PLFX Pulse Evolution Corporation (CE)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): July 15, 2014

 

PULSE EVOLUTION CORPORATION

(Exact name of registrant as specified in its charter)

 

Nevada		333-190431		47-1336692
(State or other jurisdiction		(Commission		(IRS Employer
of incorporation)		File No.)		Identification No.)

 

10521 SW Village Center Drive, Suite 201, Port St. Lucie, FL		34987
(Address of principal executive offices)		(Zip Code)

 

(772) 545-4200

Registrant’s telephone number, including area code

 

Not applicable.

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

  

 

 

Item 1.01. Entry into a Material Definitive Agreement.

 

The Share Exchange Agreement

 

In furtherance of the previously disclosed letter of intent, Pulse Evolution Corporation (“we,” “us,” “our,” or “Company”) entered into with Pulse Entertainment Corporation (“Pulse Entertainment”), on September 26, 2014, a share exchange agreement (the “Share Exchange Agreement”) and its shareholders, some of whom are officers and directors of our company, pursuant to which we agreed to issue up to 58,362,708 shares of our unregistered common stock, $0.001 par value (the “Common Stock”), net of certain share cancellations, to the shareholders of Pulse Entertainment holding 21,535,252 shares of its issued and outstanding common stock (the “Share Exchange”), such shares representing 100% of the issued and outstanding common stock of Pulse Entertainment. Upon completion of the closing, Pulse Entertainment will become a subsidiary of our company and the total shares of common stock outstanding are expected to be 137,017,748, which amount includes the 4,855,000 shares issued to investors in our recent private placements discussed below.

 

The closing date must occur on or before October 31, 2014 and is conditioned upon certain, limited customary representations and warranties, the approval of the holders of not less than 51% of the Pulse Entertainment common stock and Pulse Entertainment’s completion of an audit of its June 30, 2014 financial statements.

 

Pulse Entertainment is a creatively driven, digital production and intellectual property company, established to produce specialized, high-impact applications of computer-generated human likeness for utilization in entertainment, life sciences, education and telecommunication. Founded by leading producers of photorealistic digital humans, Pulse Entertainment develops “virtual humans” for live and holographic concerts, advertising, feature films, branded content, medical applications and training. The Company’s business model is focused on participation in intellectual property through the development, production and ownership of entertainment properties featuring globally recognized animated virtual performers and through multi-year revenue-share relationships with living celebrities and late celebrity estates. In late 2013, Pulse Entertainment entered into a multi-year agreement with the estate of Michael Jackson to produce a photo-realistic digital likeness of the late celebrity and to participate in a share of revenues that could be realized through performances of the ‘Virtual Michael Jackson’ in diverse entertainment and media applications. In August 2014, the Company entered into a similar agreement with Authentic Brands Group, the principal owner of rights related to the estate of the late celebrity Elvis Presley.

 

Pulse Entertainment produced a computer-generated and animated human likeness of the late popular entertainer Michael Jackson that appeared in a live performance at the Billboard Music Awards on May 18, 2014. The virtual performance of Michael contributed to the award show’s highest television viewership in 13 years and an 11-year high in advertising in the demographic of viewers age 18 to 49. This production reached approximately 11 million television viewers during the initial ABC network broadcast, followed by more than 51 million online views through YouTube and Vevo and generated more than 2,400 news articles and an estimated 98 billion internet impressions for the Michael Jackson hologram and more than 300 million internet impressions estimated for Pulse Entertainment and members of its management.

 

Following the closing of the Share Exchange Agreement, we intend to continue Pulse Entertainment’s historical businesses and proposed businesses as we continue to seek new production opportunities like the Virtual Elvis opportunity discussed below.

 

The foregoing description of the Share Exchange Agreement does not purport to be complete and is qualified in its entirety by reference to such Share Exchange Agreement, which is filed as Exhibit 2.1 hereto, and is incorporated herein by reference.

 

Recent Private Placements

 

Beginning on July 15, 2014, and continuing through the date hereof, the Company entered into a securities purchase agreements (the “Securities Purchase Agreements”) with six investors who are unrelated parties to the Company whereby they agreed to purchase an aggregate of 4,855,000 shares of our Common Stock at prices ranging from $0.40 per share to $1.00 per share, for a total purchase price of $2,225,000. The Securities Purchase Agreements provide piggyback registration rights for the Common Stock acquired by the investors in the event that the Company registers any of its Common Stock under the Securities Act of 1933, as amended (the “Securities Act”) for sale to the public for cash in an underwritten offering, if the applicable registration form being used by the Company will permit such registration. The Company is not required to register the Common Stock if registration is effected by the Company on behalf of another shareholder that is exercising registration rights that prohibit registration of other securities or the Common Stock has already been registered.

 

The Company claims an exemption from the registration requirements of the Securities Act, for the private placement of these securities pursuant to Regulation S, and/or Section 4(a)(2) of the Securities Act, and/or Regulation D promulgated thereunder because, among other things, the transaction did not involve a public offering, the investors are accredited investors, they acquired the Common Stock for investment and not resale, and the Company took appropriate measures to restrict the transfer of the Common Stock.

 

The foregoing description of the Securities Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the form of Securities Purchase Agreement, which is filed as Exhibit 10.1 hereto, and is incorporated herein by reference.

 

 

Elvis Presley Visual Rights Partner Agreement with ABG EPE IP, LLC

 

Under the terms of the partner agreement (the “Partner Agreement”) we entered into with ABG EPE IP, LLC (“ABG”) effective as of August 1, 2014, we agreed to develop for ABG entertainment projects (the “Project” or “Projects”) to utilize a realistic computer-generated image of Elvis Presley (“Virtual Elvis”). The likeness will be used to create entertainment and branding revenue opportunities for us, generated from holographic performances in live shows and commercials. ABG holds the likeness, appearance, and publicity rights of Elvis Presley (“IP Rights”). Under the terms of the Partner Agreement, ABG has granted us exclusive rights to develop Projects, during the first nine months of the agreement, whereby we have agreed to create and make presentations to third parties (the “Target” or “Targets”) regarding the commercial and live use of the Projects including rights to license the IP Rights from ABG in connection with such use and enter into development agreements with us for the production and financing of the Projects.

 

Under the terms of the Partner Agreement, ABG has granted us a limited and nonexclusive worldwide license to the IP Rights, to use, copy, modify, and create the Projects (the “Company License Rights”). We will retain ownership over the technology, materials, and media used in the performance of the Projects, which is separable from the IP Rights (“Company Materials”). ABG may use the Company Materials on a perpetual, irrevocable, assignable, sub-licensable worldwide basis if ABG pays us certain royalties. ABG has the right to approve all elements of the Virtual Elvis Projects we develop including any advertising elements which we are required to submit to them for approval.

 

We agreed to pay an upfront royalty to ABG and certain minimum annual royalties for each year during the term of the Partner Agreement based on revenues derived from live and non-live events from Virtual Elvis Projects. We are entitled to an IP Royalty from ABG based on revenues generated from live and non-live events produced under the agreements with Targets. In addition, we agreed to pay ABG a royalty for any transactions with a Target based on revenues.

 

The Partner Agreement will be automatically terminated if we breach the same provision of the Partner Agreement twice, however, ABG will still be entitled to certain royalties. After the first breach by us, ABG must give us written notice of the breach. Further, ABG has the right to suspend its performance under and/or terminate the Partner Agreement if we (i) fail to make a required payment to ABG (subject to a 5 business day cure period), (ii) breach the Partner Agreement (subject to a 15 business day cure period), (iii) commit an act of gross negligence or wanton misconduct (subject to a 10 business day cure period), (iv) file a bankruptcy petition or such petition is filed against us, (v) fail to generate the minimum net revenue in any Contract Year. We have the right to suspend our performance under and/or terminate the Partner Agreement if ABG breaches the Partner Agreement, subject to a cure period of 30 business days after ABG receives written notice from us.

 

ABG has the right to exchange certain amounts we paid them for warrants to purchase our common stock exercisable at a fixed price subject to certain anti-dilution rights in the event our total equity is diluted below the warrant exercise price. The Partner Agreement contains general provisions dealing with confidentiality, insurance, indemnity, quality standards of the Projects, and dispute resolution.

 

The foregoing description of the Partner Agreement is qualified in its entirety by reference to such Partner Agreement, which is filed as Exhibits 10.2 hereto and is incorporated herein by reference.

 

Item 3.02. Unregistered Sales of Equity Securities

 

The disclosure in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item.

 

Item 4.01. Changes in Registrant’s Certifying Accountant.

 

(a) Prior independent registered public accounting firm

 

On June 30, 2014, our Board of Directors approved the dismissal of Weinberg & Baer LLC (“Weinberg & Baer”) as our independent registered public accounting firm. We informed Weinberg & Baer of its dismissal on June 30, 2014. The decision to dismiss Weinberg & Baer was a result of our planned acquisition of Pulse Entertainment and the execution of the Share Exchange Agreement and became effective as of the date of notification of dismissal and was approved by our Board of Directors. Weinberg & Baer did not resign or decline to stand for re-election.

 

While Weinberg & Baer had served as our independent registered public accounting firm since May 7, 2014, it had never issued a report on our financial statements. During the period of time that Weinberg & Baer served as our independent registered public accounting firm from May 7, 2014 to the date of dismissal there were no disagreements with Weinberg & Baer on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Weinberg & Baer, would have caused it to make reference to the subject matter of the disagreements in its reports on the financial statements of the Company for the period ended June 30, 2013 and the period from July 1, 2013 through June 30, 2014; and (b) there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.

 

 

The Company has provided Weinberg & Baer with a copy of this Form 8-K prior to its filing with the Securities and Exchange Commission (“SEC”) and requested Weinberg & Baer to furnish the Company with a letter addressed to the SEC stating whether or not Weinberg & Baer agrees with the above statements. A copy of Weinberg & Baer’s letter is attached hereto as Exhibit 16.1 to this Form 8-K.

 

(b) New independent registered public accounting firm

 

On June 30, 2014, our Board of Directors approved the engagement of Friedman LLP (“Friedman LLP”) as our independent registered public accounting firm and Friedman LLP was engaged on June 30, 2014. During the fiscal period from May 31, 2013 (inception) to June 30, 2013 and from July 1, 2013 through June 30, 2014, neither the Company nor anyone on its behalf consulted Friedman LLP regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our consolidated financial statements, and no written report or oral advice was provided to the Company that Friedman LLP concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was the subject of a disagreement or reportable event as defined in Regulation S-K, Item 304(a)(1)(iv) and Item 304(a)(1)(v), respectively, except that Friedman LLP was engaged by Pulse Entertainment to perform an audit of Pulse Entertainment Corporation which the Company intends to acquire as previously disclosed. In approving the selection of Friedman LLP as our independent registered public accounting firm, our Board of Directors considered these services previously provided by Friedman LLP and concluded that such services would not adversely affect the independence of Friedman LLP.

 

Item 9.01. Financial Statements and Exhibits

 

(d) Exhibits

 

Exhibit		Description
2.1		Share Exchange Agreement among Pulse Evolution Corporation and Pulse Entertainment Corporation dated September 25, 2014.
10.1		Form of Securities Purchase Agreement.
10.2		Partner Agreement between ABG EPE IP, LLC and Pulse Evolution Corporation effective as of August 1, 2014.*
16.1		Letter of Weinberg & Baer LLC dated July 1, 2014 to the Securities and Exchange Commission regarding statements included in this Form 8-K.

 

*Portions of this agreement have been omitted and redacted and separately filed with the Securities and Exchange Commission with a request for confidential treatment.

 

 

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 hereunto duly authorized.

 

	PULSE EVOLUTION CORPORATION
Date: September 26, 2014	By:	/S/ Frank Patterson
		Frank Patterson, Chief Executive Officer

 

 

SHARE EXCHANGE AGREEMENT

 

by and among

 

PULSE EVOLUTION CORPORATION

 

a Nevada Corporation

 

and

 

PULSE ENTERTAINMENT CORPORATION

 

A Delaware corporation

 

and

 

THE SHAREHOLDERS OF

 

PULSE ENTERTAINMENT CORPORATION

 

Dated as of September 26, 2014

 

 

TABLE OF CONTENTS

 

			PAGE
ARTICLE I REPRESENTATIONS, COVENANTS, AND WARRANTIES OF PEC AND THE SHAREHOLDERS			1
Section 1.01	Incorporation		1
Section 1.02	Authorized Shares and Capital		1
Section 1.03	Subsidiaries and Predecessor Corporations		2
Section 1.04	Financial Statements		2
Section 1.05	Information		2
Section 1.06	Options or Warrants		2
Section 1.07	Absence of Certain Changes or Events		3
Section 1.08	Litigation and Proceedings		3
Section 1.09	Contracts.		3
Section 1.10	Compliance With Laws and Regulations		4
Section 1.11	Approval of Agreement		4
Section 1.12	PEC Schedules		4
Section 1.13	Valid Obligation		4
Section 1.14	Investment Representations		4
ARTICLE II REPRESENTATIONS, COVENANTS, AND WARRANTIES OF THE COMPANY			6
Section 2.01	Organization		6
Section 2.02	Capitalization		6
Section 2.03	Subsidiaries and Predecessor Corporations		7
Section 2.04	SEC Reports		7
Section 2.05	Information		7
Section 2.06	Options or Warrants		7
Section 2.07	Absence of Certain Changes or Events		7
Section 2.08	Litigation and Proceedings		8
Section 2.09	Contracts		8
Section 2.10	No Conflict With Other Instruments		8
Section 2.11	Compliance With Laws and Regulations		8
Section 2.12	Approval of Agreement		9
Section 2.13	Material Transactions or Affiliations		9
Section 2.14	The Company Schedules		9
Section 2.15	Valid Obligation		9
Section 2.16	OTC Marketplace Quotation.		9
ARTICLE III SHARE EXCHANGE			9
Section 3.01	The Exchange and Share Cancellation.		9
Section 3.02	Closing		10
Section 3.03	Closing Events		10
Section 3.04	Termination		10
ARTICLE IV SPECIAL COVENANTS			10
Section 4.01	Access to Properties and Records		10
Section 4.02	Delivery of Books and Records		10
Section 4.03	Third Party Consents and Certificates		10
Section 4.04	Actions Prior to Closing		11

 

 

ARTICLE V CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY			11
Section 5.01	Accuracy of Representations and Performance of Covenants		11
Section 5.02	Officer’s Certificate		12
Section 5.03	Approval by the PEC Shareholders		12
Section 5.04	No Governmental Prohibition		12
Section 5.05	Consents		12
Section 5.06	Other Items.		12
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF PEC AND THE PEC SHAREHOLDERS			13
Section 6.01	Accuracy of Representations and Performance of Covenants		13
Section 6.02	Officer’s Certificate		13
Section 6.03	Good Standing		13
Section 6.04	No Governmental Prohibition		13
Section 6.05	Approval by the Company Board of Directors		13
Section 6.06	Consents		13
Section 6.07	Shareholder Report		14
Section 6.08	Other Items		14
ARTICLE VII MISCELLANEOUS			14
Section 7.01	Brokers		14
Section 7.02	Governing Law		14
Section 7.03	Notices		14
Section 7.04	Attorney’s Fees		15
Section 7.05	Confidentiality		15
Section 7.06	Public Announcements and Filings		15
Section 7.07	Schedules; Knowledge		15
Section 7.08	Third Party Beneficiaries		15
Section 7.09	Expenses		15
Section 7.10	Entire Agreement		15
Section 7.11	Survival; Termination		15
Section 7.12	Counterparts		15
Section 7.13	Amendment or Waiver		15
Section 7.14	Best Efforts		15

 

Exhibit A – Shareholders’ Signature Pages

 

 

STOCK EXCHANGE AGREEMENT

 

THIS STOCK EXCHANGE AGREEMENT (hereinafter referred to as this “Agreement”) is entered into as of this 26 day of September 2014, by and between PULSE EVOLUTION CORPORATION, a Nevada corporation (the “Company”), with offices at 10521 SW Village Center Drive, Suite 201, Port St. Lucie, FL 34987 and PULSE ENTERTAINMENT CORPORATION, a Delaware corporation (“PEC”), with offices at 10521 SW Village Center Drive, Suite 201, Port St. Lucie, FL 34987 and the shareholders of PEC set forth on Composite Exhibit A (the “PEC Shareholders”), upon the following premises:

 

Premises

 

WHEREAS, The Company is a publicly held corporation organized under the laws of the State of Nevada;

 

WHEREAS, PEC is a privately-held company organized under the laws of Delaware;

 

WHEREAS, The Company agrees to acquire up to 21,535,252 of the issued and outstanding shares of PEC (representing 100% of PEC’s issued and outstanding common stock) from the PEC Shareholders in exchange for the issuance of 5.53849 shares of the Company’s Common Stock for each share of PEC’s common stock (the “Exchange”) after giving effect to the Forward Stock Split and other transactions provided for in this Agreement. On the Closing Date, the PEC Shareholders will become shareholders of the Company and PEC will become a subsidiary of the Company.

