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): December 30, 2015
YAPPN
CORP.
(Exact
Name of Small Business Issuer as Specified in Charter)
Delaware |
|
000-55082 |
|
27-3448069
|
(State
or Other Jurisdiction
of Incorporation) |
|
(Commission
File
Number) |
|
(IRS
Employer
Identification No.) |
1001
Avenue of the Americas, 11th Floor
New
York, NY |
|
10018 |
(Address
of Principal Executive Offices) |
|
(Zip
Code) |
Small
Business Issuer’s telephone number, including area code: (888) 859-4441
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the small business
issuer under any of the following provisions:
☐ |
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)) |
In
this Current Report on Form 8-K, “Company,” “our company,” “us,” and “our” refer
to Yappn Corp. and its subsidiaries, unless the context requires otherwise.
FORWARD-LOOKING
STATEMENTS
Our
disclosure and analysis in this Current Report on Form 8-K contains some forward-looking statements. Certain of the matters discussed
concerning our operations, cash flows, financial position, economic performance and financial condition, and the effect of economic
conditions include forward-looking statements. Statements that are predictive in nature, that depend upon or refer to future events
or conditions or that include words such as "expects," "anticipates," "intends," "plans,"
"believes," "estimates" and similar expressions are forward-looking statements. Although we believe that these
statements are based upon reasonable assumptions, including projections of orders, sales, operating margins, earnings, cash flow,
research and development costs, working capital, capital expenditures and other projections, they are subject to several risks
and uncertainties. Investors are cautioned that our forward-looking statements are not guarantees of future performance and the
actual results or developments may differ materially from the expectations expressed in the forward-looking statements.
As
for the forward-looking statements that relate to future financial results and other projections, actual results will be different
due to the inherent uncertainty of estimates, forecasts and projections may be better or worse than projected. Given these uncertainties,
you should not place any reliance on these forward-looking statements. These forward-looking statements also represent our estimates
and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking
statements, and the estimates and assumptions associated with them, after the date of this filing to reflect events or changes
in circumstances or changes in expectations or the occurrence of anticipated events. You are advised, however, to consult any
additional disclosures we make in our reports on Form 10-K, Form 10-Q, Form 8-K, or their successors.
ITEM
2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
On
December 30, 2015, the Company completed a secured debt and warrant financing of $2,086,000 through the offering of units by way
of private placement, with each unit consisting of (i) a 12% secured convertible debenture with a maturity date of five years
from issuance and (ii) ten (10) five year common share purchase warrants, vesting in 1/3 implements and having an exercise price
of $0.01 per share. The units were sold at $1.00 per unit.
The
foregoing description of the 12% Secured Debentures and the form of common share purchase warrants are a summary and are qualified
in its entirety by reference to such document, which is attached hereto as Exhibit 10.1 and 10.2 respectively, and is incorporated
herein by reference.
The
offer and sale of all securities listed above to all non-U.S. citizens or entities were affected in reliance on the exemptions
for sales of securities not involving a public offering, as set forth in Regulation S promulgated under the Securities Act of
1933 (“Securities Act”). The Investor acknowledged the following: Subscriber is not a United States Person, nor is
the Subscriber acquiring the securities directly or indirectly for the account or benefit of a United States Person. None of the
funds used by the Subscriber to purchase the securities have been obtained from United States Persons. For purposes of this Agreement,
"United States Person" within the meaning of U.S. tax laws, means a citizen or resident of the United States, any former
U.S. citizen subject to Section 877 of the Internal Revenue Code, any corporation, or partnership organized or existing under
the laws of the United States of America or any state, jurisdiction, territory or possession thereof and any estate or trust the
income of which is subject to U.S. federal income tax irrespective of its source, and within the meaning of U.S. securities laws,
as defined in Rule 902(o) of Regulation S, means: (i) any natural person resident in the United States; (ii) any partnership or
corporation organized or incorporated under the laws of the United States; (iii) any estate of which any executor or administrator
is a U.S. person; (iv) any trust of which any trustee is a U.S. person; (v) any agency or branch of a foreign entity located in
the United States; (vi) any 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; (vii) any 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; and
(viii) any partnership or corporation if organized under the laws of any foreign jurisdiction, and 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)) who are not natural persons, estates or trusts.
