HANG WITH, INC. SERIES A CONVERTIBLE PARTICIPATING PREFERRED STOCK PURCHASE AGREEMENT
EXHIBIT
10.4
HANG WITH, INC.
SERIES A CONVERTIBLE PARTICIPATING PREFERRED STOCK
This
Series A Convertible Participating Preferred Stock Purchase
Agreement (the
“Agreement”) is entered into as of this 7th day of
October, 2016, by and among Hang
With, Inc., a Nevada
corporation (the “Company”), and Friendable,
Inc., a Nevada corporation (the
“Purchaser”).
Recitals
Whereas,
the Company has authorized the sale
and issuance of an aggregate of up to Five Million (5,000,000)
shares of its Series A Convertible Participating Preferred Stock
with par value of $0.001 per share (the “Preferred
Stock”);
Whereas,
Purchaser desires to purchase 330,397
shares of Preferred Stock (the “Shares”) at a price per share of $2.27 for an
aggregate purchase price of $750,000 on the terms and conditions
set forth herein; and
Whereas,
the Company desires to issue and sell
the Shares to the Purchaser on the terms and conditions set forth
herein.
Now,
Therefore, in consideration of
the foregoing recitals and the mutual promises hereinafter set
forth, the parties hereto agree as follows:
Section 1.
Agreement to Sell and Purchase.
1.1 Authorization
of Shares. On or prior to the
first Closing (as defined in Section 2
below), the Company shall have
authorized (i) the sale and issuance to Purchaser of the
Shares and (ii) the issuance of such shares of common stock of
the Company, $.001 par value (the “Common Stock”), to be issued upon conversion of the
Shares (the “Conversion
Shares”). The Shares and
the Conversion Shares shall have the rights, preferences,
privileges and restrictions set forth in the Amended and Restated
Articles of Incorporation of the Company filed with the Nevada
Secretary of State on October 14, 2014 (the
“Articles”).
1.2 Sale
and Purchase. Subject to the
terms and conditions hereof, the Company hereby agrees to issue and
sell to Purchaser, and Purchaser agrees to purchase from the
Company, an aggregate of 330,397 Shares at a purchase price of
$2.27 per share for an aggregate purchase price of $750,000. The
Purchaser paying the $750,000 aggregate purchase price to the
Company is conditional upon investors purchasing the
Purchaser’s securities for an aggregate purchase price of
$1,615,000 pursuant to a securities purchase agreement of even date
herewith entered into between the Purchaser and such investors. In
addition, as detailed in Section
2.2, the Company will issue one
hundred thousand (100,000) shares of Common Stock to the Purchaser
at the first Closing.
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Section 2.
Closing, Delivery and Payment.
2.1 Closing.
The three closing of the sale and
purchase of the Shares as well as the issuance of one hundred
thousand (100,000) shares of Common Stock to the Purchaser (each, a
“Closing”) shall take place at such times and places
as the Company and Purchaser may mutually agree (each such date is
hereinafter referred to as a “Closing Date”).
2.2 Delivery.
(a) At
the first Closing, on the date hereof, subject to the terms and
conditions hereof, the Company will deliver to the Purchaser a
certificate made out in the name of Purchaser (or trust or entity
controlled by Purchaser as directed by Purchaser) for an aggregate
total of 99,118 shares of Preferred Stock and Purchaser shall pay
the Company, by check or wire transfer made payable to the order of
the Company the sum of Two Hundred Twenty Five Thousand Dollars
($225,000). In addition, the Company will issue one hundred
thousand (100,000) shares of Common Stock to the Purchaser at the
first Closing as compensation as part of the software license and
software development agreements that the Purchaser plans on
entering into with the Company (the “Compensation
Stock”). For the
avoidance of doubt, the issuance of the Compensation Stock is in
addition to the 154,185 shares of Preferred Stock to be issued at
the first Closing.
(b) At
the second Closing, which will take place, subject to the terms and
conditions hereof, after the Purchaser receives financing
sufficient to pay the Company, by check or wire transfer made
payable to the order of the Company the sum of One Hundred Seventy
Five Thousand Dollars ($175,000) but in no event earlier than
November 3, 2016, the Company will deliver to the Purchaser a
certificate made out in the name of Purchaser (or trust or entity
controlled by Purchaser as directed by Purchaser) for an aggregate
total of 77,093 shares of Preferred Stock and Purchaser shall pay
the Company, by check or wire transfer made payable to the order of
the Company the sum of One Hundred Seventy Five Thousand Dollars
($175,000).
(c) At
the third Closing, which will take place, subject to the terms and
conditions hereof, after the Purchaser receives financing
sufficient to pay the Company, by check or wire transfer made
payable to the order of the Company the sum of One Hundred Seventy
Five Thousand Dollars ($175,000) but in no event earlier than
December 5, 2016, the Company will deliver to the Purchaser a
certificate made out in the name of Purchaser (or trust or entity
controlled by Purchaser as directed by Purchaser) for an aggregate
total of 77,093 shares of Preferred Stock and Purchaser shall pay
the Company, by check or wire transfer made payable to the order of
the Company the sum of One Hundred Seventy Five Thousand Dollars
($175,000).