 

WHEREAS, for Federal income tax purposes, it is intended that the Exchange qualify as a reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”); and

 

Agreement

 

NOW THEREFORE, on the stated premises and for and in consideration of the mutual covenants and agreements hereinafter set forth and the mutual benefits to the parties to be derived herefrom, and intending to be legally bound hereby, it is hereby agreed as follows:

 

ARTICLE I

REPRESENTATIONS, COVENANTS, AND WARRANTIES OF PEC AND THE SHAREHOLDERS

 

As an inducement to, and to obtain the reliance of the Company, except as set forth in the PEC Schedules (as hereinafter defined), PEC represents and warrants to the Company and each of the PEC Shareholders that as of the date hereof and the Closing Date (as hereinafter defined), as follows:

 

Section 1.01 Incorporation. PEC is a company duly organized, validly existing, and in good standing under the laws of Delaware and has the corporate power and is duly authorized under all applicable laws, regulations, ordinances, and orders of public authorities to carry on its business in all material respects as it is now being conducted. Included in the PEC Schedules is a complete and correct copy of the Certificate of Incorporation of PEC as in effect on the date hereof. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, violate any provision of PEC’s Certificate of Incorporation. PEC has taken all actions required by law, its Certificate of Incorporation, or otherwise to authorize the execution, delivery and performance of this Agreement. PEC has full power, authority, and legal capacity and has taken all action required by law, it’s Certificate of Incorporation, and otherwise to consummate the transactions herein contemplated.

 

Section 1.02 Authorized Shares and Capital. The authorized number of common shares with $0.0001 par value of PEC is 300,000,000 with 21,535,252 shares issued and outstanding. The issued and outstanding shares are validly issued, fully paid, and non-assessable and not issued in violation of the preemptive or other rights of any person. PEC is authorized to issue 100,000,000 shares of preferred stock, $0.0001 par value, none of which are issued and outstanding.

 

 

Section 1.03 Subsidiaries and Predecessor Corporations. PEC owns a 100% interest in The KOPP Initiative, LLC, a Florida limited liability company (the “Subsidiaries”). Except for its ownership interest in the Subsidiaries, PEC does not have any subsidiaries, and does not own, beneficially or of record, any shares of any other corporation. For purposes hereinafter, the term “PEC” also includes the Subsidiaries.

 

Section 1.04 Financial Statements.

 

(a) Prior to Closing, PEC shall provide the Company with PEC’s (i) the balance sheets of PEC and its Subsidiaries as of June 30, 2014 and the related statements of operations, stockholders’ equity and cash flows for the period ended June 30, 2014 (the “PEC Financial Statements”).

 

(b) All such financial statements shall be prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved. The PEC balance sheets shall be true and accurate and present fairly as of their respective dates the financial condition of PEC. As of the date of such balance sheets, except as and to the extent reflected or reserved against therein, PEC shall have no liabilities or obligations (absolute or contingent) which should be reflected in the balance sheets or the notes thereto prepared in accordance with generally accepted accounting principles, and all assets reflected therein will be properly reported and present fairly the value of the assets of PEC, in accordance with generally accepted accounting principles. The statements of operations, stockholders’ equity and cash flows will reflect fairly the information required to be set forth therein by generally accepted accounting principles.

 

(c) PEC has duly and punctually paid all Governmental fees and taxation which it has become liable to pay and has duly allowed for all taxation reasonably foreseeable and is under no liability to pay any penalty or interest in connection with any claim for governmental fees or taxation and PEC has made any and all proper declarations and returns for taxation purposes and all information contained in such declarations and returns is true and complete and full provision or reserves have been made in its financial statements for all Governmental fees and taxation.

 

(d) The books and records, financial and otherwise, of PEC are in all material aspects complete and correct and have been maintained in accordance with good business and accounting practices.

 

(e) All of PEC’s assets are reflected on its financial statements, and, except as set forth in the PEC Schedules or the financial statements of PEC or the notes thereto, PEC has no material liabilities, direct or indirect, matured or unmatured, contingent or otherwise.

 

Section 1.05 Information. The information concerning PEC set forth in this Agreement and in the PEC Schedules is complete and accurate in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact required to make the statements made, in light of the circumstances under which they were made, not misleading. In addition, PEC has fully disclosed in writing to the Company (through this Agreement or the PEC Schedules) all information relating to matters involving PEC or its assets or its present or past operations or activities which (i) indicated or may indicate, in the aggregate, the existence of a greater than $50,000 liability, (ii) have led or may lead to a competitive disadvantage on the part of PEC or (iii) either alone or in aggregation with other information covered by this Section, otherwise have led or may lead to a material adverse effect on PEC, its assets, or its operations or activities as presently conducted or as contemplated to be conducted after the Closing Date, including, but not limited to, information relating to governmental, employee, environmental, litigation and securities matters and transactions with affiliates.

 

Section 1.06 Options or Warrants. Except as disclosed on PEC Schedule 1.06, There are no existing options, warrants, calls, or commitments of any character relating to the authorized and unissued stock of PEC.

 

 

Section 1.07 Absence of Certain Changes or Events. Since June 30, 2014 or such other date as provided for herein:

 

(a) there has not been any material adverse change in the business, operations, properties, assets, or condition (financial or otherwise) of PEC;

 

(b) PEC has not (i) amended its Articles of Incorporation since October 10, 2013; (ii) declared or made, or agreed to declare or make, any payment of dividends or distributions of any assets of any kind whatsoever to stockholders or purchased or redeemed, or agreed to purchase or redeem, any of its shares; (iii) made any material change in its method of management, operation or accounting, (iv) entered into any other material transaction other than sales in the ordinary course of its business; or (v) made any increase in or adoption of any profit sharing, bonus, deferred compensation, insurance, pension, retirement, or other employee benefit plan, payment, or arrangement made to, for, or with its officers, directors, or employees; and

 

(c) PEC has not (i) granted or agreed to grant any options, warrants or other rights for its stocks, bonds or other corporate securities calling for the issuance thereof, (ii) borrowed or agreed to borrow any funds or incurred, or become subject to, any material obligation or liability (absolute or contingent) except as disclosed herein and except liabilities incurred in the ordinary course of business; (iii) sold or transferred, or agreed to sell or transfer, any of its assets, properties, or rights or canceled, or agreed to cancel, any debts or claims; or (iv) issued, delivered, or agreed to issue or deliver any stock, bonds or other corporate securities including debentures (whether authorized and unissued or held as treasury stock) except in connection with this Agreement.

 

Section 1.08 Litigation and Proceedings. Except as disclosed on PEC Schedule 1.08, there are no actions, suits, proceedings, or investigations pending or, to the knowledge of PEC after reasonable investigation, threatened by or against PEC or affecting PEC or its properties, at law or in equity, before any court or other governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind. PEC does not have any knowledge of any material default on its part with respect to any judgment, order, injunction, decree, award, rule, or regulation of any court, arbitrator, or governmental agency or instrumentality or of any circumstances which, after reasonable investigation, would result in the discovery of such a default.

 

Section 1.09 Contracts.

 

(a) All “material” contracts, agreements, franchises, license agreements, debt instruments or other commitments to which PEC is a party or by which it or any of its assets, products, technology, or properties are bound other than those incurred in the ordinary course of business have been previously disclosed to the Company or the PEC Shareholders. A “material” contract, agreement, franchise, license agreement, debt instrument or commitment is one which (i) will remain in effect for more than six (6) months after the date of this Agreement or (ii) involves aggregate obligations of at least fifty thousand dollars ($50,000);

 

(b) All contracts, agreements, franchises, license agreements, and other commitments to which PEC is a party or by which its properties are bound and which are material to the operations of PEC taken as a whole are valid and enforceable by PEC in all respects, except as limited by bankruptcy and insolvency laws and by other laws affecting the rights of creditors generally; and

 

(c) Except as previously disclosed to the Company or the PEC Shareholders or reflected in the most recent PEC balance sheet, PEC is not a party to any oral or written (i) contract for the employment of any officer or employee; (ii) profit sharing, bonus, deferred compensation, stock option, severance pay, pension benefit or retirement plan, (iii) agreement, contract, or indenture relating to the borrowing of money, (iv) guaranty of any obligation; (vi) collective bargaining agreement; or (vii) agreement with any present or former officer or director of PEC.

 

 

Section 1.10 Compliance With Laws and Regulations. To the best of its knowledge, PEC has complied with all applicable statutes and regulations of any federal, state, or other governmental entity or agency thereof, except to the extent that noncompliance would not materially and adversely affect the business, operations, properties, assets, or condition of PEC or except to the extent that noncompliance would not result in the occurrence of any material liability for PEC.

 

Section 1.11 Approval of Agreement. This Agreement has been duly and validly authorized and executed and delivered on behalf of PEC and the PEC Shareholders and this Agreement constitutes a valid and binding agreement of PEC and the PEC Shareholders enforceable in accordance with its terms.

 

Section 1.12 PEC Schedules. PEC has delivered to the Company the following schedules, which are collectively referred to as the “PEC Schedules” and which consist of separate schedules dated as of the date of execution of this Agreement, all certified by the chief executive officer of PEC as complete, true, and correct as of the date of this Agreement in all material respects:

 

(a) a schedule containing complete and correct copies of the Articles of Incorporation of PSection 1.05EC and the Bylaws, each as in effect as of the date of this Agreement;

 

(b) a schedule containing the financial statements of PEC identified in paragraph 1.04(a);

 

(c) a schedule setting forth any information, together with any required copies of documents, required to be disclosed in the Company Schedules by Sections 1.01 through 1.11.

 

PEC shall cause the PEC Schedules and the instruments and data delivered to the Company hereunder to be promptly updated after the date hereof up to and including the Closing Date.

 

Section 1.13 Valid Obligation. This Agreement and all agreements and other documents executed by PEC in connection herewith constitute the valid and binding obligations of PEC, enforceable in accordance with its or their terms, except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and subject to the qualification that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought.

 

Section 1.14 Investment Representations.

 

(a) Investment Purpose. As of the date hereof, the PEC Shareholders understand and agree that the consummation of this Agreement including the delivery of the Exchange Consideration (as hereinafter defined) to the PEC Shareholders in exchange for the PEC Shares as contemplated hereby constitutes the offer and sale of securities under the Securities Act of 1933, as amended (the “Securities Act “) and applicable state statutes and that the PEC Shares are being acquired for the PEC Shareholders’ own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the Securities Act; provided, however, that by making the representations herein, the PEC Shareholders do not agree to hold any of the Exchange Consideration for any minimum or other specific term and reserves the right to dispose of the Exchange Consideration at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act.

 

(b) Accredited Investor Status. Each of the PEC Shareholders is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”).

 

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

 

 

(d) Information. The PEC Shareholders and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Exchange Consideration which have been requested by the PEC Shareholders or its advisors. The PEC Shareholders and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Notwithstanding the foregoing, the Company has not disclosed to the PEC Shareholders any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the PEC Shareholders. The PEC Shareholders understands that its investment in the Exchange Consideration involves a significant degree of risk. The PEC Shareholders is not aware of any facts that may constitute a breach of any of the Company’s representations and warranties made herein.

 

(e) Governmental Review. Each of the PEC Shareholders understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Exchange Consideration.

 

(f) Transfer or Re-sale. Each of the PEC Shareholders understands that (i) the sale or re-sale of the Exchange Consideration has not been and is not being registered under the Securities Act or any applicable state securities laws, and the Exchange Consideration may not be transferred unless (a) the Exchange Consideration is sold pursuant to an effective registration statement under the Securities Act, (b) the PEC Shareholders shall have delivered to the Company, at the cost of the PEC Shareholders, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Exchange Consideration to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion shall be accepted by the Company, (c) the Exchange Consideration is sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the Securities Act (or a successor rule) (“Rule 144”)) of the PEC Shareholders who agree to sell or otherwise transfer the Exchange Consideration only in accordance with this Section and who is an Accredited Investor, (d) the Exchange Consideration is sold pursuant to Rule 144, or (e) the Exchange Consideration is sold pursuant to Regulation S under the Securities Act (or a successor rule) (“Regulation S”), and the PEC Shareholders shall have delivered to the Company, at the cost of the PEC Shareholders, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall be accepted by the Company; (ii) any sale of such Exchange Consideration made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Exchange Consideration 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) neither the Company nor any other person is under any obligation to register such Exchange Consideration under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the foregoing or anything else contained herein to the contrary, the Exchange Consideration may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

 

(g) Legends. Each of the PEC Shareholders understand that the shares of the Company’s common stock that comprise the Exchange Consideration (the “Exchange Shares”) and, until such time as the Exchange Shares have been registered under the Securities Act may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Exchange Shares may bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such Exchange Shares):

 

 

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE COMPANY), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.

 

FURTHERMORE, HOLDERS OF THE SECURITIES WILL NOT BE ENTITLED TO VOTING RIGHTS OR DIVIDENDS DURING THE QUARTERLY PERIOD OF TIME IN WHICH THE SECURITIES ARE USED IN A STOCK LOAN TRANSACTION AS PROVIDED FOR IN THE COMPANY’S AMENDED AND RESTATED ARTICLES OF INCORPORATION FILED WITH THE NEVADA SECRETARY OF STATE ON MAY 22, 2014.”

 

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Exchange Share upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) the Exchange Shares are registered for sale under an effective registration statement filed under the Securities Act or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Exchange Shares may be made without registration under the Securities Act, which opinion shall be accepted by the Company so that the sale or transfer is effected. Each of the PEC Shareholders agrees to sell all Exchange Shares, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any.

 

(h) Residency. Each of the PEC Shareholders is a resident of the jurisdiction set forth immediately below the PEC Shareholders’ name on the signature pages hereto or provided separately to the Company.

 

ARTICLE II

REPRESENTATIONS, COVENANTS, AND WARRANTIES OF THE COMPANY

 

As an inducement to, and to obtain the reliance of PEC and the PEC Shareholders, except as set forth in the Company Schedules (as hereinafter defined), the Company represents and warrants, as of the date hereof and as of the Closing Date, as follows:

 

Section 2.01 Organization. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada and has the corporate power and is duly authorized under all applicable laws, regulations, ordinances, and orders of public authorities to carry on its business in all material respects as it is now being conducted. Included in the Company Schedules are complete and correct copies of the certificate of incorporation and bylaws of the Company as in effect on the date hereof. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, violate any provision of the Company’s certificate of incorporation or bylaws. the Company has taken all action required by law, its certificate of incorporation, its bylaws, or otherwise to authorize the execution and delivery of this Agreement, and the Company has full power, authority, and legal right and has taken all action required by law, its certificate of incorporation, bylaws, or otherwise to consummate the transactions herein contemplated.