In
addition, on July 15, 2015, the Company reported the completion of a secured debt financing of US $4.5 Million of 12%
Secured Debentures (the “Secured Debentures”). The holders of the Secured Debentures (the “Holders”)
have agreed to consent to the offering above, extend the maturity date of the Secured Debentures from December 31, 2015 to
July 15, 2020, and are provided with the right to amend the Secured Debenture such that a Holder shall have the right, at any
time after the earlier of (i) six (6) months from the date of first issuance of any subsequent Debentures; and (ii) June 30,
2016, to require the Company to satisfy the outstanding obligations underlying the Secured Debenture; provided, however, that
at least two thirds (66.67%) of the Holders of the principal amount of the Secured Debentures consent to a put of their
Secured Debentures to the Company.
ITEM
3.02. UNREGISTERED SALES OF EQUITY SECURITIES
See
2.03 above.
ITEM
9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(d)
Exhibits.
The
following exhibits are furnished herewith:
Exhibit No. | |
Description |
| |
|
10.1 | |
Form of 12% Secured Debenture. |
| |
|
10.2 | |
Form of Common Stock Purchase Warrant. |
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.
January
6, 2016 |
|
Yappn
Corp. |
|
|
|
|
|
|
By: |
/s/
Neil Stiles |
|
|
|
Neil
Stiles |
|
|
|
Chief
Executive Officer |
4
Exhibit 10.1
THESE SECURITIES HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR PROVINCE IN RELIANCE UPON AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY CANADIAN NATIONAL OR PROVINCIAL
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR ANY CANADIAN NATIONAL OR PROVINCIAL SECURITIES LAW OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR ANY CANADIAN NATIONAL OR PROVINCIAL SECURITIES LAW AND IN
ACCORDANCE WITH APPLICABLE STATE OR PROVINCIAL SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
UNLESS PERMITTED UNDER SECURITIES LEGISLATION,
THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) [INSERT
THE DISTRIBUTION DATE], AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.
Date of Issuance: _____________,
2015
$_________
YAPPN CORP.
12% SECURED CONVERTIBLE DEBENTURE
DUE __________________2020
THIS DEBENTURE is a duly
authorized and issued 12% Secured Debenture of Yappn Corp., a Delaware corporation, having a principal place of business at 1001
Avenue of the Americas, 11th Floor, New York, NY 10018 (the "Company"), designated as its 12% Secured Debenture,
due_______, 2020 (the "Debenture").
FOR VALUE RECEIVED, the
Company promises to pay to ________________________ or his registered assigns (the "Holder"), the principal sum of ____________________Dollars
($____,000) on _________, 2020 or such earlier date as the Debenture is required or permitted to be repaid as provided hereunder
(the "Maturity Date", five years form the date of issuance), and to pay interest to the Holder on the aggregate outstanding
principal amount of this Debenture at the rate of 12% per annum, payable on the Maturity Date (except that, if any such date is
not a Business Day, then such payment shall be due on the next succeeding Business Day).
This
Debenture is derived from a Subscription Agreement between the Holder and the Company (the “Subscription Agreement”)
dated ____ , 2015 and incorporates the terms and conditions contained in the Subscription Agreement by reference. The lead
Debenture Holder shall be Winterberry Investments Inc. (“Winterberry” or the “Lead Debenture Holder”),
including with respect to enforcement of the terms and conditions of the Debenture. The Debentures shall, however, rank equally
with one another and with the 12% Secured Debentures, dated July 15, 2015, as disclosed on the Company’s Current Report on
Form 8-K filed with the Securities and Exchange Commission on July 16, 2015.
This Debenture is subject
to the following additional provisions:
Section 1. This Debenture
is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations, as requested by the
Holder surrendering the same, subject to regulatory requirements. No service charge will be made for such registration of transfer
or exchange.