(c) At
the fourth Closing, which will take place, subject to the terms and
conditions hereof, after the Purchaser receives financing
sufficient to pay the Company, by check or wire transfer made
payable to the order of the Company the sum of One Hundred Seventy
Five Thousand Dollars ($175,000) but in no event earlier than
January 4, 2017, the Company will deliver to the Purchaser a
certificate made out in the name of Purchaser (or trust or entity
controlled by Purchaser as directed by Purchaser) for an aggregate
total of 77,093 shares of Preferred Stock and Purchaser shall pay
the Company, by check or wire transfer made payable to the order of
the Company the sum of One Hundred Seventy Five Thousand Dollars
($175,000).
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Section 3.
Representations and Warranties of the
Company.
Except
as set forth on any Schedule of Exceptions delivered to the
Purchaser, the Company hereby represents and warrants to Purchaser
as follows:
3.1 Organization,
Good Standing and Qualification. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Nevada. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute
and deliver this Agreement, to issue and sell the Shares and the
Conversion Shares and to issue the Compensation Stock and to carry
out the provisions of this Agreement and the Articles and to carry
on its business as presently conducted and as presently proposed to
be conducted. The Company is duly qualified and is authorized to do
business and is in good standing as a foreign corporation in all
jurisdictions in which the nature of its activities and of its
properties (both owned and leased) make such qualifications
necessary, except for those jurisdictions in which failure to do so
would not have a material adverse effect on the Company or its
business.
3.2 Capitalization;
Voting Rights.
(a) The
authorized capital stock of the Company, immediately prior to the
first Closing, will consist of (a) seventy five million
(75,000,000) shares of Common Stock, thirteen million four hundred
nineteen thousand nine hundred sixteen (13,419,916) shares of which
are issued and outstanding, three million eight hundred
seventy-three thousand eight hundred fifty three
(3,873,853) shares of which are currently reserved for
issuance pursuant to outstanding option agreements, and one million
one hundred twenty-six thousand one hundred forty seven (1,126,147)
shares of which will be reserved in the future for issuance to key
employees, consultants and others affiliated with the Company
pursuant to stock grant, stock purchase and/or option plans or any
other stock incentive program, arrangement or agreement approved by
the Company’s Board of Directors and (b) twenty million
(20,000,000) shares of Preferred Stock, five million (5,000,000) of
which are designated Series A Convertible Participating Preferred
Stock, two hundred sixty four thousand three hundred sixteen
(264,316) of which are issued and outstanding. All issued and
outstanding shares of the Company’s Common Stock
(i) have been duly authorized and validly issued,
(ii) are fully paid and nonassessable and (iii) were
issued in compliance with all applicable state and federal laws
concerning the issuance of securities.
(b)
Under the Company’s 2013
Equity Compensation Plan and 2014 Equity Compensation Plan
(collectively, the
“Plans”): (i) there are 3,873,853 options
currently outstanding, and (ii) 1,126,147 shares of Common Stock
remain available for future issuances to officers, directors,
employees and consultants of the Company. The Company has not made
any representations regarding equity incentives to any officer,
employee, director or consultant that are inconsistent with any
share amounts and terms set forth in the Company’s board
minutes.
(c) Other
than (i) the 3,873,853 options
currently outstanding, (ii) the 1,126,147 shares reserved for issuance
under the Plans, (iii) two Promissory Notes for a total of $200,000
plus interest convertible into shares of Common Stock at a price
per share of $1.50, and (iv) the conversion privileges of the
Series A Preferred Stock, and
except as may be granted pursuant to, or referred to in, this
Agreement, there are no outstanding options, warrants, rights
(including conversion or preemptive rights and rights of first
refusal), proxy or stockholder agreements, or agreements of any
kind for the purchase or acquisition from the Company of any of its
securities.
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(d) The
rights, preferences, privileges and restrictions of the Shares
and the Compensation Stock are
as stated in the Articles. The Conversion Shares have been duly and
validly reserved for issuance. When issued in compliance with the
provisions of this Agreement and the Articles, the Shares, the
Conversion Shares, and the
Compensation Stock will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances other
than (i) liens and encumbrances created by or imposed upon the
Purchaser; and (ii) any right of first refusal set forth in the
Company’s Bylaws; provided, however, that the Shares, the
Conversion Shares, and the
Compensation Stock may be subject to restrictions on
transfer under state and/or federal securities laws as set forth
herein or as otherwise required by such laws at the time a transfer
is proposed. The sale of the Shares and the subsequent conversion
of the Shares into Conversion Shares and the issuance of
the Compensation Stock are not
and will not be subject to any preemptive rights or rights of first
refusal that have not been properly waived or complied
with.
