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): August 14, 2015
Realco International, Inc.
(Exact name of registrant as specified in its charter)
Nevada | 333-191175 | 46-4824543 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
154 Thames Street, Newport, Rhode Island | 02840 | |
(Address of principal executive offices | (Zip Code) |
(914) 550-9993
(Registrant’s
telephone number, including area code)
Realco International, Inc., 500 7th Ave., 17th Floor, New York, New York 10018
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[_] 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))
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This current report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to anticipated future events, future results of operations or future financial performance. These forward-looking statements include, but are not limited to, statements relating to our ability to raise sufficient capital to finance our existing and anticipated operations, market acceptance of our technology and product offerings, our ability to attract and retain key personnel, our ability to protect our intellectual property, and estimates of our cash expenditures for the next 12 to 36 months. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “should,” “intends,” “expects,” “plans,” “goals,” “projects,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other comparable terminology.
These forward-looking statements are only predictions, are uncertain and involve substantial known and unknown risks, uncertainties and other factors which may cause our (or our industry’s) actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements. The “Risk Factors” section of this current report sets forth detailed risks, uncertainties and cautionary statements regarding our business and these forward-looking statements.
We cannot guarantee future results, levels of activity or performance. You should not place undue reliance on these forward-looking statements, which speak only as of the date that they were made. These cautionary statements should be considered with any written or oral forward-looking statements that we may issue in the future. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to reflect actual results, later events or circumstances or to reflect the occurrence of unanticipated events.
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EXPLANATORY NOTE
As used in this Current Report, the terms the “ Company ”, “we ,” “ us ,” and “ our ” refer to the Registrant, Realco International, Inc., a Nevada corporation, and its wholly-owned subsidiary PeerLogix Technologies, Inc., a Delaware corporation, after giving effect to the Share Exchange, unless otherwise stated or the context clearly indicates otherwise. The term “ Realco ” refers to Realco International, Inc., the Nevada corporation, before giving effect to the Share Exchange, and the term “ PeerLogix ” refers to PeerLogix Technologies, Inc. (the Delaware corporation formerly known as “PeerLogix, Inc.”), before giving effect to the Share Exchange.
All references in this Current Report on Form 8-K to (i) shares, warrants and options of Realco outstanding after the Closing of the Share Exchange; (ii) New Warrants, New Options and shares of common stock issued to PeerLogix shareholders in the Share Exchange; and (iii) Units and Investor Warrants issued to Investors in the Offering, other than the shares subject to the Share Cancellation and as may otherwise be indicated herein, give effect to the contemplated Stock Split (as hereinafter defined). The Contemplated Stock Split cannot take effect unless and until such time as FINRA (Financial Industry Regulatory Authority) has been granted at least ten (10) days prior notice of the Stock Split, which notice must be made by Realco filing with FINRA an Issuer Company-Related Action Notification Form. Realco expects to file such Forms with FINRA on August 17, 2015. There can be no assurance that FINRA will approve the Share Split or that it will occur ten (10) days from filing by the Company.
On August 14, 2015, Realco entered into a share exchange transaction whereby all of the shareholders of PeerLogix, a privately held Delaware corporation, exchanged all of their shares of common stock for newly issued common shares of PeerLogix (the “ Share Exchange ”). As a result of the Share Exchange, Realco acquired the business of PeerLogix, and will continue the existing business operations of PeerLogix, as a wholly-owned subsidiary. Realco and PeerLogix will be managed by PeerLogix management after effectiveness of the Share Exchange.
This Current Report contains summaries of the material terms of various agreements executed in connection with the transactions described herein. The summaries of these agreements are subject to, and are qualified in their entirety by, reference to these agreements, all of which are incorporated herein by reference.
This current report is being filed in connection with a series of transactions consummated by the Company and certain related events and actions taken by the Company.
This current report responds to the following items on Form 8-K:
Item 1.01 | Entry into a Material Definitive Agreement |
Item 2.01 | Completion of Acquisition or Disposition of Assets |
Item 3.02 | Unregistered Sales of Equity Securities |
Item 4.01 | Changes in Registrant’s Certifying Accountant |
Item 5.01 | Changes in Control of Registrant |
Item 5.02 | Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers |
Item 5.06 | Change in Shell Company Status |
Item 9.01 | Financial Statements and Exhibits |
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TABLE OF CONTENTS
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Item 1.01. Entry into a Material Definitive Agreement
On August 14, 2015, the Company entered into an Agreement and Plan of Reorganization, which we refer to in this Current Report as the “ Share Exchange Agreement ”, and completed the Share Exchange. For a description of the Share Exchange and the material agreements entered into in connection with the Share Exchange, please see the disclosures set forth in Item 2.01 to this Current Report, which disclosures are incorporated into this item by reference.
Item 2.01. Completion of Acquisition or Disposition of Assets
THE SHARE EXCHANGE AND RELATED TRANSACTIONS
The Share Exchange
On August 14, 2015, Realco, PeerLogix and the shareholders of PeerLogix entered into the Share Exchange Agreement and completed the Share Exchange (which we refer to as the “ Closing Date ”). A copy of the Share Exchange Agreement is attached as Exhibit 2.1 to this Current Report and is incorporated herein by reference.
Pursuant to the Share Exchange Agreement, on the Closing Date, all of the shareholders of PeerLogix exchanged all of their shares of common stock for newly issued common shares of Realco. Realco acquired the business of PeerLogix pursuant to the Share Exchange and will continue the existing business operations of PeerLogix as a wholly-owned subsidiary.
Simultaneously with the Share Exchange, on the Closing Date all of the issued and outstanding options and warrants to purchase shares of PeerLogix common stock were exchanged, respectively, into options (the “ New Options ”) and warrants (the “ New Warrants ”) to purchase shares of Common Stock of Realco. The number of shares of Common Stock issuable under, and the price per share upon exercise of, the New Options and the New Warrants were the same as those of the original options and warrants of PeerLogix, as a result of a 1 for 1 exchange ratio of securities pursuant to the Share Exchange, which is described in the Share Exchange Agreement. The New Options will be administered under PeerLogix’s 2015 Equity Incentive Plan, which the Company assumed and adopted on the Closing Date in connection with the Share Exchange.
On the Closing Date, an aggregate of 17,050,002 shares of Common Stock was issued to former PeerLogix stockholders and 600,000 New Options and 1,050,000 New Warrants were issued to holders of outstanding PeerLogix options and warrants, respectively. The stockholders of Realco before the Share Exchange, without giving effect to the Offering (as defined below) and after giving effect to the Share Cancellation (as hereinafter defined), retained 990,000 shares of Realco Common Stock, which after giving effect to a 4.04 for 1 split of Realco common stock will occur following the Closing Date (the “ Stock Split ”), will have become 3,999,600 shares of Realco common stock.
The Share Exchange Agreement contains customary representations, warranties and covenants of Realco, and, as applicable, PeerLogix for like transactions. As a result of the Transaction, a change in control of the Company occurred as of the date of the Share Exchange. The Share Exchange will be treated as a reverse merger and recapitalization of the Company for financial accounting purposes. The historical financial statements of Realco before the Share Exchange will be replaced with the historical financial statements of PeerLogix before the Share Exchange in all future filings with the Securities and Exchange Commission (the “ SEC ”).
Following closing of the Share Exchange, our board of directors consists of three members. In keeping with the foregoing, on the Closing Date, Jay Lasky, the sole director of Realco before the Share Exchange, appointed William Gorfein, Joshua Partridge and Timothy Askew to fill vacancies on the board of directors, and Mr. Lasky resigned from his position as sole director. Also on the Closing Date, Jay Lasky, the sole officer of Realco, resigned and new executive officers designated by PeerLogix were appointed. The officers and directors of the Company as of the Closing Date are identified in this Current Report under the heading “Directors and Executive Officers.”
Before the Share Exchange, Realco’s board of directors adopted the 2015 Equity Incentive Plan, which was submitted to and approved by the shareholders of the Company prior to the closing of the Share Exchange. The 2015 Equity Incentive Plan provides for the issuance of up to 3,000,000 shares of Common Stock as incentive awards granted to executive officers, key employees, consultants and directors. In addition, the Company assumed and adopted PeerLogix’s 2015 Equity Incentive Plan, and as described above option holders under that plan will be granted New Options to purchase Common Stock. No further options will be granted under the 2015 PeerLogix Equity Incentive Plan. The parties intend that the Share Exchange be treated as a tax free exchange under Section 368 of the Internal Revenue Code of 1986, as amended.
The issuance of shares of Common Stock to holders of PeerLogix’s capital stock in connection with the Share Exchange was not registered under the Securities Act of 1933, as amended (the “ Securities Act ”), in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act and Regulation D promulgated by the SEC under that section, which exempts transactions by an issuer not involving any public offering. These securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirement.
The Offering
Concurrently with the closing of the Share Exchange and in contemplation of the Share Exchange, the Company completed a private offering (the “ Offering ”) of 1,418,333 units of its securities (“ Units ”), at a price of $0.60 per Unit. Each Unit consists of one share of Common Stock and a warrant to purchase one share of Common Stock. The warrants (the “ Investor Warrants ”) are exercisable for a period of five years at a purchase price of $0.72 per share of Common Stock. The Offering was made only to accredited investors, as defined under Regulation D, Rule 501(a). On the Closing Date, the investors in the Offering collectively purchased 1,418,333 Units for total cash consideration of $851,000.
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The sale of Units in the Offering was exempt from registration under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D as promulgated by the SEC. In the Offering, no general solicitation was made by us or any person acting on our behalf. The Units were sold pursuant to transfer restrictions, and the certificates for shares of Common Stock and Investor Warrants underlying the Units sold in the Offering contain appropriate legends stating that such securities are not registered under the Securities Act and may not be offered or sold absent registration or an exemption from registration.
The Company paid its Placement Agent (which will be disclosed on a Subsequent Current Report on Form 8-K) a commission of 10% of the funds raised from such investors in the Offering. In addition, the Placement Agent received warrants to purchase a number of Units equal to 10% of the Units sold to investors in the Offering. As a result of the foregoing arrangement, at the initial closing of the Offering, the Placement Agent was paid commissions of $110,630 and was issued warrants to purchase 141,833 Units at an exercise price of $0.60 per Unit.
The form of the Investor Warrant issued in the Offering is attached as Exhibit 10.8 to this Current Report and is incorporated herein by reference.
The PeerLogix Private Sale
Prior to the commencement of the Offering, PeerLogix completed a Financing (the “ PeerLogix Offering ”), wherein it sold 1,000,000 of its Units to Accredited Investors (the “ PeerLogix Units ”) at a price of $0.50 per PeerLogix Unit. Each Unit consists of one share of Common Stock and a warrant to purchase one share of Common Stock. The warrants are exercisable for a period of five years at a purchase price of $0.60 per share of Common Stock.
The sale of PeerLogix Units (including the common stock, warrants and the common stock underlying the warrants, was exempt from registration under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D as promulgated by the SEC. In the Offering, no general solicitation was made by us or any person acting on our behalf. The PeerLogix Units were sold pursuant to transfer restrictions, and the certificates for shares of common stock and warrants underlying the PeerLogix Units sold in the Offering contain appropriate legends stating that such securities are not registered under the Securities Act and may not be offered or sold absent registration or an exemption from registration.
PeerLogix paid the Placement Agent a commission of $50,000 (10% of the funds raised from such investors in the PeerLogix Offering) in connection with the PeerLogix Offering. In addition, the Placement Agent received warrants to purchase 50,000 PeerLogix Units at a price of $0.60 per PeerLogix Unit.
Registration Rights
All of the securities issued in connection with the Offering, the PeerLogix Offering and the Share Exchange (collectively the “ Transactions ”) are “restricted securities,” and as such are subject to all applicable restrictions specified by federal and state securities laws. In connection with the PeerLogix Offering, the Offering and the Share Exchange, the Company entered into registration rights agreements with all of its shareholders. Under the terms of the registration rights agreements, the Company has committed to file a registration statement covering the resale of (i) all shares of common stock outstanding as of the Closing; (ii) all of the shares of common stock underlying the Investor Warrants and the warrants that were included in the PeerLogix Units; (iii) all of the shares issuable upon exercise of the Placement Agent Warrants (and the shares underlying the warrants issuable upon exercise of such Placement Agent Warrants) issued in the Offering and the Peerlogix Offering within 60 days from the Closing Date (the “ Filing Deadline ”), and shall use commercially reasonable efforts to cause the registration statement to become effective no later than 90 days after it is filed (the “ Effective Deadline ”).
The Company has agreed to use reasonable efforts to maintain the effectiveness of the registration statement through the one year anniversary of the date the registration statement is declared effective by the SEC, or until Rule 144 of the Securities Act is available to investors in the Offering with respect to all of their shares, whichever is earlier.
The holders of any registrable securities removed from the Registration Statement a result of a Rule 415 or other comment from the SEC shall have “piggyback” registration rights for the shares of Common Stock or Common Stock underlying such warrants with respect to any registration statement filed by the Company following the effectiveness of the Registration Statement which would permit the inclusion of these shares. The form of the registration rights agreement are attached as Exhibits 10.3, 10.4, and 10.5 to this Current Report and is incorporated herein by reference.
Share Cancellation Agreement
Contemporaneous with the closing of the Share Exchange, all 18,000,000 shares of Realco common stock owned by Captain’s Crew LLC (pre-stock-split) were cancelled for no consideration (the “ Share Cancellation ”).
Current Ownership
Immediately after giving effect to the Transactions, the options granted under the 2015 Plan (that were assumed by the Company), and the warrants issued to the Placement Agent in connection with the Offering and the PeerLogix Offering and the issuance of the New Warrants and the Investor Warrants, there were issued and outstanding securities of the Company on the closing of the Transactions:
· | 22,467,935 shares of Common Stock; |
· | No shares of preferred stock; |
· | Options to purchase 600,000 shares of Common Stock granted under the 2015 PeerLogix Plan; |
· | Investor Warrants to purchase 1,418,333 shares of Common Stock at a price of $0.72 per share issued to the investors in the Offering; and 141,833 warrants to purchase Units at a price of $0.60 per unit issued to the Placement Agent in the Offering. |
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· | New Warrants issued to PeerLogix Investors to purchase 1,000,000 shares of Common Stock at $0.60 per share and 50,000 warrants exercisable at a price of $0.60 per share issued to the Placement Agent in connection with the PeerLogix Offering. |
Accounting Treatment; Change of Control
The Share Exchange is being accounted for as a “reverse merger” and recapitalization and PeerLogix is deemed to be the acquirer in the reverse merger. Consequently, the assets and liabilities and the historical operations that will be reflected in the consolidated financial statements prior to the Share Exchange will be those of PeerLogix, and the consolidated financial statements after completion of the Share Exchange will include the assets and liabilities of PeerLogix, historical operations of PeerLogix and operations of PeerLogix from the Closing Date of the Share Exchange. Except as described in the previous paragraphs, no arrangements or understandings exist among present or former controlling stockholders with respect to the election of members of our board of directors and, to our knowledge, no other arrangements exist that might result in a change of control of the Company. Further, as a result of the issuance of the shares of Common Stock pursuant to the Share Exchange, a change in control of the Company occurred as of the date of consummation of the Share Exchange.
DESCRIPTION OF BUSINESS
Immediately following the Share Exchange, the business of PeerLogix became the business of the Company.
Overview
PeerLogix is a data aggregation company providing a proprietary software as a service (“ SAAS ”) platform which enables the tracking and cataloguing of Torrent files and Torrent networks in order to determine consumer trends and preferences based upon media consumption. PeerLogix’s patent pending platform collects Torrent data, including IP addresses of the uploading and downloading parties (e.g., location), the name, file type, media type (whether movie, television, documentary, music, e-books, software, etc.), and genre of media downloaded, and utilizes licensed and publicly available demographic and other databases to further filter the collected data to provide insights into consumer preferences to digital advertising firms, product and media companies, entertainment studios and others.
Industry Background
Brand advertisers and consumer product companies utilize a broad array of consumer data on which to base advertising decisions. They have traditionally relied upon information collected from legacy media distribution providers to base their research (e.g., Comcast and other cable providers). These traditional methods are inherently inefficient by today’s standards and are often times cost-prohibitive due to their fragmented nature, relying upon separate, non-integrated legacy providers for television and music research related to consumer preferences.
Digital surveying methods provide a solution to many of the inefficiencies present with traditional methods. As a result, advertisers, agencies, entertainment studios and others are rapidly adopting digital methodologies to augment their traditional practices. One such digital surveying method yet to be widely implemented is Torrent measurement, which PeerLogix believes is a significant market opportunity.
In today’s digital world, consumers have access to media, television shows, music, movies, video games and software through a number of growing and fragmented methods and providers. This change in behavior and habits is an evolution resulting from technological innovation, and has resulted in greater choice and democratization amongst consumers. The resulting digital empowerment has directly lead to the birth of platforms providing consumers direct access to media, which often times circumvent legacy providers previously relied upon for distribution such as traditional cable providers).
One of the more prominent digital platforms to arise has been Torrent (e.g., Popcorn Time, BitTorrent, Vuse). Torrent enables consumers to share TV shows, music, movies, video games and software directly with one another, rather than relying on a centralized source (e.g., iTunes, Netflix). Since Torrent is such a widely used platform for digital media consumption, demographic data related to its use can provide digital agencies and consumer product companies with a wide variety of critical and yet untapped information about consumers enabling them to target their messages and offerings to such consumers.
Marketing and Advertising Industry Implications
PeerLogix believes Torrent data represents a substantial improvement over search and other tracking data utilized to obtain marketing insights, as Torrent data reflects actual consumption of media with respect to which the downloading party has taken an affirmative effort to obtain, as opposed to search data, such as Google, which can reflect pure curiosity.
Through rigorous testing and analysis, PeerLogix has been able to show that on a general basis, the domestic population of Torrent users most commonly resides in middle to upper-middle class households, possessing greater than average levels of discretionary income. These results run contrary to general public perception of Torrent users, which is individuals who are unable to afford market priced content and unlikely to convert into sales for consumer product companies. PeerLogix sees this dichotomy as a significant opportunity in the market place, as the Company’s prospective core client base, digital agencies and consumer product companies, proactively seek to new audiences deemed financially worthy of sales and advertising efforts.
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PeerLogix Torrent Opportunity
Torrent Usage and Activity
Torrent is a geography agnostic platform used by approximately 130 million people worldwide to share TV shows, movies, music, video games and software with one another. All major entertainment content is available to consumers using Torrent to access media. Of this population of Torrent users, approximately 40 million reside in the United States and 90 million are distributed throughout all major and developing countries of the world.
Torrent activity represents one of the most significant categories of global Internet usage, comprising approximately 22% of all Internet traffic. Although Torrent data available at any one point in time is ephemeral and is then lost, PeerLogix has been storing and continues to store all such data in a fully scalable database which has been aggregating the results since approximately January 1, 2014, providing the distinctive ability to provide trend data on the basis of media consumption. The Company’s proprietary platform operates on an automatic basis with little human interaction and continually acquires and catalogues Torrent data in real time, obtaining millions of data points daily.
PeerLogix Platform
Our proprietary technology enables the tracking and cataloguing of Torrent files and Torrent networks in order to determine consumer trends and preferences based upon media consumption. PeerLogix’s patent pending platform collects Torrent data, including IP addresses of the uploading and downloading parties (e.g., location), the name, file type, media type (whether movie, television, documentary, music, e-books, software, etc.), and genre of media downloaded. We utilize licensed and publicly available demographic and other databases to further filter the collected data to provide insights into consumer preferences to digital advertising firms, product and media companies, and others.
How is Torrent Utilized?
Typical steps taken for an “everyday person” to download media using Torrent are: a) search for a respective piece of media (e.g., Classic Rock Music) using a commonly accessible search engine (e.g., Google, Yahoo); b) download a small .torrent file representing the internet coordinates of the desired media content to the consumer’s local computer; and c) open the aforementioned .torrent file utilizing a commonly available Torrent client (e.g., BitTorrent, Vuze) to download the entirety of the desired media content to the consumer’s local computer.
PeerLogix Application
Market
Understanding customer and target audience information is of the upmost importance for organizations undertaking media planning activities. As marketing becomes increasingly data-centric, the ability to obtain rich insights about consumers’ media preferences is expected to represent a significant competitive advantage for PeerLogix’s clients.
According to International Data Corporation (IDC), the Global Big Data technology and services industry represents over a $14 billion market in 2014, with a compound annual growth rate of 18.5 percent. This is the market targeted by PeerLogix.
The PeerLogix platform analyzes our proprietary Torrent Library of over 400 million media downloads and overlays it with select third party demographic and behavioral datasets to determine the degree of likelihood a client’s target audience is to be interested in a specific TV show, musical artist, movie, video game and/or commercial software package. By blending Torrent data with third party datasets, our platform enables media pattern identification and tracking and furthermore, enables clients to test assumptions about who their customers really are and the specific media those customers truly value.
Our offering will be bundled as a Software-as-a-Service (SaaS) application that is a personalized dashboard delivering fully automated, real-time insights and analysis. The application automatically updates information, visualizations and stated trends based on on-going worldwide Torrent activity.
Application Main Features
Simplicity
To facilitate easy adoption, PeerLogix’s SaaS application does not require any download or installation from clients. Users are provided a login are able to gain easy access from anywhere in the world.
Ease of use
PeerLogix has invested resources into user design, and prioritized user-experience within the product. The result is an easy to use interface that reflects the psychology and preferences of PeerLogix clients. PeerLogix’s application incorporates cutting-edge charts and visualizations to enhance user experience, to meet the demands of companies in today’s marketplace. The result is a format that the company believes will result in faster adoption and market penetration for PeerLogix’s solution.
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Compliance
Working under a client-server architecture, usage and adoptability statistics are monitored and consequently viewable by the management of PeerLogix clients, enabling clients to effectively gauge ROI directly attributable to the PeerLogix’s solution.
Product Architecture
Architecture
The client-server cloud-based architecture provides several key advantages for the security, scalability and redundancy of the infrastructure.
Client Security
The PeerLogix application is a “thin client”, meaning all requests, proprietary data and algorithms reside on the server side. All communications between the Dashboard and servers are through an encrypted channel.
Server Scalability and Redundancy
All of our web services are hosted on the Amazon EC2 cloud, which is a web service that provides resizable compute capacity in the cloud. Our current architecture allows us to further scale out (add more servers) and/or scale up (add more capacity to an existing server) within minutes, and our current architecture has been tested successful under heavy stress tests. Additionally, our load balancers enable updates and maintenance without any downtime and all of its data is backed up and mirrored between two SQL servers.
Server Security
PeerLogix web services on Amazon EC2 have gone through a hardening process to enhance their security according to known practices, and all algorithms and data servers are isolated from the internet. Only requests originating from our Dashboard are delivered to our data servers, with all other connection requests ignored.
PeerLogix’s Proprietary Torrent Monitoring System
The Torrent protocol is a communications protocol that enables computers to share Media Files (e.g., TV shows, movies, music, video games and commercial software). Rather than making a single TCP connection, Torrent enables a single user to download Media over many small data requests over different IP connections from a multitude of distributing computers simultaneously, resulting in quicker and more reliable download speeds for the user. A Torrent Client utilized by an individual uses files with an extension of “.torrent” to coordinate Media File distribution by locating other computers in any geography of the world sharing part or the entirety of the contents of said Media File. To accomplish this series of actions, the Torrent Client running on the distributing/sharing individual’s computer breaks the Media File into a number of smaller but identically sized pieces. Pieces are typically downloaded by the downloading individuals Torrent Client non-sequentially, and are rearranged into the correct order by the receiving Torrent Client on the downloading individual’s computer (see below). Typical Media File sharing architecture utilizing Torrent Protocol (PeerLogix technology not depicted):
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Search Scraper
PeerLogix’s Search Scraper scans websites and message forums to find .torrent files, extracts their web addresses, and subsequently downloads any .torrent files found into a MySQL database. This process mimics the behavior a person would undertake to obtain .torrent files. PeerLogix believes its proprietary search technology is capable of finding the vast majority of .torrent files in existence on the internet.
Accuracy & Geo-location
PeerLogix incorporates a third party geo-location service provided by Digital Element to determine authenticity of IP Addresses as well as their physical geographic location to an accuracy of a few hundred yards. IP Addresses deemed to be VPNs or using an alternative masking service are flagged, giving us the ability to filter them out during later analysis steps, if deemed necessary. Information we are able to directly conclude about Torrent users as a result of their IP Address are: Country, Region/State, City, ZIP/Postal Code, Internet Connection Type & Speed, Mobile Carrier (if applicable), Latitude/Longitude (approximate), Internet Service Provider, Home/Business, Company Name (if applicable).
Consumer Privacy
PeerLogix Torrent data meets anonymity standards necessary to be classified as non-personally identifiable data (Non-PII), and all contributors have taken an affirmative effort to participate in, or contribute to the respective Torrent Network or Networks containing media files of interest. As a result, PeerLogix’s data collection methods meet or exceed the current accountability and data collection standards of domestic and international government and regulatory organizations.
Market Positioning & Product Expansion
Worldwide Solution
PeerLogix sees its large swath of international data as a significant competitive advantage compared to alternative data offerings. Our data is contributed to by individuals from the vast majority of countries in the world. As a result, we have the ability to offer clients information giving them a strategic advantage when entering new markets, such as understanding the cultural preferences of local populations, consequently better positioning products with locally preferred music artists, television or movie content.
Competitive Advantages
PeerLogix, and the Torrent data we collect possess three significant competitive advantages to other data sources.
· | Scale – Torrent users, and consequently each data point we collect, represent individuals from the vast majority of countries around the world. As a result, we are able to measure specific media preferences of populations in most countries, and are not limited to predefined major markets. Clients of PeerLogix are able to gain significant competitive advantages understanding media preferences within new markets they choose to enter with their products (e.g., introducing a new consumer packaged good into a select province of India or Indonesia). |
· | Granularity – Our Torrent tracking mechanisms are location agnostic, and our incorporated geolocation service is able to identify the physical location of a Torrent user within the accuracy of a few hundred yards. As a result, our offering is able to determine media preferences on a neighborhood-by-neighborhood level (e.g., television preferences in Manhattan vs Brooklyn), providing clients first of its kind abilities previously unattainable with transactional data. |
· | Transactional Data – Each Torrent user and Torrent transaction we collect in our database represents an affirmative action taken by the Torrent user to obtain and watch/listen to the content. We believe PeerLogix is the only company able to provide transactional media information on a worldwide basis, in every major and developing country. |
Expanding Value of Torrent Data
Third Party Datasets
PeerLogix has also collected third party nonproprietary datasets from a multitude of data brokers. These datasets include: Consumer Lifestyles, Sports, Household Characteristics, Financial, Apparel Preferences, Charitable Causes, Political Leanings, Parenting, Hobbies, Food, Travel, Pets, Automotive, Income, Home Market Valuations, Net Worth, Credit Worthiness, Languages, Ethnicities, Gender, Education, Occupation, Children, Marital Status and Religion. All third party data is collected anonymously and aggregated by zip code. By aggregating in this method, we are able to overlay information from one or a combination of these datasets to build a profile of popular characteristics associated with Torrent populations.