Section 2. This Debenture
has been issued subject to certain investment representations of the original Holder set forth in the Subscription Agreement. Interest
shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing
on the Original Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated
damages and other amounts which may become due hereunder, has been made. Any payment hereunder will be paid to the Holder in whose
name this Debenture is registered on the records of the Company regarding registration and transfers of this Debenture (the “Debenture
Register”). Prior to due presentment to the Company for transfer of this Debenture, the Company and any agent of the
Company may treat the Holder in whose name this Debenture is duly registered on the Debenture Register as the owner hereof for
the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture is overdue, and neither
the Company nor any such agent shall be affected by notice to the contrary.
Section 3. Events of Default.
(a) "Event of Default",
wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary
or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of
any administrative or governmental body):
i) any default in the payment
of the principal of, interest (including Late Fees) on, or liquidated damages in respect of, any Debentures, free of any claim
of subordination, as and when the same shall become due and payable which default is not cured, if possible to cure, within 10
days of notice of such default sent by the Holder;
ii) the Company or any
of its subsidiaries shall commence, or there shall be commenced against the Company or any such subsidiary a case under any applicable
bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company commences any other proceeding
under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar
law of any jurisdiction whether now or hereafter in effect relating to the Company or any subsidiary thereof or there is commenced
against the Company or any subsidiary thereof any such bankruptcy, insolvency or other proceeding which remains undismissed for
a period of 60 days; or the Company or any subsidiary thereof is adjudicated insolvent or bankrupt; or any order of relief or other
order approving any such case or proceeding is entered; or the Company or any subsidiary thereof suffers any appointment of any
custodian or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of 60
days; or the Company or any subsidiary thereof makes a general assignment for the benefit of creditors; or the Company shall fail
to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Company
or any subsidiary thereof shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring
of its debts; or the Company or any subsidiary thereof shall by any act or failure to act expressly indicate its consent to, approval
of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company or any subsidiary thereof
for the purpose of effecting any of the foregoing;
iii) the Company breaches
any covenant in the Subscription Agreement or hereunder, which breach is not cured, if possible to cure, within 10 days of notice
of such breach sent by the Holder.
(b) If any Event of Default
occurs and is continuing, the full principal amount of this Debenture, together with interest and other amounts owing in respect
thereof, to the date of acceleration shall become at the Holder's election, immediately due and payable in cash.
Section 4. Conversion.
a)
i) Holder's Conversion Right. At any time after the Original Issue Date until this Debenture is no longer outstanding, this Debenture,
including interest and principal, may be convertible into shares of Common Stock at a price of Twenty Fine cents ($0.25) per share
(the “Set Price”) at the option of the Holder, in whole at any time and from time to time. The Holder shall effect
conversions by delivering to the Company the form of Notice of Conversion attached hereto as Annex A (a "Notice of Conversion"),
specifying the date on which such conversion is to be effected (a "Conversion Date"). If no Conversion Date is specified
in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is provided hereunder. To effect
conversions hereunder, the Holder shall not be required to physically surrender their Debenture to the Company. The Company shall
deliver any objection to any Notice of Conversion within 2 Business Days of receipt of such notice. In the event of any dispute
or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The
Holder and any assignee, by acceptance of this Debenture, acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of this Debenture, the unpaid and unconverted principal amount of this Debenture may be less
than the amount stated on the face hereof.
ii) If the Company, at
any time while this Debenture is outstanding: (A) shall pay a stock dividend or otherwise make a distribution or distributions
on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the Company pursuant to this Debenture, including as
interest thereon), (B) subdivide outstanding shares of Common Stock into a larger number of shares, (C) combine (including by way
of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issue by reclassification of
shares of the Common Stock any shares of capital stock of the Company, then the Set Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event
and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant
to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination
or re-classification.
iii) Whenever the Set Price
is adjusted pursuant to any of Section 4, the Company shall promptly mail to each Holder a notice setting forth the Set Price after
such adjustment and setting forth a brief statement of the facts requiring such adjustment.
iv) If (A) the Company
shall declare a dividend (or any other distribution) on the Common Stock; (B) the Company shall declare a special nonrecurring
cash dividend on or a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common
Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval
of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation
or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case,
the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of the Debentures, and shall
cause to be mailed to the Holders at their last addresses as they shall appear upon the stock books of the Company, at least 20
calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer or share exchange; provided, that the failure to mail such notice
or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified
in such notice. Holders are entitled to convert Debentures during the 20-day period commencing the date of such notice to the effective
date of the event triggering such notice.