 

Section 2.02 Capitalization. The Company’s authorized capitalization consists of (a) 300,000,000 shares of common stock, par value $0.001 per share (“the Company Common Stock”), of which 81,424,286 shares are issued and outstanding, and (b) 100,000,000 shares of preferred stock, par value $.001 per share, none of which are issued and outstanding. All issued and outstanding shares are legally issued, fully paid, and non-assessable and not issued in violation of the preemptive or other rights of any person.

 

 

Section 2.03 Subsidiaries and Predecessor Corporations. The Company does not have any predecessor corporation(s), no subsidiaries, and does not own, beneficially or of record, any shares of any other corporation.

 

Section 2.04 SEC Reports. The Company has filed all reports required to be filed by it under the Securities Act and the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”), including pursuant to Section 13(a) or 15(d) of the Exchange Act, (the “SEC Reports”).

 

Section 2.05 Information. The information concerning the Company set forth in this Agreement and the Company Schedules is complete and accurate in all material respects and does not contain any untrue statements of a material fact or omit to state a material fact required to make the statements made, in light of the circumstances under which they were made, not misleading. In addition, the Company has fully disclosed in writing to the PEC Shareholders (through this Agreement or the Company Schedules) all information relating to matters involving the Company or its assets or its present or past operations or activities which (i) indicated or may indicate, in the aggregate, the existence of a greater than $50,000 liability , (ii) have led or may lead to a competitive disadvantage on the part of the Company or (iii) either alone or in aggregation with other information covered by this Section, otherwise have led or may lead to a material adverse effect on the Company, its assets, or its operations or activities as presently conducted or as contemplated to be conducted after the Closing Date, including, but not limited to, information relating to governmental, employee, environmental, litigation and securities matters and transactions with affiliates.

 

Section 2.06 Options or Warrants. Except as disclosed on Company Schedule 2.06, there are no options, warrants, convertible securities, subscriptions, stock appreciation rights, phantom stock plans or stock equivalents or other rights, agreements, arrangements or commitments (contingent or otherwise) of any character issued or authorized by the Company relating to the issued or unissued capital stock of the Company (including, without limitation, rights the value of which is determined with reference to the capital stock or other securities of the Company) or obligating the Company to issue or sell any shares of capital stock of, or options, warrants, convertible securities, subscriptions or other equity interests in, the Company. There are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares of the Company Common Stock of the Company or to pay any dividend or make any other distribution in respect thereof or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any person.

 

Section 2.07 Absence of Certain Changes or Events. Since June 30, 2014 and except as disclosed in an SEC Report:

 

(a) there has not been (i) any material adverse change in the business, operations, properties, assets or condition of the Company or (ii) any damage, destruction or loss to the Company (whether or not covered by insurance) materially and adversely affecting the business, operations, properties, assets or condition of the Company;

 

(b) the Company has not (i) amended its certificate of incorporation or bylaws except as required by this Agreement; (ii) declared or made, or agreed to declare or make any payment of dividends or distributions of any assets of any kind whatsoever to stockholders or purchased or redeemed, or agreed to purchase or redeem, any of its capital stock; (iii) waived any rights of value which in the aggregate are outside of the ordinary course of business or material considering the business of the Company; (iv) made any material change in its method of management, operation, or accounting; (v) entered into any transactions or agreements other than in the ordinary course of business; (vi) made any accrual or arrangement for or payment of bonuses or special compensation of any kind or any severance or termination pay to any present or former officer or employee; (vii) increased the rate of compensation payable or to become payable by it to any of its officers or directors or any of its salaried employees whose monthly compensation exceed $1,000; or (viii) made any increase in any profit sharing, bonus, deferred compensation, insurance, pension, retirement, or other employee benefit plan, payment, or arrangement, made to, for or with its officers, directors, or employees;

 

 

(c) The Company has not (i) granted or agreed to grant any options, warrants, or other rights for its stock, bonds, or other corporate securities calling for the issuance thereof; (ii) borrowed or agreed to borrow any funds or incurred, or become subject to, any material obligation or liability (absolute or contingent) except liabilities incurred in the ordinary course of business; (iii) paid or agreed to pay any material obligations or liabilities (absolute or contingent) other than current liabilities reflected in or shown on the most recent the Company balance sheet and current liabilities incurred since that date in the ordinary course of business and professional and other fees and expenses in connection with the preparation of this Agreement and the consummation of the transaction contemplated hereby; (iv) sold or transferred, or agreed to sell or transfer, any of its assets, properties, or rights (except assets, properties, or rights not used or useful in its business which, in the aggregate have a value of less than $1,000), or canceled, or agreed to cancel, any debts or claims (except debts or claims which in the aggregate are of a value less than $1,000); (v) made or permitted any amendment or termination of any contract, agreement, or license to which it is a party if such amendment or termination is material, considering the business of the Company; or (vi) issued, delivered or agreed to issue or deliver, any stock, bonds or other corporate securities including debentures (whether authorized and unissued or held as treasury stock), except in connection with this Agreement; and

 

(d) to its knowledge, the Company has not become subject to any law or regulation which materially and adversely affects, or in the future, may adversely affect, the business, operations, properties, assets or condition of the Company.

 

Section 2.08 Litigation and Proceedings. There are no actions, suits, proceedings or investigations pending or, to the knowledge of the Company after reasonable investigation, threatened by or against the Company or affecting the Company or its properties, at law or in equity, before any court or other governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind except as disclosed in the Company Schedules. The Company has no knowledge of any default on its part with respect to any judgment, order, writ, injunction, decree, award, rule or regulation of any court, arbitrator, or governmental agency or instrumentality or any circumstance which after reasonable investigation would result in the discovery of such default.

 

Section 2.09 Contracts.

 

(a) The Company is not a party to, and its assets, products, technology and properties are not bound by, any leases, contract, franchise, license agreement, agreement, debt instrument, obligation, arrangement, understanding or other commitments whether such agreement is in writing or oral (“Contracts”).

 

(b) The Company is not a party to or bound by, and the properties of the Company are not subject to any Contract, agreement, other commitment or instrument; any charter or other corporate restriction; or any judgment, order, writ, injunction, decree, or award; and

 

(c) The Company is not a party to any oral or written (i) contract for the employment of any officer or employee; (ii) profit sharing, bonus, deferred compensation, stock option, severance pay, pension benefit or retirement plan, (iii) agreement, contract, or indenture relating to the borrowing of money, (iv) guaranty of any obligation, (vi) collective bargaining agreement; or (vii) agreement with any present or former officer or director of the Company.

 

Section 2.10 No Conflict With Other Instruments. The execution of this Agreement and the consummation of the transactions contemplated by this Agreement will not result in the breach of any term or provision of, constitute a default under, or terminate, accelerate or modify the terms of, any indenture, mortgage, deed of trust, or other material agreement or instrument to which the Company is a party or to which any of its assets, properties or operations are subject.

 

Section 2.11 Compliance With Laws and Regulations. The Company has complied with all United States federal, state or local or any applicable foreign statute, law, rule, regulation, ordinance, code, order, judgment, decree or any other applicable requirement or rule of law (a “Law”) applicable to the Company and the operation of its business. This compliance includes, but is not limited to, the filing of all reports to date with federal and state securities authorities.

 

 

Section 2.12 Approval of Agreement. The Board of Directors of the Company has authorized the execution and delivery of this Agreement by the Company and has approved this Agreement and the transactions contemplated hereby.

 

Section 2.13 Material Transactions or Affiliations. Except as disclosed herein and in the Company Schedules, there exists no contract, agreement or arrangement between the Company and any predecessor and any person who was at the time of such contract, agreement or arrangement an officer, director, or person owning of record or known by the Company to own beneficially, 5% or more of the issued and outstanding common stock of the Company and which is to be performed in whole or in part after the date hereof or was entered into not more than three years prior to the date hereof. Neither any officer, director, nor 5% Shareholders of the Company has, or has had since inception of the Company, any known interest, direct or indirect, in any such transaction with the Company which was material to the business of the Company. The Company has no commitment, whether written or oral, to lend any funds to, borrow any money from, or enter into any other transaction with, any such affiliated person.

 

Section 2.14 The Company Schedules. The Company has delivered to the PEC Shareholders the following schedules, which are collectively referred to as the “Company Schedules” and which consist of separate schedules, which are dated the date of this Agreement, all certified by the chief executive officer of the Company to be complete, true, and accurate in all material respects as of the date of this Agreement.

 

(a) a schedule containing complete and accurate copies of the certificate of incorporation and bylaws of the Company as in effect as of the date of this Agreement;

 

(b) a schedule setting forth any information, together with any required copies of documents, required to be disclosed in the Company Schedules by Sections 2.01 through 2.13.

 

The Company shall cause the Company Schedules and the instruments and data delivered to the PEC Shareholders hereunder to be promptly updated after the date hereof up to and including the Closing Date.

 

Section 2.15 Valid Obligation. This Agreement and all agreements and other documents executed by the Company in connection herewith constitute the valid and binding obligation of the Company, enforceable in accordance with its or their terms, except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and subject to the qualification that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought.

 

Section 2.16 OTC Marketplace Quotation. The Company Common Stock is quoted on the OTC Pink tier of the OTC Markets under the symbol “PLFX”. There is no action or proceeding pending or, to the Company’s knowledge, threatened against the Company by The Financial Industry Regulatory Authority, Inc. (“FINRA”) with respect to any intention by such entity to prohibit or terminate the quotation of the Company Common Stock on the OTC Pink tier.

 

ARTICLE III

SHARE EXCHANGE

 

Section 3.01 The Exchange and Share Cancellation. On the terms and subject to the conditions set forth in this Agreement, on the Closing Date (as defined in Section 3.02), (i) the PEC Shareholders listed in Composite Exhibit A, representing an aggregate of 21,535,252 shares of PEC common stock, upon their agreement, shall sell, assign, transfer and deliver, free and clear of all liens, pledges, encumbrances, charges, restrictions or known claims of any kind, nature, or description, all of the shares of PEC held by them as set forth on Composite Exhibit A; the objective of such purchase (the “Exchange”) being the acquisition by the Company of not less than 51% of the issued and outstanding shares of PEC common stock. In exchange for the transfer of such securities by the PEC Shareholders, the Company shall deliver to the PEC Shareholders 5.53849 (the “Exchange Ratio”) shares of the Company’s common stock (the “Exchange Shares”) for each share of PEC common stock (an aggregate of up to 119,272,816 shares of the Company’s common stock (hereinafter referred to as the “Exchange Consideration”) after giving effect to the Forward Stock Split as set forth on Composite Exhibit A. Immediately upon completion of the Exchange, the PEC Shareholders listed in Section 5.06(c) (the “Cancelling Shareholders”), principally representing the management founders of PEC, shall cancel an aggregate of 60,910,113 Exchange Shares in the amounts set forth in Section 5.06(c) (the “Cancelled Shares”). The number of Cancelled Shares is intended to reflect the nearly equivalent number of PEC Shares as a percentage of the total outstanding shares of PEC as the Cancelling Shareholders acquired a controlling interest in the Company in anticipation of completion of the Exchange and other transactions contemplated by this Agreement. At the Closing Date, the PEC Shareholders shall, on surrender of their certificates representing their PEC shares to the Company or its registrar or transfer agent, be entitled to receive a certificate or certificates evidencing their ownership of the Exchange Shares.

 

 

Section 3.02 Closing. The closing (“Initial Closing”) of the transactions contemplated by this Agreement shall occur following completion of the conditions set forth in Articles V and VI, and upon delivery of the Exchange Consideration as described in Section 3.01 herein. The Initial Closing shall take place at a mutually agreeable time and place and is anticipated to close by no later than October 31, 2014, but in no event before this Agreement has been signed by PEC Shareholders holding at least 51% of the shares of PEC common stock outstanding (the “Initial Closing Date”). Subsequent to the Initial Closing Date, the Company may complete one or more additional Closings to complete the exchanges provided for in this Agreement to allow the Company to complete the acquisition of up to a 100% interest in PEC for a period of up to 30 days after the Closing Date. Each closing that occurs after the Initial Closing Date, along with the Closing or the Initial Closing shall be collectively be referred to as the “Closing” or “Closing Date”.

 

Section 3.03 Closing Events. At the Closing, the Company, and PEC shall execute, acknowledge, and deliver (or shall ensure to be executed, acknowledged, and delivered), any and all certificates, opinions, financial statements, schedules, agreements, resolutions, rulings or other instruments required by this Agreement to be so delivered at or prior to the Closing, together with such other items as may be reasonably requested by the parties hereto and their respective legal counsel in order to effectuate or evidence the transactions contemplated hereby.

 

Section 3.04 Termination. This Agreement may be terminated by each of the PEC Shareholders or the Company only (a) in the event that the Company or PEC do not meet the conditions precedent set forth in Articles V and VI or (b) if the Initial Closing has not occurred by October 31, 2014. If this Agreement is terminated pursuant to this section, this Agreement shall be of no further force or effect as to any party hereto, and no obligation, right or liability shall arise hereunder.

 

ARTICLE IV
SPECIAL COVENANTS

 

Section 4.01 Access to Properties and Records. The Company and PEC will each afford to the officers and authorized representatives of the other full access to the properties, books and records of the Company or PEC, as the case may be, in order that each may have a full opportunity to make such reasonable investigation as it shall desire to make of the affairs of the other, and each will furnish the other with such additional financial and operating data and other information as to the business and properties of the Company or PEC, as the case may be, as the other shall from time to time reasonably request. Without limiting the foregoing, as soon as practicable after the end of each fiscal quarter (and in any event through the last fiscal quarter prior to the Closing Date), each party shall provide the other with quarterly internally prepared and unaudited financial statements.

 

Section 4.02 Delivery of Books and Records. At the Closing, PEC shall deliver to the Company, the originals of the corporate minute books, books of account, contracts, records, and all other books or documents of PEC now in the possession of PEC or its representatives.

 

Section 4.03 Third Party Consents and Certificates. The Company and PEC agree to cooperate with each other in order to obtain any required third party consents to this Agreement and the transactions herein contemplated.

 

 

Section 4.04 Actions Prior to Closing.

 

(a) From and after the date hereof until the Closing Date and except as set forth in the Company Schedules or PEC Schedules or as permitted or contemplated by this Agreement, the Company (subject to paragraph (d) below) and PEC respectively, will each:

 

(i) carry on its business in substantially the same manner as it has heretofore and as disclosed in the Company SEC Reports;

 

(ii) maintain and keep its properties in states of good repair and condition as at present, except for depreciation due to ordinary wear and tear and damage due to casualty;

 

(iii) maintain in full force and effect insurance comparable in amount and in scope of coverage to that now maintained by it;

 

(iv) perform in all material respects all of its obligations under material contracts, leases, and instruments relating to or affecting its assets, properties, and business;

 

(v) use its best efforts to maintain and preserve its business organization intact, to retain its key employees, and to maintain its relationship with its material suppliers and customers; and

 

(vi) fully comply with and perform in all material respects all obligations and duties imposed on it by all federal and state laws (including without limitation, the federal securities laws) and all rules, regulations, and orders imposed by federal or state governmental authorities.

 

(b) From and after the date hereof until the Closing Date, neither the Company nor PEC will:

 

(i) make any changes in their Articles of Incorporation, articles or certificate of incorporation or bylaws except as contemplated by this Agreement including a name change;

 

(ii) take any action described in Section 1.07 in the case of PEC or in Section 2.07, in the case of the Company (all except as permitted therein or as disclosed in the applicable party’s schedules);

 

(iii) enter into or amend any contract, agreement, or other instrument of any of the types described in such party’s schedules, except that a party may enter into or amend any contract, agreement, or other instrument in the ordinary course of business involving the sale of goods or services; or

 

(iv) sell any assets or discontinue any operations, sell any shares of capital stock or conduct any similar transactions other than in the ordinary course of business except as disclosed in the Company SEC Reports.