PeerLogix believes the following implementations, which further-enhance Torrent analysis, provide significant market opportunities for the Company, as well as unique value propositions not identically available from alternative date solutions. Implemented applications include:
PeerLogix Dashboard Primary Features
Audience Analysis - Clients of PeerLogix are able to select a single musical artist, television show, movie, ebook or video game, and discover generalized audience characteristics of the population of downloaders (e.g., the demographics of Jay-Z listeners). This analysis has many applications, and provides entertainers, content owners and studios an easier ability to understand the underlying audience characteristics of content they produce. This facilitates simpler and more efficient marketing efforts and better evaluation of potential merchandising opportunities.
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Media Analysis – Conversely to the aforementioned Audience Analysis, clients of PeerLogix are able to select a single or multitude of demographics and behaviors from our aggregated third party data, and the PeerLogix Dashboard will calculate highly correlated Torrent downloads associated with those demographics and behaviors, This enables the determination of preferred media preferences of people exhibiting said characteristics (e.g., soccer fans who have a high degree of credit worthiness prefer watching Breaking Bad and Game of Thrones). This analysis has many applications, including but not limited to determining ideal placement of advertising in respect to television programming, assisting agencies and others to direct advertising spend across campaigns and projects.
Development Pipeline
We plan to expand our product and service offerings by including additional products that cater to the marketing and advertising needs of our core client base. These offerings include:
- | Digital Advertising Delivery |
o | A data pipeline to Digital Advertising Exchanges, enabling direct advertising to Torrent users for clients of said Digital Advertising Exchanges. Utilizing this model, we expect that PeerLogix would receive a royalty payment for each advertising impression shown. The primary advantage of this model is immediate scalability to hundreds (and perhaps thousands) of clients who are already customers of said Digital Advertising Exchanges. |
o | PeerLogix Digital Advertising Server, enabling website owners who are frequented by Torrent users to receive advertising campaigns facilitated by PeerLogix to their websites. Music and entertainment marketers are increasingly appropriating advertising budgets to target users using music streaming services (e.g., Pandora, Spotify), and PeerLogix sees this model as a compliment to such efforts. |
Revenue Model
Revenue from Clients
The PeerLogix solution will be sold on a subscription basis, with estimated annualized revenues per client between $24,000 and $96,000. We intend to offer various pricing schemes to accommodate Agencies, Entertainment Studios, Trading Desks, and others. As with most subscription based services, we intend to offer different subscription packages for ongoing support, such as an ongoing support license. Over time, we intend to apply optimization techniques to determine different pricing schemes.
We will offer our clients both online and invoice billing. Online billing will enable easy payment from the client’s business checking account or check card. Invoice billing will require a traditional commercial document being issued by PeerLogix to clients on a monthly basis, typically providing net 30 payment terms.
Foundational Marketing Efforts
Public Relations.
We intend to generate both international and local media coverage for PeerLogix’s offerings,
through a variety of channels, including media articles and interviews with management. To date, we have been approached by representatives
of several international media companies expressing interest in covering PeerLogix developments through earned media, such as news
announcements and content creation. Our proactive efforts will be supported by local public relations agencies. We will attempt
to focus our efforts on media channels and publications that target advertising and marketing issues, as well as small cap financial
industry publications.
Online Marketing. We intend to utilize online campaigns that are designed to direct additional potential customers to our offerings. Rigorous social media profiles on top platforms will assist in bolstering PeerLogix’s value proposition to the market; top platforms include: Facebook, LinkedIn, Twitter, Wikipedia.
We believe in utilizing Earned Media to bolster PeerLogix’s value proposition to both client and investor markets. Core areas of concentration will include: publishing company news and industry news via distribution channels, including 1 st party blogs and investor relations webpages; social media feeds, including: Facebook, LinkedIn and Twitter; weekly and quarterly newsletters intended to provide proprietary value to companies in our industry (e.g., ADP Quarterly Jobs Report vs PeerLogix Quarterly Media Report).
Thought Leadership. Management intends to develop periodic thought leadership pieces on advertising data and the current and future state of media trends. By participating in industry events and conferences, we plan to position ourselves as a source of imminent and forthcoming insight for emerging trends in media and consumer data sciences. We intend to originate much of this messaging from events, both hosted by and participated in by PeerLogix, to then continue the topics and conversation through aforementioned social media channels. These “Community Building” efforts are intended to organically build interest in PeerLogix both in our industry and in the financial markets.
Acquisition Costs
Because we offer a software solution, our primary variables in respect to expenses are sales efforts, customer acquisition costs and customer churn.
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Customer Acquisition Costs.
We continually evaluate our customer acquisition costs with the intent of optimizing our marketing channels and marketing messages. We anticipate Investor and Public relations costs to comprise a noteworthy percentage of our overall budget. PeerLogix’s management intends to implement a broadly inclusive plan, with the intention of drawing a significant amount of attention to our value proposition for client industries, as well as the company’s compelling investment thesis to the public markets. Furthermore, these efforts are intended to augment efforts undertaken by our presales partner, Corporate Rain International (see below), to prompt quicker market penetration of the PeerLogix Dashboard. Specific efforts will include, but are not limited to: PR strategy, media relations, news announcements, content creation, thought leadership development and traditional and digital advertising. The Company has planned allocating approximately $350,000 to customer acquisition, marketing, sales, public relations and investor relations efforts over an initial 12 month period, with further budgeting to be determined thereafter.
Churn
SaaS churn is the rate at which SaaS customers, such as those who become clients of PeerLogix, cancel their recurring revenue subscription. It is a general indicator of customer dissatisfaction, cheaper and/or better offers from competitors, more successful sales and/or marketing by competitors, or reasons having to do with the customer life cycle. 5-8% annual churn rates are generally experienced by SaaS companies offering analytics products, and PeerLogix management anticipates similar results with its own customer retention.
Corporate Rain
We have engaged with a preeminent lead generation and presales outsourcing firm, Corporate Rain International. Tim Askew, a member of our Board of Directors, is the founder and CEO of Corporate Rain. Corporate Rain’s lead generation abilities are intended to accelerate PeerLogix’s market penetration and growth rate.. Efforts undertaken by our Public Relations engagement(s) are intended to augment and enhance the capabilities of our presales staff provided by Corporate Rain. Primary values PeerLogix receives from such an engagement are:
- | Prospecting List – Because PeerLogix applications are diversely applicable throughout advertising and marketing, a well-documented and vetted prospecting list of potential PeerLogix clients is pivotal for ensuring successful and efficient targeted sales practices. |
- | Sales Campaigns – Bringing a new SaaS product to market requires proper market education to encourage adoption. In addition to our generalized Public Relations efforts, our Sales Campaigns are intended to deliver PeerLogix’s value proposition in a more targeted manor, directly to prospective clients. |
- | Trade Show Campaigns – In an effort to grow PeerLogix’s Earned Media, the CEO and select other staff members will participate in trade shows and speaking panels to broaden the market’s perception of PeerLogix’s role as “thought leaders” in data analytics and consumer sciences. |
- | City Blitzes – PeerLogix, through its coordinated presales development, intends to implement hyper-focused sales efforts in targets cities immediately following tradeshow participation. |
Through these marketing, public relations, investor relations and presales efforts, the Company hopes to generate sufficient market interest to support sales, and therefore targeted revenue projections.
Customer Support
To ensure customer satisfaction, our customer support efforts include both proactive and responsive models.
Proactive
We have developed an event-driven automatic system that notifies PeerLogix support to errors faced by clients. Errors that could potentially be present in new releases of our platform are able to be detected by our support staff immediately after a client experiences them.
Responsive model
We intend to offer online and telephone support for clients to support our products and offerings.
Intellectual Property
We have filed a patent application, including a secondary continuation-in-part (CIP) patent, on our proprietary Torrent tracking technology and business applications. We have patent pending status currently in the United States (US 13/847,418), Europe, Australia, Canada, Japan and Israel.
We have also filed a PCT (Patent Cooperation Treaty) application in China, India, Brazil and Mexico to preserve our ability to later file in these countries.
In additional to our patent portfolio, it should be restated that our proprietary database contains 18 months of Torrent media consumption that cannot be acquired or recreated by new market entrants, as Torrent data is ephemeral and is therefore lost if not captured. By possessing this historical information, we are afforded the unique ability to analyze historical trends that a potential future competitor would not be capable of upon entrance to the market.
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Competition
Our primary competitors are Nielsen, Kantar (a subsidiary of WPP Group) and Rentrak. Secondary competitors include Google’s Trends offering and Facebook’s suite of advertising tools. All of these companies have significantly greater resources than PeerLogix. Nielsen’s and Rentrak’s services are largely based on sampling methodologies with a small sample in each market used to measure television and movie viewing behaviors These are the standards currently employed for the measurement of television and movie behavior for advertising purposes, referred to often times as the “sample currency.” Facebook’s and Google’s services are based on sampling of their users’ posts and search activity which is used to determine present and emerging curiosity of people who participate on their platforms.
We expect to enjoy a unique competitive position, derived from the scale, granularity and the transactional nature of our data. Our services and systems differ from a sampling service (e.g., Nielsen) in that we possess a measurement system based on a massive amount of passively-collected viewing and listening activity. This results in far more granular, reliable and predictable determination of consumers’ actual preferences as compared to either a small, compensated sample approach (e.g., Nielsen) or search engine data which is merely an expression of interest and not listening or viewing intent.
Although we believe we are currently able to compete effectively in our market, we may not be able to do so in the future or be capable of maintaining or further increasing our market share. A failure to compete successfully in our market could adversely affect our business and financial condition.
Employees
We currently have six employees in the United States and three in Israel, of whom six are full-time employees, and three are part-time employees contributed by Corporate Rain International. One of our domestic and all three of the Israeli staff focus on research and development. Our director, Timothy Askew, is the Founder and CEO of Corporate Rain International, which is an elite international sales outsourcing boutique and consulting firm. None of our employees is represented by a labor union, and we consider our employee relations to be good. We also utilize a number of consultants to assist with research and development and commercialization activities, generally on a monthly retainer basis.
We intend to hire additional personnel to focus on account management, development, marketing, customer support and technological support.
Description of Property
Our executive officers are located in leased premises at 500 7th Ave., 17th Floor, New York, New York 10018 and our phone number is 914-550-9993 .
Legal Proceedings
From time to time we may be named in claims arising in the ordinary course of business. Currently, no legal proceedings, government actions, administrative actions, investigations or claims are pending against us or involve us that, in the opinion of our management, could reasonably be expected to have a material adverse effect on our business and financial condition.
We anticipate that we will expend significant financial and managerial resources in the defense of our intellectual property rights in the future if we believe that our rights have been violated. We also anticipate that we will expend significant financial and managerial resources to defend against claims that our products and services infringe upon the intellectual property rights of third parties.
Available Information
We are subject to the reporting requirements of the Securities Exchange Act of 1934 (“ Exchange Act ”). Reports filed with the SEC pursuant to the Exchange Act, including annual and quarterly reports, and other reports we file, can be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. Investors may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. Investors can request copies of these documents upon payment of a duplicating fee by writing to the SEC. The reports we file with the SEC are also available on the SEC’s website (http://www.sec.gov).
RISK FACTORS AND SPECIAL CONSIDERATIONS
This Report contains forward-looking statements.
Information provided in this Report and in the annexed Exhibits may contain forward-looking statements, which reflect management’s current view with respect to future events and the Company’s performance. Such forward-looking statements may include projections with respect to market size and acceptance, revenues and earnings and marketing and sales strategies.
PeerLogix operates in a highly competitive and highly regulated business environment. The Company’s business can be expected to be affected by government regulation, economic, political and social conditions, business’ response to new and existing products and services and services, technological developments and the ability to obtain and maintain patent and/or other intellectual property protection for its products and intellectual property. The Company’s actual results could differ materially from management’s expectations because of changes both within and outside of the Company’s control.
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Risks Related To Our Business and Our Industry
We are a company that has a limited operating history and it is difficult to predict our future growth and operating results .
As of the date of this Report, the Company had limited capital and no operating history. Therefore, the Company is subject to the risks involved with any speculative early-stage enterprise. There is no assurance that the Company will be able to successfully structure, market and distribute its products or services. The Company may experience continuing net losses and negative cash flows from operations. The extent of continuing losses and negative cash flows from operations and the time required to reach profitability are highly uncertain. There is no assurance that the Company will be able to achieve profitability or that profitability, if achieved, can be sustained on an ongoing basis. Such risks for the Company include, but are not limited to:
· | An evolving, unpredictable and unproven business model; |
· | An intensely competitive developing market with low barriers to entry; |
· | Rapidly changing technology; |
· | Managing growth; |
· | Dependence on key personnel; |
· | Limited operating capital and limited access to credit; and |
· | Other unforeseen changes and developments. |
In order to address these risks, the Company must, among other things:
· | Implement and successfully execute its business strategy; |
· | Provide superior customer service; |
· | Respond to competitive developments; |
· | Attract, retain and motivate qualified personnel; and |
· | Respond to unforeseen and changing circumstances. |
The Company cannot assure you that it will succeed in addressing these risks.
We have not generated any revenues to date and have a history of losses since inception
PeerLogix has not generated any revenue to date and, through the date of this Report, has incurred net losses of approximately $123,774 since its formation in 2013. It can be expected that the Company will continue to incur significant operating expenses and continue to experience losses in the foreseeable future. As a result, the Company cannot predict when, if ever, it might achieve profitability and cannot be certain that it will be able to sustain profitability, if achieved.
Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern .
In its audit opinion issued in connection with our consolidated balance sheets as of December 31, 2014 and 2013 and our consolidated statements of operations, stockholder’s deficit and cash flows for the years ended December 31, 2014 and 2013, our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern given our recurring net losses, negative cash flows from operations and working capital deficiency. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts of liabilities that might be necessary should we be unable to continue in existence.
The Company will face substantial competition
The technology, information, data aggregation and measurement industries are very competitive, and are characterized by large, global businesses that utilize technological solutions as well as physical data aggregation and audience measurement systems to capture and obtain data and segregate such data into products and solutions for sale to various industries. The technology utilized by these businesses is rapidly evolving and the business is intensely competitive. The Company expects such competition to intensify in the future. Barriers to entry are minimal, allowing current and new competitors to launch new services at a relatively low cost. The Company currently or potentially competes with a variety of other companies. These competitors include major companies such as Neilsen, Comscore, Facebook, Google, Twitter and others. Competition may also arise from the local, national and global companies that may enter the industry such as advertising agencies, media companies and others which, if successful, could have a material adverse effect on the Company’s business, prospects, financial condition and results of operations.
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The Company believes that the principal competitive factors in the data aggregation industry are:
· | Brand name recognition; |
· | Customer service; |
· | Technological capabilities; |
· | Quality of data; |
· | Ease of use; and |
· | Online availability. |
All of the Company’s competitors have operating histories, significant customer bases, greater brand recognition and significantly greater financial, marketing and other resources. Competitors devote greater resources to marketing and promotional campaigns and devote substantially more resources to website and systems development. Increased competition may result in reduced operating margins. The Company cannot assure potential investors that the Company will compete successfully against existing or future competitors.
The Company’s products will represent new and rapidly evolving technologies
The Company’s product offering depends on new, rapidly evolving technologies and on the marketability and profitability of these products. The Company’s ability to commercialize its products and services will depend upon its ability to develop new products and services to remain competitive; its ability to develop, adopt or have access to new technologies; its ability to successfully implement its marketing and promotion strategy; its ability to have access to Torrent data; its ability to retain and grow the customer base; its ability to provide adequate server, network and system capacity through the Amazon Cloud services or otherwise; the risk of unanticipated increased costs for network services; increased competition from providers of Internet and peer-to-peer services; its ability to maintain and grow market share in the industry; and the risks from changes in U.S. and international regulatory environments affecting Torrent data and data and information aggregation services. The occurrence of any of these risks could have a material adverse effect on the business, prospects, financial condition and results of operations of the Company. In addition, if the Company were unable, for technical, legal, financial or other reasons, to obtain Torrent data, the Company’s business, prospects, financial condition and results of operations would be materially adversely affected.
The Company will need to manage growth
In order to maximize the potential growth in the Company’s market opportunities, the Company believes that it must expand rapidly and significantly. The impetus for expansion will place a significant strain on the Company’s management, operational and financial resources. In order to manage growth, the Company must implement and continually improve its operational and financial systems, expand operations, attract and retain superior management and train, manage and expand its employee base. The Company can give no assurance that it will effectively manage its operations, that its systems, procedures, or controls will adequately support its operations or that the Company’s management will successfully implement its business plan. If the Company cannot effectively manage its growth, the Company’s business, prospects, financial condition and results of operations could be materially adversely affected.
The Company may experience fluctuations in operating results
Given the early stage of the Company and the rapidly evolving nature of the markets in which the Company will be competing, the Company expects to experience significant fluctuations in the future operating results due to a variety of factors, many of which are outside of its control. Factors that may adversely affect the Company’s operating results include, without limitation, the following:
· | The continued acceptance and use of the Internet and Torrent downloads by consumers; |
· | The ability of the Company to develop and upgrade its systems and infrastructure; |
· | The announcement or introduction of new products and services by the competitors of the Company; |
· | The amount and timing of operating costs and capital expenditures relating to the expansion of the Company’s business, operations and infrastructure; and |
· | General economic conditions and economic conditions specific to the Internet. |
Dependence on Management
The success of the Company is highly dependent upon the capabilities of the management of the Company, as is the success of any business dependent upon the ability of those responsible for making the important business decisions. Although the Company will seek to hire and retain qualified software engineers, technical personnel and managers with business experience and abilities commensurate with the needs of the Company, there is no assurance that the Company will succeed despite its collective efforts.
The loss of the services of the principal members of the Company’s management could hinder the Company’s ability to fulfill its business plan and further develop and commercialize its products and services. The Company faces intense competition for such personnel from other companies. There is no assurance that the Company will be successful in hiring or retaining qualified personnel.
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The Company’s performance will depend substantially on the continued services and performance of its senior management and other key personnel. The Company’s performance will also depend on its ability to retain and motivate its other qualified officers and key employees. The loss of the services of any of its executive officers or other key employees could have a material adverse effect on the Company’s business, prospects, financial condition and results of operation. The Company’s future success also depends on its ability to identify, attract, hire, train, retain and motivate other highly skilled technical, marketing, managerial and financial personnel. Competition for such personnel is intense, and the Company’s failure to attract and retain the necessary technical, marketing, managerial and financial personnel could have a material adverse effect on the Company’s business, prospects, financial condition and results of operations.
No restrictions on activities of the Company
Neither the terms of the Common Stock nor any other agreement restricts the activities of the Company with respect to borrowing for any purpose, use of its assets, encumbrance of future income to secure Company obligations or debts, or the acquisition of assets of any kind and nature.
Intellectual property and proprietary rights
The Company’s success depends upon proprietary technology and the execution thereof. The Company will rely on a combination of patent, trademark, copyright and trade-secret laws, as well as confidentiality agreements and technical measures to protect its proprietary rights. Much of the Company’s proprietary information may not be patentable, and the Company does not currently possess any patents, although the Company does have a single patent pending currently. The Company cannot assure that it will develop proprietary products or processes that are patentable, and that if issued, that any patent will give a competitive advantage or that such patent will not be challenged by third parties, or that the patents of others will not have a material adverse effect on the Company’s ability to do business. The Company may apply to register certain trademarks in, or claim certain trademark rights in, the United States and/or foreign jurisdictions. The Company cannot assure that its means of protecting its proprietary rights will suffice or that the Company’s competitors will not independently develop competitive technology or duplicate services or design around patents or other intellectual property rights issued to the Company.
Uninsured losses
The Company may not be able to arrange for comprehensive insurance, including liability, fire, and extended coverage and where economically feasible, earthquake and flood insurance for its business, which is customarily obtained for similar businesses. The lack of comprehensive insurance could materially adversely affect the Company and the value of its securities in the event of an uninsured loss.
Market size
Management has attempted to determine the potential market for the Company’s products and services. The projections that may be included as a part of this Memorandum are based on management’s assumptions regarding potential market size. All projections or predictions with respect to market size are for purposes of illustration only. The Company cannot predict the size of the market with any guarantee of accuracy. Accordingly, the size of the market anticipated by the Company may be materially greater or lesser than the actual market size.
Developing market; unproven acceptance of the Company’s services
The markets for the Company’s services are rapidly evolving and are characterized by an increasing number of market entrants who have introduced or developed competitive service and product offerings. As is typical in the case of a new and rapidly evolving industry, demand and market acceptance for recently introduced products and services are subject to a high level of uncertainty and risk. If the market fails to develop, develops more slowly than expected or becomes saturated with competitors, or if the Company’s products and services do not achieve or sustain market acceptance, the Company’s business, prospects, financial condition and results of operations would be materially adversely effected.
Rapid technological change
To remain competitive, the Company will be required to continually enhance and improve the responsiveness, functionality and features of its technology. The Internet, mobile phone and social networking industries are characterized by rapid technological change, changes in user and customer requirements and preferences, frequent new product and service introductions embodying new technologies and the emergence of new industry standards and practices that could at any time render its then existing products and services, as well as proprietary technology and systems, obsolete. The Company’s future success will depend, in part, on its ability to develop leading software and technologies useful in its business, enhance its existing services, develop new services and technologies that address the increasingly sophisticated and varied needs of its prospective customers, and respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis. The development of other proprietary technology entails significant technical and business risks. There can be no assurance that the Company will successfully use new technologies effectively or adapt its software and technology (proprietary or otherwise) to customer requirements or emerging industry standards. If the Company were unable, for technical, legal, financial or other reasons, to adapt in a timely manner in response to changing market conditions or customer requirements, the Company’s business, prospects, financial condition and results of operations would be materially adversely affected.
Liability exposure
Although the Company intends to obtain appropriate liability insurance in the future, it cannot guarantee that it will be able to obtain such insurance or that any such insurance will be sufficient to cover all possible liabilities. Liability claims, regardless of their ultimate outcome, could result in costly litigation and could have a material adverse effect on the Company’s business, prospects, financial condition and results of operations.
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The Company will rely on Amazon Cloud for hosting services
The Company utilizes and intends to continue to utilize the Amazon Cloud to host its overall technology platforms. If the Amazon Cloud business services were to be interrupted for any material period of time, breached by hackers, or otherwise be non-functioning or unavailable for use, this could have a material adverse effect on the Company’s business, prospects, financial condition and results of operations. Replication of the network infrastructure of the Amazon Cloud would be costly and time consuming, and the Company can give no assurance that such replication, in whole or in part, could be achieved in a short time frame or at all, which could have a material adverse effect on the Company’s business, prospects, financial condition and results of operations.
Our future potential products in our development pipeline are in the early stages and may never be commercially successful.
Our future potential products in our development pipeline are either at very early stages of product development or pre-definition and may never be developed or commercialized. The progress and results of any future products are uncertain, and may result in a failure to develop additional effective products. Even if we successfully complete one or more of our future potential products’ development, they may not be commercially successful due to, among other things, low market acceptance. Third parties may develop superior products or have proprietary rights that preclude us from marketing our products.
We only recently established limited sales and marketing capabilities, and we may be unable to effectively sell, market and distribute our products in the future, and the failure to do so would have an adverse effect on our business and results of operations.
We only recently established limited sales and marketing capabilities. If we are unable to develop an effective sales, marketing, customer relationship management and distribution capabilities or enter into agreements with third parties to perform these functions, we will not be able to successfully commercialize our offerings. We currently have only limited internal sales and marketing capabilities. In order to successfully commercialize any of our products, we must either further internally develop sales, marketing, and customer relationship management and distribution capabilities or make arrangements with third parties to perform these services.
If we do not develop a skilled marketing and sales force and supporting customer relationship management, we will be unable to successfully market any of our offerings directly. To promote any of our potential products through third parties, we will have to locate acceptable third parties for these functions and enter into agreements with them on acceptable terms, and we may not be able to do so.
We may be unable to obtain requisite data and other content to source our offerings.
Our products and services rely on data collected from Torrent networks. Once received, the data must be reviewed, processed and integrated. If we are unable to obtain quality Torrent data, for reasons such as, but not limited to: changing technology protocols, or changing behavior in respect to how consumers’ obtain media, we may not be able to meet the needs of our clients, and we could lose clients, and therefore impact on our ability to grow our business, which could result in a material adverse effect on our results of operations, financial condition and cash flows.
The future success of our company is highly dependent on our ability to maintain and grow our base of clients who subscribe to our suite of offerings.
Our success depends on effective software solutions, marketing, sales and customer relations for our offerings, as well as acceptance of future enhancements and new offerings by our prospective clients. If we are unable to both retain clients and secure new clients, our results of operations, financial condition and cash flows will be adversely affected.
Our offerings are highly dependent on employees who are skilled and experienced in information technologies.
If we are unable to attract, hire and retain high quality information technology personnel at a reasonable cost, we may not be able to meet the needs of clients, enhance existing services, or develop new lines of business. This inability could have a material adverse effect on our results of operations, financial condition and cash flows.
Measurement services are receiving a high level of consumer group and government scrutiny relating to the privacy issues around the methodologies used in targeted advertising.
Although we are confident that our anonymous data aggregation methodologies are compliant with all current privacy laws, it is possible that privacy trends and market perceptions of the transparency of data could result in additional government restrictions or limitations on the use of that data, which would adversely affect many of our products. We believe it is unlikely that we will be required to change or limit our products. Nonetheless, if additional government restrictions are imposed, such restrictions could slow our ability to realize a return on our investments in new data-driven products or result in additional costs not currently anticipated.
Our services are highly dependent on the effective and efficient use of technology and our overall information management infrastructure.
If we are unable to acquire, establish and maintain our information management systems to ensure accurate, reliable and timely data processed in an efficient and cost effective manner, we may not be able to meet the needs of clients, enhance existing services or develop new lines of business. This inability could have an adverse effect on our business and long-term growth prospects.
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Interruption or failure of our information technology and communications systems could hurt our ability to effectively provide our products and services, which could damage our reputation and harm our operating results.