(d) The Company covenants
that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock solely for the purpose
of issuance upon conversion of the Debenture
(e) Any and all notices
or other communications or deliveries to be provided by the Holders hereunder, including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by facsimile, sent by a nationally recognized overnight courier service, addressed
to the Company, at the address set forth or such other address or facsimile number as the Company may specify for such purposes
by notice to the Holders delivered in accordance with this Section. Any and all notices or other communications or deliveries to
be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, sent by a nationally recognized
overnight courier service addressed to each Holder at the facsimile telephone number or address of such Holder appearing on the
books of the Company, or if no such facsimile telephone number or address appears, at the principal place of business of the Holder.
Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section
prior to 5:30 p.m. (New York City time), (ii) the date after the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile telephone number specified in this Section later than 5:30 p.m. (New York City time) on any date
and earlier than 11:59 p.m. (New York City time) on such date, (iii) the second Business Day following the date of mailing, if
sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required
to be given.
Section 5. Negative Covenants.
This Debenture contains
the following covenants of the Company:
(a) that the Company will
not, and will not permit any of its subsidiaries to, directly or indirectly, issue, incur, guarantee, assume, become liable, contingently
or otherwise, with respect to or otherwise become responsible for the payment of any indebtedness except in the ordinary course
of business;
(b) the Company will not,
and will not permit any of its subsidiaries to, make payment of any dividend or other distribution in respect of such corporation’s
capital stock, purchase, redeem, or otherwise acquire or retire for value any capital stock, option, warrant, or any other right
to acquire shares of capital stock of such corporation, make any principal payment on, or purchase, repurchase, redeem or otherwise
acquire retire for value prior to any scheduled maturity or scheduled repayment of any indebtedness which is subordinated in right
of payment to the Debentures;
(c) that the Company will
not, and will not permit any of its subsidiaries to, sell any material asset of such corporation except on conditions acceptable
to the Holder or except in the ordinary course of business;
(d) that the Company will
not, and will not permit any of its subsidiaries to, create, incur, assume or suffer to exist any liens upon any of their respective
properties securing any indebtedness of the Company or the subsidiaries unless such indebtedness is expressly subordinated to the
Debentures;
(e) that the Company will
not amalgamate, consolidate or merge with any individual, corporation, partnership, joint venture, trust, estate, unincorporated
organization or government or any agency or political subdivision thereof ("Person") or convey, transfer or lease
all or substantially all of its assets to any Person, except on conditions acceptable to the Holder or in the ordinary course of
business;
(f) that the Company will
not, and will not permit any of subsidiaries to, enter into any sale/leaseback transaction except on conditions acceptable to the
Holder;
Section 6. Definitions.
For the purposes hereof, in addition to the terms defined elsewhere in this Debenture: (a) capitalized terms not otherwise defined
herein have the meanings given to such terms in the Subscription Agreement, and (b) the following terms shall have the following
meanings:
"Business Day"
means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which
banking institutions in the State of New York are authorized or required by law or other government action to close.
"Common Stock"
means the common stock, $.0001 par value per share, of the Company and stock of any other class into which such shares may hereafter
have been reclassified or changed.
"Exchange Act"
means the Securities Exchange Act of 1934, as amended.
"Original Issue
Date" shall mean the date of the first issuance of the Debentures regardless of the number of transfers of any Debenture
and regardless of the number of instruments which may be issued to evidence such Debenture.
“VWAP”
means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market (or,
if the Principal Market is not the principal trading market for such security, then on the principal securities exchange or securities
market on which such security is then traded) during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00
p.m., New York time, as reported by Bloomberg through its “Volume at Price” function or, if the foregoing does not
apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board
for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported
by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average
of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in
the “pink sheets” by OTC Markets Group Inc.