 

ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY

 

The obligations of the Company under this Agreement are subject to the satisfaction, at or before the Closing Date, of the following conditions:

 

Section 5.01 Accuracy of Representations and Performance of Covenants. The representations and warranties made by PEC and the PEC Shareholders in this Agreement were true when made and shall be true at the Closing Date with the same force and effect as if such representations and warranties were made at and as of the Closing Date (except for changes therein permitted by this Agreement). PEC shall have performed or complied with all covenants and conditions required by this Agreement to be performed or complied with by PEC prior to or at the Closing. The Company shall be furnished with a certificate, signed by a duly authorized executive officer of PEC and dated the Closing Date, to the foregoing effect.

 

 

Section 5.02 Officer’s Certificate. The Company shall have been furnished with a certificate dated the Closing Date and signed by a duly authorized officer of PEC to the effect that no litigation, proceeding, investigation, or inquiry is pending, or to the best knowledge of PEC threatened, which might result in an action to enjoin or prevent the consummation of the transactions contemplated by this Agreement, or, to the extent not disclosed in the PEC Schedules, by or against PEC, which might result in any material adverse change in any of the assets, properties, business, or operations of PEC.

 

Section 5.03 Approval by the PEC Shareholders. The Exchange shall have been approved by the holders of not less than fifty one percent (51%) of the PEC common stock, including voting power, of PEC, unless a lesser number is agreed to by the Company.

 

Section 5.04 No Governmental Prohibition. No order, statute, rule, regulation, executive order, injunction, stay, decree, judgment or restraining order shall have been enacted, entered, promulgated or enforced by any court or governmental or regulatory authority or instrumentality which prohibits the consummation of the transactions contemplated hereby.

 

Section 5.05 Consents. All consents, approvals, waivers or amendments pursuant to all contracts, licenses, permits, trademarks and other intangibles in connection with the transactions contemplated herein, or for the continued operation of PEC after the Closing Date on the basis as presently operated shall have been obtained.

 

Section 5.06 Other Items.

  

(a) The Company shall have received a list containing the name, address, and number of shares held by the PEC Shareholders as of the date of Closing, certified by an executive officer of PEC as being true, complete and accurate; and

 

(b) The Company shall have received such further opinions, documents, certificates or instruments relating to the transactions contemplated hereby as the Company may reasonably request.

 

 

(c) In support of the transactions contemplated in this Agreement, the following PEC Shareholders shall have cancelled the number of shares of the Exchange Shares set forth next to their name:

 

Canceling Shareholder Name			No. of Cancellation Shares
Tradition Studios IP Acquisition LLC			33,873,423
(Alternative)2 Holding AG			10,966,210
Scenic Loop Holding LLC			10,966,210
Jim Berney			4,873,370
Aaron Blaise			230,400
Total			60,910,113

 

(d) The Company shall have received the PEC Financial Statements as provided for in Sections 1.04(a) and (b).

 

ARTICLE VI

CONDITIONS PRECEDENT TO OBLIGATIONS OF PEC

AND THE PEC SHAREHOLDERS

 

The obligations of PEC and each of the PEC Shareholders under this Agreement are subject to the satisfaction of the Company, or each PEC Shareholder, as the case may be, at or before the Closing Date, of the following conditions:

 

Section 6.01 Accuracy of Representations and Performance of Covenants. The representations and warranties made by the Company in this Agreement were true when made and shall be true as of the Closing Date (except for changes therein permitted by this Agreement) with the same force and effect as if such representations and warranties were made at and as of the Closing Date. Additionally, the Company shall have performed and complied with all covenants and conditions required by this Agreement to be performed or complied with by the Company.

 

Section 6.02 Officer’s Certificate. PEC shall have been furnished with certificates dated the Closing Date and signed by duly authorized executive officers of the Company, to the effect that no litigation, proceeding, investigation or inquiry is pending, or to the best knowledge of the Company threatened, which might result in an action to enjoin or prevent the consummation of the transactions contemplated by this Agreement or, to the extent not disclosed in the Company Schedules, by or against the Company, which might result in any material adverse change in any of the assets, properties or operations of the Company.

 

Section 6.03 Good Standing. PEC shall have received a certificate of good standing from the Secretary of State of Nevada or other appropriate office, dated as of a date within ten days prior to the Closing Date certifying that the Company is in good standing as a corporation in the State of Nevada and has filed all tax returns required to have been filed by it to date and has paid all taxes reported as due thereon.

 

Section 6.04 No Governmental Prohibition. No order, statute, rule, regulation, executive order, injunction, stay, decree, judgment or restraining order shall have been enacted, entered, promulgated or enforced by any court or governmental or regulatory authority or instrumentality which prohibits the consummation of the transactions contemplated hereby.

 

Section 6.05 Approval by the Company Board of Directors and its Shareholders. The Company’s board of directors shall have approved the Exchange and the following (the “Corporate Actions”):

 

(a) effect a 1:10 forward stock split of the Company’s issued and outstanding common stock (the “Forward Stock Split”).

 

Section 6.06 Consents. All consents, approvals, waivers or amendments pursuant to all contracts, licenses, permits, trademarks and other intangibles in connection with the transactions contemplated herein, or for the continued operation of the Company after the Closing Date on the basis as presently operated shall have been obtained including approval of the Corporate Actions by FINRA.

 

 

Section 6.07 Shareholder Report.

 

The PEC Shareholders shall receive a shareholder’s report reflective of all the Company shareholder’s which does not exceed 21,535,252 shares of the Company common stock issued and outstanding as of the day prior to the Closing Date and no shares of preferred stock outstanding.

 

Section 6.08 Other Items.

 

(a) The PEC Shareholders shall have received further opinions, documents, certificates, or instruments relating to the transactions contemplated hereby as the PEC Shareholders may reasonably request.

 

(b) This Agreement shall have been executed by the holders of 51% of the shares of PEC common stock.

 

ARTICLE VII
MISCELLANEOUS

 

Section 7.01 Brokers. The Company and PEC agree that there were no finders or brokers involved in bringing the parties together or who were instrumental in the negotiation, execution or consummation of this Agreement. The Company and PEC each agree to indemnify the other against any claim by any third person other than those described above for any commission, brokerage, or finder’s fee arising from the transactions contemplated hereby based on any alleged agreement or understanding between the indemnifying party and such third person, whether express or implied from the actions of the indemnifying party.

 

Section 7.02 Governing Law. This Agreement shall be governed by, enforced, and construed under and in accordance with the laws of the State of Nevada, without giving effect to the principles of conflicts of law thereunder. Each of the parties (a) irrevocably consents and agrees that any legal or equitable action or proceedings arising under or in connection with this Agreement shall be brought exclusively in the state or federal courts of the United States with jurisdiction in St. Lucie County, Florida. By execution and delivery of this Agreement, each party hereto irrevocably submits to and accepts, with respect to any such action or proceeding, generally and unconditionally, the jurisdiction of the aforesaid courts, and irrevocably waives any and all rights such party may now or hereafter have to object to such jurisdiction.

 

Section 7.03 Notices. Any notice or other communications required or permitted hereunder shall be in writing and shall be sufficiently given if personally delivered to it or sent by telecopy, overnight courier or registered mail or certified mail, postage prepaid, addressed as follows:

 

If to PEC, to:

 

Frank Patterson, Chief Executive Officer

Pulse Entertainment Corporation

10521 SW Village Center Drive, Suite 201

Port St. Lucie, FL 34987

 

If to the Company, to:

 

John Textor, Executive Chairman

Pulse Evolution Corporation

10521 SW Village Center Drive, Suite 201

Port St. Lucie, FL 34987

 

or such other addresses as shall be furnished in writing by any party in the manner for giving notices hereunder, and any such notice or communication shall be deemed to have been given (i) upon receipt, if personally delivered, (ii) on the day after dispatch, if sent by overnight courier, (iii) upon dispatch, if transmitted by telecopy and receipt is confirmed by telephone and (iv) three (3) days after mailing, if sent by registered or certified mail.

 

 

Section 7.04 Attorney’s Fees. In the event that either party institutes any action or suit to enforce this Agreement or to secure relief from any default hereunder or breach hereof, the prevailing party shall be reimbursed by the losing party for all costs, including reasonable attorney’s fees, incurred in connection therewith and in enforcing or collecting any judgment rendered therein.

 

Section 7.05 Confidentiality. Each party hereto agrees with the other that, unless and until the transactions contemplated by this Agreement have been consummated, it and its representatives will hold in strict confidence all data and information obtained with respect to another party or any subsidiary thereof from any representative, officer, director or employee, or from any books or records or from personal inspection, of such other party, and shall not use such data or information or disclose the same to others, except (i) to the extent such data or information is published, is a matter of public knowledge, or is required by law to be published; or (ii) to the extent that such data or information must be used or disclosed in order to consummate the transactions contemplated by this Agreement. In the event of the termination of this Agreement, each party shall return to the other party all documents and other materials obtained by it or on its behalf and shall destroy all copies, digests, work papers, abstracts or other materials relating thereto, and each party will continue to comply with the confidentiality provisions set forth herein.

 

Section 7.06 Public Announcements and Filings. Unless required by applicable law or regulatory authority, none of the parties will issue any report, statement or press release to the general public, to the trade, to the general trade or trade press, or to any third party (other than its advisors and representatives in connection with the transactions contemplated hereby) or file any document, relating to this Agreement and the transactions contemplated hereby, except as may be mutually agreed by the parties. Copies of any such filings, public announcements or disclosures, including any announcements or disclosures mandated by law or regulatory authorities, shall be delivered to each party at least one (1) business day prior to the release thereof.

 

Section 7.07 Schedules; Knowledge. Each party is presumed to have full knowledge of all information set forth in the other party’s schedules delivered pursuant to this Agreement.

 

Section 7.08 Third Party Beneficiaries. This contract is strictly between the Company, the PEC Shareholders and PEC, and, except as specifically provided, no director, officer, stockholder (other than the PEC Shareholders), employee, agent, independent contractor or any other person or entity shall be deemed to be a third party beneficiary of this Agreement.

 

Section 7.09 Expenses. Subject to Section 7.04 above, whether or not the Exchange is consummated, each of the Company and PEC will bear their own respective expenses, including legal, accounting and professional fees, incurred in connection with the Exchange or any of the other transactions contemplated hereby.

 

Section 7.10 Entire Agreement. This Agreement represents the entire agreement between the parties relating to the subject matter thereof and supersedes all prior agreements, understandings and negotiations, written or oral, with respect to such subject matter.

 

Section 7.11 Survival; Termination. The representations, warranties, and covenants of the respective parties shall survive the Closing Date and the consummation of the transactions herein contemplated for a period of two years.

 

Section 7.12 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which taken together shall be but a single instrument.

 

Section 7.13 Amendment or Waiver. Every right and remedy provided herein shall be cumulative with every other right and remedy, whether conferred herein, at law, or in equity, and may be enforced concurrently herewith, and no waiver by any party of the performance of any obligation by the other shall be construed as a waiver of the same or any other default then, theretofore, or thereafter occurring or existing. At any time prior to the Closing Date, this Agreement may by amended by a writing signed by all parties hereto, with respect to any of the terms contained herein, and any term or condition of this Agreement may be waived or the time for performance may be extended by a writing signed by the party or parties for whose benefit the provision is intended.

 

Section 7.14 Best Efforts. Subject to the terms and conditions herein provided, each party of PEC and the Company shall use its best efforts to perform or fulfill all conditions and obligations to be performed or fulfilled by it under this Agreement so that the transactions contemplated hereby shall be consummated as soon as practicable. Each party of PEC and the Company also agrees that it shall use its best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective this Agreement and the transactions contemplated herein.

 

 

IN WITNESS WHEREOF, the corporate parties hereto have caused this Agreement to be executed by their respective officers, hereunto duly authorized, as of the date first-above written.

 

	PULSE ENTERTAINMENT CORPORATION
	A Delaware corporation
	By:	/s/ Frank Patterson
		Frank Patterson, Chief Executive Officer
	PULSE EVOLUTION CORPORATION
	A Nevada corporation
	By:	/s/ John C. Textor
		John C. Textor, Executive Chairman

 

 

COMPOSITE EXHIBIT A

 

PULSE ENTERTAINMENT CORPORATION SHAREHOLDERS SIGNATURE PAGE

 

Purchaser Name		No. Shares of PEC Common Stock		% of PEC’s Outstanding Shares		No. Shares of the Company’s Common Stock		% of Company’s Outstanding Shares

 

Sign:
Name:

 

 

PULSE EVOLUTION CORPORATION

 

Share Exchange Agreement

 

PEC Schedules

 

Schedule 1.06

 

Options or Warrants

 

On May 14th, 2014, PEC and Transformative Media, LLC (Transformative) entered into an Advisory Agreement (the “Agreement”) wherein Transformative agreed to provide certain services to PEC in exchange for consideration including cash, equity, an operating budget and credits as specified in the Agreement. The equity portion of the consideration was comprised of 200,000 stock options with an exercise price of $1.73 per share. Per the Agreement, the following option grants were to be issued by PEC:

 

100,000 options immediately upon execution of the Agreement

50,000 options each quarter beginning three months from the date of the Agreement if certain performance conditions were achieved.

 

Schedule 2.06

 

Options or Warrants

 

On March 19, 2014, the Company entered into an Investor Introduction Agreement (“the Agreement”) with an international advisory services group (“the Advisor”). The Advisor is to support the Company in its fund raising process through introductions of potential investors and to assist the Company in developing a coherent investor relations strategy. The Agreement calls for the Advisor to be paid a success fee in cash equal to six percent of all investments introduced by the Advisor. In addition the Advisor shall be entitled to shares equal to three percent of the underlying shares issued in any such transactions. As of June 30, 2014, the Advisor had been paid approximately $300,000 in cash. Additionally the Advisor had earned 477,531 shares of common stock, of which 224,869 shares of common stock were issued. A liability has been recognized for the portion of shares not issued as of June 30, 2014 of approximately $499,000, which is recorded in accrued expenses.

 

On July 15, 2014, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with three investors who are unrelated parties to the Company whereby they agreed to purchase an aggregate of 4,750,000 shares of our Common Stock (3,750,000 were purchased at a price of $0.40 per share, for a total purchase price of $1,500,000 and $1,000,000 were purchased at a price of $0.62 per share for a purchase price of $620,000. The Securities Purchase Agreement provides piggyback registration rights for the Common Stock acquired by the investors in the event that the Company registers any of its Common Stock under the Securities Act of 1933, as amended (the “Securities Act”) for sale to the public for cash in an underwritten offering, if the applicable registration form being used by the Company will permit such registration. The Company is not required to register the Common Stock if registration is effected by the Company on behalf of another shareholder that is exercising registration rights that prohibit registration of other securities or the Common Stock has already been registered.

 

The Company entered into a Consulting Services Agreement with William P. Krueger effective as of July 1, 2014 to provide financial, organizational and commercial matters consulting services to the Company. The term of the agreement is for a period of 10 months. The Company agreed to pay Mr. Krueger $90,000 in cash and issue 2,769,246 shares of Common Stock subject to certain events of forfeiture if Mr. Krueger terminates his employment during the term of the agreement without good reason as provided for in the agreement.

 

 

The Company is in discussions with James Rock to issue him 1,152,006 shares of Common Stock for future services Mr. Rock will perform on behalf of the Company.

 

Under the terms of the partner agreement (the “Partner Agreement”) we entered into with ABG EPE IP, LLC (“ABG”) effective as of August 1, 2014, we agreed with ABG that it has the right to exchange certain amounts the Company paid them under the Partner Agreement for warrants to purchase our common stock exercisable at a fixed price subject to certain anti-dilution rights in the event our total equity is diluted below the warrant exercise price.