(e) No
stock options, stock appreciation rights or other equity-based
awards issued or granted by the Company are subject to the
requirements of Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”). Each “nonqualified
deferred compensation plan” (as such term is defined under
Section 409A(d)(1) of the Code and the guidance thereunder) under
which the Company makes, is obligated to make or promises to make,
payments (each, a “409A
Plan”) complies in all material respects with the
requirements of Section 409A of the Code and the guidance
thereunder. No payment to be made under any 409A Plan is, or to the
knowledge of the Company will be, subject to the penalties of
Section 409A(a)(1) of the Code.
3.3 Authorization;
Binding Obligations. All
corporate action on the part of the Company, its officers,
directors and stockholders necessary for the authorization of this
Agreement, the performance of all obligations of the Company
hereunder and thereunder at each Closing and the authorization,
sale, issuance and delivery of the Shares and issuance of the
Compensation Stock pursuant
hereto and the Conversion Shares pursuant to the Articles has been
taken or will be taken prior to each Closing. The Agreement, when
executed and delivered, will be valid and binding obligations of
the Company enforceable in accordance with their terms, except (i)
as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting
enforcement of creditors’ rights; and (ii) as limited by
general principles of equity that restrict the availability of
specific performance, injunctive relief or other equitable
remedies. The sale of the Shares and the subsequent conversion of
the Shares into Conversion Shares and the issuance of the
Compensation Stock are not and will not be subject to any
preemptive rights or rights of first refusal that have not been
properly waived or complied with.
3.4 Subsidiaries.
The Company does not own or control
any equity security or other interest of any other corporation,
partnership, limited liability company or other business entity.
The Company is not a participant in any joint venture, partnership,
limited liability company or similar arrangement. Since its
inception, the Company has not consolidated or merged with,
acquired all or substantially all of the assets of, or acquired the
stock of or any interest in any corporation, partnership, limited
liability company or other business entity.
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3.5 Liabilities.
The Company has no material liabilities and, to the best of its
knowledge, no material contingent liabilities, except current
liabilities incurred in the ordinary course of business that have
not been, either in any individual case or in the aggregate,
materially adverse.
3.6 Agreements;
Action.
(a) Except
for agreements explicitly contemplated hereby, there are no
agreements, understandings or proposed transactions between the
Company and any of its officers, directors, affiliates or any
affiliate thereof.
(b) There
are no agreements, understandings, instruments, contracts, proposed
transactions, judgments, orders, writs or decrees to which the
Company is a party or to its knowledge by which it is bound which
may involve (i) obligations (contingent or otherwise) of, or
payments to, the Company (other than obligations of, or payments
to, the Company arising in the ordinary course of business), or
(ii) the license of any patent, copyright, trade secret or
other proprietary right to or from the Company (other than licenses
arising from the purchase of “off the shelf” or other
standard products), or (iii) provisions restricting or
affecting the development, manufacture or distribution of the
Company’s products or services, or (iv) indemnification
by the Company with respect to infringements of proprietary
rights.
(c) The
Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any
class or series of its capital stock, (ii) incurred any
indebtedness for money borrowed or any other liabilities (other
than with respect to dividend obligations, distributions,
indebtedness and other obligations incurred in the ordinary course
of business), (iii) made any loans or advances to any person,
other than ordinary advances for travel expenses, or
(iv) sold, exchanged or otherwise disposed of any of its
assets or rights, other than in the ordinary course of
business.
3.7 Obligations
to Related Parties. There are
no obligations of the Company to officers, directors, stockholders,
or employees of the Company other than (a) for payment of
salary for services rendered, (b) reimbursement for reasonable
expenses incurred on behalf of the Company and (c) for other
standard employee benefits made generally available to all
employees (including stock option agreements outstanding under any
stock option plan approved by the Board of Directors of the
Company). No officer, director or, to the best of the
Company’s knowledge, key employees, stockholders, or any member of their immediate
families, are indebted to the Company or have any direct or
indirect ownership interest in any firm or corporation with which
the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation which competes with the
Company, except that officers, directors and/or stockholders of the
Company may own stock in publicly traded companies which may
compete with the Company. No such officer, director or stockholder,
or any member of their immediate families is, directly or
indirectly, interested in any material contract with the Company
(other than such contracts as relate to any such person’s
ownership of capital stock or other securities of the Company). The
Company is not a guarantor or indemnitor of any indebtedness of any
other person, firm or corporation.
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3.8 Title
to Properties and Assets; Liens, Etc. The Company has good and marketable title to its
properties and assets, and good title to its leasehold estates, in
each case subject to no mortgage, pledge, lien, lease, encumbrance
or charge, other than (i) those resulting from taxes which have not
yet become delinquent, (ii) minor liens and encumbrances which do
not materially detract from the value of the property subject
thereto or materially impair the operations of the Company and
(iii) those that have otherwise arisen in the ordinary course of
business. All facilities, machinery, equipment, fixtures, vehicles
and other properties owned, leased or used by the Company are in
good operating condition and repair and are reasonably fit and
usable for the purposes for which they are being used. The Company
is in compliance with all material terms of each lease to which it
is a party or is otherwise bound.