Section 7. The Debentures
shall be secured and supported by a first security interest in all of the assets and undertakings of the Company and its subsidiaries.
Section 8. Except as expressly
provided herein, no provision of this Debenture shall alter or impair the obligation of the Company, which is absolute and unconditional,
to pay the principal of, interest and liquidated damages (if any) on, this Debenture at the time, place, and rate, and in the coin
or currency, herein prescribed. This Debenture is a direct debt obligation of the Company. This Debenture ranks pari passu with
all other 12% Secured Debentures, dated July 15, 2015 as disclosed on the Company’s Current Report on Form 8-K filed with
the Securities and Exchange Commission on July 16, 2015 now or hereafter issued under the terms set forth herein. As long as this
Debenture is outstanding, the Company shall not and shall cause it subsidiaries not to, without the consent of the Holder, amend
its certificate of incorporation, bylaws or other charter documents so as to adversely affect any rights of the Holder. This Debenture
may be amended with the written consent of the holders of at least two thirds (66.67%) of the principal amount of the Debentures.
Any amendment will be submitted to the Lead Debenture Holder who will coordinate any consent, including but not limited to, notifying
all Holders within three (3) business days of a put request, providing for a meeting of Holders within ten (10) business days following
notice or preparing and distributing written consents in lieu of a meeting within ten (10) business days following notice. If the
consent requirement is satisfied, the Lead Debenture Holder will provide notice to the Company as provided in Section 11 herein.
Section 9. Put Provision.
A Holder shall have the right, at any time after the later of (i) six (6) months from the Original Issue Date or (ii) June 30,
2016, to require the Company to satisfy the outstanding obligations underlying this Debenture; provided, however, that the holders
of at least two thirds (66.67%) of the principal amount of the Debentures consent to a put of their Debentures. Any put request
will be submitted to the Lead Debenture Holder who will coordinate any consent, including but not limited to, notifying all Holders
within three (3) business days of a put request, providing for a meeting of Holders within ten (10) business days following notice
or preparing and distributing written consents in lieu of a meeting within ten (10) business days following notice. If the consent
requirement is satisfied, the Lead Debenture Holder will provide notice to the Company as provided in Section 11 herein. In the
event a put is made on this Debenture and the consent requirement is satisfied, the Company shall have sixty (60) days to satisfy
the put request.
Section 10. Prepayment.
The Company may prepay any portion of the principal amount of this Debenture together with the interest without the prior written
consent of the Holder pursuant to the following conditions: (a) for the first year following the Original Issue Date, the Company
may exercise its prepayment right at 125% of the outstanding principal amount of this Debenture together with the interest, for
the second year following the Original Issue Date, the Company may exercise its prepayment right at 120% of the outstanding principal
amount of this Debenture together with the interest, for the third year following the Original Issue Date, the Company may exercise
its prepayment right at 115% of the outstanding principal amount of this debenture together with the interest, and for the fourth
and fifth year following the Original Issue Date, the Company may exercise its prepayment right at 110% of the outstanding principal
amount of this Debenture together with the interest. In the event the Company determines to exercise its prepayment right herein,
the Company shall provide the Holder with twenty (20) days written notice (in which time the Holder may elect to convert the Debenture
pursuant to the terms and conditions herein).
Section 11. If this Debenture
shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon
cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture
for the principal amount of this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss,
theft or destruction of such Debenture, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to
the Company.
Section 12. Any and all
notices or other communications or deliveries to be provided by the Holder hereunder, shall be in writing and delivered personally,
by facsimile, by email attachment, or sent by a nationally recognized overnight courier service, addressed to the Company, at the
address set forth above, or such other facsimile number, email address, or address as the Company may specify for such purposes
by notice to the Holder delivered in accordance with this Section 9. Any and all notices or other communications or deliveries
to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, by email attachment, or sent
by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or email address or address
of the Holder appearing on the books of the Company, or if no such facsimile number or email attachment or address appears on the
books of the Company, at the principal place of business of such Holder, as set forth in the Subscription Agreement. Any
notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile number or email attachment to the email address set
forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on any date, (ii) the next Business Day after
the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment
to the email address set forth on the signature pages attached hereto on a day that is not a Business Day or later than 5:30 p.m.