The availability of our products and services depends on the continuing operation of our information technology and communications systems. Some of our systems are not fully redundant, and our disaster recovery planning cannot account for all eventualities. The occurrence of a natural disaster, a decision to close a facility we are using without adequate notice for financial reasons, or other unanticipated problems at our data centers could result in lengthy interruptions in our service. In addition, our products and services are highly technical and complex and may contain errors or vulnerabilities. Any errors or vulnerabilities in our products and services, or damage to or failure of our systems, could result in interruptions in our services, which could reduce our revenue and results of operations.
Risks Related to Our Common Stock; Liquidity Risks
Our securities are “Penny Stock" and subject to specific rules governing their sale to investors.
The SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to the Company, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that a broker or dealer approve a person’s account for transactions in penny stocks; and the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
In order to approve a person’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience objectives of the person; and make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth the basis on which the broker or dealer made the suitability determination; and that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for Company’s shareholders to sell shares of our common stock.
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
There is very limited recent trading activity in our Common Stock and there is no assurance that an active market will develop in the future.
There is no recent trading activity in our Common Stock. Further, although the Common Stock is currently quoted on the OTCQB, maintained by OTC Markets, Inc., trading of our Common Stock may be extremely sporadic. For example, several days may pass before any shares may be traded. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations of the price of, the Common Stock. There can be no assurance that following the Transactions, a more active market for the Common Stock will develop, or if one should develop, there is no assurance that it will be sustained. This severely limits the liquidity of the Common Stock, and would likely have a material adverse effect on the market price of the Common Stock and on our ability to raise additional capital.
Because we became public by means of a Share Exchange, we may not be able to attract the attention of major brokerage firms.
Additional risks may exist since we became public through a “Share Exchange.” Securities analysts of major brokerage firms may not provide coverage of us since there is little incentive to brokerage firms to recommend the purchase of our Common Stock. No assurance can be given that brokerage firms will want to conduct any secondary offerings on behalf in the future.
Compliance with the reporting requirements of federal securities laws can be expensive.
The Company is a public reporting company in the United States, and accordingly, subject to the information and reporting requirements of the Exchange Act and other federal securities laws, and the compliance obligations of the Sarbanes-Oxley Act. The costs of preparing and filing annual and quarterly reports and other information with the SEC and furnishing audited reports to stockholders are substantial. In addition, the Company will incur substantial expenses in connection with the preparation of the Registration Statement and related documents with respect to the registration of resales of the Common Stock owned by its shareholders.
We do not currently have a separate Chief Financial Officer.
We do not currently have a separate Chief Financial Officer. Our Chief Executive Officer is also functioning as our Chief Financial Officer. Although we are currently seeking to retain a Chief Financial Officer, there can be no assurance we will be able to retain a suitable candidate on acceptable terms.
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Applicable regulatory requirements, including those contained in and issued under the Sarbanes-Oxley Act of 2002, may make it difficult for the Company to retain or attract qualified officers and directors, which could adversely affect the management of its business and its ability to obtain or retain listing of its Common Stock.
The Company may be unable to attract and retain those qualified officers, directors and members of board committees required to provide for effective management because of the rules and regulations that govern publicly held companies, including, but not limited to, certifications by principal executive officers. The enactment of the Sarbanes-Oxley Act has resulted in the issuance of a series of related rules and regulations and the strengthening of existing rules and regulations by the SEC, as well as the adoption of new and more stringent rules by the stock exchanges. The perceived increased personal risk associated with these changes may deter qualified individuals from accepting roles as directors and executive officers.
Further, some of these changes heighten the requirements for board or committee membership, particularly with respect to an individual’s independence from the corporation and level of experience in finance and accounting matters. The Company may have difficulty attracting and retaining directors with the requisite qualifications. If the Company is unable to attract and retain qualified officers and directors, the management of its business and its ability to obtain or retain listing of our shares of Common Stock on any stock exchange (assuming the Company elects to seek and are successful in obtaining such listing) could be adversely affected.
The Company may have undisclosed liabilities and any such liabilities could harm the Company’s revenues, business, prospects, financial condition and results of operations.
Even though Realco represented in the Share Exchange Agreement that it had no liabilities at the closing of the Share Exchange, there can be no assurance that there are no unknown liabilities. Any such liabilities of Realco that survive the Share Exchange could harm the Company’s revenues, business, prospects, financial condition and results of operations upon the Company’s acceptance of responsibility for such liabilities.
If the Company fails to maintain an effective system of internal controls, it may not be able to accurately report its financial results or detect fraud. Consequently, investors could lose confidence in the Company’s financial reporting and this may decrease the trading price of its stock.
We have identified a material weakness relating to the lack of segregation of duties. The Company must maintain effective internal controls to provide reliable financial reports and detect fraud. The Company has been assessing its internal controls to identify areas that need improvement. It is in the process of implementing changes to internal controls, but has not yet completed implementing these changes. Failure to implement these changes to the Company’s internal controls or any others that it identifies as necessary to maintain an effective system of internal controls could harm its operating results and cause investors to lose confidence in the Company’s reported financial information. Any such loss of confidence would have a negative effect on the trading price of the Company’s stock.
The price of the Common Stock may become volatile, which could lead to losses by investors and costly securities litigation.
The trading price of the Common Stock is likely to be highly volatile and could fluctuate in response to factors such as:
· | actual or anticipated variations in the Company’s operating results; |
· | announcements of developments by the Company or its competitors; |
· | regulatory actions regarding the Company’s products |
· | announcements by the Company or its competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; |
· | adoption of new accounting standards affecting the Company’s industry; |
· | additions or departures of key personnel; |
· | introduction of new products by the Company or its competitors; |
· | sales of the Company’s Common Stock or other securities in the open market; and |
· | other events or factors, many of which are beyond the Company’s control. |
The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been initiated against such a company. Litigation initiated against the Company, whether or not successful, could result in substantial costs and diversion of its management’s attention and resources, which could harm the Company’s business and financial condition.
Investors may experience dilution of their ownership interests because of the future issuance of additional shares of the Common Stock.
In the future, the Company may issue additional authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of its present stockholders. The Company may also issue additional shares of its Common Stock or other securities that are convertible into or exercisable for Common Stock in connection with hiring or retaining employees, future acquisitions, future sales of its securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares of Common Stock may create downward pressure on the trading price of the Common Stock. There can be no assurance that the Company will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with any capital raising efforts, including at a price (or exercise prices) below the price at which shares of the Common Stock is currently traded on the OTC Markets.
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The Common Stock is controlled by insiders.
The Company’s officers and directors beneficially own approximately 62.53% of our outstanding shares of Common Stock. Such concentrated control of the Company may adversely affect the price of its Common Stock. Investors who acquire Common Stock may have no effective voice in the management of the Company. Sales by insiders or affiliates of the Company, along with any other market transactions, could affect the market price of the Common Stock.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management’s discussion and analysis should be read in conjunction with Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.) (the “Company”) (“Peerlogix”) historical financial statements and the related notes. The management’s discussion and analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Current Report. The Company’s actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Current Report.
As the result of the Transactions and the change in business and operations of the Company from a shell company to a technology company, a discussion of the past financial results of Realco is not pertinent, and the financial results of PeerLogix, the accounting acquirer, are considered the financial results of the Company on a historical and going-forward basis.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The discussion and analysis of PeerLogix’s financial condition and results of operations are based on PeerLogix’s consolidated financial statements, which PeerLogix has prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires PeerLogix to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, PeerLogix evaluates such estimates and judgments, including those described in greater detail below. PeerLogix bases its estimates on historical experience and on various other factors that PeerLogix believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Results of Operations
Results of Operations for the three months ended March 31, 2015 and 2014
The following table sets forth the summary income statement for the three months ended March 31, 2015 and 2014:
For the Three Months Ended | ||||||||
March 31,
2015 |
March 31,
2014 |
|||||||
Revenues | $ | – | $ | – | ||||
Operating Expenses | $ | (97,649 | ) | $ | (134,395 | ) | ||
Interest Expense | $ | (1,658 | ) | $ | (275 | ) | ||
Net Loss | $ | (99,307 | ) | $ | (134,670 | ) |
Revenues: From November 20, 2012, date of inception, through March 31, 2015 the Company has generated minimal revenues.
Operating Expenses: Operating expenses consist primarily of compensation and related costs for personnel and facilities, and include costs related to our facilities, finance, human resources, information technology and fees for professional services. Professional services are principally comprised of outside legal, audit, information technology consulting, marketing, investor relations and outsourcing services.
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Operating expenses decreased by 27% during the three months ended March 31, 2015, as compared to the three months ended March 31, 2014. The overall $36,746 decrease in operating expenses is primarily attributable to the following approximate net increases (decreases) in operating expenses:
● | An increase of payroll and related expenses of $28,000 due to an increase in officer’s salaries. |
● | An increase of research and development expenses of $15,000. Research and development expenses consist primarily of payments to third parties for the development of software. We expense research and development costs as incurred. |
● | A decrease in equity-based compensation expense of $64,000. The decrease was due to an equity-based award issued to a consultant during the prior period. |
● | A decrease in professional fees of $38,000 (excluding equity-based compensation). In the current period the Company incurred an increase in consulting fees related to business development, financial advisory services and investor relations; and a substantial decrease in legal fees related to patent costs. |
● |
An increase in computer and internet expenses of $19,000 due to increases in server costs. The Company leases servers on a monthly basis from a third party. |
Interest Expense: Interest expense is primarily related to the Company’s convertible promissory notes and notes payable.
Interest expense - increased by $1,383 to $1,658 during the three months ended March 31, 2015 as compared to interest expense of $275 during the three months ended March 31, 2014.
Results of Operations for the years ended December 31, 2014 and 2013
The following table sets forth the summary income statement for the years ended December 31, 2014 and 2013:
For the Years Ended | ||||||||
December 31,
2014 |
December 31,
2013 |
|||||||
Revenues | $ | – | $ | 250 | ||||
Operating Expenses | $ | (271,596 | ) | $ | (75,552 | ) | ||
Interest Expense | $ | (3,563 | ) | $ | – | |||
Net Loss | $ | (275,159 | ) | $ | (75,302 | ) |
Revenues: From November 20, 2012, date of inception, through December 31, 2014 the Company has generated minimal revenues.
Operating Expenses: Operating expenses consist primarily of compensation and related costs for personnel and facilities, and include costs related to our facilities, finance, human resources, information technology and fees for professional services. Professional services are principally comprised of outside legal, audit, information technology consulting, marketing, investor relations and outsourcing services.
Operating expenses increased by 259% during the year ended December 31, 2014, as compared to the year ended December 31, 2013. The overall $196,044 increase in operating expenses is primarily attributable to the following approximate net increases (decreases) in operating expenses:
● | An increase of payroll and related expenses of $2,000 due to an increase in officer’s salaries. |
● | An increase of research and development expenses of $29,000. Research and development expenses consist primarily of payments to third parties for the development of software. We expense research and development costs as incurred. |
● | An increase in equity-based compensation expense of $64,000. The increase was due to an equity-based award issued to a consultant during the current period. |
● | An increase in rent expense of $8,000 due to the Company entering into a new lease agreement for its office facility. |
● | An increase in professional fees of $45,000 (excluding equity-based compensation). In the current period the Company incurred an increase in accounting fees; and a substantial increase in legal fees related to patent costs. |
● | An increase in computer and internet expenses of $51,000 due to increases in server costs. |
Interest Expense: Interest expense is primarily related to the Company’s convertible promissory notes and notes payable.
Interest expense - increased by $3,563 to $3,563 during the year ended December 31, 2014 as compared to interest expense of $0 during the year ended December 31, 2013.
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Liquidity and Capital Resources
The following table summarizes total current assets, liabilities and working capital at March 31, 2015 compared to December 31, 2014:
Period ended | ||||||||||||
March 31,
2015 |
December 31,
2014 |
Increase/
(Decrease) |
||||||||||
Current Assets | $ | 312,236 | $ | 10,544 | $ | 301,692 | ||||||
Current Liabilities | $ | 191,423 | $ | 200,738 | $ | (9,315 | ) | |||||
Working Capital (Deficit) | $ | 120,813 | $ | (190,194 | ) | $ | 311,007 |
As of March 31, 2015, we had working capital of $120,813 as compared to a working capital deficit of $(190,194) as of December 31, 2014, an increase of $311,007. The change in working capital is primarily attributable to our first quarter 2015 financing in which we received proceeds of $500,000 and converted $25,000 of convertible debt offset by repayments of notes payable, our convertible debt and related liabilities approaching maturity during the past quarter and our historic negative cash flow from operations resulting in our growing accounts payable and accrued liabilities.
We have incurred net operating losses and operating cash flow deficits since inception, continuing through the first quarter of 2015. We have been funded primarily by a combination of equity issuances and debt, to execute on our business plan and for working capital. Our principal source of liquidity is our cash. At June 30, 2015, we had cash and cash equivalents totaling approximately $800. We believe our existing available cash is insufficient to enable the Company to meet the working capital requirements for the near future. Consequently, we will be required to raise additional capital to complete the development and commercialization of our current product. However, there can be no assurance that we will be able to raise additional capital on terms acceptable to us, or at all. In order to boost sales, we continue to explore potential expansion opportunities in the industry through mergers and acquisitions, enhancement of our existing products, development of new products and expansion into other international markets. We will incur increased costs as a result of being a public company, which could affect our profitability and operating results.
Upon effectiveness of the merger, w e will be obligated to file annual, quarterly and current reports with the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and the rules subsequently implemented by the SEC and the Public Company Accounting Oversight Board have imposed various requirements on public companies, including requiring changes in corporate governance practices. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities of ours more time-consuming and costly. We expect to spend between $200,000 and $250,000 in legal and accounting expenses annually to comply with our reporting obligations and Sarbanes-Oxley. These costs could affect profitability and our results of operations.
Management has determined that additional capital will be required in the form of equity or debt securities. In addition, if we cannot raise additional short term capital we will be forced to continue to further accrue liabilities due to our limited cash reserves. There are no assurances that management will be able to raise capital on terms acceptable to the Company. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our planned development, which could harm our business, financial condition and operating results. If we obtain additional funds by selling any of our equity securities or by issuing common stock to pay current or future obligations, the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution, or the equity securities may have rights preferences or privileges senior to the common stock. If adequate funds are not available to us when needed on satisfactory terms, we may be required to cease operating or otherwise modify our business strategy.
Merger Transaction
On August 14, 2015, Realco International, Inc. (“Realco”), PeerLogix, Inc. (“PeerLogix”) and the shareholders of PeerLogix entered into a Share Exchange Agreement and on August 14, 2015 (the “ Closing Date”) completed the Share Exchange.
Pursuant to the Share Exchange Agreement, on the Closing Date, all of the shareholders of PeerLogix exchanged all of their shares of common stock for newly issued common shares of Realco. Realco acquired the business of PeerLogix pursuant to the Share Exchange and will continue the existing business operations of PeerLogix as a wholly-owned subsidiary.
Simultaneously with the Share Exchange, on the Closing Date all of the issued and outstanding options and warrants to purchase shares of PeerLogix common stock were exchanged, respectively, into options (the “New Options”) and warrants (the “New Warrants”) to purchase shares of Common Stock of Realco. The number of shares of Common Stock issuable under, and the price per share upon exercise of, the New Options and the New Warrants were the same as those of the original options and warrants of PeerLogix, as a result of a 1 for 1 exchange ratio of securities pursuant to the Share Exchange, which is described in the Share Exchange Agreement. The New Options will be administered under PeerLogix’s 2015 Equity Incentive Plan, which the Company assumed and adopted on the Closing Date in connection with the Share Exchange.
A copy of the Share Exchange Agreement is attached as Exhibit 2.1 to this Current Report and is incorporated herein by reference.
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Financing Transaction
Concurrently with the closing of the Share Exchange and in contemplation of the Share Exchange, Realco completed a private offering (the “Offering”) of 1,418,333 units of its securities (“Units”), at a price of $0.60 per Unit. Each Unit consists of one share of Common Stock and a warrant to purchase one share of Common Stock. The warrants (the “Investor Warrants”) are exercisable for a period of five years at a purchase price of $0.72 per share of Common Stock. The Offering was made only to accredited investors, as defined under Regulation D, Rule 501(a). On the Closing Date, the investors in the Offering collectively purchased 1,418,333 Units for total cash consideration of $851,000.
The Company paid the placement agent a commission of 10% of the funds raised from such investors in the Offering. In addition, the placement agent received warrants to purchase a number of Units equal to 10% of the Units sold to investors in the Offering. As a result of the foregoing arrangement, at the initial closing of the Offering, the placement agent was paid commissions of $110,630 and was issued warrants to purchase 85,100 Units at an exercise price of $0.60 per Unit.
Going Concern
As reflected in the condensed consolidated financial statements, the Company had an accumulated deficit at March 31, 2015, a net loss and net cash used in operating activities for the period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The ability of the Company to continue its operations is dependent on management’s plans, which include the raising of capital through debt and/or equity markets, with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. The Company may need to incur additional liabilities with certain related parties to sustain the Company’s existence. There can be no assurance that the Company will be able to raise any additional capital.
We may also require additional funding to finance the growth of our anticipated future operations as well as to achieve our strategic objectives. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all. In that event, the Company would be required to change its growth strategy and seek funding on that basis, if at all.
Our plan regarding these matters is to raise additional debt and/or equity financing to allow us the ability to cover our current cash flow requirements and meet our obligations as they become due. There can be no assurances that financing will be available or if available, that such financing will be available under favorable terms. In the event that we are unable to generate adequate revenues to cover expenses and cannot obtain additional financing in the near future, we may seek protection under bankruptcy laws. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Summary Cash flows for the three months ended March 31, 2015 and 2014:
Three Months Ended | ||||||||
March 31,
2015 |
March 31,
2014 |
|||||||
Net cash used in operating activities | $ | (103,961 | ) | $ | (71,991 | ) | ||
Net cash provided by financing activities | $ | 385,753 | $ | 68,206 |
Cash Used in Operating Activities
Our primary uses of cash from operating activities include payments to consultants for research and development, compensation and related costs, legal and professional fees, computer and internet expenses and other general corporate expenditures.
Cash used in operating activities consist of net loss adjusted for certain non-cash items, primarily equity-based compensation expense, as well as the effect of changes in working capital and other activities.
The adjustments for the non-cash items decreased from the three months ended March 31, 2014 to the three months ended March 31, 2015 due to a decrease in equity-based compensation recorded during the first quarter of 2014. In addition, the net decrease in cash from changes in working capital activities from the three months ended March 31, 2014 to the three months ended March 31, 2015 primarily consisted of an increase in prepaid expenses primarily due to retainers paid for accounting and auditing services, and an increase in account payables and accrued expenses primarily due to an increase in accrued payroll and payroll related expenses, accrued legal fees for patent related costs, and accrued consulting fees related to research and development expenses.
Cash Used in Financing Activities
Cash provided by financing activities consists primarily of net proceeds from issuance or repayments of notes payable, convertible promissory notes, related party loans and proceeds from the issuance of common stock, warrants and class A units.
Cash provided by financing activities increased from the three months ended March 31, 2014 to the three months ended March 31, 2015, primarily driven by an increase in proceeds from the issuance of common stock and warrants offset by the repayment of related party loans.
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Summary Cash flows for the years ended December 31, 2014 and 2013:
For the Years Ended | ||||||||
December 31,
2014 |
December 31,
2013 |
|||||||
Net cash used in operating activities | $ | (148,950 | ) | $ | (63,246 | ) | ||
Net cash provided by financing activities | $ | 154,093 | $ | 68,152 |
Cash Used in Operating Activities
Our primary uses of cash from operating activities include payments to consultants for research and development, compensation and related costs, legal and professional fees, computer and internet expenses and other general corporate expenditures.
Cash used in operating activities consist of net loss adjusted for certain non-cash items, primarily equity-based compensation expense, as well as the effect of changes in working capital and other activities.
The adjustments for the non-cash items increased from the year ended December 31, 2013 to the year ended December 31, 2014 due to an increase in equity-based compensation recorded during the first quarter of 2014. In addition, the net increase in cash from changes in working capital activities from the year ended December 31, 2013 to the year ended December 31, 2014 primarily consisted of an increase in account payables and accrued expenses primarily due to an increase in accrued legal and professional fees for patent related costs and accountings fees, accrued computer and internet expenses for increased server costs, and accrued consulting fees related to research and development expenses.
Cash Provided by Financing Activities
Cash provided by financing activities consists primarily of net proceeds from issuance or repayments of notes payable, convertible promissory notes, related party loans and proceeds from the issuance of common stock, warrants and class A units.
Cash provided by financing activities increased from the year ended December 31, 2013 to the year ended December 31, 2014, primarily driven by an increase in proceeds from convertible promissory notes and related party loans offset by a reduction in proceeds from the issuance of class A units.
Recent Accounting Pronouncements
In June 2014, the FASB issued ASU No. 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation,” (“ASU 2014-10”). ASU 2014-10 removes the definition of a development stage entity from the ASC, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, ASU 2014-10 eliminates the requirements for development stage entities to (1) present inception-to-date information in the statements of operations, cash flows, and stockholders’ equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. ASU 2014-10 is effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early adoption is permitted. The Company has elected to adopt ASU 2014-10 and, as a result, is not required to present the previously required development stage disclosures.
The FASB has issued ASU No. 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This ASU requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered.. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The Company is currently evaluating the effect of the ASU on its consolidated financial position, results of operations and cash flows.
In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15, which is effective for annual reporting periods ending after December 15, 2016, extends the responsibility for performing the going-concern assessment to management and contains guidance on how to perform a going-concern assessment and when going-concern disclosures would be required under U.S. GAAP. The Company elected to adopt ASU 2014-15 early. Management’s evaluations regarding the events and conditions that raise substantial doubt regarding the Company’s ability to continue as a going concern have been disclosed in Note 2 to our consolidated financial statements.
In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update 2015-03, Interest—Imputation of Interest. To simplify presentation of debt issuance costs, the amendments in this Update would require that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. The recognition and measurement guidance for debt issuance costs would not be affected by the amendments in this Update. This Accounting Standards Update is the final version of Proposed Accounting Standards Update 2014-250—Interest—Imputation of Interest (Subtopic 835-30), which has been deleted. The amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company is currently evaluating the effects of ASU 2015-03 on its consolidated financial statements.
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The FASB and the SEC have issued certain accounting standards updates and regulations that will become effective in subsequent periods; however, management of the Company does not believe that any of those updates would have significantly affected the Company’s financial accounting measures or disclosures had they been in effect during 2015, 2014 or 2013, and does not believe that any of those pronouncements will have a significant impact on the Company’s consolidated financial statements at the time they become effective.
Critical Accounting Policies
Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
Our significant accounting policies are summarized in Note 3 of our financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.
We believe the following critical accounting policies and procedures, among others, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from these estimates. The Company’s significant estimates and assumptions include the fair value of the Company’s equity instruments, convertible debt, stock-based compensation, and the valuation allowance relating to the Company’s deferred tax assets.
Income Taxes
Deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in effect for the years in which the temporary differences are expected to reverse. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of these differences that have been included or excluded in the financial statements or tax returns.
The Company follows the provisions of Accounting Standards Codification (“ASC”) Topic 740 “Income Taxes”, which prescribes a recognition threshold and measurement process for consolidated financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance also prescribes direction on the recognition, classification, interest and penalties in interim periods, disclosure and transition.
Convertible Instruments
The Company bifurcates conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria includes circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule when the host instrument is deemed to be conventional as that term is described under applicable U.S. GAAP.
When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. The Company also records, when necessary, deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the preferred shares.
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Accounting for Warrants
The Company accounts for the issuance of common stock purchase warrants issued in connection with debt and equity offerings in accordance with the provisions of ASC 815, Derivative Instruments and Hedging Activities (“ASC 815”). The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).
The Company assessed the classification of its common stock purchase warrants as of the date of each equity offering and determined that such instruments met the criteria for equity classification as the underlying common stock is not traded in a public market and require physical settlement. The warrants are reported on the condensed consolidated balance sheet as equity, as the settlement terms indicate that the instruments are indexed to the entity’s underlying stock.
Share-Based Compensation
The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and amortized over the respective employment agreements or director service periods. For non-employees, the fair value of the award is measured on the commitment date and generally re-measured on interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Stock-based compensation expense is recorded by the Company in the same expense classifications in the consolidated statements of operations as if such amounts were paid in cash.
Fair Value of Financial Instruments
The carrying amounts of cash, accounts payable, and accrued liabilities approximate fair value due to the short-term nature of these instruments.
The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures” which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |
Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |
Level 3 | Pricing inputs that are generally unobservable inputs and not corroborated by market data. |
Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the warrant liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s Chief Financial Officer, who reports to the Chief Executive Officer, determine its valuation policies and procedures.
The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s Chief Financial Officer and are approved by the Chief Executive Officer.
Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.
Off Balance Sheet Arrangements:
We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).
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Description of Property
Our executive officers are located in leased premises at 500 7th Ave., 17th Floor, New York, NY 10018 and our phone number is (914) 550-9993.
SECURITY OWNERSHIP OF CERTAIN STOCKHOLDERS AND MANAGEMENT
The following tables set forth certain information regarding the beneficial ownership of our Common Stock as of August 14, 2015 (i) each person who, to our knowledge, owns more than 5% of the Common Stock; (ii) each of the directors and executive officers of the Company; and (iii) all of our executive officers and directors as a group. Unless otherwise indicated in the footnotes to the following tables, each person named in the table has sole voting and investment power and that person’s address is c/o PeerLogix, Inc., 500 7th Ave., 17th Floor, New York, New York 10018. Shares of Common Stock subject to options or warrants currently exercisable or exercisable within 60 days of August 14, 2015 are deemed outstanding for computing the share ownership and percentage of the person holding such options and warrants, but are not deemed outstanding for computing the percentage of any other person.
