 

Stock Option Grants

 

On April 29, 2016, we issued an aggregate of 67,307 non-statutory stock options under our 2015 Plan to employees of the Company at an exercise price of $2.75 per share, the closing sale price of our Common Stock on the OTC Markets OTC marketplace on the date of grant.

 

The issuances of the non-statutory stock options in connection with these transactions were exempt from registration under Rule 701 under the Securities Act as transactions pursuant to compensatory benefit plans and contracts relating to compensation as provided under Rule 701 or under Section 4(a)(2) of the Securities Act as transactions by an issuer not involving any public offering.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

On October 12, 2016, October 15, 2016, November 26, 2016, December 7, 2016, December 20, 2016 and January 20, 2017, the principal and any accrued and unpaid interest on our outstanding Secured Notes and Additional Secured Notes in the aggregate principal amount of $2,515,000 became due and payable. We were unable to repay the noteholders at that time. Pursuant to the terms of the Secured Notes and Additional Secured Notes, our failure to pay any principal or interest within 5 days of the date such payment is due will constitute an event of default. Following the occurrence of an event of default, among other things, the interest rate on the Secured Notes and Additional Secured Notes increased to 15%. In addition to other remedies available to the noteholders, our obligation to repay amounts due under the Secured Notes and Additional Secured Notes is secured by a first priority security interest in and lien on all of our assets and property, including our intellectual property.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 
 
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Table of Contents

 

ITEM 5. OTHER INFORMATION

 

Termination of Officers

 

On August 16, 2016, we terminated Kelly Sardo as our Chief Financial Officer and Treasurer. As a result of her termination as Chief Financial Officer and Treasurer, Ms. Sardo no longer serves as the Company’s “Principal Financial and Accounting Officer” for SEC reporting purposes. At this time, Ms. Sardo continues to serve as our Secretary.

 

In addition, on August 16, 2016, we terminated William Campbell as our Chief Strategy Officer, John Egazarian as our Chief Operating Officer, Michael Betts as our Chief Technology Officer, J.P. Lespinasse as our Chief Marketing Officer and Joseph LaPlante as our Chief Content Officer.

 

On August 16, 2016, we were forced to lay off all of our employees and cease significant operations.

 

Third Convertible Note Offering

 

On July 20, 2016, the Company entered into Purchase Agreements with the Additional Secured Note Buyers, pursuant to which the Additional Secured Buyers purchased the Additional Secured Notes in the aggregate principal amount of $150,000 (before deducting placement agent fees and expenses of $16,605).

 

The Company used the net proceeds from the Third Convertible Note Offering for working capital and general corporate purposes.

 

The Additional Secured Notes will be secured by a security interest in and lien on all now owned or hereafter acquired assets and property, real and personal, of the Company and its subsidiaries, including the Company’s intellectual and technology property pursuant to the terms of a Security Agreement among the Company and the Additional Secured Buyers. The security interest in and liens on all assets and property of the Company will be a first priority security interest pari passu with the holders of the Secured Notes.

 

The Additional Secured Notes have an aggregate principal balance of $150,000, and a stated maturity date of 6 months from the date of issuance. The principal on the Additional Secured Notes bears interest at a rate of 12% per annum, which is also payable on maturity. The Additional Secured Notes will rank senior to all existing indebtedness of the Company, except as otherwise set forth in the Additional Secured Notes. Upon the closing of a Qualified Offering by the Company during the term of the Additional Secured Notes involving the sale of at least $15,000,000 in Equity Financing Securities, all of the outstanding principal amount of the Additional Secured Notes, together with accrued and unpaid interest due thereon, will automatically convert into Third Units at a conversion price per Third Unit equal to the lesser of (a) 80% of the price per share of the Equity Financing Securities sold in the Qualified Offering, or (b) $2.00. At any time prior to a Mandatory Conversion, the holders of the Additional Secured Notes may convert all or part of the outstanding principal amount of the Additional Secured Notes, together with accrued and unpaid interest due thereon, into Third Units at a conversion price of $2.00 per Unit. Each Third Unit will consists of one Third Unit Share of the Company’s Common Stock, and one Third Unit Warrant to purchase one additional Third Unit Warrant Shares of the Company’s Common Stock at an exercise price equal to (a) 125% of the price at which the Company’s Equity Financing Securities are sold in a Qualified Offering in the event of a Mandatory Conversion, or (b) 125% of $2.00 in the event of an Optional Conversion. Upon failure by the Company to pay any principal amount or interest due under the Additional Secured Notes within 5 days of the date such payment is due, or the occurrence of other event of default under the terms of the Additional Secured Notes, the entire unpaid principal balance of the Additional Secured Notes, together with any accrued and unpaid interest thereon, will become due and payable, without presentment, demand, protest or notice of any kind. In the event of any liquidation, dissolution or winding up of the Company, each holder of an Additional Secured Note will be entitled to receive, pari passu with the other holders of the Secured Notes and Additional Secured Notes, and in preference to the holders of the Company’s other outstanding securities, an amount equal to two times the principal amount of, and any accrued and unpaid interest on, such holder’s Additional Secured Note. The conversion price and number of Third Units issuable upon conversion of the Additional Secured Notes will be subject to adjustment from time to time for subdivision or consolidation of shares and other standard dilutive events.

 
 
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Pursuant to the terms of a Placement Agency Agreement between the Company and the Placement Agent for the Third Convertible Note Offering, in connection with the closing of the Third Convertible Note Offering, the Placement Agent was paid a commission of an aggregate of $15,000. In addition, the Placement Agent, or its designees, will receive warrants to purchase a number of shares of Common Stock equal to 10% of the number of Third Unit Shares into which Additional Secured Notes sold in the Third Convertible Note Offering to Additional Secured Buyers introduced to the Third Convertible Note Offering by the Placement Agent, and 8% of the number of Third Unit Shares into which Additional Secured Notes sold in the Third Convertible Note Offering to Additional Secured Buyers introduced to the Third Convertible Note Offering by the Company or its representatives, are converted upon a Mandatory Conversion, with a term of 5 years and an exercise price per share equal to the exercise price of the Third Unit Warrant Shares issued to Additional Secured Buyers introduced to the Third Convertible Note Offering by the Placement Agent upon a Mandatory Conversion.

 

The Third Unit Warrants, to be received upon conversion of the Additional Secured Notes, provide for the purchase of shares of the Company’s Common Stock an exercise price equal to (a) 125% of the price at which the Company’s Equity Financing Securities are sold in a Qualified Offering in the event of a Mandatory Conversion, or (b) 125% of $2.00 in the event of an Optional Conversion. The Third Unit Warrants are exercisable for cash only, for a term of 5 years from the date of issuance. The number of shares of Common Stock to be deliverable upon exercise of the Third Unit Warrants is subject to adjustment for subdivision or consolidation of shares and other standard dilutive events.

 

The Company granted registration rights to each Additional Secured Buyer with respect to the Third Unit Shares and Third Unit Warrant Shares, and to the Placement Agent, with respect to the Common Stock issuable upon exercise of the Additional Placement Agent Warrants, in each case on a pari passu basis with, and upon substantially the same terms as the registration rights granted to, the investors in a Qualified Offering.

 

ITEM 6. EXHIBITS

 

In reviewing the agreements included as exhibits to this Quarterly Report, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the parties to the applicable agreement and:

 

 

· should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

 

 

 

 

· have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

 

 

 

 

· may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and

 

 

 

 

· were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

 

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Form 10-Q and the Company’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.

 
 
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The following exhibits are included as part of this report:

 

Exhibit No.

 

SEC Report

Reference No.

 

Description

 

4.1

 

4.5

 

Form of 12% Senior Secured Convertible Promissory Note (Second Convertible Note Offering) (1)

4.2

 

4.6

 

Form of Unit Warrant (Second Convertible Note Offering) (1)

4.3

 

4.7

 

Form of Placement Agent Warrant (Second Convertible Note Offering) (1)

4.4

 

*

 

Form of 12% Senior Secured Convertible Promissory Note (Third Convertible Note Offering)

4.5

 

*

 

Form of Unit Warrant (Third Convertible Note Offering)

4.6

 

*

 

Form of Placement Agent Warrant (Third Convertible Note Offering)

10.1

 

10.31

 

Placement Agent Agreement by and between the Registrant and Katalyst Securities LLC (Second Convertible Note Offering) (1)

10.2

 

10.32

 

Form of Securities Purchase Agreement among the Registrant and the investors party thereto (Second Convertible Note Offering) (1)

10.3

 

10.33

 

Escrow Agreement by and among the Registrant, Katalyst Securities LLC and Delaware Trust Company, as escrow agent (Second Convertible Note Offering) (1)

10.4

 

10.34

 

Form of Security Agreement among the Registrant and the secured parties (Second Convertible Note Offering) (1)

10.5

 

*

 

Placement Agent Agreement by and between the Registrant and Katalyst Securities LLC (Third Convertible Note Offering)

10.6

 

*

 

Form of Securities Purchase Agreement among the Registrant and the investors party thereto (Third Convertible Note Offering)

10.7

 

*

 

Escrow Agreement by and among the Registrant, Katalyst Securities LLC and Delaware Trust Company, as escrow agent (Third Convertible Note Offering)

10.8

 

*

 

Form of Security Agreement among the Registrant and the secured parties (Third Convertible Note Offering)

31.1 / 31.2

 

*

 

Certification of Principal Executive Officer and Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 / 32.2

 

*

 

Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

 

*

 

XBRL Instance Document

101.SCH

 

*

 

XBRL Taxonomy Extension Schema Document

101.CAL

 

*

 

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

 

*

 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

 

*

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

 

*

 

XBRL Taxonomy Extension Presentation Linkbase Document

_____________

* Filed herewith

 

 

(1) Filed with the SEC on April 14, 2016, as an exhibit, numbered as indicated above, to the Registrant’s Annual Report on Form 10-K, for the fiscal year ended December 31, 2015, which exhibit is incorporated herein by reference.

  
 
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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

CÜR MEDIA, INC.

     

 

Dated: October 31, 2017

By:

/s/ Thomas Brophy

Name:

Thomas Brophy

Title:

President, Chief Executive Officer,
Interim Chief Financial Officer and Treasurer

(Principal Executive Officer and Principal Financial
Officer)

 
 
43
 
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EXHIBIT INDEX

 

Exhibit No.

 

SEC Report

Reference No.

 

Description

 

4.1

 

4.5

 

Form of 12% Senior Secured Convertible Promissory Note (Second Convertible Note Offering) (1)

4.2

 

4.6

 

Form of Unit Warrant (Second Convertible Note Offering) (1)

4.3

 

4.7

 

Form of Placement Agent Warrant (Second Convertible Note Offering) (1)

4.4

 

*

 

Form of 12% Senior Secured Convertible Promissory Note (Third Convertible Note Offering)

4.5

 

*

 

Form of Unit Warrant (Third Convertible Note Offering)

4.6

 

*

 

Form of Placement Agent Warrant (Third Convertible Note Offering)

10.1

 

10.31

 

Placement Agent Agreement by and between the Registrant and Katalyst Securities LLC (Second Convertible Note Offering) (1)

10.2

 

10.32

 

Form of Securities Purchase Agreement among the Registrant and the investors party thereto (Second Convertible Note Offering) (1)

10.3

 

10.33

 

Escrow Agreement by and among the Registrant, Katalyst Securities LLC and Delaware Trust Company, as escrow agent (Second Convertible Note Offering) (1)

10.4

 

10.34

 

Form of Security Agreement among the Registrant and the secured parties (Second Convertible Note Offering) (1)

10.5

 

*

 

Placement Agent Agreement by and between the Registrant and Katalyst Securities LLC (Third Convertible Note Offering)

10.6

 

*

 

Form of Securities Purchase Agreement among the Registrant and the investors party thereto (Third Convertible Note Offering)

10.7

 

*

 

Escrow Agreement by and among the Registrant, Katalyst Securities LLC and Delaware Trust Company, as escrow agent (Third Convertible Note Offering)

10.8

 

*

 

Form of Security Agreement among the Registrant and the secured parties (Third Convertible Note Offering)

31.1 / 31.2

 

*

 

Certification of Principal Executive Officer and Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1/32.2

 

*

 

Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

 

*

 

XBRL Instance Document

101.SCH

 

*

 

XBRL Taxonomy Extension Schema Document

101.CAL

 

*

 

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

 

*

 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

 

*

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

 

*

 

XBRL Taxonomy Extension Presentation Linkbase Document

_____________

* Filed herewith

 

 

(1) Filed with the SEC on April 14, 2016, as an exhibit, numbered as indicated above, to the Registrant’s Annual Report on Form 10-K, for the fiscal year ended December 31, 2015, which exhibit is incorporated herein by reference.

 

 

44

 

EXHIBIT 4.4

 

For U.S. Investors:

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (C) IN COMPLIANCE WITH RULE 144 OR 144A THEREUNDER, IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, (D) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR (E) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY SATISFACTORY TO THE COMPANY. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.

 

For Non-U.S. Investors:

 

THESE SECURITIES WERE ISSUED IN AN OFFSHORE TRANSACTION TO PERSONS WHO ARE NOT U.S. PERSONS (AS DEFINED IN REGULATION S) PURSUANT TO REGULATION S PROMULGATED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). ACCORDINGLY, NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD IN THE UNITED STATES OR, DIRECTLY OR INDIRECTLY, TO U.S. PERSONS EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN ACCORDANCE WITH THE SECURITIES ACT.

 

12% SENIOR SECURED CONVERTIBLE PROMISSORY NOTE

 

CÜR MEDIA, INC.

 

DUE _______, 2016

 

Original Issue Date: _______________, 2016

US$__________

 

This 12% Senior Secured Convertible Promissory Note (the “ Note ”) is one of a series of duly authorized and issued promissory notes (the “ Notes ”) of CÜR MEDIA, INC. , a Delaware corporation (the “ Company ”), designated its 12% Senior Secured Convertible Promissory Notes. The Note has been issued in accordance with exemptions from registration under the Securities Act of 1933, as amended (the “ Securities Act ”) pursuant to a Securities Purchase Agreement dated __________, 2016 (the “ Purchase Agreement ”) between the Company and the Holder (as defined below). Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Purchase Agreement.

  

 
1
 
 

 

Article I.

 

Section 1.01 Principal and Interest .

 

(a) FOR VALUE RECEIVED, the Company hereby promises to pay to the order of ____________________ (together with its/his/her permitted assigns (the “ Holder ”), in lawful money of the United States of America and in immediately available funds the principal sum of Dollars (US$_______) on _______________, 2016 1 (the “ Maturity Date ”).

 

(b) The Company further promises to pay interest in cash on the unpaid principal amount of this Note at a rate per annum equal to twelve percent (12%), commencing to accrue on the date hereof and payable on the Maturity Date or earlier prepayment as provided herein. Interest will be computed on the basis of a 360-day year of twelve 30-day months for the actual number of days elapsed.

 

(c) From and after the occurrence of an Event of Default (as defined herein), the interest rate shall be increased to fifteen percent (15%). In the event that such Event of Default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure; provided, however, that the interest, as calculated at such increased rate during the continuance of such Event of Default, shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of cure of such Event of Default.

 

Section 1.02 Conversion .

 

(a) Mandatory Conversion . Upon the closing of a financing (a “ Qualified Offering ”) by the Company during the term of the Note (the “ Mandatory Conversion Date ”) involving the sale of at least $15,000,000 in equity securities by the Company (and/or securities convertible into equity securities of the Company (the “ Equity Financing Securities” ) excluding the capital raised in this Offering, and the Earlier 2016 Note Offering, all of the outstanding principal amount of this Note, together with accrued and unpaid interest due thereon, shall automatically, without the necessity of any action by the Holder or the Company, convert (the “ Mandatory Conversion ”) into units of the Company (the “ Units ”) at a conversion price per Unit equal to the lesser of (a) 80% of the price per share of the Equity Financing Securities sold in the Qualified Offering, or (b) $2.00 (the “Mandatory Conversion Price ”). Each Unit shall consist of one share (the “ Unit Shares ”) of the Company’s common stock, $0.0001 par value per share (the “ Common Stock ”), and one five-year warrant (the “ Unit Warrants ”) to purchase one additional share (the “ Unit Warrant Shares ”) of Common Stock at an exercise price equal to 125% of the price per share of the Equity Financing Securities sold in the Qualified Offering. The number of Units issuable upon a Mandatory Conversion of this Note shall be determined by the quotient obtained by dividing (i) the outstanding principal amount of this Note being converted plus accrued but unpaid interest thereon on the Mandatory Conversion Date by (ii) the Mandatory Conversion Price. The calculation by the Company of the number of Units to be received by the Holder upon conversion hereof, shall be conclusive absent manifest error. No fraction of Units will be issued on conversion, but the number of Units shall be rounded to the nearest whole number of Units. On the Mandatory Conversion Date, as the result of the Mandatory Conversion, the Note shall be of no further force or effect and shall be terminated. The Holder shall thereafter return this Note to the Company via a nationally recognized overnight delivery service (or provide an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction). On or before the fifth trading day for the Common Stock following the Mandatory Conversion, the Company shall cause its transfer agent to issue and deliver to the Holder at the address specified in this Note or such other address as directed by the Holder, a certificate, registered in the name of the Holder, for the number of Units to which the Holder is entitled.

________

1 Six (6) month anniversary of the date of issuance.

 

 
2
 
 

 

(b) Optional Conversion . At any time prior to a Mandatory Conversion, the Holder may, in its sole discretion, determine to convert (the “ Optional Conversion ”) all or part of the outstanding principal amount of this Note, together with accrued and unpaid interest due thereon, into Units at a conversion price of $2.00 per Unit (the “ Optional Conversion Price ”). The Company shall not issue any fraction of a Unit upon any such conversion. If the issuance would result in the issuance of a fraction of a Unit, the Company shall round such fraction of a Unit up to the nearest whole Unit. The number of Units issuable upon an Optional Conversion shall be determined by the quotient obtained by dividing (i) the outstanding principal amount of this Note being converted plus accrued but unpaid interest thereon on the conversion date for the Optional Conversion by (ii) the Optional Conversion Price. The calculation by the Company of the number of Units to be received by the Holder upon conversion hereof, shall be conclusive absent manifest error. To convert any portion of the unpaid principal of this Note into Units on any date (an “ Optional Conversion Date ”), the Holder shall (i) transmit by facsimile (or otherwise deliver), for receipt on or prior to 12:00 noon., New York time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “ Optional Conversion Notice ”) to the Company and (ii) return this Note to the Company via a nationally recognized overnight delivery service (or provide an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction). On or before the fifth trading day for the Company’s Common Stock following the date of receipt of an Optional Conversion Notice, the Company shall cause the Company’s transfer agent to issue and deliver to the Holder at the address as specified in the Optional Conversion Notice, a certificate, registered in the name of the Holder, for the number of Unit Shares to which the Holder shall be entitled. If the outstanding principal amount of this Note is greater than the principal portion being converted, then the Company shall as soon as practicable after receipt of this Note, at its own expense, issue and deliver to the Holder a new Note representing the outstanding principal amount not converted. Such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the principal amount remaining outstanding, (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Original Issue Date of this Note, and (iv) shall have the same rights and conditions as this Note.

 

Section 1.03 Absolute Obligation/Ranking .

 

(a) This Note is a direct debt obligation of the Company. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the coin or currency, herein prescribed.

 

(b) The Note ranks pari passu with all other Notes now or hereafter issued pursuant to the Purchase Agreement. Except as expressly provided herein, this Note, and all other Notes now or hereafter issued pursuant to the Purchase Agreement, rank senior to all prior indebtedness of the Company, and will rank pari passu with the notes sold by the Company in the Earlier 2016 Note Offering.

 

Section 1.04 Liquidation Preference . In the event of any liquidation, dissolution or winding up of the Company, the Holder will be entitled to receive, pari passu with the other holders of Notes now or hereafter issued pursuant to the Purchase Agreement and the holders of notes issued in the Earlier 2016 Note Offering, if any, and in preference to the holders of the Company’s other outstanding securities, an amount equal to two times the principal amount of, and any accrued and unpaid interest on, the Note.

 

Section 1.05 Pre-Payment . Except as otherwise set forth in this Note, the Company may prepay any portion of the principal amount of this Note without the prior written consent of the Holder.

 

Section 1.06 Different Denominations; Transfer .

 

(a) This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration of transfer or exchange.

 

 
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(b) This Note and any shares of Common Stock issued upon conversion of this Note may only be offered, sold, assigned or transferred by the Holder without the consent of the Company, provided that the provisions of the Purchase Agreement are complied with in all respects.

 

Section 1.07 Reliance on Note Register . Prior to due presentment to the Company for permitted transfer or conversion of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

 

Section 1.08 Paying Agent and Registrar . Initially, the Company will act as paying agent and registrar. The Company may change any paying agent, registrar, or Company-registrar by giving the Holder not less than ten (10) business days’ written notice of its election to do so, specifying the name, address, telephone number and facsimile number of the paying agent or registrar. The Company may act in any such capacity. Upon an assignment of the Note to the Company, the Company may act as paying agent and registrar without regard to the notice provision provided above.

 

Section 1.09 Investment Representations . This Note has been issued subject to certain investment representations of the original Holder set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations.

 

Section 1.10 Security; Other Rights .

 

(a) The obligations of the Company to the Holder under this Note shall be secured by a security interest in and lien on all now owned or hereafter acquired assets and property, real and personal, of the Company and its subsidiaries, including the Company’s intellectual property, pari passu with the other holders of Notes now or hereafter issued pursuant to the Security Agreement dated __________, 2016 (the “ Security Agreement ”) between the Company and the Holder, and pari passu with the holders of any notes issued in the Earlier 2016 Note Offering. Except as expressly provided herein and/or in the Security Agreement, the security interest in and liens on all assets and property of the Company will be a first priority security interest pari passu with any notes issued in the Earlier 2016 Note Offering.

 

(b) In addition to the rights and remedies given it by this Note and the Purchase Agreement, the Holder shall have all those rights and remedies allowed by applicable laws. The rights and remedies of the Holder are cumulative and recourse to one or more right or remedy shall not constitute a waiver of the others.

 

Section 1.11 Reservation of Common Stock . The Company shall reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of conversion of this Note, that number of shares of Common Stock equal to the number of Unit Shares and Unit Warrant Shares into which the Note is convertible based upon the then applicable conversion price.

 

Article II.

 

Section 2.01 Events of Default . Each of the following events shall constitute a default under this Note (each an “ Event of Default ”):

 

(a) failure by the Company to pay any principal amount or interest when due hereunder within five (5) days of the date such payment is due;

 

(b) the Company or any subsidiary of the Company shall: (i) make a general assignment for the benefit of its creditors; (ii) apply for or consent to the appointment of a receiver, trustee, assignee, custodian, sequestrator, liquidator or similar official for itself or any of its assets and properties; (iii) commence a voluntary case for relief as a debtor under the United States Bankruptcy Code; (iv) file with or otherwise submit to any governmental authority any petition, answer or other document seeking: (A) reorganization, (B) an arrangement with creditors or (C) to take advantage of any other present or future applicable law respecting bankruptcy, reorganization, insolvency, readjustment of debts, relief of debtors, dissolution or liquidation; (v) file or otherwise submit any answer or other document admitting or failing to contest the material allegations of a petition or other document filed or otherwise submitted against it in any proceeding under any such applicable law, or (vi) be adjudicated a bankrupt or insolvent by a court of competent jurisdiction;

 

 
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(c) any case, proceeding or other action shall be commenced against the Company or any subsidiary of the Company for the purpose of effecting, or an order, judgment or decree shall be entered by any court of competent jurisdiction approving (in whole or in part) anything specified in Section 2.01(b) hereof, or any receiver, trustee, assignee, custodian, sequestrator, liquidator or other official shall be appointed with respect to the Company, or shall be appointed to take or shall otherwise acquire possession or control of all or a substantial part of the assets and properties of the Company, and any of the foregoing shall continue unstayed and in effect for any period of sixty (60) days;

 

(d) any material breach by the Company of any of its representations or warranties contained in this Note or the Purchase Agreement; or

 

(e) any material default, whether in whole or in part, shall occur in the due observance or performance of any obligations or other covenants, terms or provisions to be performed by the Company under this Note which is not cured within five (5) business days after receipt of written notice thereof.

 

Section 2.02 If any Event of Default specified in Section 2.01(b) or Section 2.01(c) occurs, then the full principal amount of this Note, together with any other amounts owing in respect thereof, to the date of the Event of Default, shall become immediately due and payable without any action on the part of the Holder, and if any other Event of Default occurs, the full principal amount of this Note, together with any other amounts owing in respect thereof, to the date of acceleration shall become, at the Holder’s election, immediately due and payable in cash. All Notes for which the full amount hereunder shall have been paid in accordance herewith shall promptly be surrendered to or as directed by the Company. The Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such declaration may be rescinded and annulled by the Holder at any time prior to payment hereunder and the Holder shall have all rights as a Note holder until such time, if any, as the full payment under this Section shall have been received by it. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

 

Article III.

 

Section 3.01 Negative Covenants . So long as this Note shall remain in effect and until any outstanding principal and interest and all fees and all other expenses or amounts payable under this Note and the Purchase Agreement have been paid in full, unless the Holders of a majority of the principal amount of the Notes shall otherwise consent in writing (such consent not to be unreasonably withheld), the Company shall not:

 

(a) Senior or Pari Passu Indebtedness . Incur, create, assume, guaranty or permit to exist any indebtedness that ranks senior in priority to, or pari passu with, the obligations under this Note and the Purchase Agreement, except for (i) indebtedness existing on the date hereof (including the indebtedness arising from the Earlier 2016 Note Offering) and set forth in Schedule A attached hereto and only to the extent that such indebtedness ranks senior in priority to or pari passu with the obligations under this Note and the Purchase Agreement on the Original Issue Date, and (ii) indebtedness created as a result of a subsequent financing if the gross proceeds to the Company of such financing are equal to or greater than the aggregate principal amount of the Notes and the Notes are repaid in full upon the closing of such financing.

 

 
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(b) Liens . Create, incur, assume or permit to exist any lien on any property or assets (including stock or other securities of the Company) now owned or hereafter acquired by it or on any income or revenues or rights in respect of any thereof, except:

 

(i) liens on property or assets of the Company existing on the date hereof (including liens arising from the Earlier 2016 Note Offering) and set forth on Schedule A attached hereto, provided that such liens shall secure only those obligations which they secure on the date hereof;

 

(ii) any lien created under this Note or the Purchase Agreement;

 

(iii) any lien existing on any property or asset prior to the acquisition thereof by the Company, provided that

 

1) such lien is not created in contemplation of or in connection with such acquisition and

 

2) such lien does not apply to any other property or assets of the Company;

 

(iv) liens for taxes, assessments and governmental charges;

 

(v) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, landlord’s or other like liens arising in the ordinary course of business and securing obligations that are not due and payable;

 

(vi) pledges and deposits made in the ordinary course of business in compliance, with workmen’s compensation, unemployment insurance and other social security laws or regulations;

 

(vii) deposits to secure the performance of bids, trade contracts (other than for indebtedness), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

 

(viii) zoning restrictions, easements, licenses, covenants, conditions, rights-of-way, restrictions on use of real property and other similar encumbrances incurred in the ordinary course of business and minor irregularities of title that, in the aggregate, are not substantial in amount and do not materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of the Company;

 

(ix) purchase money security interests in real property, improvements thereto or equipment hereafter acquired (or, in the case of improvements, constructed) by the Company, provided that

 

1) such security interests secure indebtedness permitted by this Note,

 

2) such security interests are incurred, and the indebtedness secured thereby is created, within 90 days after such acquisition (or construction),

 

3) the indebtedness secured thereby does not exceed 85% of the lesser of the cost or the fair market value of such real property, improvements or equipment at the time of such acquisition (or construction) and

 

4) such security interests do not apply to any other property or assets of the Company;

 

 
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(x) liens arising out of judgments or awards (other than any judgment that constitutes an Event of Default hereunder) in respect of which the Company shall in good faith be prosecuting an appeal or proceedings for review and in respect of which it shall have secured a subsisting stay of execution pending such appeal or proceedings for review, provided the Company shall have set aside on its books adequate reserves with respect to such judgment or award; and

 

(xi) deposits, liens or pledges to secure payments of workmen’s compensation and other payments, public liability, unemployment and other insurance, old-age pensions or other social security obligations, or the performance of bids, tenders, leases, contracts (other than contracts for the payment of money), public or statutory obligations, surety, stay or appeal bonds, or other similar obligations arising in the ordinary course of business.

 

(c) Dividends and Distributions . In the case of the Company, declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, with respect to any shares of its capital stock or directly or indirectly redeem, purchase, retire or otherwise acquire for value any shares of any class of its capital stock or set aside any amount for any such purpose.

 

(d) Limitation on Certain Payments and Prepayments .

 

(i) Pay in cash any amount in respect of any indebtedness or preferred stock that may at the obligor’s option be paid in kind or in other securities; or

 

(ii) Optionally prepay, repurchase or redeem or otherwise defease or segregate funds with respect to any indebtedness of the Company, other than for senior indebtedness existing on the date hereof and set forth in Schedule B attached hereto, indebtedness under this Note or the Purchase Agreement or indebtedness created under the Earlier 2016 Note Offering. For avoidance of doubt, nothing in the Section shall be deemed to prevent or limit the Company from paying accounts payable and accrued liabilities.

 

Article IV.

 

Section 4.01 Representations of the Company . The Company hereby represents and warrants to the Holder that:

 

(a) (i) The Company has the requisite corporate power and authority to enter into and perform its obligations under this Note, (ii) the execution and delivery of this Note by the Company and the consummation by it of the transactions contemplated hereby have been duly authorized by the Company’s Board of Directors, and no further consent or authorization is required by the Company, its Board of Directors or its stockholders, (iii) this Note has been duly executed and delivered by the Company, (iv) this Note constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors’ rights and remedies.

 

(b) The execution, delivery and performance of this Note by the Company, and the consummation by the Company of the transactions contemplated hereby, will not (i) result in a violation of the Articles of Incorporation or By-laws (or equivalent constitutive document) of the Company or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including U.S. federal and state securities laws and regulations) applicable to the Company or by which any property or asset of the Company is bound or affected, except for those which could not reasonably be expected to have a material adverse effect on the assets, business, condition (financial or otherwise), results of operations or future prospects of the Company.

 

 
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(c) There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending against or affecting the Company or any subsidiary, wherein an unfavorable decision, ruling or finding would adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, this Note.

 

Section 4.02 Representations of the Holder . The Holder hereby represents and warrants to the Company that:

 

(a) Investment Purpose . The Holder is acquiring this Note, and, upon conversion of this Note and exercise of the Unit Warrant, the Holder will acquire the Units, Unit Shares and Unit Warrant Shares into which this Note and the Unit Warrant may be converted (the “ Conversion Shares ” and, together with the Note, the “ Securities ”), for its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the Securities Act; provided, however, that by making the representations herein, such Holder reserves the right to dispose of the Securities at any time in accordance with or pursuant to an effective registration statement covering such Securities, or an available exemption under the Securities Act. The Holder agrees not to sell, hypothecate or otherwise transfer the Securities unless such Securities are registered under the federal and applicable state securities laws or unless, in the opinion of counsel satisfactory to the Company, an exemption from such law is available.

 

(b) Investor Status . The Holder meets the requirements of at least one of the suitability standards for an “Accredited Investor” as that term is defined in Rule 501(a)(3) of Regulation D under the Securities Act, or is not a “U.S. Person” as that term is defined in Rule 902(k) of Regulation S.

 

(c) Investor Qualifications . The Holder (i) if a natural person, represents that the Holder has reached the age of 21 and has full power and authority to execute and deliver this Note and all other related agreements or certificates and to carry out the provisions hereof and thereof; (ii) if a corporation, partnership, or limited liability company or partnership, or association, joint stock company, trust, unincorporated organization or other entity, represents that such entity was not formed for the specific purpose of acquiring this Note, such entity is duly organized, validly existing and in good standing under the laws of the state of its organization, the consummation of the transactions contemplated hereby is authorized by, and will not result in a violation of state law or its charter or other organizational documents, such entity has full power and authority to execute and deliver this Note and all other related agreements or certificates and to carry out the provisions hereof and thereof and to purchase and hold this Note, the execution and delivery of this Note has been duly authorized by all necessary action, this Note has been duly executed and delivered on behalf of such entity and is a legal, valid and binding obligation of such entity; or (iii) if executing this Note in a representative or fiduciary capacity, represents that it has full power and authority to execute and deliver this Note in such capacity and on behalf of the subscribing individual, ward, partnership, trust, estate, corporation, or limited liability company or partnership, or other entity for whom the Holder is executing this Note, and such individual, partnership, ward, trust, estate, corporation, or limited liability company or partnership, or other entity has full right and power to perform pursuant to this Note and make an investment in the Company, and represents that this Note constitutes a legal, valid and binding obligation of such entity. The execution and delivery of this Note will not violate or be in conflict with any order, judgment, injunction, agreement or controlling document to which the Holder is a party or by which it is bound.

 

(d) Solicitation . The Holder is unaware of, is in no way relying on, and did not become aware of the offering of this Note through or as a result of, any form of general solicitation or general advertising including, without limitation, any article, notice, advertisement or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, in connection with the offering and sale of this Note and is not subscribing for this Note and did not become aware of the offering of this Note through or as a result of any seminar or meeting to which the Holder was invited by, or any solicitation of a subscription by, a person not previously known to the Holder in connection with investments in securities generally.

 

 
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(e) Brokerage Fees . The Holder has taken no action that would give rise to any claim by any person for brokerage commissions, finders’ fees or the like relating to this Note or the transaction contemplated hereby (other than commissions to be paid by the Company to the Placement Agent, if any).

 

(f) Knowledge and Experience . The Holder has such knowledge and experience in financial, tax, and business matters, and, in particular, investments in securities, so as to enable it to utilize the information made available to it in connection with this Note to evaluate the merits and risks of an investment in this Note and the Company and to make an informed investment decision with respect thereto.

 

(g) Liquidity . The Holder has adequate means of providing for such Holder’s current financial needs and foreseeable contingencies and has no need for liquidity of its investment in this Note for an indefinite period of time, and after purchasing this Note the Holder will be able to provide for any foreseeable current needs and possible personal contingencies. The Holder must bear and acknowledges the substantial economic risks of the investment in this Note including the risk of illiquidity and the risk of a complete loss of this investment.

 

(h) High Risk Investment . The Holder is aware that an investment in this Note, and upon conversion of this Note, the Units (including the securities underlying the Units), involves a number of very significant risks and has carefully researched and reviewed and understands the risks of, and other considerations relating to, the purchase of this Note, and, upon conversion of this Note and the exercise of the Unit Warrants, the Conversion Shares.

 

(i) Reliance on Exemptions . The Holder understands that this Note is being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and such Holder’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Holder set forth herein in order to determine the availability of such exemptions and the eligibility of such Holder to acquire such securities.

 

(j) Information . The Holder has been furnished with all documents and materials relating to the business, finances and operations of the Company and its subsidiaries and information that Holder requested and deemed material to making an informed investment decision regarding its purchase of this Note. The Holder has been afforded the opportunity to review such documents and materials and the information contained therein. The Holder has been afforded the opportunity to ask questions of the Company and its management. The Holder understands that such discussions, as well as any written information provided by the Company, were intended to describe the aspects of the Company’s and its subsidiaries’ business and prospects which the Company believes to be material, but were not necessarily a thorough or exhaustive description, and except as expressly set forth in this Note or the Purchase Agreement, the Company makes no representation or warranty with respect to the completeness of such information and makes no representation or warranty of any kind with respect to any information provided by any entity other than the Company. Some of such information may include projections as to the future performance of the Company and its subsidiaries, which projections may not be realized, may be based on assumptions which may not be correct and may be subject to numerous factors beyond the Company’s and its subsidiaries’ control. Additionally, Holder understands and represents that it is purchasing this Note notwithstanding the fact that the Company and its subsidiaries, may disclose in the future certain material information Holder has not received, including the financial results of the Company and its subsidiaries for the current fiscal quarter. Neither such inquiries nor any other due diligence investigations conducted by such Holder shall modify, amend or affect such Holder’s right to rely on the Company’s representations and warranties contained herein. The Holder has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its investment in this Note.

 

 
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(k) No Other Representations or Information . In evaluating the suitability of an investment in this Note, the Holder has not relied upon any representation or information (oral or written) with respect to the Company or its subsidiaries, or otherwise, other than as stated in this Note or the Purchase Agreement.

 

(l) No Governmental Review . The Holder understands that no United States federal or state agency or any other government or governmental agency has passed on or will pass on, or has made or will make, any recommendation or endorsement of this Note (or the Conversion Shares), or the fairness or suitability of the investment in this Note (or the Conversion Shares), nor have such authorities passed upon or endorsed the merits of the offering of this Note (or the Conversion Shares).

 

(m) Transfer or Resale . The Holder understands that: (i) this Note, and, upon conversion of the Note, the Units (including the securities underlying the Units), have not been and are not being registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, or (B) such Holder shall have delivered to the Company an opinion of counsel, in a generally acceptable form, to the effect that such securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration requirements; (ii) any sale of such securities made in reliance on Rule 144 under the Securities Act (or a successor rule thereto) (“ 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 defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the SEC thereunder; and (iii) except as otherwise provided herein or the Purchase Agreement, neither the Company nor any other person is under any obligation to register such securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder. There can be no assurance that there will be any market for this Note or the Units (including the securities underlying the Units), nor can there be any assurance that this Note will be freely transferable at any time in the foreseeable future.

 

(n) Legends . The Holder understands that the certificates representing the Unit Shares and Unit Warrant Shares shall bear a restrictive legend in substantially the following form (and a stop transfer order may be placed against transfer of such stock certificates):

   

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (C) IN COMPLIANCE WITH RULE 144 OR 144A THEREUNDER, IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, (D) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR (E) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY SATISFACTORY TO THE COMPANY. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.