3.9 Patents
and Trademarks.
(a) The
Company owns the trademark rights to the names "Hang With" and
“Hang W/” (the "Trademarks") and owns or possesses sufficient legal rights to all
patents, trademarks, service marks, trade names, copyrights, trade
secrets, information and other proprietary rights and processes
necessary for its business as now conducted and as proposed to be
conducted (the "Intellectual
Property Rights"), without any
known infringement of the rights of others.
(b) There
are no outstanding options, licenses or agreements of any kind
relating to the foregoing, nor is the Company bound by or a party
to any options, licenses or agreements of any kind with respect to
the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information and other proprietary rights
and processes of any other person or entity other than such
licenses or agreements arising from the purchase of “off the
shelf” or standard products.
(c) The
Company has not received any communications alleging that the
Company has violated or, by conducting its business as proposed,
would violate any of the patents, trademarks, service marks, trade
names, copyrights or trade secrets or other proprietary rights of
any other person or entity.
(d) The
Company is not aware that any of its employees is obligated under
any contract (including licenses, covenants or commitments or any
nature) or other agreement, or subject to any judgment, decree or
order of any court or administrative agency, that would interfere
with their duties to the Company’s business by the employees
of the Company, nor the conduct of the Company’s business as
proposed, will, to the Company’s knowledge, conflict with or
result in a breach of the terms, conditions or provisions of, or
constitute a default under, any contract, covenant or instrument
under which any employee is now obligated.
(e) The
Company does not believe it is or will be necessary to utilize any
inventions, trade secrets or proprietary information of any of its
employees made prior to their employment by the Company, except for
inventions, trade secrets or proprietary information that have been
assigned to the Company. To the Company's knowledge, the
Company has taken all necessary and appropriate steps to maintain
and protect the Company's Trademark and Intellectual Property
Rights.
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(f) To
the best of Company’s knowledge, the owners of any
Intellectual Property Rights licensed, optioned or assigned to the
Company have taken all necessary and appropriate steps to maintain
and protect the Intellectual Property Rights that are subject to
such licenses, options or assignments. To the best of
Company’s knowledge, no Person other than the Company has
used, disclosed or appropriated the Company’s Trademark or
Intellectual Property Rights except for the benefit of the
Company.
(g) The
Company has not entered into any agreement granting any third party
the right to bring infringement actions with respect to, or
otherwise to enforce rights with respect to, the Company's
Trademarks or Intellectual Property Rights. The Company has not
entered into any agreement to indemnify any other person against
any charge of infringement of any third party intellectual property
right or the Company's Trademarks or Intellectual Property Rights
including, without limitation, in-licensed Intellectual Property
Rights.
(h) To
the Company’s knowledge, there have been no claims made
against the Company asserting the invalidity, misuse or
unenforceability of the Company's Trademarks or Intellectual
Property Rights, and to the best of Company’s knowledge,
there are no valid grounds for the same. The Company has not
received any notices of, and is not aware of any facts which
indicate a likelihood of, any infringement or misappropriation by,
or conflict with, any third party with respect to the Company's
Trademarks or Intellectual Property Rights (including, without
limitation, any demand or request that the Company license any
rights from a third party).
3.10
Compliance with
Other Instruments. The Company
is not in violation or default of any term of its Articles of
Incorporation or Bylaws, or of any provision of any mortgage,
indenture, contract, agreement, instrument or contract to which it
is party or by which it is bound or of any judgment, decree, order,
writ or, to its knowledge, any statute, rule or regulation
applicable to the Company which would materially and adversely
affect the business, assets, liabilities, financial condition,
operations or prospects of the Company. The execution, delivery,
and performance of and compliance with this Agreement and the
related agreements, and the issuance and sale of the Shares and the
issuance of the Compensation Stock pursuant hereto and of the Conversion Shares
pursuant to the Articles, will not, with or without the passage of
time or giving of notice, result in any such material violation, or
be in conflict with or constitute a default under any such term, or
result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Company or
the suspension, revocation, impairment, forfeiture or nonrenewal of
any permit, license, authorization or approval applicable to the
Company, its business or operations or any of its assets or
properties.
3.11
Litigation.
There is no action, suit, proceeding
or investigation pending or to the Company’s knowledge
currently threatened against the Company that questions the
validity of this Agreement or the right of the Company to enter
into any of such agreements, or to consummate the transactions
contemplated hereby or thereby, or which might result, either
individually or in the aggregate, in any material adverse change in
the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity
ownership of the Company, nor is the Company aware that there is
any basis for the foregoing. The foregoing includes, without
limitation, actions pending or threatened (or any basis therefor
known to the Company) involving the prior employment of any of the
Company’s employees, their use in connection with the
Company’s business of any information or techniques allegedly
proprietary to any of their former employers, or their obligations
under any agreements with prior employers. The Company is not a
party or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or
investigation by the Company currently pending or which the Company
intends to initiate.