 

Schedule 1.08

 

Litigation

 

On May 29, 2014, Hologram USA, Inc., Musion Das Hologram Limited and Uwe Maass (the “Plaintiffs”) filed a amended complaint in the U.S. District Court for the District of Nevada (Case No. 2:14-cv-00772-GMN-NJK). The complaint alleges that Pulse Evolution Corporation, Pulse Entertainment Corporation, John Textor, Dick Clark Productions, Inc., John Branca and John McClain, as executors of the Estate of Michael J. Jackson, MJJ Productions, Inc. Musion Events, Ltd. Musion 3D, Ltd., William James Rock and Ian Christopher O’Connell (collectively, the “Defendants”) infringed on the Plaintiffs’ patent rights in connection with a musical performance at the 2014 Billboard Music Awards in Las Vegas Nevada featuring an image of the late Michael Jackson. The complaint seeks an order of the Court temporarily and permanently enjoining the Defendants from carrying out the Michael Jackson performance, a judgment for infringement, damages, attorneys’ fees and costs. Plaintiffs’ Emergency Motion for Temporary Restraining Order filed in connection with its May 15, 2014 complaint was denied on May 16, 2014.

 

 

SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of July ___, 2014, entered into by and among PULSE EVOLUTION CORPORATION, a Nevada corporation (the “Company”), and the Buyer(s) set forth on the signature pages 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) and/or Rule 506 of Regulation D (“Regulation D”) and/or Regulation S (“Regulation S”) as promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”); 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 the number of shares of the Company’s restricted common stock (the “Shares” or the “Securities”) as set forth on Annex A at a purchase price of $0.40 per share (the “Purchase Price”) (the “Subscription Amount”);

 

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 COMMON STOCK.

 

(a) Purchase of Shares. 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, the Shares as set forth on the Buyer Signature Page, attached hereto as Annex A, for each Buyer affixed hereto. Upon Buyer’s execution of this Agreement on the Buyer Signature Page and Buyer’s completion of the Accredited Investor Certification, the Investor Profile, the Anti-Money Laundering Information Form, in the form attached as Annex A to this Agreement, and any other documents, agreements, supplements and additions thereto required by the Company (collectively, the “Subscription Documents”) to be completed by the Buyer, the Buyer shall wire transfer the Subscription Amount set forth on its Buyer Signature Page, in same-day funds, in accordance with the instructions to be provided by Buyer to the Company at Closing.

 

(b) Closing Date. The closing of the purchase and sale of the Shares (the “Closing”) shall take place as soon as practicable following the satisfaction of the conditions to the Closing set forth herein (or such later date as is mutually agreed to by the Company and the Buyer(s)) (the date of any such Closing is hereinafter referred to as a “Closing Date”). The Closing shall occur on a Closing Date at the law offices of Eavenson, Fraser, Lunsford & Evans, PL, 2000 PGA Boulevard, Suite 3200, Palm Beach Gardens, FL 33408 (or such other place as is mutually agreed to by the Company and the Buyer(s)).

 

2. Acceptance of Subscriptions. The 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 Shares, 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 Shares is terminated, all funds received by the Company from the Buyer will be immediately returned without interest or offset, and this subscription shall thereafter be of no further force or effect.

 

3. BUYER’S REPRESENTATIONS AND WARRANTIES.

 

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

 

(a) Investment Purpose. Buyer is acquiring the Shares 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.

 

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

 

 

(c) Non-U.S. 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 Shares 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 Shares for the account of a U.S. Person or for resale in the United States and the Buyer confirms that the Shares 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 (i) as of the execution date of this Agreement is not located within the United States, and (ii) is not purchasing the Shares for the account or benefit of any U.S. person except in accordance with one or more available exemptions from the registration requirements of the Securities Act or in a transaction not subject thereto;

 

(iii) the Buyer acknowledges that the Shares 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 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 Securities Act;

 

(iv) the Buyer and if applicable, the disclosed principal for whom the Buyer is acting, understands that the Company is the seller of the Shares 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 Shares or underlying securities other than to a non-U.S. Person;

 

(v) the Buyer and if applicable, the disclosed principal for whom the Buyer is acting, acknowledges and understands that in the event the Shares 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

 

(vi) neither the Buyer nor any disclosed principal will offer, sell or otherwise dispose of the Shares 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.

 

(d) 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, and as set forth on the Accredited Investor Certification attached hereto.

 

(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 Shares, 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 Shares, 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) Solicitation. The Buyer is unaware of, is in no way relying on, and did not become aware of the offering of the Shares 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 Shares and is not subscribing for the Shares and did not become aware of the offering of the Shares 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.

 

(g) Brokerage Fees. 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 (other than commissions to be paid by the Company to the Brokers).

 

(h) 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 Shares to evaluate the merits and risks of an investment in the Shares and the Company and to make an informed investment decision with respect thereto.

 

(i) Buyer Liquidity. 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 Shares for an indefinite period of time, and after purchasing the Shares 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 Shares including the risk of illiquidity and the risk of a complete loss of this investment.

 

(j) High Risk Investment. The Buyer is aware that an investment in the 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 Shares.

 

(k) Reliance on Exemptions. Buyer understands that the Shares 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 such securities.

 

(l) Information. 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 its purchase of the Shares. Buyer and its Advisors have reviewed all filings made by the Company with the SEC, including all filings made publicly available through the SEC’s web portal https://www.sec.gov/edgar. Buyer and its Advisors have been afforded the opportunity to review such documents and materials and the information contained therein. Buyer and its Advisors have been afforded the opportunity to ask questions of the Company and its management. 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 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 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, Buyer understands and represents that he is purchasing the Shares notwithstanding the fact that the Company and its subsidiaries, if any, may disclose in the future certain material information Buyer 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. Buyer 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 the Shares.

 

(m) No Other Representations or Information. In evaluating the suitability of an investment in the Shares, 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. 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 Shares.

 

(n) No Governmental Review. Buyer 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 the Shares, or the fairness or suitability of the investment in the Shares, nor have such authorities passed upon or endorsed the merits of the offering of the Shares.

 

 

(o) Transfer or Resale. Buyer understands that: (i) the Shares 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 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), except as otherwise provided herein, 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 or resale for the Shares, nor can there be any assurance that the Shares will be freely transferable at any time in the foreseeable future.

 

(p) Legends. Buyer understands that the certificates or other instruments representing the 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 REPRESENTED HEREBY 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 “1933 ACT”). ACCORDINGLY, NONE OF THE SECURITIES REPRESENTED HEREBY 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.

 

For all Persons:

 

AS PROVIDED FOR IN THE COMPANY’S AMENDED AND RESTATED ARTICLES OF INCORPORATION FILED WITH THE NEVADA SECRETARY OF STATE ON MAY 22, 2014, ONLY HOLDERS OF SECURITIES THAT CERTIFY TO THE COMPANY ON A QUARTERLY BASIS THAT THE SECURITIES HAVE NOT BEEN USED IN CONNECTION WITH STOCK LOAN TRANSACTIONS SHALL BE ENTITLED TO VOTING RIGHTS OR DIVIDENDS DURING THAT SAME QUARTERLY PERIOD.

 

 

(q) Organization and Standing of Buyer. If such 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.

 

(r) Authorization, Enforcement. Such Buyer has the requisite power and authority to enter into and perform this Agreement, the other Subscription Documents, the Transactions and to purchase the Shares being sold to it hereunder. The execution, delivery and performance of this Agreement and the other Subscription Documents by such Buyer and the consummation by it 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 its Board of Directors, stockholders, partners, members, as the case may be, is required. This Agreement and the other Subscription Documents have been duly authorized, executed and delivered by such Buyer and upon execution of this Agreement and the Subscription 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.

 

(s) No Conflicts. The execution, delivery and performance of this Agreement and the other Subscription 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 Subscription Documents or to purchase the Shares 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.

 

(t) 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;

 

(u) Anti-Money Laundering; OFAC.

 

(i) 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 Shares 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 individuals¹ or entities in certain countries regardless of whether such individuals or entities appear on the OFAC lists;

 

(ii) 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.

 

 

(iii) 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

 

(iv) 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.

 

4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

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

 

(a) Organization and Qualification. The Company and each of its subsidiaries, if any, is a corporation or other business entity 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 and each of its subsidiaries 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. Each subsidiary of the Company is identified on Schedule 3(a) attached hereto.

 

(b) Authorization, Enforcement, Compliance with Other Instruments. (i) The Company and each of its subsidiaries that is party to this Agreement, has the requisite corporate power and authority to enter into and perform, as the case may be, under this Agreement, and all other agreements and documents that are exhibits hereto and thereto or are contemplated hereby or thereby or necessary or desirable to effect the transactions contemplated hereby and thereby to which it is a party and to issue the Shares in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, by the Company and each such subsidiary and the consummation by it of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the Shares have been duly authorized by the Company’s or such subsidiary’s Board of Directors, and no further consent or authorization is required by the Company or such subsidiary, their respective Board of Directors or their respective stockholders, (iii) this Agreement, will be duly executed and delivered by the Company and each of its subsidiaries that is party thereto, (iv) this Agreement, when executed will constitute the valid and binding obligations of the Company and each of its subsidiaries that is party thereto enforceable against the Company and each such subsidiary 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 of the Company consists of a total of 300,000,000 shares of common stock, $0.0001 par value per share and 100,000,000 shares of undesignated preferred stock, of which (i) ___________shares of Common Stock are issued and outstanding, and (ii) zero (0) shares of preferred stock are issued or outstanding, and All of the outstanding shares of Common Stock have been duly authorized, validly issued and are fully paid and nonassessable. No shares of capital stock of the Company or any of its subsidiaries are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company, except as disclosed in the Articles of Incorporation of the Company, as amended and effective on the date hereof. As of the date of this Agreement, except as set forth on Schedule 3(c), (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 the Company or any of its subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries 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 or any of its subsidiaries, (ii) there are no outstanding debt securities other than as set forth in Schedule 3(c), and (iii) except as contemplated hereby, there are no agreements or arrangements under which the Company or any of its subsidiaries is obligated to register the sale of any of their securities under the Securities Act. There are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Shares as described in this Agreement. The 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 Shares or those restrictions as disclosed herein). Except as set forth on Schedule 3(c), no co-sale right, right of first refusal or other similar right exists with respect to the Shares or the issuance and sale thereof. The issue and sale of the Shares will not result in a right of any holder of Company securities 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 Articles of Incorporation, and as in effect on the date hereof (the “Articles of Incorporation”), and the Company’s Bylaws, as in effect on the date hereof (the “Bylaws”), and the terms of all securities exercisable for Company Shares and the material rights of the holders thereof in respect thereto other than stock options issued to employees and consultants.

 

 

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.

 

 

(d) Issuance of Shares. The Shares 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.

 

(e) No Conflicts. The execution, delivery and performance of this Agreement by the Company and each of its subsidiaries that is party hereto or thereto, and the consummation by the Company and each of its subsidiaries that is party hereto or thereto of the transactions contemplated hereby and thereby will not (i) result in a violation of the Articles of Incorporation, the Bylaws or any certificate of designations of any outstanding series of preferred stock (or equivalent constitutive document) of the Company or any of its subsidiaries 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 or any subsidiary 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 any subsidiary or by which any property or asset of the Company or any subsidiary 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, neither the Company nor any subsidiary is in violation of any term of or in default under its constitutive documents. Except as set forth in Schedule 3(e), and except those which could not reasonably be expected to have a Material Adverse Effect, neither the Company nor any subsidiary is 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 or any subsidiary. The business of the Company and its subsidiaries is not being conducted, and shall not be conducted in violation of any material law, ordinance, or regulation of any governmental entity. Except as specifically contemplated by this Agreement and as required under the Securities Act and any applicable state securities laws, neither the Company nor any of its subsidiaries is 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 in accordance with the terms hereof or thereof. Neither the execution and delivery by the Company of this Agreement, 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 their assets is subject, except for (i) any notice, consent or waiver, set forth in Schedule 3(e), or (ii) 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.

 

(f) Absence of Litigation. Except as set forth on Schedule 3(f), 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 (i) adversely affect the validity or enforceability of, or the authority or ability of the Company or any of its subsidiaries to perform its obligations under, this Agreement, or (ii) have a Material Adverse Effect.

 

 

(g) Acknowledgment Regarding Buyer’s Purchase of the Shares. The Company acknowledges and agrees that each Buyer is acting solely in the capacity of an arm’s length purchaser with respect to this Agreement, 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 this Agreement 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 this Agreement, and the transactions contemplated hereby and thereby is merely incidental to such Buyer’s purchase of the Shares. The Company further represents to the Buyers that the Company’s decision to enter into this Agreement, has been based solely on the independent evaluation by the Company and its representatives.

 

(h) 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 Shares.

 

(i) 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 Shares under the Securities Act or cause this offering of the Shares to be integrated with prior offerings by the Company for purposes of the Securities Act.

 

(j) Employee Relations. Neither Company nor any subsidiary is involved in any labor dispute nor, to the knowledge of the Company, is any such dispute threatened. Neither Company nor any subsidiary is party to any collective bargaining agreement. None of the Company’s or its subsidiaries’ employees is a member of a union, and the Company believes that its and its subsidiaries’ relationship with their respective employees is good.

 

(k) Intellectual Property Rights. Except as set forth on Schedule 3(k), 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. Except as set forth on Schedule 3(k), neither 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.

 

(l) Environmental Laws.

 

(i) The Company and each subsidiary 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 or any subsidiary, 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”).

 

(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 or any subsidiary.

 

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

 

 

(m) Title. Except as set forth on Schedule 3(m), each of the Company and its subsidiaries 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. Except as set forth on Schedule 3(m), with respect to properties and assets it leases, each of the Company and its subsidiaries 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.

 

(n) No Material Adverse Breaches, etc. Neither Company nor any subsidiary is 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. Neither Company nor any subsidiary is 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.

 

(o) Tax Status. Except as set forth in Schedule 3(o), the Company and each subsidiary has made and filed all 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. Except as set forth in Schedule 3(o), there are no unpaid taxes in any material amount claimed to be due from the Company or any subsidiary by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.

 

(p) Certain Transactions. Except as set forth in Schedule 3(p), and except for arm’s length transactions pursuant to which the Company or any subsidiary 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 or any subsidiary is presently a party to any transaction with the Company or any subsidiary (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.

 

(q) Rights of First Refusal. Except as set forth on Schedule 3(q), 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.

 

(r) 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 Shares. The Company further acknowledges that without such representations and warranties of the Company made hereunder, the Buyers would not enter into this Agreement.

 

(s) 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 Brokers’ Fee to the Brokers, as described above.

 

5. 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, 6 and 7 of this Agreement.

 

(b) Form D. The Company agrees to file a Form D with respect to the offer and sale of the Shares as required under Regulation D. The Company shall, take such action as the Company shall reasonably determine is necessary to qualify the Shares, or obtain an exemption for the 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.

 

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

 

The obligation of the Company hereunder to issue and sell the Shares to the Buyer(s) at the Closing is subject to the satisfaction, at or before the 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) Buyer shall have executed this Agreement and the required Subscription Documents and delivered them to the Company.

 

 

(b) The Buyer(s) shall have delivered to the Company the Purchase Price for Shares in respective amounts as set forth on the signature page(s) affixed hereto by wire transfer of immediately available U.S. funds pursuant to the wire instructions set forth in Section 1(a) hereof and the Company 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 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 Closing Date.

 

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

 

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

 

(i) The Company shall have executed this Agreement and delivered it to the Buyer

 

(ii) The representations and warranties of the Company contained in this Agreement, 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 which case, such representations and warranties shall be true and correct without further qualification) as of the date when made and as of the 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, to be performed, satisfied or complied with by the Company at or prior to the Closing Date.