    

 
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(o) Confidentiality . The Holder acknowledges and agrees that certain of the information received by it in connection with the transactions contemplated by this Note is of a confidential nature and may be regarded as material non-public information under Regulation FD promulgated by the SEC and that such information has been furnished to the Holder for the sole purpose of enabling the Holder to consider and evaluate an investment in this Note. The Holder agrees that it will treat such information in a confidential manner, will not use such information for any purpose other than evaluating an investment in this Note, will not, directly or indirectly, trade or permit the Holder’s agents, representatives or affiliates to trade in any securities of the Company while in possession of such information and will not, directly or indirectly, disclose or permit the Holder’s agents, representatives or affiliates to disclose any of such information without the Company’s prior written consent. The Holder shall make its agents, affiliates and representatives aware of the confidential nature of the information contained herein and the terms of this section including the Holder’s agreement to not disclose such information, to not trade in the Company’s securities while in the possession of such information and to be responsible for any disclosure or other improper use of such information by such agents, affiliates or representatives. Likewise, without the Company’s prior written consent, the Holder will not, directly or indirectly, make any statements, public announcements or other release or provision of information in any form to any trade publication, to the press or to any other person or entity whose primary business is or includes the publication or dissemination of information related to the transactions contemplated by this Note.

 

(p) No Legal Advice from the Company . The Holder acknowledges that it has had the opportunity to review this Note and the transactions contemplated by this Note with its own legal counsel and investment and tax advisors. The Holder is relying solely on such advisors and not on any statements or representations of the Company or any of its employees, representatives or agents for legal, tax, economic and related considerations or investment advice with respect to this investment, the transactions contemplated by this Note or the securities laws of any jurisdiction.

 

(q) No Group Participation . The Holder and its affiliates is not a member of any group, nor is any Holder acting in concert with any other person, including any other Holder, with respect to its acquisition of this Note (and the Conversion Shares).

 

Article V.

 

Section 5.01 Registration Rights . The Holder shall have piggyback registration rights with respect to the Unit Shares and Unit Warrant Shares, as further set forth in Section 1(e) of the Purchase Agreement.

 

Article VI.

 

Section 6.01 Conversion Price Adjustments .

 

(a) General . The conversion prices and the number of Units issuable upon the conversion of this Note shall be subject to adjustment from time to time upon the occurrence of certain events described in this Section 6.01.

 

(i) Subdivision or Combination of Stock . In case the Company shall at any time subdivide (whether by way of stock dividend, stock split or otherwise) its outstanding shares of Common Stock into a greater number of shares, the conversion price in effect immediately prior to such subdivision shall be proportionately reduced and the number of Units shall be proportionately increased, and conversely, in case the outstanding shares of Common Stock of the Company shall be combined (whether by way of stock combination, reverse stock split or otherwise) into a smaller number of shares, the conversion price in effect immediately prior to such combination shall be proportionately increased and the number of Units shall be proportionately decreased. The conversion price and the number of Units issuable upon conversion, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described in this Section 6.01(a)(i).

 

(ii) Dividends in Stock, Property, Reclassification . If at any time, or from time to time, the holders of Common Stock (or any shares of stock or other securities at the time receivable upon the conversion of this Note) shall have received or become entitled to receive, without payment therefor:

 

 
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1) any shares of stock or other securities that are at any time directly or indirectly convertible into or exchangeable for Common Stock, or any rights or options to subscribe for, purchase or otherwise acquire any of the foregoing by way of dividend or other distribution, or

 

2) additional stock or other securities or property (including cash) by way of spin-off, split-up, reclassification, combination of shares or similar corporate rearrangement (other than shares of Common Stock issued as a stock split or adjustments in respect of which shall be covered by the terms of Section 6.01(a)(i) above),

 

then and in each such case, the conversion price and the number of Unit Shares and Unit Warrant Shares to be issued upon conversion of this Note and exercise of the Unit Warrants shall be adjusted proportionately, and the Holder hereof shall, upon the conversion of this Note and exercise of the Unit Warrants, be entitled to receive, in addition to the number of Units receivable thereupon, and without payment of any additional consideration therefor, the amount of stock and other securities and property (including cash in the cases referred to above) that such Holder would hold on the date of such exercise had such Holder been the holder of record of such Common Stock as of the date on which holders of Common Stock received or became entitled to receive such shares or all other additional stock and other securities and property. The conversion price and the Unit Shares and Unit Warrant Shares, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described in this Section 6.01(a)(ii).

 

(iii) Reorganization, Reclassification, Consolidation, Merger or Sale . If any recapitalization, reclassification or reorganization of the capital stock of the Company, or any consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets or other transaction shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities or other assets or property (an “ Organic Change ”), then lawful and adequate provisions shall be made by the Company whereby the Holder hereof shall thereafter have the right to purchase and receive (in lieu of the Units of the Company immediately theretofore purchasable and receivable upon the conversion of this Note) such shares of stock, securities or other assets or property as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such stock immediately theretofore purchasable by reason of the Units and receivable assuming the full conversion of this Note. In the event of any Organic Change, appropriate provision shall be made by the Company with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustments of the conversion price and of the number of Units purchasable and receivable upon the exercise of this Note) shall thereafter be applicable, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof. To the extent necessary to effect the foregoing provisions, the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall assume by written instrument reasonably satisfactory in form and substance to the Holder executed and mailed or delivered to the registered Holder hereof at the last address of such Holder appearing on the books of the Company, the obligation to deliver to such Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Holder may be entitled to purchase. In any event, the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall be deemed to assume such obligation to deliver to such Holder such shares of stock, securities or assets even in the absence of a written instrument assuming such obligation to the extent such assumption occurs by operation of law.

 

 
12
 
 

 

Article VII.

 

Section 7.01 Notice . Notices regarding this Note shall be sent to the parties at the following addresses, unless a party notifies the other parties, in writing, of a change of address:

 

 

If to the Company:

CÜR Media, Inc.

2217 New London Turnpike

South Glastonbury, CT 06073

Attn: Kelly Sardo, CFO

Phone: (860) 430-1520

 

 

 

 

With a copy to:

CKR Law LLP

1330 Avenue of the Americas, 14 th Floor

New York, NY 10019

Attn: Eric C. Mendelson

Phone: (212) 259-7300

 

 

 

 

If to the Holder:

To the Holder’s address set forth on the Omnibus Signature Page to the Purchase Agreement

 

Section 7.02 Governing Law; Jurisdiction . All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Note (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “ New York Courts ”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Note), 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, or such New York Courts are improper or inconvenient venue for such proceeding. 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 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 Note 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. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorney’s fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

 

Section 7.03 Severability . The invalidity of any of the provisions of this Note shall not invalidate or otherwise affect any of the other provisions of this Note, which shall remain in full force and effect.

 

Section 7.04 Entire Agreement and Amendments . This Note together with the Purchase Agreement and Security Agreement represents the entire agreement between the parties hereto with respect to the subject matter hereof and there are no representations, warranties or commitments, except as set forth herein. This Note may be amended only by an instrument in writing executed by the Company and persons holding at least a majority of the principal amount of the Notes.

 

Section 7.05 Cancellation . After all Principal, accrued Interest and other amounts at any time owed on this Note has been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.

 

 
13
 
 

 

Section 7.06 Construction; Headings . This Note shall be deemed to be jointly drafted by the Company and all the Purchasers and shall not be construed against any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note.

 

Section 7.07 Payment of Collection, Enforcement and Other Costs . If (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, but not limited to, attorneys’ fees and disbursements.

 

Section 7.08 The Company hereby covenants and agrees that the Company will not, by amendment of its Articles 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 Note, and will at all times in good faith carry out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this Note. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon conversion of this Note above the conversion 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 nonassessable shares of Common Stock upon the conversion of this Note, and (iii) shall, so long as any of the Notes are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Notes, the maximum number of shares of Common Stock as shall from time to time be necessary to effect the conversion of the Notes then outstanding (without regard to any limitations on conversion).

 

[Remainder of Page Intentionally Left Blank]

  

 
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IN WITNESS WHEREOF , with the intent to be legally bound hereby, the Company has executed this Note as of the date first written above.

 

 

CÜR MEDIA, INC.

       
By:

 

Name:

Kelly Sardo  
  Title: Chief Financial Officer  

   

 
15
 
 

 

EXHIBIT I

 

NOTICE OF OPTIONAL CONVERSION

 

(To be executed by the Holder in order to convert the Note)

 

TO: CÜR Media, Inc.

 

The undersigned hereby irrevocably elects to convert the unpaid principal amount and accrued interest amount indicated below of the 12% Senior Secured Convertible Promissory Note due _______, 2016 (the “Note”) into Conversion Shares of CÜR Media, Inc. , according to the conditions stated therein, as of the Optional Conversion Date written below.

 

Optional Conversion Date:

Applicable Conversion Price (per Unit):

$

Principal amount of Note to be converted:

$

Principal amount of Note unconverted:

$

Interest amount to be converted

$

Number of Units to be issued:

Issue the Unit Shares comprising part of the Units in the following name and to the following address:

Issue to the following account of the Holder:

Authorized Signature:

Name:

Title:

Phone Number:

 

 
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SCHEDULE A

 

EXISTING OBLIGATIONS

 

Lien by Connecticut Department of Economic and Community Development

 

Security interest related to Notes issued in the Earlier 2016 Note Offering

 

 
17
 
 

 

SCHEDULE B

 

SENIOR AND PARI PASSU INDEBTEDNESS

 

The State of Connecticut Department of Economic and Community Development Promissory Note, dated June 19, 2012

 

Notes issued in the Earlier 2016 Note Offering

 

 

18

 

EXHIBIT 4.5

 

Warrant Certificate No. ______

 

NEITHER THE SECURITIES REPRESENTED HEREBY NOR THE SECURITIES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS . SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) IN COMPLIANCE WITH RULE 144 UNDER THE SECURITIES ACT, IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, (C) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR (D) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY SATISFACTORY TO THE COMPANY. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.

 

Effective Date: _________, 2016

 

Expiration Date: __________, 2021 1

 

CÜR MEDIA, INC.

 

WARRANT TO PURCHASE COMMON STOCK

 

CÜR MEDIA, INC. , a Delaware corporation (the “ Company ”), for value received, hereby issues to __________________________ (the “ Holder ”) this Warrant (the “ Warrant ”) to purchase ______________ shares (as from time to time adjusted as hereinafter provided) (each such share a “ Warrant Share ” and all such shares being the “ Warrant Shares ”) of the Company’s Common Stock (as defined below), at the Exercise Price (as defined below), as adjusted from time to time as provided herein, on or before the Expiration Date, all subject to the following terms and conditions.

 

This Warrant is one of a series of Warrants (collectively, the “ Unit Warrants ”) of like tenor being issued to holders of the 12% senior secured convertible promissory notes (the “ Notes ”) of CÜR Media, Inc. , upon conversion of such Notes in accordance with, and subject to, the terms and conditions described in the Securities Purchase Agreement entered into by and between the Company and buyer(s) of the Notes set forth on the signature pages affixed thereto (the “ Purchase Agreement ”). Capitalized terms used herein without definition have the meanings ascribed to them in the Purchase Agreement.

 

As used in this Warrant, (i) “ Business Day ” means any day other than Saturday, Sunday or any other day on which commercial banks in the City of New York, New York, are authorized or required by law or executive order to close; (ii) “ Common Stock ” means the common stock of the Company, $0.0001 par value per share, including any securities issued or issuable with respect thereto or into which or for which such shares may be exchanged for, or converted into, pursuant to any stock dividend, stock split, stock combination, recapitalization, reclassification, reorganization or other similar event; (iii) “ Exercise Price ” means $_____ 2 per share of Common Stock, subject to adjustment as provided herein; (iv) “ Trading Day ” means any day on which the Common Stock is traded on the primary national or regional stock exchange on which the Common Stock is listed, or if not so listed, the OTC Markets, if quoted thereon, is open for the transaction of business; and (v) “ Affiliate ” means any person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, a person, as such terms are used and construed in Rule 144 promulgated under the Securities Act of 1933, as amended (the “ Securities Act ”).

_______________

1 Five (5) year anniversary of the date of issuance.

2  An exercise price equal to (a) 125% of the price at which the Company’s equity securities (or securities convertible into or exercisable for equity securities) are sold in a Qualified Offering in the event of a Mandatory Conversion, or (b) 125% of $2.00 in the event of an Optional Conversion.

 

 
1
 
 

 

1. DURATION AND EXERCISE OF WARRANTS

 

(a) Exercise Period . The Holder may exercise this Warrant for a period of five years from the Effective Date of this Warrant in whole or in part on any Business Day on or before 5:00 P.M., Eastern Time, on the Expiration Date, at which time this Warrant shall become void and of no value.

 

(b) Exercise Procedures .

 

(i) While this Warrant remains outstanding and exercisable in accordance with Section 1(a), the Holder may exercise this Warrant in whole or in part at any time and from time to time by:

 

(A) delivery to the Company of a duly completed and executed copy of the notice of exercise attached as Exhibit A (the “ Notice of Exercise ”);

 

(B) surrender of this Warrant to the Secretary of the Company at its principal offices or at such other office or agency as the Company may specify in writing to the Holder; and

 

(C) payment of the then-applicable Exercise Price per share multiplied by the number of Warrant Shares being purchased upon exercise of the Warrant (such amount, the “ Aggregate Exercise Price ”) made in the form of cash, or by certified check, wire transfer, bank draft or money order payable in lawful money of the United States of America.

 

(ii) Upon the exercise of this Warrant in compliance with the provisions of this Section 1(b), and except as limited pursuant to Section 1(b)(iii), the Company shall promptly issue and cause to be delivered to the Holder a certificate for the Warrant Shares purchased by the Holder. Each exercise of this Warrant shall be effective immediately prior to the close of business on the date (the “ Date of Exercise ”) that the conditions set forth in Section 1(b) have been satisfied, as the case may be. Upon delivery of each of the items set forth in Section 1(b)(i), 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.

 

 
2
 
 

 

(iii) Notwithstanding the foregoing provisions of this Section 1(b), the Holder may not exercise this Warrant if and to the extent that such exercise would require the Company to issue a number of shares of Common Stock in excess of its authorized but unissued shares of Common Stock, less all amounts of Common Stock that have been reserved for issue upon the conversion of all outstanding securities convertible into shares of Common Stock and the exercise of all outstanding options, warrants and other rights exercisable for shares of Common Stock. If the Company does not have the requisite number of authorized but unissued shares of Common Stock to permit the Holder to exercise this Warrant, then the Company shall use commercially reasonable efforts to obtain the necessary stockholder consent to increase the authorized number of shares of Common Stock to permit such Holder to exercise this Warrant pursuant to Section 1(b)(i).

 

(c) Partial Exercise . This Warrant shall be exercisable, either in its entirety or, from time to time, for part only of the number of Warrant Shares referenced by this Warrant; provided, that any such partial exercise must be for an integral number of Warrant Shares. If this Warrant is exercised in part, the Company shall issue, at its expense, a new Warrant, in substantially the form of this Warrant, referencing such reduced number of Warrant Shares that remain subject to this Warrant.

 

(e) Disputes . In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute in accordance with Section 15.

 

2. ISSUANCE OF WARRANT SHARES

 

(a) The Company covenants that all Warrant Shares will, upon issuance in accordance with the terms of this Warrant, be (i) duly authorized, fully paid and non-assessable, and (ii) free from all liens, charges and security interests, with the exception of claims arising through the acts or omissions of any Holder and except as arising from applicable Federal and state securities laws.

 

(b) The Company shall register this Warrant upon records to be maintained by the Company for that purpose in the name of the record holder of such Warrant from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner thereof for the purpose of any exercise thereof, any distribution to the Holder thereof and for all other purposes.

 

(c) The Company will not, by amendment of its articles of incorporation, by-laws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all action necessary or appropriate in order to protect the rights of the Holder to exercise this Warrant, or against impairment of such rights.

 

 
3
 
 

 

3. ADJUSTMENTS OF EXERCISE PRICE, NUMBER AND TYPE OF WARRANT SHARES

 

(a) The Exercise Price and the number of shares purchasable upon the exercise of this Warrant shall be subject to adjustment from time to time upon the occurrence of certain events described in this Section 3(a); provided , that notwithstanding the provisions of this Section 3, the Company shall not be required to make any adjustment if and to the extent that such adjustment would require the Company to issue a number of shares of Common Stock in excess of its authorized but unissued shares of Common Stock, less all amounts of Common Stock that have been reserved for issue upon the conversion of all outstanding securities convertible into shares of Common Stock and the exercise of all outstanding options, warrants and other rights exercisable for shares of Common Stock. If the Company does not have the requisite number of authorized but unissued shares of Common Stock to make any adjustment, the Company shall use its commercially reasonable efforts to obtain the necessary stockholder consent to increase the authorized number of shares of Common Stock to make such an adjustment pursuant to this Section 3(a).

 

(i) Subdivision or Combination of Stock . In case the Company shall at any time subdivide (whether by way of stock dividend, stock split or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced and the number of Warrant Shares shall be proportionately increased, and conversely, in case the outstanding shares of Common Stock of the Company shall be combined (whether by way of stock combination, reverse stock split or otherwise) into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of Warrant Shares shall be proportionately decreased. The Exercise Price and the Warrant Shares, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described in this Section 3(a)(i).

 

(ii) Dividends in Stock, Property, Reclassification . If at any time, or from time to time, the holders of Common Stock (or any shares of stock or other securities at the time receivable upon the exercise of this Warrant) shall have received or become entitled to receive, without payment therefore:

 

(A) any shares of stock or other securities that are at any time directly or indirectly convertible into or exchangeable for Common Stock, or any rights or options to subscribe for, purchase or otherwise acquire any of the foregoing by way of dividend or other distribution, or

 

 
4
 
 

 

(B) additional stock or other securities or property (including cash) by way of spin-off, split-up, reclassification, combination of shares or similar corporate rearrangement (other than shares of Common Stock issued as a stock split or adjustments in respect of which shall be covered by the terms of Section 3(a)(i) above),

 

then and in each such case, the Exercise Price and the number of Warrant Shares to be obtained upon exercise of this Warrant shall be adjusted proportionately, and the Holder hereof shall, upon the exercise of this Warrant, be entitled to receive, in addition to the number of shares of Common Stock receivable thereupon, and without payment of any additional consideration therefor, the amount of stock and other securities and property (including cash in the cases referred to above) that such Holder would hold on the date of such exercise had such Holder been the holder of record of such Common Stock as of the date on which holders of Common Stock received or became entitled to receive such shares or all other additional stock and other securities and property. The Exercise Price and the Warrant Shares, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described in this Section 3(a)(ii) .

 

(iii) Reorganization, Reclassification, Consolidation, Merger or Sale . If any recapitalization, reclassification or reorganization of the capital stock of the Company, or any consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets or other transaction shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities or other assets or property (an “ Organic Change ”), then lawful and adequate provisions shall be made by the Company whereby the Holder hereof shall thereafter have the right to purchase and receive (in lieu of the shares of the Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented by this Warrant) such shares of stock, securities or other assets or property as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such stock immediately theretofore purchasable and receivable assuming the full exercise of the rights represented by this Warrant. In the event of any Organic Change, appropriate provision shall be made by the Company with respect to the rights and interests of the Holder of this Warrant to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Exercise Price and of the number of shares purchasable and receivable upon the exercise of this Warrant) shall thereafter be applicable, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof. To the extent necessary to effect the foregoing provisions, the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall assume by written instrument reasonably satisfactory in form and substance to the Holder executed and mailed or delivered to the registered Holder hereof at the last address of such Holder appearing on the books of the Company, the obligation to deliver to such Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Holder may be entitled to purchase. If there is an Organic Change, then the Company shall cause to be mailed to the Holder at its last address as it shall appear on the books and records of the Company, at least 10 calendar days before the effective date of the Organic Change, a notice stating the date on which such Organic Change is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares for securities, cash, or other property delivered upon such Organic Change; provided , that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to exercise this Warrant during the 10-day period commencing on the date of such notice to the effective date of the event triggering such notice. In any event, the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall be deemed to assume such obligation to deliver to such Holder such shares of stock, securities or assets even in the absence of a written instrument assuming such obligation to the extent such assumption occurs by operation of law.

 

 
5
 
 

 

(b) Certificate as to Adjustments . Upon the occurrence of each adjustment or readjustment pursuant to this Section 3, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each Holder of this Warrant a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall promptly furnish or cause to be furnished to such Holder a like certificate setting forth: (i) such adjustments and readjustments; and (ii) the number of shares and the amount, if any, of other property which at the time would be received upon the exercise of the Warrant.

 

(c) Certain Events . If any event occurs as to which the other provisions of this Section 3 are not strictly applicable but the lack of any adjustment would not fairly protect the purchase rights of the Holder under this Warrant in accordance with the basic intent and principles of such provisions, or if strictly applicable would not fairly protect the purchase rights of the Holder under this Warrant in accordance with the basic intent and principles of such provisions, then the Company's Board of Directors will, in good faith and subject to applicable law, make an appropriate adjustment to protect the rights of the Holder; provided , that no such adjustment pursuant to this Section 3(c) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 3.

 

4. TRANSFERS AND EXCHANGES OF WARRANT AND WARRANT SHARES

 

(a) Registration of Transfers and Exchanges . Subject to Section 4(c), upon the Holder’s surrender of this Warrant, with a duly executed copy of the Form of Assignment attached as Exhibit B , to the Secretary of the Company at its principal offices or at such other office or agency as the Company may specify in writing to the Holder, the Company shall register the transfer of all or any portion of this Warrant. Upon such registration of transfer, the Company shall issue a new Warrant, in substantially the form of this Warrant, evidencing the acquisition rights transferred to the transferee and a new Warrant, in similar form, evidencing the remaining acquisition rights not transferred, to the Holder requesting the transfer.

 

(b) Warrant Exchangeable for Different Denominations . The Holder may exchange this Warrant for a new Warrant or Warrants, in substantially the form of this Warrant, evidencing in the aggregate the right to purchase the number of Warrant Shares, which may then be purchased hereunder, each of such new Warrants to be dated the date of such exchange and to represent the right to purchase such number of Warrant Shares as shall be designated by the Holder. The Holder shall surrender this Warrant with duly executed instructions regarding such re-certification of this Warrant to the Secretary of the Company at its principal offices or at such other office or agency as the Company may specify in writing to the Holder.

 

 
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(c) Restrictions on Transfers . This Warrant may not be transferred at any time without (i) registration under the Securities Act or (ii) an exemption from such registration and a written opinion of legal counsel addressed to the Company that the proposed transfer of the Warrant may be effected without registration under the Securities Act, which opinion will be in form and from counsel reasonably satisfactory to the Company.

 

(d) Permitted Transfers and Assignments . Notwithstanding any provision to the contrary in this Section 4, the Holder may transfer, with or without consideration, this Warrant or any of the Warrant Shares (or a portion thereof) to the Holder’s Affiliates (as such term is defined under Rule 144 of the Securities Act) without obtaining the opinion from counsel that may be required by Section 4(c)(ii), provided, that the Holder delivers to the Company and its counsel certification, documentation, and other assurances reasonably required by the Company’s counsel to enable the Company’s counsel to render an opinion to the Company’s Transfer Agent that such transfer does not violate applicable securities laws.

 

5. MUTILATED OR MISSING WARRANT CERTIFICATE

 

If this Warrant is mutilated, lost, stolen or destroyed, upon request by the Holder, the Company will, at its expense, issue, in exchange for and upon cancellation of the mutilated Warrant, or in substitution for the lost, stolen or destroyed Warrant, a new Warrant, in substantially the form of this Warrant, representing the right to acquire the equivalent number of Warrant Shares; provided , that, as a prerequisite to the issuance of a substitute Warrant, the Company may require satisfactory evidence of loss, theft or destruction as well as an indemnity from the Holder of a lost, stolen or destroyed Warrant.

 

6. PAYMENT OF TAXES

 

The Company will pay all transfer and stock issuance taxes attributable to the preparation, issuance and delivery of this Warrant and the Warrant Shares (and replacement Warrants) including, without limitation, all documentary and stamp taxes; provided , however , that the Company shall not be required to pay any tax in respect of the transfer of this Warrant, or the issuance or delivery of certificates for Warrant Shares or other securities in respect of the Warrant Shares to any person or entity other than to the Holder.

 

7. FRACTIONAL WARRANT SHARES

 

No fractional Warrant Shares shall be issued upon exercise of this Warrant. Upon the full exercise of this Warrant, the Company, in lieu of issuing any fractional Warrant Share, shall round up the number of Warrant Shares issuable to nearest whole share.

 

 
7
 
 

 

8. NO STOCK RIGHTS AND LEGEND

 

No holder of this Warrant, as such, shall be entitled to vote or be deemed the holder of any other securities of the Company that may at any time be issuable on the exercise hereof, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, the rights of a stockholder of the Company or the right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or give or withhold consent to any corporate action or to receive notice of meetings or other actions affecting stockholders (except as provided herein), or to receive dividends or subscription rights or otherwise (except as provide herein).

 

Each certificate for Warrant Shares initially issued upon the exercise of this Warrant, and each certificate for Warrant Shares issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with a legend in substantially the following form:

 

 

NEITHER THE SECURITIES REPRESENTED HEREBY NOR THE SECURITIES ISSUABLE UPON THE CONVERSION OF THIS NOTE HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS . SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) IN COMPLIANCE WITH RULE 144 UNDER THE SECURITIES ACT, IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, (C) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR (D) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY SATISFACTORY TO THE COMPANY. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.

 

 

9. REGISTRATION RIGHTS

 

The Holder shall have piggyback registration rights with respect to the Warrant Shares, as further set forth in Section 1(e) of the Purchase Agreement.

 

 
8
 
 

 

10. NOTICES

 

All notices, consents, waivers, and other communications under this Warrant must be in writing and will be deemed given to a party when (a) delivered to the appropriate address by hand or by nationally recognized overnight courier service (costs prepaid); (b) sent by facsimile or e-mail with confirmation of transmission by the transmitting equipment; (c) received or rejected by the addressee, if sent by certified mail, return receipt requested, if to the registered Holder hereof; or (d) seven days after the placement of the notice into the mails (first class postage prepaid), to the Holder at the address, facsimile number, or e-mail address furnished by the registered Holder to the Company in accordance with the Subscription Agreement by and between the Company and the Holder or, if the registered Holder is not the original purchaser of this Warrant, then as provided in the Form of Assignment delivered to the Company pursuant to Section 4(a) in connection with the assignment of this Warrant to such Holder, or if to the Company, to it at:

 

CÜR Media, Inc.

2217 New London Turnpike

South Glastonbury, CT 06027

Attn: Kelly Sardo, CFO

Facsimile Number: (845) 818-3588

Telephone Number: (860) 430-1520

E-mail address: tbrophy@curmusic.com

 

(or to such other address, facsimile number, or e-mail address as the Holder or the Company as a party may designate by notice to the other party in accordance with this Section 10) with a copy to

 

CKR Law LLP

1330 Avenue of the Americas, 14 th Floor

New York, NY 10019

Attn: Eric C. Mendelson

Facsimile Number: (212) 259-8200

Telephone Number: (212) 259-7300

E-mail address: emendelson@ckrlaw.com

 

11. SEVERABILITY

 

If a court of competent jurisdiction holds any provision of this Warrant invalid or unenforceable, the other provisions of this Warrant will remain in full force and effect. Any provision of this Warrant held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

 

12. BINDING EFFECT

 

This Warrant shall be binding upon and inure to the sole and exclusive benefit of the Company, its successors and assigns, the registered Holder or Holders from time to time of this Warrant and the Warrant Shares.

 

13. SURVIVAL OF RIGHTS AND DUTIES

 

This Warrant shall terminate and be of no further force and effect on the earlier of 5:00 P.M., Eastern Time, on the Expiration Date or the date on which this Warrant has been exercised in full.

 

 
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14. GOVERNING LAW

 

This Warrant will be governed by and construed under the laws of the State of New York without regard to conflicts of laws principles that would require the application of any other law.

 

15. DISPUTE RESOLUTION

 

In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within five (5) Business Days of receipt of the Notice of Exercise giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation of the Exercise Price or the Warrant Shares within three Business Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, at its sole discretion, within five (5) Business Days, submit via facsimile (a) the disputed determination of the Exercise Price to an independent, reputable investment bank selected by the Company and approved by the Holder, or (b) the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant. The Company shall cause at its expense the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than ten (10) Business Days from the time it receives the disputed determinations or calculations; provided that, if such disputed determination or arithmetic calculation being submitted by the Holder is determined to be incorrect, then the expense of the investment bank or the accountant shall be the responsibility of the Holder. Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be final, binding and conclusive upon the parties thereto.

 

16. NOTICES OF RECORD DATE

 

Upon (a) any establishment by the Company of a record date of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or right or option to acquire securities of the Company, or any other right, or (b) any capital reorganization, reclassification, recapitalization, merger or consolidation of the Company with or into any other corporation, any transfer of all or substantially all the assets of the Company, or any voluntary or involuntary dissolution, liquidation or winding up of the Company, or the sale, in a single transaction, of a majority of the Company’s voting stock (whether newly issued, or from treasury, or previously issued and then outstanding, or any combination thereof), the Company shall mail to the Holder at least ten (10) Business Days, or such longer period as may be required by law, prior to the record date specified therein, a notice specifying (i) the date established as the record date for the purpose of such dividend, distribution, option or right and a description of such dividend, option or right, (ii) the date on which any such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up, or sale is expected to become effective and (iii) the date, if any, fixed as to when the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, transfer, consolation, merger, dissolution, liquidation or winding up.

 

 
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17. RESERVATION OF SHARES

 

The Company shall reserve and keep available out of its authorized but unissued shares of Common Stock for issuance upon the exercise of this Warrant, free from pre-emptive rights, such number of shares of Common Stock for which this Warrant shall from time to time be exercisable. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation. Without limiting the generality of the foregoing, the Company covenants that it will use commercially reasonable efforts to take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable Warrant Shares upon the exercise of this Warrant and use commercially reasonable efforts to obtain all such authorizations, exemptions or consents, including but not limited to consents from the Company’s stockholders or Board of Directors or any public regulatory body, as may be necessary to enable the Company to perform its obligations under this Warrant.

 

18. HEADINGS

 

The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

19. AMENDMENT AND WAIVERS

 

Any term of this Warrant may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and the Holders of a majority of the Unit Warrants.

 

20. NO THIRD PARTY RIGHTS

 

This Warrant is not intended, and will not be construed, to create any rights in any parties other than the Company and the Holder, and no person or entity may assert any rights as third-party beneficiary hereunder.

 

[SIGNATURE PAGE FOLLOWS]

 

 
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the date first set forth above.

 

  CÜR MEDIA, INC.
       
By:  

 

Name:

Kelly Sardo

 
  Title:

Chief Financial Officer

 

 

 
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EXHIBIT A

 

NOTICE OF EXERCISE

 

(To be executed by the Holder of Warrant if such Holder desires to exercise Warrant)

 

To CÜR Media, Inc.:

 

The undersigned hereby irrevocably elects to exercise this Warrant and to purchase thereunder, ___________________ full shares of CÜR Media, Inc., common stock issuable upon exercise of the Warrant and delivery of $_________ (in cash as provided for in the foregoing Warrant) and any applicable taxes payable by the undersigned pursuant to such Warrant.

 

The undersigned requests that certificates for such shares be issued in the name of:

 

_________________________________________

 

_________________________________________

 

_________________________________________

 

(Please print name, address and social security or federal employer identification number (if applicable))*

 

If the shares issuable upon this exercise of the Warrant are not all of the Warrant Shares which the Holder is entitled to acquire upon the exercise of the Warrant, the undersigned requests that a new Warrant evidencing the rights not so exercised be issued in the name of and delivered to:

 

_________________________________________

 

_________________________________________

 

_________________________________________

 

(Please print name, address and social security or federal employer

identification number (if applicable))*

 

 

Name of Holder (print): ________________________

(Signature): ________________________________

(By:) _____________________________________

(Title:) ____________________________________

Dated: ____________________________________

 

________________

* If Warrant Shares are to be issued in any name other than that of the registered Holder of the Warrant, then the Holder must include an opinion of counsel, reasonably satisfactory to the Company, to the effect that such issuance complies with all applicable securities laws.

 

 
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EXHIBIT B

 

FORM OF ASSIGNMENT

 

FOR VALUE RECEIVED, ___________________________________ hereby sells, assigns and transfers to each assignee set forth below all of the rights of the undersigned under the Warrant (as defined in and evidenced by the attached Warrant) to acquire the number of Warrant Shares set opposite the name of such assignee below and in and to the foregoing Warrant with respect to said acquisition rights and the shares issuable upon exercise of the Warrant:

 

Name of Assignee

(and social security or federal employer

identification number (if applicable))

Address

Number of Shares

 

If the total of the Warrant Shares are not all of the Warrant Shares evidenced by the foregoing Warrant, the undersigned requests that a new Warrant evidencing the right to acquire the Warrant Shares not so assigned be issued in the name of and delivered to the undersigned.

 

 

Name of Holder (print): ____________________

(Signature): _____________________________

(By:) __________________________________

(Title:) _________________________________

Dated: _________________________________

 

 

 

14

 

EXHIBIT 4.6

 

Warrant Certificate No. ______

 

NEITHER THE SECURITIES REPRESENTED HEREBY NOR THE SECURITIES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS . SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) IN COMPLIANCE WITH RULE 144 UNDER THE SECURITIES ACT, IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, (C) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR (D) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY SATISFACTORY TO THE COMPANY. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.

 

Effective Date: _________, 2016

 

Expiration Date: __________, 2021 1

 

CÜR MEDIA, INC.

 

WARRANT TO PURCHASE COMMON STOCK

 

CÜR MEDIA, INC. , a Delaware corporation (the “ Company ”), for value received, hereby issues to __________________________ (the “ Holder ”) this Warrant (the “ Warrant ”) to purchase ______________ shares 2 (as from time to time adjusted as hereinafter provided) (each such share a “ Warrant Share ” and all such shares being the “ Warrant Shares ”) of the Company’s Common Stock (as defined below), at the Exercise Price (as defined below), as adjusted from time to time as provided herein, on or before the Expiration Date, all subject to the following terms and conditions.

 

This Warrant is one of a series of Warrants (collectively, the “ Placement Agent Warrants ”) of like tenor being issued to the Placement Agent pursuant the terms and conditions described in the Placement Agency Agreement, by and between the Company and the Placement Agent, in connection with the Company’s Offering of 12% senior secured convertible promissory notes (the “ Notes ”) of CÜR Media, Inc. , in accordance with, and subject to, the terms and conditions described in the Securities Purchase Agreement entered into by and between the Company and buyer(s) of the Notes set forth on the signature pages affixed thereto (the “ Purchase Agreement ”). Capitalized terms used herein without definition have the meanings ascribed to them in the Purchase Agreement.

____________

1  Five (5) year anniversary of the date of issuance.

2 A number of shares of Common Stock equal to 10% of the number of Unit Shares into which Notes sold in the Offering to Buyers introduced to the Offering by the Placement Agent, and 8% of the number of Unit Shares into which Notes sold in the Offering to Buyers introduced to the Offering by the Company or its representatives, are converted upon a Mandatory Conversion.

 

 
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As used in this Warrant, (i) “ Business Day ” means any day other than Saturday, Sunday or any other day on which commercial banks in the City of New York, New York, are authorized or required by law or executive order to close; (ii) “ Common Stock ” means the common stock of the Company, $0.0001 par value per share, including any securities issued or issuable with respect thereto or into which or for which such shares may be exchanged for, or converted into, pursuant to any stock dividend, stock split, stock combination, recapitalization, reclassification, reorganization or other similar event; (iii) “ Exercise Price ” means $_____ 3 per share of Common Stock, subject to adjustment as provided herein; (iv) “ Trading Day ” means any day on which the Common Stock is traded on the primary national or regional stock exchange on which the Common Stock is listed, or if not so listed, the OTC Markets, if quoted thereon, is open for the transaction of business; and (v) “ Affiliate ” means any person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, a person, as such terms are used and construed in Rule 144 promulgated under the Securities Act of 1933, as amended (the “ Securities Act ”).

 

1. DURATION AND EXERCISE OF WARRANTS

 

(a) Exercise Period . The Holder may exercise this Warrant for a period of five years from the Effective Date of this Warrant in whole or in part on any Business Day on or before 5:00 P.M., Eastern Time, on the Expiration Date, at which time this Warrant shall become void and of no value.

 

(b) Exercise Procedures .

 

(i) While this Warrant remains outstanding and exercisable in accordance with Section 1(a), the Holder may exercise this Warrant in whole or in part at any time and from time to time by:

 

(A) delivery to the Company of a duly completed and executed copy of the notice of exercise attached as Exhibit A (the “ Notice of Exercise ”);

 

(B) surrender of this Warrant to the Secretary of the Company at its principal offices or at such other office or agency as the Company may specify in writing to the Holder; and

 

(C) payment of the then-applicable Exercise Price per share multiplied by the number of Warrant Shares being purchased upon exercise of the Warrant (such amount, the “ Aggregate Exercise Price ”) made in the form of cash, or by certified check, wire transfer, bank draft or money order payable in lawful money of the United States of America.

____________

3  A per share exercise price equal to the exercise price of the Unit Warrant Shares issued to Buyers introduced to the Offering by the Placement Agent upon a Mandatory Conversion.

 

 
2
 
 

 

(ii) Upon the exercise of this Warrant in compliance with the provisions of this Section 1(b), and except as limited pursuant to Section 1(b)(iii), the Company shall promptly issue and cause to be delivered to the Holder a certificate for the Warrant Shares purchased by the Holder. Each exercise of this Warrant shall be effective immediately prior to the close of business on the date (the “ Date of Exercise ”) that the conditions set forth in Section 1(b) have been satisfied, as the case may be. Upon delivery of each of the items set forth in Section 1(b)(i), 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.

 

(iii) Notwithstanding the foregoing provisions of this Section 1(b), the Holder may not exercise this Warrant if and to the extent that such exercise would require the Company to issue a number of shares of Common Stock in excess of its authorized but unissued shares of Common Stock, less all amounts of Common Stock that have been reserved for issue upon the conversion of all outstanding securities convertible into shares of Common Stock and the exercise of all outstanding options, warrants and other rights exercisable for shares of Common Stock. If the Company does not have the requisite number of authorized but unissued shares of Common Stock to permit the Holder to exercise this Warrant, then the Company shall use commercially reasonable efforts to obtain the necessary stockholder consent to increase the authorized number of shares of Common Stock to permit such Holder to exercise this Warrant pursuant to Section 1(b)(i).

 

(c) Partial Exercise . This Warrant shall be exercisable, either in its entirety or, from time to time, for part only of the number of Warrant Shares referenced by this Warrant; provided, that any such partial exercise must be for an integral number of Warrant Shares. If this Warrant is exercised in part, the Company shall issue, at its expense, a new Warrant, in substantially the form of this Warrant, referencing such reduced number of Warrant Shares that remain subject to this Warrant.