Name of Beneficial Owner |
No. Shares of Common Stock Beneficially Owned |
% of Common Stock Outstanding |
||
William Gorfein 1 and 2 | 6,962,042 | 30.58% | ||
Joshua Partridge 1 and 2 | 6,962,042 | 30.58% | ||
Offer Attia | 1,199,821 | 5.34% | ||
New World Merchant Partners LLC | 1,000,000 | 4.45% | ||
GlaBro US Holdings LLC | 1,166,359 | 5.19% | ||
Placement Agent 3 and 4 | 125,000 | – | ||
Tim Askew 1 | – | 0.56% | ||
All officers and directors as a group (3 people) | 14,049,084 | 62.53% |
__________
(1) | Officer and/or director. |
(2) | Represents (i) 300,000 shares issuable upon the exercise of stock options and (ii) 6,692,042 shares of Common Stock owned by such shareholder. |
(3) | In June 2015, New World Merchant Partners LLC entered into an agreement with the Placement Agent pursuant to which it agreed to sell the Placement Agent or its designees an aggregate of 1,000,000 shares of PeerLogix common stock 250,000 shares of Realco Common Stock for aggregate consideration of $100 in order to induce the Placement Agent to effect this Offering and the PeerLogix Offering. |
(4) | Does not include shares or warrants issuable upon exercise of Placement Agent Warrants |
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DIRECTORS AND EXECUTIVE OFFICERS
The following persons are the executive officers, non-executive officers and directors of the Company and hold the positions set forth opposite their name in both PeerLogix and Realco.
Name | Age | Position |
William Gorfein | 27 | Chief Executive Officer; Chief Financial Officer and Director |
Joshua Partridge | 28 | Head of Business Development, Secretary & Director |
Timothy Askew | 65 | Director |
William Gorfein – CEO, Founder of PeerLogix and Director
Mr. Gorfein’s leadership has spanned multiple organizations as he has provided services to companies and clients while functioning in both information technology and financially based roles. Most recently before cofounding PeerLogix, he was the lead solutions engineer for BreezeIT, a subsidiary of Core 3 Technologies in Orange County, CA. While in this capacity, Mr. Gorfein was responsible for overseeing the budget and managing the technical and implementation requirements for the majority of datacenter equipment and architectures sold to customers from the small business to the enterprise level. With over a decade of software and hardware development experience, Mr. Gorfein has developed extensive expertise in the areas of platform development, life-cycle management and server architecture.
Previously the technical lead of two major software initiatives, Mr. Gorfein oversaw the development and implementation of content monitoring software for a rights management group based in Los Angeles, and he has worked on independent software projects relating to O.C.R. (optical character recognition) and employee time management. Mr. Gorfein has hand-picked and managed multiple development teams and has led cross continent collaborations in Egypt, India and China.
Mr. Gorfein’s is experienced in understanding the underlying macro-conditions driving enterprises to adopt Information Technology, and successfully taking advantage of these trends through foresight, creativity and resource management abilities. He received his Bachelor’s degree with a focus on Economy and Industry from the University of Arizona in Tucson, AZ.
Joshua Partridge – Head of Business Development, Founder of PeerLogix and Director
In 2008, Mr. Partridge began working for Arsenal Pictures, a boutique international sales agency for motion pictures located in Los Angeles, CA. While in this role, he handled acquisitions and sales, as well as the majority of day-to-day operations, helping the firm achieve greater international and domestic sales distribution. After three years of serving in this role and experiencing the dramatic shift occurring within the Entertainment Industry’s global distribution channels, he began independently consulting for clients in the areas of technology, management and business development. Mr. Partridge was contracted to counsel both content producers and law firms on their media protection strategies, as well as production consulting, quality control, revenue projections and investor relations for television and film companies.
In 2012, Mr. Partridge partnered with William Gorfein to form PeerLogix with the goal of helping organizations in a multitude of industries gain deeper understanding of their consumers and audience base. He received his Bachelor of Science degree in Regional Development with a focus on economic growth from the University of Arizona in Tucson, AZ.
Timothy Askew – Director
Timothy Askew is the Founder and CEO of Corporate Rain International, the elite international sales outsourcing boutique and consulting firm. He writes a popular weekly column for Inc. Magazine and is the author of the recently published The Poetry of Small Business. Mr. Askew is a founding member of the Inc. Business Owner's Council and sits on the board of the Darien Theatre. He has produced for Broadway, as well appearing on Broadway as an actor.
Mr. Askew has a BA in History and an MA in Philosophy and Religion from Emory University in Atlanta, Georgia. He also has an MA in Education from Claremont Graduate School in California. He has served on the Small Business Advisory Council for the State of New York. Mr. Askew frequently mentors fledgling entrepreneurs in New York and nationally.
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Executive Compensation
The following summary compensation table sets forth the salaries of PeerLogix’s CEO and the other most highly compensated executive officers of PeerLogix (other than the CEO) whose annual salaries exceeded $100,000 for the current year (the “ Named Executive Officers ”). In addition to their salaries, the executive officers were eligible for bonuses awarded by PeerLogix from time to time.
Summary Compensation Table
Name and Principal Position(s) | Year | Salary | Bonus |
Other Annual Compensation |
Securities Underlying Options |
William Gorfein (CEO & CFO) | 2014 | $23,952 | $0 | $0 | None |
Joshua Partridge (Secretary) | 2014 | $ 2,100 | $0 | $0 | None |
William Gorfein (CEO & CFO) | 2013 | $20,316 | $0 | $0 | None |
Joshua Partridge (Secretary) | 2013 | $ 3,290 | $0 | $0 | None |
Employment Agreements
Each of the named executive officers executed employment agreements with PeerLogix in August 2015, which was adopted by Realco upon closing of the Share Exchange.
Mr. Gorfein’s employment agreement is for a period of three (3) years, after which the agreement is renewable for one (1) year periods, unless the Company or Mr. Gorfein gives six (6) months’ notice of the intention to terminate the agreement. Mr. Gorfein receives a salary of $120,000 per year with annual increases of 10% per year. Mr. Gorfein may also receive an annual cash bonus in an amount to be determined by the Board of Directors.
Mr. Partridge’s employment agreement is for a period of three (3) years, after which the agreement is renewable for one (1) year periods, unless the Company or Mr. Partridge gives six (6) months’ notice of the intention to terminate the agreement. Mr. Partridge receives a salary of $120,000 per year with annual increases of 10% per year. Mr. Partridge may also receive an annual cash bonus in an amount to be determined by the Board of Directors.
Mr. Gorfein and Mr. Partridge have each been granted options to acquire 300,000 shares of restricted stock of the Company, which shall be subject to, and vest over a period of three (3) years.
The Company agrees to promptly reimburse Mr. Gorfein and Mr. Partridge for all reasonable and necessary business expenses, including without limitation, telephone and other charges incurred by them on behalf of the Company. In addition, the Company has agreed to provide Mr. Gorfein and Mr. Partridge with health insurance.
Board of Directors and Corporate Governance
The Company’s Board of Directors consists of three (3) members, William Gorfein, Joshua Partridge and Timothy Askew. The Company does not pay Members of its Board of Directors any cash compensation and currently compensates the Board through the issuance of Stock Options.
Board Committees
The Company does not intend to maintain a board of directors that is composed of a majority of “independent” directors. The Company does not expect to initially appoint an audit committee, nominating committee and/or compensation committee, or to adopt charters relative to each such committees, but may adopt a code of ethics in connection with the Reorganization.
2015 Equity Incentive Plan
The Board of Directors and stockholders of Realco have adopted the 2015 Equity Incentive Plan on or prior to the Closing of the Reorganization, which will reserve a total of 3,000,000 shares of Common Stock for issuance under the 2015 Plan. If an incentive award granted under the 2015 Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered in connection with an incentive award, the shares subject to such award and the surrendered shares will become available for further awards under the 2015 Plan.
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Shares issued under the 2015 Plan through the settlement, assumption or substitution of outstanding awards or obligations to grant future awards as a condition of acquiring another entity are not expected to reduce the maximum number of shares available under the 2015 Plan. In addition, the number of shares of Common Stock subject to the 2015 Plan, any number of shares subject to any numerical limit in the 2015 Plan, and the number of shares and terms of any incentive award are expected to be adjusted in the event of any change in our outstanding Common Stock by reason of any stock dividend, spin-off, split-up, stock split, reverse stock split, recapitalization, reclassification, merger, consolidation, liquidation, business combination or exchange of shares or similar transaction.
Administration
It is expected that the compensation committee of the Board, or the Board in the absence of such a committee, will administer the 2015 Plan. Subject to the terms of the 2015 Plan, the compensation committee would have complete authority and discretion to determine the terms of awards under the 2015 Plan.
Grants
The 2015 Plan is expected to authorize the grant to 2015 Plan participants of nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance grants intended to comply with Section 162(m) of the Internal Revenue Code (as amended, the “Code”) and stock appreciation rights, as described below:
· | Options granted under the 2015 Plan entitle the grantee, upon exercise, to purchase a specified number of shares from us at a specified exercise price per share. The exercise price for shares of Common Stock covered by an option cannot be less than the fair market value of the Common Stock on the date of grant unless agreed to otherwise at the time of the grant. |
· | Restricted stock awards and restricted stock units may be awarded on terms and conditions established by the compensation committee, which may include performance conditions for restricted stock awards and the lapse of restrictions on the achievement of one or more performance goals for restricted stock units. |
· | The compensation committee may make performance grants, each of which will contain performance goals for the award, including the performance criteria, the target and maximum amounts payable, and other terms and conditions. |
· | The 2015 Plan authorizes the granting of stock awards. The compensation committee will establish the number of shares of Common Stock to be awarded and the terms applicable to each award, including performance restrictions. |
· | Stock appreciation rights (“ SARs ”) entitle the participant to receive a distribution in an amount not to exceed the number of shares of Common Stock subject to the portion of the SAR exercised multiplied by the difference between the market price of a share of Common Stock on the date of exercise of the SAR and the market price of a share of Common Stock on the date of grant of the SAR. |
Duration, Amendment, and Termination
The Board is expected to have the power to amend, suspend or terminate the 2015 Plan without stockholder approval or ratification at any time or from time to time. No change may be made that increases the total number of shares of Common Stock reserved for issuance pursuant to incentive awards or reduces the minimum exercise price for options or exchange of options for other incentive awards, unless such change is authorized by our stockholders within one year. Unless sooner terminated, the 2015 Plan would terminate ten years after it is adopted.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Realco Shareholders
On April 13, 2015, (the “ SS Closing Date ”), Steven Allen Friedman (the “ Selling Stockholder ”), the owner of 18,000,000 shares of Realco common stock (the “ SS Shares ”), consummated a Securities Purchase Agreement (“ SPA ”) pursuant to which the Selling Stockholder sold the SS Shares to Captain’s Crew LLC (“ CC ”) for aggregate consideration of $370,613.30, or approximately $0.0206 per share. Upon completion of the purchase of the SS Shares, CC owned 18,000,000 shares, or approximately 94.8% of Realco issued and outstanding Common Stock.
Forward Split and Share Cancellation
Upon the closing of the Share Exchange, 18,000,000 shares of common stock were cancelled by CC, a shareholder of Realco, for no consideration (the “ Share Cancellation ”). Realco’s Common Stock will forward-split on a 4.04 for 1 basis following the closing of the Share Exchange so that there would have been 6,999,981 shares of the Realco’s common stock issued and outstanding before taking into account the issuance of shares of Common Stock to purchasers of Units in the Offering and in the Share Exchange.
CC is 100% owned and managed by Jay Lasky. Funds utilized for the purchase of the SS Shares were provided by a number of unaffiliated persons that funded an escrow for the purpose of effecting a change of control of Realco in anticipation of the Share Exchange. Subsequent to the SS Closing Date, the persons that funded CC also entered into agreements to acquire additional unrestricted shares of Pubco’s Common Stock from certain non-affiliate shareholders of the Pubco. It is expected that all SS Shares will be cancelled in connection with the closing of the Reorganization.
In accordance with the SPA and the transactions contemplated thereby, effective on the SS Closing Date, Steven Allen Friedman resigned as a director and officer of Realco, Esther Gerson resigned as an officer of Realco and Jay Lasky was appointed to serve as Chief Executive Officer and sole director of Realco. Neither Mr. Friedman nor Ms. Gerson had any disagreements with Realco regarding the operations, policies or practices of Realco. Mr. Lasky resigned as Chief Executive Officer and sole director of Realco upon the closing of the Share Exchange and the appointment of the PeerLogix officers and directors to similar positions with Realco.
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Transactions with the Placement Agent and its Related Parties
The placement agent in the Peerlogix Offering received as compensation for its services $50,000 (10% commission) and PeerLogix warrants that automatically converted upon the closing of the Share Exchange into warrants to purchase 50,000 Realco Units at a price of $0.50 per Unit, with each Unit consisting of one share of Realco Common Stock and one warrant to purchase a share of Realco Common Stock at a price of $0.60 per Share.
In June 2015, New World Merchant Partners LLC entered into an agreement with the Placement Agent pursuant to which it agreed to sell the Placement Agent or its designees an aggregate of 1,000,000 shares of PeerLogix common stock and 250,000 shares of Realco Common Stock for aggregate consideration of $100 in order to induce the Placement Agent to effect this Offering and the PeerLogix Offering. The 1,000,000 PeerLogix shares may be deemed to be “restricted securities” and the 250,000 Realco shares are not considered “restricted securities.”
The price of the Units in the Offering and the PeerLogix Offering was determined following our discussions with the Placement Agent. Among the factors considered in the negotiations were our limited operating history, our history of losses, an assessment of our management and our proposed operations, our current financial condition, the prospects for the industry in which we operate, the prospects for the development of our business with the capital raised in the Offering and the PeerLogix Offering and the general condition of the securities markets at the time of the Offering and the PeerLogix Offering. The offering price of the Units or the exercise price of the Investor Warrants and the New Warrants does not necessarily bear any relationship to our assets, book value or results of operations or any other generally accepted criterion of value.
The Company has agreed to indemnify the Placement Agent and other broker-dealers who are FINRA members selected by the Placement Agent to offer and sell Units, to the fullest extent permitted by law against certain liabilities that may be incurred in connection with the Offering and the PeerLogix Offering, including certain civil liabilities under the Securities Act, and, where such indemnification is not available, to contribute to the payments the Placement Agent may be required to make in respect of such liabilities. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to the Placement Agent, pursuant to the foregoing provisions or otherwise, the Company has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Sales by PeerLogix
In the first quarter of 2015, PeerLogix completed the PeerLogix Offering, wherein it sold $500,000 of Units to accredited investors. Each Unit was sold at a price of $0.50 per Unit and consisted of one (1) share of common stock, par value $0.001 per share, of PeerLogix and one (1) warrant entitling the holder to purchase one share of Common Stock for a five-year period at an exercise price of $0.60 per share. All of the net proceeds that PeerLogix received from the PeerLogix Offering were for PeerLogix’s working capital. All of the Units sold in the PeerLogix Offering were converted to Realco securities upon the closing of the Share Exchange. The Placement Agent also acted as placement agent in connection with the PeerLogix Offering and received as compensation for its services $50,000 (10% commission) and PeerLogix warrants that automatically converted upon the closing of the Share Exchange into warrants to purchase 50,000 Realco Units at a price of $0.50 per Unit, with each Unit consisting of one share of Realco Common Stock and one warrant to purchase a share of Realco Common Stock at a price of $0.60 per Share.
DESCRIPTION OF CAPITAL STOCK
Authorized Capital Stock
As of August 14, 2015, our authorized capital stock consisted of 100,000,000 shares of Common Stock, par value $0.001 per share and 10,000,000 shares of “blank check” Preferred Stock, $0.001 par value.
Issued and Outstanding Capital Stock
After giving effect to the Transactions, the options granted under the 2015 PeerLogix Plan (that were exchanged for Realco Options upon Realco’s assumption of options issued under the 2015 PeerLogix Plan), and the warrants issued to the Placement Agent in connection with the Offering, there are issued and outstanding securities of the Company on the closing of the Transactions:
· | 22,464,935 shares of Common Stock; |
· | No shares of preferred stock; |
· | Options to purchase 600,000 shares of Common Stock granted under the 2015 Peerlogix Plan; |
· | Investor Warrants to purchase 1,418,333 shares of Common Stock at a price of $0.72 per share issued to the investors in the Offering; and 141,833 warrants to purchase Units at a price of $0.60 per unit issued to the Placement Agent in the Offering |
· | New Warrants issued to PeerLogix Investors to purchase 1,000,000 shares of Common Stock at $0.60 per share and 50,000 warrants exercisable at a price of $0.60 per share issued to the Placement Agent in connection with the PeerLogix Offering. |
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Description of Common Stock
The holders of Common Stock are entitled to one vote per share on all matters submitted to a vote of the stockholders, including the election of directors. Generally, all matters to be voted on by stockholders must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast by all shares of Common Stock that are present in person or represented by proxy. Except as otherwise provided by law, amendments to the articles of incorporation generally must be approved by a majority of the votes entitled to be cast by all outstanding shares of Common Stock. The amended and restated Articles of Incorporation do not provide for cumulative voting in the election of directors. The Common Stock holders will be entitled to such cash dividends as may be declared from time to time by the Board from funds available. Upon liquidation, dissolution or winding up of the Company, the Common Stock holders will be entitled to receive pro rata all assets available for distribution to such holders.
Description of Preferred Stock
The Company is authorized to issue up to 10,000,000 shares of preferred stock, par value $0.001 per share. No shares of its preferred stock are issued or outstanding.
All shares of the designated and the undesignated preferred stock are issuable on such other terms and conditions as the Board may determine at or prior to issuance, without further action of the stockholders. Such preferred shares may or may not be: issued in series, convertible into shares of Common Stock, redeemable by the Company and entitled to cumulative dividends. Other terms and conditions may be imposed at the time of issuance. Should some or all of the outstanding or future issues of any convertible preferred stock be exchanged for shares of Common Stock, the resulting increase in the number of issued and outstanding Common Stock may or may not have a depressive effect on the market value of our Common Stock.
Unless specifically issued without such rights, the holders of preferred stock are entitled to one vote for each share held on all matters submitted to a vote of shareholders. Future issuance of shares of preferred stock, or the issuance of rights to purchase such shares, could be used to discourage an unsolicited acquisition proposal. For instance, the issuance of a series of preferred stock might impede an acquisition or other business combination by including class voting rights that would enable the holder to block such a transaction, or facilitate a business combination by including voting rights that would provide a required percentage vote of the stockholders. In addition, under certain circumstances, the issuance of preferred stock could adversely affect the voting power of the holders of the Common Stock.
Although the Board of Directors is required to make any determination to issue such stock based on its judgment as to the best interests of our shareholders, the Board of Directors could act in a manner that would discourage an acquisition attempt or other transaction that some, or a majority, of the shareholders might believe to be in their best interests or in which stockholders might receive a premium for their stock over the then market price of such stock. The Board of Directors does not at present intend to seek stockholder approval prior to any issuance of currently authorized stock, unless otherwise required by law or stock exchange rules. We have no present plans to issue any preferred stock.
Registration Rights Agreements
The Company expects to file within 60 days of the date of the final Closing of the Offering, a Registration Statement registering for resale all shares of Common Stock owned by its holders of restricted shares; consistent with the terms and provisions of the Registration Rights Agreements, attached hereto as Exhibits 10.3, 10.4, and 10.5. The holders of any registrable securities removed from the Registration Statement a result of a Rule 415 or other comment from the SEC shall have “piggyback” registration rights for the shares of Common Stock or Common Stock underlying such warrants with respect to any registration statement filed by the Company following the effectiveness of the Registration Statement which would permit the inclusion of these shares. The Company has agreed to use its reasonable efforts to have the registration statement declared effective within 90 days of filing the registration statement.
The Company shall keep the Registration Statement “evergreen” for one (1) year from the date it is declared effective by the SEC or until Rule 144 of the Securities Act is available to Investors herein with respect to all of their shares, whichever is earlier.
Description of Investor Warrants
After the consummation of the Share Exchange and the simultaneous closing of the Offering, there were Investor Warrants issued to purchase 1,418,333 shares of Common Stock held by investors purchasing Units in the Offering. Each Investor Warrant entitles the holder to purchase one share of Common Stock at a purchase price of $0.72 during the five (5) year period commencing on the issuance of the Investor Warrants. Each Investor Warrant may be redeemed by the Company at any time following a period of any 20 of the 30 consecutive trading days in which the closing sales price of the Common Stock equals or exceeds twice the then exercise price of the Investor Warrant, on notice to the holder and at a redemption price of $0.001 per warrant share; provided the resale of the warrant shares has been registered under the Securities Act or are otherwise freely tradable. Such notice shall specify, among other things, that payment of the redemption price will be made upon surrender of the Investor Warrant, and that if the Investor Warrant is not exercised by the close of business on the date fixed for redemption, which shall be not less than 30 days prior to the date fixed for redemption, the exercise rights of the Warrant shall expire unless extended by the Company. The Investor Warrants contain provisions that permit cashless exercise by the holders thereof.
No fractional shares will be issued upon exercise of the Investor Warrants. If, upon exercise of the Investor Warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round up to the nearest whole number, the number of shares of Common Stock to be issued to the Investor Warrant holder.
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Description of New Warrants
After the consummation of the Share Exchange, there were 1,000,000 Investor Warrants issued to purchase 1,000,000 shares of Common Stock held by investors purchasing Units in the PeerLogix Offering. Each New Warrant entitles the holder to purchase one share of Common Stock at a purchase price of $0.60 during the five (5) year period commencing on the issuance of the New Warrants. Each New Warrant may be redeemed by the Company at any time following a period of any 20 of the 30 consecutive trading days in which the closing sales price of the Common Stock equals or exceeds twice the then exercise price of the New Warrant, on notice to the holder and at a redemption price of $0.001 per warrant share; provided the resale of the warrant shares has been registered under the Securities Act or are otherwise freely tradable. Such notice shall specify, among other things, that payment of the redemption price will be made upon surrender of the New Warrant, and that if the New Warrant is not exercised by the close of business on the date fixed for redemption, which shall be not less than 30 days prior to the date fixed for redemption, the exercise rights of the New Warrant shall expire unless extended by the Company. The New Warrants contain provisions that permit cashless exercise by the holders thereof.
No fractional shares will be issued upon exercise of the New Warrants. If, upon exercise of the New Warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round up to the nearest whole number, the number of shares of Common Stock to be issued to the New Warrant holder.
Placement Agent Warrants
In connection with the PeerLogix Offering and the Offering, the Placement Agent was issued, in addition to other compensation, seven (7) year warrants to acquire 50,000 PeerLogix Units and seven (7) year warrants to acquire 85,100 Units that are identical to the Units sold in the Offering.
Anti-Takeover Effects of Provisions of Nevada State Law
We may be or in the future we may become subject to Nevada’s control share laws. A corporation is subject to Nevada’s control share law if it has more than 200 stockholders, at least 100 of whom are stockholders of record and residents of Nevada, and if the corporation does business in Nevada, including through an affiliated corporation. This control share law may have the effect of discouraging corporate takeovers. The Company currently has less than 200 stockholders.
The control share law focuses on the acquisition of a “controlling interest,” which means the ownership of outstanding voting shares that would be sufficient, but for the operation of the control share law, to enable the acquiring person to exercise the following proportions of the voting power of the corporation in the election of directors: (1) one-fifth or more but less than one-third; (2) one-third or more but less than a majority; or (3) a majority or more. The ability to exercise this voting power may be direct or indirect, as well as individual or in association with others.
The effect of the control share law is that an acquiring person, and those acting in association with that person, will obtain only such voting rights in the control shares as are conferred by a resolution of the stockholders of the corporation, approved at a special or annual meeting of stockholders. The control share law contemplates that voting rights will be considered only once by the other stockholders. Thus, there is no authority to take away voting rights from the control shares of an acquiring person once those rights have been approved. If the stockholders do not grant voting rights to the control shares acquired by an acquiring person, those shares no not become permanent non-voting shares. The acquiring person is free to sell the shares to others. If the buyer or buyers of those shares themselves do not acquire a controlling interest, the shares are not governed by the control share law.
If control shares are accorded full voting rights and the acquiring person has acquired control shares with a majority or more of the voting power, and stockholder of record, other than the acquiring person, who did not vote in favor of approval of voting rights, is entitled to demand fair value for such stockholder’s shares.
In addition to the control share law, Nevada has a business combination law, which prohibits certain business combinations between Nevada corporations and “interested stockholders” for three years after the interested stockholder first becomes an interested stockholder, unless the corporation’s board of directors approves the combination in advance. For purposes of Nevada law, an interested stockholder is any person who is: (a) the beneficial owner, directly or indirectly, of 10% or more of the voting power of the outstanding voting shares of the corporation, or (b) an affiliate or associate of the corporation and at any time within the previous three years was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then-outstanding shares of the corporation. The definition of “business combination” contained in the statute is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquirer to use the corporation’s assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other stockholders.
The effect of Nevada’s business combination law is to potentially discourage parties interested in taking control of the Company from doing so if it cannot obtain the approval of our board of directors.
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MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The Common Stock is currently available for trading in the over-the-counter market and is quoted on the OTC Bulletin Board under the symbol “RLQT”. As of the Closing Date, there was no bid history for the Common Stock, because the Common Stock had never been traded.
Trades in the Common Stock may be subject to Rule 15g-9 of the Exchange Act, which imposes requirements on broker/dealers who sell securities subject to the rule to persons other than established customers and accredited investors. For transactions covered by the rule, broker/dealers must make a special suitability determination for purchasers of the securities and receive the purchaser’s written agreement to the transaction before the sale.
The SEC also has rules that regulate broker/dealer practices in connection with transactions in “penny stocks.” Penny stocks generally are equity securities with a price of less than $5.00 (other than securities listed on certain national exchanges, provided that the current price and volume information with respect to transactions in that security is provided by the applicable exchange or system). The penny stock rules require a broker/dealer, before effecting a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker/dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker/dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker/dealer and salesperson compensation information, must be given to the customer orally or in writing before effecting the transaction, and must be given to the customer in writing before or with the customer’s confirmation. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for shares of Common Stock. As a result of these rules, investors may find it difficult to sell their shares.
Holders
As of the date of this filing, there are approximately 19 record holders of 17,050,002 shares of the Common Stock. As of the date of this filing, 6,196,832 shares of Common Stock are issuable upon the exercise of outstanding warrants and options. The shares issued in connection with the Transactions are “restricted securities,” which may be sold or otherwise transferred only if such shares are first registered under the Securities Act or are exempt from the registration requirements. As discussed elsewhere in this Current Report, we have agreed to file a registration statement within 60 days of the Closing Date, to register the shares of Common Stock owned by our shareholders and shares of Common Stock issuable upon exercise of the Investor Warrants issued in the Offering and the shares of Common Stock issuable upon exercise of the New Warrants.
Dividend Policy
The Company has never declared or paid dividends. We do not intend to pay cash dividends on our Common Stock for the foreseeable future, but currently intend to retain any future earnings to fund the development and growth of our business. The payment of dividends if any, on the Common Stock will rest solely within the discretion of our board of directors and will depend, among other things, upon our earnings, capital requirements, financial condition, and other relevant factors.