 

8. REGISTRATION OF THE SHARES; COMPLIANCE WITH SECURITIES ACT.

 

8.1 Registration Procedures and Expenses. The Company shall:

 

(a) Piggyback Registration Rights. Whenever the Company proposes to register under the Securities Act any of its Common Stock for sale to the public for cash in an underwritten offering, and the registration form to be used would permit inclusion thereto of the Shares and any shares of common stock issued or issuable directly or indirectly with respect to the Shares held by the Buyers by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization (together, for purposes of this Section 8, the “Registrable Securities”) (a “Piggyback Registration”), the Company will give prompt written notice to Shareholder and will include in such Piggyback Registration, subject to the allocation provisions below, all Registrable Securities with respect to which the Company has received from the Shareholder a written request for inclusion within 30 days after the Company’s sending of such notice; provided however, that the Company shall not be required to effect any registration of Registrable Securities if (i) the registration is the Company’s underwritten offering, (ii) registration is effected by the Company on behalf of a shareholder exercising registration rights that pursuant to the terms thereof prohibit the shareholder’s shares from being included in such registration (a “Limited Demand Registration”), (iii) the Registrable Securities was previously included in a Registration Statement, whether an underwritten offering or otherwise, or (iv) the registration statement is filed or effected on Form S-4 or Form S-8, each as promulgated under the 1933 Act, or their then equivalents;

 

(b) use its reasonable best efforts, subject to receipt of necessary information from the Buyers whose securities are included therein, to cause the SEC to declare the Registration Statement (or post-effective amendment, as applicable) effective within 30 business days after the Closing Date or, if the SEC reviews the Registration Statement, within 120 days after the Closing Date (the “Effective Deadline”);

 

(c) promptly prepare and file with the SEC such amendments and supplements to the Registration Statement and any prospectus prepared in connection therewith (the “Prospectus “) as may be necessary to keep the Registration Statement effective until (the “Effectiveness Period”) the earliest of (i) two years after the effective date of the Registration Statement, or (ii) such time as the Registrable Securities become eligible for resale by non-affiliates pursuant to Rule 144(k) under the Securities Act or any other rule of similar effect, or (iii) such time as all of the Registrable Securities have been sold pursuant to the Registration Statement;

 

(d) so long as the Registration Statement is effective covering the resale of the Registrable securities owned by the Buyer, furnish to the Buyer with respect to the Shares registered under the Registration Statement (and to each underwriter, if any, of such Shares) such number of copies of prospectuses and such other documents as the Buyer may reasonably request, in order to facilitate the public sale or other disposition of all or any of the Registrable Securities by the Buyer;

 

 

(e) file documents required of the Company for normal Blue Sky clearance in states specified in writing by the Buyer; provided, however, that the Company shall not be required to qualify to do business or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented;

 

(f) bear all reasonable expenses in connection with the procedures in paragraphs (a) through (e) of this Section 8.1 and the registration of the Registrable Securities pursuant to the Registration Statement, other than fees and expenses, if any, of counsel or other advisers to the Buyers (in each case except as otherwise provided herein) or underwriting discounts, brokerage fees and SECs incurred by the Buyers, if any, in connection with the offering pursuant to the Registration Statement;

 

(g) file a Form D with respect to offer and sale of the Shares to the Buyer as required under Regulation D under the Securities Act and to provide a copy thereof to the Buyer promptly after filing; and

 

(h) file, not later than the next business day after the Closing, a Current Report on Form 8-K with the SEC disclosing all material terms of the transactions contemplated hereby in accordance with the applicable SEC rules and regulations.

 

8.2 Transfer of Shares. The Buyer agrees that it will not effect any disposition of the Shares or its right to purchase the Shares that would constitute a sale within the meaning of the Securities Act or any applicable state securities laws, except as contemplated in the Registration Statement or as otherwise permitted by law, and that it will promptly notify the Company of any changes in the information set forth in the Registration Statement regarding the Buyer or its plan of distribution.

 

8.3 Indemnification. For the Purpose of this Section 8.3:

 

(i) the term “Buyer/Affiliate” shall mean any affiliate of the Buyer, including a transferee of the Shares from the Buyer who is an affiliate of the Buyer, and any person who controls the Buyer or any affiliate of the Buyer within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act; and

 

(ii) the term “Registration Statement” shall include any preliminary prospectus, final prospectus, free writing prospectus, exhibit, supplement or amendment included in or relating to, and any document incorporated by reference in, the Registration Statement.

 

(a) The Company agrees to indemnify and hold harmless the Buyer and each Buyer/Affiliate against any losses, claims, damages, liabilities or expenses, joint or several, to which the Buyer or Buyer/Affiliate may become subject, under the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the prior written consent of the Company), insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, including the Prospectus, financial statement and schedules, and all other documents files as a part thereof, as amended at the time of effectiveness of the Registration Statement, including any information deemed to be a part thereof as of the time of effectiveness pursuant to paragraph (b) of Rule 430A, or pursuant to Rules 430B, 430C, or 434, of the Rules and Regulations, or the Prospectus, in the form first filed with the SEC pursuant to Rule 424(b) of the Rules and Regulations, or filed as part of the Registration Statement at the time of effectiveness if no Rule 424(b) filing is required , or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state in any of them a material fact required to be stated therein or necessary to make the statements in any of them, in light of the circumstances under which they were made, not misleading, or arise out of or are based in whole or in part on any breach by the Company of the representations or warranties of the Company contained in this Agreement, or any failure of the Company to perform its obligations hereunder or under law, and will promptly reimburse the Buyer and each such Buyer/Affiliate for any legal and other expenses as such expenses are reasonably incurred by the Buyer or such Buyer/Affiliate in connection with investigating, defending or preparing to defend, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the Company will not be liable for amounts paid in settlement of any such loss, claim damage, liability or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, and, provided further, that the Company will not be liable in any such case to the extent that any such loss, claim, damage, liability, action or expense arises out of or is based upon (i) an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, the Prospectus or any amendment or supplement thereto in reliance upon and in conformity with written information furnished to the Company by the Buyer, or (ii) the failure of the Buyer to comply with the covenants and agreements contained in this 8.2, or (iii) the breach by the Buyer of any covenant, representation or warranty made by the Buyer herein, or (iv) any statement or omission in any Prospectus that is corrected in any subsequent Prospectus that was delivered to the Buyer prior to the pertinent sale or sales by the Buyer, or (v) any violation by the Buyer of any applicable federal or state securities laws, rule or regulations.

 

 

(b) The Buyer will severally, but not jointly with the other Buyers, indemnify and hold harmless the Company, each of its directors, each of its officers, counsel, employees, and agents, including such officers who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, claims, damages, liabilities or expenses to which the Company, each of its directors, each of its officers, counsel, employees, and agents and each such controlling person may become subject, under the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, but only if such settlement is effected with the written consent of the Buyer) insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon (i) any failure to comply with the covenants and agreements contained in 8.2 hereof, or (ii) the breach by the Buyer of any agreement, covenant, representation or warranty made by the Buyer herein, or (iii) any untrue or alleged untrue statement of any material fact contained in the Registration Statement, the Prospectus, or any amendment or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements in the Registration Statement, the Prospectus or any amendment or supplement thereto not misleading in light of the circumstances under which they were made, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, the Prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by the Buyer expressly for use therein, and will reimburse the Company, each of its directors, each of its officers, counsel, employees, and agents and each such controlling person for any legal and other expense reasonably incurred by the Company, each of its directors, each of its officers, counsel, employees, and agents and each such controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action.

 

(c) Promptly after receipt by an indemnified party under this Section 8.3 of notice of the threat or commencement of any action, indemnifiable hereunder such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 8.3, promptly notify the indemnifying party in writing thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party for contribution or otherwise under the indemnity agreement contained in this Section 8.3 to the extent it is not prejudiced as a result of such failure. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with all other indemnifying parties similarly notified, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded, based on an opinion of counsel reasonably satisfactory to the indemnifying party, that there may be a conflict of interest between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of its election to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 8.3 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed such counsel in connection with the assumption of legal defenses in accordance with the proviso to the preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel, reasonably satisfactory to such indemnifying party, representing all, of the indemnified parties who are parties to such action) or (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of action, in each of which cases the reasonable fees and expenses of counsel shall be at the expense of the indemnifying party. In no event shall any indemnifying party be liable in respect of any amounts paid in settlement of any action Unless the indemnifying party shall have approved in writing the terms of such settlement; provided that such consent shall not be unreasonably withheld. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnification could have been sought hereunder by such indemnified party from all liability on claims that are the subject matter of such proceeding.

 

(d) If the indemnification provided for in this Section 8.3 is required by its terms but is for any reason held by a court of competent jurisdiction to be unavailable to or otherwise insufficient to hold harmless an indemnified party under paragraphs (a), (b) or (c) of this Section 8.3 in respect to any losses, claims, damages, liabilities or expenses referred to herein, then each applicable indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of any losses, claims, damages, liabilities or expenses referred to herein (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Buyer from the private placement of Shares hereunder or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but the relative fault of the Company and the Buyer in connection with the statements or omissions or inaccuracies in the representations and warranties in this Agreement and/or the Registration Statement which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The respective relative benefits received by the Company on the one hand and each Buyer on the other shall be deemed to be in the same proportion as the amount paid by such Buyer to the Company pursuant to this Agreement for the Shares purchased by such Buyer that were sold pursuant to the Registration Statement bears to the difference between the amount such Buyer paid for the Shares that were sold pursuant to the Registration Statement and the amount received by such Buyer from such sale. The relative fault of the Company, on the one hand, and each Buyer on the other shall be determined by reference to, among other things, whether the untrue or alleged statement of the material fact or the omission or alleged omission to state a material fact or the inaccurate or the alleged inaccurate representation and/or warranty relates to information supplied by the Company or by such Buyer and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omissions. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in paragraph (c) of this Section8.3, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in paragraph (c) of this Section8.3 with respect to the notice of the threat or commencement of any threat or action shall apply if a claim for contribution is to be made under this paragraph (d); provided, however, that no additional notice shall be required with respect to any threat or action for which notice has been given under paragraph (c) for purposes of indemnification. The Company and each Buyer agree that it would not be just and equitable if contribution pursuant to this Section 8.3 were determined solely by pro rata allocation (even if the Buyers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this paragraph.

 

 

8.4 Termination of Conditions and Obligations. The restrictions imposed by this Section 8 upon the transferability of the Shares shall cease and terminate as to any particular number of Shares upon the earlier of (i) the passage of two years from the effective date of the Registration Statement covering such Registrable Securities (unless the Buyer is then, or was during the preceding three months, an affiliate (as defined in Rule 144 promulgated under the Securities Act) of the Company and (ii) such time as an opinion of counsel satisfactory in form and substance to the Company shall have been rendered to the effect that such conditions are not necessary in order to comply with the Securities Act.

 

8.5 Information Available. The Company, upon the reasonable request of the Buyer and with prior notice, will be available to the Buyer or a representative thereof at the Company’s headquarters to discuss information relevant for disclosure in the Registration Statement covering the Registrable Securities and will otherwise cooperate with the Buyer when conducting an investigation for the purpose of reducing or eliminating the Buyer’s exposure to liability under the Securities Act, including the reasonable production of information at the Company’s headquarters, subject to appropriate confidentiality limitations.

 

9. GOVERNING LAW: MISCELLANEOUS.

 

(a) Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Florida 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 Saint Lucie County, Florida, and expressly consent to the jurisdiction and venue of the Circuit Court sitting in 19^th Judicial Circuit Court of Saint Lucie County, Florida and the United States District Court for the Southern District of Florida in Ft. Pierce, Florida 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.

 

(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, except as otherwise set forth herein, the transactions contemplated hereby.

 

(d) Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. Facsimile and e-mailed copies of signatures shall be deemed to be originals for purposes of the effectiveness of this Agreement.

 

(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, 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.

 

(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:

 

If to the Company, to:		PULSE EVOLUTION CORPORATION 10521 SW Village Center Drive, Suite 200 Port St. Lucie, FL 34987 Attention: Frank Patterson, Chief Executive Officer Facsimile: (772) 345-4101
With a copy to (which copy should not constitute a notice hereunder):		Eavenson, Fraser, Lunsford & Evans, PL 2000 PGA Boulevard, Suite 3200 Palm Beach Gardens, FL 33408 Attn: Bradley B. Eavenson, Esq. Facsimile: (561) 626-1042

 

If to the Buyer(s), to its address and facsimile number set forth on the Buyer 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.

 

(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) 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.

 

(l) 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.

 

(m) 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.

 

(n) 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.

 

 

(o) 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.		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 US$1 trillion a year.
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 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.

 

[Signature Page Follows]

 

 

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:
	PULSE EVOLUTION CORPORATION

 

	By:
	Name:
	Title:

 

	BUYERS:
	The Buyers executing the Signature Page and the Subscription Documents in the form attached hereto as Annex A and delivering the same to the Company or its agents shall be deemed to have executed this Agreement and agreed to the terms hereof.

 

[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]

 

 

Annex A

 

Buyer Signature Page

to

Securities Purchase Agreement

 

The undersigned, desiring to: (i) enter into the Securities Purchase Agreement, dated as of _________ ___, 2014 (the “Securities Purchase Agreement”), between the undersigned, PULSE EVOLUTION CORPORATION, a Nevada corporation (the “Company”), and the other parties thereto, in or substantially in the form furnished to the undersigned, and (ii) purchase the Shares of the Company as set forth below, hereby agrees to purchase such Shares from the Company and further agrees to join the Securities Purchase Agreement, with all the rights and privileges pertaining 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 ________ Shares at a price of $__________ per share for a total purchase price of $____________ (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:

 

 

SCHEDULE I

 

SCHEDULE OF BUYERS

 

Name		No. of Shares		Amount of Subscription

 

 

PULSE EVOLUTION CORPORATION

ACCREDITED 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 PULSE EVOLUTION CORPORATION.

 

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.

 

 

PULSE EVOLUTION CORPORATION

 

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.

  

 

PULSE EVOLUTION CORPORATION

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.

 

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

 

 

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. We will ask you for your name, address, date of birth and other information that will allow us to identify you. We will ask to see a non-expired valid issued government identification, such as your driver’s license or other identifying documents. Until you provide the information or documents we need, we may not be able to effect any transactions for you.

 

 

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:

 

FOR INVESTORS WHO ARE INDIVIDUALS:

 

YEARLY INCOME:

AGE:

 

NET WORTH (excluding value of primary residence):
OCCUPATION:
ADDRESS OF EMPLOYER:
INVESTMENT OBJECTIVE(S):

 

IDENTIFICATION & DOCUMENTATION AND SOURCE OF FUNDS:

 

1.	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:

 

 

Schedule 3(a)

Subsidiaries of the Company

 

Pulse Entertainment Corporation, a Delaware corporation

 

Schedule 3(c)

Outstanding Options, Warrants, Etc.

 

The Company plans to create a standard employee incentive stock option plan that will result in dilution to all shareholders by approximately 10% of the total outstanding shares of the company. The amount of stock options, or restricted stock grants, available under the plan may change, from time to time, at the discretion of the compensation committee of the Board of Directors, as approved by the full vote of the Board of Directors.

 

Schedule 3(e)

Conflicts

 

None.

 

Schedule 3(f)

Litigation

 

On May 29, 2014, Hologram USA, Inc., Musion Das Hologram Limited and Uwe Maass (the “Plaintiffs”) filed a amended complaint in the U.S. District Court for the District of Nevada (Case No. 2:14-cv-00772-GMN-NJK). The complaint alleges that Pulse Evolution Corporation, Pulse Entertainment Corporation, John Textor, Dick Clark Productions, Inc., John Branca and John McClain, as executors of the Estate of Michael J. Jackson, MJJ Productions, Inc. Musion Events, Ltd. Musion 3D, Ltd., William James Rock and Ian Christopher O’Connell (collectively, the “Defendants”) infringed on the Plaintiffs’ patent rights in connection with a musical performance at the 2014 Billboard Music Awards in Las Vegas Nevada featuring an image of the late Michael Jackson. The complaint seeks an order of the Court temporarily and permanently enjoining the Defendants from carrying out the Michael Jackson performance, a judgment for infringement, damages, attorneys’ fees and costs. Plaintiffs’ Emergency Motion for Temporary Restraining Order filed in connection with its May 15, 2014 complaint was denied on May 16, 2014.

 

Schedule 3(k)

Intellectual Property Rights

 

See Form 8K filed on ______, 2014.