 

(e) Disputes . In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute in accordance with Section 15.

 

2. ISSUANCE OF WARRANT SHARES

 

(a) The Company covenants that all Warrant Shares will, upon issuance in accordance with the terms of this Warrant, be (i) duly authorized, fully paid and non-assessable, and (ii) free from all liens, charges and security interests, with the exception of claims arising through the acts or omissions of any Holder and except as arising from applicable Federal and state securities laws.

 

(b) The Company shall register this Warrant upon records to be maintained by the Company for that purpose in the name of the record holder of such Warrant from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner thereof for the purpose of any exercise thereof, any distribution to the Holder thereof and for all other purposes.

 

 
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(c) The Company will not, by amendment of its articles of incorporation, by-laws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all action necessary or appropriate in order to protect the rights of the Holder to exercise this Warrant, or against impairment of such rights.

 

3. ADJUSTMENTS OF EXERCISE PRICE, NUMBER AND TYPE OF WARRANT SHARES

 

(a) The Exercise Price and the number of shares purchasable upon the exercise of this Warrant shall be subject to adjustment from time to time upon the occurrence of certain events described in this Section 3(a); provided , that notwithstanding the provisions of this Section 3, the Company shall not be required to make any adjustment if and to the extent that such adjustment would require the Company to issue a number of shares of Common Stock in excess of its authorized but unissued shares of Common Stock, less all amounts of Common Stock that have been reserved for issue upon the conversion of all outstanding securities convertible into shares of Common Stock and the exercise of all outstanding options, warrants and other rights exercisable for shares of Common Stock. If the Company does not have the requisite number of authorized but unissued shares of Common Stock to make any adjustment, the Company shall use its commercially reasonable efforts to obtain the necessary stockholder consent to increase the authorized number of shares of Common Stock to make such an adjustment pursuant to this Section 3(a).

 

(i) Subdivision or Combination of Stock . In case the Company shall at any time subdivide (whether by way of stock dividend, stock split or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced and the number of Warrant Shares shall be proportionately increased, and conversely, in case the outstanding shares of Common Stock of the Company shall be combined (whether by way of stock combination, reverse stock split or otherwise) into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of Warrant Shares shall be proportionately decreased. The Exercise Price and the Warrant Shares, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described in this Section 3(a)(i).

 

(ii) Dividends in Stock, Property, Reclassification . If at any time, or from time to time, the holders of Common Stock (or any shares of stock or other securities at the time receivable upon the exercise of this Warrant) shall have received or become entitled to receive, without payment therefore:

 

 
4
 
 

 

(A) any shares of stock or other securities that are at any time directly or indirectly convertible into or exchangeable for Common Stock, or any rights or options to subscribe for, purchase or otherwise acquire any of the foregoing by way of dividend or other distribution, or

 

(B) additional stock or other securities or property (including cash) by way of spin-off, split-up, reclassification, combination of shares or similar corporate rearrangement (other than shares of Common Stock issued as a stock split or adjustments in respect of which shall be covered by the terms of Section 3(a)(i) above),

 

then and in each such case, the Exercise Price and the number of Warrant Shares to be obtained upon exercise of this Warrant shall be adjusted proportionately, and the Holder hereof shall, upon the exercise of this Warrant, be entitled to receive, in addition to the number of shares of Common Stock receivable thereupon, and without payment of any additional consideration therefor, the amount of stock and other securities and property (including cash in the cases referred to above) that such Holder would hold on the date of such exercise had such Holder been the holder of record of such Common Stock as of the date on which holders of Common Stock received or became entitled to receive such shares or all other additional stock and other securities and property. The Exercise Price and the Warrant Shares, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described in this Section 3(a)(ii) .

 

(iii) Reorganization, Reclassification, Consolidation, Merger or Sale . If any recapitalization, reclassification or reorganization of the capital stock of the Company, or any consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets or other transaction shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities or other assets or property (an “ Organic Change ”), then lawful and adequate provisions shall be made by the Company whereby the Holder hereof shall thereafter have the right to purchase and receive (in lieu of the shares of the Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented by this Warrant) such shares of stock, securities or other assets or property as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such stock immediately theretofore purchasable and receivable assuming the full exercise of the rights represented by this Warrant. In the event of any Organic Change, appropriate provision shall be made by the Company with respect to the rights and interests of the Holder of this Warrant to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Exercise Price and of the number of shares purchasable and receivable upon the exercise of this Warrant) shall thereafter be applicable, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof. To the extent necessary to effect the foregoing provisions, the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall assume by written instrument reasonably satisfactory in form and substance to the Holder executed and mailed or delivered to the registered Holder hereof at the last address of such Holder appearing on the books of the Company, the obligation to deliver to such Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Holder may be entitled to purchase. If there is an Organic Change, then the Company shall cause to be mailed to the Holder at its last address as it shall appear on the books and records of the Company, at least 10 calendar days before the effective date of the Organic Change, a notice stating the date on which such Organic Change is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares for securities, cash, or other property delivered upon such Organic Change; provided , that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to exercise this Warrant during the 10-day period commencing on the date of such notice to the effective date of the event triggering such notice. In any event, the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall be deemed to assume such obligation to deliver to such Holder such shares of stock, securities or assets even in the absence of a written instrument assuming such obligation to the extent such assumption occurs by operation of law.

 

 
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(b) Certificate as to Adjustments . Upon the occurrence of each adjustment or readjustment pursuant to this Section 3, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each Holder of this Warrant a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall promptly furnish or cause to be furnished to such Holder a like certificate setting forth: (i) such adjustments and readjustments; and (ii) the number of shares and the amount, if any, of other property which at the time would be received upon the exercise of the Warrant.

 

(c) Certain Events . If any event occurs as to which the other provisions of this Section 3 are not strictly applicable but the lack of any adjustment would not fairly protect the purchase rights of the Holder under this Warrant in accordance with the basic intent and principles of such provisions, or if strictly applicable would not fairly protect the purchase rights of the Holder under this Warrant in accordance with the basic intent and principles of such provisions, then the Company's Board of Directors will, in good faith and subject to applicable law, make an appropriate adjustment to protect the rights of the Holder; provided , that no such adjustment pursuant to this Section 3(c) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 3.

 

4. TRANSFERS AND EXCHANGES OF WARRANT AND WARRANT SHARES

 

(a) Registration of Transfers and Exchanges . Subject to Section 4(c), upon the Holder’s surrender of this Warrant, with a duly executed copy of the Form of Assignment attached as Exhibit B , to the Secretary of the Company at its principal offices or at such other office or agency as the Company may specify in writing to the Holder, the Company shall register the transfer of all or any portion of this Warrant. Upon such registration of transfer, the Company shall issue a new Warrant, in substantially the form of this Warrant, evidencing the acquisition rights transferred to the transferee and a new Warrant, in similar form, evidencing the remaining acquisition rights not transferred, to the Holder requesting the transfer.

 

 
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(b) Warrant Exchangeable for Different Denominations . The Holder may exchange this Warrant for a new Warrant or Warrants, in substantially the form of this Warrant, evidencing in the aggregate the right to purchase the number of Warrant Shares, which may then be purchased hereunder, each of such new Warrants to be dated the date of such exchange and to represent the right to purchase such number of Warrant Shares as shall be designated by the Holder. The Holder shall surrender this Warrant with duly executed instructions regarding such re-certification of this Warrant to the Secretary of the Company at its principal offices or at such other office or agency as the Company may specify in writing to the Holder.

 

(c) Restrictions on Transfers . This Warrant may not be transferred at any time without (i) registration under the Securities Act or (ii) an exemption from such registration and a written opinion of legal counsel addressed to the Company that the proposed transfer of the Warrant may be effected without registration under the Securities Act, which opinion will be in form and from counsel reasonably satisfactory to the Company.

 

(d) Permitted Transfers and Assignments . Notwithstanding any provision to the contrary in this Section 4, the Holder may transfer, with or without consideration, this Warrant or any of the Warrant Shares (or a portion thereof) to the Holder’s Affiliates (as such term is defined under Rule 144 of the Securities Act) without obtaining the opinion from counsel that may be required by Section 4(c)(ii), provided, that the Holder delivers to the Company and its counsel certification, documentation, and other assurances reasonably required by the Company’s counsel to enable the Company’s counsel to render an opinion to the Company’s Transfer Agent that such transfer does not violate applicable securities laws.

 

5. MUTILATED OR MISSING WARRANT CERTIFICATE

 

If this Warrant is mutilated, lost, stolen or destroyed, upon request by the Holder, the Company will, at its expense, issue, in exchange for and upon cancellation of the mutilated Warrant, or in substitution for the lost, stolen or destroyed Warrant, a new Warrant, in substantially the form of this Warrant, representing the right to acquire the equivalent number of Warrant Shares; provided , that, as a prerequisite to the issuance of a substitute Warrant, the Company may require satisfactory evidence of loss, theft or destruction as well as an indemnity from the Holder of a lost, stolen or destroyed Warrant.

 

6. PAYMENT OF TAXES

 

The Company will pay all transfer and stock issuance taxes attributable to the preparation, issuance and delivery of this Warrant and the Warrant Shares (and replacement Warrants) including, without limitation, all documentary and stamp taxes; provided , however , that the Company shall not be required to pay any tax in respect of the transfer of this Warrant, or the issuance or delivery of certificates for Warrant Shares or other securities in respect of the Warrant Shares to any person or entity other than to the Holder.

 

 
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7. FRACTIONAL WARRANT SHARES

 

No fractional Warrant Shares shall be issued upon exercise of this Warrant. Upon the full exercise of this Warrant, the Company, in lieu of issuing any fractional Warrant Share, shall round up the number of Warrant Shares issuable to nearest whole share.

 

8. NO STOCK RIGHTS AND LEGEND

 

No holder of this Warrant, as such, shall be entitled to vote or be deemed the holder of any other securities of the Company that may at any time be issuable on the exercise hereof, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, the rights of a stockholder of the Company or the right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or give or withhold consent to any corporate action or to receive notice of meetings or other actions affecting stockholders (except as provided herein), or to receive dividends or subscription rights or otherwise (except as provide herein).

 

Each certificate for Warrant Shares initially issued upon the exercise of this Warrant, and each certificate for Warrant Shares issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with a legend in substantially the following form:

 

 

NEITHER THE SECURITIES REPRESENTED HEREBY NOR THE SECURITIES ISSUABLE UPON THE CONVERSION OF THIS NOTE HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS . SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) IN COMPLIANCE WITH RULE 144 UNDER THE SECURITIES ACT, IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, (C) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR (D) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY SATISFACTORY TO THE COMPANY. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.

 

 

9. REGISTRATION RIGHTS

 

The Holder shall have piggyback registration rights with respect to the Warrant Shares, as further set forth in Section 1(e) of the Purchase Agreement.

 

 
8
 
 

 

10. NOTICES

 

All notices, consents, waivers, and other communications under this Warrant must be in writing and will be deemed given to a party when (a) delivered to the appropriate address by hand or by nationally recognized overnight courier service (costs prepaid); (b) sent by facsimile or e-mail with confirmation of transmission by the transmitting equipment; (c) received or rejected by the addressee, if sent by certified mail, return receipt requested, if to the registered Holder hereof; or (d) seven days after the placement of the notice into the mails (first class postage prepaid), to the Holder at the address, facsimile number, or e-mail address furnished by the registered Holder to the Company in accordance with the Subscription Agreement by and between the Company and the Holder or, if the registered Holder is not the original purchaser of this Warrant, then as provided in the Form of Assignment delivered to the Company pursuant to Section 4(a) in connection with the assignment of this Warrant to such Holder, or if to the Company, to it at:

 

CÜR Media, Inc.

2217 New London Turnpike

South Glastonbury, CT 06027

Attn: Kelly Sardo, CFO

Facsimile Number: (845) 818-3588

Telephone Number: (860) 430-1520

E-mail address: tbrophy@curmusic.com

 

(or to such other address, facsimile number, or e-mail address as the Holder or the Company as a party may designate by notice to the other party in accordance with this Section 10) with a copy to

 

CKR Law LLP

1330 Avenue of the Americas, 14 th Floor

New York, NY 10019

Attn: Eric C. Mendelson

Facsimile Number: (212) 259-8200

Telephone Number: (212) 259-7300

E-mail address: emendelson@ckrlaw.com

 

11. SEVERABILITY

 

If a court of competent jurisdiction holds any provision of this Warrant invalid or unenforceable, the other provisions of this Warrant will remain in full force and effect. Any provision of this Warrant held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

 

12. BINDING EFFECT

 

This Warrant shall be binding upon and inure to the sole and exclusive benefit of the Company, its successors and assigns, the registered Holder or Holders from time to time of this Warrant and the Warrant Shares.

 

 
9
 
 

 

13. SURVIVAL OF RIGHTS AND DUTIES

 

This Warrant shall terminate and be of no further force and effect on the earlier of 5:00 P.M., Eastern Time, on the Expiration Date or the date on which this Warrant has been exercised in full.

 

14. GOVERNING LAW

 

This Warrant will be governed by and construed under the laws of the State of New York without regard to conflicts of laws principles that would require the application of any other law.

 

15. DISPUTE RESOLUTION

 

In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within five (5) Business Days of receipt of the Notice of Exercise giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation of the Exercise Price or the Warrant Shares within three Business Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, at its sole discretion, within five (5) Business Days, submit via facsimile (a) the disputed determination of the Exercise Price to an independent, reputable investment bank selected by the Company and approved by the Holder, or (b) the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant. The Company shall cause at its expense the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than ten (10) Business Days from the time it receives the disputed determinations or calculations; provided that, if such disputed determination or arithmetic calculation being submitted by the Holder is determined to be incorrect, then the expense of the investment bank or the accountant shall be the responsibility of the Holder. Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be final, binding and conclusive upon the parties thereto.

 

16. NOTICES OF RECORD DATE

 

Upon (a) any establishment by the Company of a record date of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or right or option to acquire securities of the Company, or any other right, or (b) any capital reorganization, reclassification, recapitalization, merger or consolidation of the Company with or into any other corporation, any transfer of all or substantially all the assets of the Company, or any voluntary or involuntary dissolution, liquidation or winding up of the Company, or the sale, in a single transaction, of a majority of the Company’s voting stock (whether newly issued, or from treasury, or previously issued and then outstanding, or any combination thereof), the Company shall mail to the Holder at least ten (10) Business Days, or such longer period as may be required by law, prior to the record date specified therein, a notice specifying (i) the date established as the record date for the purpose of such dividend, distribution, option or right and a description of such dividend, option or right, (ii) the date on which any such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up, or sale is expected to become effective and (iii) the date, if any, fixed as to when the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, transfer, consolation, merger, dissolution, liquidation or winding up.

 

 
10
 
 

 

17. RESERVATION OF SHARES

 

The Company shall reserve and keep available out of its authorized but unissued shares of Common Stock for issuance upon the exercise of this Warrant, free from pre-emptive rights, such number of shares of Common Stock for which this Warrant shall from time to time be exercisable. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation. Without limiting the generality of the foregoing, the Company covenants that it will use commercially reasonable efforts to take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable Warrant Shares upon the exercise of this Warrant and use commercially reasonable efforts to obtain all such authorizations, exemptions or consents, including but not limited to consents from the Company’s stockholders or Board of Directors or any public regulatory body, as may be necessary to enable the Company to perform its obligations under this Warrant.

 

18. HEADINGS

 

The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

19. AMENDMENT AND WAIVERS

 

Any term of this Warrant may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and the Holders of a majority of the Placement Agent Warrants.

 

20. NO THIRD PARTY RIGHTS

 

This Warrant is not intended, and will not be construed, to create any rights in any parties other than the Company and the Holder, and no person or entity may assert any rights as third-party beneficiary hereunder.

 

[SIGNATURE PAGE FOLLOWS]

 

 
11
 
 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the date first set forth above.

 

  CÜR MEDIA, INC.
       
By:  

 

Name:

Kelly Sardo

 
  Title:

Chief Financial Officer

 

 

 
12
 
 

 

EXHIBIT A

 

NOTICE OF EXERCISE

 

(To be executed by the Holder of Warrant if such Holder desires to exercise Warrant)

 

To CÜR Media, Inc.:

 

The undersigned hereby irrevocably elects to exercise this Warrant and to purchase thereunder, ___________________ full shares of CÜR Media, Inc., common stock issuable upon exercise of the Warrant and delivery of $_________ (in cash as provided for in the foregoing Warrant) and any applicable taxes payable by the undersigned pursuant to such Warrant.

 

The undersigned requests that certificates for such shares be issued in the name of:

 

_________________________________________

 

_________________________________________

 

_________________________________________

 

(Please print name, address and social security or federal employer identification number (if applicable))*

 

If the shares issuable upon this exercise of the Warrant are not all of the Warrant Shares which the Holder is entitled to acquire upon the exercise of the Warrant, the undersigned requests that a new Warrant evidencing the rights not so exercised be issued in the name of and delivered to:

 

_________________________________________

 

_________________________________________

 

_________________________________________

 

(Please print name, address and social security or federal employer

identification number (if applicable))*

 

 

Name of Holder (print): ___________________

(Signature): ____________________________

(By:) _________________________________

(Title:) ________________________________

Dated: _________________________________

 

____________

* If Warrant Shares are to be issued in any name other than that of the registered Holder of the Warrant, then the Holder must include an opinion of counsel, reasonably satisfactory to the Company, to the effect that such issuance complies with all applicable securities laws.

 

 
13
 
 

 

EXHIBIT B

 

FORM OF ASSIGNMENT

 

FOR VALUE RECEIVED, ___________________________________ hereby sells, assigns and transfers to each assignee set forth below all of the rights of the undersigned under the Warrant (as defined in and evidenced by the attached Warrant) to acquire the number of Warrant Shares set opposite the name of such assignee below and in and to the foregoing Warrant with respect to said acquisition rights and the shares issuable upon exercise of the Warrant:

 

Name of Assignee

(and social security or federal employer

identification number (if applicable))

Address

Number of Shares

 

If the total of the Warrant Shares are not all of the Warrant Shares evidenced by the foregoing Warrant, the undersigned requests that a new Warrant evidencing the right to acquire the Warrant Shares not so assigned be issued in the name of and delivered to the undersigned.

 

 

Name of Holder (print): ______________________

(Signature): _______________________________

(By:) ____________________________________

(Title:) ___________________________________

Dated: ___________________________________

 

 

 

14

 

EXHIBIT 10.5

 

KATALYST SECURITIES LLC

15 MAIDEN LANE, ROOM 601

NEW YORK, NY 10038

TEL: 212-587-6667

Member: FINRA & SIPC

 

PLACEMENT AGENCY AGREEMENT

 

April 27, 2016

 

EXECUTION COPY

 

Ms. Kelly Sardo

Chief Financial Officer

CÜR Media, Inc.

2217 New London Turnpike

South Glastonbury, CT. 06073

 

 

Re: Private placement offering of 12% Senior Secured Convertible Promissory Notes

 

Dear Ms. Sardo:

 

This Placement Agency Agreement (“Agreement”) sets forth the terms upon which Katalyst Securities LLC (“Katalyst”), a registered broker-dealer and member of the Financial Industry Regulatory Authority (“FINRA”) (hereinafter referred to as the “Placement Agent”), shall be engaged by CÜR Media, Inc., a publicly traded Delaware corporation (hereinafter referred to as the “Company”), to act as exclusive Placement Agent in connection with the private placement (the “Offering”) of the 12% Senior Secured Convertible Promissory Notes of the Company (the “Bridge Notes”). No minimum Offering amount is required to complete and close the Offering.

 

1. Appointment of Placement Agent .

 

(a) On the basis of the written and documented representations and warranties of the Company provided herein, and subject to the terms and conditions set forth herein, the Placement Agent is hereby appointed as an exclusive Placement Agent of the Company during the Offering Period (as defined in Section 1(b) below) to assist the Company in finding qualified subscribers for the Offering. The Placement Agent may assist the Company to sell the Bridge Notes through other broker-dealers who are FINRA members (collectively, the “Sub Agents”) and may reallow all or a portion of the Placement Agent Fees (as defined in Section 3(b) below) it receives to such other Sub Agents or pay a finders or consultant fee to such other Sub Agents as allowed by applicable law. On the basis of such representations and warranties and subject to such terms and conditions, the Placement Agent hereby accepts such appointment and agrees to perform the services hereunder diligently and in good faith and in a professional and businesslike manner and in compliance with applicable law and to use its reasonable best efforts to assist the Company in finding subscribers for the Bridge Notes who qualify as “accredited investors,” as such term is defined in Rule 501(a) of Regulation D (as defined in Section 1(c) below). The Placement Agent has no obligation to purchase any of the Bridge Notes or sell any Bridge Notes. Unless sooner terminated in accordance with this Agreement, the engagement of the Placement Agent hereunder shall continue until the later of the Termination Date (as defined in Section 1(b) below) or the Final Closing (as defined in Section 4(e) below). The Offering is currently anticipated to be the private placement of a maximum of gross proceeds of Three Million Dollars ($3,000,000) (the “Maximum Amount”), subject to increase upon mutual agreement by the Company and the Placement Agent, through the sale of the Bridge Notes, which are convertible into units of the Company’s securities (the “Units”), each Unit consisting of one (1) share (the “Unit Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) and a warrant (the “Unit Warrants”) to purchase one (1) share of Common Stock for every share of Common Stock received upon conversion (the “Unit Warrant Shares”) at an exercise price equal to 125% of the price at which the Company’s equity securities are sold in Qualified Offering (as defined below). The offering price per Bridge Note is par (100%) (the “Offering Price”). The minimum subscription is Twenty Five Thousand Dollars ($25,000), provided, however, that subscriptions in lesser amounts may be accepted by the Company in its sole discretion.

 

  

 

Placement Agency Agreement

Page 1

 
 
 

 

The Bridge Notes will be an obligation of the Company that will bear interest at the rate of twelve percent (12%) per annum and will mature on the date that is six (6) months from the date of issuance, subject to earlier conversion as described below. The interest on the Bridge Notes shall be accrued and shall be payable at maturity.

 

The Bridge Notes will be secured by a security interest in and lien on all now owned or hereafter acquired assets and property, real and personal, of the Company and its subsidiaries, including the Company’s intellectual property pursuant to the Security Agreement by and between the Company and the subscribers in the Offering (the “Security Agreement”). Except as put forth in the Subscription Documents, as defined below, the security interest in and liens on all assets and property of the Company will be a first priority security interest and will be senior to all existing indebtedness of the Company.

 

Mandatory conversion of the principal amount of the Notes, and any accrued and unpaid interest, into Units following a qualified offering (a “Qualified Offering”) of at least Fifteen Million Dollars ($15,000,000) (including the capital raised in this Offering) in equity securities or securities convertible into or exercisable for equity securities (“Equity Financing Securities”), at a conversion price per Unit equal to the lesser of 80% of (a) the price per share of the Equity Financing Securities sold in the Qualified Offering, or (b) $2.00 (the “Mandatory Conversion”).

 

(b) The Placement Agent is engaged to raise a Maximum Amount of Three Million Dollars ($3,000,000) of Bridge Notes, subject to increase upon mutual agreement by the Company and the Placement Agent, on a reasonable best efforts basis. The Company agrees and acknowledges that the Placement Agent is not acting as an underwriter with respect to the Offering and the Company shall determine the purchasers in the Offering in its sole discretion. The Bridge Notes will be offered by the Company to potential subscribers, which may include related parties of the Placement Agent or the Company, until the later of (a) such time as the Maximum Amount is sold or (b) May 31, 2016, subject to a thirty (30) day extension if agreed to by the Company and the Placement Agent (the “Offering Period”). The date on which the Offering is terminated shall be referred to as the “Termination Date”. The closing of the Offering may be held up to ten days after the Termination Date.

 

(c) The Company shall only offer securities to and accept subscriptions from or sell Bridge Notes to, persons or entities that qualify as (or are reasonably believed to be) “accredited investors,” as such term is defined in Rule 501(a) of Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”) under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Act”), or to persons or entities that are not a “U.S. Persons” as that term is defined in Rule 902(k) of Regulation S (“Regulation S”) as promulgated by the SEC under the Act.

 

(d) The offering of Bridge Notes will be made by the Placement Agent on behalf of the Company solely pursuant to the Securities Purchase Agreement by and between the Company and the subscribers in the Offering (the “Securities Purchase Agreement”) and the Exhibits to the Securities Purchase Agreement, including, but not limited to, and to the extent applicable, the Investor Term Sheet (the “Investor Term Sheet”), the Security Agreement, the Bridge Note, and any documents, agreements, supplements and additions thereto (collectively, the “Subscription Documents”), which at all times will be in form and substance reasonably acceptable to the Company and the Placement Agent and their respective counsel and contain such legends and other information as the Company and the Placement Agent and their respective counsel, may, from time to time, deem necessary and desirable to be set forth therein.

 

  

 

Placement Agency Agreement

Page 2

 
 
 

 

(e) With respect to the Offering, the Company shall provide the Placement Agent, on terms set forth herein, the right to offer and sell up to the Maximum Amount of available Bridge Notes being offered during the Offering Period (subject to prior offer and sale of some of the Bridge Notes). It is understood that no sale shall be regarded as effective unless and until accepted by the Company. The Company may, in its sole discretion, accept or reject, in whole or in part, any prospective investment in the Bridge Notes or allot to any prospective subscriber less than the number of Bridge Notes that such subscriber desires to purchase. Purchases of Bridge Notes may be made by the Placement Agent and its selected Sub Agents and their respective officers, directors, employees and affiliates and by the officers, directors, employees and affiliates of the Company (collectively, the “Affiliates”) for the Offering and such purchases will be made by the Affiliates based solely upon the same information that is provided to the investors in the Offering.

 

2. Representations, Warranties and Covenants .

 

A. Representations, Warranties and Covenants of the Company . The Company hereby represents and warrants to the Placement Agent that, unless and except as otherwise set forth in the Company’s SEC Filings (as defined in Section 2(A)(b) below)immediately prior to the closing of the transactions contemplated hereby, each of the representations and warranties contained in this Section 2 is true in all respects as of the date hereof and will be true in all respects as of the Closing Date and any subsequent Closing Dates (as defined in Section 4(e) below). In addition to the representations and warranties set forth herein, the Placement Agent shall be entitled to rely upon the representations and warranties made or given by the Company to any acquirer of Bridge Notes in the Offering in any agreement, certificate, legal opinion or otherwise in connection with an Offering. For purposes of this Section 2(A), the term Company includes all of the Company’s subsidiaries (if any).

 

(a) The Subscription Documents have been and/or will be prepared by the Company, in conformity with all applicable laws, and in compliance with Regulation D, Section 4(a)(2) of the Act and/or Regulation S and the requirements of all other rules and regulations (the “Regulations”) of the SEC relating to offerings of the type contemplated by the Offering, and the applicable securities laws and the rules and regulations of those jurisdictions wherein the Placement Agent notifies the Company that the Bridge Notes are to be offered and sold (including U.S. states). The Bridge Notes will be offered and sold pursuant to the registration exemption provided by Regulation D, Section 4(a)(2) of the Act and Regulation S as a transaction not involving a public offering and the requirements of any other applicable state securities laws and the respective rules and regulations thereunder in those United States jurisdictions in which the Placement Agent notifies the Company that the Bridge Notes are being offered for sale. None of the Company, its affiliates, or any person acting on its or their behalf (other than the Placement Agent, its respective affiliates or any person acting on their behalf, in respect of which no representation is made) has taken nor will it take any action that conflicts with the conditions and requirements of, or that would make unavailable with respect to the Offering, the exemption(s) from registration available pursuant to Rule 506(b) of Regulation D, Section 4(a)(2) of the Act and/or Regulation S and applicable state securities laws, or knows of any reason why any such exemption would be otherwise unavailable to it). Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would require registration under the Act of the issuance of the Bridge Notes, Unit Shares, Unit Warrants, Unit Warrant Shares, Placement Agent Warrants (as defined in Section 3(b) below) or the Placement Agent Warrants Shares (as defined in Section 3(b) below)). None of the Company, its predecessors or affiliates has been subject to any order, judgment or decree of any court of competent jurisdiction temporarily, preliminarily or permanently enjoining such person for failing to comply with Rule 503 of Regulation D or the equivalent state securities law requirements. The Company has not, for a period of six months prior to the commencement of the offering of Bridge Notes, sold, offered for sale or solicited any offer to buy any of its securities in a manner that would cause the exemption from registration set forth in Rule 506(B) of Regulation D and state securities laws to become unavailable with respect to the offer and sale of the Bridge Notes to this Agreement in the United States. The Company’s Common Stock is currently traded on the OTCQB (the “Principal Market”). The Company has taken no action designed to, or likely to have the effect of, terminating the quotation of the Common Stock on the Principal Market. The Company, on the Closing Date (as defined in Section 4(e) below), will be in compliance with all of the then-applicable requirements for continued quotation of the Common Stock on the Principal Market.

 

  

 

Placement Agency Agreement

Page 3

 
 
 

 

(b) The Subscription Documents, as prepared and contemplated by the Company, will not and do not include any untrue statement of a material fact or omit to state any 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. To the knowledge of the Company, none of the statements, documents, certificates or other items made, prepared or supplied by the Company with respect to the transactions contemplated hereby contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements contained therein not misleading in light of the circumstances in which they were made. There is no fact which the Company has not disclosed in the Subscription Documents or which is not disclosed in the filings (the “SEC Filings”) that the Company makes with the SEC and of which the Company is aware that materially adversely affects or that could reasonably be expected to have a material adverse effect on the (i) assets, liabilities, results of operations, condition (financial or otherwise), business or business prospects of the Company or (ii) ability of the Company to perform its obligations under this Agreement and the other Subscription Documents (the “Company Material Adverse Effect”). Notwithstanding anything to the contrary herein, the Company makes no representation or warranty with respect to any estimates, projections and other forecasts and plans (including the reasonableness of the assumptions underlying such estimates, projections and other forecasts and plans) that may have been delivered to the Placement Agent or its respective representatives, except that such estimates, projections and other forecasts and plans have been prepared in good faith on the basis of assumptions stated therein, which assumptions were believed to be reasonable at the time of such preparation. Other than the Company’s SEC Filings, the Company has not distributed and will not distribute prior to the Closing any offering material in connection with the offering and sale of the Bridge Notes, unless such offering materials are provided to the Placement Agent prior to or simultaneously with such delivery to the offerees of the Bridge Notes.

 

(c) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is qualified and in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted by the Company or the property owned or leased by the Company requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a Company Material Adverse Effect. The Company has all requisite corporate power and authority to conduct its business as presently conducted and as proposed to be conducted (as described in the Subscription Documents and/or the SEC Filings), has all the necessary and requisite documents and approvals from all state authorities, has all requisite corporate power and authority to enter into and perform its obligations under this Agreement, the Securities Purchase Agreement, the Bridge Note, the Security Agreement, substantially in the form made part of the Subscription Documents and the other agreements, if any, contemplated by the Offering (this Agreement, the Securities Purchase Agreement, the Security Agreement and the other agreements contemplated hereby that the Company is required to execute and deliver are collectively referred to herein as the “Company Transaction Documents”) and has received all necessary Board and stockholder approvals, to issue, sell and deliver the Bridge Notes and the Common Stock underlying the Placement Agent Warrants (the “Placement Agent Warrant Shares”) issuable upon exercise of the Placement Agent Warrants (as defined in Section 3(b) below) and to make the representations in this Agreement accurate and not misleading. Prior to the First Closing (as defined in Section 4(e) below), each of the Company Transaction Documents and the Offering will have been duly authorized. This Agreement has been duly authorized, executed and delivered and constitutes, and each of the other Company Transaction Documents, upon due execution and delivery, will constitute, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms (i) except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect related to laws affecting creditors’ rights generally, including the effect of statutory and other laws regarding fraudulent conveyances and preferential transfers, and except that no representation is made herein regarding the enforceability of the Company’s obligations to provide indemnification and contribution remedies under the securities laws and (ii) subject to the limitations imposed by general equitable principles (regardless of whether such enforceability is considered in a proceeding at law or in equity).

 

  

 

Placement Agency Agreement

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(d) None of the execution and delivery of or performance by the Company under this Agreement or any of the other Company Transaction Documents or the consummation of the transactions in this Agreement or in the Subscription Documents (including the issuance and sale of the Bridge Notes, Unit Shares, Unit Warrants, or upon exercise of the Unit Warrants, the Unit Warrants Shares, the issuance of the Placement Agent Warrants or, upon exercise of the Placement Agent Warrants, the issuance and sale of the Placement Agent Warrants Shares, conflicts with or violates, or causes a default under (with our without the passage of time or the giving of notice), or will result in the creation or imposition of, any lien, charge or other encumbrance upon any of the assets of the Company under any agreement, evidence of indebtedness, joint venture, commitment or other instrument to which the Company is a party or by which the Company or its assets may be bound, any statute, rule, law or governmental regulation applicable to the Company, or any term of the Company’s Certificate of Incorporation as in effect on the date hereof or any Closing Date (as defined in Section 4(e) below) for the Offering (the “Certificate of Incorporation”) or By-Laws as in effect on the date hereof or any Closing Date for the Offering (the “By-Laws”) of the Company, or any license, permit, judgment, decree, order, statute, rule or regulation applicable to the Company or any of its assets, except in the case of a conflict, violation, lien, charge or other encumbrance (except with respect to the Company’s Certificate of Incorporation or By-Laws) which would not, or could not reasonably be expected to, have a Company Material Adverse Effect. No consent, approval, authorization or other order of, or registration, qualification or filing with, any regulatory body, administrative agency, or other governmental body is required for the execution and delivery of this Agreement by the Company and the valid issuance or sale of the Bridge Notes, the Unit Shares, the Unit Warrants, and upon exercise of the Unit Warrants, the Unit Warrant Shares, the Placement Agent Warrants and, upon exercise of the Placement Agent Warrants, the Placement Agent Warrants Shares by the Company pursuant to this Agreement, other than such as have been made or obtained and that remain in full force and effect, and except for the filing of a Form D or any filings required to be made under state securities laws, which shall be timely filed by the Company.

 

(e) The Company’s financial statements, together with the related notes, if any, included in the Company’s SEC Filings, present fairly, in all material respects, the financial position of the Company as of the dates specified and the results of operations for the periods covered thereby. Such financial statements and related notes were prepared in accordance with United States generally accepted accounting principles applied on a consistent basis throughout the periods indicated, except that the unaudited financial statements omit full notes, and except for normal year end adjustments. If the financials for the Company are unaudited financial statements, it will state such clearly on the financials. During the period of engagement of the Company’s independent certified public accountants, there have been no disagreements between the accounting firm and the Company on any matters of accounting principles or practices, financial statement disclosure or auditing scope or procedures. The Company has made and kept books and records and accounts which are in reasonable detail and which fairly and accurately reflect the activities of the Company in all material respects, subject only to year-end adjustments. Except as set forth in such financial statements, the Company’s SEC Filings or otherwise disclosed in the Company Transaction Documents, the Company’s senior management has no knowledge of any material liabilities of any kind, whether accrued, absolute or contingent, or otherwise, and subsequent to the date of the Company Transaction Documents and prior to the date of the First Closing, it shall not enter into any material transactions or commitments without promptly thereafter notifying the Placement Agent and the purchasers in the Offering in writing of any such material transaction or commitment. The other financial and statistical information with respect to the Company and any pro forma information and related notes included in the SEC Filings present fairly the information shown therein on a basis consistent with the financial statements of the Company included in the SEC Filings. Except as disclosed in the Subscription Documents or the Company’s SEC Filings, the Company does not know of any facts, circumstances or conditions which could materially adversely affect its operations, earnings or prospects that have not been fully disclosed in the financial statements appearing in the SEC Filings or other financial statements appearing in the SEC Filings or other documents or information provided by the Company.

 

  

 

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(f) Immediately prior to the First Closing, the issuance of the Bridge Notes, Unit Shares, Unit Warrants, Unit Warrant Shares, Placement Agent Warrants and the Placement Agent Warrants Shares will have been duly authorized and, when issued and delivered against payment therefor as provided in the Company Transaction Documents, will be validly issued, fully paid and nonassessable. No holder of any of the Bridge Notes, Unit Shares, Unit Warrants, Unit Warrant Shares, Placement Agent Warrants and Placement Agent Warrants Shares will be subject to personal liability solely by reason of being such a holder, and except as described in the Subscription Documents, none of the Bridge Notes, Unit Shares, Unit Warrants, Unit Warrant Shares, Placement Agent Warrants or Placement Agent Warrants Shares will be subject to preemptive or similar rights of any stockholder or security holder of the Company or an adjustment under the antidilution or exercise rights of any holders of any outstanding shares of capital stock, options, warrants or other rights to acquire any securities of the Company. Immediately prior to the First Closing, a sufficient number of authorized but unissued shares of Common Stock underlying the Units, Unit Warrants, Placement Agent Warrants will have been reserved for issuance upon the conversion and exercise.

 

(g) Except as described in the Subscription Documents and/or the Company’s SEC Filings, and as of the date of each Closing: (i) there will be no outstanding options, stock subscription agreements, warrants or other rights permitting or requiring the Company or others to purchase or acquire any shares of capital stock or other equity securities of the Company or to pay any dividend or make any other distribution in respect thereof; (ii) there will be no securities issued or outstanding which are convertible into or exchangeable for any of the foregoing and there are no contracts, commitments or understandings, whether or not in writing, to issue or grant any such option, warrant, right or convertible or exchangeable security; (iii) no Bridge Notes of the Company or other securities of the Company are reserved for issuance for any purpose; (iv) there will be no voting trusts or other contracts, commitments, understandings, arrangements or restrictions of any kind with respect to the ownership, voting or transfer of shares of stock or other securities of the Company, including, without limitation, any preemptive rights, rights of first refusal, proxies or similar rights, and (v) no person prior to the execution of this Agreement by the Company holds a right to require the Company to register any securities of the Company under the Act or to participate in any such registration. Immediately prior to the First Closing, the issued and outstanding shares of capital stock of the Company will conform in all material respects to all statements in relation thereto contained in the Company Transaction Documents and the Company’s SEC Filings describe all material terms and conditions thereof. All issuances by the Company of its securities have been issued pursuant to either a current effective registration statement under the 1933 Act or an exemption from registration requirements under the Act, and were issued in accordance with any applicable Federal and state securities laws.