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3.12
Tax Returns and
Payments. The Company has
timely filed all tax returns (federal, state and local) required to
be filed by it. All taxes shown to be due and payable on such
returns, any assessments imposed, and to the Company’s
knowledge all other taxes due and payable by the Company on or
before each Closing have been paid or will be paid prior to the
time they become delinquent. The Company has not been advised
(i) that any of its returns, federal, state or other, have
been or are being audited as of the date hereof, or (ii) of
any deficiency in assessment or proposed judgment to its federal,
state or other taxes. The Company has no knowledge of any liability
of any tax to be imposed upon its properties or assets as of the
date of this Agreement that is not adequately provided
for.
3.13
Employees.
The Company has no collective
bargaining agreements with any of its employees. There is no labor
union organizing activity pending or, to the Company’s
knowledge, threatened with respect to the Company. No employee has
any agreement or contract, written or verbal, regarding his
employment. To the Company’s knowledge, no employee of the
Company, nor any consultant with whom the Company has contracted,
is in violation of any term of any employment contract, proprietary
information agreement or any other agreement relating to the right
of any such individual to be employed by, or to contract with, the
Company because of the nature of the business to be conducted by
the Company; and to the Company’s knowledge the continued
employment by the Company of its present employees, and the
performance of the Company’s contracts with its independent
contractors, will not result in any such violation. The Company has
not received any notice alleging that any such violation has
occurred. No employee of the Company has been granted the right to
continued employment by the Company or to any material compensation
following termination of employment with the Company. The Company
is not aware that any officer or key employee, or that any group of
key employees, intends to terminate their employment with the
Company, nor does the Company have a present intention to terminate
the employment of any officer, key employee or group of key
employees.
3.14
Obligations of Management.
Except for the Company’s chief financial officer who is paid
on an hourly basis and used when needed, each officer and key
employee of the Company is currently devoting substantially all of
his or her business time to the conduct of the business of the
Company and/or to its parent company. Except for the
Company’s chief financial officer, the Company is not aware
that any officer or key employee of the Company is planning to work
less than full time at the Company and/or its parent/affiliate
company in the future. No officer or key employee is currently
working or, to the Company’s knowledge, plans to work for a
competitive enterprise, whether or not such officer or key employee
is or will be compensated by such enterprise.
3.15
No Excluded Works
or Inventions. No current
employee, officer or consultant of the Company has excluded works
or inventions made prior to his or her employment with the Company
from his or her assignment of inventions pursuant to such employee,
officer or consultant’s agreement. The Company, after
reasonable investigation, is not aware that any of its employees,
officers or consultants is in violation thereof and the Company
will use its best efforts to prevent any such
violation.
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3.16
Registration
Rights. The Company is
presently not under any obligation, and has not granted any rights,
to register any of the Company’s presently outstanding
securities or any of its securities that may hereafter be
issued. To the Company’s knowledge, no stockholder of
the Company has entered into any agreement with respect to the
voting of equity securities of the Company.
3.17
Compliance with Laws;
Permits. The Company is not in
violation of any applicable statute, rule, regulation, order or
restriction of any domestic or foreign government or any
instrumentality or agency thereof in respect of the conduct of its
business or the ownership of its properties which violation would
materially and adversely affect the business, assets, liabilities,
financial condition, operations or prospects of the Company. No
governmental orders, permissions, consents, approvals or
authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the
execution and delivery of this Agreement and the issuance of the
Shares or the Conversion Shares or the Compensation Stock, except
such as has been duly and validly obtained or filed, or with
respect to any filings that must be made after each Closing, as
will be filed in a timely manner. The Company has all franchises,
permits, licenses and any similar authority necessary for the
conduct of its business as now being conducted by it, the lack of
which could materially and adversely affect the business,
properties, prospects or financial condition of the Company and
believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be
conducted.
3.18
Environmental and
Safety Laws. The Company is not
in violation of any applicable statute, law or regulation relating
to the environment or occupational health and safety, and to its
knowledge, no material expenditures are or will be required in
order to comply with any such existing statute, law or
regulation.
3.19
Offering
Valid. Assuming the accuracy of
the representations and warranties of the Purchaser contained
in Section 4.2
hereof, the offer, sale and issuance
of the Shares, the issuance of the Compensation Stock, and the
Conversion Shares will be exempt from the registration requirements
of the Securities Act of 1933, as amended (the
“Securities
Act”), and will have been
registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification
requirements of all applicable state securities laws. Neither the
Company nor any agent on its behalf has solicited or will solicit
any offers to sell or has offered to sell or will offer to sell all
or any part of the Shares or the Compensation Stock to any person
or persons so as to bring the sale of such Shares and the issuance
of the Compensation Stock by
the Company within the registration provisions of the Securities
Act or any state securities laws.
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3.21 Information.