 

On May 29, 2014, Hologram USA, Inc., Musion Das Hologram Limited and Uwe Maass (the “Plaintiffs”) filed a amended complaint in the U.S. District Court for the District of Nevada (Case No. 2:14-cv-00772-GMN-NJK). The complaint alleges that Pulse Evolution Corporation, Pulse Entertainment Corporation, John Textor, Dick Clark Productions, Inc., John Branca and John McClain, as executors of the Estate of Michael J. Jackson, MJJ Productions, Inc. Musion Events, Ltd. Musion 3D, Ltd., William James Rock and Ian Christopher O’Connell (collectively, the “Defendants”) infringed on the Plaintiffs’ patent rights in connection with a musical performance at the 2014 Billboard Music Awards in Las Vegas Nevada featuring an image of the late Michael Jackson. The complaint seeks an order of the Court temporarily and permanently enjoining the Defendants from carrying out the Michael Jackson performance, a judgment for infringement, damages, attorneys’ fees and costs. Plaintiffs’ Emergency Motion for Temporary Restraining Order filed in connection with its May 15, 2014 complaint was denied on May 16, 2014.

 

 

Schedule 3(m)

Title

 

See Form 8K filed on ______, 2014.

 

On May 29, 2014, Hologram USA, Inc., Musion Das Hologram Limited and Uwe Maass (the “Plaintiffs”) filed a amended complaint in the U.S. District Court for the District of Nevada (Case No. 2:14-cv-00772-GMN-NJK). The complaint alleges that Pulse Evolution Corporation, Pulse Entertainment Corporation, John Textor, Dick Clark Productions, Inc., John Branca and John McClain, as executors of the Estate of Michael J. Jackson, MJJ Productions, Inc. Musion Events, Ltd. Musion 3D, Ltd., William James Rock and Ian Christopher O’Connell (collectively, the “Defendants”) infringed on the Plaintiffs’ patent rights in connection with a musical performance at the 2014 Billboard Music Awards in Las Vegas Nevada featuring an image of the late Michael Jackson. The complaint seeks an order of the Court temporarily and permanently enjoining the Defendants from carrying out the Michael Jackson performance, a judgment for infringement, damages, attorneys’ fees and costs. Plaintiffs’ Emergency Motion for Temporary Restraining Order filed in connection with its May 15, 2014 complaint was denied on May 16, 2014.

 

Schedule 3(o)

Tax Status

 

None.

 

Schedule 3(p)

Certain Transactions

 

See 10Q for the period end January 31, 2014

See Form 8K filed on ______, 2014

 

Schedule 3(q)

Rights of First Refusal

 

None.

 

 

 

Portions of this Exhibit 10.2 marked by a [__] have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission.

 

PARTNER AGREEMENT

 

Partner Agreement (the “Agreement”) is entered into by and between ABG EPE IP, LLC (hereinafter “ABG”), a Delaware limited liability company, and Pulse Evolution Corporation (hereinafter “Partner”) a Nevada corporation, and is effective on August 1, 2014 (“Effective Date”).

 

1.	Services. Partner will perform the services (“Services”) and create and deliver the deliverables (“Deliverables”) as specified on Exhibit A, for ABG. Partner shall respond promptly to all ABG inquiries regarding the Services, and shall provide written progress reports as requested by ABG.
2.	Project Development. Partner will identify and develop various entertainment projects (“Project” or “Projects”) to exploit a computer-generated likeness of Elvis Presley (“Virtual Elvis”), which would be created by Partner should the Project provide sufficient capital for such purposes, representing the photo-realistic digital likenesses of the late celebrity, whose likeness, appearance and publicity rights are controlled by ABG.
3.	Advances & Royalties. In consideration for the rights granted to Partner, Partner has agreed to guarantee ABG certain minimum sums, as set forth in Exhibit A, as an advance against the Royalties. Subject to the terms of the Agreements, and Partner’s performance hereunder, ABG shall pay Partner the Partner IP Royalty (as defined in Exhibit A) and Partner shall pay ABG a Development Royalty (as defined in Exhibit A).
4.	Ownership

 

a. Intellectual Property Rights. For purposes of this Agreement, “Intellectual Property Rights” shall mean any and all proprietary rights of any kind, tangible or intangible, now known or hereafter existing, including without limitation copyrights, neighboring rights and moral rights; trade secret; trademark; and patent and other intellectual property rights, and all registrations and applications thereof now or hereafter in force throughout the universe.

 

b. Work For Hire. Partner acknowledges that all Services performed by Partner (including, without limitation, any and all consultants, employees, persons or entities engaged by Partner or rendering services to or through Partner) are at the direction of and specifically for the use of ABG. All Deliverables created or performed by Partner shall constitute Works Made For Hire under the copyright laws of the United States, and ABG shall own full and exclusive rights in all such Deliverables. If Deliverables are deemed not a Work Made for Hire, then Partner hereby transfers, assigns and conveys all rights, tittle and interest (specifically excluding any intellectual property that is owned by partner and can be separated from ABG, intellectual property, hereinafter defined as “Partner Property”) in and to the results and proceeds of the Services and Deliverables to ABG and ABG shall own all Intellectual Property Rights contained therein. Partner agrees without further consideration to execute, and to cause any and all consultants, employees, persons or entities engaged by Partner or rendering services to Partner to execute any document reasonably requested by ABG to further evidence or attest to the vesting of such rights in ABG. Partner shall and hereby does waive, to the maximum extent permitted by law, the benefits of any provision of law known as droit moral or any similar law in any jurisdiction, including 17 U.S.§ 106A, and agree not to permit or prosecute any action or suit on the ground that the work product or Deliverables as used by ABG or any other party constitutes an infringement of Partner’s droit moral. For the avoidance of doubt, ABG shall not be able to license any Partner property to a third party without the consent of Partner for commercial purposes.

 

c. Projects Developed. ABG will enter into license agreements with Targets, and Partner will enter into Development Agreements with Targets the funding for which shall be borne by third-parties or Targets, such as production companies, brand sponsors and/or financial investors. ABG and Partner will not be responsible for the animation and production costs related to the development and/or production of Projects, In the event either or both of such parties desire to become investors in Projects, such investments shall be subject to separate agreements.

 

 

d. Partner Materials. Partner shall retain ownership of the technology, materials and media which are separable from ABG Property and are used in the performance of Services and the execution of Projects, including but without limitation development done directly for Targets and/or creation of Projects (“Partner Materials”). ABG shall be entitled to use the Partner Materials on a perpetual, irrevocable, assignable, sub-licensable, worldwide basis in or in connection with the ABG Property subject only to ABG paying Partner the Partner IP Royalty.

 

e. ABG Materials. ABG agrees to provide Partner with the information, and material listed on Exhibit A (the “ABG Materials”). ABG hereby grants Partner a limited, nonexclusive, license to use, copy, modify and create derivative works based on the ABG Materials solely as the same is necessary for Partner’s performance of Partner’s obligations under this Agreement and provided that all such use, copying and modification shall be in strict accordance with ABG’s instructions and for the sold benefit of ABG. ABG reserves all rights not expressly granted herein. Partner agrees that it shall not, by virtue of this Agreement, acquire any rights in any Deliverables or ABG Materials or any other asset or property of ABG, whether tangible or intangible, and whether or no created by Partner or Partner Group (collectively, “ABG Property”), and if it has acquired such interest, it hereby assigns such interest back to ABG. Partner agrees not to assert any rights inconsistent with ABG’s ownership of the ABG Property. Subject to ABG’s prior written approval as to the content and timing, Partner may promote the relationship created by this agreement, on Partner website, social media accounts and prospective client pitch materials during the Term and only in pitch meetings after expiration of the Term. In no instance shall Partner reveal the business terms contained in this Agreement or any Confidential Information (as defined below). Partner’s use of any materials shall be subject to Partner’s clearance of all third party rights (if applicable) and shall be without any warranty from ABG. During the Term and at all times thereafter, ABG will not attack any right, title or interest Partner has in or to any Partner Property.

 

f. During the Term and all times together, Consultant will not attack any right, title or interest ABG has in or to any Intellectual Property, including, without limitation, the rights to any persona and related trademarks, including, without limitation the right of publicity and/or any rights arising under Section 1125 of the Lanham Act or any other similar law. During the term and at all times thereafter, Consultant will not misuse or bring into disrepute the name and character or ABG, the ABG Property or any of the affiliated or related entities or properties or either.

 

5.	Partner Warranties. Partner represents and warrants to ABG that (a) the Services shall be performed and the Deliverables created

 

(i)

in accordance with ABG’s, (ii) in a professional manner, using the highest standards of workmanship, care, good faith, and integrity, and (iii) in accordance with all applicable laws, ordinances, regulations and orders, including without limitation federal, state or local laws of the United States or any other country, and Partner shall obtain all permits, registrations and licenses required to comply with such laws, ordinances, regulations and order; (b) none of the Deliverables, or any part thereof will (i) contain libelous, injurious or unlawful material; or (ii) infringe the copyright, patent, trademark, trade name, trade secret or other proprietary rights of any third party; (c) the Deliverables and Services are free and clear of any and all mortgages, liens or other encumbrances; and (e) neither the execution of this Agreement nor the performance of Services or delivery of Deliverables violates or will violate any contractual right of any third party.

 

 

6.

Insurance: Both parties shall procure and maintain insurance in an amount of at least one million dollars ($1,000,000 U.S.) per occurrence and three million dollars ($3,000,000 U.S.) in the aggregate naming the other party as an additional insured. Partner’s insurance shall be available for use in indemnifying ABG from third-party claims for personal injury, death, property damage, negligent design, other liability claims or any advertising injury arising out of or in connection with the Services and Deliverables. In the event, that any insurance policy required hereunder includes or permits a waiver of subrogation, such waiver shall apply to the other party. In the event that such waiver is required by a third party agreement then this Agreement shall be deemed to require such waiver. Any claims covered by the other party’s insurance policies shall not be offset or reduced in any amount whatsoever by any other insurance which either party may independently maintain. Either party shall notify the other party of all claims regarding the results and proceeds of Partner’s Services and/or the Deliverables.

 

(ii) Within thirty (30) days following the execution of this Agreement, both parties shall provide certificates of insurance certifying that the other party and any other entity specified by ABG, have been added as additional insured to each of the insurance policies set forth above. Before any proposed cancellation or material modification in the coverage the insurance carrier will give the certificate holder(s) not less than thirty (30) days prior written notice thereof. Upon receipt of any such notification, the certification holder shall, in their sole discretion, have the right, to: declare a material breach of this Agreement (which must be cured prior to any insurance lapse or result in a termination of this Agreement which termination shall take effect on the last day of coverage, notwithstanding any provision of this Agreement to the contrary) and/or the right, but not the obligation to purchase replacement insurance from an insurance carrier of their choice, and the applicable party agrees to pay all costs thereof immediately upon request by the other, failing which they may deduct the cost from any monies payable to the other party hereunder.

 

7.	Indemnity. Partner agrees to indemnify, defend and hold harmless ABG, against any third party claim, and to pay all costs and damages arising out of such claim (including without limitation attorneys’ fees and court costs), loss or liability arising out of or relating to (a) the Services of the Deliverables; (b) breach of any warranty provided in this Agreement; or (c) to the extent caused by the Partner, including without limitation any claim that the Services or Deliverables infringe any Intellectual Property Rights or any other right or interest of any third party. ABG agrees to provide Partner with notice of any indemnified claim known to ABG, and to provide Partner with reasonable information and assistance, at Partner’s sole cost and expense, relative to the defense of any such claim. Partner shall not settle any indemnified claim without ABG’s prior, written consent. Partner waives any and all immunity under RCW Title 51 or other state workers compensation laws.
8a.	Confidentiality. a) Both Partner and ABG acknowledge that during and prior to the term of this Agreement, both may have access to information regarding the other party’s business which items confidential and/or proprietary, including without l imitation information relating to technical and financial information; actual or prospective (if known to Partner) clients, customers, business partners, or investors (collectively “Business Contact”); business and marketing plans, suppliers; business opportunities, and current and anticipated products and services. Both parties agree that all such information, including information disclosed prior to the date of this Agreement and is the confidential trade secret property of such party (“Proprietary Information”). Both parties acknowledge and agree that all Deliverables and work product hereunder are Proprietary Information. Both parties agree not to (i) copy, use or disclose any Proprietary Information or any tangible or intangible work product containing or referring to such Proprietary Information for any purpose except for the benefit of such party and as necessary for the performance of this Agreement, and otherwise as authorized in writing by the disclosing party; (ii) take advantage of any business opportunity which, as the result of access to Proprietary information, either party knows or should know the other party may, or is likely to consider; (iii) remove any Proprietary Information from the other’s parties premises without prior written permission from such other party; or (iv) accept or solicit any work, services, good, employment or other business if doing so could reasonably be expected to negatively impact the other parties business relationship with a business contact. Both parties further agree that during the term of this Agreement and thereafter, they will ensure that they will comply with all of the above restrictions on use and disclosure of Proprietary Information. Disclosure of Proprietary Information to either party shall not require prior written permission, provided that party advised each member of the receiving party that Proprietary Information is confidential and is not to be copied or disclosed, and further provided that each member of Partner to whom Proprietary Information is disclosed executes and agreement in favor of the other party, agreeing to be bound by the restrictions contained in this Agreement. Proprietary Information does not include information that disclosing party can document is or has become available to the general public without restriction and through no breach of an obligation by either party or any other person, or which was rightfully in the possession of the disclosing party without restriction prior to its disclosure to the other party.

 

 

8b.

Exceptions to Obligation of Confidentiality. This Agreement shall impose no obligation of confidentiality with respect to any portion of the proprietary information received hereunder which is (i) now or hereafter becomes, through no unauthorized act on recipient’s part, generally known or available; (ii) known to the recipient at the time recipient receives the same from the disclosing party; (iii) hereafter furnished to recipient by a third party that does not have an obligation of confidentiality to the disclosing party with respect thereto; (iv) furnished to others by the disclosing party without restriction on disclosure; or (v) independently developed by Recipient without use of the disclosing Party’s proprietary Information. Nothing in this Agreement shall prevent the Recipient from disclosing Confidential Information to the extent the Recipient is required to do so by the rules of an applicable securities market or exchange or is legally compelled to do so by any governmental investigative or judicial agency or court pursuant to proceedings over which such agency or court has jurisdiction; provided, however, that prior to any such disclosure, the Recipient shall (a) assert the confidential nature of the proprietary information to the market, exchange or agency or court; (b) promptly notify the disclosing party in writing of the requirement, order or request to disclose; and (c) at the disclosing party’s sole cost and expense, cooperate fully with the disclosing party in protecting against any such disclosure and/or obtaining a protective order narrowing the scope of the compelled disclosure and protecting the confidentiality of the information. Any proprietary information that is disclosed under this Section shall otherwise remain subject to the provisions of this Agreement.

 

9.	[___]
10.	[___]
11.	Termination

 

	(a)	Automatic Termination for Repetitive Breach. If Partner breaches a provision of this Agreement, and subsequent breaches the same provision a second time (a “Repetitive Breach”) this Agreement shall be deemed automatically terminated, with all amounts, including but not limited to any Guaranteed Minimum Royalties for the then-current Term and any and all ABG Development Royalties payable hereunder becoming due and payable immediately. ABG shall provide written notice of the initial breach.
	(b)	ABG’s Right to Suspend or Terminate. ABG shall have the right to suspend its performance hereunder and/or terminate the Agreement in its entirely upon the occurrence of any of the following events, including, without limitation:

 

	(i)	The failure of Partner to make any payment required to be made under this Agreement, which failure is not cured within five (5) business days of Partner’s receipt of written notice from ABG specifying the nature of such failure with particularity; or
	(ii)	The breach by Partner of any of its representation or warranties herein or the failure of Partner to comply with any of the other terms of this Agreement or otherwise discharge its duties hereunder, and such breach or failure is not cured within fifteen (15) days of Partner’s receipt of written notice from ABG specifying the nature of such breach or failure with particularity; or
	(iii)	Any act of gross negligence or wanton misconduct by Partner, and such action is not corrected within ten (10) days of Partner’s receipt of written notice from ABG specifying the nature of such action with particularity; or
	(iv)	The making by Partner of an assignment for the benefit of creditors, or the filing by or against Partner of any petition under any federal, national, state of local bankruptcy, insolvency or similar Laws, if such filing shall not have been dismissed or stayed within sixty (60) days after the date thereof; or
	(v)	The failure of Partner to generate the minimum [__] Revenue as set forth in the Summary of Commercial terms with respect to any contract year.