LEGAL PROCEEDINGS
From time to time, the Company may be named in claims arising in the ordinary course of business. Currently, no legal proceedings or claims are pending against or involve the Company that, in the opinion of management, could reasonably be expected to have a material adverse effect on our business and financial condition.
RECENT SALES OF UNREGISTERED SECURITIES
Sales by PeerLogix
Prior to the commencement of the Offering, PeerLogix completed the PeerLogix Offering, wherein it sold 1,000,000 PeerLogix Units to investors at a price of $0.50 per PeerLogix Unit. Each Unit consists of one share of Common Stock and a warrant to purchase one share of Common Stock. The warrants are exercisable for a period of five years at a purchase price of $0.60 per share of Common Stock.
The sale of PeerLogix Units (including the common stock, warrants and the common stock underlying the warrants, was exempt from registration under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D as promulgated by the SEC. In the Offering, no general solicitation was made by us or any person acting on our behalf. The PeerLogix Units were sold pursuant to transfer restrictions, and the certificates for shares of common stock and warrants underlying the PeerLogix Units sold in the Offering contain appropriate legends stating that such securities are not registered under the Securities Act and may not be offered or sold absent registration or an exemption from registration.
PeerLogix paid the Placement Agent a commission of $50,000 (10% of the funds raised from such investors in the PeerLogix Offering) in connection with the PeerLogix Offering. In addition, the Placement Agent received warrants to purchase 50,000 PeerLogix Units at a price of $0.60 per PeerLogix Unit.
34 |
Sales by Realco
Concurrently with the closing of the Share Exchange and in contemplation of the Share Exchange, the Company completed the Offering of 1,418,333 Units, at a price of $0.60 per Unit. Each Unit consists of one share of Common Stock and one Investor Warrant to purchase one share of Common Stock. The Investor Warrants are exercisable for a period of five years at a purchase price of $0.72 per share of Common Stock. The Offering was made only to accredited investors, as defined under Regulation D, Rule 501(a). On the Closing Date, the investors in the Offering collectively purchased 1,418,333 Units for total cash consideration of $851,000.
The sale of Units in the Offering was exempt from registration under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D as promulgated by the SEC. In the Offering, no general solicitation was made by us or any person acting on our behalf. The Units were sold pursuant to transfer restrictions, and the certificates for shares of Common Stock and Investor Warrants underlying the Units sold in the Offering contain appropriate legends stating that such securities are not registered under the Securities Act and may not be offered or sold absent registration or an exemption from registration.
The Company paid the Placement Agent a commission of 10% of the funds raised from such investors in the Offering. In addition, the Placement Agent received warrants to purchase a number of Units equal to 10% of the Units sold to investors in the Offering. As a result of the foregoing arrangement, at the initial closing of the Offering, the Placement Agent was paid commissions of $110,630 and was issued warrants to purchase 85,100 Units at an exercise price of $0.60 per Unit.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Nevada Revised Statutes (“ NRS ”) Sections 78.7502 and 78.751 provide us with the power to indemnify any of our directors, officers, employees and agents. The person entitled to indemnification must have conducted himself in good faith, and must reasonably believe that his conduct was in, or not opposed to, our best interests. In a criminal action, the director, officer, employee or agent must not have had reasonable cause to believe that his conduct was unlawful.
Under NRS Section 78.751, advances for expenses may be made by agreement if the director or officer affirms in writing that he has met the standards for indemnification and will personally repay the expenses if it is determined that such officer or director did not meet those standards.
Our bylaws include an indemnification provision under which we have the power to indemnify our directors, officers, former directors and officers, employees and other agents (including heirs and personal representatives) against all costs, charges and expenses actually and reasonably incurred, including an amount paid to settle an action or satisfy a judgment to which a director or officer is made a party by reason of being or having been a director or officer of the Company. Our bylaws further provide for the advancement of all expenses incurred in connection with a proceeding upon receipt of an undertaking by or on behalf of such person to repay such amounts if it is determined that the party is not entitled to be indemnified under our bylaws. No advance will be made by the Company to a party if it is determined that the party acting in bad faith. These indemnification rights are contractual, and as such will continue as to a person who has ceased to be a director, officer, employee or other agent, and will inure to the benefit of the heirs, executors and administrators of such a person.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted for our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
PART F/S
Reference is made to the disclosure set forth under Item 9.01 of this Current Report, which disclosure is incorporated herein by reference.
INDEX TO EXHIBITS
See Item 9.01(c) below, which is incorporated by reference herein.
DESCRIPTION OF EXHIBITS
See Exhibit Index below and the corresponding exhibits, which are incorporated by reference herein.
35 |
Item 3.02. Unregistered Sales of Equity Securities.
The disclosure set forth in Item 2.01 to this Current Report is incorporated into this item by reference.
Item 4.01. Changes in Registrant’s Certifying Accountant.
On August 14, 2015, we engaged Marcum LLP as our independent registered public accounting firm , and effective August 14, 2015, we dismissed John Scrudato CPA (“Scrudato”), as our independent registered public accounting firm. The decision to dismiss Scrudato and to appoint Marcum LLP was approved by our board of directors.
Scrudato’s report on our financial statements for either of the two most recent fiscal years ended December 31, 2014 and 2013 did not contain an adverse opinion or disclaimer of opinion, or qualification or modification as to uncertainty, audit scope, or accounting principles, except that such report on our financial statements contained an explanatory paragraph in respect to the substantial doubt about our ability to continue as a going concern.
During our two most recent fiscal years ended December 31, 2014 and 2013 and in the subsequent interim period through the date of dismissal, there were no disagreements, resolved or not, with Scrudato on any matter of accounting principles or practices, financial statement disclosure, or audit scope and procedures, which disagreement(s), if not resolved to the satisfaction of Scrudato, would have caused Scrudato to make reference to the subject matter of the disagreement(s) in connection with its report. During our two most recent fiscal years ended December 31, 2014 and 2013 and in the subsequent interim period through the date of dismissal, there were no reportable events as described in Item 304(a)(1)(v) of Regulation S-K.
We provided Scrudato with a copy of the disclosure in this Item 4.01 of this Current Report on Form 8-K prior to its filing with the Securities and Exchange Commission, and requested that it furnish us with a letter addressed to the Securities and Exchange Commission stating whether it agrees with the statements made in this Item 4.01 of this current report on Form 8-K, and if not, stating the respects with which it does not agree. A copy of the letter provided from Scrudato will be filed as an exhibit to a Current Report on Form 8-K upon receipt.
During our two most recent fiscal years ended December 31, 2014 and 2013 and in the subsequent interim period through the date of appointment, we have not consulted with Marcum LLP regarding either the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, nor has Marcum LLP provided to us a written report or oral advice that Marcum LLP concluded was an important factor considered by us in reaching a decision as to the accounting, auditing or financial reporting issue. In addition, during such periods, we have not consulted with Marcum LLP regarding any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) and the related instructions) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).
Item 5.01. Changes in Control of the Registrant.
As a result of the private placement and the Share Exchange, the Company experienced a change in control, with the former stockholders of PeerLogix acquiring control of the Company. The disclosure set forth in Item 2.01 to this Current Report is incorporated into this item by reference.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
The disclosure set forth in Item 2.01 to this Current Report is incorporated into this item by reference.
Item 5.06. Change in Shell Company Status.
The disclosure set forth in Item 2.01 to this Current Report is incorporated into this item by reference. As a result of the completion of the Share Exchange, we believe that we are no longer a shell company, as defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act.
36 |
Item 9.01. Financial Statements and Exhibits.
(a) Financial Statements of business acquired
In accordance with Item 9.01(a), PeerLogix’s unaudited financial statements as of March 31, 2015 and for the years ended December 31, 2014 and 2013 are included with this Current Report beginning on Page F-1.
(b) Pro forma financial information
In accordance with Item 9.01(b), unaudited pro-forma consolidated financial statements are included with this Current Report beginning on Page F-28.
(c) Exhibits [to be completed]
Exhibit No. | Description | |
2.1 | Securities Exchange Agreement, dated as of August 14, 2015, by and among Reaclo International, Inc., PeerLogix Technologies, Inc. and the shareholders of PeerLogix Technologies, Inc.* | |
2.2 | Plan of Share Exchange, dated as of August 14, 2015 by and between Realco International, Inc. and PeerLogix Technologies, Inc.* | |
2.3 | Articles of Exchange* | |
3.1 | Articles of Incorporation of Realco, Inc. | |
3.2 | Bylaws of Realco, Inc. | |
3.3 | Certificate of Incorporation of Peerlogix Technologies, Inc.* | |
3.4 | Bylaws of PeerLogix Technologies, Inc.* | |
10.1 | Executive Employment Agreement between PeerLogix Technologies, Inc. and William Gorfein dated as of August 14, 2015.* | |
10.2 | Executive Employment Agreement between PeerLogix Technologies, Inc. and Joshua Partridge dated as of August 14, 2015.* | |
10.3 | Registration Rights Agreement between Realco International, Inc. and the Purchasers party thereto dated as of August 14, 2015.* | |
10.4 | Registration Rights Agreement between Realco International, Inc. and Placement Agent dated as of August 14, 2015.* | |
10.5 | Registration Rights Agreement between Realco International, Inc. and the Stockholders party thereto dated as of August 14, 2015.* | |
10.6 | Form of Subscription Agreement * | |
10.7 | Form of Warrant to Purchase Common Stock* | |
10.8 | Form of Warrant to Purchase Units of Realco International, Inc.* | |
10.9 | Escrow Agreement * | |
10.10 | Escrow Agreement Extension Notice* | |
10.11 | Peerlogix, Inc. 2015 Equity Incentive Plan* | |
10.12 | Peerlogix Technologies, Inc. 2015 Equity Incentive Plan* | |
16 | Letter re change in certifying accountant** | |
21.1 | Subsidiaries of Realco International, Inc.* |
* Filed herewith
** To be filed by amendment
37 |
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.
REALCO INTERNATIONAL, INC. |
|
Date: August 14 , 2015 | By: /s/ William Gorfein |
Name: William Gorfein | |
Title: Chief Executive Officer |
38 |
Peerlogix, Inc.
March 31, 2015 and 2014
Index to the Condensed Consolidated Financial Statements
Contents | Page(s) | |
Condensed Consolidated Balance Sheets at March 31, 2015 (unaudited) and December 31, 2014 | F- 2 | |
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2015 and 2014 (unaudited) | F- 3 | |
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014 (unaudited) | F-4 | |
Condensed Consolidated Notes to the Financial Statements (unaudited) | F- 5 |
F- 1 |
Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.)
Condensed Consolidated Balance Sheets
See accompanying notes to the condensed consolidated financial statements
F- 2 |
Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.)
Condensed Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended | ||||||||
March 31, 2015 | March 31, 2014 | |||||||
Revenue | $ | – | $ | – | ||||
Operating expenses | ||||||||
Compensation | 37,320 | 9,002 | ||||||
Research and development expenses | 20,894 | 5,856 | ||||||
Professional fees | 10,915 | 112,505 | ||||||
General and administrative expenses | 28,520 | 7,032 | ||||||
Operating expenses | 97,649 | 134,395 | ||||||
Loss from operations | (97,649 | ) | (134,395 | ) | ||||
Interest expense | (1,658 | ) | (275 | ) | ||||
Net loss | $ | (99,307 | ) | $ | (134,670 | ) | ||
Net loss per common share - basic and diluted | $ | (0.01 | ) | $ | (0.01 | ) | ||
Weighted average common shares outstanding during the period - basic and diluted | 16,315,002 | 15,266,800 |
See accompanying notes to the condensed consolidated financial statements
F- 3 |
Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended | ||||||||
March 31, 2015 | March 31, 2014 | |||||||
Cash Flows From Operating Activities: | ||||||||
Net loss | $ | (99,307 | ) | $ | (134,670 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
Class A units issued for services | – | 64,037 | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other current assets | (19,900 | ) | (990 | ) | ||||
Accounts payable and accrued liabilities | 15,246 | (368 | ) | |||||
Net Cash Used In Operating Activities | (103,961 | ) | (71,991 | ) | ||||
Cash Flows From Financing Activities: | ||||||||
Proceeds from demand loans | 5,500 | – | ||||||
Repayment of demand loans | (5,500 | ) | – | |||||
Proceeds from notes payable - related party | – | 12,000 | ||||||
Repayment of notes payable - related party | (53,725 | ) | – | |||||
Proceeds from officer loans | 3,741 | 6,206 | ||||||
Proceeds from convertible notes | – | 50,000 | ||||||
Net proceeds from issuance of common stock and warrants | 435,737 | – | ||||||
Net Cash Provided By Financing Activities | 385,753 | 68,206 | ||||||
Net change in cash | 281,792 | (3,785 | ) | |||||
Cash at beginning of period | 10,049 | 4,906 | ||||||
Cash at end of period | $ | 291,841 | $ | 1,121 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Interest paid | $ | 1,860 | $ | – | ||||
Income tax paid | $ | – | $ | – | ||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Common stock and warrants issued for conversion of convertible notes | $ | 25,000 | $ | – | ||||
Stock issuance costs paid in the form of warrants | $ | 25,000 | $ | – | ||||
Forgiveness of related party loan | $ | 2,577 | $ | – |
See accompanying notes to the condensed consolidated financial statements
F- 4 |
Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.)
March 31, 2015 and 2014
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Organization and Operations
IP Squared Technologies Holdings, LLC
IP Squared Technologies Holdings, LLC (the “LLC”) was organized as a Limited Liability Company under the laws of the State of Delaware on November 20, 2012. The LLC is a data aggregation company providing a proprietary software as a service (“SAAS”) platform which enables the tracking and cataloguing of Torrent files and Torrent networks in order to determine consumer trends and preferences based upon media consumption.
Peerlogix Technologies, Inc.(formerly Peerlogix, Inc.)
Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.) (the “Company”) (“Peerlogix”) was incorporated on December 9, 2014 under the laws of the State of Delaware for the sole purpose of acquiring all of the outstanding membership units of IP Squared Technologies Holdings, LLC. Upon incorporation, the Company issued an aggregate of 16,000,002 common shares of the newly formed corporation’s common stock to the members of the LLC for all of the outstanding membership units of IP Squared Technologies Holdings, LLC ( the “Recapitalization”). The transaction utilizes the capital structure of the Company and the assets and liabilities of IP Squared Technologies Holdings, LLC, which are recorded at historical cost. No value was given to the stock issued by the newly formed corporation. Therefore, the shares were recorded to reflect the $0.001 par value and paid in capital was recorded as a negative amount of ($16,000). See Note 8
Basis of Presentation - Unaudited Interim Financial Information
The accompanying unaudited interim condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim condensed consolidated financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year, or any other period. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2014 and notes thereto contained elsewhere in this document.
Note 2 - Going Concern and Management Liquidity Plans
The Company has not yet generated any revenues and continues to incur recurring losses from operations and has an accumulated deficit since inception. Accordingly, the accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred a net loss of approximately $100,000 for the three months ended March 31, 2015. These conditions raise substantial doubt about the Company's ability to continue as a going concern.
The Company's primary source of operating funds since inception has been cash proceeds from the sale of Class A units, common stock and common stock warrants, convertible debentures and notes payable. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.
The Company requires immediate capital to remain viable. In addition, the Company is currently in default on certain notes payable (see Note 11). The Company can give no assurance that such financing will be available on terms advantageous to the Company, or at all. Should the Company not be successful in obtaining the necessary financing to fund its operations, the Company would need to curtail certain or all of its operational activities. There can be no assurance that such a plan will be successful. The accompanying consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
Accordingly, the accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the condensed consolidated financial statements do not necessarily purport to represent realizable or settlement values. The condensed consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.
F- 5 |
Note 3 – Summary of Significant Accounting Policies
Principles of Consolidation
The Company's wholly-owned consolidated subsidiary is as follows:
Name of consolidated subsidiary or entity | State or other jurisdiction of incorporation or organization | Date of incorporation or formation (date of acquisition, if applicable) |
Attributable
interest |
|||
IP Squared Technologies Holdings, LLC |
Delaware |
November 20, 2012 (December 9, 2014) |
100% |
The condensed consolidated financial statements include all accounts of the Company and its wholly owned subsidiary as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014. All significant inter-company balances and transactions have been eliminated.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from these estimates. The Company’s significant estimates and assumptions include the fair value of the Company’s equity instruments, convertible debt, stock-based compensation, and the valuation allowance relating to the Company’s deferred tax assets.
Accounting for Warrants
The Company accounts for the issuance of common stock purchase warrants issued in connection with debt and equity offerings in accordance with the provisions of ASC 815, Derivative Instruments and Hedging Activities (“ASC 815”). The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).
The Company assessed the classification of its common stock purchase warrants as of the date of each equity offering and determined that such instruments met the criteria for equity classification, as the settlement terms indicate that the instruments are indexed to the entity’s underlying stock.
Research and Development
Research and development (“R&D”) expenses are charged to operations as incurred. During the three months ended March 31, 2015 and 2014 the Company incurred R&D expenses of $20,894 and $5,856, respectively.
Advertising
The Company expenses advertising when incurred. During the three months ended March 31, 2015 and 2014 the Company incurred advertising expenses of $895 and $0, respectively.
Net Loss Per Share
Basic loss per share was computed using the weighted average number of outstanding common shares. Diluted loss per share includes the effect of dilutive common stock equivalents from the assumed exercise of options, warrants, convertible preferred stock and convertible notes. Common stock equivalents were excluded in the computation of diluted loss per share since their inclusion would be anti-dilutive. The weighted average common shares outstanding of the Company at March 31, 2014 have been retroactively recast to reflect the Recapitalization.
Total shares issuable upon the exercise of warrants and conversion of convertible promissory notes for the three months ended March 31, 2015 and 2014 were as follows:
March 31, | ||||||||
2015 | 2014 | |||||||
Warrants | 1,100,000 | – | ||||||
Convertible promissory notes | 103,725 | 80,290 | ||||||
Total | 1,203,725 | 80,290 |
F- 6 |
Recently Issued Accounting Pronouncements
The FASB and the SEC have issued certain accounting standards updates and regulations that will become effective in subsequent periods; however, management of the Company does not believe that any of those updates would have significantly affected the Company’s financial accounting measures or disclosures had they been in effect during 2015 or 2014, and does not believe that any of those pronouncements will have a significant impact on the Company’s condensed consolidated financial statements at the time they become effective.
Subsequent Events
Management has evaluated subsequent events to determine whether events or transactions occurring through August 14, 2015, the date on which the financial statements were available to be issued, will require potential adjustment to or disclosure in the Company’s condensed consolidated financial statements.
Note 4 – Demand Loans Payable
On January 30, 2015 an officer of a related party to the Company advanced $5,500 to the Company. The proceeds from the non-interest bearing advance were used for general operating expenses. The Company did not impute interest on the loan as it was deemed to be de minimus to the financial statements. On March 5, 2015 the loan was repaid.
Note 5 - Notes Payable – Related Party
On March 6, 2015, the Company repaid a Senior Unsecured Note including accrued interest in the amount of $55,585 to a shareholder of the Company. The note was due and payable on the earlier of (i) June 30, 2015 and (ii) the date upon which the Company receives gross proceeds of any offering of indebtedness, equity securities, or other of no less than $500,000. The remaining outstanding principal and interest on the note in the amount of $2,577 was forgiven and accounted for as contributed capital.
Note 6 – Convertible Notes Payable
a)
Senior Unsecured Convertible Note
On December 1, 2014, the Company issued a Senior Unsecured Convertible Note in the principal amount of $12,500. The note bears interest at a rate of 5% per annum. Principal and accrued interest on the note is due and payable on the earlier of (i) September 12, 2015 and (ii) the date upon which the Company receives gross proceeds of any offering of indebtedness, equity securities, or other of no less than $200,000 (the “Qualified Financing”). The note will automatically convert at the effective time of a Qualified Financing under the same terms given to investors in the Qualified Financing. During the first quarter of 2015 the Company entered into a Qualified Financing and the note became convertible. As per the terms of the Qualified Financing, the noteholder was issued 25,000 shares of common stock and 25,000 warrants entitling the holder to purchase one share of common stock for a five-year period at an exercise price of $0.60 per share.
b)
Senior Unsecured Convertible Note
On December 18, 2014, the Company issued a Senior Unsecured Convertible Note in the principal amount of $12,500. The note bears interest at a rate of 5% per annum. Principal and accrued interest on the note is due and payable on the earlier of (i) September 12, 2015 and (ii) the date upon which the Company receives gross proceeds of a Qualified Financing. The note will automatically convert at the effective time of a Qualified Financing under the same terms given to investors in the Qualified Financing. During the first quarter of 2015 the Company entered into a Qualified Financing and the note became convertible. As per the terms of the Qualified Financing, the noteholder was issued 25,000 shares of common stock and 25,000 warrants entitling the holder to purchase one share of common stock for a five-year period at an exercise price of $0.60 per share.
Note 7 - Loans Payable - Officers
During the three months ended March 31, 2015 and the years ended December 31, 2014, 2013 and 2012, the Company’s officer made non-interest bearing loans to the Company. As of March 31, 2015 and December 31, 2014 the Company is reflecting a liability of $33,348, and $29,607, respectively. The Company did not impute interest on the loan as it was deemed to be de minimus to the financial statements.
F- 7 |
Note 8 - Stockholders’ Deficit
Common stock
During February and March 2015, the Company sold $500,000 of Units to investors. Each Unit was sold at a price of $0.50 per Unit and consisted of one (1) share of common stock, par value $0.001 per share, of PeerLogix and one (1) warrant entitling the holder to purchase one share of common stock for a five-year period at an exercise price of $0.60 per share (the “Precedent Financing). An aggregate of 1,000,000 shares and 1,000,000 warrants were issued to such investors. All of the net proceeds that PeerLogix received from the Precedent Financing will continue to be utilized for PeerLogix’s working capital needs prior to the closing of a planned future reorganization with a public entity (“Pubco”) and private placement. All of the Units sold in the Precedent Financing will be converted to Pubco securities upon the closing of the planned reorganization. The placement agent received as compensation for its services $50,000 (10% commission) and PeerLogix warrants that will automatically convert upon the closing of the reorganization into warrants to purchase 50,000 Pubco Units at a price of $0.01 per Unit, with each Unit consisting of one share of Pubco common stock and one warrant to purchase a share of Pubco common stock at a price of $0.60 per Share. The value of the warrants was a direct cost of the private placement and has been recorded as a reduction in additional paid in capital. In addition the Company incurred legal and other miscellaneous costs in the amount of $14,263 related to the transaction.
Note 9 - Stock Warrants
The following tables set forth information concerning the Company's warrants outstanding as of, and during the three months ended March 31, 2015:
Shares Underlying Warrants | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||||
Outstanding at December 31, 2014 | – | $ | – | $ | – | |||||||||
Granted | 1,100,000 | 0.57 | – | |||||||||||
Expired | – | – | – | |||||||||||
Exercised | – | – | – | |||||||||||
Cancelled | – | – | – | |||||||||||
Outstanding at March 31, 2015 | 1,100,000 | 0.57 | – |
The following is additional information with respect to the Company's warrants as of March 31, 2015:
Number of Warrants | Range of Exercise Price | Weighted Average Remaining Contractual Life (In Years) |
Average Exercise Price |
Currently Exercisable | |||||
1,100,000 | $0.01 - $0.60 | 5.00 | $ | 0.57 | 1,100,000 | ||||
1,100,000 | 1,100,000 |
Note 10 - Commitments and Contingencies
Litigations, Claims and Assessments
In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. There are no such matters that are deemed material to the condensed consolidated financial statements as of March 31, 2015 and December 31, 2014.
Operating Leases
The Company has an operating lease for its New York office facility under a month-to-month agreement. Currently, the Company pays monthly rental payments of approximately $900. Rent expense for the three months ended March 31, 2015 and 2014 totaled $2,700 and $1,364, respectively.
F- 8 |
Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.)
December 31, 2014 and 2013
Index to the Consolidated Financial Statements
Contents | Page(s) | |
Report of Independent Registered Public Accounting Firm | F-10 | |
Consolidated Balance Sheets at December 31, 2014 and 2013 | F-11 | |
Consolidated Statements of Operations for the Years Ended December 31, 2014 and 2013 | F-12 | |
Consolidated Statements of Stockholders’ Deficit (Members’ Deficit) for the Years Ended December 31, 2014 and 2013 | F-13 | |
Consolidated Statements of Cash Flows for the Years Ended December 31, 2014 and 2013 | F-14 | |
Consolidated Notes to the Financial Statements | F-15 |
F- 9 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
and Stockholders of Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.)
We have audited the accompanying consolidated balance sheet of Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.) (the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of operations, stockholders’ deficit (members’ deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.) as of December 31, 2014 and 2013, and the consolidated results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully discussed in Note 2 to the consolidated financial statements, the Company has not yet generated any revenues, has incurred net losses since inception and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Marcum LLP
Marcum LLP
New York, NY
August 14, 2015
F- 10 |
Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.)
Consolidated Balance Sheets
See accompanying notes to the consolidated financial statements .
F- 11 |
Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.)
Consolidated Statements of Operations
For the Years Ended | ||||||||
December 31,
2014 |
December 31,
2013 |
|||||||
Revenue | $ | – | $ | 250 | ||||
Operating expenses | ||||||||
Compensation | 26,052 | 23,606 | ||||||
Research and development expenses | 57,407 | 28,675 | ||||||
Professional fees | 126,411 | 17,872 | ||||||
General and administrative expenses | 61,726 | 5,399 | ||||||
Operating expenses | 271,596 | 75,552 | ||||||
Loss from operations | (271,596 | ) | (75,302 | ) | ||||
Interest expense | (3,563 | ) | – | |||||
Net loss | $ | (275,159 | ) | $ | (75,302 | ) | ||
Net loss per common share - basic and diluted | $ | (0.02 | ) | $ | (0.01 | ) | ||
Weighted average number of common shares outstanding during the period - basic and diluted | ||||||||
Weighted average common shares outstanding - basic and diluted | 15,819,212 | 14,660,166 |
See accompanying notes to the consolidated financial statements
F- 12 |
Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.)