 

(h) The Company’s subsidiaries, if any, are duly incorporated or organized, validly existing and in good standing under the laws of their jurisdiction of incorporation or organization and have all requisite power and authority to carry on their business as now conducted. Such subsidiaries are duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on their respective business or properties. All of the outstanding capital stock or other voting securities of such subsidiaries are owned by the Company, directly or indirectly, free and clear of any liens, claims, or encumbrances. The conduct of business by the Company as presently and proposed to be conducted is not subject to continuing oversight, supervision, regulation or examination by any governmental official or body of the United States, or any other jurisdiction wherein the Company conducts or proposes to conduct such business, except as described in the Subscription Documents and/or the Company’s SEC Filings and except as such regulation is applicable to US public companies and commercial enterprises generally. The Company has obtained all material licenses, permits and other governmental authorizations necessary to conduct its business as presently conducted. The Company has not received any notice of any violation of, or noncompliance with, any federal, state, local or foreign laws, ordinances, regulations and orders (including, without limitation, those relating to environmental protection, occupational safety and health, securities laws, equal employment opportunity, consumer protection, credit reporting, “truth-in-lending”, and warranties and trade practices) applicable to its business, the violation of, or noncompliance with, would have a Company Material Adverse Effect, and the Company knows of no facts or set of circumstances which could give rise to such a notice.

 

 

 

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(i) Except as described in the Subscription Documents and/or the Company’s SEC Filings, no default by the Company or, to the knowledge of the Company, any other party, exists in the due performance under any material agreement to which the Company is a party or to which any of its assets is subject (collectively, the “Company Agreements”). The Company Agreements, if any, disclosed in the Subscription Documents and/or the Company’s SEC Filings are the only material agreements to which the Company is bound or by which its assets are subject, are accurately described in the Subscription Documents and/or the Company’s SEC Filings and are in full force and effect in accordance with their respective terms, subject to any applicable bankruptcy, insolvency or other laws affecting the rights of creditors generally and to general equitable principles and the availability of specific performance.

 

(j) Subsequent to the respective dates as of which information is given in the Subscription Documents, the Company has operated its business in the ordinary course and, except as may otherwise be set forth in the Subscription Documents or the Company’s SEC Filings, there has been no: (i) Company Material Adverse Effect; (ii) material transaction otherwise than in the ordinary course of business consistent with past practice; (iii) issuance of any securities (debt or equity) or any rights to acquire any such securities other than pursuant to equity incentive plans approved by its Board of Directors; (iv) damage, loss or destruction, whether or not covered by insurance, with respect to any material asset or property of the Company; or (v) agreement to permit any of the foregoing.

 

(k) Except as set forth in the Subscription Documents and/or the Company’s SEC Filings, there are no actions, suits, claims, hearings or proceedings pending before any court or governmental authority or, to the knowledge of the Company, threatened, against the Company, or involving its assets or any of its officers or directors (in their capacity as such) which, (i) if determined adversely to the Company or such officer or director, could reasonably be expected to have a Company Material Adverse Effect or adversely affect the transactions contemplated by this Agreement or the Company Transaction Documents or the enforceability hereof or (ii) would be required to be disclosed in the Company’s Annual Report on Form 10-K under the requirements of Item 103 of Regulation S-K. The Company is not subject to any injunction, judgment, decree or order of any court, regulatory body, arbitral panel, administrative agency or other government body.

 

(l) The Certificate of Incorporation and By-laws of the Company are true, correct and complete copies of the certificate of incorporation and bylaws of the Company, as in effect on the date hereof. Any subsequent amendments to the certificate of incorporation or bylaws will be provided promptly to the Placement Agent and investors in the Offering. The Company is not: (i) in violation of its Certificate of Incorporation or By-Laws; (ii) in default of any contract, indenture, mortgage, deed of trust, note, loan agreement, security agreement, lease, alliance agreement, joint venture agreement or other agreement, license, permit, consent, approval or instrument to which the Company is a party or by which it is or may be bound or to which any of its assets may be subject, the default of which could reasonably be expected to have a Company Material Adverse Effect; (iii) in violation of any statute, rule or regulation applicable to the Company, the violation of which would have a Company Material Adverse Effect; or (iv) in violation of any judgment, decree or order of any court or governmental body having jurisdiction over the Company and specifically naming the Company, which violation or violations individually, or in the aggregate, could reasonably be expected to have a Company Material Adverse Effect.

 

 

 

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(m) Except as disclosed in the Subscription Documents and/or the Company’s SEC Filings, as of the date of this Agreement, no current or former stockholder, director, officer or employee of the Company, nor, to the knowledge of the Company, any affiliate of any such person is presently, directly or indirectly through his/her affiliation with any other person or entity, a party to any loan from the Company or any other transaction (other than as an employee) with the Company.

 

(n) The Company is not obligated to pay, and has not obligated the Placement Agent to pay, a finder’s or origination fee in connection with the Offering other than to the Placement Agent under this Agreement, and hereby agrees to indemnify the Placement Agent from any such claim made by any other person as more fully set forth in Section 8 hereof. The Company has not offered for sale or solicited offers to purchase the Bridge Notes except for negotiations with the designated Placement Agent. Except as set forth in the Subscription Documents, no other person has any right to participate in any offer, sale or distribution of the Company’s securities to which the Placement Agent’s rights, described herein, shall apply.

 

(o) Until the earlier of (i) the Termination Date or (ii) the Final Closing (as defined in Section 4(e) below), the Company will not issue any press release, grant any interview, or otherwise communicate with the media in any manner whatsoever with respect to the Offering without the Placement Agent’s prior written consent, which consent will not unreasonably be withheld or delayed, and subject to any applicable laws and regulations.

 

(p) No representation or warranty contained in Section 2(A) of this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein not misleading in the context of such representations and warranties. The Placement Agent shall be entitled to rely on such representations and warranties.

 

(q) No consent, authorization or filing of or with any court or governmental authority is required in connection with the issuance or the consummation of the transactions contemplated herein or in the other Company Transaction Documents, except for required filings with the SEC and the applicable state securities commissions relating specifically to the Offering (all of which filings will be duly made by, or on behalf of, the Company), and those which are required to be made after the First Closing (as defined in Section 4(e) below) (all of which will be duly made on a timely basis).

 

  

 

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(r) Neither the sale of the Bridge Notes by the Company nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, nor any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. Without limiting the foregoing, the Company is not (a) a person whose property or interests in property are blocked pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) or (b) a person who engages in any dealings or transactions, or be otherwise associated, with any such person. The Company and its subsidiaries, if any, are in compliance, in all material respects, with the USA Patriot Act of 2001 (signed into law October 26, 2001). Each of the Company, its affiliates and any of their respective officers, directors, supervisors, managers, agents, or employees, has not violated, its participation in the offering will not violate, and the Company has instituted and maintains policies and procedures designed to ensure continued compliance with, each of the following laws: (a) anti-bribery laws, including but not limited to, any applicable law, rule, or regulation of any locality, including but not limited to any law, rule, or regulation promulgated to implement the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, signed December 17, 1997, including the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any other law, rule or regulation of similar purposes and scope, (b) anti-money laundering laws, including but not limited to, applicable federal, state, international, foreign or other laws, regulations or government guidance regarding anti-money laundering, including, without limitation, Title 18 US. Code section 1956 and 1957, the Bank Secrecy Act, and international anti-money laundering principles or procedures by an intergovernmental group or organization, such as the Financial Action Task Force on Money Laundering, of which the United States is a member and with which designation the United States representative to the group or organization continues to concur, all as amended, and any Executive order, directive, or regulation pursuant to the authority of any of the foregoing, or any orders or licenses issued thereunder or (c) laws and regulations imposing U.S. economic sanctions measures, including, but not limited to, the International Emergency Economic Powers Act, the United Nations Participation Act and the Syria Accountability and Lebanese Sovereignty Act, all as amended, and any Executive Order, directive, or regulation pursuant to the authority of any of the foregoing, including the regulations of the United States Treasury Department set forth under 31 CFR, Subtitle B, Chapter V, as amended, or any orders or licenses issued thereunder. Neither the Company nor any director, officer, agent, employee or other person acting on behalf of the Company has, in the course of its actions for, or on behalf of, the Company (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; or (iii) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

 

(s) None of Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the Offering, any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i)–(viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3) or has been involved in any matter which would be a Disqualification Event except for the fact that it occurred before September 23, 2013. The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e), and has furnished to the Placement Agent a copy of any disclosures provided thereunder.

 

(t) The Company is not aware of any person (other than any Issuer Covered Person or Placement Agent Covered Person (as defined below) that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of any the Bridge Notes. For purposes of this subsection Placement Agent Covered Person shall mean Katalyst Securities LLC, or any of its directors, executive officers, general partners, managing members or other officers participating in the Offering.

 

(u) The Company will promptly notify the Placement Agent in writing of (A) any Disqualification Event relating to any Issuer Covered Person and (B) any event that would, with the passage of time, become a Disqualification Event relating to any Issuer Covered Person. The Company will notify the Agent in writing, prior to the Closing Date (as defined in Section 4(e) below) of (i) any Disqualification Event relating to any Issuer Covered Person and (ii) any event that would, with the passage of time, become a Disqualification Event relating to any Issuer Covered Person.

 

  

 

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(v) The authorized capital stock of the Company as of the First Closing (as defined in Section 4(e) below) will be set forth in the Company’s SEC Filings. All issued and outstanding shares of capital stock have been duly authorized and validly issued, are fully paid and nonassessable, were not issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities, and, except as disclosed in the Company’s SEC Filings, have been issued and sold in compliance with the registration requirements of federal and state securities laws or the applicable statutes of limitation have expired. Except as set forth in the Company’s SEC Filings, there are no (i) outstanding rights (including, without limitation, preemptive rights), warrants or options to acquire, or instruments convertible into or exchangeable for, any unissued shares of capital stock or other equity interest in the Company, or any contract, commitment, agreement, understanding or arrangement of any kind to which the Company or its subsidiaries is a party and relating to the issuance or sale of any capital stock or convertible or exchangeable security of the Company; or (ii) obligations of the Company to purchase redeem or otherwise acquire any of its outstanding capital stock or any interest therein or to pay any dividend or make any other distribution in respect thereof.

 

(w) The Company has ownership or license or legal right to use all patents, copyrights, trade secrets, know-how, trademarks, trade names, customer lists, designs, manufacturing or other processes, computer software, systems, data compilation, research results or other proprietary rights used in the business of the Company or its subsidiaries (collectively “Intellectual Property”). All of such patents, registered trademarks and registered copyrights have been duly registered in, filed in or issued by the United States Patent and Trademark Office, the United States Register of Copyrights or the corresponding offices of other jurisdictions and have been maintained and renewed in accordance with all applicable provisions of law and administrative regulations in the United States and all such jurisdictions. The Company believes it has taken all reasonable steps required in accordance with sound business practice and business judgment to establish and preserve its and its subsidiaries’ ownership of all material Intellectual Property with respect to their products and technology. To the knowledge of the Company, there is no infringement of the Intellectual Property by any third party. To the knowledge of the Company, the present business, activities and products of the Company and its subsidiaries do not infringe any intellectual property of any other person. There is no proceeding charging the Company or its subsidiaries with infringement of any adversely held Intellectual Property has been filed and the Company is unaware of any facts which are reasonably likely to form a basis for any such proceeding. There are no proceedings that have been instituted or pending or, to the knowledge of the Company, threatened, which challenge the rights of the Company or its subsidiaries to the use of the Intellectual Property. The Intellectual Property owned by the Company and its subsidiaries, and to the knowledge of the Company, the Intellectual Property licensed to the Company and its subsidiaries, has not been adjudged invalid or unenforceable, in whole or in part. There is no pending or, to the knowledge of the Company, threatened proceeding by others challenging the validity or scope of any such Intellectual Property, and the Company is unaware of any facts which are reasonably likely to form a basis for any such claim. Each of the Company and its subsidiaries has the right to use, free and clear of material claims or rights of other persons, all of its customer lists, designs, computer software, systems, data compilations, and other information that are required for its products or its business as presently conducted. Neither the Company nor its subsidiaries is making unauthorized use of any confidential information or trade secrets of any person. The activities of any of the employees on behalf of the Company or of its subsidiaries do not violate any agreements or arrangements between such employees and third parties that are related to confidential information or trade secrets of third parties or that restrict any such employee’s engagement in business activity of any nature. Each former and current employee or consultant of the Company or its subsidiaries is a party to a written contract with the Company or its subsidiaries that assigns to the Company or its subsidiaries, or has received an employee handbook that requires an employee to assign, all rights to all inventions, improvements, discoveries and information relating to the Company or its subsidiaries, except for any failure to so do as would not reasonably be expected to result in a Company Material Adverse Effect. All licenses or other agreements under which (i) the Company or its subsidiaries employs rights in Intellectual Property, or (ii) the Company or its subsidiaries has granted rights to others in Intellectual Property owned or licensed by the Company or its subsidiaries are in full force and effect, and there is no default (and there exists no condition which, with the passage of time or otherwise, would constitute a default by the Company or such subsidiary) by the Company or its subsidiaries with respect thereto.

 

  

 

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(x) The Company has filed all necessary federal, state, local and foreign income and franchise tax returns and have paid or accrued all taxes shown as due thereon, and except as set out in the SEC Filings, the Company has no knowledge of a tax deficiency which has been or might be asserted or threatened against it by any taxing jurisdiction, other than any deficiency which the Company is contesting in good faith and with respect to which adequate reserves for payment have been established.

 

(y) The Company maintains and will continue to maintain insurance of the types and in the amounts that the Company reasonably believes are adequate for its business, including, but not limited to, insurance covering all real and personal property owned or leased by the Company against theft, damage, destruction, acts of vandalism and all other risks customarily insured against by similarly situated companies, all of which insurance is in full force and effect.

 

(z) On each Closing Date (as defined in Section 4(e) below), all stock transfer or other taxes (other than income taxes) that are required to be paid in connection with the sale and transfer of the Bridge Notes and the Placement Agent Warrants will be, or will have been, fully paid or provided for by the Company and the Company will have complied with all laws imposing such taxes.

 

(aa) The Company (including its subsidiaries) is not an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for an investment company, within the meaning of the Investment Company Act of 1940 and will not be deemed an “investment company” as a result of the transactions contemplated by the Offering.

 

(bb) The books, records and accounts of the Company accurately and fairly reflect, in reasonable detail, the transactions in, and dispositions of, the assets of, and the operations of, the Company.

 

(cc) The Company’s statements contained in its Annual Report on Form 10-K for the year ended December 31, 2015 regarding its (i) disclosure controls and procedures (as such term is defined in Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”) and (ii) internal accounting controls were and continue to be accurate. The Company is not aware of any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s or its subsidiaries’ internal controls. Except as set forth in the Company’s SEC Filings, since December 31, 2015, there have been no changes that have materially affected, or are reasonably likely to materially affect, the Company’s or its subsidiaries’ internal control over financial reporting, including any corrective actions with regard to significant deficiencies and material weaknesses. There are no material off-balance sheet arrangements (as defined in Item 303 of Regulation S-K), or any other relationships with unconsolidated entities (in which the Company or its control persons have an equity interest) that may have a material current or future effect on the Company’s or its subsidiaries’ financial condition, revenues or expenses, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources.

 

(dd) Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has engaged or will engage in any form of general solicitation or general advertising (within the meaning of Regulation D promulgated under the Securities Act) in connection with the offer or sale of the Bridge Notes, Unit Shares, Unit Warrants, unit Warrant Shares, Placement Agent Warrants, or Placement Agent Warrant Shares.

 

(ee) Except as set forth in the Company’s SEC Filings, the Company is in compliance in all material respects with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the SEC thereunder that are effective as of the date hereof.

 

 

 

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(ff) The Company is not a party to any collective bargaining agreement or employs any member of a union. The Company believes that its relations with its employees are good. No executive officer of the Company, to the knowledge of the Company, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer does not subject the Company to any liability with respect to any of the foregoing matters. The Company and its subsidiaries are in compliance with all federal, state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits, terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually or in the aggregate, reasonably be expected to result in a Company Material Adverse Effect.

 

(gg) None of the Company, its subsidiaries or any executive officer of the Company (as defined in Rule 501(f) of Regulation D under the Securities Act) has taken and will not take any action designed to or that might reasonably be expected to cause or result in an unlawful manipulation of the price of the Common Stock to facilitate the sale or resale of the Bridge Notes, the Placement Warrants or the Placement Agent Warrant Shares. The Company confirms that, to its knowledge, with the exception of the proposed sale of Bridge Notes, neither it nor any other person acting on its behalf has provided any of the potential investors or their agent or counsel with any information that constitutes or might constitute material, non-public information. The Company understands and confirms that the potential investors shall be relying on the foregoing representations in effecting transactions in securities of the Company.

 

(hh) The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s Certificate of Incorporation or the laws of the jurisdiction of its formation which is or could become applicable to any potential investor as a result of the transactions contemplated by the Offering, including, without limitation, the Company’s issuance of the Bridge Notes and any potential investor’s ownership of the Bridge Notes. The Company has not adopted a stockholder rights plan or similar arrangement relating to accumulations of beneficial ownership of its capital stock or a change in control of the Company.

 

(ii) The Company acknowledges that the Placement Agent, its Sub Agents, legal counsel to the Company and/or their respective affiliates, principals, representatives or employees may now or hereafter own shares of the Company.

 

B. Representations, Warranties and Covenants of Katalyst. Katalyst hereby represents and warrants to the Company that the following representations and warranties are true and correct as of the date of this Agreement:

 

(a) Katalyst represents that neither it, nor to its knowledge any of its Sub Agents or any of its or their respective directors, executive officers, general partners, managing members or other officers participating in the Offering (each, a “Katalyst Covered Person” and, together, “Katalyst Covered Persons”), is subject to any of the “Bad Actor” Disqualification Event described in Rule 506(d)(1)(i) to (viii) under the Securities Act or has been involved in any matter which would be a Disqualification Event except for the fact that it occurred before September 23, 2013.

 

(b) Katalyst will notify the Company promptly in writing of any Disqualification Event relating to any Katalyst Covered Person not previously disclosed to the Company in accordance with the prior section.

 

  

 

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3. Placement Agent Compensation .

 

(a) In connection with the Offering, the Company will pay a cash fee (the “Placement Agent Cash Fee”) to the Placement Agent at each Closing (as defined in Section 4(e) below) equal to 10% of each Closing’s gross proceeds from any sale of Bridge Notes in the Offering to investors introduced to the Company by the Placement Agent and Eight Percent (8%) of each Closing’s gross proceeds from any sale of Bridge Notes in the Offering to investors introduced by the Company or its Representatives. The Placement Agent Cash Fee shall be paid to the Placement Agent in cash by wire transfer from the escrow account established for the Offering, and as a condition to closing, simultaneous with the distribution of funds to the Company.

 

(b) Also, at each Closing, the Company will deliver to the Placement Agent (or its designees), warrants exercisable for a period of five (5) years to purchase shares of the Company’s Common Stock equal, in the aggregate, to 10% of the number of Unit Shares into which the Bridge Notes sold in the Offering to investors introduced to the Offering by the Placement Agent and Eight Percent (8%) of each Closing’s gross proceeds from any sale of Bridge Notes in the Offering to investors introduced by the Company or its Representatives are converted upon a Mandatory Conversion, with an exercise price per share equal to the exercise price of the Unit Warrant Shares issued to the investors upon a Mandatory Conversion (“Placement Agent Warrants”). To the extent permitted by applicable laws, all warrants shall permit unencumbered transfer to the Placement Agent’s employees and affiliates and the warrants may be issued directly to the Placement Agent’s employees and affiliates at the Placement Agent’s request. The Placement Agent Cash Fee and the Placement Agent Warrants are sometimes referred to collectively as the “Placement Agent Fees”).

 

(c) To the extent there is more than one Closing, payment of the proportional amount of the Placement Agent Cash Fees will be made out of the gross proceeds from any sale of Bridge Notes sold at each Closing and the Company will issue to the Placement Agent the corresponding number of Placement Agent Warrants. All cash compensation and warrants under this Agreement shall be paid directly by the Company to and in the name provided to the Company by the Placement Agent.

 

4. Subscription and Closing Procedures .

 

(a) The Company shall cause to be delivered to the Placement Agent copies of the Subscription Documents and has consented, and hereby consents, to the use of such copies for the purposes permitted by the Act and applicable securities laws and in accordance with the terms and conditions of this Agreement, and hereby authorizes the Placement Agent and its agents and employees to use the Subscription Documents in connection with the sale of the Bridge Notes until the earlier of (i) the Termination Date or (ii) the Final Closing (as defined in Section 4(e) below), and no person or entity is or will be authorized to give any information or make any representations other than those contained in the Subscription Documents or to use any offering materials other than those contained in the Subscription Documents in connection with the sale of the Bridge Notes, unless the Company first provides the Placement Agent with notification of such information, representations or offering materials.

 

(b) The Company shall make available to the Placement Agent and its representatives such information, including, but not limited to, financial information, and other information regarding the Company (the “Information”), as may be reasonably requested in making a reasonable investigation of the Company and its affairs. The Company shall provide access to the officers, directors, employees, independent accountants, legal counsel and other advisors and consultants of the Company as shall be reasonably requested by the Placement Agent. The Company recognizes and agrees that the Placement Agent (i) will use and rely primarily on the Information and generally available information from recognized public sources in performing the services contemplated by this Agreement without independently verifying the Information or such other information, (ii) does not assume responsibility for the accuracy of the Information or such other information, and (iii) will not make an appraisal of any assets or liabilities owned or controlled by the Company or its market competitors.

 

 

 

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(c) Each prospective purchaser will be required to complete and execute the Subscription Documents, Anti-Money Laundering Form, Accredited Investor Certification and other documents which will be forwarded or delivered to the Placement Agent at the Placement Agent’s offices at the address set forth in Section 12 hereof or to an address identified in the Subscription Documents.

 

(d) Simultaneously with the delivery to the Placement Agent of the Subscription Documents, the subscriber’s check or other good funds will be forwarded directly by the subscriber to the escrow agent and deposited into a non interest bearing escrow account (the “Escrow Account”) established for such purpose (the “Escrow Agent”). All such funds for subscriptions will be held in the Escrow Account pursuant to the terms of an escrow agreement among the Company, the Placement Agent and the Escrow Agent. The Company will pay all fees related to the establishment and maintenance of the Escrow Account. Subject to the receipt of subscriptions for the amount for Closing, the Company will either accept or reject, for any or no reason, the Subscription Documents in a timely fashion and at each Closing will countersign the Subscription Documents and provide duplicate copies of such documents to the Placement Agent for distribution to the subscribers. The Company will give notice to the Placement Agent of its acceptance of each subscription. The Company, or the Placement Agent on the Company’s behalf, will promptly return to subscribers incomplete, improperly completed, improperly executed and rejected subscriptions and give written notice thereof to the Placement Agent upon such return.

 

(e) If subscriptions have been accepted prior to the Termination Date, the funds therefor have been collected by the Escrow Agent and all of the conditions set forth elsewhere in this Agreement are fulfilled, a closing shall be held promptly with respect to the Bridge Notes sold (the “First Closing”). Thereafter, the remaining Bridge Notes will continue to be offered and sold until the earlier of the Termination Date or the date that additional subscription amounts up to the Maximum Offering amount have been collected by the Escrow Agent. Additional Closings (each a “Closing”, collectively “Closings”) may from time to time be conducted at times mutually agreed to between the Company and the Placement Agent with respect to additional Bridge Notes sold, with the final closing (“Final Closing”) to occur within 10 days after the earlier of the Termination Date and the date on which the Maximum Amount has been subscribed for. Delivery of payment for the accepted subscriptions for the Bridge Notes from the funds held in the Escrow Account will be made at each Closing at the Placement Agent’s office against delivery of the Bridge Notes by the Company at the address set forth in Section 12 hereof (or at such other place as may be mutually agreed upon between the Company and the Placement Agent), net of amounts agreed upon by the parties herein, including, the Blue Sky counsel as of such Closing. The Bridge Notes will be issued after each Closing and will be forwarded to the subscriber directly by the stock transfer agent within seven (7) business days following each Closing. Executed certificates for the Placement Agent Warrants will be issued in such authorized denominations and registered in such names as the Placement Agent may request within seven (7) business days following each Closing (“Closing Date”).

 

(f) If no Subscription Documents have been received and accepted by the Company on or before the Termination Date for any reason, the Offering will be terminated, no Bridge Notes will be sold, and the Escrow Agent will, at the request of the Placement Agent, cause all monies received from subscribers for the Bridge Notes to be promptly returned to such subscribers without interest, penalty, expense or deduction.

 

5. Further Covenants . The Company hereby covenants and agrees that:

 

(a) Except upon prior written notice to the Placement Agent, the Company shall not, at any time prior to the Final Closing, knowingly take any action which would cause any of the representations and warranties made by it in this Agreement not to be complete and correct in all material respects on and as of the date of each Closing with the same force and effect as if such representations and warranties had been made on and as of each such date (except to the extent any representation or warranty relates to an earlier date).

 

  

 

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(b) If, at any time prior to the Final Closing, any event shall occur that causes a Company Material Adverse Effect which as a result it becomes necessary to amend or supplement the Subscription Documents so that the representations and warranties herein remain true and correct in all material respects, or in case it shall be necessary to amend or supplement the Subscription Documents to comply with Regulation D or any other applicable securities laws or regulations, the Company will promptly notify the Placement Agent and shall, at its sole cost, prepare and furnish to the Placement Agent copies of appropriate amendments and/or supplements in such quantities as the Placement Agent may reasonably request. The Company will not at any time before the Final Closing prepare or use any amendment or supplement to the Subscription Documents of which the Placement Agent will not previously have been advised and furnished with a copy, or which is not in compliance in all material respects with the Act and other applicable securities laws. As soon as the Company is advised thereof, the Company will advise the Placement Agent and its counsel, and confirm the advice in writing, of any order preventing or suspending the use of the Subscription Documents, or the suspension of any exemption for such qualification or registration thereof for offering in any jurisdiction, or of the institution or threatened institution of any proceedings for any of such purposes, and the Company will use their best efforts to prevent the issuance of any such order and, if issued, to obtain as soon as reasonably possible the lifting thereof.

 

(c) The Company shall comply with the Act, the Exchange Act, the rules and regulations thereunder, all applicable state securities laws and the rules and regulations thereunder in the states in which the Company’s Blue Sky counsel has advised the Placement Agent and/or the Company that the Bridge Notes are qualified or registered for sale or exempt from such qualification or registration, so as to permit the continuance of the sales of the Bridge Notes, and will file or cause to be filed with the SEC, and shall promptly thereafter forward or cause to be forwarded to the Placement Agent, any and all reports on Form D as are required. The Company will pay the attorney’s fee and out of pocket expenses related to the filings for registrations of sale or exemption from such qualifications with any state securities commissions and any other regulatory agencies. Such fees will be paid at the time of invoicing, or at the time of Closing, if known, and if not yet invoiced, funds will remain in escrow to cover the estimated invoice. The Company will pay the invoice or authorize release of the funds from escrow within five (5) days of receipt of invoice.

 

(d) The Company, at its own cost and expense, shall use best efforts to qualify the Bridge Notes for sale under the securities laws of such jurisdictions in the United States as may be mutually agreed to by the Company and the Placement Agent, and the Company will make or cause to be made such applications and furnish information as may be required for such purposes, provided that the Company will not be required to qualify as a foreign corporation in any jurisdiction or execute a general consent to service of process. The Company will, from time to time, prepare and file such statements and reports as are or may be required to continue such qualifications in effect for so long a period as the Placement Agent may reasonably request with respect to the Offering.

 

(e) The Company shall place a legend on the certificates representing the Bridge Notes, Unit Shares, Unit Warrant Shares, Placement Agent Warrants, and Placement Agent Warrant Shares that the securities evidenced thereby have not been registered under the Act or applicable state securities laws, setting forth or referring to the applicable restrictions on transferability and sale of such securities under the Act and applicable state laws.

 

(f) The Company shall apply the net proceeds from the sale of the Bridge Notes for the purposes set forth in the Subscription Documents. Except as set forth in the Subscription Documents, the Company shall not use any of the net proceeds of the Offering to repay indebtedness to officers (other than accrued salaries incurred in the ordinary course of business), directors or stockholders of the Company without the prior written consent of the Placement Agent.

 

 

 

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(g) During the Offering Period, the Company shall afford each prospective purchaser of Bridge Notes the opportunity to ask questions of and receive answers from an officer of the Company concerning the terms and conditions of the Offering and the opportunity to obtain such other additional information necessary to verify the accuracy of the Subscription Documents to the extent the Company possesses such information or can acquire it without unreasonable expense.

 

(h) Except with the prior written consent of the Placement Agent, the Company shall not, at any time prior to the earlier of the Final Closing or the Termination Date, except as contemplated by the Subscription Documents (i) engage in or commit to engage in any transaction outside the ordinary course of business as described in the Subscription Documents, (ii) issue, agree to issue or set aside for issuance any securities (debt or equity) or any rights to acquire any such securities, (iii) incur, outside the ordinary course of business, any material indebtedness, (iv) dispose of any material assets, (v) make any material acquisition or (vi) change its business or operations in any material respect.

 

(i) Whether or not the transactions contemplated hereby are consummated, or this Agreement is terminated, the Company shall pay all reasonable expenses incurred in connection with the preparation and printing of all necessary offering documents and instruments related to the Offering and the issuance of the Bridge Notes, Unit Shares, Unit Warrants, Unit Warrant Shares, Placement Agent Warrants and Placement Agent Warrant Shares and will also pay for the Company’s expenses for accounting fees, legal fees, printing costs, and other costs involved with the Offering. The Company will provide at its own expense such quantities of the Subscription Documents and other documents and instruments relating to the Offering as the Placement Agent may reasonably request. The Company will pay at its own expense in connection with the creation, authorization, issuance, transfer and delivery of the Bridge Notes, including, without limitation, fees and expenses of any transfer agent or registrar; the fees and expenses of the Escrow Agent; all fees and expenses of legal, accounting and other advisers to the Company; the registration or qualification of the Bridge Notes for offer and sale under the securities or Blue Sky laws of such jurisdictions, payable within five (5) days of being invoiced. The Company will pay all such amounts, unless previously paid, at the First Closing, or, if there is no Closing, within ten (10) days after written request therefor following the Termination Date. In addition to any fees payable to the Placement Agent hereunder, the Company hereby agrees to pay the Placement Agent’s legal counsel fees and legal out of pocket expenses related to the Bridge Note Offering in an aggregate amount equal to the lesser of (i)Ten Thousand Dollars ($10,000) or (ii)1% of the aggregate Purchase Price paid for Bridge Notes sold in the Offering (the “Placement Agent Counsel Fee”), a proportionate amount of which will be paid from the escrow account at the time of each Closing and as a condition to Closing . This reimbursement obligation is in addition to the reimbursement of fees and expenses relating to attendance by the Placement Agent at proceedings or to indemnification and contribution as contemplated elsewhere in this agreement. In the event either Placement Agent’s personnel must attend or participate in judicial or other proceedings to which we are not a party relating to the subject matter of this agreement, the Company shall pay such Placement Agent an additional per diem payment, per person, at our customary rates, together with reimbursement of all out-of-pocket expenses and disbursements, including reasonable attorneys’ fees and disbursements incurred by it in respect of its preparation for and participation in such proceedings.

 

(j) On each Closing Date, the Company permits the Placement Agent to rely on any representations and warranties made by the Company to the investors and will cause its counsel to permit the Placement Agent to rely upon any opinion furnished to the investors in the Offering.

 

(k) The Company will comply with all of its obligations and covenants set forth in its agreements with the investors in the Offering. If not filed on EDGAR, the Company will promptly deliver to the Placement Agent and their counsel copies of any and all filings with the SEC and each amendment or supplement thereto, as well as all prospectuses and free writing prospectuses, prior to the closing of the Offering and six months thereafter. The Placement Agent is authorized on behalf of the Company to use and distribute copies of any Subscription Documents, including Company’s SEC Filings in connection with the sale of the Bridge Notes as, and to the extent, permitted by federal and applicable state securities laws. The Company acknowledges and agrees that the Placement Agent will be relying, without assuming responsibility for independent verification, on the accuracy and completeness of all financial and other information that is and will be furnished to them by the Company and the Company will be liable for any material misstatements or omissions contained therein.

 

  

 

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6. Conditions of Placement Agent’s Obligations . The obligations of the Placement Agent hereunder to affect a Closing are subject to the fulfillment, at or before each Closing, of the following additional conditions:

 

(a) Each of the representations and warranties made by the Company shall be true and correct on each Closing Date.

 

(b) The Company shall have performed and complied in all material respects with all agreements, covenants and conditions required to be performed, and complied with by it at or before the Closing.

 

(c) The Subscription Documents do not, and as of the date of any amendment or supplement thereto will not, include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

(d) No order suspending the use of the Subscription Documents or enjoining the Offering or sale of the Bridge Notes shall have been issued, and no proceedings for that purpose or a similar purpose shall have been initiated or pending, or, to the best of the Company’s knowledge, be contemplated or threatened.

 

(e) No holder of any of the Bridge Notes from the Offering will be subject to personal liability solely by reason of being such a holder, and except as described in the Subscription Documents, none of the Company’s Bridge Notes, Unit Shares, Unit Warrants, Unit Warrant Shares, Placement Agent Warrants, or Placement Agent Warrant Shares will be subject to preemptive or similar rights of any stockholder or security holder of the Company, or an adjustment under the antidilution or exercise rights of any holders of any outstanding shares of capital stock, membership units, options, warrants or other rights to acquire any securities of the Company.

 

(f) There shall have been no material adverse change nor development involving a prospective change in the financial condition, operations or projects of the Company, except where such change would not have a Company Material Adverse Effect on the business activities, financial or otherwise, results of operations or prospects of the Company, taken individually or in the aggregate.

 

(g) If requested, the Placement Agent shall have received a certificate of the Chief Executive Officer of the Company, dated as of the Closing Date, certifying, as to the fulfillment of the conditions set forth in subparagraphs (a), (b), (c), (d), (e) and (f) above.

 

(h) The Company shall have delivered to the Placement Agent: (i) a good standing certificate dated as of a date within 10 days prior to the date of the First Closing from the secretary of state of its jurisdiction of incorporation and (ii) resolutions of the Company’s Board of Directors approving this Agreement and the transactions and agreements contemplated by this Agreement, and the Subscription Documents, all as certified by the Chief Executive Officer of the Company.

 

(i) At each Closing, the Company shall have (i) paid to the Placement Agent the Placement Agent Cash Fee in respect of all Bridge Notes sold at such Closing, (ii) executed and delivered to the Placement Agent the Placement Agent Warrants in respect of all Bridge Notes sold at such Closing, and (iii) paid all fees, costs and expenses as set forth in Section 5 hereof.

 

(j) There shall have been delivered to the Placement Agent a signed opinion of counsel to the Company dated as of each Closing date.

 

 

 

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(k) All proceedings taken at or prior to the Closing in connection with the authorization, issuance and sale of the Bridge Notes and the Placement Agent Warrants will be reasonably satisfactory in form and substance to the Placement Agent and its counsel, and such counsel shall have been furnished with all such documents, certificates and opinions as it may reasonably request upon reasonable prior notice in connection with the transactions contemplated hereby.

 

(l) The Company agrees and understands that this Agreement in no way constitutes a guarantee that the Offering will be successful. The Company acknowledges that the Company is ultimately responsible for the successful completion of a transaction.

 

7. Conditions of the Company’s Obligations . The obligations of the Company hereunder are subject to the satisfaction of each of the following conditions:

 

(a) The satisfaction or waiver of all conditions to Closing as set forth herein.

 

(b) As of each Closing, each of the representations and warranties made by Placement Agent herein being true and correct as of the Closing Date for such Closing.

 

(c) At each Closing, the Company shall have received the proceeds from the sale of the Bridge Notes that are part of such Closing less applicable Placement Agent Fees and other deductions contemplated by this Agreement.

 

(d) At each Closing, the Company shall have received a copy of Subscription Documents signed by investors delivered by the Placement Agent.

 

7 A. Mutual Condition . The obligations of the Placement Agent and the Company hereunder are subject to the execution by each investor of a Subscription Agreement in form and substance acceptable to the Placement Agent and the Company and deposit by such investor with the escrow agent of all funds required to be so deposited by such investor.

 

8. Indemnification .

 

(a) The Company will: (i) indemnify and hold harmless the Placement Agent, and its agents and their respective officers, directors, employees, agents, selected dealers and each person, if any, who controls the Placement Agent within the meaning of the Act and such agents (each a “Placement Agent Indemnitee” or a “Placement Agent Party”) against, and pay or reimburse each Placement Agent Indemnitee for, any and all losses, claims, damages, liabilities or expenses whatsoever (or actions or proceedings or investigations in respect thereof (collectively, “Proceedings”), joint or several (which will, for all purposes of this Agreement, include, but not be limited to, all reasonable costs of defense and investigation and all reasonable attorneys’ fees, including appeals), to which any Placement Agent Indemnitee may become subject (a) under the Act or otherwise, in connection with the offer and sale of the Bridge Notes and (b) as a result of the breach of any representation, warranty or covenant made by the Company herein or the failure of the Company to perform its obligations under the Agreement, regardless of whether such losses, claims, damages, liabilities or expenses shall result from any claim by any Indemnitee or by any third party; and (ii) reimburse each Placement Agent Indemnitee for any legal or other expenses reasonably incurred in connection with investigating or defending against any such loss, claim, action, proceeding or investigation; provided , however , that the Company will not be liable in any such case to the extent that any such claim, damage or liability is finally judicially determined to have resulted primarily from (A) an untrue statement or alleged untrue statement of a material fact made in the Subscription Documents, or an omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, made solely in reliance upon and in conformity with written information furnished to the Company by the Placement Agent specifically for use in the Subscription Documents, (B) any violations by the Placement Agent of the Act, state securities laws or any rules or regulations of FINRA, which does not result from a violation thereof by the Company or any of its respective affiliates or (C) the Placement Agent’s willful misconduct or gross negligence. In addition to the foregoing agreement to indemnify and reimburse, the Company will indemnify and hold harmless each Placement Agent Indemnitee against any and all losses, claims, damages, liabilities or expenses whatsoever (or actions or proceedings or investigations in respect thereof), joint or several (which shall, for all purposes of this Agreement, include, but not be limited to, all reasonable costs of defense and investigation and all reasonable attorneys’ fees, including appeals) to which any Placement Agent Indemnitee may become subject insofar as such costs, expenses, losses, claims, damages or liabilities arise out of or are based upon the claim of any person or entity that he or it is entitled to broker’s or finder’s fees from any Placement Agent Indemnitee in connection with the Offering as a result of the Company obligating itself or any Indemnitee to pay such a fee, other than fees due to the Placement Agent, its dealers, sub-agents or finders. The foregoing indemnity agreements will be in addition to any liability the Company may otherwise have. The Placement Agent Indemnitees are intended third party beneficiaries of this provision.