The Company has provided the Purchaser
with all information requested by the Purchaser in connection with
his decision to purchase the Shares. To the Company’s
knowledge, neither this Agreement nor the exhibits hereto (if any)
contain any untrue statement of a material fact nor, to the
Company’s knowledge, omit to state a material fact necessary
in order to make the statements contained herein not
misleading.
Section 4.
Representations and Warranties of the
Purchaser
Purchaser
hereby represents and warrants to the Company as follows (such
representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this
Agreement):
4.1 Requisite
Power and Authority. Purchaser
has all necessary power and authority under all applicable
provisions of law to execute and deliver this Agreement and to
carry out their provisions. All actions on the part of the
Purchaser required for the lawful execution and delivery of this
Agreement has been or will be effectively taken prior to each
Closing. Upon execution and delivery, this Agreement will be valid
and binding obligations of Purchaser, enforceable in accordance
with their terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors’
rights, and (ii) as limited by general principles of equity
that restrict the availability of specific performance, injunctive
relief or other equitable remedies.
4.2 Investment
Representations. Purchaser
understands that neither the Shares nor the Conversion Shares nor
the Compensation Stock have been registered under the Securities
Act. Purchaser also understands that the Shares are being offered
and sold and the Compensation Stock is being issued pursuant to an
exemption from registration contained in the Securities Act based
in part upon Purchaser’s representations contained in the
Agreement. Purchaser hereby represents and warrants as
follows:
(a) Purchaser
Bears Economic Risk. Purchaser
has substantial experience in evaluating and investing in private
placement transactions of securities in companies similar to the
Company so that it is capable of evaluating the merits and risks of
its investment in the Company and has the capacity to protect its
own interests. Purchaser must bear the economic risk of this
investment indefinitely unless the Shares (or the Conversion
Shares) or the Compensation Stock are registered pursuant to the Securities Act, or
an exemption from registration is available. Purchaser understands
that the Company has no present intention of registering the
Shares, the Conversion Shares, the Compensation Stock, or any
shares of its Common Stock. Purchaser also understands that there
is no assurance that any exemption from registration under the
Securities Act will be available and that, even if available, such
exemption may not allow Purchaser to transfer all or any portion of
the Shares or the Conversion Shares or the Compensation
Stock under the circumstances,
in the amounts or at the times Purchaser might
propose.
(b) Acquisition
for Own Account. Purchaser is
acquiring the Shares and the Conversion Shares and the Compensation
Stock for Purchaser’s own account for investment only, and
not with a view towards their distribution.
10
(c) Purchaser
Can Protect Its Interest. Purchaser represents that by reason of its, or of
its management’s or advisor’s, business or financial
experience, Purchaser has the capacity to protect its own interests
in connection with the transactions contemplated in this Agreement.
Further, Purchaser is aware of no publication of any advertisement
in connection with the transactions contemplated in the
Agreement.
(d) Accredited
Investor. Purchaser represents
that it is an accredited investor within the meaning of Regulation
D under the Securities Act.
(e) Rule
144. Purchaser acknowledges and
agrees that the Shares and the Compensation Stock, and, if issued,
the Conversion Shares must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption
from such registration is available. Purchaser has been advised or
is aware of the provisions of Rule 144 promulgated under the
Securities Act, which permits limited resale of shares purchased in
a private placement subject to the satisfaction of certain
conditions, including, among other things: the availability of
certain current public information about the Company, the resale
occurring not less than six months after a party has purchased and
paid for the security to be sold, the sale being through an
unsolicited “broker’s transaction” or in
transactions directly with a market maker (as said term is defined
under the Securities Exchange Act of 1934, as amended) and the
number of shares being sold during any three-month period not
exceeding specified limitations.
(f) Company
Information. Such Purchaser has had an opportunity to
discuss the Company’s business, management and financial
affairs with directors, officers and management of the Company and
believes that such Purchaser has received all of the information
such Purchaser considers necessary or appropriate for deciding
whether to purchase the Shares. Such Purchaser has also had the
opportunity to ask questions of, and receive answers from, the
Company and its management regarding the terms and conditions of
this investment.
(g) Legends.
It is understood that the certificates evidencing the Preferred
Stock (and the Conversion Stock) may bear a legend similar to
following:
“THE SHARES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY
TO THE ISSUER, THE TRANSFER QUALIFIES FOR AN EXEMPTION FROM OR
EXEMPTION TO THE REGISTRATION PROVISIONS
THEREOF”
Section 5.
Conditions to Closing; Covenants.
5.1 Conditions
to Purchaser’s Obligations at each Closing.
Purchaser’s obligations to
purchase the Shares at each Closing are subject to the
satisfaction, at or prior to each Closing, of the following
conditions:
(a) Representations
and Warranties True. The
representations and warranties made by the Company in
Section 3 hereof shall be true and correct in all material
respects as of each Closing Date.
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(b) Performance
of Obligations. The Company
shall have performed and complied with all agreements and
conditions herein required to be performed or complied with by the
Company on or before each Closing, and the Articles shall continue
to be in full force and effect as of each Closing
Date.