Consolidated Statements of Stockholders' Deficit (Members' Deficit)
For the Years Ended December 31, 2014 and 2013
Total | |||||||||||||||||||||
Common Stock | Additional | Members'/ | |||||||||||||||||||
Class A Units | par value $0.001 | Paid-in | Accumulated | Stockholders' | |||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | |||||||||||||||
Balance, January 1, 2013 | 10,000 | $ | – | – | $ | – | $ | – | $ | (6,770 | ) | $ | (6,770 | ) | |||||||
Class A units issued for cash | 472 | 45,000 | – | – | – | – | 45,000 | ||||||||||||||
Net loss | – | – | – | – | – | (75,302 | ) | (75,302 | ) | ||||||||||||
Balance, December 31, 2013 | 10,472 | 45,000 | – | – | – | (82,072 | ) | (37,072 | ) | ||||||||||||
Class A units issued for services | 698 | 64,037 | – | – | – | – | 64,037 | ||||||||||||||
Recapitalization from LLC to corporation | (11,170 | ) | (109,037 | ) | 16,000,002 | 16,000 | (239,727 | ) | 332,764 | – | |||||||||||
Net loss | – | – | – | – | – | (275,159 | ) | (275,159 | ) | ||||||||||||
Balance, December 31, 2014 | – | $ | – | 16,000,002 | $ | 16,000 | $ | (239,727 | ) | $ | (24,467 | ) | $ | (248,194 | ) |
See accompanying notes to the consolidated financial statements
F- 13 |
Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.)
Consolidated Statements of Cash Flows
For the Years Ended | ||||||||
December 31, 2014 | December 31, 2013 | |||||||
Cash Flows From Operating Activities: | ||||||||
Net loss | $ | (275,159 | ) | $ | (75,302 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
Class A units issued for services | 64,037 | – | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | (495 | ) | – | |||||
Accounts payable and accrued liabilities | 62,667 | 12,056 | ||||||
Net Cash Used In Operating Activities | (148,950 | ) | (63,246 | ) | ||||
Cash Flows From Financing Activities: | ||||||||
Proceeds from demand loans | – | 15,000 | ||||||
Proceeds from notes payable - related party | 53,725 | 2,433 | ||||||
Proceeds from officer loans | 17,368 | 5,719 | ||||||
Proceeds from convertible notes | 83,000 | – | ||||||
Proceeds from issuance of Class A units | – | 45,000 | ||||||
Net Cash Provided By Financing Activities | 154,093 | 68,152 | ||||||
Net change in cash | 5,143 | 4,906 | ||||||
Cash at beginning of year | 4,906 | – | ||||||
Cash at end of year | $ | 10,049 | $ | 4,906 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Interest paid | $ | – | $ | – | ||||
Income tax paid | $ | – | $ | – | ||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Recapitalization from LLC to corporation | $ | 223,727 | $ | – |
See accompanying notes to the consolidated financial statements
F- 14 |
Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.)
December 31, 2014 and 2013
Notes to the Consolidated Financial Statements
Note 1 - Organization and Nature of Operations
IP Squared Technologies Holdings, LLC
IP Squared Technologies Holdings, LLC (the “LLC”) was organized as a Limited Liability Company under the laws of the State of Delaware on November 20, 2012. The LLC is a data aggregation company providing a proprietary software as a service (“SAAS”) platform which enables the tracking and cataloguing of Torrent files and Torrent networks in order to determine consumer trends and preferences based upon media consumption.
Peerlogix Technologies, Inc (formerly Peerlogix, Inc.).
Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.) (the “Company”) (“Peerlogix”) was incorporated on December 9, 2014 under the laws of the State of Delaware for the sole purpose of acquiring all of the outstanding membership units of IP Squared Technologies Holdings, LLC. Upon incorporation, the Company issued an aggregate of 16,000,002 common shares of the newly formed corporation’s common stock to the members of the LLC for all of the outstanding membership units of IP Squared Technologies Holdings, LLC ( the “Recapitalization”). The transaction utilizes the capital structure of the Company and the assets and liabilities of IP Squared Technologies Holdings, LLC, which are recorded at historical cost. No value was given to the stock issued by the newly formed corporation. Therefore, the shares were recorded to reflect the $0.001 par value and paid in capital was recorded as a negative amount of ($16,000). See Note 8.
Note 2 - Going Concern and Management Liquidity Plans
The Company has not yet generated any revenues and continues to incur recurring losses from operations and has an accumulated deficit since inception. Accordingly, the accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred a net loss of approximately $275,000 for the year ended December 31, 2014 and has a working capital deficit of approximately $190,000 as of December 31, 2014. These conditions raise substantial doubt about the Company's ability to continue as a going concern.
The Company's primary source of operating funds since inception has been cash proceeds from the sale of Class A units, convertible debentures and notes payable. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.
The Company requires immediate capital to remain viable. In addition, the Company is currently in default on certain notes payable. (see Note 11) The Company can give no assurance that such financing will be available on terms advantageous to the Company, or at all. Should the Company not be successful in obtaining the necessary financing to fund its operations, the Company would need to curtail certain or all of its operational activities. There can be no assurance that such a plan will be successful. The accompanying consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
Accordingly, the accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which contemplates continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the consolidated financial statements do not necessarily purport to represent realizable or settlement values. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.
Note 3 – Summary of Significant Accounting Policies
Basis of Presentation
The Company’s consolidated financial statements have been prepared in accordance with U.S. GAAP.
F- 15 |
Principles of Consolidation
The Company's wholly-owned consolidated subsidiary is as follows:
Name of consolidated subsidiary or entity | State or other jurisdiction of incorporation or organization | Date of incorporation or formation (date of acquisition, if applicable) |
Attributable
interest |
|||
IP Squared Technologies Holdings, LLC |
Delaware |
November 20, 2012 (December 9, 2014) |
100% |
The consolidated financial statements include all accounts of the Company and its wholly owned subsidiary as of December 31, 2014 and 2013 and for the years then ended. All significant inter-company balances and transactions have been eliminated.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from these estimates. The Company’s significant estimates and assumptions include the fair value of the Company’s equity instruments, convertible debt, stock-based compensation, and the valuation allowance relating to the Company’s deferred tax assets.
Concentration of Credit Risk
The Company maintains deposits in a financial institution which is insured by the Federal Deposit Insurance Corporation (“FDIC”). The balance at times may exceed federally insured limits.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. As of December 31, 2014 and 2013, the Company does not have any cash equivalents.
Income Taxes
Deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in effect for the years in which the temporary differences are expected to reverse. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of these differences that have been included or excluded in the financial statements or tax returns.
The Company follows the provisions of Accounting Standards Codification (“ASC”) Topic 740 “Income Taxes”, which prescribes a recognition threshold and measurement process for consolidated financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance also prescribes direction on the recognition, classification, interest and penalties in interim periods, disclosure and transition.
The Company classifies interest expense and any related penalties, if any, related to income tax uncertainties as a component of income tax expense. No interest or penalties have been recognized as of December 31, 2014 and 2013.
Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s financial statements for the years ended December 31, 2014 and 2013. The Company does not expect any significant changes in the unrecognized tax benefits within twelve months of the reporting date.
Prior to the Recapitalization in December 2014, the Company was a Delaware limited liability company that passed through income and losses to its members. As a result, the Company was not subject to any U.S. federal or state income taxes as the related tax consequences were reported by the individual members and would not have had a material impact on the consolidated financial statements. See Note 1.
Convertible Instruments
The Company bifurcates conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria includes circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule when the host instrument is deemed to be conventional as that term is described under applicable U.S. GAAP.
F- 16 |
When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. The Company also records, when necessary, deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the preferred shares.
Research and Development
Research and development (“R&D”) expenses are charged to operations as incurred. During the years ended December 31, 2014 and 2013 the Company incurred R&D expenses of $57,407 and $28,675, respectively.
Net Loss Per Share
Basic loss per share was computed using the weighted average number of outstanding common shares. Diluted loss per share includes the effect of dilutive common stock equivalents from the assumed exercise of options, warrants, convertible preferred stock and convertible notes. Common stock equivalents were excluded in the computation of diluted loss per share since their inclusion would be anti-dilutive. The weighted average common shares outstanding of the Company at December 31, 2014 and 2013 have been retroactively recast to reflect the Recapitalization.
Total shares issuable upon the conversion of convertible promissory notes for the years ended December 31, 2014 and 2013 were as follows:
December 31, | ||||||||
2014 | 2013 | |||||||
Convertible promissory notes | 96,248 | – | ||||||
Total | 96,248 | – |
Share-Based Compensation
The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and amortized over the respective employment agreements or director service periods. For non-employees, the fair value of the award is measured on the commitment date and generally re-measured on interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Stock-based compensation expense is recorded by the Company in the same expense classifications in the consolidated statements of operations as if such amounts were paid in cash.
Fair Value of Financial Instruments
The carrying amounts of cash, accounts payable, and accrued liabilities approximate fair value due to the short-term nature of these instruments.
The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures” which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |
Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |
Level 3 | Pricing inputs that are generally unobservable inputs and not corroborated by market data. |
F- 17 |
Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the warrant liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s Chief Financial Officer, who reports to the Chief Executive Officer, determine its valuation policies and procedures.
The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s Chief Financial Officer and are approved by the Chief Executive Officer.
Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.
No such items existed as of December 31, 2014 and 2013.
Recently Issued Accounting Pronouncements
In June 2014, the FASB issued ASU No. 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation,” (“ASU 2014-10”). ASU 2014-10 removes the definition of a development stage entity from the ASC, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, ASU 2014-10 eliminates the requirements for development stage entities to (1) present inception-to-date information in the statements of operations, cash flows, and stockholders’ equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. ASU 2014-10 is effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early adoption is permitted. The Company has elected to adopt ASU 2014-10 and, as a result, is not required to present the previously required development stage disclosures.
The FASB has issued ASU No. 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This ASU requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered.. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The Company is currently evaluating the effect of the ASU on its consolidated financial position, results of operations and cash flows.
In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15, which is effective for annual reporting periods ending after December 15, 2016, extends the responsibility for performing the going-concern assessment to management and contains guidance on how to perform a going-concern assessment and when going-concern disclosures would be required under U.S. GAAP. The Company elected to adopt ASU 2014-15 early. Management’s evaluations regarding the events and conditions that raise substantial doubt regarding the Company’s ability to continue as a going concern have been disclosed in Note 2 to our consolidated financial statements.
In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update 2015-03, Interest—Imputation of Interest. To simplify presentation of debt issuance costs, the amendments in this Update would require that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. The recognition and measurement guidance for debt issuance costs would not be affected by the amendments in this Update. This Accounting Standards Update is the final version of Proposed Accounting Standards Update 2014-250—Interest—Imputation of Interest (Subtopic 835-30), which has been deleted. The amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company is currently evaluating the effects of ASU 2015-03 on its consolidated financial statements.
The FASB and the SEC have issued certain accounting standards updates and regulations that will become effective in subsequent periods; however, management of the Company does not believe that any of those updates would have significantly affected the Company’s financial accounting measures or disclosures had they been in effect during 2014 or 2013, and does not believe that any of those pronouncements will have a significant impact on the Company’s consolidated financial statements at the time they become effective.
Subsequent Events
Management has evaluated subsequent events to determine whether events or transactions occurring through August 14, 2015, the date on which the financial statements were available to be issued, will require potential adjustment to or disclosure in the Company’s consolidated financial statements.
F- 18 |
Note 4 – Demand Loans Payable
On January 24, 2013 a family member of an officer of the Company advanced $15,000 to the Company. The proceeds from the non-interest bearing advance were used for general operating expenses. As of December 31, 2014 and 2013, the Company is reflecting a liability of $15,000. The Company did not impute interest on the loan as it was deemed to be de minimus to the financial statements.
Note 5 - Notes Payable – Related Party
On December 1, 2013, the Company issued a Senior Unsecured Note in the principal amount of $2,433 to a shareholder of the Company. The note bears interest at a rate of 5% per annum. Principal and accrued interest on the note is due and payable on the earlier of (i) June 30, 2015 and (ii) the date upon which the Company receives gross proceeds of any offering of indebtedness, equity securities, or other of no less than $500,000. During 2014 the Company received additional advances under the note totaling $53,725. At December 31, 2014 and 2013 the principal balance on the note was $56,158 and $2,433, respectively. Note principal and interest in the aggregate of $55,585 was repaid on March 6, 2015, at which time, the remaining outstanding principal and interest on the note in the amount of $2,577 was forgiven and accounted for as contributed capital.
Debt under this obligation is as follows:
December 31, 2014 | December 31, 2013 | |||||||
Notes payable | $ | 56,158 | $ | 2,433 | ||||
Less: Current maturities | (56,158 | ) | – | |||||
Notes payable, net of Current maturities | $ | – | $ | 2,433 |
Note 6 – Convertible Notes Payable
a)
Senior Unsecured Convertible Note
On December 1, 2014, the Company issued a Senior Unsecured Convertible Note in the principal amount of $12,500. The note bears interest at a rate of 5% per annum. Principal and accrued interest on the note is due and payable on the earlier of (i) September 12, 2015 and (ii) the date upon which the Company receives gross proceeds of any offering of indebtedness, equity securities, or other of no less than $200,000 (the “Qualified Financing”). The note will automatically convert at the effective time of a Qualified Financing under the same terms given to investors in the Qualified Financing. At December 31, 2014, the principal balance on the note was $12,500. Through December 31, 2014, the Company evaluated the conversion option in this instrument and determined that the instrument is contingently convertible since the note could not be converted to equity, as a Qualified Financing (as defined) did not occur. In addition the Company determined no beneficial conversion feature existed at such time. During the first quarter of 2015 the Company entered into a Qualified Financing. As per the terms of the Qualified Financing, On March 4, 2015 the note was converted into 25,000 shares of common stock and 25,000 warrants entitling the holder to purchase one share of common stock for a five-year period at an exercise price of $0.60 per share.
b)
Senior Unsecured Convertible Note
On December 18, 2014, the Company issued a Senior Unsecured Convertible Note in the principal amount of $12,500. The note bears interest at a rate of 5% per annum. Principal and accrued interest on the note is due and payable on the earlier of (i) September 12, 2015 and (ii) the date upon which the Company receives gross proceeds of a Qualified Financing. The note will automatically convert at the effective time of a Qualified Financing under the same terms given to investors in the Qualified Financing. At December 31, 2014, the principal balance on the note was $12,500. Through December 31, 2014, the Company evaluated the conversion option in this instrument and determined that the instrument is contingently convertible since the note could not be converted to equity, as a Qualified Financing (as defined) did not occur. In addition the Company determined no beneficial conversion feature existed at such time. During the first quarter of 2015 the Company entered into a Qualified Financing. As per the terms of the Qualified Financing, on March 4, 2015 the note was converted into 25,000 shares of common stock and 25,000 warrants entitling the holder to purchase one share of common stock for a five-year period at an exercise price of $0.60 per share.
F- 19 |
c)
Senior Unsecured Convertible Notes
During 2014 the Company engaged in an offering (the “Offering”) of Series A 10% Senior Convertible Promissory Notes in the aggregate principal amount of up to $300,000 with multiple investors (collectively, the “Convertible Notes”). During 2014, the Company received aggregate proceeds of $58,000 related to the offering.
The Convertible Notes contained the following terms and conditions:
· | Maturing March through September 2016, | |||
· | Interest rate at 10% per annum, with interest payable at maturity, | |||
· |
Until the effective time of a merger, the Convertible Notes shall be convertible at the option of the holder thereof into shares of membership interests in the Company based on a $10 million pre-conversion valuation.
At the effective time of a merger, the Convertible Notes shall be automatically converted without any prior action by any holder into securities offered in a qualified financing at 20% discount to the qualified financing. For purposes of Note 6 (c) qualified financing means the sale for cash by the Company or any successor in interest to the Company by means of merger, share exchange, asset acquisition or otherwise, of equity or equity derivative securities (e.g., convertible indebtedness, preferred stock, warrants, etc.), or any combination thereof, generating aggregate gross proceeds of at least $1,500,000 (including the amount of any Notes which convert into securities issued in the qualified financing) as described herein, provided, that the Company shall effect a qualified transaction (e.g., merge, sell all or substantially all of its assets, etc.) substantially simultaneously with the consummation of such qualified financing.
|
|||
The Company evaluates the provisions of the convertible notes periodically to determine whether any of the provisions would be considered embedded derivatives that would require bifurcation under ASC 815, Derivative Instruments and Hedging Activities (“ASC 815”). Because the Company is privately held, the shares of common stock underlying the convertible notes were not readily convertible to cash. Thus, the conversion option did not meet the net settlement requirement of ASC 815 and would not be considered a derivative if freestanding. Accordingly, the convertible notes did not contain an embedded conversion feature that must be bifurcated.
Since the convertible notes issued did not contain an embedded conversion feature that required bifurcation, we evaluated the conversion feature to determine if it was a beneficial conversion feature under ASC 470 (“Accounting for Debt”). The Company determined the conversion price exceeded the fair value of the underlying common stock. As such, there was no beneficial conversion feature for the convertible note issuances.
Debt under these obligations is as follows:
December 31,
2014 |
December 31,
2013 |
|||||||
Convertible notes payable | $ | 83,000 | $ | – | ||||
Less: current maturities | (25,000 | ) | – | |||||
Convertible notes payable, net of Current maturities | $ | 58,000 | $ | – |
Future minimum principal payments are as follows:
Year ending December 31: | ||||
2015 | $ | 25,000 | ||
2016 | 58,000 | |||
$ | 83,000 |
F- 20 |
Note 7 - Loans Payable - Officers
During the years ended December 31, 2014, 2013 and 2012, the Company’s officer made non-interest bearing loans to the Company. As of December 31, 2014 and 2013 the Company is reflecting a liability of $29,607, and $12,239, respectively. The Company did not impute interest on the loan as it was deemed to be de minimus to the financial statements.
Note 8 - Stockholders’ Deficit (Members’ Deficit)
Shares authorized
The Company is authorized to issue is 20,000,000 shares of Common Stock, par value $0.001 per share.
Capital contribution
On December 9, 2014, as part of the recapitalization, the Company applied paragraph 505-10-S99-3 of the FASB Accounting Standards Codification (formerly Topic 4B of the Staff Accounting Bulletins (“SAB”) (“SAB Topic 4B”) issued by the U.S. Securities and Exchange Commission (the “SEC”), by reclassifying the LLC members’ capital account inclusive of capital contributions of $109,037 and the LLC’s accumulated losses of ($332,764) as of December 9, 2014 to additional paid-in capital.
Class A Units
During the year ended December 31, 2013, IP Squared issued 472 Class A units for cash proceeds of $45,000.
During the year ended December 31, 2014, IP Squared issued 698 Class A units to a consultant for services rendered. The units were fully vested on the date of issuance. The Company recorded $64,037 of consultant fees in connection with such issuance. The Company determined the fair value of the equity–based payment based on the fair value of the consideration received which was more reliably measurable.
Each holder of Class A units was entitled to one vote for each Class A unit held. Upon the Recapitalization, all of the then-outstanding Class A units were converted into shares of common stock. As of December 31, 2014 and December 31, 2013, the Company had zero and 10,472 Class A units outstanding, respectively.
IP Squared Technologies Holdings, LLC Members’ Distributions
Prior to the Recapitalization, in accordance with the LLC Agreement, the Company distributed to the holders of Class A units (hereafter referred to as the members) pro rata net income or losses based upon the number of units held by the members.
Note 9 - Commitments and Contingencies
Litigations, Claims and Assessments
In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. There are no such matters that are deemed material to the consolidated financial statements as of December 31, 2014 and 2013.
Operating Leases
The Company has an operating lease for its New York office facility under a month-to-month agreement. Currently, the Company pays monthly rental payments of approximately $900. Rent expense totaled $8,121 and $0 for the years ended December 31, 2014 and 2013, respectively.
Note 10 – Income Taxes
The tax effects of temporary differences that give rise to deferred tax assets as of December 31, 2014 and December 31, 2013 are presented below:
Prior to the Recapitalization in December 2014, the Company was a Delaware limited liability company that passed through income and losses to its members. As a result, the Company was not subject to any U.S. federal or state income taxes as the related tax consequences were reported by the individual members.
F- 21 |
The income tax provision (benefit) consists of the following:
December 31, | ||||||||
2014 | 2013 | |||||||
Federal | ||||||||
Current | – | – | ||||||
Deferred | 8,300 | – | ||||||
State and local | ||||||||
Current | – | – | ||||||
Deferred | 2,500 | – | ||||||
Change in valuation allowance | (10,800 | ) | – | |||||
Income tax provision (benefit) | – | – |
The reconciliation between the statutory federal income tax rate (34%) and the Company’s effective rate for the year ended December 31, 2014 and 2013 is as follows:
2014 | 2013 | |||||||
U.S. Federal statutory rate | (34.0 | )% | – | |||||
State tax benefit, net of federal tax | (10.11 | ) | – | |||||
Change in valuation allowance | 44.11 | – | ||||||
Income tax provision (Benefit) | 0.0% | 0.0% |
As of December 31, 2014 and 2013 the deferred tax asset consisted of the following:
2014 | 2013 | |||||||
Deferred Tax Asset | ||||||||
Net operating loss carryovers | $ | 10,800 | $ | – | ||||
Total deferred tax asset | 10,800 | – | ||||||
Valuation allowance | (10,800 | ) | – | |||||
Net Deferred Tax Asset, net of valuation allowance | $ | – | $ | – |
The Company files its income tax returns in the U.S. federal jurisdiction and the state of New York. The Company’s federal and state income tax returns are subject to examination by tax authorities beginning with the year ended December 31, 2012.
At December 31, 2014, the Company had approximately $24,000 of federal and state net operating losses that may be available to offset future taxable income. The net operating loss carryforwards will begin to expire in 2034 unless utilized. In accordance with Section 382 of the Internal Revenue Code, deductibility of the Company’s U.S. net operating carryovers may be subject to an annual limitation in the event of a change of control as defined the regulations.
The Company assesses the likelihood that deferred tax assets will be realized. To the extent that realization is not likely, a valuation allowance is established. Based upon the Company’s losses since inception, management believes that it is more likely than not that the future benefits of its deferred tax assets will not be realized and has therefore established a full valuation allowance. As of December 31, 2014, the change in valuation allowance was $10,800.
Note 11 - Subsequent Events
Financing activity
During February and March 2015, the Company sold $500,000 of Units to investors. Each Unit was sold at a price of $0.50 per Unit and consisted of one (1) share of common stock, par value $0.001 per share, of PeerLogix and one (1) warrant entitling the holder to purchase one share of common stock for a five-year period at an exercise price of $0.60 per share (the “Precedent Financing). All of the net proceeds that PeerLogix received from the Precedent Financing will continue to be utilized for PeerLogix’s working capital needs prior to the closing of a planned future reorganization with a public entity (“Pubco”) and private placement. All of the Units sold in the Precedent Financing will be converted to Pubco securities upon the closing of the planned reorganization. The placement agent received as compensation for its services $50,000 (10% commission) and PeerLogix warrants that will automatically convert upon the closing of the reorganization into warrants to purchase 50,000 Pubco Units at a price of $0.01 per Unit, with each Unit consisting of one share of Pubco common stock and one warrant to purchase a share of Pubco common stock at a price of $0.60 per Share.
F- 22 |
Promissory notes
During June 2015, the Company issued Promissory Notes in the aggregate principal amount of $17,500 to six lenders. The Notes bear interest at 50%, calculated monthly, and mature August 1, 2015. If the notes are repaid within the first month, the lenders are to be repaid 50% interest on the Notes (the “Premium”), a minimum payment of $26,250. The Premium shall be accreted to interest expense over the life of the note. As of August 1, 2015, the Company is not compliant with the repayment terms of the notes and is in default. The Company intends to request that the maturity date of these notes be further extended, however, there can be no assurance that a further extension will be granted.
Employment Agreements
On August 13, 2015 the Company entered into an employment agreement with Joshua Partridge as the Company’s Head of Business Development and Secretary. The agreement calls for a three year term, an annual salary of $120,000 per annum with annual 10% increases and a payment upon termination in an amount equal to any and all unpaid salary through the end of the term.
On August 13, 2015 the Company entered into an employment agreement with William Gorfein as the Company’s Chief Executive Officer. The agreement calls for a three year term, an annual salary of $120,000 per annum with annual 10% increases and a payment upon termination in an amount equal to any and all unpaid salary through the end of the term.
F- 23 |
Peerlogix, Inc.
Pro Forma Condensed Combined Balance Sheet
As of March 31, 2015
(unaudited)
Proforma | Proforma | |||||||||||||||||||||
Adjustments | Adjustments | |||||||||||||||||||||
Peerlogix | Realco | Peerlogix | Realco | |||||||||||||||||||
Technologies, Inc | International, Inc. | Technologies, Inc. | International, Inc. | Reference | Combined | |||||||||||||||||
a | b | |||||||||||||||||||||
Assets | ||||||||||||||||||||||
Current Assets | ||||||||||||||||||||||
Cash | $ | 291,841 | $ | 167 | $ | – | $ | 740,370 | h | $ | 1,032,378 | |||||||||||
Prepaid expenses and other current assets | 20,395 | – | – | – | 20,395 | |||||||||||||||||
Total Current Assets | 312,236 | 167 | – | 740,370 | 1,052,773 | |||||||||||||||||
Total Assets | $ | 312,236 | $ | 167 | $ | – | $ | 740,370 | $ | 1,052,773 | ||||||||||||
Liabilities and Stockholders' Equity (Deficit) | ||||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||||
Accounts payable and accrued liabilities | $ | 90,075 | $ | – | $ | – | $ | – | $ | 90,075 | ||||||||||||
Demand loans payable | 15,000 | – | – | – | 15,000 | |||||||||||||||||
Current maturities of convertible notes payable | 53,000 | – | – | – | 53,000 | |||||||||||||||||
Loans payable - officers | 33,348 | 36,169 | – | (36,169 | ) | c | 33,348 | |||||||||||||||
Total Current Liabilities | 191,423 | 36,169 | – | (36,169 | ) | 191,423 | ||||||||||||||||
Long-Term Liabilities: | ||||||||||||||||||||||
Convertible notes payable, net of current maturities | 5,000 | – | – | – | 5,000 | |||||||||||||||||
Total Long-Term Liabilities | 5,000 | – | – | – | 5,000 | |||||||||||||||||
Total Liabilities | 196,423 | 36,169 | – | (36,169 | ) | 196,423 | ||||||||||||||||
Commitments and Contingencies | ||||||||||||||||||||||
Stockholders' Equity (Deficit) | ||||||||||||||||||||||
Common stock | 17,050 | 190 | – | (17,015 | ) | d,e,f,h | 225 | |||||||||||||||
Additional paid in capital | 222,537 | 22,110 | – | 735,252 | c,d,e,f,g,h | 979,899 | ||||||||||||||||
Accumulated deficit | (123,774 | ) | (58,302 | ) | – | 58,302 | g | (123,774 | ) | |||||||||||||
Total Stockholders' Equity (Deficit) | 115,813 | (36,002 | ) | – | 776,539 | 856,350 | ||||||||||||||||
Total Liabilities and Stockholders' Equity (Deficit) | $ | 312,236 | $ | 167 | $ | – | $ | 740,370 | $ | 1,052,773 |
F- 24 |
Peerlogix, Inc.