(New York City time) on any Business Day, (iii) the second Business Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.
Section 13. Except as expressly
set forth in any security agreement securing the obligations under this Debenture, all questions concerning the construction, validity,
enforcement and interpretation of this Debenture shall be governed by and construed and enforced in accordance with the internal
laws of the State of New York, without regard to the principles of conflicts of law thereof and each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the transaction contemplated herein (whether brought against
a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the
state and federal courts sitting in the City of New York, Borough of Manhattan (the "New York Courts"). Each party hereto
hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed herein and hereby irrevocably waives, and agrees
not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court,
or such New York Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered
or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under
this Debenture and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto
hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Debenture or the transactions contemplated hereby. If either party shall commence an action
or proceeding to enforce any provisions of this Debenture, then the prevailing party in such action or proceeding shall be reimbursed
by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution
of such action or proceeding.
Section 14. Any waiver
by the Company or the Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of this Debenture. The failure of the Company or
the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture.
Any waiver must be in writing.
Section 15. If any provision
of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and if any provision
is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.
If it shall be found that any interest or other amount deemed interest due hereunder violates applicable laws governing usury,
the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest. The
Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive
the Company from paying all or any portion of the principal of or interest on the Debentures as contemplated herein, wherever enacted,
now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Company
(to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it
will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holder, but will
suffer and permit the execution of every such as though no such law has been enacted.
IN WITNESS WHEREOF, the
Company has caused this 12% Secured Convertible Debenture to be duly executed by a duly authorized officer as of the date first
above indicated.
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ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal
under the 12% Secured Convertible Debenture of Yappn Corp. (the "Company") shares of common stock (the "Common Stock"),
of the Company according to the conditions hereof, as of the date written below. If shares are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith
such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the holder
for any conversion, except for such transfer taxes, if any.
Conversion calculations:
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Principal Amount of Debentures to be Converted: |
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Interest Amount of Debentures to be Converted |
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Number of shares of Common Stock to be issued: |
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11
Exhibit 10.2
NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND
THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES.
UNLESS
PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS
AND A DAY AFTER THE LATER OF (I) [INSERT THE DISTRIBUTION DATE], AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY
PROVINCE OR TERRITORY.
COMMON
STOCK PURCHASE WARRANT
yappn
corp.
Warrant
Shares: [______] |
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Date:
November __, 2015 |
THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, _____________ or its assigns
(the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter
set forth, including the vesting schedule below up to and on close of business on November __, 2020 (the “Termination
Date”) but not thereafter, to subscribe for and purchase from Yappn Corp., a Delaware corporation (the “Company”),
up to ______ shares (as subject to adjustment hereunder, the “Warrant Shares”) of Common Stock. The purchase
price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
This
Warrant vests as follows:
______(1/3)
on November __, 2016 (the “Initial Exercise Date”)
______(1/3)
on November __, 2017
______(1/3)
on November __, 2018
Section
1. Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that
certain Subscription Agreement (the “Subscription Agreement”), dated November __, 2015, among the Company and
the Holder.
Section
2. Exercise.
a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any
time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such
other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the
Holder appearing on the books of the Company) of a duly executed facsimile copy (or e-mail attachment) of the Notice of Exercise
in the form annexed hereto and within three (3) Trading Days of the date said Notice of Exercise is delivered to the Company,
the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s
check drawn on a United States bank or, if available, pursuant to the cashless exercise procedure specified in Section 2(c) below.
No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization)
of any Notice of Exercise form be required. Notwithstanding anything herein to the contrary, the Holder shall not be required
to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder
and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation
within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this
Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of
lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant
Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date
of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of
such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions
of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available
for purchase hereunder at any given time may be less than the amount stated on the face hereof. Each certificate for Common
Stock issued upon exercise of this Warrant shall bear the following legend
“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 CORPORATION, (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 € 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 CORPORATION AN OPINION OF COUNSEL OR OTHER EVIDENCE OF EXEMPTION, IN
EITHER CASE REASONABLY SATISFACTORY TO THE CORPORATION. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS
IN COMPLIANCE WITH THE U.S. SECURITIES ACT.”