(c) Legal
Investment. On each Closing
Date, the sale and issuance of the Shares and the proposed issuance
of the Conversion Shares and the issuance of the Compensation Stock
shall be legally permitted by all laws and regulations to which the
Purchaser and the Company are subject.
(d) Consents,
Permits, and Waivers. The
Company shall have obtained any and all consents, permits and
waivers necessary or appropriate for consummation of the
transactions contemplated by the Agreement (except for such as may
be properly obtained subsequent to each
Closing).
(e)
Proceedings.
All corporate and other proceedings in
connection with the transactions contemplated at each Closing
hereby shall be reasonably satisfactory in substance and form to
the Purchaser and their counsel.
(f)
Secretary’s
Certificate.
Purchaser shall have received from the Company’s Secretary a
certificate having attached thereto (i) the Company’s
Articles as in effect at the time of each Closing, (ii) the
Company’s Bylaws as in effect at the time of each Closing,
(iii) resolutions approved by the Board of Directors
authorizing the transactions contemplated hereby, (iv) a true and
correct list of the members of the Company’s Board of
Directors and a true an correct list of the Company’s
officers, (v) resolutions approved by the Company’s
stockholders authorizing the filing of the Articles; (vi) a
pre-closing and post-closing capitalization table, and
(vii) good standing certificates (including tax good standing)
with respect to the Company from the applicable authority(ies) in
Nevada and any other jurisdiction in which the Company is qualified
to do business, dated a recent date before each
Closing.
5.2 Conditions
to Obligations of the Company. The Company’s obligation to issue and sell
the Shares at each Closing and issue the Compensation Stock at the
first Closing is subject to the satisfaction, on or prior to such
Closing, of the following conditions:
(a) Representations
and Warranties True. The
representations and warranties made by the Purchaser in Section 4
hereof shall be true and correct in all material respects at the
date of each Closing, with the same force and effect as if they had
been made on and as of said date.
(b) Performance
of Obligations. The Purchaser
shall have performed and complied with all agreements and
conditions herein required to be performed or complied with by the
Purchaser on or before each Closing.
(c) Consents,
Permits, and Waivers. The
Company shall have obtained any and all consents, permits and
waivers necessary or appropriate for consummation of the
transactions contemplated by the Agreement (except for such as may
be properly obtained subsequent to each
Closing).
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Section 6.
Affirmative Covenants of the Company.
The
Company agrees with the Purchaser as follows:
(a) Financial
Information. The Company will deliver to the Purchaser,
within one hundred and eighty (180) days after the end of each
fiscal year, annual unaudited financial statements.
(b) Rights
of Inspection. Subject to the
execution of a confidentiality agreement, and in addition to any
rights provided to a shareholder under Nevada law, Purchaser shall
have the right, no more than two (2) times each fiscal year, to
visit and inspect any of the properties of the Company and the
books and records of the Company (on at least 48 hours’ prior
written notice to the Company) and to discuss its affairs, finances
and accounts with its officers, at such reasonable times during
normal business hours as may be reasonably
requested.
(c) Confidentiality.
Any information provided to Purchaser
under this Section 6,
as well as the terms and conditions of this Agreement itself, shall
be deemed to be confidential information of the Company, and
Purchaser shall not disclose such information to any third parties.
Notwithstanding the foregoing, if Purchaser is ordered by a court,
administrative agency, or other governmental body of competent
jurisdiction to disclose any such information, or if Purchaser is
served or otherwise becomes aware of a motion or similar request
that such an order is to be issued, then Purchaser will not be
liable to the Company for disclosure of the information required by
such order if Purchaser shall (a) promptly notify the Company
of the motion or order by the most expeditious means possible; and
(b) join or agree to (or at a minimum shall not oppose) a motion or
similar request by the Company for an order protecting the
confidentiality of the information covered by such order. In
addition, the Board of Directors, in its sole discretion, may
determine that certain information to be delivered hereunder is
competitively sensitive information and may refuse to deliver such
information to Purchaser if Purchaser is deemed by the Board to be
a competitor or potential competitor of the
Company.
(d) Termination.
The rights and
obligations of Purchaser under this Section 6 shall terminate upon
the earlier to occur of (i) the transfer of all of the Shares and
the Compensation Stock owned by
Purchaser; and (ii) the consummation by the Company of an initial
public offering of its Common Stock.
(e) Anti-Dilution
Protection. For the avoidance of doubt, the Purchaser shall
have all of the anti-dilution protection included in Section B.5 of
Article FOURTH of the Articles.
Section 7.
Miscellaneous.
7.1 Governing
Law. This Agreement shall be
governed in all respects by the laws of the State of California
without regard to principles of conflict of
laws.