 

 

 

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(b) The Placement Agent will: (i) indemnify and hold harmless the Company, and its agents and their respective officers, directors, employees, agents, selected dealers and each person, if any, who controls the Company within the meaning of the Act and such agents (each a “Company Indemnitee” or a “Company Party”) against, and pay or reimburse each Company Indemnitee for, any and all losses, claims, damages, liabilities or expenses whatsoever (or Proceedings, joint or several (which will, for all purposes of this Agreement, include, but not be limited to, all reasonable costs of defense and investigation and all reasonable attorneys’ fees, including appeals), to which any Company Indemnitee may become subject (a) under the Act or otherwise, in connection with the offer and sale of the Bridge Notes and (b) which results from (x) any untrue statement or alleged untrue statement of any material fact contained in the Subscription Documents made in reliance upon and in conformity with information contained in the Subscription Documents relating to the Placement Agent, or an omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in either case, if made or omitted in reliance upon and in conformity with written information furnished to the Company by the Placement Agent, specifically for use in the preparation thereof or (y) any violations by the Placement Agent of the Act or state securities laws which does not result from a violation thereof by the Company Indemnitees or any of their respective affiliates, and (ii) reimburse each Company Indemnitee for any legal or other expenses reasonably incurred in connection with investigating or defending against any such loss, claim, action, proceeding or investigation; provided, however, in no event (except in the event of gross negligence or willful misconduct by the Placement Agent to the extent and only to the extent if found in a final judgment by a court of competent jurisdiction) shall the Placement Agent’s indemnification obligation hereunder exceed the amount of Placement Agent Cash Fees actually received by the Placement Agent.

 

(c) Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, claim, proceeding or investigation (the “Action”), such indemnified party, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, will notify the indemnifying party of the commencement thereof, but the omission to so notify the indemnifying party will not relieve it from any liability that it may have to any indemnified party under this Section 8 unless the indemnifying party has been substantially prejudiced by such omission. The indemnifying party will be entitled to participate in and, to the extent that it may wish, jointly with any other indemnifying party, to assume the defense thereof subject to the provisions herein stated, with counsel reasonably satisfactory to such indemnified party. The indemnified party will have the right to employ separate counsel in any such Action and to participate in the defense thereof, but the fees and expenses of such counsel will not be at the expense of the indemnifying party if the indemnifying party has assumed the defense of the Action with counsel reasonably satisfactory to the indemnified party, provided, however, that if the indemnified party shall be requested by the indemnifying party to participate in the defense thereof or shall have concluded in good faith and specifically notified the indemnifying party either that there may be specific defenses available to it that are different from or additional to those available to the indemnifying party or that such Action involves or could have a Company Material Adverse Effect upon it with respect to matters beyond the scope of the indemnity agreements contained in this Agreement, then the counsel representing it, to the extent made necessary by such defenses, shall have the right to direct such defenses of such Action on its behalf and in such case the reasonable fees and expenses of such counsel in connection with any such participation or defenses shall be paid by the indemnifying party. No settlement of any Action against an indemnified party will be made without the consent of the indemnifying party and the indemnified party, which consent shall not be unreasonably withheld or delayed in light of all factors of importance to such party, and no indemnifying party shall be liable to indemnify any person for any settlement of any such claim effected without such indemnifying party’s consent. Notwithstanding the immediately preceding sentence, if at any time an indemnified party requests the indemnifying party to reimburse the indemnified party for legal or other expenses in connection with investigating, responding to or defending any Proceedings as contemplated by this indemnity agreement, the indemnifying party will be liable for any settlement of any Proceedings effected without its written consent if (i) the proposed settlement is entered into more than 30 days after receipt by the indemnifying party of the request for reimbursement, (ii) the indemnifying party has not reimbursed the indemnified party within 30 days of such request for reimbursement, (iii) the indemnified party delivered written notice to the indemnifying party of its intention to settle and the failure to pay within such 30 day period, and (iv) the indemnifying party does not, within 15 days of receipt of the notice of the intention to settle and failure to pay, reimburse the indemnified party for such legal or other expenses and object to the indemnified party’s seeking to settle such Proceedings.

 

  

 

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9. Contribution . To provide for just and equitable contribution, if: (i) an indemnified party makes a claim for indemnification pursuant to Section 8 hereof and it is finally determined, by a judgment, order or decree not subject to further appeal that such claims for indemnification may not be enforced, even though this Agreement expressly provides for indemnification in such case; or (ii) any indemnified or indemnifying party seeks contribution under the Act, the Exchange Act, or otherwise, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and the Placement Agent on the other in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Placement Agent on the other shall be deemed to be in the same proportion as the total net proceeds from the Offering (before deducting expenses) received by the Company bear to the total Placement Agent Fees received by the Placement Agent. The relative fault, in the case of an untrue statement, alleged untrue statement, omission or alleged omission will be determined by, among other things, whether such statement, alleged statement, omission or alleged omission relates to information supplied by the Company or by the Placement Agent, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement, alleged statement, omission or alleged omission. The Company and the Placement Agent agree that it would be unjust and inequitable if the respective obligations of the Company and the Placement Agent for contribution were determined by pro rata allocation of the aggregate losses, liabilities, claims, damages and expenses or by any other method or allocation that does not reflect the equitable considerations referred to in this Section 9. No person guilty of a fraudulent misrepresentation (within the meaning of Section 10(f) of the Act) will be entitled to contribution from any person who is not guilty of such fraudulent misrepresentation. For purposes of this Section 9, each person, if any, who controls the Placement Agent within the meaning of the Act will have the same rights to contribution as the Placement Agent, and each person, if any, who controls the Company within the meaning of the Act will have the same rights to contribution as the Company, subject in each case to the provisions of this Section 9. Anything in this Section 9 to the contrary notwithstanding, no party will be liable for contribution with respect to the settlement of any claim or action effected without its written consent. This Section 9 is intended to supersede, to the extent permitted by law, any right to contribution under the Act, the Exchange Act or otherwise available.

 

10. Termination .

 

(a) The Offering may be terminated by the Placement Agent at any time prior to the expiration of the Offering Period in the event that: (i) any of the representations, warranties or covenants of the Company contained herein or in the Subscription Documents shall prove to have been false or misleading in any material respect when actually made; (ii) the Company shall have failed to perform any of its material obligations hereunder or under any other Company Transaction Document or any other transaction document; (iii) there shall occur any event, within the control of the Company that is reasonably likely to materially and adversely affect the transactions contemplated hereunder or the ability of the Company to perform hereunder; or (iv) the Placement Agent determines that it is reasonably likely that any of the conditions to Closing to be fulfilled by the Company set forth herein will not, or cannot, be satisfied.

 

(b) This Offering may be terminated by the Company at any time prior to the Termination Date in the event that (i) the Placement Agent shall have failed to perform any of its material obligations hereunder or (ii) on account of the Placement Agent’s fraud, illegal or willful misconduct or gross negligence. In the event of any termination by the Company, the Placement Agent shall be entitled to receive, on the Termination Date, all unpaid Placement Agent Fees earned or accrued through the Termination Date and reimbursement of all expenses as provided for in this Agreement, but shall be entitled to no other amounts whatsoever except as may be due under any indemnity or contribution obligation for provided herein, at law or otherwise. On such Termination Date, the Company shall pay all such unpaid costs and expenses incurred by the Placement Agent in connection with the Offering, Placement Agent counsel fee provided above and all unpaid Blue Sky Fees and other expenses set forth in Section 5(i) hereof.

 

(c) This Offering may be terminated upon mutual agreement of the Company and the Placement Agent at any time prior to the expiration of the Offering Period.

 

(d) Except as otherwise provided above, before any termination by the Placement Agent under Section 10(a) or by the Company under Section 10(b) shall become effective, the terminating party shall give ten (10) day prior written notice to the other party of its intention to terminate the Offering (the “Termination Notice”). The Termination Notice shall specify the grounds for the proposed termination. If the specified grounds for termination, or their resulting adverse effect on the transactions contemplated hereby, are curable, then the other party shall have five (5) days from the Termination Notice within which to remove such grounds or to eliminate all of their material adverse effects on the transactions contemplated hereby; otherwise, the Offering shall terminate.

 

(e) Upon any termination pursuant to this Section 10, the Placement Agent and the Company will instruct the Escrow Agent to cause all monies received with respect to the subscriptions for Bridge Notes not accepted by the Company to be promptly returned to such subscribers without interest, penalty or deduction.

 

  

 

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11. Survival .

 

(a) The obligations of the parties to pay any costs and expenses hereunder and to provide indemnification and contribution as provided herein shall survive any termination hereunder. In addition, the provisions of Sections 3, and 8 through 22 shall survive the sale of the Bridge Notes or any termination of the Offering hereunder.

 

(b) The respective indemnities, covenants, representations, warranties and other statements of the Company and the Placement Agent set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of, and regardless of any access to information by the Company or the Placement Agent, or any of their officers or directors or any controlling person thereof, and will survive the sale of the Bridge Notes or any termination of the Offering hereunder.

 

12. Notices . All notice and other communications hereunder will be in writing and shall be deemed effectively given to a party by (a) personal delivery; (b) upon deposit with the United States Post Office, by certified mail, return receipt requested, first-class mail, postage prepaid; (c) delivered by hand or by messenger or overnight courier, addressee signature required, to the addresses below or at such other address and/or to such other persons as shall have been furnished by the parties:

 

If to the Company:

 

CÜR Media, Inc.

Ms. Kelly Sardo

2217 New London Turnpike

South Glastonbury, CT 06073

 

 

 

With a copy to:

 

CKR Law LLP

(which shall not constitute notice)

 

1330 Avenue of the Americas, 14 th Floor

New York, NY 10019

Attention: Eric C. Mendelson, Esq.

 

 

 

If to Katalyst Securities LLC.

 

Katalyst Securities LLC

1330 Avenue of the Americas, 14 th Floor

New York, NY 10019

Attention: Michael Silverman

 

 

 

With a copy to:

 

Barbara J. Glenns, Esq.

(which shall not constitute notice)

 

Law Office of Barbara J. Glenns, Esq.

30 Waterside Plaza, Suite 25G

New York, NY 10010

 

13. Governing Law, Jurisdiction . This Agreement shall be deemed to have been made and delivered in New York City and shall be governed as to validity, interpretation, construction, effect and in all other respects by the internal laws of the State of New York without regard to principles of conflicts of law thereof.

 

  

 

Placement Agency Agreement

Page 21

 
 
 

 

THE PARTIES HERETO AGREE TO SUBMIT ALL CONTROVERSIES TO THE EXCLUSIVE JURISDICTION OF FINRA ARBITRATION IN ACCORDANCE WITH THE PROVISIONS SET FORTH BELOW AND UNDERSTAND THAT (A) ARBITRATION IS FINAL AND BINDING ON THE PARTIES, (B) THE PARTIES ARE WAIVING THEIR RIGHTS TO SEEK REMEDIES IN COURT, INCLUDING THE RIGHT TO A JURY TRIAL, (C) PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED AND DIFFERENT FROM COURT PROCEEDINGS, (D) THE ARBITRATOR’S AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL REASONING AND ANY PARTY’S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULES BY ARBITRATORS IS STRICTLY LIMITED, (E) THE PANEL OF FINRA ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY, AND (F) ALL CONTROVERSIES WHICH MAY ARISE BETWEEN THE PARTIES CONCERNING THIS AGREEMENT SHALL BE DETERMINED BY ARBITRATION PURSUANT TO THE RULES THEN PERTAINING TO FINRA. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK . JUDGMENT ON ANY AWARD OF ANY SUCH ARBITRATION MAY BE ENTERED IN ANY FEDERAL OR STATE COURT WITHIN THE STATE AND COUNTY OF NEW YORK. THE PARTIES AGREE THAT THE DETERMINATION OF THE ARBITRATORS SHALL BE BINDING AND CONCLUSIVE UPON THEM. THE PREVAILING PARTY, AS DETERMINED BY SUCH ARBITRATORS, IN A LEGAL PROCEEDING SHALL BE ENTITLED TO COLLECT ANY COSTS, DISBURSEMENTS AND REASONABLE ATTORNEY’S FEES FROM THE OTHER PARTY. PRIOR TO FILING AN ARBITRATION, THE PARTIES HEREBY AGREE THAT THEY WILL ATTEMPT TO RESOLVE THEIR DIFFERENCES FIRST BY SUBMITTING THE MATTER FOR RESOLUTION TO A MEDIATOR, ACCEPTABLE TO ALL PARTIES, AND WHOSE EXPENSES WILL BE BORNE EQUALLY BY ALL PARTIES. THE MEDIATION WILL BE HELD IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, ON AN EXPEDITED BASIS. IF THE PARTIES CANNOT SUCCESSFULLY RESOLVE THEIR DIFFERENCES THROUGH MEDIATION, THE MATTER WILL BE RESOLVED BY ARBITRATION. THE ARBITRATION SHALL TAKE PLACE IN THE COUNTY OF NEW YORK, THE STATE OF NEW YORK, ON AN EXPEDITED BASIS.

 

14. Miscellaneous .

 

(a) No provision of this Agreement may be changed or terminated except by a writing signed by the party or parties to be charged therewith. Unless expressly so provided, no party to this Agreement will be liable for the performance of any other party’s obligations hereunder. Either party hereto may waive compliance by the other with any of the terms, provisions and conditions set forth herein; provided, however, that any such waiver shall be in writing specifically setting forth those provisions waived thereby. No such waiver shall be deemed to constitute or imply waiver of any other term, provision or condition of this Agreement. Neither party may assign its rights or obligations under this Agreement to any other person or entity without the prior written consent of the other party.

 

(b) Each party shall, without payment of any additional consideration by any other party, at any time on or after the date of any Closings, take such further action and execute such other and further documents and instruments as the other party may reasonably request in order to provide the other party with the benefits of this Agreement.

 

(c) The Parties to this Agreement each hereby confirm that they will cooperate with each other to the extent that it may become necessary to enter into any revisions or amendments to this Agreement, in the future to conform to any federal or state regulations as long as such revisions or amendments do not materially alter the obligations or benefits of either party under this Agreement.

 

15. Entire Agreement; Severability . This Agreement together with any other agreement referred to herein supersedes all prior understandings and written or oral agreements between the parties with respect to the Offering and the subject matter hereof. If any portion of this Agreement shall be held invalid or unenforceable, then so far as is reasonable and possible (i) the remainder of this Agreement shall be considered valid and enforceable and (ii) effect shall be given to the intent manifested by the portion held invalid or unenforceable.

 

16. 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. The exchange of copies of this Agreement and of signature pages by facsimile transmission or in pdf format shall constitute effective execution and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for all purposes. Signatures of the parties transmitted by facsimile or in pdf format shall be deemed to be their original signatures for all purposes.

 

17. Announcement of Offering . The Placement Agent and its counsel and advisors may, subsequent to the Final Closing of any Offering, make public their involvement with the Company, including use of the Company’s trademarks and logos. The Placement Agent’s counsel and advisors are intended third party beneficiaries of this Section.

 

 

 

Placement Agency Agreement

Page 22

 
 
 

 

18. Advice to the Board . The Company acknowledges that any advice given by the Placement Agent to the Company is solely for benefit and use of the Company’s board of directors and officers, who will make all decisions regarding whether and how to pursue any opportunity or transaction, including any potential Offering. The Company’s board of directors and management may consider such advice, but will also base their decisions on the advice of legal, tax and other business advisors and other factors which they consider appropriate. Accordingly, as an independent contractor, the Placement Agent will not assume the responsibilities of a fiduciary to the Company or its stockholders in connection with the performance of the services. Any advice provided may not be used, reproduced, disseminated, quoted or referred to without prior written consent of the providing party. The Placement Agent does not provide accounting, tax or legal advice. The Company is a sophisticated business enterprise that has retained the Placement Agent for the limited purposes set forth in this Agreement. The parties acknowledge and agree that their respective rights and obligations are contractual in nature. Each party disclaims an intention to impose fiduciary obligations on the other by virtue of the engagement contemplated by this Agreement.

 

19. Other Investment Banking Services . The Company acknowledges that the Placement Agent and their affiliates are securities firms engaged in securities trading and brokerage activities and providing investment banking and financial advisory services. In the ordinary course of business, the Placement Agent and their affiliates may at any time hold long or short positions, and may trade or otherwise effect transactions, for their own account or the accounts of customers, in the Company’s debt or equity securities, its affiliates or other entities that may be involved in the transactions contemplated by this Agreement. In addition, the Placement Agent and their affiliates may from time to time perform various investment banking and financial advisory services for other clients and customers who may have conflicting interests with respect to the Company or the Offering. The Company also acknowledges that the Placement Agent and their affiliates have no obligation to use in connection with this engagement or to furnish the Company, confidential information obtained from other companies. Furthermore, the Company acknowledges the Placement Agent may have fiduciary or other relationships whereby their or their affiliates may exercise voting power over securities of various persons, which securities may from time to time include securities of the Company or others with interests in respect of any Offering. The Company acknowledges that the Placement Agent or such affiliates may exercise such powers and otherwise perform our functions in connection with such fiduciary or other relationships without regard to the Placement Agent’s relationship to the Company hereunder. The Placement Agent acknowledges that the Company has a class of securities traded on the OTC Markets OTCQB marketplace and is subject to the restrictions imposed by Regulation FD under the Act. The Placement Agent agrees that (i) it will not use the Information for the purpose of trading in the Company's Common Stock or any other securities, and will take all steps necessary to prevent use of the Information for such purpose by its subsidiaries and affiliates and all of their respective officers, directors, shareholders, employees, agents, advisors, other representatives, actual and prospective institutional lenders, and actual and prospective financing sources, including, without limitation, their respective accountants, attorneys and financial advisors, and (ii) it will not disclose such Information to any other party for the purpose of trading in the Company's Common Stock

 

20. Successors . This Agreement shall inure to the benefit of and be binding upon the successors of the Placement Agent and of the Company (including any party that acquires the Company or all or substantially all of its assets or merges with the Company). Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person or corporation, other than the parties hereto and parties expressly referred to herein, any legal or equitable right, remedy or claim under or in respect to this Agreement or any provision hereof. The term “successors” shall not include any purchaser of the Bridge Notes merely by reason of such purchase. No subrogee of a benefited party shall be entitled to any benefits hereunder. Each party hereto disclaims any an intention to impose any fiduciary obligation on any other party by virtue of the arrangements contemplated by this Agreement.

 

[Signatures on following page.]

 

  

 

Placement Agency Agreement

Page 23

 
 
 

 

If the foregoing is in accordance with your understanding of the agreement among the Company and the Placement Agent, kindly sign and return this Agreement, whereupon it will become a binding agreement as provided herein, between the Company and the Placement Agent in accordance with its terms.

 

This Agreement contains a predispute arbitration provision in paragraph 13.

 

 

CÜR Media, Inc.

       
By: /s/ Kelly Sardo

 

 

Kelly Sardo

Chief Financial Officer

 
     
  KATALYST SECURITIES LLC    

 

 

 

 

 

By:

/s/ Michael A. Silverman

 

 

 

Michael A. Silverman

Managing Director

 

 

 

 

 

Placement Agency Agreement

Page 24

EXHIBIT 10.6

 

SECURITIES PURCHASE AGREEMENT

   

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of May 26, 2016, entered into by and between CÜR Media, Inc., a Delaware corporation (the “Company”), and the Buyer(s) set forth on the signature page(s) affixed hereto (individually, a “Buyer” or collectively, the “Buyers”).

 

WITNESSETH:

 

WHEREAS , the Company and the Buyer(s) are executing and delivering this Agreement in reliance upon an exemption from securities registration pursuant to Section 4(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”) and/or Rule 506(b) of Regulation D (“Regulation D”) and/or Regulation S (“Regulation S”) as promulgated by the U.S. Securities and Exchange Commission (the “SEC”) thereunder; and

 

WHEREAS , the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall sell to the Buyers, as provided herein, and the Buyers shall purchase from the Company, in one or more closings, up to a maximum of $3,000,000 in principal amount (the “Maximum Amount”) of the Company’s 12% Senior Secured Convertible Promissory Notes, with a term of six (6) months, substantially in the form of Exhibit A to this Agreement (the “Notes”), at a purchase price of 100% (par) per Note (the “Purchase Price”); and the total Purchase Price shall be allocated among the Buyer(s) in the respective amounts set forth on the Buyer Omnibus Signature Page(s), affixed hereto (the “Subscription Amount”); and

 

WHEREAS, the Maximum Amount may be increased if agreed to by the Company and the Placement Agent (defined below); and

 

WHEREAS, except as otherwise set forth in the Notes or Security Agreement (defined below), the Notes will be senior to all current indebtedness of the Company, will rank pari passu with the promissory notes (“Earlier 2016 Notes”) sold by the Company in the private placement offering of Earlier 2016 Notes consummated on April 15, 2016, upon the sale of an aggregate of $2,060,000 in principal amount of Earlier 2016 Notes and will be secured by a first priority security interest in and lien on all now owned or hereafter acquired assets and property, real and personal, of the Company and its subsidiaries pari passu with the Earlier 2016 Notes, pursuant to the terms of a security agreement among the Company and the Buyers, substantially in the form of Exhibit B to this Agreement (the “Security Agreement”); and

 

WHEREAS , if during the term of the Note, the Company completes an offering of Company equity securities (or other Company securities convertible, exercisable or exchangeable for Company equity securities) (“Equity Financing Securities”) in the amount of at least $15,000,000 (excluding the capital raised in this Offering and the offering for the Earlier 2016 Notes (the “Earlier 2016 Note Offering”) (the “Qualified Offering”) the entire outstanding principal amount of, and interest accrued but unpaid on, the Notes will automatically be converted (“Mandatory Conversion”) into units (the “Conversion Units”) at a price per Conversion Unit equal to the lesser of (a) 80% of the price at which the Company’s Equity Financing Securities are sold in the Qualified Offering (the “Variable Conversion Price”), or (b) $2.00 (the “Fixed Conversion Price”), with each Conversion Unit consisting of one share (the “Unit Shares”) of the Company’s common stock, $0.0001 par value per share (“Common Stock”), and one five-year warrant, substantially in the form of Exhibit C to this Agreement (the “Unit Warrants”), to purchase one additional share of the Company’s Common Stock (the “Unit Warrant Shares”) at an exercise price equal to (a) 125% of the price at which the Company’s equity securities are sold in the Qualified Offering in the event of a Mandatory Conversion, or (b) 125% of $2.00 in the event of an Optional Conversion (as defined below); and

 

 
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WHEREAS, at any time during the term of the Note and prior to the Qualified Offering, each Buyer or subsequent registered holder of the Note, may, in their sole discretion, elect to convert all or a portion of the outstanding principal amount of such Note and all accrued but unpaid interest due thereon into Conversion Units at the Fixed Conversion Price (“Optional Conversion”); and

 

WHEREAS, the Company has agreed to provide the Buyers with piggyback registration rights with respect to the Unit Shares and Unit Warrant Shares, as further set forth in Section 1(e) hereof; and

 

WHEREAS, the Company may offer Notes at any time through and including May 31, 2016, subject to a 30 day extension if agreed to by the Company and the Placement Agent (as such date may be extended, the “Offering Period”); and

 

WHEREAS , the Notes will be due and payable six (6) months from the date of issuance (“Maturity”), and will accrue interest at the rate of 12% per annum, with such interest being due and payable at Maturity; and

 

WHEREAS , the aggregate proceeds from the sale of the Notes shall be held in escrow, pending closing of the purchase and sale of the Notes, pursuant to the terms of an escrow agreement among the Company, the Placement Agent (as defined below) and the Escrow Agent (as defined below) (the “Escrow Agreement”); and

 

WHEREAS, no minimum principal amount of Notes is required to be sold to consummate an initial Closing (as defined below) of the Offering or any subsequent closings of the Offering; and

 

WHEREAS , Katalyst Securities LLC (the “Placement Agent”), a Financial Industry Regulatory Authority (“FINRA”) registered broker-dealer, will act as the Company’s exclusive Placement Agent, on a reasonable best efforts basis, in connection with the Offering; and

 

WHEREAS , the Placement Agent will be paid at each Closing (as defined below) a cash commission of 10% of funds raised from Investors introduced to the Offering by the Placement Agent and 8% of funds raised from Investors introduced to the Offering by the Company or its representatives (the “Placement Agent Fee”), and will receive warrants (“Placement Agent Warrants”) to purchase a number of shares of Common Stock equal to 10% of the number of Unit Shares into which Notes sold in the Offering to Buyers introduced to the Offering by the Placement Agent and 8% of the number of Unit Shares into which Notes sold in the Offering to Investors introduced to the Offering by the Company or its representatives are converted upon a Mandatory Conversion, with a term of five (5) years, at an exercise price per share equal to the exercise price of the Unit Warrant Shares; and

 

 
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WHEREAS, any sub-agent of the Placement Agent that introduced or introduces investors to the Offering will be entitled to share in the Placement Agent Fee and Placement Agent Warrants attributable to those investors as described above, pursuant to the terms of an executed sub-agent agreement between the sub-agent(s) and the Placement Agent; and

 

NOW, THEREFORE , in consideration of the mutual covenants and other agreements contained in this Agreement the Company and the Buyer(s) hereby agree as follows:

 

1. PURCHASE AND SALE OF NOTES .

 

(a) Purchase of Notes . Subject to the satisfaction (or waiver) of the terms and conditions of this Agreement, each Buyer agrees, severally and not jointly, to purchase at Closing (as defined below), and the Company agrees to sell and issue to each Buyer, severally and not jointly, at Closing, Notes in the principal amounts set forth on the Buyer Omnibus Signature Page, attached hereto as Annex A , for each Buyer affixed hereto. Upon a Buyer’s execution of this Agreement on the Buyer Omnibus Signature Page and Buyer’s completion of the Investor Certification, attached hereto as Annex B , the Investor Profile, attached hereto as Annex C , the Anti-Money Laundering Information Form, attached hereto as Annex D , and if applicable, the Wire Transfer Authorization (each attached hereto), the Buyer shall wire transfer the Subscription Amount set forth on its Buyer Omnibus Signature Page, in same-day funds, in accordance with the instructions set forth immediately below, which Subscription Amount shall be held in escrow pursuant to the terms of the Escrow Agreement and disbursed in accordance therewith.

 

Wire Instructions

 

Bank Name:

 

PNC Bank

Bank Address:

 

300 Delaware Avenue

Wilmington, DE 19801

ABA/Routing #:

 

031100089

SWIFT Code:

 

PNCCUS33

Account Name:

 

Delaware Trust Company

Account Number:

 

5605012373

FFC:

 

CÜR MEDIA, INC. Subscription Escrow #5; Account #79-2689

 

MUST INCLUDE THE SUBSCRIBER’S NAME

  

(b) Closing Date . The initial closing of the purchase and sale of the Notes (the “Closing”) shall take place at 10:00 a.m. New York time on or before the fifth (5 th ) business day following the satisfaction of the conditions to the Closing set forth herein and in Sections 5 and 6 below (or such later date as is mutually agreed to by the Company and the Buyer(s)). There may be multiple Closings, subject to prior termination, until such time as subscriptions for the sale of the Notes up to the Maximum Amount are accepted (the date of any such Closing is hereinafter referred to as a “Closing Date”). Each Closing shall occur on a Closing Date at the offices of CKR Law LLP, 1330 Avenue of the Americas, 14 th Floor, New York, New York 10019 (or such other place as is mutually agreed to by the Company and the Buyer(s)). The Notes may be offered and sold through the end of the Offering Period.

 

 
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(c) Escrow Arrangements; Form of Payment . Upon execution hereof by the Buyer and pending the Closing, the Purchase Price shall be deposited in a non-interest bearing escrow account with Delaware Trust Company, as escrow agent (the “Escrow Agent”), pursuant to the terms of the Escrow Agreement. Subject to the satisfaction of the terms and conditions of this Agreement, (i) on the Closing Date, the Escrow Agent shall deliver to the Company in accordance with the terms of the Escrow Agreement the Purchase Price for the Notes to be issued and sold to the Buyer(s) on such Closing Date, and (ii) promptly after the Closing Date, but in no instance more than seven (7) business days after the Closing, the Company shall deliver to the Buyer(s), the Notes, duly executed on behalf of the Company.

 

(d) Acceptance of Subscriptions . Each Buyer understands and agrees that the Company, in its sole and absolute discretion, reserves the right to accept or reject this or any other subscription for the Notes, in whole or in part, notwithstanding prior receipt by the Buyer of notice of acceptance of this subscription. If the subscription is rejected in whole or the Offering of the Notes is terminated, all funds received by the Escrow Agent from the Buyer will be promptly returned without interest or offset, and this subscription shall thereafter be of no further force or effect. If this subscription is rejected in part, the funds for the rejected portion of this subscription will be returned without interest or offset, and this subscription will continue in full force and effect to the extend this subscription was accepted.

 

(e) Registration Rights.

 

(i) Piggyback Registration Rights .

 

(1) Each Buyer (together with any permitted transferee of such Buyer’s Note, a “Holder”) is hereby granted the right to “piggyback” the Unit Shares and Unit Warrant Shares issuable and/or issued upon exercise of the Unit Warrants (such shares being referred to herein as “Registrable Securities”) on the registration statement filed by the Company to register the equity securities (or other Company securities convertible, exercisable or exchangeable for Company equity securities) issued by the Company in connection with the Earlier 2016 Note Offering and a Qualified Offering (the “Registration Statement”), so long as the registration form to be used is suitable for the registration of the Registrable Securities (a “Piggyback Registration”) (it being understood that the Form S-8 and Form S-4, or any successor forms, may not be used for such purposes), all at the Company’s cost and expense (except commissions or discounts and fees of any of the Holder’s own professionals, if any; it being understood that the Company shall not be obligated to pay the fees and expenses of Holder’s counsel); provided, however, that this paragraph 1(e)(i)(1) shall not apply to any Registrable Securities if such Registrable Securities may then be sold under Rule 144 (assuming the Holder’s compliance with the provisions of the Rule) with the result that the sold securities are freely tradable without restriction and the Company delivers an opinion to that effect to the transfer agent; and provided, further, that if the offering with respect to which a Registration Statement is filed is an underwritten primary or secondary offering of the Company’s securities and the managing underwriter advises the Company in writing that in its opinion the number of securities requested to be included in such registration exceeds the number that can be sold in such offering without adversely affecting such underwriter’s ability to effect an orderly distribution of such securities or otherwise adversely effecting such offering (including, without limitation, causing a diminution in the offering price of the Company’s securities) the Company will include in such Registration Statement: (A) first, the securities being sold for the account of the Company; (B) second, the number of securities with respect to which the Company has granted rights to participate in such registration (including the Registrable Securities) that, in the opinion of such underwriter, can be sold pro rata among the respective holders of such securities on the basis of the amount of such securities then owned by each such Holder. The Company shall give each Holder of Registrable Securities at least fifteen (15) days written notice of the intended filing date of any Registration Statement, other than a registration statement filed on Form S-4 or Form S-8, or any successor forms, and each Holder of Registrable Securities shall have seven (7) days after receipt of such notice to notify the Company of its intent to include the Registrable Securities in the Registration Statement.

 

 
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(2) If, at any time after giving written notice of its intention to register any securities and prior to the effective date of the Registration Statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to all Holders of the Registrable Securities and (A) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such abandoned registration and (B) in the case of a determination to delay such registration of its securities, shall be permitted to delay the registration of such Registrable Securities for the same period as the delay in registering such other Company securities.

 

(ii) Expenses . The Company shall bear all fees and expenses attendant to registering the Registrable Securities (except any underwriters’ discounts and commissions and fees of any of the Holders’ own professionals, if any; it being understood that the Company shall not be obligated to pay the fees and expenses of Holder’s counsel). The Company agrees to use its best efforts to cause the filing required herein to become effective promptly and to qualify to register the Registrable Securities in such States as are reasonably requested by the Holder; provided, however, that in no event shall the Company be required to register the Registrable Securities in a State in which such registration would cause (A) the Company to be obligated to register or license to do business in such State, (B) subject the Company to any material tax where it is not then so subject, (C) require the Company to file a general consent to service of process in such jurisdiction, or (D) the principal stockholders of the Company to be obligated to escrow any of their shares of capital stock of the Company.

 

(iii) Indemnification . The Company shall indemnify and hold harmless the Holder of the Registrable Securities to be sold pursuant to any Registration Statement filed hereunder, and each of such Holder’s officers, directors, employees, agents, partners, legal counsel and accountants, and each person, if any, who controls each of the foregoing within the meaning of Section 15 of the Securities Act or Section 20(a) of the 1934 Act, as amended, against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever incurred by the indemnified party in any action or proceeding between the indemnitor and indemnified party or between the indemnified party and any third party or otherwise) to which any of them may become subject under the Securities Act, the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or any other statute or at common law or otherwise under laws of foreign countries, arising from such Registration Statement or based upon any untrue statement or alleged untrue statement of a material fact contained in (A) any preliminary prospectus, registration statement or prospectus (as from time to time each may be amended and supplemented); (B) in any post-effective amendment or amendments or any new registration statement and prospectus in which is included the Registrable Securities; or (C) any application or other document or written communication (collectively called “application”) executed by the Company or based upon written information furnished by the Company in any jurisdiction in order to qualify the Registrable Securities under the securities laws thereof or filed with the commission, any state securities commission or agency, Nasdaq or any securities exchange; or the omission or alleged omission therefrom of 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; unless such statement or omission is made in reliance upon, and in strict conformity with, written information furnished to the Company with respect to the Holders expressly for use in a preliminary prospectus, registration statement or prospectus, or any amendment or supplement thereof, or in any application, as the case may be. The Company agrees promptly to notify the holders of the Registrable Securities of the commencement of any litigation proceedings against the Company or any of its officers, directors or controlling persons in connection with the issue and sale or resale of the Registrable Securities or in connection with any such registration statement or prospectus.

 

 
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(iv) The Company shall keep the Registration Statement filed to register the Registrable Securities “evergreen” until the earlier of (1) one year from the date it is declared effective by the SEC or (2) until Rule 144 is available to the holders of Registrable Securities who are not and have not been affiliates of the Company with respect to all of their Registrable Securities, whichever is earlier.

 

(v) The holders of Registrable Securities removed from the Registration Statement as a result of a “cutback comment” shall have piggyback registration rights for such Registrable Securities with respect to any registration statement filed by the Company following the effectiveness of the Registration Statement that would permit the inclusion of such shares.

 

(f) Offering Period. Subject to a permitted 30 day extension, the Offering will be conducted through May 31, 2016.

 

2. BUYER’S REPRESENTATIONS AND WARRANTIES .

 

Each Buyer represents and warrants, severally and not jointly, as to such Buyer, that:

 

(a) Investment Purpose . Each Buyer is acquiring the Notes, and, upon conversion of the Notes, the Buyer will acquire the Conversion Units and the Unit Shares, and upon exercise of the Unit Warrants, the Unit Warrant Shares (the Unit Shares and the Unit Warrant Shares being hereinafter referred to collectively as the “Conversion Shares”) and the Note, Conversion Units, Unit Shares, Unit Warrants and Unit Warrant Shares being hereinafter referred to collectively as the “Securities”), for its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the Securities Act; provided, however, that by making the representations herein, such Buyer reserves the right to dispose of the Securities at any time in accordance with or pursuant to an effective registration statement covering such Securities, or an available exemption under the Securities Act. The Buyer agrees not to sell, hypothecate or otherwise transfer the Securities unless such Securities are registered under the federal and applicable state securities laws or unless, in the opinion of counsel satisfactory to the Company, an exemption from such law is available.

 

 
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(b) Residence of Buyer . Each Buyer resides in the jurisdiction set forth on the Buyer Omnibus Signature Page affixed hereto.

 

(c) Accredited Investor Status . The Buyer meets the requirements of at least one of the suitability standards for an “ Accredited Investor ” as that term is defined in Rule 501(a)(3) of Regulation D, for the reason set forth on the Investor Certification attached hereto as Annex B , or is not a “U.S. Person” as that term is defined in Rule 902(k) of Regulation S.

 

(d) Non-US Person . If a Buyer is not a person in the United States or a U.S. Person (as defined in Rule 902(k) of Regulation S) or is not purchasing the Notes on behalf of a person in the United States or a U.S. Person:

 

(i) neither the Buyer nor any disclosed principal is a U.S. Person nor are they subscribing for the Notes for the account of a U.S. Person or for resale in the United States and the Buyer confirms that the Notes have not been offered to the Buyer in the United States and that this Agreement has not been signed in the United States;

 

(ii) the Buyer acknowledges that the Notes have not been registered under the Securities Act and may not be offered or sold in the United States or to a U.S. Person unless the securities are registered under the U.S. Securities Act and all applicable state securities laws or an exemption from such registration requirements is available, and further agrees that hedging transactions involving such securities may not be conducted unless in compliance with the U.S. Securities Act;

 

(iii) the Buyer and if applicable, the disclosed principal for whom the Buyer is acting, understands that the Company is the seller of the Notes and underlying securities and that, for purposes of Regulation S, a “distributor” is any underwriter, dealer or other person who participates pursuant to a contractual arrangement in the distribution of securities sold in reliance on Regulation S and that an “affiliate” is any partner, officer, director or any person directly or indirectly controlling, controlled by or under common control with any person in question. Except as otherwise permitted by Regulation S, the Buyer and if applicable, the disclosed principal for whom the Buyer is acting, agrees that it will not, during a one year distribution compliance period, act as a distributor, either directly or through any affiliate, or sell, transfer, hypothecate or otherwise convey the Notes or underlying securities other than to a non-U.S. Person;

 

(iv) the Buyer and if applicable, the disclosed principal for whom the Buyer is acting, acknowledges and understands that in the event the Notes are offered, sold or otherwise transferred by the Buyer or if applicable, the disclosed principal for whom the Buyer is acting, to a non-U.S Person prior to the expiration of a one year distribution compliance period, the purchaser or transferee must agree not to resell such securities except in accordance with the provisions of Regulation S, pursuant to registration under the Securities Act, or pursuant to an available exemption from registration; and must further agree not to engage in hedging transactions with regard to such securities unless in compliance with the Securities Act; and

 

 
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(v) neither the Buyer nor any disclosed principal will offer, sell or otherwise dispose of the Notes or the underlying securities in the United States or to a U.S. Person unless (A) the Company has consented to such offer, sale or disposition and such offer, sale or disposition is made in accordance with an exemption from the registration requirements under the Securities Act and the securities laws of all applicable states of the United States or, (B) the SEC has declared effective a registration statement in respect of such securities.

