FORM OF] NOTE PURCHASE AGREEMENT
Exhibit 10.4
DAM HOLDINGS, INC.
[FORM OF] NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT (this “Agreement”) is made as of
October 24, 2011, by and among DAM HOLDINGS, INC, a Nevada corporation (the “Company”) and [ ]
(“Investor”).
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Issuance of Notes.
1.1 Issuance of Notes. Subject to the terms and conditions of this Agreement, at each Closing (as defined below), the Company shall issue and sell to Investor unsecured convertible promissory notes (each such note, a “Note,” and collectively, the “Notes”) in the principal amount (the “Principal Amount”) equal to the amount set forth in
Exhibit A attached hereto, against payment by Investor to the Company of the Principal Amount. The Company shall issue and sell Notes with an aggregate principal amount of $500,000 under this Agreement, and Investor shall be obligated to purchase such Notes pursuant to the funding schedule set forth in Exhibit A. The Notes shall each be substantially in the form of Exhibit B attached hereto. Capitalized but otherwise undefined terms used herein have the meanings provided therefor in the Notes.
2. Closings.
2.1 Initial Closing. The initial closing of the purchase and sale of Notes hereunder (the “Initial Closing”) shall take place via the exchange of documents on the date of this Agreement and shall be with respect to advances by Investor to or for the benefit of the Company prior to the date hereof.
2.2 Subsequent Closings. Subsequent to the Initial Closing, the Company shall issue and sell additional Notes to Investor, and Investor shall be obligated to purchase such Notes as set forth in the funding schedule on Exhibit B. The closing of the purchase and sale of such additional Notes hereunder shall take place via the exchange of documents on such date as is mutually agreeable to the Company and Investor (which each such date and place, together with the Initial Closing, are designated as a
“Closing”).
2.3 Delivery. At each Closing: (a) Investor shall deliver to the Company a check or wire transfer of immediately available funds in the amount of Investor’s Principal Amount with respect to such Closing, and (b) the Company shall execute and deliver to Investor a Note reflecting the name of Investor, a principal amount equal to Investor’s Principal Amount for such Closing as set forth in Exhibit B and the date of such Closing. Each such Note shall be a binding obligation of the Company
upon execution thereof by the Company and delivery thereof to an Investor.
3. Representations, Warranties and Covenants of Investor.
Investor hereby represents, warrants and covenants to the Company as follows:
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3.1 Purchase for Own Account. Investor represents that it is acquiring the Notes and the equity securities issuable upon conversion of the Notes (together with the equity securities of the Company, the “Securities”) solely for investment for its own account and not as a nominee or agent or with a view to the resale or distribution of any part thereof, and that it has no present intention of selling, granting any participation in, or otherwise distributing the same. The acquisition by Investor of any of the
Securities shall constitute confirmation of the representation by Investor that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities.
3.2 Disclosure of Information. Investor has received all the information it considers necessary or appropriate for deciding whether to acquire the Securities. Investor further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Securities and the business, properties, prospects and financial condition of the Company.
3.3 Investment Experience. Investor has (a) a preexisting personal or business relationship with the Company or its officers and directors or controlling persons, (b) a preexisting personal or business relationship with the Company or its officers and directors or controlling persons, and/or (c) by reason of its own business and financial experience, has the capacity to protect its own interests in connection with the investment contemplated hereby. Investor represents that it is an investor in securities of companies in the development stage and acknowledges that it is able
to fend for itself, can bear the economic risk of its investment, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Securities.
3.4 Accredited Investor. Investor represents that it is an “accredited investor” within the meaning of Securities and Exchange Commission (“SEC”) Rule 501 of Regulation D, as presently in effect.
3.5 Restrictions on Transfer. Investor understands that the Securities are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act of 1933, as amended (the “Act”), only in certain limited circumstances. In this connection, Investor
represents that it is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Act. INVESTOR UNDERSTANDS AND ACKNOWLEDGES HEREIN THAT AN INVESTMENT IN THE COMPANY’S SECURITIES INVOLVES AN EXTREMELY HIGH DEGREE OF RISK AND MAY RESULT IN A COMPLETE LOSS OF ITS INVESTMENT. Investor understands that the Securities have not been and will not be registered under the Act and have not been and will not be registered or qualified in any state in which they are offered, and thus Investor will not be able to resell or otherwise transfer its Securities unless they are registered under the Act and registered or qualified under applicable state securities laws, or an exemption from such registration or qualification is available. Investor has no immediate need for liquidity in connection with this investment and does not anticipate
that it will need to sell its Securities in the foreseeable future.