Pro Forma Condensed Combined Statement of Operations
For the Three Months Ended March 31, 2015
(unaudited)
Realco | Proforma Adjustments | Proforma Adjustments Realco | ||||||||||||||||||||
PeerLogix, Inc. | International, Inc. | PeerLogix, Inc. | International, Inc. | Reference | Combined | |||||||||||||||||
a | b | |||||||||||||||||||||
Revenue | $ | – | $ | – | $ | – | $ | – | c | $ | – | |||||||||||
Operating expenses | ||||||||||||||||||||||
Compensation | 37,320 | – | 28,680 | – | 66,000 | |||||||||||||||||
Research and development expenses | 20,894 | – | – | – | 20,894 | |||||||||||||||||
Professional fees | 10,915 | – | – | – | 10,915 | |||||||||||||||||
General and administrative expenses | 28,520 | 23,049 | – | – | 51,569 | |||||||||||||||||
Operating expenses | 97,649 | 23,049 | 28,680 | – | 149,378 | |||||||||||||||||
Loss from operations | (97,649 | ) | (23,049 | ) | (28,680 | ) | – | (149,378 | ) | |||||||||||||
Interest expense | (1,658 | ) | – | – | – | (1,658 | ) | |||||||||||||||
Net loss | $ | (99,307 | ) | $ | (23,049 | ) | $ | (28,680 | ) | $ | – | $ | (151,036 | ) | ||||||||
Net loss per common share - basic and diluted | $ | (0.0067 | ) | |||||||||||||||||||
Weighted average common shares outstanding - basic and diluted | 22,467,935 |
F- 25 |
Peerlogix, Inc.
Pro Forma Condensed Combined Statement of Operations
(unaudited)
For the year ended December 31, 2014 Peerlogix, Inc. |
For the period February 14, 2014 (Inception) to December 31, 2014 Realco International, Inc. |
Proforma Adjustments PeerLogix, Inc. | Proforma Adjustments Realco International, Inc. | Reference | Combined | |||||||||||||||||
a | b | |||||||||||||||||||||
Revenue | $ | – | $ | 23,750 | $ | – | $ | (23,750 | ) | d | $ | – | ||||||||||
Operating expenses | ||||||||||||||||||||||
Compensation | 26,052 | – | 213,948 | – | c | 240,000 | ||||||||||||||||
Research and development expenses | 57,407 | – | – | – | 57,407 | |||||||||||||||||
Professional fees | 126,411 | – | – | – | 126,411 | |||||||||||||||||
General and administrative expenses | 61,726 | 59,003 | – | – | 120,729 | |||||||||||||||||
Operating expenses | 271,596 | 59,003 | 213,948 | – | 544,547 | |||||||||||||||||
Loss from operations | (271,596 | ) | (35,253 | ) | (213,948 | ) | (23,750 | ) | (544,547 | ) | ||||||||||||
Interest expense | (3,563 | ) | – | – | – | (3,563 | ) | |||||||||||||||
Net loss | $ | (275,159 | ) | $ | (35,253 | ) | $ | (213,948 | ) | $ | (23,750 | ) | $ | (548,110 | ) | |||||||
Net loss per common share - basic and diluted | $ | (0.0244 | ) | |||||||||||||||||||
Weighted average common shares outstanding - basic and diluted | 22,467,935 |
F- 26 |
PEERLOGIX, INC.
PRO FORMA UNAUDITED COMBINED FINANCIAL STATEMENTS
INTRODUCTORY NOTE
On August 14, 2015, Realco International, Inc. (“Realco”) and Peerlogix, Inc. (“Peerlogix”), a privately held company, entered into an Agreement and Plan of Merger (the “Merger Agreement”). Under the terms of the Merger Agreement, Peerlogix exchanged all of their shares of common stock for newly issued common shares of Realco (the “Share Exchange”), with Realco remaining as the surviving corporation (the “Merger”). The Share Exchange will be treated as a reverse merger and recapitalization of Peerlogix Technologies, Inc. for financial accounting purposes. Following the closing of the Merger, Realco changed its name to Peerlogix, Inc. (the “Company”) and Peerlogix changed its name to “Peerlogix Technologies, Inc.” As of the date of these pro forma financial statements Realco’s name change has not become effective. The stockholders of the Company before the Share Exchange, without giving effect to the Offering (as defined below) and after giving effect to cancellation of 18,000,000 shares of Realco common stock, retained 990,000 shares of Realco common stock, which after giving effect to a 4.04 for 1 split of Realco common stock (the “Stock Split”), will have become 3,999,600 shares of Realco common stock. Upon closing the transaction Peerlogix, Inc. had 21,049,602 shares of common stock outstanding. As a result of this transaction, the former owners of Peerlogix Technologies, Inc. own approximately 81.0% of Peerlogix, Inc. common stock and Peerlogix Technologies, Inc. is a wholly-owned subsidiary of Peerlogix, Inc.
Concurrently with the closing of the merger and in contemplation of the merger, the Company completed a private offering (the “Offering”) of 1,418,333 units of its securities (“Units”), at a price of $0.60 per Unit. Each Unit consists of one share of Common Stock and a warrant to purchase one share of Common Stock. The warrants are exercisable for a period of five years at a purchase price of $0.72 per share of Common Stock. The investors in the Offering collectively purchased 2.5 million Units for total cash consideration of $851,000. The placement agent was paid commissions of $85,100 and was issued warrants to purchase 141,833 Units at an exercise price of $0.60 per Unit, with a term of five years.
The following unaudited pro forma condensed combined balance sheet as of March 31, 2015 combines the unaudited condensed balance sheet of Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.) and Realco International, Inc. as of March 31, 2015, giving effect to the transactions described in the Merger Agreement as if they had occurred on March 31, 2015.
The following unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2015 combines the unaudited condensed statement of operations of Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.) and Realco International, Inc. for the three months ended March 31, 2015, giving effect to the transactions described in the Merger Agreement as if they had occurred on January 1, 2015.
The following unaudited pro forma condensed combined statement of operations for the year ended December 31, 2014 combines the statement of operations of Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.) and Realco International, Inc. for the year ended December 31, 2014, giving effect to the transactions described in the Merger Agreement as if they had occurred on January 1, 2014.
The pro forma adjustments give effect to events that are directly attributable to the transactions discussed above, that have a continuing impact on the operations of Realco International, Inc., and are based on available data and certain assumptions that management believes are factually supportable.
We are providing this information to aid you in your analysis of the financial aspects of the acquisition. The unaudited pro forma condensed combined financial statements described above should be read in conjunction with the historical financial statements of Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.) and those of Realco International, Inc. and the related notes thereto contained elsewhere in this filing. The pro forma adjustments and the unaudited pro forma information are not necessarily indicative of the financial position or results of operations that may have actually occurred had the merger taken place on the dates noted, or of the future financial position or operating results of Realco International, Inc.
F- 27 |
PEERLOGIX, INC.
NOTES TO THE PRO FORMA UNAUDITED COMBINED FINANCIAL STATEMENTS
Note 1 – Merger Transaction
On August 14, 2015, Realco International, Inc. (the “Company”) (“Realco”) and Peerlogix, Inc. (“Peerlogix”), a privately held company, entered into an Agreement and Plan of Merger (the “Merger Agreement”). Under the terms of the Merger Agreement, Peerlogix exchanged all of their shares of common stock for newly issued common shares of Realco (the “Share Exchange”), with Realco remaining as the surviving corporation (the “Merger”). Following the closing of the Merger, Realco changed its name to Peerlogix, Inc. and Peerlogix changed its name to “Peerlogix Technologies, Inc.” The transaction is being accounted for as a reverse business combination. At closing of the transaction former Peerlogix shareholders received approximately 81% of the common stock of the combined company.
Note 2 – Pro Forma Adjustments
The following unaudited pro forma condensed combined balance sheet as of March 31, 2015 combines the unaudited condensed balance sheet of Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.) and Realco International, Inc. as of March 31, 2015, giving effect to the transactions described in the Share Exchange as if they had occurred at the beginning of the period.
Balance Sheet – March 31, 2015
a. | Derived from the unaudited balance sheet of Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.) as of March 31, 2015. |
b. | Derived from the unaudited balance sheet of Realco International, Inc. as of March 31, 2015. |
c. | Relating to cancellation of Realco International, Inc. officer loan. |
d. | Relating to 17,050,002 shares of Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.) common stock exchanged. |
e. | Relating to 18,000,000 shares of Realco International, Inc. common stock cancelled. |
f. | 3,999,600 shares of Realco International, Inc. common stock retained by Realco stockholders relating to the 4.04 for 1 split of Realco International, Inc. common stock simultaneous to the share exchange. |
g. | Elimination of Realco International, Inc. Accumulated Deficit related to merger transaction. |
h. | Concurrently with the closing of the merger and in contemplation of the merger, the Company completed a private offering (the “Offering”) of 1,418,333 units of its securities (“Units”), at a price of $0.60 per Unit. Each Unit consists of one share of Common Stock and a warrant to purchase one share of Common Stock. The warrants are exercisable for a period of five years at a purchase price of $0.72 per share of Common Stock. The investors in the Offering collectively purchased 1,418,333 Units for total cash consideration of $851,000. The placement agent was paid commissions of $85,100 and was issued warrants to purchase 141,833 Units at an exercise price of $0.60 per Unit. |
F- 28 |
Statement of Operations – For the three months ended March 31, 2015.
a. | Derived from the unaudited Condensed Statement of Operations of Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.) for the three months ended March 31, 2015. |
b. | Derived from the unaudited Condensed Statement of Operations of Realco International, Inc. for the three months ended March 31, 2015. |
c. | Adjusted for the employment agreements entered into as a part of the transactions contemplated by the Merger Agreement. The agreements call for a three year term, aggregate salaries of $240,000 per annum with annual 10% increases and a payment upon termination in an amount equal to any and all unpaid salary through the end of the term. |
The following unaudited pro forma combined statement of operations for the year ended December 31, 2014 combines the statement of operations of Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.) for the year ended December 31, 2014 and Realco for the period from February 14, 2014 (inception) to December 31, 2014, giving effect to the transactions described in the Merger Agreement as if they had occurred on January 1, 2014.
Statement of Operations – For the year ended December 31, 2014
a. | Derived from the Statement of Operations of Peerlogix Technologies, Inc. (formerly Peerlogix, Inc.) for the year ended December 31, 2014, included elsewhere in this document. |
b. | Derived from the Statement of Operations of Realco International, Inc. for the period from February 14, 2014 (inception) to December 31, 2014 |
c. | Adjusted for the employment agreements entered into as a part of the transactions contemplated by the Merger Agreement. The agreements call for a three year term, aggregate salaries of $240,000 per annum with annual 10% increases and a payment upon termination in an amount equal to any and all unpaid salary through the end of the term. In addition, the Company granted the employees 600,000 options to purchase the Company’s common stock, these options have not been accounted for in the pro forma financial statmeents. |
d. | Elimination of Realco International, Inc. revenue since it is unrelated to the merger entity. |
F- 29 |
Exhibit 2.1
SECURITIES EXCHANGE AGREEMENT
by and among
Realco International, Inc.,
PEERLOGIX TECHNOLOGIES, INC.
and
THE SHAREHOLDERS OF
PEERLOGIX TECHNOLOGIES, INC.
Dated as of August 14, 2015
ARTICLE I Exchange of Securities | 1 |
1.1. Securities Exchange. | 1 |
1.2. Closing. | 2 |
ARTICLE II Representations and Warranties of the SHAREHOLDERS | 2 |
2.1. Good Title. | 2 |
2.2. Organization. | 2 |
2.3. Power and Authority. | 2 |
2.4. No Conflicts. | 3 |
2.5. Litigation. | 3 |
2.6. No Finder’s Fee. | 3 |
2.7. Purchase Entirely for Own Account. | 3 |
2.8. Available Information. | 3 |
2.9. Non-Registration. | 3 |
2.10. Restricted Securities. | 4 |
2.11. Legends. | 4 |
2.12. Additional Legend. | 4 |
ARTICLE III Representations and Warranties of PEERLOGIX | 4 |
3.1. Organization, Standing and Power. | 5 |
3.2. Subsidiaries; Equity Interests. | 5 |
3.3. Capital Raise. | 5 |
3.4. Capital Structure. | 5 |
3.5. Authority; Execution and Delivery; Enforceability. | 6 |
3.6. No Conflicts; Consents. | 6 |
3.7. Taxes. | 6 |
3.8. Litigation. | 6 |
3.9. Compliance with Applicable Laws. | 7 |
3.10. Brokers. | 7 |
3.11. Contracts. | 7 |
3.12. Financial Statements. | 7 |
ARTICLE IV Representations and Warranties of Realco | 7 |
4.1. Organization, Standing and Power. | 8 |
4.2. Subsidiaries; Equity Interests. | 8 |
4.3. Capital Structure. | 8 |
4.4. Authority; Execution and Delivery; Enforceability. | 9 |
4.5. No Conflicts; Consents. | 9 |
4.6. Taxes. | 9 |
4.7. Benefit Plans. | 10 |
4.8. Litigation. | 10 |
4.9. Compliance with Applicable Laws. | 10 |
4.10. Contracts. | 11 |
4.11. Title to Properties. | 11 |
4.12. Intellectual Property. | 11 |
4.13. Labor Matters. | 11 |
4.14. SEC Documents; Undisclosed Liabilities. | 11 |
4.15. Share Exchange With Affiliates and Employees. | 12 |
i |
Annex A Schedule of Securities Exchanged
Annex B Definitions
ii |
SECURITIES EXCHANGE AGREEMENT
This SECURITIES EXCHANGE AGREEMENT (this “ Agreement ”), dated as of August 14, 2015, is by and among Realco International, Inc., a Nevada corporation (“ Realco ”), PeerLogix Technologies, Inc., a Delaware corporation (“ PeerLogix ”), and the shareholders of PeerLogix identified on Annex A hereto (each, a “ Selling Shareholder ” and together the “ Selling Shareholders ”). Each of the parties to this Agreement is individually referred to herein as a “ Party ” and collectively, as the “ Parties .” Capitalized terms used herein that are not otherwise defined herein shall have the meanings ascribed to them in Annex B hereto.
BACKGROUND
A. PeerLogix has outstanding the securities listed in Annex A (the “ PeerLogix Securities ”), all of which are held by the Selling Shareholders. Each Shareholder is the record and beneficial owner of the PeerLogix Securities set forth opposite such Shareholder’s name Annex A hereto. Each Selling Shareholder has agreed to transfer all of his, her or its (hereinafter “ its ”) PeerLogix Securities in exchange for newly issued shares of Common Stock, $0.00001 par value per share, of Realco (the “ Realco Stock ”) that will, in the aggregate, constitute 17,050,002 issued and outstanding capital stock of Realco on a fully diluted basis as of and immediately after the Closing, assuming completion of a 4.04 for 1 forward stock split of Realco Stock and the retirement of 18,000,000 pre-split shares of Realco Stock by a Realco shareholder. The number of shares of Realco Stock to be received by each Selling Shareholder or its designee is listed opposite each such Selling Shareholder’s name in Annex A . The aggregate number of shares of Realco Stock that is reflected on Annex A is referred to herein as the “ Shares .”
B. The Board of Directors and shareholders of Realco and the Board of Directors and Selling Shareholders of PeerLogix have determined that it is desirable to affect this plan of reorganization and securities exchange.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, and intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I
Exchange of Securities
1.1. Securities Exchange.
On the Effective Date (as hereinafter defined), each Selling Shareholder shall sell, transfer, convey, assign and deliver to Realco its PeerLogix Securities free and clear of all liens, in exchange for the Realco Stock listed in Annex A opposite such Shareholder’s name.
1 |
1.2. Closing.
The closing (the “ Closing ”) of the transactions contemplated hereby (the “ Share Exchange ”) shall take place on the execution date hereof (the “ Closing Date ”) remotely via electronic exchange of documents and signatures.
1.3 Effective Date.
The Share Exchange shall become effective on such date (the "Effective Date") as the Articles of Share Exchange, as required under Nevada law (the “Articles of Share Exchange”) is filed with and accepted by the Secretary of State of the State of Nevada or at such later time as is specified in the Articles of Share Exchange. As soon as practicable after satisfaction or, to the extent permitted hereunder, waiver of all conditions to the Share Exchange as more fully described in Article V, below,, the Parties will file an Articles of Share Exchange with the Secretary of State of the State of Nevada and make all other filings or recordings required by Nevada law in connection with the Share Exchange. On the Effective Date, PeerLogix shall become a wholly owned subsidiary of Realco.
ARTICLE II
Representations and Warranties of the Shareholders
Each of the Selling Shareholders hereby severally (and not jointly) represents and warrants to Realco with respect to itself, as follows.
2.1. Good Title.
The Selling Shareholder is the record and beneficial owner, and has good title to its PeerLogix Securities, with the right and authority to sell and deliver such PeerLogix Securities. Upon delivery of any certificate or certificates duly assigned, representing the same as herein contemplated and/or upon registering of Realco as the new owner of such PeerLogix Securities in the applicable securities registers of PeerLogix, Realco will receive good title to such PeerLogix Securities, free and clear of all Liens.
2.2. Organization.
The Selling Shareholder, if an entity, is duly organized and validly existing in its jurisdiction of organization.
2.3. Power and Authority.
The Selling Shareholder has the legal power and authority to execute and deliver this Agreement and to perform its obligations hereunder. All acts required to be taken by the Selling Shareholder to enter into this Agreement and to carry out the Share Exchange have been properly taken. This Agreement constitutes a legal, valid and binding obligation of the Selling Shareholder, enforceable against the Selling Shareholder in accordance with the terms hereof.
2 |
2.4. No Conflicts.
The execution and delivery of this Agreement by the Selling Shareholder and the performance by the Selling Shareholder of its obligations hereunder in accordance with the terms hereof: (a) will not require the consent of any third party or Governmental Entity under any Laws; (b) will not violate any Laws applicable to the Selling Shareholder; and (c) will not violate or breach any contractual obligation to which the Selling Shareholder is a party.
2.5. Litigation.
There is no pending proceeding against the Selling Shareholder that involves the PeerLogix Securities or that challenges, or may have the effect of preventing, delaying or making illegal, or otherwise interfering with, any of the Share Exchange and, to the knowledge of the Selling Shareholder, no such proceeding has been threatened, and no event or circumstance exists that is reasonably likely to give rise to or serve as a basis for the commencement of any such proceeding.
2.6. No Finder’s Fee.
The Selling Shareholder has not created any obligation for any finder, investment banker or broker’s fee in connection with the Share Exchange that are not payable entirely by the Selling Shareholder.
2.7. Purchase Entirely for Own Account.
The Selling Shareholder is acquiring the Shares proposed to be acquired hereunder for investment for its own account and not with a view to the resale or distribution of any part thereof, and the Selling Shareholder has no present intention of selling or otherwise distributing the Shares, except in compliance with applicable securities laws.
2.8. Available Information.
The Selling Shareholder has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of investment in Realco and has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the Realco Stock.
2.9. Non-Registration.
The Selling Shareholder understands that the Shares have not been registered under the Securities Act and, if issued in accordance with the provisions of this Agreement, will be issued by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Selling Shareholder’s representations as expressed herein. The non-registration shall have no prejudice with respect to any rights, interests, benefits and entitlements attached to the Shares in accordance with Realco’s charter documents or the laws of its jurisdiction of incorporation.
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2.10. Restricted Securities.
The Selling Shareholder understands that the Shares are characterized as “restricted securities” under the Securities Act inasmuch as this Agreement contemplates that, if acquired by the Selling Shareholder pursuant hereto, the Shares would be acquired in a transaction not involving a public offering. The issuance of the Shares hereunder is being affected in reliance upon an exemption from registration afforded under Section 4(a)(2) of the Securities Act for Share Exchange by an issuer not involving a public offering. The Selling Shareholder further acknowledges that if the Shares are issued to the Selling Shareholder in accordance with the provisions of this Agreement, such Shares may not be resold without registration under the Securities Act or the existence of an exemption therefrom. The Selling Shareholder represents that it is familiar with Rule 144 promulgated under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.
2.11. Legends.
It is understood that the Realco Stock will bear the following legend or one that is substantially similar to the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR (2) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, IN WHICH CASE THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY AN OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.
2.12. Additional Legend.
Additionally, the Realco Stock will bear any legend required by the “blue sky” laws of any state to the extent such laws are applicable to the securities represented by the certificate so legended.
ARTICLE III
Representations and Warranties of PeerLogix
Subject to the exceptions set forth in the PeerLogix Disclosure Letter (regardless of whether or not the PeerLogix Disclosure Letter is referenced below with respect to any particular representation or warranty), PeerLogix represents and warrants to Realco and the Shareholders as follows.
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3.1. Organization, Standing and Power.
PeerLogix and each of its subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized and has the corporate power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold its properties and assets and to conduct its businesses as presently conducted, other than such franchises, licenses, permits, authorizations and approvals the lack of which, individually or in the aggregate, has not had and would not reasonably be expected to have a material adverse effect on PeerLogix and its subsidiaries taken as a whole, a material adverse effect on the ability of PeerLogix to perform its obligations under this Agreement or on the ability of PeerLogix to consummate the Share Exchange (a “ PeerLogix Material Adverse Effect ”).
3.2. Subsidiaries; Equity Interests.
The PeerLogix Disclosure Letter lists each subsidiary of PeerLogix and its jurisdiction of organization. All the outstanding shares of capital stock or equity investments of each subsidiary have been validly issued and are fully paid and non-assessable and are as of the date of this Agreement owned by PeerLogix or by another subsidiary unless otherwise indicated on the PeerLogix Disclosure Letter.
3.3. Capital Raise. On or prior to closing, PeerLogix shall raise capital of at least $800,000 from the issuance of its common stock to investors (the “ PPO ”). All of such investors shall agree to exchange their respective shares of PeerLogix for shares of Realco at the Closing.
3.4. Capital Structure.
The authorized capitalization of PeerLogix consists of 25,000,000 shares of common stock, 17,050,002 of which are issued and outstanding and which does not include (i) 1,050,000 warrants issued to investors that are each exercisable into one (1) share of PeerLogix common stock at a price of $.60 per share; and (ii) 50,000 warrants issued to the Placement Agent and its affiliates (the “ PA Warrants ”), that are exercisable into an aggregate of 50,000 shares of PeerLogix common stock and warrants to purchase 50,000 additional shares of PeerLogix common stock at a price of $.60 per share. The 1,050,000 warrants issued to investors will automatically convert upon the closing of the reorganization contemplated hereunder into warrants to purchase 1,050,000 shares of Realco Stock at a price of $.60 per share. The 50,000 PA Warrants will automatically convert upon the closing of the reorganization contemplated hereunder into 50,000 Realco warrants (the “ Realco PA Warrants ”). The Realco PA Warrants will be exercisable into an aggregate of 50,000 shares of Realco Stock and warrants to purchase 50,000 additional shares of Realco stock at a price of $.60 per share. Except as set forth above or in the PeerLogix Disclosure Letter, no shares of common stock or other voting securities of PeerLogix are issued, reserved for issuance or outstanding. All outstanding securities of PeerLogix and each of its subsidiaries are duly authorized, validly issued, fully paid and non-assessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the applicable corporate laws, the PeerLogix Constituent Instruments or any Contract to which PeerLogix is a party or otherwise bound. As of the date of this Agreement, except as set forth above or in the PeerLogix Disclosure Letter, there are not any options, warrants, rights, convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which PeerLogix or any of its subsidiaries is a party or by which any of them is bound.
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3.5. Authority; Execution and Delivery; Enforceability.
PeerLogix has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the Share Exchange. The execution and delivery by PeerLogix of this Agreement and the consummation by PeerLogix of the Share Exchange have been duly authorized and approved by the Board of Directors of PeerLogix and no other corporate proceedings on the part of PeerLogix are necessary to authorize this Agreement and the Share Exchange. When executed and delivered, this Agreement will be enforceable against PeerLogix in accordance with its terms.
3.6. No Conflicts; Consents.
(a) The execution and delivery by PeerLogix of this Agreement does not, and the consummation of the Share Exchange and compliance with the terms hereof will not, conflict with, or result in any violation of or default under, any provision of (i) the PeerLogix Constituent Instruments or the comparable charter or organizational documents of any of its subsidiaries, (ii) any Contract to which PeerLogix or any of its subsidiaries is a party or to which any of their respective properties or assets is subject or (iii) subject to the filings and other matters referred to in Section 3.6(b), any material judgment, order or decree or material law applicable to PeerLogix or any of its subsidiaries or their respective properties or assets, other than, in the case of clauses (ii) and (iii) above, any such items that, individually or in the aggregate, have not had and would not reasonably be expected to have a PeerLogix Material Adverse Effect.
(b) Except as set forth in the PeerLogix Disclosure Letter, no Consent of, or registration, declaration or filing with, or permit from, any Governmental Entity is required to be obtained or made by or with respect to PeerLogix or any of its subsidiaries in connection with the execution, delivery and performance of this Agreement or the consummation of the Share Exchange.
3.7. Taxes.
PeerLogix and each of its subsidiaries has timely filed, or has caused to be timely filed on its behalf, all Tax Returns required to be filed by it, and all such Tax Returns are true, complete and accurate, except to the extent any failure to file or any inaccuracies in any filed Tax Returns, individually or in the aggregate, have not had and would not reasonably be expected to have a PeerLogix Material Adverse Effect.
3.8. Litigation.
Except as set forth in the PeerLogix Disclosure Letter, there is no Action against or affecting PeerLogix or any of its subsidiaries or any of their respective properties which (a) adversely affects or challenges the legality, validity or enforceability of any of this Agreement or the Shares or (b) could, if there were an unfavorable decision, individually or in the aggregate, have or reasonably be expected to result in a PeerLogix Material Adverse Effect.
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3.9. Compliance with Applicable Laws.
Except as set forth in the PeerLogix Disclosure Letter, PeerLogix and each of its subsidiaries have conducted their business and operations in compliance with all applicable Laws, except for instances of noncompliance that, individually and in the aggregate, have not had and would not reasonably be expected to have a PeerLogix Material Adverse Effect. This Section 3.9 does not relate to taxes, which are the subject of Section 3.7.
3.10. Brokers.
Except as set forth in the PeerLogix Disclosure Letter, no broker, investment banker, financial advisor or other person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the Share Exchange based upon arrangements made by or on behalf of PeerLogix or any of its subsidiaries.