 

(e) Accredited Investor Qualifications. The Buyer (i) if a natural person, represents that the Buyer has reached the age of 21 and has full power and authority to execute and deliver this Agreement and all other related agreements or certificates and to carry out the provisions hereof and thereof; (ii) if a corporation, partnership, or limited liability company or partnership, or association, joint stock company, trust, unincorporated organization or other entity, represents that such entity was not formed for the specific purpose of acquiring the Notes, such entity is duly organized, validly existing and in good standing under the laws of the state of its organization, the consummation of the transactions contemplated hereby is authorized by, and will not result in a violation of state law or its charter or other organizational documents, such entity has full power and authority to execute and deliver this Agreement and all other related agreements or certificates and to carry out the provisions hereof and thereof and to purchase and hold the Notes, the execution and delivery of this Agreement has been duly authorized by all necessary action, this Agreement has been duly executed and delivered on behalf of such entity and is a legal, valid and binding obligation of such entity; or (iii) if executing this Agreement in a representative or fiduciary capacity, represents that it has full power and authority to execute and deliver this Agreement in such capacity and on behalf of the subscribing individual, ward, partnership, trust, estate, corporation, or limited liability company or partnership, or other entity for whom the Buyer is executing this Agreement, and such individual, partnership, ward, trust, estate, corporation, or limited liability company or partnership, or other entity has full right and power to perform pursuant to this Agreement and make an investment in the Company, and represents that this Agreement constitutes a legal, valid and binding obligation of such entity. The execution and delivery of this Agreement will not violate or be in conflict with any order, judgment, injunction, agreement or controlling document to which the Buyer is a party or by which it is bound.

 

(f) Buyer Relationship with Brokers. The Buyer’s substantive relationship with a broker, if any, for the transactions contemplated hereby, or subagent thereof (collectively, “Brokers”), through which the Buyer may be subscribing for the Notes predates such Broker’s contact with the Buyer regarding an investment in the Notes.

 

(g) Solicitation . The Buyer is unaware of, is in no way relying on, and did not become aware of the offering of the Notes through or as a result of, any form of general solicitation or general advertising including, without limitation, any article, notice, advertisement or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, in connection with the offering and sale of the Notes and is not subscribing for the Notes and did not become aware of the offering of the Notes through or as a result of any seminar or meeting to which the Buyer was invited by, or any solicitation of a subscription by, a person not previously known to the Buyer in connection with investments in securities generally.

 

 
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(h) Brokerage Fees . Except as otherwise provided herein, the Buyer has taken no action that would give rise to any claim by any person for brokerage commissions, finders’ fees or the like relating to this Agreement or the transaction contemplated hereby.

 

(i) Buyer’s Advisors . The Buyer and the Buyer’s attorney, accountant, purchaser representative and/or tax advisor, if any (collectively, the “Advisors”), as the case may be, has such knowledge and experience in financial, tax, and business matters, and, in particular, investments in securities, so as to enable it to utilize the information made available to it in connection with the Notes to evaluate the merits and risks of an investment in the Notes and the Company and to make an informed investment decision with respect thereto.

 

(j) Buyer Liquidity . Each Buyer has adequate means of providing for such Buyer’s current financial needs and foreseeable contingencies and has no need for liquidity of its investment in the Notes for an indefinite period of time, and after purchasing the Notes the Buyer will be able to provide for any foreseeable current needs and possible personal contingencies. The Buyer must bear and acknowledges the substantial economic risks of the investment in the Notes including the risk of illiquidity and the risk of a complete loss of this investment.

 

(k) High Risk Investment . The Buyer is aware that an investment in the Notes, and upon conversion of the Notes, the Conversion Units (including the Unit Shares), and upon exercise of the Unit Warrants, the Unit Warrant Shares, involves a number of very significant risks and has carefully researched and reviewed and understands the risks of, and other considerations relating to, the purchase of the Notes, and upon conversion of the Notes, the Conversion Units (including the Unit Shares), and upon exercise of the Unit Warrants, the Unit Warrant Shares.

 

(l) Reliance on Exemptions . Each Buyer understands that the Notes are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and such Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of such Buyer to acquire the Securities.

 

 
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(m) Information . Each Buyer and its Advisors have been furnished with all documents and materials relating to the business, finances and operations of the Company and its subsidiaries and information that Buyer requested and deemed material to making an informed investment decision regarding Buyer’s purchase of the Notes and the underlying securities. Each Buyer and its Advisors have been afforded the opportunity to review such documents and materials, as well as the Company’s SEC Filings, as such term is defined below (hard copies of which were made available to the Buyer upon request to the Company or were otherwise accessible to the Buyer via the SEC’s EDGAR system), and the information contained therein. Each Buyer and its Advisors have been afforded the opportunity to ask questions of the Company and its management. Each Buyer understands that such discussions, as well as any written information provided by the Company, were intended to describe the aspects of the Company’s business and prospects which the Company believes to be material, but were not necessarily a thorough or exhaustive description, and except as expressly set forth in this Agreement, the Company makes no representation or warranty with respect to the completeness of such information and makes no representation or warranty of any kind with respect to any information provided by any entity other than the Company. Some of such information may include projections as to the future performance of the Company and its subsidiaries, which projections may not be realized, may be based on assumptions which may not be correct and may be subject to numerous factors beyond the Company’s and its subsidiaries’ control. Additionally, the Buyer understands and represents that he is purchasing the Notes notwithstanding the fact that the Company and its subsidiaries may disclose in the future certain material information the Subscriber has not received, including the financial results of the Company and its subsidiaries for their current fiscal quarters. Neither such inquiries, nor any other due diligence investigations conducted by such Buyer or its Advisors, shall modify, amend or affect such Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. Each Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Notes.

 

(n) No Other Representations or Information . In evaluating the suitability of an investment in the Notes and if applicable, the Conversion Units, the Buyer has not relied upon any representation or information (oral or written) with respect to the Company or its subsidiaries, or otherwise, other than as stated in this Agreement and the Notes. No oral or written representations have been made, or oral or written information furnished, to the Buyer or its Advisors, if any, in connection with the offering of the Notes.

 

(o) No Governmental Review . Each 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 Notes (or the Conversion Units, Unit Shares, Unit Warrants, or Unit Warrant Shares), or the fairness or suitability of the investment in the Notes (or the Conversion Shares), nor have such authorities passed upon or endorsed the merits of the offering of the Notes (or the Conversion Units, Unit Shares, Unit Warrants, or Unit Warrant Shares).

 

(p) Transfer or Resale . Each Buyer understands that: (i) the Notes and Conversion Units (including the underlying securities) have not been and may not be registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, or (B) such Buyer shall have delivered to the Company an opinion of counsel, in a generally acceptable form, to the effect that such securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration requirements; (ii) any sale of such securities made in reliance on Rule 144 under the Securities Act (or a successor rule thereto) (“ 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 defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the SEC thereunder; and (iii) the Company is not, and except as otherwise set forth in this Agreement and the Registration Rights Agreement, no other person is, under any obligation to register such securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder. The Company reserves the right to place stop transfer instructions against the shares and certificates for the Unit Shares and Unit Warrant Shares to the extent specifically set forth under this Agreement. There can be no assurance that there will be any market or resale for the Notes (or the Unit Shares or the Unit Warrant Shares), nor can there be any assurance that the Notes (or the Unit Shares or the Unit Warrant Shares) will be freely transferable at any time in the foreseeable future.

 

 
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(q) Legends . Each Buyer understands that the certificates or other instruments representing the Notes (and the Unit Shares and Warrant Unit Shares) shall bear a restrictive legend in substantially the following form (and a stop transfer order may be placed against transfer of such stock certificates):

  

 

For U.S. Persons:

 

 

 

 

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (C) IN COMPLIANCE WITH RULE 144 OR 144A THEREUNDER, IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, (D) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR (E) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN EITHER CASE REASONABLY SATISFACTORY TO THE COMPANY. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.

 

 

 

 

 

For Non-U.S. Persons:

 

 

 

 

 

THESE SECURITIES WERE ISSUED IN AN OFFSHORE TRANSACTION TO PERSONS WHO ARE NOT U.S. PERSONS (AS DEFINED IN REGULATION S) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”). ACCORDINGLY, NONE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD IN THE UNITED STATES OR, DIRECTLY OR INDIRECTLY, TO U.S. PERSONS EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT, AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN ACCORDANCE WITH THE 1933 ACT.

 

  

 
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The legend set forth above shall be removed and the Company, within three (3) business days, shall issue a certificate without such legend to the holder of the Notes (and the Unit Shares and Warrant Unit Shares) upon which it is stamped, if, unless otherwise required by state securities laws, (i) the Buyer or its broker make the necessary representations and warranties to the transfer agent for the Common Stock that it has complied with the prospectus delivery requirements in connection with a sale transaction, provided the Notes (and the Unit Shares and Warrant Unit Shares) are registered under the Securities Act or (ii) in connection with a sale transaction, after such holder provides the Company with an opinion of counsel satisfactory to the Company, which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale, assignment or transfer of the Notes (or the Unit Shares and Unit Warrant Shares) may be made without registration under the Securities Act. .

 

(r) Organization and Standing of Buyer . If the Buyer is an entity, it is a corporation, partnership or other entity duly incorporated or organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization. If the Buyer is an individual, he or she is at least the greater of (a) eighteen (18) years of age or (b) the age of legal majority in his or her jurisdiction of residence.

 

(s) Authorization, Enforcement . The Buyer has the requisite power and authority to enter into and perform under this Agreement and the Security Agreement (collectively, together with the Notes and Unit Warrant, the “Transaction Documents”) and to purchase the Notes being sold to it hereunder. The execution, delivery and performance of this Agreement and the Transaction Documents by such Buyer and the consummation by Buyer of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate or partnership action, and no further consent or authorization of such Buyer or Buyer’s Board of Directors, stockholders, partners, members, as the case may be, is required. This Agreement and the other Transaction Documents (to the extent the Buyer is party thereto) have been duly authorized, executed and delivered by such Buyer and upon execution of this Agreement and the Transaction Documents by the other parties hereto and thereto, constitute, or shall constitute when executed and delivered, a valid and binding obligation of such Buyer enforceable against such Buyer in accordance with the terms hereof and thereof, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

 

 
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(t) No Conflicts . The execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation by such Buyer of the transactions contemplated hereby and thereby or relating hereto do not and will not (i) if the Buyer is not an individual, result in a violation of such Buyer’s charter documents or bylaws or other organizational documents or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of any agreement, indenture or instrument or obligation to which such Buyer is a party or by which its properties or assets are bound, or result in a violation of any law, rule, or regulation, or any order, judgment or decree of any court or governmental agency applicable to such Buyer or its properties (except for such conflicts, defaults and violations as would not, individually or in the aggregate, have a material adverse effect on such Buyer). Such Buyer is not required 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 and the other Transaction Documents or to purchase the Notes in accordance with the terms hereof, provided that for purposes of the representation made in this sentence, such Buyer is assuming and relying upon the accuracy of the relevant representations and agreements of the Company herein.

 

(u) Receipt of Documents . Each Buyer, its counsel and/or its Advisors have received and read in their entirety: (i) this Agreement and each representation, warranty and covenant set forth herein; and (ii) all due diligence and other information necessary to verify the accuracy and completeness of such representations, warranties and covenants; each Buyer has received answers to all questions such Buyer submitted to the Company regarding an investment in the Company; and each Buyer has relied on the information contained therein and has not been furnished any other documents, literature, memorandum or prospectus.

 

(v) Status as a Former Shell Company . Each Buyer understands that the Company is a former “shell company” as such term is defined in Rule 12b-2 under the Exchange Act. The Company ceased to be a “shell company” on January 28, 2014, and filed Form 10 type information under cover of Form 8-K on February 3, 2014. Pursuant to Rule 144(i), securities issued by a current or former shell company (such as the Securities) that otherwise meet the holding period and other requirements of Rule 144 nevertheless cannot be sold in reliance on Rule 144 until one year after such company (a) is no longer a shell company; and (b) has filed current “Form 10 information” (as defined in Rule 144(i)) with the SEC reflecting that it is no longer a shell company, and provided that at the time of a proposed sale pursuant to Rule 144, such company is subject to the reporting requirements of section 13 or 15(d) of the Exchange Act and has filed all reports and other materials required to be filed by section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months (or for such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports. As a result, the restrictive legends on certificates for the securities cannot be removed except in connection with an actual sale meeting the foregoing requirements or pursuant to an effective registration statement.

 

(w) Trading Activities . The Buyer’s trading activities with respect to the Company’s Common Stock shall be in compliance with all applicable federal and state securities laws, rules and regulations and the rules and regulations of the principal market on which the Company’s Common Stock is listed or traded. Neither the Buyer nor its affiliates has an open short position in the Common Stock of the Company and, except as set forth below, the Buyer shall not, and shall not cause any of its affiliates under common control with the Buyer, to engage in any short sale as defined in any applicable SEC or Financial Industry Regulatory Authority (FINRA) rules on any hedging transactions with respect to the Common Stock until the earlier to occur of (i) the third anniversary of the Closing Date and (ii) the Buyer(s) no longer own Common Stock. Without limiting the foregoing, the Buyer agrees not to engage in any naked short transactions in excess of the amount of shares owned (or an offsetting long position) by the Buyer.

 

 
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(x) Regulation FD . Each Buyer acknowledges and agrees that certain of the information received by it in connection with the transactions contemplated by this Agreement is of a confidential nature and may be regarded as material non-public information under Regulation FD promulgated by the SEC and that such information has been furnished to the Buyer for the sole purpose of enabling the Buyer to consider and evaluate an investment in the Notes. The Buyer agrees that it will treat such information in a confidential manner, will not use such information for any purpose other than evaluating an investment in the Notes, will not, directly or indirectly, trade or permit the Buyer’s agents, representatives or affiliates to trade in any securities of the Company while in possession of such information and will not, directly or indirectly, disclose or permit the Buyer’s agents, representatives or affiliates to disclose any of such information without the Company’s prior written consent. The Buyer shall make its agents, affiliates and representatives aware of the confidential nature of the information contained herein and the terms of this section including the Buyer’s agreement to not disclose such information, to not trade in the Company’s securities while in the possession of such information and to be responsible for any disclosure or other improper use of such information by such agents, affiliates or representatives. Likewise, without the Company’s prior written consent, the Buyer will not, directly or indirectly, make any statements, public announcements or other release or provision of information in any form to any trade publication, to the press or to any other person or entity whose primary business is or includes the publication or dissemination of information related to the transactions contemplated by this Agreement.

 

(y) No Legal Advice from the Company . Each Buyer acknowledges that it had the opportunity to review this Agreement and the transactions contemplated by this Agreement with its own legal counsel and investment and tax Advisors. Each Buyer is relying solely on such Advisors and not on any statements or representations of the Company or any of its employees, representatives or agents for legal, tax, economic and related considerations or investment advice with respect to this investment, the transactions contemplated by this Agreement or the securities laws of any jurisdiction.

 

(z) No Group Participation . Each Buyer and its affiliates is not a member of any group, nor is any Buyer acting in concert with any other person, including any other Buyer, with respect to its acquisition of the Notes (and the Unit Shares and the Unit Warrant Shares).

 

(aa) Reliance . Any information which the Buyer has heretofore furnished or is furnishing herewith to the Company or any Broker is complete and accurate and may be relied upon by the Company and any Broker in determining the availability of an exemption from registration under U.S. federal and state securities laws in connection with the offering of securities as described in this Agreement and the related summary term sheet and transmittal letter, if any. The Buyer further represents and warrants that it will notify and supply corrective information to the Company immediately upon the occurrence of any change therein occurring prior to the Company’s issuance of the Notes. Within five (5) days after receipt of a request from the Company or any Broker, the Buyer will provide such information and deliver such documents as may reasonably be necessary to comply with any and all laws and ordinances to which the Company or any Broker is subject.

 

 
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(bb) (For ERISA plan Buyers only) . The fiduciary of the ERISA plan represents that such fiduciary has been informed of and understands the Company’s investment objectives, policies and strategies, and that the decision to invest “plan assets” (as such term is defined in ERISA) in the Company is consistent with the provisions of ERISA that require diversification of plan assets and impose other fiduciary responsibilities. The Buyer fiduciary or Plan (a) is responsible for the decision to invest in the Company; (b) is independent of the Company or any of its affiliates; (c) is qualified to make such investment decision; and (d) in making such decision, the Buyer fiduciary or Plan has not relied primarily on any advice or recommendation of the Company or any of its affiliates;

 

(cc) Anti-Money Laundering; OFAC .

 

[The Buyer should check the Office of Foreign Assets Control (“OFAC”) website at http://www.treas.gov/ofac before making the following representations.] The Buyer represents that the amounts invested by it in the Company in the Notes were not and are not directly or indirectly derived from activities that contravene U.S. federal or state or international laws and regulations, including anti-money laundering laws and regulations. U.S. federal regulations and Executive Orders administered by OFAC prohibit, among other things, the engagement in transactions with, and the provision of services to, certain foreign countries, territories, entities and individuals. The lists of OFAC prohibited countries, territories, persons and entities can be found on the OFAC website at http://www.treas.gov/ofac. In addition, the programs administered by OFAC (the “OFAC Programs”) prohibit dealing with individuals 1 or entities in certain countries regardless of whether such individuals or entities appear on the OFAC lists;

 

To the best of the Buyer’s knowledge, none of: (1) the Buyer; (2) any person controlling or controlled by the Buyer; (3) if the Buyer is a privately-held entity, any person having a beneficial interest in the Buyer; or (4) any person for whom the Buyer is acting as agent or nominee in connection with this investment is a country, territory, individual or entity named on an OFAC list, or a person or entity prohibited under the OFAC Programs. Please be advised that the Company may not accept any amounts from a prospective investor if such prospective investor cannot make the representation set forth in the preceding paragraph. The Buyer agrees to promptly notify the Company should the Buyer become aware of any change in the information set forth in these representations. The Buyer understands and acknowledges that, by law, the Company may be obligated to “freeze the account” of the Buyer, either by prohibiting additional subscriptions from the Buyer, declining any redemption requests and/or segregating the assets in the account in compliance with governmental regulations, and a Broker may also be required to report such action and to disclose the Buyer’s identity to OFAC. The Buyer further acknowledges that the Company may, by written notice to the Buyer, suspend the redemption rights, if any, of the Buyer if the Company reasonably deems it necessary to do so to comply with anti-money laundering regulations applicable to the Company or any Broker or any of the Company’s other service providers. These individuals include specially designated nationals, specially designated narcotics traffickers and other parties subject to OFAC sanctions and embargo programs;

___________

1 These individuals include specially designated nationals, specially designated narcotics traffickers and other parties subject to OFAC sanctions and embargo programs.

 

 
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To the best of the Buyer’s knowledge, none of: (1) the Buyer; (2) any person controlling or controlled by the Buyer; (3) if the Buyer is a privately-held entity, any person having a beneficial interest in the Buyer; or (4) any person for whom the Buyer is acting as agent or nominee in connection with this investment is a senior foreign political figure 2 , or any immediate family 3 member or close associate 4 of a senior foreign political figure, as such terms are defined in the footnotes below; and

 

If the Buyer is affiliated with a non-U.S. banking institution (a “Foreign Bank”), or if the Buyer receives deposits from, makes payments on behalf of, or handles other financial transactions related to a Foreign Bank, the Buyer represents and warrants to the Company that: (1) the Foreign Bank has a fixed address, other than solely an electronic address, in a country in which the Foreign Bank is authorized to conduct banking activities; (2) the Foreign Bank maintains operating records related to its banking activities; (3) the Foreign Bank is subject to inspection by the banking authority that licensed the Foreign Bank to conduct banking activities; and (4) the Foreign Bank does not provide banking services to any other Foreign Bank that does not have a physical presence in any country and that is not a regulated affiliate.

 

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY .

 

The Company represents and warrants to each of the Buyers that:

 

(a) Organization and Qualification . The Company is a corporation duly organized and validly existing in good standing under the laws of the jurisdiction of its formation, and has the requisite corporate power to own its properties and to carry on its business as now being conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect, as defined below.

_________

2 A “senior foreign political figure” is defined as a senior official in the executive, legislative, administrative, military or judicial branches of a foreign government (whether elected or not), a senior official of a major foreign political party, or a senior executive of a foreign government-owned corporation. In addition, a “senior foreign political figure” includes any corporation, business or other entity that has been formed by, or for the benefit of, a senior foreign political figure.

 

3 “Immediate family” of a senior foreign political figure typically includes the figure’s parents, siblings, spouse, children and in-laws.

 

4 A “close associate” of a senior foreign political figure is a person who is widely and publicly known to maintain an unusually close relationship with the senior foreign political figure, and includes a person who is in a position to conduct substantial domestic and international financial transactions on behalf of the senior foreign political figure.

  

 
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(b) Authorization, Enforcement, Compliance with Other Instruments . (i) The Company, has the requisite corporate power and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents and to issue the Notes in accordance with the terms hereof and thereof, (ii) the execution and delivery by the Company of each of the Transaction Documents to which it is a party and the consummation by it of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the Notes have been duly authorized by the Company’s Board of Directors, and no further consent or authorization is required by the Company, its Board of Directors or its stockholders, (iii) each of the Transaction Documents will be duly executed and delivered by the Company, (iv) the Transaction Documents when executed will constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors’ rights and remedies.

 

(c) Capitalization . The authorized capital stock of the Company consists of 300,000,000 shares of Common Stock, par value $0.0001 per share and 10,000,000 shares of preferred stock par value $0.0001 per share (the “Preferred Stock”). As of the date hereof the Company has 2,440,336 shares of Common Stock issued and outstanding and no shares of Preferred Stock issued and outstanding. All of the outstanding shares of Common Stock of the Company have been duly authorized, validly issued and are fully paid and nonassessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company. As of the date of this Agreement except as set forth in the Company’s SEC Filings (as defined below), (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company, or contracts, commitments, understandings or arrangements by which the Company is or may become bound to issue additional shares of capital stock of such Company or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company, (ii) there are no outstanding debt securities, (iii) there are no agreements or arrangements under which the Company is obligated to register the sale of any of its securities under the Securities Act, and (iv) there are no outstanding registration statements. Except as set forth in the Company’s SEC Filings, there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Notes as described in this Agreement. The Notes (and the Unit Shares, the Unit Warrants and the Unit Warrant Shares) when issued, will be free and clear of all pledges, liens, encumbrances and other restrictions (other than those arising under applicable securities laws as a result of the issuance of the Notes). No co-sale right, right of first refusal or other similar right exists with respect to the Notes (or the Unit Shares, the Unit Warrants, or the Unit Warrant Shares) or the issuance and sale thereof. Except as set forth in the Company’s SEC Filings, the issue and sale of the Notes (and the Unit Shares, the Unit Warrants, or the Unit Warrant Shares) will not result in a right of any holder of securities of the Company to adjust the exercise, exchange or reset price under such securities. The Company has made available to the Buyer true and correct copies of the Company’s Certificate of Incorporation, as in effect on the date hereof (the “Certificate of Incorporation”), and the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all securities exercisable for Common Stock of the Company and the material rights of the holders thereof in respect thereto.

 

 
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(d) Issuance of Securities . The Notes are duly authorized and, upon issuance in accordance with the terms hereof, shall be duly issued, fully paid and nonassessable, are free from all taxes, liens and charges with respect to the issue thereof. Upon conversion of the Notes in accordance with the Transaction Documents, the Unit Shares, the Unit Warrants and, if applicable, the Unit Warrant Shares will be duly issued, fully paid and nonassessable.

 

(e) No Conflicts . The execution, delivery and performance of each of the Transaction Documents by the Company, and the consummation by the Company of the transactions contemplated hereby and thereby will not (i) result in a violation of the Certificate of Incorporation, or the By-laws of the Company or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including U.S. federal and state securities laws and regulations) applicable to the Company or by which any property or asset of the Company is bound or affected except for those which could not reasonably be expected to have a material adverse effect on the assets, business, condition (financial or otherwise), results of operations or future prospects of the Company and its subsidiaries taken as a whole (a “Material Adverse Effect”). Except those which could not reasonably be expected to have a Material Adverse Effect, the Company is not in violation of any term of or in default under its constitutive documents. Except those which could not reasonably be expected to have a Material Adverse Effect, or as otherwise set forth in the Company’s SEC Filings, the Company is not in violation of any term of or in default under any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company. The business of the Company is not being conducted, and shall not be conducted in violation of any material law, ordinance, or regulation of any governmental entity, except for any violation which could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. Except as specifically contemplated by this Agreement and as required under the Securities Act and any applicable state securities laws, the Company is not required 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 or contemplated by this Agreement or the other Transaction Documents in accordance with the terms hereof or thereof. Neither the execution and delivery by the Company of the Transaction Documents to which it is a party, nor the consummation by the Company of the transactions contemplated hereby or thereby, will require any notice, consent or waiver under any contract or instrument to which the Company is a party or by which the Company is bound or to which any of its assets is subject, except for any notice, consent or waiver the absence of which would not have a Material Adverse Effect and would not adversely affect the consummation of the transactions contemplated hereby or thereby. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding two sentences have been obtained or effected on or prior to the date hereof. The Company is unaware of any facts or circumstance, which might give rise to any of the foregoing.

 

 
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(f) SEC Filings; Financial Statements . The Company has filed (and, except for certain Current Reports on Form 8-K, has, within the past two years, timely filed (subject to 12b-25 filings with respect to certain periodic filings)) all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (all of the foregoing and all other documents filed with the SEC prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein, being hereinafter referred to herein as the “ SEC Filings ”). The SEC Filings are available to the Buyers via the SEC’s EDGAR system. As of their respective dates, the SEC Filings complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder, and none of the SEC Filings, at the time they were filed with the SEC, 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. As of their respective dates, the audited financial statements of the Company included in the Company’s SEC Filings for the period from inception through December 31, 2015, and the subsequent unaudited interim financial statements included in the Company’s SEC Filings (collectively, the “Financial Statements”) complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements were prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such Financial Statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude 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 its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). As of the date hereof, there are no outstanding or unresolved comments in comment letters received from the staff of the SEC with respect to any of the SEC Filings. No other information provided by or on behalf of the Company to the Buyer including, without limitation, information referred to in this Agreement, contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

(g) Absence of Litigation . Except as set forth in the Company’s SEC Filings, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body now pending or, to the knowledge of the Company, threatened, against or affecting the Company, wherein an unfavorable decision, ruling or finding would (i) adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, this Agreement or any of the other Transaction Documents, or (ii) have a Material Adverse Effect.

 

(h) Acknowledgment Regarding Buyer’s Purchase of the Notes . The Company acknowledges and agrees that each Buyer is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that each Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby and any advice given by such Buyer or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to such Buyer’s purchase of the Notes (and the Unit Shares, the Unit Warrants and, if applicable, the Unit Warrant Shares). The Company further represents to the Buyers that the Company’s decision to enter into the Transaction Documents has been based solely on the independent evaluation by the Company and its representatives.

 

 
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(i) No General Solicitation . Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Notes.

 

(j) No Integrated Offering . Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of the Notes under the Securities Act or cause this offering of the Notes to be integrated with prior offerings by the Company for purposes of the Securities Act.

 

(k) Employee Relations . Except as set forth in the Company’s SEC Filings, the Company is not involved in any labor dispute nor, to the knowledge of the Company, is any such dispute threatened. The Company is not party to any collective bargaining agreement. The Company’s employees are not members of any union, and the Company’s relationship with its employees is good.

 

(l) Intellectual Property Rights . The Company owns or possesses all patents, trademarks, domain names (whether or not registered) and any patentable improvements or copyrightable derivative works thereof, websites and intellectual property rights relating thereto, service marks, trade names, copyrights, licenses and authorizations, and all rights with respect to the foregoing, which are necessary for the conduct of its business as now conducted without any conflict with the rights of others except for such conflicts that would not result in a Material Adverse Effect. Neither the Company nor any subsidiary has received any notice of infringement of, or conflict with, the asserted rights of others with respect to any intellectual property that it utilizes.

 

(m) Environmental Laws .

 

(i) The Company has complied with all applicable Environmental Laws (as defined below), except for violations of Environmental Laws that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect. There is no pending or, to the knowledge of the Company, threatened civil or criminal litigation, written notice of violation, formal administrative proceeding, or investigation, inquiry or information request, relating to any Environmental Law involving the Company, except for litigation, notices of violations, formal administrative proceedings or investigations, inquiries or information requests that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect. For purposes of this Agreement, “Environmental Law” means any national, state, provincial or local law, statute, rule or regulation or the common law relating to the environment or occupational health and safety, including without limitation any statute, regulation, administrative decision or order pertaining to (i) treatment, storage, disposal, generation and transportation of industrial, toxic or hazardous materials or substances or solid or hazardous waste; (ii) air, water and noise pollution; (iii) groundwater and soil contamination; (iv) the release or threatened release into the environment of industrial, toxic or hazardous materials or substances, or solid or hazardous waste, including without limitation emissions, discharges, injections, spills, escapes or dumping of pollutants, contaminants or chemicals; (v) the protection of wild life, marine life and wetlands, including without limitation all endangered and threatened species; (vi) storage tanks, vessels, containers, abandoned or discarded barrels, and other closed receptacles; (vii) health and safety of employees and other persons; and (viii) manufacturing, processing, using, distributing, treating, storing, disposing, transporting or handling of materials regulated under any law as pollutants, contaminants, toxic or hazardous materials or substances or oil or petroleum products or solid or hazardous waste. As used above, the terms “release” and “environment” shall have the meaning set forth in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“ CERCLA ”).

 

 
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(ii) To the knowledge of the Company there is no material environmental liability with respect to any solid or hazardous waste transporter or treatment, storage or disposal facility that has been used by the Company.

 

(iii) The Company (i) has received all permits, licenses or other approvals required of it under applicable Environmental Laws to conduct its businesses and (ii) is in compliance with all terms and conditions of any such permit, license or approval.

 

(n) Title . The Company has good and marketable title to all of its personal property and assets free and clear of any material restriction, mortgage, deed of trust, pledge, lien, security interest or other charge, claim or encumbrance which would have a Material Adverse Effect. With respect to properties and assets it leases, the Company is in material compliance with such leases and holds a valid leasehold interest free of any liens, claims or encumbrances which would have a Material Adverse Effect.

 

(o) Internal Accounting Controls . Except as set forth in the Company’s SEC Filings, the Company is in material compliance with the provisions of the Sarbanes-Oxley Act of 2002 currently applicable to the Company. Except as set forth in the Company’s SEC Filings, the Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, and (iii) the recorded amounts for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

(p) No Material Adverse Breaches, etc . The Company is not subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected in the future to have a Material Adverse Effect. Except as set forth in the Company’s SEC Filings, the Company is not in breach of any contract or agreement which breach, in the judgment of the Company’s officers, has or is expected to have a Material Adverse Effect.

 

 
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(q) Tax Status . The Company has made and filed all U.S. federal and state, income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject and (unless and only to the extent that the Company or such subsidiary has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due from the Company by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.

 

(r) Certain Transactions . Except for arm’s length transactions pursuant to which the Company makes payments in the ordinary course of business upon terms no less favorable than it could obtain from third parties, none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

 

(s) Rights of First Refusal . The Company is not obligated to offer the securities offered hereunder on a right of first refusal basis or otherwise to any third parties including, but not limited to, current or former stockholders of the Company, underwriters, brokers, agents or other third parties.

 

(t) Reliance . The Company acknowledges that the Buyers are relying on the representations and warranties made by the Company hereunder and that such representations and warranties are a material inducement to the Buyer purchasing the Notes. The Company further acknowledges that without such representations and warranties of the Company made hereunder, the Buyers would not enter into this Agreement.

 

(u) Brokers’ Fees . The Company does not have any liability or obligation to pay any fees or commissions to any Broker, finder or agent with respect to the transactions contemplated by this Agreement, except for the payment of the Placement Agent Fee to the Placement Agent, as applicable.

 

4. COVENANTS .

 

(a) Best Efforts . Each party shall use its best efforts timely to satisfy each of the conditions to be satisfied by it as provided in Sections 5 and 6 of this Agreement.

 

(b) Form D . The Company agrees to file a Form D with respect to the offer and sale of the Notes as required under Regulation D. The Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify the Notes (and the Unit Shares, the Unit Warrants and the Unit Warrant Shares), or obtain an exemption for the Notes (and the Unit Shares, the Unit Warrants and the Unit Warrant Shares) for sale to the Buyers at the Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of the United States and shall provide evidence of any such action so taken to the Buyers on or prior to the Closing Date.

 

 
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(c) Reporting Status . Until the date on which the Buyer(s) shall have sold all the Common Stock, including the Unit Shares and Unit Warrant Shares, the Company shall file in a timely manner (or, with respect to Form 8-K reports, shall use its reasonable commercial efforts to file in a timely manner) all reports required to be filed with the SEC pursuant to the Exchange Act, and the regulations of the SEC thereunder, and the Company shall not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would otherwise permit such termination.

 

(d) Use of Proceeds . The Company shall use the net proceeds from the sale of the Notes (after deducting fees and expenses (including brokerage fees, if applicable, legal fees and expenses and fees payable to the Escrow Agent) for certain payments to content owners, working capital and general corporate purposes.

 

(e) Listings or Quotation . The Company shall use its best efforts to maintain the listing or quotation of its Common Stock upon the OTCQB tier of the OTC marketplace. The Company plans to list its securities for trading on the NASDAQ Capital Market in connection with the consummation of the Qualified Offering.

 

(f) Resales Absent Effective Registration Statement . Each of the Buyers understands and acknowledges that (i) the Transaction Documents will, if applicable, require the Company to issue and deliver the Unit Shares and the Unit Warrant Shares to the Buyers with legends restricting their transferability under the Securities Act, and (ii) Buyer is aware that resales of such Unit Shares and Unit Warrant Shares may not be made unless, at the time of resale, there is an effective registration statement under the Securities Act covering such Buyer’s resale(s) or an applicable exemption from registration.

 

(g) Registration Rights . The Buyers shall have piggyback registration rights with respect to the Unit Shares and Unit Warrant Shares, as further set forth in Section 1(e) hereof.

 

(h) Indemnification of Buyers . In consideration of the Buyer’s execution and delivery of this Agreement and acquiring the Notes hereunder, and in addition to all of the Company’s other obligations under this Agreement, the Company shall defend, protect, indemnify and hold harmless the Buyer(s) and each other holder of the Notes (and, if applicable, the Unit Shares and Unit Warrant Shares), and all of their officers, directors, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Buyer Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Buyer Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by the Buyer Indemnitees or any of them as a result of, or arising out of, or relating to (a) any actual or alleged false acknowledgment, representation or warranty, or misrepresentation or omission to state a material fact by the Company or (b) any breach of any covenant, agreement or obligation of the Company contained in this Agreement. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under applicable law. The indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Buyer Indemnitee against the Company or others, and any liabilities the Company may be subject to pursuant to law.

 

 
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(i) Delivery of Notes and Other Transaction Documents . Promptly after the Closing Date, but in no instance more than seven (7) business days after the Closing, the Company shall deliver to the Buyer(s), the Notes, in the respective amounts set forth on the Buyer Omnibus Signature Pages affixed hereto, together with fully-executed copies of this Agreement and the Security Agreement, each duly executed on behalf of the Company.

 

5. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL .

 

The obligation of the Company hereunder to issue and sell the Notes to the Buyer(s) at each Closing is subject to the satisfaction, at or before each Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

 

(a) Each Buyer shall have executed this Agreement and completed and executed the Investor Certification, the Investor Profile and the Anti-Money Laundering Information Form and delivered them to the Company.

 

(b) The Buyer(s) shall have delivered to the Escrow Agent the Purchase Price for Notes in respective amounts as set forth on the signature page(s) affixed hereto and the Escrow Agent shall have delivered the net proceeds to the Company by wire transfer of immediately available U.S. funds pursuant to the wire instructions provided by the Company.

 

(c) The representations and warranties of the Buyer(s) contained in this Agreement shall be true and correct in all material respects as of the date when made and as of the applicable Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer(s) shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer(s) at or prior to the applicable Closing Date.

 

(d) With respect to the initial Closing, proceeds from the sale of the Notes of not less than the Minimum Amount shall be in escrow pursuant to the Escrow Agreement.

 

6. CONDITIONS TO THE BUYER’S OBLIGATION TO PURCHASE .

 

The obligation of the Buyer(s) hereunder to purchase the Notes at the applicable Closing is subject to the satisfaction, at or before the applicable Closing Date, of each of the following conditions:

 

(a) The representations and warranties of the Company contained in this Agreement and the other Transaction Documents shall be true and correct in all material respects (except to the extent that any of such representations and warranties is already qualified as to materiality in Section 3 above, in which case, such representations and warranties shall be true and correct without further qualification) as of the date when made and as of the applicable Closing Date as though made at that time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement and the other Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the applicable Closing Date.

 

 
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(b) The Company shall have obtained any and all consents, permits, approvals, registrations and waivers necessary or appropriate for consummation by the Company of the purchase and sale of the Notes and the transactions contemplated hereby or under the Transaction Documents, all of which shall be in full force and effect.

 

(c) The Buyers shall have received a certificate, executed by the President of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyers.

 

(d) The Company shall have delivered to the Buyers a certificate, executed on its behalf by an appropriate officer, dated as of the Closing Date, certifying the resolutions adopted by its Board of Directors approving the transactions contemplated by this Agreement, the other Transaction Documents and the issuance of the Notes, certifying the current versions of its Certificate of Incorporation and By-laws (or equivalent documents), certifying as to the good standing of the Company in the jurisdiction of its formation and in jurisdictions authorized to conduct business, and certifying as to the signatures and authority of persons signing this Agreement on behalf of the Company. The foregoing certificate shall only be required to be delivered on the first Closing Date, unless any information contained in the certificate has changed.