“UNLESS
PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS
AND A DAY AFTER THE LATER OF (I) [INSERT THE DISTRIBUTION DATE], AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY
PROVINCE OR TERRITORY.”
b) Exercise Price. The exercise price per share of the Common Stock under this Warrant shall be $0.01, subject to adjustment
hereunder (the “Exercise Price”).
c) Cashless Exercise. This Warrant may also be exercised, in whole or in part, at such time by means of a “cashless
exercise.” If the Holder elects to conduct a Cashless Exercise, the Company shall cause to be delivered to the Holder a
certificate or certificates representing the number of shares of Common Stock computed using the following formula:
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X
= Y (A-B)
A
Where:
X
= the number of shares of Common Stock to be issued to Holder;
Y
= the portion of the Warrant (in number of shares of Common
Stock)
being exercised by Holder (at the date of such
calculation);
A
= the fair market value of one share of Common Stock on the
Exercise
Date (VWAP); and
B
= Exercise Price (as adjusted to the
date of such calculation). |
(A)
= the VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless
exercise,” as set forth in the applicable Notice of Exercise;
(B)
= the Exercise Price of this Warrant, as adjusted hereunder; and
(X)
= the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant
if such exercise were by means of a cash exercise rather than a cashless exercise.
If
Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9)
of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised, and the
holding period of the Warrants being exercised may be tacked on to the holding period of the Warrant Shares. The Company
agrees not to take any position contrary to this Section 2(c).
“VWAP”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based
on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a
Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or
OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the
Common Stock are then reported in the “Pink Sheets” published by OTC Markets, Inc. (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in
all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith
by the Holders of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees
and expenses of which shall be paid by the Company.
Trading
Market” means the OTC Bulletin Board; provided, however, that in the event the Common Stock is ever
listed or quoted on the NASDAQ Global Market, the NASDAQ Global Select Market, the NASDAQ Capital Market, the New York Stock Exchange,
NYSE Arca, the NYSE MKT, or the OTCQX Marketplace or the OTCQB Marketplace operated by OTC Markets Group Inc., than the “Trading
Market” shall mean such other market or exchange or any successor to the foregoing on which the Common Stock is
then listed or quoted.
Notwithstanding
anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise
pursuant to this Section 2(c).
d) Mechanics
of Exercise.
i. Delivery of Warrant Shares Upon Exercise. Warrant
Shares purchased hereunder shall be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s
or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system
(“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration
statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (B) the Warrant Shares
are eligible for resale by the Holder pursuant to Rule 144, and otherwise by physical delivery of a certificate, registered in
the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder
is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is three
(3) Trading Days after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery
Date”). The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named
therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been
exercised, with payment to the Company of the Exercise Price (or by cashless exercise, if permitted) and all taxes required to
be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance of such shares, having been paid.
ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request
of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder
a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which
new Warrant shall in all other respects be identical with this Warrant.
iii. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise
of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the
Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Exercise Price or round up to the next whole share.
iv. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer
tax or other incidental expense in respect of the issuance of Warrant Shares, all of which taxes and expenses shall be paid by
the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by
the Holder; provided, however, that in the event that Warrant Shares are to be issued in a name other than the name
of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed
by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer
tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise
and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required
for same-day electronic delivery of the Warrant Shares.
v. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise
of this Warrant, pursuant to the terms hereof.