7.2 Survival.
The representations, warranties,
covenants and agreements made herein shall survive any
investigation made by any Purchaser and the closing of the
transactions contemplated hereby. All statements as to factual
matters contained in any certificate or other instrument delivered
by or on behalf of the Company pursuant hereto in connection with
the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder solely as
of the date of such certificate or instrument.
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7.3 Successors
and Assigns. Except as
otherwise expressly provided herein, the provisions hereof shall
inure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person
who shall be a holder of the Shares or the Compensation Stock from
time to time.
7.4 Entire
Agreement. This Agreement, and
any Exhibits and Schedules hereto and the other documents delivered
pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof
and no party shall be liable or bound to any other in any manner by
any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.
7.5 Severability.
In case any provision of the Agreement
shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
7.6 Amendment
and Waiver.
(a) This
Agreement may be amended or modified only upon the written consent
of the Company and holders of at least a majority of the Preferred
Stock (treated as if converted and including any Conversion Shares
into which the Shares have been converted that have not been sold
to the public).
(b) The
obligations of the Company and the rights of the holders of the
Shares and the Conversion Shares under the Agreement may be waived
only with the written consent of the holders of at least a majority
of the Preferred Stock (treated as if converted and including any
Conversion Shares into which the Shares have been converted that
have not been sold to the public).
7.7 Delays
or Omissions. It is agreed that
no delay or omission to exercise any right, power or remedy
accruing to any party, upon any breach, default or noncompliance by
another party under this Agreement or the Articles, shall impair
any such right, power or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance thereafter
occurring. It is further agreed that any waiver, permit, consent or
approval of any kind of character on any Purchaser’s part of
any breach, default or noncompliance under this Agreement or under
the Articles or any waiver on such party’s part of any
provisions or conditions of the Agreement or the Articles must be
in writing and shall be effective only to the extent specifically
set forth in such writing. All remedies, either under this
Agreement or the Articles, by law, or otherwise afforded to any
party, shall be cumulative and not alternative.
7.8 Notices.
All notices required or permitted
hereunder shall be in writing and shall be deemed effectively
given: (i) upon personal delivery to the party to be notified;
(ii) when sent by confirmed telex or facsimile if sent during
normal business hours of the recipient, if not, then on the next
business day; (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage
prepaid; or (iv) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent
to the Company and to Purchaser at the addresses as set forth on
the signature page hereof or at such other address as the Company
or Purchaser may designate by ten (10) days advance written notice
to the other parties hereto.
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7.9 Titles
and Subtitles. The titles of
the sections and subsections of the Agreement are for convenience
of reference only and are not to be considered in construing this
Agreement.
7.10
Counterparts.
This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all
of which together shall constitute one
instrument.
7.11
Broker’s
Fees. Each party hereto
represents and warrants that no agent, broker, investment banker,
person or firm acting on behalf of or under the authority of such
party hereto is or will be entitled to any broker’s or
finder’s fee or any other commission directly or indirectly
in connection with the transactions contemplated herein. Each party
hereto further agrees to indemnify each other party for any claims,
losses or expenses incurred by such other party as a result of the
representation in this Section 7.11
being untrue.
7.12
Expenses.
Each party hereto shall pay their own
costs and expenses that they incur with respect to the negotiation,
execution, delivery and performance of the
Agreement.
7.13
Exculpation.
Purchaser acknowledges that it is not
relying upon any person, firm, or corporation, other than the
Company and its officers and directors, in making its investment or
decision to invest in the Company. Each Purchaser agrees that no
Purchaser nor the respective controlling persons, officers,
directors, partners, agents, or employees of any Purchaser shall be
liable for any action heretofore or hereafter taken or omitted to
be taken by any of them in connection with the Shares, Conversion
Shares, and the Compensation Stock.
7.14
Indemnification. The
Company hereby agrees to defend, indemnify, and hold harmless
Purchaser and each of Purchaser’s employees, agents,
attorneys, representatives, and affiliates, harmless from and
against any and all losses, liabilities, claims, demands,
judgments, costs and expenses (including attorneys’ fees and
actual costs and expenses) arising out of or related to: (i) the
breach or failure of the Company's obligations, representations,
warranties and/or covenants under this Agreement; or (ii) the
Company's negligence, recklessness, or willful misconduct in
connection with or relating to the performance of any of its
services.
[REMAINDER
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In
Witness Whereof, the parties
hereto have executed the Series
A Convertible Participating Preferred Stock Purchase
Agreement as of the date set
forth in the first paragraph hereof.
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COMPANY:
Hang With, Inc.
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Address:
Attn: Xxxxxx Xxxxxx
7
Xxxxxxxxxx
Xxxxxx,
XX 00000
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By:
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/s/ Xxxxxx Xxxxxx
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Name: Xxxxxx Xxxxxx
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Title: CEO
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PURCHASER:
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By:
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/s/ Xxxxxx Xxxxxxxx
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Name:
Xxxxxx Xxxxxxxx
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Title:
CEO
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Address:
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0000
X Xxxxxx Xxx., Xxxxx 000
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Xxxxxxxx,
XX 00000
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