 

(e) Legal Opinion . CKR Law LLP, counsel to the Company, shall deliver an opinion addressed to the Buyers and the Placement Agent, dated as of the Closing Date, in form and substance reasonably acceptable to the Buyers and Placement Agent.

 

7. GOVERNING LAW: MISCELLANEOUS .

 

(a) Governing Law . This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York without regard to the principles of conflict of laws. The parties further agree that any action between them shall be heard exclusively in federal or state court sitting in the New York County, New York, and expressly consent to the jurisdiction and venue of the Supreme Court of New York, sitting in New York County and the United States District Court for the Southern District of New York for the adjudication of any civil action asserted pursuant to this paragraph.

 

(b) Irrevocable Subscription . Each of the Buyers hereby acknowledges and agrees that the subscription hereunder is irrevocable by such Buyer, except as required by applicable law, and that this Agreement shall survive the death or disability of the Buyer and shall be binding upon and inure to the benefit of the parties and their heirs, executors, administrators, successors, legal representatives, and permitted assigns. If the Buyer is more than one person, the obligations of the Buyer hereunder shall be joint and several and the agreements, representations, warranties, and acknowledgments herein shall be deemed to be made by and be binding upon each such person and such person’s heirs, executors, administrators, successors, legal representatives, and permitted assigns.

 

 
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(c) Expenses . Each of the parties hereto shall pay its own fees and expenses (including the fees of any attorneys, accountants, appraises or others engaged by such party) in connection with this Agreement and the transactions contemplated hereby whether or not the transactions contemplated hereby are consummated; provided, however , that the Company will reimburse the Placement Agent for its legal fees and expenses in an aggregate amount equal to the lesser of (i)$10,000 or (ii)1% of the aggregate Purchase Price paid for Notes sold in the Offering .

 

(d) Counterparts . This Agreement may be executed in several counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. All of such counterparts shall be read as though one, and they shall have the same force and effect as though all the signers had signed a single page. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.

 

(e) Headings . The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.

 

(f) Severability . 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.

 

(g) Entire Agreement, Amendments . This Agreement supersedes all other prior oral or written agreements between the Buyer(s), the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein (including any term sheet), and this Agreement, the other Transaction Documents and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor any Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the party to be charged with enforcement.

 

 
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(h) Notices . Any notices, consents, waivers, or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered (i) upon receipt, when delivered personally; (ii) upon confirmation of receipt, when sent by facsimile; (iii) upon receipt when sent by U.S. certified mail, return receipt requested, or (iv) one (1) day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:

 

 

CÜR Media, Inc.

2217 New London Turnpike

South Glastonbury, CT 06073

Attention: Kelly Sardo, CFO

Telephone: 860.430.1520

 

 

With a copy to:

CKR Law LLP

1330 Avenue of the Americas, 14 th Floor

New York, NY 10019

Attention: Eric C. Mendelson

Telephone: 212.259.7300

 

If to the Buyer(s), to its address and facsimile number set forth on the Buyer Omnibus Signature Page affixed hereto. Each party shall provide five (5) days’ prior written notice to the other party of any change in address or facsimile number.

 

(i) Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. Neither the Company nor any Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other party hereto; provided, however, that the Company may assign this Agreement and its rights and obligations hereunder and under the Notes to an affiliated entity without the consent of any Buyer if simultaneously therewith the affiliated entity assumes the obligations of the Company under this Agreement.

 

(j) No Third Party Beneficiaries . This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

 

(k) Survival . Unless this Agreement is terminated under Section 7(n), the representations and warranties of the Company and the Buyer(s) contained in Sections 2 and 3, the agreements and covenants set forth in Sections 4 and 7 shall survive the Closing for a period of twelve (12) months following the date on which all of the Notes are repaid in full or converted in their entirety (whichever is the earliest). Each Buyer shall be responsible only for its own representations, warranties, agreements and covenants hereunder.

 

(l) Publicity . The Company shall have the right to approve, before issuance any press release or any other public statement with respect to the transactions contemplated hereby made by any other party; and the Company shall be entitled, without the prior approval of any Buyer, to issue any press release or other public disclosure with respect to such transactions required under applicable securities or other laws or regulations or as it otherwise deems appropriate.

 

(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.

 

 
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(n) Termination . In the event that the initial Closing shall not have occurred with respect to the Buyers on or before thirty (30) business days from the date hereof due to the Company’s or the Buyer’s failure to satisfy the conditions set forth in Sections 5 and 6 above (and the non-breaching party’s failure to waive such unsatisfied condition(s)), the non-breaching party shall have the option to terminate this Agreement with respect to such breaching party by providing five (5) days’ written notice to such breaching party of the non-breaching party’s intent to terminate this Agreement (and if the non-breaching party is the Buyer, to also withdraw its subscription) at the close of business on such date without liability of any party to any other party.

 

(o) 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.

 

(p) Remedies . In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Buyer and the Company will be entitled to specific performance under this Agreement. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agree to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate).

 

(q) ANTI MONEY LAUNDERING REQUIREMENTS

 

The USA PATRIOT Act

What is money laundering?

How big is the problem and why is it important?

The USA PATRIOT Act is designed to detect, deter, and punish terrorists in the United States and abroad. The Act imposes new anti-money laundering requirements on brokerage firms and financial institutions. Since April 24, 2002, all brokerage firms have been required to have new, comprehensive anti-money laundering programs.

  

To help you understand these efforts, we want to provide you with some information about money laundering and our steps to implement the USA PATRIOT Act.

Money laundering is the process of disguising illegally obtained money so that the funds appear to come from legitimate sources or activities. Money laundering occurs in connection with a wide variety of crimes, including illegal arms sales, drug trafficking, robbery, fraud, racketeering, and terrorism.

The use of the U.S. financial system by criminals to facilitate terrorism or other crimes could well taint our financial markets. According to the U.S. State Department, one recent estimate puts the amount of worldwide money laundering activity at $1 trillion a year.

 

 
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What are we required to do to eliminate money laundering?

Under new rules required by the USA PATRIOT Act, our anti-money laundering program must designate a special compliance officer, set up employee training, conduct independent audits, and establish policies and procedures to detect and report suspicious transaction and ensure compliance with the new laws.

As part of our required program, we may ask you to provide various identification documents or other information. Until you provide the information or documents we need, we may not be able to effect any transactions for you.

 

(r) Omnibus Signature Page . This Agreement is intended to be read and construed in conjunction with the Securities Purchase Agreement and Security Agreement. Accordingly, pursuant to the terms and conditions of this Agreement and such related agreements, it is hereby agreed that the execution by the Buyer of this Agreement, in the place set forth on the Buyer Omnibus Signature Page below, shall constitute agreement to be bound by the terms and conditions hereof and the terms and conditions of the Securities Purchase Agreement and Security Agreement, with the same effect as if such separate but related agreement were separately signed.

 

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

 

 

COMPANY:

 

 

 

 

CÜR MEDIA, INC.

 

       
By:

 

Name:

Kelly Sardo  
 

Title:

Chief Financial Officer  

 

 

 

 

 

BUYERS:

 

 

 

 

 

 

The Buyers executing the Omnibus Signature Page attached hereto as Annex A and the documents annexed thereto and delivering the same to the Company or their agents shall be deemed to have executed this Securities Purchase Agreement and agreed to the terms hereof.

 

  

 
30
 
 

  

 

A. To subscribe for Notes in the private offering of CÜR Media, Inc. :

 

 

1. Date and Fill in the principal amount of Notes being purchased and Complete and Sign the Buyer Omnibus Signature Page of the Securities Purchase Agreement, attached as Annex A .

 

 

2. Initial the Investor Certification attached as Annex B .

 

 

3. Complete and Sign the Investor Profile attached as Annex C .

 

 

4. Complete and Sign the Anti-Money Laundering Information Form attached as Annex D .

 

 

5. Fax or email all forms and then send all signed original documents to:

  

CKR Law LLP

1330 Avenue of the Americas, 14th Floor

New York, NY 10019

Facsimile Number: 212.259.8200

Telephone Number: 212.259.7300

Attention: Kathleen L. Rush

Email: krush@ckrlaw.com

 

6. If you are paying the Purchase Price by wire transfer, you should send a wire transfer for the exact dollar amount of the Purchase Price of the principal amount of Notes you are offering to purchase according to the following instructions:

 

 

Bank Name:

 

PNC Bank

 

Bank Address:

 

300 Delaware Avenue

Wilmington, DE 19801

 

ABA/Routing #:

 

031100089

 

SWIFT Code:

 

PNCCUS33

 

Account Name:

 

Delaware Trust Company

 

Account Number:

 

5605012373

 

FFC:

 

CÜR MEDIA, INC. Subscription Escrow #5; Account # 79-2689

 

 

MUST INCLUDE THE SUBSCRIBER’S NAME

 

 
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Annex A

 

BUYER OMNIBUS SIGNATURE PAGE

to

Securities Purchase Agreement and

Security Agreement

 

The undersigned, desiring to: (i) enter into the Securities Purchase Agreement, dated as of ____________ ___, 1 2016 (the “Securities Purchase Agreement ”), between the undersigned, CÜR Media, Inc. (the “Company”), and the other parties thereto, in or substantially in the form furnished to the undersigned, (ii) enter into the Security Agreement (the “Security Agreement ”), among the undersigned, the Company, and the other parties thereto, in or substantially in the form furnished to the undersigned, and (iii) purchase the Notes of the Company as set forth below, hereby agrees to purchase such Notes from the Company and further agrees to join the Securities Purchase Agreement and the Security Agreement as a party thereto, with all the rights and privileges appertaining thereto, and to be bound in all respects by the terms and conditions thereof. The undersigned specifically acknowledges having read the representations section in the Securities Purchase Agreement entitled “Buyer’s Representations and Warranties,” and hereby represents that the statements contained therein are complete and accurate with respect to the undersigned as a Buyer.

 

The Buyer hereby elects to purchase US$____________ principal amount of Notes (to be completed by the Buyer) under the Securities Purchase Agreement.

 

 

 

BUYER (individual)

 

BUYER (entity)

 

 

 

 

 

 

 

 

 
Signature  

Name of Entity

 

 

 

 

 

 

 

 

 
Print Name  

Signature

 
   

 

   
 

Print Name:

 

Signature (if Joint Tenants or Tenants in Common)

 

Title:

 
   

 

   

Address of Principal Residence:

 

Address of Executive Offices:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Social Security Number(s):

 

IRS Tax Identification Number:

 

 

 

 

 

 

 

 

 

 

Telephone Number:

 

Telephone Number:

 

 

 

 

 

 

 

   

Facsimile Number:

 

Facsimile Number:

 

 

 

 

 

 

 

 

 

 

E-mail Address:

 

E-mail Address:

 

 

 

 

 

   

DATED: ________________________

_________

1 Will reflect the Closing Date. Not to be completed by Buyer.

 

 
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Annex B

 

CÜR MEDIA, INC.

 

INVESTOR CERTIFICATION

 

For Individual Investors Only

(all Individual Investors must INITIAL where appropriate):

  

Initial _______

I have a net worth of at least US$1 million either individually or through aggregating my individual holdings and those in which I have a joint, community property or other similar shared ownership interest with my spouse. (For purposes of calculating your net worth under this paragraph, (a) your primary residence shall not be included as an asset ; (b) indebtedness secured by your primary residence, up to the estimated fair market value of your primary residence at the time of your purchase of the securities, shall not be included as a liability (except that if the amount of such indebtedness outstanding at the time of your purchase of the securities exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of your primary residence, the amount of such excess shall be included as a liability); and (c) indebtedness that is secured by your primary residence in excess of the estimated fair market value of your primary residence at the time of your purchase of the securities shall be included as a liability.)

Initial _______

I have had an annual gross income for the past two years of at least US$200,000 (or US$300,000 jointly with my spouse) and expect my income (or joint income, as appropriate) to reach the same level in the current year.

Initial _______

I am a director or executive officer of CÜR Media, Inc.

  

For Non-Individual Investors

(all Non-Individual Investors must INITIAL where appropriate):

 

Initial _______ The investor certifies that it is a partnership, corporation, limited liability company or business trust that is 100% owned by persons who meet at least one of the criteria for Individual Investors set forth above.
Initial _______ The investor certifies that it is a partnership, corporation, limited liability company or business trust that has total assets of at least US$5 million and was not formed for the purpose of investing the Company.
Initial _______ The investor certifies that it is an employee benefit plan whose investment decision is made by a plan fiduciary (as defined in ERISA §3(21)) that is a bank, savings and loan association, insurance company or registered investment advisor.
Initial _______ The investor certifies that it is an employee benefit plan whose total assets exceed US$5,000,000 as of the date of this Agreement.
Initial _______ The undersigned certifies that it is a self-directed employee benefit plan whose investment decisions are made solely by persons who meet at least one of the criteria for Individual Investors.
Initial _______ The investor certifies that it is a U.S. bank, U.S. savings and loan association or other similar U.S. institution acting in its individual or fiduciary capacity.
Initial _______ The undersigned certifies that it is a broker-dealer registered pursuant to §15 of the Securities Exchange Act of 1934.
Initial _______ The investor certifies that it is an organization described in §501(c)(3) of the Internal Revenue Code with total assets exceeding US$5,000,000 and not formed for the specific purpose of investing in the Company.
Initial _______ The investor certifies that it is a trust with total assets of at least US$5,000,000, not formed for the specific purpose of investing in the Company, and whose purchase is directed by a person with such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of the prospective investment.
Initial _______ The investor certifies that it is a plan established and maintained by a state or its political subdivisions, or any agency or instrumentality thereof, for the benefit of its employees, and which has total assets in excess of US$5,000,000.
Initial _______ The investor certifies that it is an insurance company as defined in §2(13) of the Securities Act of 1933, or a registered investment company.

  

 
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For Non-U.S. Person Investors

(all Investors who are not a U.S. Person must INITIAL this section):

 

Initial_______

The investor is not a “U.S. Person” as defined in Regulation S; and specifically the investor is not:

 

A. a natural person resident in the United States of America, including its territories and possessions (“United States”);

 

B. a partnership or corporation organized or incorporated under the laws of the United States;

 

C. an estate of which any executor or administrator is a U.S. Person;

 

D. a trust of which any trustee is a U.S. Person;

 

E. an agency or branch of a foreign entity located in the United States;

 

F. a non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. Person;

 

G. a discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; or

 

H. a partnership or corporation: (i) organized or incorporated under the laws of any foreign jurisdiction; and (ii) formed by a U.S. Person principally for the purpose of investing in securities not registered under the Securities Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a) under the Securities Act) who are not natural persons, estates or trusts.

 

And, in addition:

 

I. the investor was not offered the securities in the United States;

 

J. at the time the buy-order for the securities was originated, the investor was outside the United States; and

 

K. the investor is purchasing the securities for its own account and not on behalf of any U.S. Person (as defined in Regulation S) and a sale of the securities has not been pre-arranged with a purchaser in the United States.

  

 
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Annex C

 

CÜR MEDIA, INC.

Investor Profile

(Must be completed by Investor)

 

Section–A ‑ Personal Investor Information

   

Investor Name(s):

 

Individual executing Profile or Trustee:

 

Social Security Numbers / Federal I.D. Number:

 

Date of Birth: Marital Status:

Joint Party Date of Birth: Investment Experience (Years):

Annual Income: Liquid Net Worth:

 

Net Worth*:

 

Tax Bracket: _____ 15% or below _____ 25% - 27.5% _____ Over 27.5%

 

Home Street Address:

 

Home City, State & Zip Code:

 

Home Phone: Home Fax: Home Email:

 

Employer:

 

Employer Street Address:

 

Employer City, State & Zip Code:

 

Bus. Phone: Bus. Fax: Bus. Email:

 

Type of Business:

 

Outside Broker/Dealer:

     

Section B – Certificate Delivery Instructions

 

____ Please deliver certificate to the Employer Address listed in Section A.

____ Please deliver certificate to the Home Address listed in Section A.

____ Please deliver certificate to the following address: ________________________________________________

 

Section C – Form of Payment – Wire Transfer

 

____ Wire funds from my outside account according to Section 1(a) of the Securities Purchase Agreement.

____ The funds for this investment are rolled over, tax deferred from __________ within the allowed 60 day window.

 

Please check if you are a FINRA member or affiliate of a FINRA member firm: ____

 

 

 

 

 

Investor Signature

 

Date

__________

* For purposes of calculating your net worth in this form, (a) your primary residence shall not be included as an asset ; (b) indebtedness secured by your primary residence, up to the estimated fair market value of your primary residence at the time of your purchase of the securities, shall not be included as a liability (except that if the amount of such indebtedness outstanding at the time of your purchase of the securities exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of your primary residence, the amount of such excess shall be included as a liability); and (c) indebtedness that is secured by your primary residence in excess of the estimated fair market value of your primary residence at the time of your purchase of the securities shall be included as a liability.

 

 
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ANTI MONEY LAUNDERING REQUIREMENTS

 

The USA PATRIOT Act

 

The USA PATRIOT Act is designed to detect, deter, and punish terrorists in the United States and abroad. The Act imposes new anti-money laundering requirements on brokerage firms and financial institutions. Since April 24, 2002 all brokerage firms have been required to have new, comprehensive anti-money laundering programs.

 

To help you understand these efforts, we want to provide you with some information about money laundering and our steps to implement the USA PATRIOT Act.

  

What is money laundering?

 

Money laundering is the process of disguising illegally obtained money so that the funds appear to come from legitimate sources or activities. Money laundering occurs in connection with a wide variety of crimes, including illegal arms sales, drug trafficking, robbery, fraud, racketeering, and terrorism.

  

How big is the problem and why is it important?

 

The use of the U.S. financial system by criminals to facilitate terrorism or other crimes could well taint our financial markets. According to the U.S. State Department, one recent estimate puts the amount of worldwide money laundering activity at $1 trillion a year.

  

What are we required to do to eliminate money laundering?

 

Under rules required by the USA PATRIOT Act, our anti-money laundering program must designate a special compliance officer, set up employee training, conduct independent audits, and establish policies and procedures to detect and report suspicious transaction and ensure compliance with such laws. As part of our required program, we may ask you to provide various identification documents or other information. Until you provide the information or documents we need, we may not be able to effect any transactions for you.

 

 
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Annex D

 

ANTI-MONEY LAUNDERING INFORMATION FORM

The following is required in accordance with the AML provision of the USA PATRIOT ACT.

(Please fill out and return with requested documentation.)

 

INVESTOR NAME: ______________________________________________________

 

LEGAL ADDRESS: ______________________________________________________

 

SSN# or TAX ID#

OF INVESTOR: ______________________________________________________

 

YEARLY INCOME: __________________________________________________________

 

FOR INVESTORS WHO ARE INDIVIDUALS : AGE: ________________________________

 

NET WORTH: ______________________________________________________________ *

 

* For purposes of calculating your net worth in this form, (a) your primary residence shall not be included as an asset ; (b) indebtedness secured by your primary residence, up to the estimated fair market value of your primary residence at the time of your purchase of the securities, shall not be included as a liability (except that if the amount of such indebtedness outstanding at the time of your purchase of the securities exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of your primary residence, the amount of such excess shall be included as a liability); and (c) indebtedness that is secured by your primary residence in excess of the estimated fair market value of your primary residence at the time of your purchase of the securities shall be included as a liability.

 

FOR INVESTORS WHO ARE INDIVIDUALS : OCCUPATION: ________________________

 

ADDRESS OF BUSINESS OR OF EMPLOYER:____________________________________

 

___________________________________________________________________________

 

FOR INVESTORS WHO ARE ENTITIES:

 

YEARLY INCOME:____________ NET WORTH:____________

 

TYPE OF BUSINESS: ____________________________________

 

INVESTMENT OBJECTIVE(S) (FOR ALL INVESTORS): ___________________________

 

1. IDENTIFICATION & DOCUMENTATION AND SOURCE OF FUND . Please submit a copy of non-expired identification for the authorized signatory(ies) on the investment documents, showing name, date of birth, address and signature. The address shown on the identification document MUST match the Investor’s address shown on the Investor Signature Page.

 

Current Driver’s License

or

Valid Passport

or

Identity Card

 

( Circle one or more)

 

2. If the Investor is a corporation, limited liability company, trust or other type of entity, please submit the following requisite documents: (i) Articles of Incorporation, By-Laws, Certificate of Formation, Operating Agreement, Trust or other similar documents for the type of entity; and (ii) Corporate Resolution or power of attorney or other similar document granting authority to signatory(ies) and designating that they are permitted to make the proposed investment.

 

3. Please advise where the funds were derived from to make the proposed investment:

 

Investments

Savings

Proceeds of Sale

Other ____________

 

(Circle one or more)

 

Signature: _______________________________________

 

Print Name: ______________________________________

 

Title (if applicable): ________________________________

 

Date: ___________________________________________

 

37

 

EXHIBIT 10.7

 

ESCROW AGREEMENT

 

Escrow Agreement (the “ Escrow Agreement ”), dated as of the effective date (the “ Effective Date ”) set forth on Schedule 1 hereto (“ Schedule 1 ”), by and among the corporation identified as the “Company” on Schedule 1 hereto (the “ Company ”), the limited liability company identified as the “Depositor” on Schedule 1 hereto (the “ Depositor ”), and Delaware Trust Company, as escrow agent hereunder (the “ Escrow Agent ”).

 

WHEREAS , the Company seeks to complete a private placement offering (the “ Offering ”) of up to a maximum of $3,000,000 (subject to increase upon mutual agreement of the Company and Depositor) in principal amount (the “ Maximum Amount ”) of the Company’s 12% Senior Secured Convertible Promissory Notes (the “ Notes ”), at a purchase price of 100% (par) per Note (the “ Purchase Price ”), pursuant to the terms of a Securities Purchase Agreement between the Company and the buyer(s) set forth on the signature page(s) affixed thereto (the “ Purchase Agreement ”); and

 

WHEREAS , the Offering is being made on a reasonable best efforts basis until the Maximum Amount is reached, pursuant to Section 4(a)(2) under the Securities Act of 1933, as amended (the “ Securities Act ”) and/or Rule 506(b) of Regulation D (“ Regulation D ”) and/or Regulation S (“ Regulation S ”) as promulgated by the U.S. Securities and Exchange Commission (the “ SEC ”) thereunder; and

 

WHEREAS , Notes may be offered through May 31, 2016 (the “ Initial Offering Period ”), which period may be extended for thirty (30) days if agreed to by the Company and the Depositors (this additional period and the Initial Offering Period shall be referred to as the “ Offering Period ”); and

 

WHEREAS , no minimum amount of subscriptions for Notes is needed to complete the initial closing under the Offering (the “Initial Closing”) although such Initial Closing is subject to the satisfaction of other closing conditions (collectively, the “Initial Closing Conditions”); and

 

WHEREAS , after the Initial Closing, the Company and the Depositors may mutually agree to continue the Offering until the Maximum Amount has been reached or the end of the Offering Period, whichever is earlier, and subsequent closings (each, a “ Subsequent Closing ”) may take place on an intermittent basis, as deemed practical by the Company and the Depositors, conditioned on the receipt of acceptable subscriptions (this requirement for the receipt of acceptable subscriptions, together with certain other conditions to closing, are collectively referred to as the “ Subsequent Closing Conditions ”); and

 

WHEREAS , the subscribers in the Offering (the “ Subscribers ”), in connection with their intent to purchase Notes in the Offering, shall execute and deliver the Purchase Agreement and certain related documents memorializing the Subscribers’ agreements to purchase and the Company’s agreement to sell the number of Notes set forth therein at the Purchase Price; and

 

WHEREAS , the parties hereto desire to provide for the safekeeping of the Escrow Deposit (as defined below) until such time as the Escrow Deposit is released by the Escrow Agent in accordance with the terms and conditions of this Agreement; and

 

WHEREAS , the Escrow Agent has agreed to accept, hold, and disburse the Escrow Deposit deposited with it and the earnings thereon in accordance with the terms of this Escrow Agreement.

 

 
1
 
 

 

NOW THEREFORE , in consideration of the foregoing and of the mutual covenants hereinafter set forth, the parties hereto agree as follows:

 

1. Appointment . The Company and Depositors hereby appoint the Escrow Agent as their escrow agent for the purposes set forth herein, and the Escrow Agent hereby accepts such appointment under the terms and conditions set forth herein.

 

2. Escrow Fund . On or before the Initial Closing, or on or before any Subsequent Closing with respect to the Notes sold after the Initial Closing, each Subscriber shall have delivered to the Escrow Agent the full Purchase Price for the total number of Notes subscribed for by such Subscriber by check sent to the Escrow Agent at its address set forth on Schedule 1 hereto, or by wire transfer of immediately available funds pursuant to the wire transfer instructions set forth on Schedule 2 hereto, to the account of the Escrow Agent referenced on Schedule 2 hereto. All funds received from the Subscribers in connection with the sale of the Notes in the Offering shall be deposited with the Escrow Agent (the “ Escrow Deposit ”). The Escrow Agent shall hold the Escrow Deposit and, subject to the terms and conditions hereof, shall invest and reinvest the Escrow Deposit and the proceeds thereof (the “ Escrow Fund ”) as directed in Section 3 hereto.

 

3. Investment of Escrow Fund . During the term of this Escrow Agreement, the Escrow Fund shall be invested and reinvested by the Escrow Agent in the investment indicated on Schedule 1 hereto, or such other investments as shall be directed in writing by the Company and the Depositors and as shall be acceptable to the Escrow Agent. All investment orders involving U.S. Treasury obligations, commercial paper and other direct investments may be executed through broker-dealers selected by the Escrow Agent. Periodic statements will be provided to the Company and the Depositors reflecting transactions executed on behalf of the Escrow Fund. The Company and the Depositors, upon written request, will receive a statement of transaction details upon completion of any securities transaction in the Escrow Fund without any additional cost. The Escrow Agent shall have the right to liquidate any investments held in order to provide funds necessary to make required payments under this Escrow Agreement. The Escrow Agent shall have no liability for any loss sustained as a result of any investment in an investment indicated on Schedule 1 hereto, or any investment made pursuant to the instructions of the parties hereto or as a result of any liquidation of any investment prior to its maturity or for the failure of the parties to give the Escrow Agent instructions to invest or reinvest the Escrow Fund. The Escrow Agent may earn compensation in the form of short-term interest (“ float ”) on items like uncashed distribution checks (from the date issued until the date cashed), funds that the Escrow Agent is directed not to invest, deposits awaiting investment direction or received too late to be invested overnight in previously directed investments.

 

 
2
 
 

 

4. Disposition and Termination . The Depositors and the Company agree to notify the Escrow Agent in writing of any valid revocations and the Initial Closing date of the Offering. Additionally, subsequent to an Initial Closing, the Depositors and the Company agree to notify the Escrow Agent in writing of Subsequent Closing dates, if any, and of the termination of the Offering. Upon receipt of such written notification(s), the following procedures will take place:

 

 

(i) Release of Escrow Fund upon Initial Closing . Prior to the Initial Closing, the Company and the Depositors shall deliver to the Escrow Agent joint written instructions executed by a duly authorized executive officer of each of the Company and the Depositors (“ Instructions ”), which Instructions shall provide the day designated as the Initial Closing date, and shall specify the time and payment instructions, including the address and tax identification number of each payee, of the Escrow Fund, including with respect to placement fees that may be disbursed to the Depositors or to any other placement agent or selected dealer with respect to the Offering. Further, the Instructions shall include an acknowledgement and agreement from the Company and the Depositors that as of the Initial Closing date, the Closing Conditions have been or will be fully satisfied. The Escrow Agent shall, at the time and in accordance with the payment instructions specified in the Instructions, deliver the Escrow Fund (without interest).

 

 

 

 

(ii) Release of Escrow Fund upon a Subsequent Closing . Prior to a Subsequent Closing, the Company and the Depositors shall deliver to the Escrow Agent Instructions, which Instructions shall provide the day designated as the Subsequent Closing date, and acknowledge and agree that as of the Subsequent Closing date the Subsequent Closing Conditions have been or will be fully satisfied and shall specify the time and payment instructions, including the address and tax identification number of each payee, of the Escrow Fund, including with respect to placement fees that may be disbursed to the Depositors or to any other placement agent or selected dealer. The Escrow Agent shall, at the time and in accordance with the payment instructions specified in the Instructions, deliver the then Escrow Fund (without interest).

 

 

 

 

(iii) Release of Escrow Fund on Termination of Offering . In the event that the Escrow Agent shall have received written notice executed by a duly authorized executive officer of each of the Company and the Depositors indicating that the Offering has been terminated prior to the Initial Closing and designating a termination date, the Escrow Agent shall return to each Subscriber, the Purchase Price (without interest and deduction) delivered by such Subscriber to the Escrow Agent. The Company and the Depositors shall provide the Escrow Agent with time and payment instructions, including the address and tax identification number of each payee, for each Subscriber whose Purchase Price the Escrow Agent is to deliver pursuant to this Section (but in no case shall the Escrow Agent deliver such Exercise Price more than seven (7) days following receipt by the Escrow Agent of such delivery instructions).

 
3
 
 

 

 

(iv) Return of Escrow Fund on Rejection of Subscription . In the event the Company determines it is necessary or appropriate to reject the subscription of any Subscriber for whom the Escrow Agent has received an Escrow Deposit, the Company shall deliver written notice of such event to the Escrow Agent and the Depositors which notice shall include the reason for such rejection and the time and payment instructions, including the address and tax identification number of each payee, for the return to such Subscriber of the Purchase Price delivered by such Subscriber. The Escrow Agent shall deliver such funds (without interest and deduction) pursuant to such written notice.

 

 

 

 

(v) Return of Escrow Fund on Revocation of Subscription . In the event that the Escrow Agent shall have received written notice executed by a duly authorized executive officer of each of the Company and the Depositors indicating that any subscription has been revoked prior to the Initial Closing, pursuant to the subscription agreement between the Company and the relevant Subscriber, the Escrow Agent shall return to such revoking Subscriber, the Purchase Price (without interest and deduction) delivered by such Subscriber to the Escrow Agent. The Company and the Depositors shall provide the Escrow Agent with time and payment instructions, including the address and tax identification number of each payee, for each Subscriber whose Purchase Price the Escrow Agent is to deliver pursuant to this Section (but in no case shall the Escrow Agent deliver such Purchase Price more than seven (7) days following receipt by the Escrow Agent of such delivery instructions).

 

 

 

 

(vi) Delivery Pursuant to Court Order . Notwithstanding any provision contained herein, upon receipt by the Escrow Agent of a final and non-appealable judgment, order, decree or award of a court of competent jurisdiction (a “ Court Order ”), the Escrow Agent shall deliver the Escrow Fund in accordance with the Court Order. Any Court Order shall be accompanied by an opinion of counsel for the party presenting the Court Order to the Escrow Agent (which opinion shall be satisfactory to the Escrow Agent) to the effect that the court issuing the Court Order has competent jurisdiction and that the Court Order is final and non-appealable.

Upon delivery of the Escrow Fund by the Escrow Agent (i) to the Company following the Initial Closing, if there are to be no Subsequent Closings, (ii) following a Subsequent Closing, or (iii) to the Subscribers upon termination of the Offering prior to the Initial Closing, as the case may be, and in each case notice of termination of the Offering having been delivered by the Company and the Depositors to the Escrow Agent, this Escrow Agreement shall terminate, subject to the provisions of Section 8.

 

 
4
 
 

 

5. Escrow Agent . The Escrow Agent undertakes to perform only such duties as are expressly set forth herein and no duties shall be implied. The Escrow Agent shall have no liability under and no duty to inquire as to the provisions of any agreement other than this Escrow Agreement. The Escrow Agent may rely upon and shall not be liable for acting or refraining from acting upon any written notice, instruction or request furnished to it hereunder and believed by it to be genuine and to have been signed or presented by the proper party or parties. The Escrow Agent shall be under no duty to inquire into or investigate the validity, accuracy or content of any such document. The Escrow Agent shall have no duty to solicit any payments which may be due it or the Escrow Fund. The Escrow Agent shall not be liable for any action taken or omitted by it in good faith except to the extent that a court of competent jurisdiction determines that the Escrow Agent’s gross negligence or willful misconduct was the primary cause of any loss to the Company or Depositors. The Escrow Agent may execute any of its powers and perform any of its duties hereunder directly or through agents or attorneys (and shall be liable only for the careful selection of any such agent or attorney) and may consult with counsel, accountants and other skilled persons to be selected and retained by it. The Escrow Agent shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the advice or opinion of any such counsel, accountants or other skilled persons. In the event that the Escrow Agent shall be uncertain as to its duties or rights hereunder or shall receive instructions, claims or demands from any party hereto which, in its opinion, conflict with any of the provisions of this Escrow Agreement, it shall be entitled to refrain from taking any action and its sole obligation shall be to keep safely all property held in escrow until it shall be directed otherwise in writing by all of the other parties hereto or by a final order or judgment of a court of competent jurisdiction. Anything in this Escrow Agreement to the contrary notwithstanding, in no event shall the Escrow Agent be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Escrow Agent has been advised of the likelihood of such loss or damage and regardless of the form of action.

 

6. Succession . The Escrow Agent may resign and be discharged from its duties or obligations hereunder by giving ten (10) Business Days (as defined below) advance notice in writing of such resignation to the other parties hereto specifying a date when such resignation shall take effect. The Escrow Agent shall have the right to withhold an amount equal to any amount due and owing to the Escrow Agent, plus any costs and expenses the Escrow Agent shall reasonably believe may be incurred by the Escrow Agent in connection with the termination of the Escrow Agreement. Any corporation or association into which the Escrow Agent may be merged or converted or with which it may be consolidated shall be the Escrow Agent under this Escrow Agreement without further act.

 

7. Fees . The Company agrees to (i) pay the Escrow Agent upon the Closing and from time to time thereafter reasonable compensation for the services to be rendered hereunder, which unless otherwise agreed in writing shall be as described in Schedule 4 hereto, and (ii) pay or reimburse the Escrow Agent upon request for all expenses, disbursements and advances, including reasonable attorney’s fees and expenses, incurred or made by it in connection with the preparation, execution, performance, delivery, modification and termination of this Escrow Agreement. The Escrow Agent is authorized to deduct such fees from the Escrow Fund at the time of the Initial Closing without prior authorization from the Company or the Depositors. In the event that the Offering is terminated prior to the Initial Closing, the Company agrees to pay the Escrow Agent the Review Fee and the Acceptance Fee as described in Schedule 4 hereto.

 

 
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8. Indemnity. The Company shall indemnify and save harmless the Escrow Agent and its directors, officers, agents and employees (the “ indemnitees ”) from all loss, liability or expense (including the reasonable fees and expenses of in house or outside counsel) arising out of or in connection with (i) the Escrow Agent’s execution and performance of this Escrow Agreement, except in the case of any indemnitee to the extent that such loss, liability or expense is due to the gross negligence or willful misconduct of such indemnitee, or (ii) its following any instructions or other directions from the Company and/or the Depositors, except to the extent that (x) its following any such instruction or direction is in violation of the terms hereof or (y) such loss, liability or expense is due to the gross negligence or willful misconduct of a Depositors, in which case such Depositors shall be the indemnifying party hereunder. The parties hereto acknowledge that the foregoing indemnities shall survive the resignation or removal of the Escrow Agent or the termination of this Escrow Agreement.

 

9. TINs . The Company and the Depositors each represent that its correct TIN assigned by the Internal Revenue Service or any other taxing authority is set forth in Schedule 1 hereto. All interest or other income earned under the Escrow Agreement, if any, shall be allocated and/or paid as directed in a joint written direction of the Company and the Depositors and reported by the recipient to the Internal Revenue Service or any other taxing authority. Unless otherwise indicated in writing by the Company and the Depositors, no taxes or other withholdings are required to be made under applicable law or otherwise with respect to any payment to be made by Escrow Agent. All documentation necessary to support a claim of exemption or reduction in such taxes or other withholdings has been timely collected by Company and the Depositors and copies will be provided to Escrow Agent promptly upon a request therefor. Unless otherwise agreed to in writing by Escrow Agent, all tax returns required to be filed with the IRS and any other taxing authority as required by law with respect to payments made hereunder shall be timely filed and prepared by Company and/or the Depositors, as applicable, including but not limited to any applicable reporting or withholding pursuant to the Foreign Account Tax Reporting Act (“ FATCA ”). The parties hereto acknowledge and agree that the Escrow Agent shall have no responsibility for the preparation and/or filing of any tax return or any applicable FATCA reporting with respect to the Escrow Fund. The Escrow Agent shall withhold any taxes it deems appropriate, including but not limited to required withholding in the absence of proper tax documentation, and shall remit such taxes to the appropriate authorities as it determines may be required by any law or regulation in effect at the time of the distribution..

 

10. Notices . All communications hereunder shall be in writing and shall be deemed to be duly given and received:

 

 

(i) upon delivery if delivered personally or upon confirmed transmittal if by facsimile;

 

 

 

 

(ii) on the next Business Day (as defined herein) if sent by overnight courier; or

 

 

 

 

(iii) four (4) Business Days after mailing if mailed by prepaid registered mail, return receipt requested, to the appropriate notice address set forth on Schedule 1 hereto or at such other address as any party hereto may have furnished to the other parties in writing by registered mail, return receipt requested.

Notwithstanding the above, in the case of communications delivered to the Escrow Agent pursuant to (ii) and (iii) of this Section 10, such communications shall be deemed to have been given on the date received by the Escrow Agent. In the event that the Escrow Agent, in its sole discretion, shall determine that an emergency exists, the Escrow Agent may use such other means of communication as the Escrow Agent deems appropriate. “ Business Day ” shall mean any day other than a Saturday, Sunday or any other day on which the Escrow Agent located at the notice address set forth on Schedule 1 hereto is authorized or required by law or executive order to remain closed.

 

 
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11. Security Procedures . In the event funds transfer instructions are given (other than in writing at the time of execution of this Escrow Agreement), whether in writing, by telecopier or otherwise, the Escrow Agent is authorized to seek confirmation of such instructions by telephone call-back to the person or persons designated on Schedule 3 hereto, and the Escrow Agent may rely upon the confirmation of anyone purporting to be the person or persons so designated. The persons and telephone numbers for call-backs may be changed only in a writing actually received and acknowledged by the Escrow Agent. The Escrow Agent and the beneficiary’s bank in any funds transfer may rely solely upon any account numbers or similar identifying numbers provided by the Company or the Depositors to identify (i) the beneficiary, (ii) the beneficiary’s bank, or (iii) an intermediary bank. The Escrow Agent may apply any of the escrowed funds for any payment order it executes using any such identifying number, even where its use may result in a person other than the beneficiary being paid, or the transfer of funds to a bank other than the beneficiary’s bank or an intermediary bank designated. The parties to this Escrow Agreement acknowledge that these security procedures are commercially reasonable.