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3.6 Further Limitations on Disposition. Without in any way limiting the representations set forth above, Investor further agrees not to make any disposition of all or any portion of the Securities unless:
(a) there is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or
(b) Investor is eligible to dispose of the Securities pursuant to Rule 144 and such disposition is made in accordance with such Rule; or
(c) (i) Investor shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and (ii) if requested by the Company, Investor shall have furnished the Company with an opinion of counsel reasonably satisfactory to the Company that such disposition will not require registration of such shares under the Act.
4. Representations and Warranties of the Company.
4.1 Merger into OSO USA LLC (“OSO”). Investor acknowledges and agrees that it is accepting hereby the representations and warranties of the Company provided to OSO in connection with the merger of OSO into a wholly-owned subsidiary of the Company.
4.2 Offering. Subject in part to the truth and accuracy of Investor’s representations set forth in Section 3, the offer, sale and issuance of the Notes as contemplated by this Agreement are exempt from the registration requirements of the Act and will not result in a violation of the qualification or registration requirements of the any applicable state securities laws.
4.3 Valid Issuance of Securities. The Securities issuable upon conversion of the Notes, when issued, sold and delivered in accordance with the terms of the Notes for the consideration expressed therein, will be duly and validly issued, fully paid, and nonassessable, and will be free of restrictions on transfer other than restrictions on transfer under this Agreement and under applicable state and federal securities laws.
5. Miscellaneous.
5.1 Survival of Representations, Warranties and Covenants. The warranties, representations and covenants of the Company and Investor contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and all Closings.
5.2 Successors and Assigns. Except as otherwise provided therein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties; provided that the Company may not assign or transfer its rights or obligations hereunder without the prior written consent of Investor. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
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5.3 Governing Law; Venue. This Agreement is to be construed in accordance with and governed by the internal laws of the State of New York without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of New York to the rights and duties of the parties. All disputes and controversies arising out of or in connection with this Agreement shall be resolved exclusively by the state or federal courts located in New York County in the State of New York, and each party hereto agrees to submit
to the jurisdiction of said courts and agrees that venue shall lie exclusively with such courts.
5.4 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
5.5 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
5.6 Notices. Except as may be otherwise provided herein, all notices, requests, waivers and other communications made pursuant to this Agreement shall be in writing and shall be conclusively deemed to have been duly given: (a) when hand delivered to the other party; (b) three business days after deposit in the U.S. mail with first class or certified mail receipt requested postage prepaid and addressed to the other party at the address set forth below; or (c) the next business day after deposit with a national overnight delivery service, postage prepaid, addressed to the
parties as set forth below with next business day delivery guaranteed, provided that the sending party receives a confirmation of delivery from the delivery service provider. Each Person making a communication hereunder by facsimile shall promptly confirm by telephone to the Person to whom such communication was addressed each communication made by it by facsimile pursuant hereto but the absence of such confirmation shall not affect the validity of any such communication. A party may change or supplement the addresses given above, or designate additional addresses, for purposes of this Section 5.6 by giving the other party written notice of the new address in the manner set forth above.
5.7 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only if such amendment, modification or waiver is in writing and only with the written consent of the Company and Investor.
5.8 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.
5.9 Corporate Securities Law. THE SALE OF THE SECURITIES THAT ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF NEW YORK AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
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5.10 Expenses. Each party shall pay all of its own costs and expenses (including attorneys’ fees and disbursements) that it incurs with respect to the negotiation, execution and delivery of this Agreement.
5.11 Finder’s Fee. Each party represents that it neither is nor will be obligated for any finder’s fee or commission in connection with this transaction. Investor agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finders’ fee (and the costs and expenses of defending against such liability or asserted liability) for which Investor or any of its officers, partners, employees or representatives is responsible. The Company agrees to indemnify and hold harmless Investor from any
liability for any commission or compensation in the nature of a finder’s fee (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.
5.12 Other Investors. Investor acknowledges and agrees that the Company may enter into one or more additional Note Purchase Agreements and execute and deliver notes thereunder within 30 days of the Initial Closing to other investors in the maximum aggregate amount of $100,000. Any such Note Purchase Agreement shall have terms and conditions substantially similar to (but in no event more favorable than) the terms and conditions of this Agreement. Each additional investor shall make the same representations, warranties and covenants to the Company as are set forth in Section 3
hereof. Investor acknowledges and agrees that any such additional notes issued to investors shall be pari passu with the Notes.
5.13 Entire Agreement. This Agreement and the documents referred to herein constitute the entire agreement among the parties with respect to the subject matter hereof and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
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COMPANY:
DAM HOLDINGS, INC.
By:_____________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
Address:
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▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
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INVESTOR:
[ ]
By:_____________________________________
Name:___________________________________
Title:____________________________________
Address:
Taxpayer ID:______________________________
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EXHIBIT A
FUNDING SCHEDULE
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Date
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Principal
Amount
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TOTAL
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EXHIBIT B
FORM OF UNSECURED CONVERTIBLE PROMISSORY NOTE