Section
3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or
otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company
upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines
(including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues by
reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares,
if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding
immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted
such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a)
shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend
or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
b) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend
or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of
capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options
by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction)
(a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall
be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder
had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations
on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a
record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common
Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the
Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation,
then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding
the Beneficial Ownership Limitation).
c) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in
one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company,
directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange
offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of
the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in
one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby
such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common
Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making
or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”),
then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would
have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the
Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock
of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration
(the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number
of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard
to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the
Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise
Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the
Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon
any exercise of this Warrant following such Fundamental Transaction. Notwithstanding anything to the contrary, in the event of
a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable
at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction, purchase this Warrant
from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value of the remaining unexercised portion
of this Warrant on the date of the consummation of such Fundamental Transaction. “Black Scholes Value” means
the value of this Warrant based on the Black and Scholes Option Pricing Model obtained from the “OV” function on Bloomberg,
L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing
purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between
the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility
equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately
following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation
shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being
offered in such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement
of the applicable Fundamental Transaction and the Termination Date. The Company shall cause any successor entity in a Fundamental
Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the
obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section
3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without
unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange
for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance
to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent
entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the
exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock
pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock
and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation
of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence
of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the
date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company”
shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the
obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity
had been named as the Company herein.
d) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share,
as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as
of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
e) Notice to Holder.
i.
Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the
Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment
to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever
form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common
Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall
be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a
party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed
to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior
to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken
for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants
are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall
be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or
in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent
that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any
of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form
8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the
effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
Section
4. Transfer of Warrant.
a) Transferability. Subject to compliance with any applicable securities laws and the conditions, this Warrant and all rights
hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this
Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially
in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes
payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver
a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified
in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not
be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which
case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date the Holder delivers an
assignment form to the Company assigning this Warrant full. The Warrant, if properly assigned in accordance herewith, may be exercised
by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office
of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved
in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or
Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated
as of the date of transfer and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant
thereto.
c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose
(the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and
treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, absent actual notice to the contrary.
d) Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant,
the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities
Act and under applicable state securities or blue sky laws or (ii) eligible for resale pursuant to Rule 144, the Company may require,
as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, comply with the appropriate
provisions of the federal and state securities laws.
e) Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant
and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a
view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable
state securities law, except pursuant to sales registered or exempted under the Securities Act.
Section
5. Miscellaneous.
a) No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other
rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth
in Section 3.
b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant
Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case
of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate,
if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation,
in lieu of such Warrant or stock certificate.
c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right
required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next
succeeding Business Day.
d) Authorized Shares.
The
Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights
under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers
who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant.
The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided
herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common
Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights
represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant
Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens
and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously
with such issue).
Except
and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above
the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may
be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares
upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions
or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform
its obligations under this Warrant.
Before
taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or
in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction thereof.
e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall
be determined in accordance with the provisions of the Subscription Agreement.
f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered
and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities
laws.
g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder
shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies, notwithstanding
the fact that all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with
any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts
as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including
those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing
any of its rights, powers or remedies hereunder.
h) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company
shall be delivered in accordance with the notice provisions of the Subscription Agreement.
i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant
to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability
of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted
by the Company or by creditors of the Company.
j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees
to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby
shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted
assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant
and shall be enforceable by the Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company
and the Holder.
m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Warrant.
n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be
deemed a part of this Warrant.
********************
(Signature
Page Follows)
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first
above indicated.
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Name:
Title: |
NOTICE
OF EXERCISE
To: yappn
corp.
(1)
The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant
(only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer
taxes, if any.
(2)
Payment shall take the form of (check applicable box):
☐ in
lawful money of the United States; or
☐ [if
permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection
2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise
procedure set forth in subsection 2(c).
(3)
Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account Number:
_______________________________
_______________________________
_______________________________
(4)
Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under
the Securities Act of 1933, as amended.
[SIGNATURE
OF HOLDER]
Name
of Investing Entity: ________________________________________________________________________
Signature
of Authorized Signatory of Investing Entity: _________________________________________________
Name
of Authorized Signatory: ___________________________________________________________________
Title
of Authorized Signatory: ____________________________________________________________________
Date:
________________________________________________________________________________________
EXHIBIT
B
ASSIGNMENT
FORM
(To
assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)
FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
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Dated:
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YAPPN (CE) (USOTC:YPPN)
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