 

12. Miscellaneous . The provisions of this Escrow Agreement may be waived, altered, amended or supplemented, in whole or in part, only by a writing signed by all of the parties hereto. Neither this Escrow Agreement nor any right or interest hereunder may be assigned in whole or in part by any party, except as provided in Section 6, without the prior consent of the other parties, which consent shall not be unreasonably withheld. This Escrow Agreement shall be governed by and construed under the laws of the State of Delaware. Each party hereto irrevocably waives any objection on the grounds of venue, forum non-conveniens or any similar grounds and irrevocably consents to service of process by mail or in any other manner permitted by applicable law and consents to the jurisdiction of the courts located in the State of Delaware. The parties further hereby waive any right to a trial by jury with respect to any lawsuit or judicial proceeding arising or relating to this Escrow Agreement. No party to this Escrow Agreement is liable to any other party for losses due to, or if it is unable to perform its obligations under the terms of this Escrow Agreement because of, acts of God, fire, floods, strikes, equipment or transmission failure, or other causes reasonably beyond its control. This Escrow Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

 
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IN WITNESS WHEREOF , the parties hereto have executed this Subscription Escrow Agreement as of the date set forth in Schedule 1 .

 

 

Delaware Trust Company

as Escrow Agent

       
By: /s/ Alan R. Halpern

 

Name:

Alan R. Halpern  
  Title: Vice President  

 

 

COMPANY:

 

 

 

 

CÜR MEDIA, INC.

 

       
By: /s/ Kelly Sardo

 

Name:

Kelly Sardo  
 

Title:

Chief Financial Officer  

 

 

DEPOSITOR:

 

 

 

 

KATALYST SECURITIES LLC

 

       
By: /s/ Michael A. Silverman

 

Name:

Michael A. Silverman  
 

Title:

Managing Director  

  

 
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Schedule 1

   

Effective Date:

 

April 26, 2016

 

Name of Company:

 

CÜR Media, Inc.

 

Company Notice Address:

 

2217 New London Turnpike

South Glastonbury, CT 06073

 

Facsimile:

 

(845) 818-3588

 

Company TIN:

 

99-0375741

 

With a copy to:

 

CKR Law LLP

1330 Avenue of the Americas, 14th Floor

New York, NY 10019

Attn: Eric C. Mendelson

 

Facsimile:

 

(212) 259-8200

 

Name of Depositor:

 

Depositor:

 

Katalyst Securities LLC

1330 Avenue of the Americas, 14th Floor

New York, NY 10019

Attn: Michael A. Silverman

 

Depositor TIN:

 

23-3071873

 

With a copy to:

(which shall not

constitute notice)

 

Barbara J. Glenns, Esq.

30 Waterside Plaza, Suite 25G

New York, NY 10010

 

Facsimile:

 

(212) 689-6578

 

Escrow Deposit:

 

$3,000,000, in whole or in parts (subject to increase)

 

Security:

 

12% Senior Secured Convertible Promissory Notes

 

Purchase Price:

 

100% (par) per Note

 
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Investment:

 

 

¨ Goldman Sachs Financial Square Funds Prime Obligations Fund Service Shares (the “Share Class”), an institutional money market mutual fund for which the Escrow Agent serves as shareholder servicing agent and/or custodian or subcustodian. The parties hereto: (i) acknowledge Escrow Agent’s disclosure of the services Escrow Agent is providing to and the fees it receives from Goldman Sachs; (ii) consent to the Escrow Agent’s receipt of these fees in return for providing shareholder services for the Share Class; and (iii) acknowledge that the Escrow Agent has provided on or before the date hereof a Goldman Sachs Financial Square Funds Prime Obligations Fund Service Shares prospectus which discloses, among other things, the various expenses of the Share Class and the fees to be received by the Escrow Agent.

 

 

 

 

¨

Such other investments as Company, Depositors and Escrow Agent may from time to time mutually agree upon in a writing executed and delivered by the Company and the Depositors and accepted by the Escrow Agent.

 

 

 

 

x

The funds shall not be invested.

   

Escrow Agent notice address:

 

Delaware Trust Company

2711 Centerville Road

One Little Falls Centre

Wilmington, DE 19808

Attention: Alan R. Halpern

Fax No.: 302-636-8666

 

Escrow Agent’s compensation: See Appended Schedule 4 .

 

 
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Schedule 2

 

WIRE INSTRUCTIONS

 

PNC Bank

300 Delaware Avenue

Wilmington DE 19899

ABA# 031100089

SWIFT Code: PNCCUS33

Account Name: Delaware Trust Company

Account Number: 5605012373

FFC: CÜR MEDIA, INC. Subscription Escrow #5; Account # 79-2689

MUST INCLUDE THE SUBSCRIBER’S NAME

 

 
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Schedule 3

 

Telephone Number(s) for Call-Backs and

Person(s) Designated to Confirm Funds Transfer Instructions

If to Company:

 

 

Name

Telephone Number(s)

 

 

 

 

 

1. Kelly Sardo

860-430-1520

 

 

 

 

 

2. Eric C. Mendelson

212-259-7300

If to Depositor:

 

 

Name

Telephone Number

 

 

 

 

 

1. Michael A. Silverman

917-696-1708

 

 

 

 

 

2. Barbara J. Glenns

212-689-6153

Telephone call-backs may be made to the Company and the Depositors if joint instructions are required pursuant to this Escrow Agreement.

 

 
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Schedule 4

 

REVIEW FEE:

For initial examination of the Escrow Agreement and all supporting documents. This is a one-time fee payable upon execution of the agreement.

$500.00

ACCEPTANCE FEE:

For initial services associated with establishing the Escrow Account. This is a one-time fee payable upon execution of the agreement.

$500.00

ANNUAL ADMINISTRATION FEE:

An annual charge or any portion of a 12-month period thereof. This fee is payable 45 days after the opening of the Escrow Account or prior to the final disbursement of the Escrow Fund, whichever event occurs first, and in advance of the annual anniversary date thereafter. This charge is not prorated for the first year . There is an additional annual charge of $250.00/subaccount opened.

 

$1,500.00 covering up to 100 deposits. There will be an additional administration fee of $750.00 for each block of 50 deposits over the initial 100 deposits.

 

TRANSACTION FEES:

Wire transfer of fund: $35.00/domestic wire initiated; $50.00/international wire initiated

Checks Cut: $10.00/check cut

Securities Purchase (Buy and Sell): $50.00/transaction

Returned Check: $30.00/returned item

 

Out-of-pocket expenses, fees and disbursements and services of an unanticipated or unexpected nature are not included in the above schedule.

 

 

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 EXHIBIT 10.8

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (“Agreement”) is made and entered into as of _______________, 2016, by and among CÜR Media, Inc., a Delaware corporation (the “ Borrower ”), each subsidiary of the Borrower listed on the signature pages hereof (together with the Borrower, each a “ Grantor ”), and the secured parties listed on the signature pages hereof.

 

WITNESSETH:

 

WHEREAS , pursuant to that certain Securities Purchase Agreement, dated as of even date herewith (as such may be amended, restated, supplemented, or otherwise modified from time to time, including all schedules thereto, collectively, the “ Purchase Agreement ”), by and among the Borrower and each secured party set forth as a Buyer on the signature page(s) affixed thereto (each, a “ Buyer ” or “ Secured Party ”), the Borrower has agreed to sell, and each of the Buyers has agreed to purchase, severally and not jointly, the Notes;

 

WHEREAS , each Grantor other than the Borrower is a direct or indirect wholly-owned Subsidiary of the Borrower and will receive direct and substantial benefits from the purchase by each of the Secured Parties of the Notes; and

 

WHEREAS , it is a condition precedent to the Buyers purchasing the Notes that the Borrower and each other Grantor have granted a first priority security interest in and to the Collateral to the Secured Parties, pari passu with the holders of Earlier 2016 Notes, to secure all of the Borrower’s obligations under the Purchase Agreement and the Notes, on the terms and conditions set forth in this Agreement; and

 

NOW, THEREFORE , for and in consideration of the Purchase Agreement and the Notes, the other premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, the parties covenant and agree as follows:

 

1. Definitions .

 

Capitalized terms used herein without definition shall have the meanings ascribed to them in the Purchase Agreement. In addition to the words and terms defined elsewhere in this Agreement, the following words and terms shall have the following meanings, unless the context otherwise clearly requires:

 

Accounts ” shall have the meaning given to that term in the Code and shall include without limitation all rights of each Grantor, whenever acquired, to payment for goods sold or leased or for services rendered, whether or not earned by performance.

 

Chattel Paper ” shall have the meaning given to that term in the Code and shall include without limitation all writings owned by each Grantor, whenever acquired, which evidence both a monetary obligation and a security interest in or a lease of specific goods.

 

Code ” shall mean the Uniform Commercial Code as in effect on the date of this Agreement and as amended from time to time, of the state or states having jurisdiction with respect to all or any portion of the Collateral from time to time.

 

 
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Collateral ” shall mean (i) all tangible and intangible assets of each Grantor, including, without limitation, collectively the Accounts, Chattel Paper, Deposit Accounts, Documents, Equipment, Fixtures, General Intangibles, Instruments, Intellectual Property, Inventory and Investment Property of each Grantor, and (ii) Proceeds of each of them.

 

Deposit Accounts ” shall have the meaning given to that term in the Code and shall include a demand, time, savings, passbook or similar account maintained with a bank, savings bank, savings and loan association, credit union, trust company or other organization that is engaged in the business of banking.

 

Documents ” shall have the meaning given to that term in the Code and shall include without limitation all warehouse receipts (as defined by the Code) and other documents of title (as defined by the Code) owned by each Grantor, whenever acquired.

 

Equipment ” shall have the meaning given to that term in the Code and shall include without limitation all goods owned by each Grantor, whenever acquired and wherever located, used or brought for use primarily in the business or for the benefit of each Grantor, and not included in Inventory of each Grantor, together with all attachments, accessories and parts used or intended to be used with any of those goods or Fixtures, whether now or in the future installed therein or thereon or affixed thereto, as well as all substitutes and replacements thereof in whole or in part.

 

Event of Default ” shall mean (i) any of the Events of Default described in the Notes or (ii) any default by a Grantor in the performance of its obligations under this Agreement.

 

Fixtures ” shall have the meaning given to that term in the Code, and shall include without limitation leasehold improvements.

 

General Intangibles ” shall have the meaning given to that term in the Code and shall include, without limitation, all leases under which each Grantor, now or in the future leases and or obtains a right to occupy or use real or personal property, or both, all of the other contract rights of each Grantor, whenever acquired, and customer lists, choses in action, claims (including claims for indemnification), books, records, Intellectual Property, contracts, licenses, license agreements, tax and any other types of refunds, returned and unearned insurance premiums, rights and claims under insurance policies, and computer information, software, records and data, and oil, gas, or other minerals before extraction now owned or acquired after the date of this Agreement by each Grantor.

 

Holder ” means each Buyer and any person to whom a Buyer assigns all or any portion of a Note in accordance with the terms thereof. The Holder or Holders owning a majority of the principal amount of the Notes (the “ Majority Holders ”) are authorized to act on behalf of all of the Holders.

 

 
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Instruments ” shall have the meaning given to that term in the Code and shall include, without limitation, all negotiable instruments (as defined in the Code), all certificated securities (as defined in the Code) and all other writings which evidence a right to the payment of money now or after the date of this Agreement owned by each Grantor.

 

Intellectual Property ” shall mean, all intellectual property of the Grantors including, without limitation all copyrights, trademarks, service marks, trade names, trade secrets, patents, all documented and undocumented research, ideas, data, theories, conclusions, reports, drawings, designs, blueprints, schematics, exhibits, models, prototypes, source code, object code, flow charts, manuals, processes, specifications, formulae, product configurations, notes, inventions (whether or not patentable and whether or not reduced to practice) and any other information of any kind developed, in development or maintained by the Grantors.

 

Inventory ” shall have the meaning given to that term in the Code and shall include without limitation all goods owned by each Grantor, whenever acquired and wherever located, held for sale or lease or furnished or to be furnished under contracts of service, and all raw materials, work in process and materials owned by each Grantor, and used or consumed in each Grantor’s business, whenever acquired and wherever located.

 

Investment Property ,” “ Securities Intermediary ” and “ Commodities Intermediary ” each shall have the meaning set forth in the Code.

 

Loan Documents ” shall mean collectively, this Agreement, the Notes, the Purchase Agreement, and all other agreements, documents and instruments executed and delivered in connection therewith, as each may be amended, restated, supplemented, replaced or otherwise modified from time to time in accordance with the terms thereof.

 

Permitted Liens ” shall mean all (i) all existing liens on the assets of a Grantor which have been disclosed to the Buyers by the Company on a Schedule I attached hereto, and (ii) all purchase money security interests hereinafter incurred by a Grantor in the ordinary course of business.

 

Proceed s” shall have the meaning given to that term in the Code and shall include without limitation whatever is received when Collateral or Proceeds are sold, exchanged, collected or otherwise disposed of, whether cash or non-cash, and includes without limitation proceeds of insurance payable by reason of loss of or damage to Collateral.

 

Capitalized terms not otherwise defined in this Agreement or the Purchase Agreement shall have the meanings attributed to such terms in the Code.

 

2. Security Interest .

 

(a) As security for the full and timely payment of the Notes in accordance with the terms of the Purchase Agreement and the performance of the obligations of the Borrower under the Purchase Agreement, the Notes and the other Transaction Documents, each Grantor agrees that the Holders shall have, and each Grantor hereby grants and conveys to and creates in favor of the Holders, a first priority security interest under the Code in and to its Collateral, pari passu with the holders of Earlier 2016 Notes, regardless of where located. The security interest granted to the Holders in this Agreement shall be a senior security interest, prior and superior to the rights of all third parties existing on or arising after the date of this Agreement, pari passu with the holders of Earlier 2016 Notes, subject to the Permitted Liens.

 

 
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(b) All of the Equipment, Inventory and Goods owned by each Grantor is located in the states as specified on Schedule I attached hereto (except to the extent any such Equipment, Inventory or Goods is in transit or located at such Grantor’s job site in the ordinary course of business). Except as disclosed on Schedule I , no material Collateral is in the possession of any bailee, warehousemen, processor or consignee. Schedule I discloses such Borrower name as of the date hereof as it appears in official filings in the state or province, as applicable, of its incorporation, formation or organization, the type of entity of Borrower (including corporation, partnership, limited partnership or limited liability company), the organizational identification number issued by Borrower’s state of incorporation, formation or organization (or a statement that no such number has been issued), and the chief place of business, chief executive officer and the office where Borrower keeps its books and records. Each Grantor has only one state or province, as applicable, of incorporation, formation or organization except as disclosed on Schedule I attached hereto. Each Grantor does not do business and have not done business during the past five (5) years under any trade name or fictitious business name except as disclosed on Schedule I attached hereto.

 

3. Provisions Applicable to the Collateral .

 

The parties agree that the following provisions shall be applicable to the Collateral:

 

(a) Each Grantor covenants and agrees that at all times during the term of this Agreement it shall keep accurate and complete books and records concerning the Collateral that is now owned by the Grantor.

 

(b) The Holders or their representatives shall have the right, upon reasonable prior written notice to a Grantor and during the regular business hours of the Grantor, to examine and inspect the Collateral and to review the books and records of the Grantor concerning the Collateral that is now owned or acquired after the date of this Agreement by the Grantor and to copy the same and make excerpts therefrom; provided, however, that from and after the occurrence of an Event of Default, the rights of inspection and entry shall be subject to the requirements of the Code.

 

(c) Each Grantor shall at all times during the term of this Agreement keep the Equipment, Inventory and Fixtures that are now owned by each Grantor in the states set forth on Schedule I or, upon written notice to the Holders, at such other locations for which the Holders have filed financing statements, and in no other states without ten (10) days’ prior written notice to the Holders, except that each Grantor shall have the right until one or more Events of Default shall occur to sell, move or otherwise dispose of Inventory and other Collateral in the ordinary course of business.

 

(d) Each Grantor shall not move the location of its principal executive offices without prior written notification to the Holders.

 

(e) Without the prior written consent of the Holders, each Grantor shall not sell, lease or otherwise dispose of any Equipment or Fixtures, except in the ordinary course of their business.

 

(f) Promptly upon request of the Majority Holders from time to time, each Grantor shall furnish the Holders with such information and documents regarding the Collateral and each Grantor’s financial condition, business, assets or liabilities, at such times and in such form and detail as the Holders may reasonably request.

 

 
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(g) During the term of this Agreement, each Grantor shall deliver to the Majority Holders, upon their reasonable, written request from time to time, without limitation,

 

(i) all invoices and customer statements rendered to account debtors, documents, contracts, chattel paper, instruments and other writings pertaining to each Grantor’s contracts or the performance of each Grantor’s contracts,

 

(ii) evidence of each Grantor’s accounts and statements showing the aging, identification, reconciliation and collection thereof, and

 

(iii) reports as to each Grantor’s inventory and sales, shipment, damage or loss thereof, all of the foregoing to be certified by authorized officers or other employees of each Grantor, and Borrower shall take all necessary action during the term of this Agreement to perfect any and all security interests in favor of each Grantor and to assign to Holders all such security interests in favor of each Grantor.

 

(h) Notwithstanding the security interest in the Collateral granted to and created in favor of the Holders under this Agreement, each Grantor shall have the right until one or more Events of Default shall occur, at its own cost and expense, to collect the Accounts and the Chattel Paper and to enforce their contract rights.

 

(i) Subject to the terms of the Earlier 2016 Notes, and the Permitted Liens, after the occurrence of an Event of Default, the Majority Holders shall have the right, in their sole discretion, to give notice of the Holders’ security interest to account debtors obligated to each Grantor and to take over and direct collection of the Accounts and the Chattel Paper, to notify such account debtors to make payment directly to the Holders and to enforce payment of the Accounts and the Chattel Paper and to enforce each Grantor’s contract rights. It is understood and agreed by each Grantor that the Majority Holders shall have no liability whatsoever under this subsection (i) except for their own gross negligence or willful misconduct.

 

(j) At all times during the term of this Agreement, each Grantor shall promptly deliver to the Holders, upon the written request of the Majority Holders, all existing leases, and all other leases entered into by each Grantor from time to time, covering any material Equipment or Inventory (the “ Leased Inventory ”) which is leased to third parties.

 

(k) Each Grantor shall not change its name, entity status, federal taxpayer identification number, or provincial organizational or registration number, or the state under which it is organized without the prior written consent of the Majority Holders, which consent shall not be unreasonably withheld, conditioned or delayed.

 

(l) Each Grantor shall not close any of its Deposit Accounts or open any new or additional Deposit Accounts without first giving the Holders at least ten (10) days’ prior written notice thereof; however, the Majority Holders have the power to waive a portion of the notice period if such waiver does not harm Holders’ security position.

 

(m) Subject to restrictions applicable to the Earlier 2016 Notes and the Permitted Liens, each Grantor shall cooperate with the Majority Holders, at each Grantor’s reasonable expense, in perfecting Holders’ security interest in any of the Collateral. Each Grantor agrees that from time to time, at its own expense, such Grantor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that the Majority Holders may reasonably request, in order to perfect and protect the security interests granted or purported to be granted hereby or to enable the Holders to exercise and enforce their rights and remedies hereunder with respect to any of the Collateral.

 

(n) Subject to restrictions applicable to the Earlier 2016 Notes and the Permitted Liens, the Majority Holders may file any necessary financing statements and other documents they deem reasonably necessary in order to perfect the Holders’ security interest without either Grantor’s signature. Each Grantor grants to the Majority Holders a power of attorney for the sole purpose of executing any documents on behalf of each Grantor which the Majority Holders deem reasonably necessary to perfect Holders’ security interest. Such power, coupled with an interest, is irrevocable.

 

 
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4. Actions with Respect to Accounts .

 

Each Grantor irrevocably makes, constitutes and appoints the Majority Holders its true and lawful attorney-in-fact with power to sign its name and to take any of the following actions after the occurrence and prior to the cure of an Event of Default, at any time without notice to either Grantor and at each Grantor’s reasonable expense, subject to the terms of the Earlier 2016 Notes and the Permitted Liens:

 

(a) Verify the validity and amount of, or any other matter relating to, the Collateral by mail, telephone, telegraph or otherwise;

 

(b) Notify all account debtors that the Accounts have been assigned to the Holders and that the Holders have a security interest in the Accounts;

 

(c) Direct all account debtors to make payment of all Accounts directly to the Holders;

 

(d) Take control in any reasonable manner of any cash or non-cash items of payment or proceeds of Accounts;

 

(e) Receive, open and respond to all mail addressed to each Grantor;

 

(f) Take control in any manner of any rejected, returned, stopped in transit or repossessed goods relating to Accounts;

 

(g) Enforce payment of and collect any Accounts, by legal proceedings or otherwise, and for such purpose the Holders may:

 

(i) Demand payment of any Accounts or direct any account debtors to make payment of Accounts directly to the Holders;

 

(ii) Receive and collect all monies due or to become due to each Grantor pursuant to the Accounts;

 

(iii) Exercise all of each Grantor’s rights and remedies with respect to the collection of Accounts;

 

(iv) Settle, adjust, compromise, extend, renew, discharge or release Accounts in a commercially reasonable manner;

 

(v) Sell or assign Accounts on such reasonable terms, for such reasonable amounts and at such reasonable times as the Holders reasonably deem advisable;

 

(vi) Prepare, file and sign each Grantor’s name or names on any Proof of Claim or similar documents in any proceeding filed under federal or state bankruptcy, insolvency, reorganization or other similar law as to any account debtor;

 

(vii) Prepare, file and sign each Grantor’s name or names on any notice of lien, claim of mechanic’s lien, assignment or satisfaction of lien or mechanic’s lien or similar document in connection with the Collateral;

 

(viii) Endorse the name of each Grantor upon any chattel papers, documents, instruments, invoices, freight bills, bills of lading or similar documents or agreements relating to Accounts or goods pertaining to Accounts or upon any checks or other media of payment or evidence of a security interest that may come into the Holders’ possession;

 

(ix) Sign the name or names of each Grantor to verifications of Accounts and notices of Accounts sent by account debtors to each Grantor; or

 

(x) Take all other actions that the Holders reasonably deem to be necessary or desirable to protect each Grantor’s interest in the Accounts.

 

 
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(h) Negotiate and endorse any Document in favor of the Holders or their designees, covering Inventory which constitutes Collateral, and related documents for the purpose of carrying out the provisions of this Agreement and taking any action and executing in the name(s) of Borrower any instrument which the Majority Holders may reasonably deem necessary or advisable to accomplish the purpose hereof. Without limiting the generality of the foregoing, the Majority Holders shall have the right and power to receive, endorse and collect checks and other orders for the payment of money made payable to each Grantor representing any payment or reimbursement made under, pursuant to or with respect to, the Collateral or any part thereof and to give full discharge to the same. Each Grantor does hereby ratify and approve all acts of said attorney and agrees that said attorney shall not be liable for any acts of commission or omission, nor for any error of judgment or mistake of fact or law, except for said attorney’s own gross negligence or willful misconduct. This power, being coupled with an interest, is irrevocable until the Notes are paid in full (at which time this power shall terminate in full) and each Grantor shall have performed all of its obligations under this Agreement. Each Grantor further agrees to use its reasonable efforts to assist the Majority Holders in the collection and enforcement of the Accounts and will not hinder, delay or impede the Majority Holders in any manner in their collection and enforcement of the Accounts.

 

5. Preservation and Protection of Security Interest .

 

Each Grantor represents and warrants that it has, and covenants and agrees that at all times during the term of this Agreement, it will have, good and marketable title to the Collateral now owned by it free and clear of all mortgages, pledges, liens, security interests, charges or other encumbrances, except for the Earlier 2016 Notes and the Permitted Liens and those junior in right of payment and enforcement to that of the Holders or in favor of the Holders, and shall defend the Collateral against the claims and demands of all persons, firms and entities whomsoever. Assuming the Majority Holders have taken all required action to perfect a security interest in the Collateral as provided by the Code, each Grantor represents and warrants that as of the date of this Agreement the Holders have, and that all times in the future the Holders will have, a first priority perfected security interest in the Collateral, prior and superior to the rights of all third parties in the Collateral existing on the date of this Agreement or arising after the date of this Agreement, pari passu with the holders of Earlier 2016 Notes subject to the Permitted Liens. Except as permitted by this Agreement, each Grantor covenants and agrees that it shall not, without the prior written consent of the Majority Holders (i) borrow against the Collateral or any portion of the Collateral from any other person, firm or entity, except for borrowings which are subordinate to the rights of the Holders, excluding the Earlier 2016 Note Offering, (ii) grant or create or permit to attach or exist any mortgage, pledge, lien, charge or other encumbrance, or security interest on, of or in any of the Collateral or any portion of the Collateral except those in favor of the Holders, holders of Earlier 2016 Notes or the Permitted Liens, (iii) permit any levy or attachment to be made against the Collateral or any portion of the Collateral, except those subject to the Earlier 2016 Notes or the Permitted Liens, or (iv) permit any financing statements to be on file with respect to any of the Collateral, except financing statements in favor of the Holders, holders of Earlier 2016 Notes or those with respect to the Permitted Liens. Each Grantor shall faithfully preserve and protect the Holders’ security interest in the Collateral and shall, at its own reasonable cost and expense, cause, or assist the Majority Holders to cause that security interest to be perfected and continue perfected so long as the Notes or any portion of the Notes are outstanding, unpaid or executory. For purposes of the perfection of the Holders’ security interest in the Collateral in accordance with the requirements of this Agreement, each Grantor shall from time to time at the request of the Holders file or record, or cause to be filed or recorded, such instruments, documents and notices, including assignments, financing statements and continuation statements, as the Majority Holders may reasonably deem necessary or advisable from time to time in order to perfect and continue perfected such security interest. Each Grantor shall do all such other acts and things and shall execute and deliver all such other instruments and documents, including further security agreements, pledges, endorsements, assignments and notices, as the Majority Holders in their discretion may reasonably deem necessary or advisable from time to time in order to perfect and preserve the priority of such security interest as a first lien security interest in the Collateral prior to the rights of all third persons, firms and entities, pari passu with the holders of Earlier 2016 Notes and subject to the Permitted Liens and except as may be otherwise provided in this Agreement. Each Grantor agrees that a carbon, photographic or other reproduction of this Agreement or a financing statement is sufficient as a financing statement and may be filed instead of the original.

 

 
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6. Insurance .

 

Risk of loss of, damage to or destruction of the Equipment, Inventory and Fixtures is on each Grantor. Each Grantor shall insure the Equipment, Inventory and Fixtures against such risks and casualties and in such amounts and with such insurance companies as is ordinarily carried by corporations or other entities engaged in the same or similar businesses and similarly situated or as otherwise reasonably required by the Majority Holders in their sole discretion. In the event of loss of, damage to or destruction of the Equipment, Inventory or Fixtures during the term of this Agreement, each Grantor shall promptly notify the Majority Holders of such loss, damage or destruction. At the reasonable request of the Majority Holders, each Grantor’s policies of insurance shall contain loss payable clauses in favor of each Grantor and the Holders as their respective interests may appear and shall contain provision for notification of the Holders thirty (30) days prior to the termination of such policy. At the request of the Majority Holders, copies of all such policies, or certificates evidencing the same, shall be deposited with the Holders. If any Grantor fails to effect and keep in full force and effect such insurance or fail to pay the premiums when due, the Majority Holders may (but shall not be obligated to) do so for the account of such Grantor and add the cost thereof to the Notes. The Majority Holders are irrevocably appointed attorney-in-fact of each Grantor to endorse any draft or check which may be payable to each Grantor in order to collect the proceeds of such insurance. Unless an Event of Default has occurred and is continuing, the Holders will turn over to each Grantor the proceeds of any such insurance collected by the Holder on the condition that each Grantor apply such proceeds either (i) to the repair of damaged Equipment, Inventory or Fixtures, or (ii) to the replacement of destroyed Equipment, Inventory or Fixtures with Equipment, Inventory or Fixtures of the same or similar type and function and of at least equivalent value (in the sole judgment of the Majority Holders), provided such replacement Equipment, Fixtures or Inventory is made subject to the security interest created by this Agreement and constitutes a first lien security interest in the Equipment, Inventory and Fixtures subject only to Permitted Liens and other security interests permitted under this Agreement, including under the Earlier 2016 Notes, and is perfected by the filing of financing statements in the appropriate public offices and the taking of such other action as may be necessary or desirable in order to perfect and continue perfected such security interest. Any balance of insurance proceeds remaining in the possession of the Holders after payment in full of the Notes shall be paid over to the applicable Grantor or its order.

 

7. Maintenance and Repair .

 

Each Grantor shall maintain the Equipment, Inventory and Fixtures, and every portion thereof, in good condition, repair and working order, reasonable wear and tear alone excepted, and shall pay and discharge all taxes, levies and other impositions assessed or levied thereon as well as the cost of repairs to or maintenance of the same. If any Grantor fails to do so, the Holders may (but shall not be obligated to) pay the cost of such repairs or maintenance and such taxes, levies or impositions for the account of such Grantor and add the amount of such payments to the principal of the Notes.

 

8. Preservation of Rights against Third Parties; Preservation of Collateral in Holders’ Possession .

 

Until such time as the Holders exercise their right to effect direct collection of the Accounts and the Chattel Paper and to effect the enforcement of each Grantor’s contract rights, each Grantor assumes full responsibility for taking any and all commercially reasonable steps to preserve rights in respect of the Accounts and the Chattel Paper and their contracts against prior parties. The Holders shall be deemed to have exercised reasonable care in the custody and preservation of such of the Collateral as may come into its possession from time to time if the Holders take such action for that purpose as the relevant Grantor shall request in writing, provided that such requested action shall not, in the judgment of the Holders, impair the Holders’ security interest in the Collateral or its right in, or the value of, the Collateral, and provided further that the Holders receive such written request in sufficient time to permit the Holders to take the requested action.

 

 
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9. Events of Default and Remedies .

 

(a) If any one or more of the Events of Default shall occur or shall exist, the Majority Holders may then or at any time thereafter, so long as such default shall continue, foreclose the lien or security interest in the Collateral in any way permitted by law, or upon twenty (20) days’ prior written notice to the relevant Grantor, sell any or all Collateral at private sale at any time or place in one or more sales, at such price or prices and upon such terms, either for cash or on credit, as the Majority Holders, in their sole discretion, may elect, or sell any or all Collateral at public auction, either for cash or on credit, as the Majority Holders, in their sole discretion, may elect, and at any such sale, the Majority Holders, on behalf of the Holders, may bid for and become the Buyer of any or all such Collateral. Pending any such action the Majority Holders may liquidate the Collateral.

 

(b) If any one or more of the Events of Default shall occur or shall exist, the Majority Holders may then, or at any time thereafter, so long as such default shall continue, grant extensions to, or adjust claims of, or make compromises or settlements with, debtors, guarantors or any other parties with respect to Collateral or any securities, guarantees or insurance applying thereon, without notice to or the consent of any Grantor, without affecting each Grantor’s liability under this Agreement or the Notes. Each Grantor waives notice of acceptance, of nonpayment, protest or notice of protest of any Accounts or Chattel Paper, any of its contract rights or Collateral and any other notices to which each Grantor may be entitled.

 

(c) If any one or more of the Events of Default shall occur or shall exist and be continuing, then in any such event, the Majority Holders shall have such additional rights and remedies in respect of the Collateral or any portion thereof as are provided by the Code and such other rights and remedies in respect thereof which they may have at law or in equity or under this Agreement, including without limitation the right to enter any premises where Equipment, Inventory and/or Fixtures are located and take possession and control thereof without demand or notice and without prior judicial hearing or legal proceedings, which each Grantor expressly waives.

 

(d) The Majority Holders shall apply the Proceeds of any sale or liquidation of the Collateral, and, subject to Section 5 hereof, any Proceeds received by the Majority Holders from insurance, first to the payment of the reasonable costs and expenses incurred by the Majority Holders in connection with such sale or collection, including without limitation reasonable attorneys’ fees and legal expenses; second to the payment of the Notes, pro rata, whether on account of principal or interest or otherwise as the Majority Holders, in their sole discretion, may elect, and then to pay the balance, if any, to the relevant Grantor or as otherwise required by law. If such Proceeds are insufficient to pay the amounts required by law, the Grantors shall be liable for any deficiency.

 

(e) Upon the occurrence of any Event of Default, each Grantor shall promptly upon written demand by the Majority Holders assemble the Equipment, Inventory and Fixtures and make them available to the Holders at a place or places to be designated by the Majority Holders. The rights of the Majority Holders under this paragraph to have the Equipment, Inventory and Fixtures assembled and made available to them is of the essence of this Agreement and the Majority Holders may, at their election, enforce such right by an action in equity for injunctive relief or specific performance, without the requirement of a bond.

 

10. Defeasance .

 

Notwithstanding anything to the contrary contained in this Agreement, upon the earlier of (i) payment and performance in full of the Notes or (ii) the conversion of the Notes, this Agreement shall terminate and be of no further force and effect and the Holders shall thereupon terminate their security interest in the Collateral. Until such time, however, this Agreement shall be binding upon and inure to the benefit of the parties, their successors and assigns, provided that, without the prior written consent of the Majority Holders, no Grantor may assign this Agreement or any of its rights under this Agreement or delegate any of its duties or obligations under this Agreement and any such attempted assignment or delegation shall be null and void. This Agreement is not intended and shall not be construed to obligate the Holders to take any action whatsoever with respect to the Collateral or to incur expenses or perform or discharge any obligation, duty or disability of any Grantor.

 

 
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11. Miscellaneous .

 

(a) The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall for any reason be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability of such provision in any other jurisdiction or any other provision of this Agreement in any jurisdiction.

 

(b) No failure or delay on the part of the Holders in exercising any right, remedy, power or privilege under this Agreement and the Notes shall operate as a waiver thereof or of any other right, remedy, power or privilege of the Holders under this Agreement, the Notes or any of the other Loan Documents; nor shall any single or partial exercise of any such right, remedy, power or privilege preclude any other right, remedy, power or privilege or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges of the Holders under this Agreement, the Notes and the other Loan Documents are cumulative and not exclusive of any rights or remedies which they may otherwise have.

 

(c) Unless otherwise provided herein, all demands, notices, consents, service of process, requests and other communications hereunder shall be in writing and shall be delivered in person or by overnight courier service, or mailed by certified mail, return receipt requested, addressed:

 

If to Borrower or any other Grantor: At the address for the Borrower set forth in the Purchase Agreement.

 

If to the Holder: At the address for such Holder set forth in the Holder’s signature page to the Purchase Agreement or the address otherwise communicated by such Holder to the Borrower in writing for such notice purposes.

 

Any such notice shall be effective when delivered, if delivered by hand delivery, overnight courier service, or U.S. Mail return receipt requested.

 

(d) The section headings contained in this Agreement are for reference purposes only and shall not control or affect its construction or interpretation in any respect.

 

(e) Unless the context otherwise requires, all terms used in this Agreement which are defined by the Code shall have the meanings stated in the Code.

 

(f) The Code shall govern the settlement, perfection and the effect of attachment and perfection of the Holders’ security interest in the Collateral, and the rights, duties and obligations of the Holders and each Grantor with respect to the Collateral. This Agreement shall be deemed to be a contract under the laws of the State of Conneticut and the execution and delivery of this Agreement and, to the extent not inconsistent with the preceding sentence, the terms and provisions of this Agreement shall be governed by and construed in accordance with the laws of that State. EACH GRANTOR 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 IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

(g) This Agreement may be executed in several counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. All of such counterparts shall be read as though one, and they shall have the same force and effect as though all the signers had signed a single page. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.

 

[ Signature Page Follows ]

 

 
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IN WITNESS WHEREOF , and intending to be legally bound, the parties have executed and delivered this Security Agreement as of the day and year set forth at the beginning of this Security Agreement.

 

GRANTORS:

CÜR MEDIA, INC., a Delaware corporation

 

By: ___________________________

Name:  Kelly Sardo

Title:  Chief Financial Officer

 

 

CUR MEDIA, LLC,

a Connecticut limited liability company

 

By: ___________________________

Name:  

Title:  

 

[SECURED PARTIES SIGN BY EXECUTING OMNIBUS SIGNATURE PAGE TO THE PURCHASE AGREEMENT]

 

 
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Schedule I

 

1.      State(s)/Jurisdictions in which Collateral is located:

 

Delaware

Connecticut

 

2.      Grantor Information:

 

Grantors

 

CÜR Media, Inc.

a Delaware corporation

Organizational I.D. Number:

 

Executive Offices Address:

 

2217 New London Turnpike

South Glastonbury, CT 06073

Chief Financial Officer: Kelly Sardo

 

Doing business in Connecticut under the d/b/a CÜR Music, Inc.

CÜR Media, LLC,

a Connecticut limited liability company

Organizational I.D. Number:

 

Executive Offices Address:

 

2217 New London Turnpike

South Glastonbury, CT 06073

 

3. Permitted Liens

 

(a) Lien by Connecticut Department of Economic and Community Development

 

(b) Lien created by the Earlier 2016 Notes

 

 

12

 

EXHIBIT 31.1/31.2

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT AND RULE 13A-14(A)

OR 15D-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

I, Thomas Brophy, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of CÜR Media, Inc.

 

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

 

 

 

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

 

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

 

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

 

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date: October 31, 2017

By:

/s/ Thomas Brophy

 

Name:

Thomas Brophy

 

Title:

President, Chief Executive Officer,
Interim Chief Financial Officer and Treasurer

(Principal Executive Officer and Principal Financial
Officer)

 

EXHIBIT 32.1/32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of CÜR Media, Inc. (the “Company”), for the quarter ended June 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas Brophy, President, Chief Executive Officer, Interim Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

 

Date: October 31, 2017

By:

/s/ Thomas Brophy

 

 

Name:

Thomas Brophy

 

Title:

President, Chief Executive Officer,
Interim Chief Financial Officer and Treasurer

(Principal Executive Officer and Principal Financial
Officer)