 

 

(vi)

Partner hereby acknowledges that Partner shall not have an opportunity to cure any material breach which by its terms, cannot be cured, including, without limitation, any failure to make the Minimum [__] revenue; release of products using/including ABG Property without prior approval from ABG; the use of Advertising and Promotional materials on or in connection with Deliverables which were not approved by ABG; and/or the failure of Partner to assist with intellectual property maintenance in the manner provided by ABG. For the avoidance of doubt late payments; and unintentional releases of products and promotional material by a third party shall not be deemed an incurable breach.

 

(c)

Partner’s Right to suspend or Terminate. Partner shall have the right to suspend its performance hereunder or terminate this Agreement in its entirety upon the occurrence of the breach by ABG of any of its representations or warranties herein or the failure of ABG to comply with the terms of this Agreement or otherwise discharge its duties hereunder, and such breach of failure is not cured within thirty (30) business days of ABG’s receipt of written notice from Partner specifying the nature of such breach or failure with particularity.

 

12.	Approvals, Quality Standards

 

	(a)	Approval. “Approval(s)” or “Approved” shall mean ABG’s prior written consent, which may be given or withheld in ABG’s reasonable discretion.
	(b)	Approval Rights. ABG shall have the right to approve all elements of the Deliverables and any advertising elements. All submissions under this Agreement shall be made in such a manner as ABG shall prescribe from time to time.
	(c)	Partner shall create and submit to ABG, ideas, rough and final images. Partner shall not publicly disseminate any ABG Property or Deliverables unless and until ABG has fully and finally Approved the same. Each time Partner makes any change, the elements must be re-submitted for Approval.
	(d)	Prior to the broadcast, publication, posting, public distribution and/or use thereof of sample concepts, designs and samples (“Advertising Element”) of any advertisement or other promotional material (each an “Advertisement”) which is intended to be used in conjunction with the sales presentations by Partner, shall submit the Advertising element to ABG for its Approval. Once an Advertising Element has been approved, Partner need not submit variations of that Advertising Element for re-approval when such variations are merely of size or date and the like; provided, however, that any substantive changes to the Advertising Element must be approved in advance pursuant to this Section 12.
	(e)	Disclaimer. Partner acknowledges that it shall bear the responsibility for an expense of compliance with the Approval requirements hereunder. Partner further acknowledge that the Approval for disapproval of any Advertising Elements, Deliverables and/or ABG property uses may be based, without limitation, solely on subjective aesthetic standards. This approvals process shall not be deemed a legal review, but purely as a process meant to verify that the use of the ABG Property has been done in a manner that complies with this Agreement. Any Approval shall not waive, diminish or negate Partner’s indemnification obligations to ABG herein.
	(f)	Brandbook & Style Guides. ABG shall provide Partner with a brand book and/or Style Guide, which is subject to seasonal updates and other changes from time to time (“Style Guide”). Partner shall follow the rules set forth in the Style Guide.
	(g)	Third Party Acts. Partner will use its best efforts to ensure that its subcontractors abide by the terms of this Agreement. All acts of any such subcontractors shall be deemed to be the acts of the Partner for all purposes of this Agreement.

 

 

(h)

Goodwill and Quality Standards. Partner acknowledges that, if the Deliverables or Advertising Elements are of inferior quality in material and/or workmanship, then the substantial goodwill, which ABG has built up and now possesses in the ABG property, will be impaired. Accordingly, Partner warrants to ABG that the deliverables and Advertising Elements will maintain the high standards, appearance and quality of the Approved versions. If there is a substantial or material departure from the Approved version of anything using the ABG Property then ABG shall have the right, in the reasonable exercise of its sole and absolute discretion, to withdraw the Approval.

 

13.	Law/ Jx / Dispute Resolution. Law: This Agreement shall be governed by the laws of the State of New York, without regard to its choice of law rules. The United Nationals Convention for the international sale of goods shall not apply to Agreement. Jurisdiction: Partner consents to exclusive jurisdiction of and venue in the state courts located in New York, New York in connection with any suit or action arising out of or relating tot his Agreement. Service of process may be sent by mail to Partner at the address set forth herein, and such service shall be deemed valid service of process. Partner hereby waives any right to object on any basis, to the venue, forum and/or jurisdiction of the state courts located in New York, New York . Dispute Resolution: Prior to filing any action as aforesaid, the parties shall submit any dispute arising out of or relating to this Agreement to JAMS in New York, New York, with the selection of a mediator being made by the mutual agreement of the parties within 10 days of either party’s notice of the intent to mediate the dispute. In the event that: (a) the parties are unsuccessful at mediation; or (b) the parties do not mutually agree on a mediator in the aforesaid time frame; or (c) either party fails or refuses to response/appear, then the party requesting mediation may file in State Court in New York, New York. The prevailing party in any action or suit in law or equity brought to enforce or interpret the provisions of this Agreement shall be entitled to recover its costs and expenses incurred in connection with such mediation, action or suit, including without limitation reasonable attorneys’ fees incurred in all levels and proceedings, including settlement and appeal, in addition to and not in limitation of any other relief to which it may be entitled.
14.	Injunctive Relief. Notwithstanding the exclusive jurisdiction clause in Section 13 above. Partner acknowledges that breach of the confidentiality or ownership provisions of this agreement would irreparably injury ABG, which injury could not adequately be compensated by money damages. Accordingly, Partner agrees that ABG may seek and obtain injunctive relief from the breach or threatened breach of any provision, requirement or covenant of this Agreement, in addition to and not in limitation of any other legal remedies and without posting bond therefore in any court in any territory. ABG may seek an injunction before any court or competent jurisdiction, not limited to a court located in New York, and Partner agrees not to contest the jurisdiction of any such court, nor assert, by way or motion, defense or otherwise, that the Agreement of the subject matter hereof may not be enforced in or by such court.
15.	Audit. Both Party’s shall keep and maintain accurate account book sand records covering all transaction relating to this Agreement. Both parties are entitled to audit and inspect such records related to this Agreement at either party’s office during the term of the Agreement or after the term of the Agreement, but no more than once per statement, once per calendar year and upon thirty (30) days prior written notice. If either party or his representatives find a deficiency in the amounts paid for any period under audit, the audited party shall promptly pay audit discrepancy to the other party if such discrepancy amounts to [___].
16.	General. Headings are for reference only and shall not be of any effect in construing the contents hereof. Partner shall not assign or transfer this Agreement or any right or obligation hereunder, in whole or in part, without the prior written consent of ABG. Any attempt to assign or transfer by Partner without the written consent of ABG shall be void and of no force and effect. This Agreement, including any exhibits and attachments incorporated herein, contains the entire understanding of the parties as to the subject matter hereof, and may not be altered in any way except by an instrument signed by both parties. The provisions of this Agreement shall govern any Proprietary Information disclosed, Services performed or work product or Deliverables created prior to its effective date. If any provision of this Agreement is held to be illegal, invalid, or unenforceable, that provision shall be severed or reformed to the extent necessary to be enforceable, and the remaining provisions hereof shall remain in full force and effect. A waiver by either party of any provision oft his Agreement must be in writing and signed by such party, and shall not imply a subsequent waiver of that or any other provision. Duplicate originals of this agreement may be executed, each of which shall be deemed an original but both of which together shall constitute an Agreement. All notices permitted or required to be given under this Agreement shall be in writing and shall be deemed duly given upon personal delivery (against receipt) or on the fourth day following the date on which such notice is deposited postage prepaid in the United States Mail, registered or certified; return receipt requested, to the address(es) set fourth under each party’s signature to this Agreement, and otherwise as requested in writing by a party in accordance herewith.

 

 

This Agreement is accepted by each of the Parties as of the date executed by both parties below:

 

ABG EPE IP, LLC		Pulse Evolution Corporation
100 West 33rd St. Suite 1007		10521 SW Village Ctr., Suite 201
NY, NY 10001		Port St. Lucie, FL 34987
/s/ Terri DiPaolo		/S/ John C. Textor
Authorized signature		Authorized Signature
Terri DiPaolo, EVP Operations & General Counsel
Print name and title		Print name: John C. Textor
		Title: Chairman
7/28/2014
Date		Date: 7-26-2014

 

 

EXHIBIT A

 

This Exhibit A is subject to the terms and conditions of that certain Partner Agreement (the “Agreement”) between AGB EPE IP, LLC (hereinafter “ABG”), a Delaware limited liability company, and Pulse Evolution Corporation (“hereinafter “Partner”), a Nevada corporation, dated August 1, 2014.

 

1.

Term:

 

(a)

The “Initial Term” shall mean the period beginning on the Effective Date and ending December 31, 2019.

 

	(i)	“Contract Year 1” shall mean the Effective Date through December 31, 2015.
	(ii)	“Contract Year 2” shall mean January 1, 2016 through December 31, 2016.
	(iii)	“Contract Year 3” shall mean January 1, 2017 through December 31, 2017.
	(iv)	“Contract Year 4” shall mean January 1, 2018 through December 31, 2018.
	(v)	“Contract Year 5” shall mean January 1, 2019 through December 31, 2019.

 

(b)

Provided that Partner is not in breach of the Agreement, and provided that Minimum [__] Revenues of at least [__], Partner shall have one (1) option to renew the Agreement (“Renewal Term Option”) on the terms set forth herein for a consecutive period of five (5) years (the “Renewal Term” numbered consecutively). Partner shall exercise its Renewal Term Option not less than three (3) months and not more than twelve (12) months in advance of the expiration of the Initial Term.

 

	2.	The Initial Term and the Renewal Term are hereinafter individually and collectively referred to as the “Term” and individually as a “Contract Period”. For the purpose of the Agreement, a “Calendar Quarter” shall mean each of the following three (3) month periods during a given calendar year: from January 1 through March 31; from April 1 through June 30; from July 1 through September 30; and from October 1 through December 31.
	3.	Description of Services provided by Partner during the Term: Partner will create and present sales presentations to third parties (“Targets”), for use in the commercial exploitation of Virtual Elvis in commercial and live entertainment. When a Target enters an agreement with Partner, ABG and Target will work directly on a licensing agreement for the intellectual Property Rights, and Partner and Target work together on an agreement for Partner’s development services for the Project (“Development Agreement”).
	4.	Launch Fee an Royalties:

 

	(a)	Launch Fee: Partner shall pay ABG a Launch Fee of [__] (“Launch Fee”) on execution of this Agreement. [__]
	(b)	Revenue Share of Target agreements: ABG to pay Partner [__] (“Partner IP Royalty”) and keep [__] during the Term.
	(c)	ABG to pay Partner IP Royalty of [__] during the Term.
	(d)	Partner to pay ABG a [__]royalty (“ABG Development Royalty”) and keep [__] (“Partner Development Royalty”) of [__].
	(e)	For purposes of this Agreement both Partner IP Royalty and ABG Development Royalties are collectively referred to as “Royalties”. [__]

 

	(i)	Either party will only be liable for payments to the other party in cases where payment is actually received from Target.
	(ii)	As used herein the term “[__] Royalty Revenue” shall mean [__].

 

	(f)	Live Event royalties generated by Targets will be split [__]. For purposes of illustration and for the avoidance of doubt, if Three Million Dollars ($3,000,000) in total [__] revenue is earned for Contract Year 2, [__]. If [__] is earned for Contract Year 2, [__]. “Live Events” shall mean [__]If any of the foregoing is branded with both Graceland and EPE intellectual property, the same shall not be deemed a Live Event.
	(g)	“Non-Live Events” shall mean [__].
	(h)	All Royalties shall be paid to Partner within [__].

 

 

5.

The “Guaranteed Minimum Royalty(ies)” for Partner to retain the rights to provide Services (also known as the “GMR(s)”) shall mean non-returnable advances recoupable against Royalties due in the same Contract Year.

 

(i)

For each Contract Year during the Term, the GMR’s payable to ABG by Partner shall be:

 

Contract Year		Live Event GMR
1		$[__]
2		$[__]
3		$[__]
4		$[__]
5		$[__]

 

Contract Year		Non-Live Event GMR
1		$[__]
2		$[__]
3		$[__]
4		$[__]
5		$[__]

 

	(i)	Partner shall be permitted to cross the Royalties between Live Events and Non-Live Events.
	(ii)	For each Renewal Term (if any): (A)) [__].
	(iii)	In the event that the annual Royalties earned by ABG [__].

 

(ii)

Partner hereby acknowledges that the GMR is payable to ABG even if Partner fails to develop sell or market during the Term, and is a condition of ABG entering into the Agreement. Except for the Launch Fee set forth in Section 4 above, Partner shall pay the GMR to ABG in [__]. In the event that the annual Royalty exceeds the quarterly portion of the GMR, Partner shall pay the Royalties in excess of the previously paid portion of the GMR to ABG [__] within [__].

 

6.

“Minimum [__] Revenues” shall be defined as [__].

 

Contract		Minimum [__] Revenues Non Live
1		$[__]
2		$[__]
3		$[__]
4		$[__]
5		$[__]

 

Contract		Minimum [__] Revenues Live Event
1		$[__]
2		$[__]
3		$[__]
4		$[__]
5		$[__]

 

(i)

Partner shall be permitted to cross the Minimum [__] Revenues between Live Events and Non-Live Events.

 

 

(a)

If [__] is earned in [__], Partner shall receive the right for [__] to renew the Agreement (“Renewal Term Option”). If Renewal Term is exercised, Minimum [__] Revenues for the Renewal Term shall be:

 

Contract		Minimum [__] Revenues Live Events
6		$[__]
7		$[__]
8		$[__]
9		$[__]
10		$[__]

 

Contract		Minimum [__] Revenues Non-Live
6		$[__]
7		$[__]
8		$[__]
9		$[__]
10		$[__]

 

	7.	Territory: Worldwide
	8.	Equity Option: “Equity Option” shall mean ABG will receive the following option on the day the agreement is signed. The option to exchange the [__] price per warrant (“Strike Price”). The option will be granted to ABG for Contract Year 1. In the event Partner dilutes the total equity and the diluted share price is below [__], ABG will have the option to purchase shares at the new price per warrant. ABG will be able to exercise its Equity Option in its sole discretion.

 

(“ABG”) ABG EPE IP, LLC

 

By:	/s/ Nick Woodhouse
Printed Name:	Nick Woodhouse
Title:	President
Date:	July 28, 2014
(“Partner”) Pulse Evolution
By:	/s/ John C. Textor
Printed Name:	John C. Textor
Title:	Chairman
Date:	7-26-2014

 

 

 

Exhibit 16.1

 

Weinberg & Baer LLC

115 Sudbrook Lane, Baltimore, MD 21208

Phone (410) 702-5660

 

Office of the Chief Accountant

Securities and Exchange Commission

100F Street, NE

Washington, D.C. 20549

 

Dear Sir/Madam:

 

We have read the statements made by Pulse Evolution Corporation (formerly QurApps, Inc.) (the Company), which were provided to us and which we understand will be filed with the Commission pursuant to Item 4.01(a) of its Form 8-K, regarding the change in certifying accountant. We agree with the statements concerning our firm in such Current Report on Form 8-K. We have no basis to agree or disagree with other statements made under Item 4.01(a).

 

We hereby consent to the filing of this letter as an exhibit to the foregoing report on Form 8-K.

 

Very truly yours,

 

/s/ Weinberg & Baer, LLC
Weinberg & Baer, LLC
Baltimore, Maryland
July 1, 2014