3.11. Contracts.
Neither PeerLogix nor any of its subsidiaries is in violation of or in default under (nor does there exist any condition which upon the passage of time or the giving of notice would cause such a violation of or default under) any Contract to which it is a party or to which it or any of its properties or assets is subject, except for violations or defaults that would not, individually or in the aggregate, reasonably be expected to result in a PeerLogix Material Adverse Effect.
3.12. Financial Statements. On or before the Closing,
PeerLogix will deliver to Realco its audited financial statements for fiscal 2013 and 2014 and its unaudited financial statement for the six (6) month period ended March 31, 2015 (collectively, the “ PeerLogix Financial Statements ”). The PeerLogix Financial Statements shall be prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the period indicated. The PeerLogix Financial Statements shall fairly present in all material respects the financial condition and operating results of PeerLogix, as of the dates, and for the periods, indicated therein.
ARTICLE IV
Representations and Warranties of Realco
Subject to the exceptions set forth in the Realco Disclosure Letter (regardless of whether or not the Realco Disclosure Letter is referenced below with respect to any particular representation or warranty), Realco represents and warrants as follows to PeerLogix and the Shareholders.
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4.1. Organization, Standing and Power.
Realco is duly organized, validly existing and in good standing under the laws of the State of Nevada and has full corporate power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold its properties and assets and to conduct its businesses as presently conducted, other than such franchises, licenses, permits, authorizations and approvals the lack of which, individually or in the aggregate, has not had and would not reasonably be expected to have a material adverse effect on Realco, a material adverse effect on the ability of Realco to perform its obligations under this Agreement or on the ability of Realco to consummate the Share Exchange (an “ Realco Material Adverse Effect ”). Realco is duly qualified to do business in each jurisdiction where the nature of its business or its ownership or leasing of its properties makes such qualification necessary and where the failure to so qualify would reasonably be expected to have a Realco Material Adverse Effect. Realco has delivered to PeerLogix or its counsel true and complete copies of the Realco Charter and the Realco Bylaws.
4.2. Subsidiaries; Equity Interests.
Realco does not own, directly or indirectly, any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any person.
4.3. Capital Structure.
The authorized capital stock of Realco consists of 25,000,000 shares of common stock, $0.00001 par value per share. No other class or series of capital stock is authorized or outstanding. As of the date hereof and immediately prior to the Effective Date, (a) 18,990,000 shares of Realco Stock are issued and outstanding, and (b) no shares of Realco Stock are held by Realco in its treasury. Except as set forth above, no shares of capital stock or other voting securities of Realco were issued, reserved for issuance or outstanding. All outstanding shares of the capital stock of Realco are, and all such shares that may be issued prior to the date hereof will be when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the Nevada Revised Statutes, the Realco Charter, the Realco Bylaws or any Contract to which Realco is a party or otherwise bound. There are not any bonds, debentures, notes or other indebtedness of Realco having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of Realco Stock may vote (“ Voting Realco Debt ”). As of the date of this Agreement, there are not any options, warrants, rights, convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which Realco is a party or by which it is bound (a) obligating Realco to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in, Realco or any Voting Realco Debt, (b) obligating Realco to issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, Contract, arrangement or undertaking or (c) that give any person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights occurring to holders of the capital stock of Realco. As of the date of this Agreement, there are not any outstanding contractual obligations of Realco to repurchase, redeem or otherwise acquire any shares of capital stock of Realco. The stockholder list provided to PeerLogix or its counsel is a current stockholder list generated by its stock transfer agent, and such list accurately reflects all of the issued and outstanding shares of the Realco’ common stock prior to the Effective Date and prior to the forward split and share redemption described in Section 5.1(f), herein.
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4.4. Authority; Execution and Delivery; Enforceability.
The execution and delivery by Realco of this Agreement and the consummation by Realco of the Share Exchange have been duly authorized and approved by the Board of Directors of Realco and no other corporate proceedings on the part of Realco are necessary to authorize this Agreement and the Share Exchange. This Agreement constitutes a legal, valid and binding obligation of Realco, enforceable against Realco in accordance with the terms hereof.
4.5. No Conflicts; Consents.
(a) The execution and delivery by Realco of this Agreement does not, and the consummation of Share Exchange and compliance with the terms hereof will not, contravene, conflict with or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or to increased, additional, accelerated or guaranteed rights or entitlements of any person under, or result in the creation of any Lien upon any of the properties or assets of Realco under, any provision of (i) the Realco Charter or Realco Bylaws, (ii) any material Contract to which Realco is a party or to which any of its properties or assets is subject or (iii) subject to the filings and other matters referred to in Section 4.5(b), any material Order or material Law applicable to Realco or its properties or assets, other than, in the case of clauses (ii) and (iii) above, any such items that, individually or in the aggregate, have not had and would not reasonably be expected to have an Realco Material Adverse Effect.
(b) Except for required filings with the SEC and applicable “Blue Sky” or state securities commissions, no Consent of, or registration, declaration or filing with, or permit from, any Governmental Entity is required to be obtained or made by or with respect to Realco in connection with the execution, delivery and performance of this Agreement or the consummation of the Share Exchange.
4.6. Taxes.
(a) Realco has timely filed, or has caused to be timely filed on its behalf, all Tax Returns required to be filed by it, and all such Tax Returns are true, complete and accurate, except to the extent any failure to file, any delinquency in filing or any inaccuracies in any filed Tax Returns, individually or in the aggregate, have not had and would not reasonably be expected to have an Realco Material Adverse Effect. All Taxes shown to be due on such Tax Returns, or otherwise owed, have been timely paid, except to the extent that any failure to pay, individually or in the aggregate, has not had and would not reasonably be expected to have an Realco Material Adverse Effect.
(b) The most recent financial statements contained in the SEC Reports reflect an adequate reserve for all Taxes payable by Realco (in addition to any reserve for deferred Taxes to reflect timing differences between book and Tax items) for all Taxable periods and portions thereof through the date of such financial statements. No deficiency with respect to any Taxes has been proposed, asserted or assessed against Realco, and no requests for waivers of the time to assess any such Taxes are pending, except to the extent any such deficiency or request for waiver, individually or in the aggregate, has not had and would not reasonably be expected to have an Realco Material Adverse Effect.
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(c) There are no Liens for Taxes (other than for current Taxes not yet due and payable) on the assets of Realco. Realco is not bound by any agreement with respect to Taxes.
4.7. Benefit Plans.
Realco does not, and since its inception never has, maintained or contributed to any “employee pension benefit plans” (as defined in Section 3(2) of the Employee Retirement Income Act of 1974, as amended (“ ERISA ”), “employee welfare benefit plans” (as defined in Section 3(1) of ERISA) or any other benefit plan for the benefit of any current or former employees, consultants, officers or directors of Realco or any other bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or other plan, arrangement or understanding (whether or not legally binding) providing benefits to any current or former employee, officer or director of Realco. As of the date of this Agreement, there are not any employment, consulting, indemnification, severance or termination agreements or arrangements between Realco and any current or former employee, officer or director of Realco, nor does Realco have any general severance plan or policy.
4.8. Litigation.
There is no Action against or affecting Realco or any of its properties which (a) adversely affects or challenges the legality, validity or enforceability of either of this Agreement or the Shares or (b) could, if there were an unfavorable decision, individually or in the aggregate, have or reasonably be expected to result in an Realco Material Adverse Effect. Neither Realco nor any director or officer (in his or her capacity as such), is or has been the subject of any Action involving a claim or violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.
4.9. Compliance with Applicable Laws.
Realco is in compliance with all applicable Laws, including those relating to occupational health and safety, the environment, export controls, trade sanctions and embargoes, except for instances of noncompliance that, individually and in the aggregate, have not had and would not reasonably be expected to have an Realco Material Adverse Effect. Realco has not received any written communication during the past two years from a Governmental Entity that alleges that Realco is not in compliance in any material respect with any applicable Law. Realco is in compliance with all effective requirements of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations thereunder, that are applicable to it, except where such noncompliance could not have or reasonably be expected to result in an Realco Material Adverse Effect. This Section 4.9 does not relate to matters with respect to Taxes, which are the subject of Section 4.6.
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4.10. Contracts.
Except as disclosed in the SEC Reports, there are no Contracts that are material to the business, properties, assets, condition (financial or otherwise), results of operations or prospects of Realco taken as a whole. Realco is not in violation of or in default under (nor does there exist any condition which upon the passage of time or the giving of notice would cause such a violation of or default under) any Contract to which it is a party or to which it or any of its properties or assets is subject, except for violations or defaults that would not, individually or in the aggregate, reasonably be expected to result in an Realco Material Adverse Effect.
4.11. Title to Properties.
Realco has good title to, or valid leasehold interests in, all of its properties and assets used in the conduct of its businesses. All such assets and properties, other than assets and properties in which Realco has leasehold interests, are free and clear of all Liens, except for Liens that, in the aggregate, do not and will not materially interfere with the ability of Realco to conduct business as currently conducted. Realco has complied in all material respects with the terms of all material leases to which it is a party and under which it is in occupancy, and all such leases are in full force and effect. Realco enjoys peaceful and undisturbed possession under all such material leases.
4.12. Intellectual Property.
Realco does not own, nor is validly licensed nor otherwise has the right to use, any Intellectual Property Rights. No claims are pending or, to the knowledge of Realco, threatened that Realco is infringing or otherwise adversely affecting the rights of any person with regard to any Intellectual Property Right.
4.13. Labor Matters.
There are no collective bargaining or other labor union agreements to which Realco is a party or by which it is bound. No material labor dispute exists or, to the knowledge of Realco, is imminent with respect to any of the employees of Realco.
4.14. SEC Documents; Undisclosed Liabilities.
(a) Realco has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC, pursuant to Sections 13(a) and 15(d) of the Exchange Act (the “ SEC Reports ”).
(b) As of its respective filing date, each SEC Report complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to such SEC Report. Except to the extent that information contained in any SEC Report has been revised or superseded by a later SEC Report, none of the SEC Reports contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of Realco included in the SEC Reports comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with the U.S. generally accepted accounting principles (except, in the case of unaudited statements, as permitted by the rules and regulations of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of Realco as of the dates thereof and the consolidated results of their operations and cash flows for the periods shown (subject, in the case of unaudited statements, to normal year-end audit adjustments).
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(c) Except as set forth in the SEC Reports, Realco has no liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by U.S. generally accepted accounting principles to be set forth on a balance sheet of Realco or in the notes thereto. There are no financial or contractual obligations and liabilities (including any obligations to issue capital stock or other securities) due after the date hereof. All liabilities of Realco shall have been paid off and shall in no event remain liabilities of Realco, PeerLogix or the Shareholders following the Closing.
4.15. Transactions with Affiliates and Employees.
Except as disclosed in the SEC Reports, none of the officers or directors of Realco and, to the knowledge of Realco, none of the employees of Realco is presently a party to any transaction with Realco (other than for services as employees, officers and directors), including any Contract or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of Realco, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.
4.16. Application of Takeover Protections.
Realco has taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Realco Charter or the laws of its state of incorporation that is or could become applicable to the Shareholders as a result of the Shareholders and Realco fulfilling their obligations or exercising their rights under this Agreement, including, without limitation, the issuance of the Shares and the Shareholders’ ownership of the Shares.
4.17. Absence of Certain Changes or Events.
Except as disclosed in the SEC Reports and as provided herein, from the date of the most recent financial statements contained in the SEC Reports to the date of this Agreement, Realco has conducted its business only in the ordinary course, and during such period there has not been:
(a) any change in the assets, liabilities, financial condition or operating results of Realco from that reflected in the financial statements contained in the SEC Reports, except changes in the ordinary course of business that have not caused, in the aggregate, an Realco Material Adverse Effect;
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(b) any damage, destruction or loss, whether or not covered by insurance, that would have an Realco Material Adverse Effect;
(c) any waiver or compromise by Realco of a valuable right or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or encumbrance or payment of any obligation by Realco, except in the ordinary course of business and the satisfaction or discharge of which would not have an Realco Material Adverse Effect;
(e) any material change to a material Contract by which Realco or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder;
(g) any mortgage, pledge, transfer of a security interest in or lien created by Realco with respect to any of its material properties or assets, except liens for taxes not yet due or payable and liens that arise in the ordinary course of business and that do not materially impair Realco’ ownership or use of such property or assets;
(h) any loans or guarantees made by Realco to or for the benefit of its employees, officers or directors, or any Shareholders of their immediate families, other than travel advances and other advances made in the ordinary course of its business;
(i) any declaration, setting aside or payment or other distribution in respect of any of Realco’ capital stock, or any direct or indirect redemption, purchase, or other acquisition of any of such stock by Realco;
(j) any alteration of Realco’ method of accounting or the identity of its auditors;
(k) any issuance of equity securities to any officer, director or affiliate, except pursuant to existing Realco stock option plans; or
(l) any arrangement or commitment by Realco to do any of the things described in this Section 4.17.
4.18. Certain Registration Matters.
Except as set forth in the Realco Disclosure Letter, Realco has not granted or agreed to grant to any person any rights (including “piggy-back” registration rights) to have any securities of Realco registered with the SEC or any other governmental authority that have not been satisfied.
4.19. Quotation and Maintenance Requirements; DTC Eligibility.
Realco is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with the requirements for continued quotation of the Realco Stock on the trading market on which the Realco Stock is currently quoted. The issuance and sale of the Shares under this Agreement does not contravene the rules and regulations of the trading market on which the Realco Stock are currently quoted, and no approval of the stockholders of Realco is required for Realco to issue and deliver to the Shareholders the Shares contemplated by this Agreement.
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4.20. Disclosure.
Realco confirms that neither it nor any person acting on its behalf has provided the Shareholders or their respective agents or counsel with any information that Realco believes constitutes material, non-public information except insofar as the existence and terms of the proposed Share Exchange hereunder may constitute such information and except for information that will be disclosed by Realco in the current report on Form 8-K (the “ Super 8-K ”) of Realco that will be filed with the Securities and Exchange Commission within four business days of the Effective Date. Realco understands and confirms that the Shareholders will rely on the foregoing representations and covenants in effecting transactions in securities of Realco. All of the representations and warranties set forth in this Agreement are true and correct and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.
4.21. Information Supplied.
None of the information supplied or to be supplied by Realco for inclusion in the Super 8-K will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading.
4.22. No Undisclosed Events, Liabilities, Developments or Circumstances.
No event, liability, development or circumstance has occurred or exists, or is contemplated to occur with respect to Realco, or its businesses, properties, prospects, operations or financial condition, that would be required to be disclosed by Realco under applicable securities laws on a registration statement on Form S-1 filed with the SEC relating to an issuance and sale by Realco of the Realco Stock and which has not been publicly announced or will not be publicly announced in the Super 8-K.
4.23. No Additional Agreements.
Realco does not have any agreement or understanding with the Shareholders with respect to the Share Exchange other than as specified in this Agreement.
ARTICLE V
Effective Date Deliverables
5.1. On or before the Effective Date Realco shall undertake the following actions or otherwise deliver the following to PeerLogix:
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(a) Issuance of Stock Certificates Representing the Shares . Realco shall cause its transfer agent to deliver the Shares to the Shareholders as specified in Annex A to this Agreement.
(b) Name Change . In the Restated Amended Articles of Incorporation Realco shall change its name to PeerLogix, Inc. or some derivation thereof as may be requested by PeerLogix.
(c) Forward Split . Realco shall have taken all action necessary to effectuate a forward split of the Realco Stock on a 4.04 for 1 basis, subject to the approval of FINRA.
(d) Restated Articles of Incorporation . Realco shall have taken all action necessary to adopt the Restated Articles of Incorporation in the form attached hereto as Exhibit “B”, including a provision to increase the authorized capital stock to 100,000,000 shares of Realco Stock and 10,000,000 shares of preferred stock.
(e) Incentive Stock Option Plan . Realco shall have adopted an incentive stock option plan that authorizes the issuance of up to 3,000,000 options to employees of Realco and its subsidiaries.
(f) Cancellation of Restricted Shares . Captain’s Crew LLC will cancel the 18,000,000 (pre 4.04 for 1 split) shares of common stock it owns so that Realco will have 990,000 pre 4.04 for 1 split shares (3,999,600 post forward split shares) of common stock issued and outstanding at the Closing, without giving effect to the shares of common stock or warrants being issued in the PPO.
(g) Consents . Realco shall deliver to PeerLogix any and all consents, waivers, approvals, authorizations or orders listed in Section 4.5 of the Realco Disclosure Letter.
(h) DTC Eligibility . Realco shall deliver to PeerLogix evidence reasonably satisfactory to PeerLogix that the Realco Stock is eligible for the depository and book-entry services of The Depository Trust Company.
(i) Secretary’s Certificate . Realco shall deliver to PeerLogix a certificate, signed by its Secretary, certifying that the attached copies of the Realco Charter, Realco Bylaws and resolutions of its Board of Directors approving this Agreement and the Share Exchange are all true, complete and correct and remain in full force and effect.
(j) Good Standing Certificate . Realco shall deliver to PeerLogix a certificate of good standing of Realco issued by the Secretary of State of Nevada.
(k) Resignations and Appointments . Realco shall deliver to PeerLogix (i) a letter of resignation from Jay Lasky resigning from all offices he holds with Realco and from his position as the sole director of Realco effective at the Closing; (ii) evidence of the appointment of the following persons as directors of Realco effective as of the Closing: William Gorfein, Joshua Partridge and Timothy Askew; and (iii) evidence of the appointment of the following persons as executive officers of Realco, holding the offices in parenthesis opposite their names as follows, effective as of the Closing: William Gorfein (Chief Executive Officer and Chief Financial Officer) and Joshua Partridge (Head of Business Development and Secretary).
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(l) Payoff Letters and Releases . Realco shall deliver to PeerLogix such pay-off letters and releases relating to liabilities of Realco as PeerLogix shall request, in form and substance satisfactory to PeerLogix, so that on the Closing Date Realco will have no liabilities.
(m) Amend Bylaws. Realco shall have taken all action necessary to amend its Bylaws to reflect a fiscal year end of September 30.
5.2. PeerLogix and the Shareholders Deliverables.
On or before the Effective Date, PeerLogix and/or the Shareholders shall deliver the following to Realco:
(a) Consents . PeerLogix shall deliver to Realco any and all consents, waivers, approvals, authorizations or orders listed in Section 3.6 of the PeerLogix Disclosure Letter.
(b) Secretary’s Certificate . PeerLogix shall deliver to Realco a certificate, signed by its Secretary (or authorized director or officer), certifying that the attached copies of the PeerLogix Constituent Instruments and resolutions of the Board of Directors of PeerLogix approving this Agreement and the Share Exchange are all true, complete and correct and remain in full force and effect.
(c) Delivery of Audit Report and Financial Statements . PeerLogix shall have completed and delivered to Realco the PeerLogix Financial Statements and shall have received an audit report from an independent audit firm that is registered with the Public Company Accounting Oversight Board.
(d) Super 8-K . PeerLogix shall provide Realco with reasonable assurances that Realco will be able to comply with its obligation to file the Super 8-K within four (4) business days following the Effective Date containing the requisite PeerLogix Financial Statements and the requisite Form 10 disclosure regarding PeerLogix and its subsidiaries.
(e) Share Transfer Documents . Each Shareholder shall have delivered to Realco certificate(s) representing its PeerLogix Securities, accompanied by an executed instrument of transfer and bought and sold note for transfer by the Shareholder of its PeerLogix Securities to Realco.
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ARTICLE VI
CONDUCT PRIOR TO THE EFFECTIVE DATE
6.1 Conduct of Business by Peerlogix and Realco . During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement pursuant to its terms or the Effective Date (as herein defined), the Shareholders, on behalf of Peerlogix , and Realco shall, except to the extent that the other party shall otherwise consent in writing, carry on its business in the usual, regular and ordinary course consistent with past practices, in substantially the same manner as heretofore conducted and in compliance with all applicable laws and regulations (except where noncompliance would not have a Material Adverse Effect), pay its debts and taxes when due subject to good faith disputes over such debts or taxes, pay or perform other material obligations when due, and use its commercially reasonable efforts consistent with past practices and policies to (i) preserve substantially intact its present business organization, (ii) keep available the services of its present managers, officers and employees, and (iii) preserve its relationships with customers, suppliers, distributors, licensors, licensees, and others with which it has significant business dealings. In addition, except as permitted or required by the terms of this Agreement, without the prior written consent of the other party, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement pursuant to its terms or the Effective Date, Peerlogix and Realco shall not do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or (except as specifically provided for herein) change the period of exercisability of options or restricted stock, or reprice options granted under any employee, consultant, director or other stock plans or authorize cash payments in exchange for any options granted under any of such plans;
(b) Grant any severance or termination pay to any officer or employee except pursuant to applicable law, written agreements outstanding, or policies existing on the date hereof and as previously or concurrently disclosed in writing or made available to the other party, or adopt any new severance plan, or amend or modify or alter in any manner any severance plan, agreement or arrangement existing on the date hereof;
(c) Transfer or license to any person or otherwise extend, amend or modify any material rights to any Intellectual Property of Peerlogix or Realco or enter into grants to transfer or license to any person future patent rights, other than in the ordinary course of business consistent with past practices provided that in no event shall Peerlogix or Realco license on an exclusive basis or sell any Intellectual Property of Peerlogix or Realco, as applicable;
(d) Declare, set aside or pay any dividends on or make any other distributions (whether in cash, stock, equity securities or property) in respect of any capital stock or split, combine or reclassify any capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any capital stock;
(e) Except as provided herein., purchase, redeem or otherwise acquire, directly or indirectly, any shares of capital stock or Shareholders interest of Peerlogix and Realco, as applicable;
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(f) Issue, deliver, sell, authorize, pledge or otherwise encumber, or agree to any of the foregoing with respect to, any shares of capital stock, or any securities convertible into or exchangeable for shares of capital stock, or subscriptions, rights, warrants or options to acquire any shares of capital stock or any securities convertible into or exchangeable for shares of capital stock or Shares, or enter into other agreements or commitments of any character obligating it to issue any such shares of capital stock, shares or convertible or exchangeable securities;
(g) Except as provided herein or as disclosed to the other party, amend its Charter Documents;
(h) Acquire or agree to acquire by merging or consolidating with, or by purchasing any equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire any assets which are material, individually or in the aggregate, to the business of Realco or Peerlogix , as applicable, or enter into any joint ventures, strategic partnerships or alliances or other arrangements that provide for exclusivity of territory or otherwise restrict such party's ability to compete or to offer or sell any products or services;
(i) Sell, lease, license, encumber or otherwise dispose of any properties or assets, except sales of inventory in the ordinary course of business consistent with past practice and, except for the sale, lease or disposition (other than through licensing) of property or assets which are not material, individually or in the aggregate, to the business of such party;
(j) Incur any indebtedness for borrowed money in excess of $1,000 in the aggregate, or guarantee any such indebtedness of another person, issue or sell any debt securities or options, warrants, calls or other rights to acquire any debt securities of Realco or PEERLOGIX, as applicable, enter into any "keep well" or other agreement to maintain any financial statement condition or enter into any arrangement having the economic effect of any of the foregoing;
(k) Except as provided herein, adopt or amend any employee benefit plan, policy or arrangement, any employee stock purchase or employee stock option plan, or enter into any employment contract or collective bargaining agreement (other than offer letters and letter agreements entered into in the ordinary course of business consistent with past practice with employees who are terminable "at will"), pay any special bonus or special remuneration to any manager, director or employee, or increase the salaries or wage rates or fringe benefits (including rights to severance or indemnification) of its managers, directors, officers, employees or consultants, except in the ordinary course of business consistent with past practices;
(l) (i) pay, discharge, settle or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), or litigation (whether or not commenced prior to the date of this Agreement) other than the payment, discharge, settlement or satisfaction, in the ordinary course of business consistent with past practices or in accordance with their terms, or liabilities recognized or disclosed in the most recent financial statements (or the notes thereto) of Peerlogix or of Realco, as applicable, or incurred since the date of such financial statements, or (ii) waive the benefits of, agree to modify in any manner, terminate, release any person from or knowingly fail to enforce any confidentiality or similar agreement to which PEERLOGIX is a party or of which Peerlogix is a beneficiary or to which Realco is a party or of which Realco is a beneficiary, as applicable;
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(m) Except in the ordinary course of business consistent with past practices, modify, amend or terminate any Contract of Peerlogix or Realco, as applicable, or other material contract or material agreement to which Peerlogix or Realco is a party or waive, delay the exercise of, release or assign any material rights or claims thereunder;
(n) Except as appropriate to fairly represent Peerlogix ’s financial condition or results of operations, revalue any of its assets or adjust its revenue or expenses;;
(o) Incur or enter into any agreement, contract or commitment requiring such party to pay in excess of $1,000 in any 12 month period;
(p) Settle any litigation for a total sum of greater than $10,000.00;
(q) Make or rescind any Tax elections that, individually or in the aggregate, could be reasonably likely to adversely affect in any material respect the Tax liability or Tax attributes of such party, settle or compromise any material income tax liability or, except as required by applicable law, materially change any method of accounting for Tax purposes or prepare or file any Return in a manner inconsistent with past practice;
(r) Form, establish or acquire any Subsidiary;
(s) Permit any Person to exercise any of its discretionary rights under any Plan to provide for the automatic acceleration of any outstanding options, the termination of any outstanding repurchase rights or the termination of any cancellation rights issued pursuant to such plans; or
(t) Agree in writing or otherwise agree, commit or resolve to take any of the actions described in Section 6.1 (a) through (s) above.
ARTICLE VI
I
Covenants
7.1 Blue Sky Laws.
Realco shall take any action (other than qualifying to do business in any jurisdiction in which it is not now so qualified) required to be taken under any applicable state securities laws in connection with the issuance of the Realco Stock in connection with this Agreement.
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7.2 Fees and Expenses.
All fees and expenses incurred in connection with this Agreement shall be paid by the Party incurring such fees or expenses. Realco shall not be responsible for any fees and expenses incurred by it or its officers, directors or security holders on or prior to the Closing Date in connection with the Share Exchange contemplated by this Agreement.
7.3 Filing of Form 8-K and Super 8-K.
Realco shall file a Form 8-K with the SEC upon execution hereof and shall, within four (4) business days of the Effective Date, a Super Form 8-K and attach as exhibits all relevant agreements with the SEC disclosing the terms of this Agreement and other requisite disclosure regarding the Share Exchange and including the requisite audited consolidated financial statements of PeerLogix and the requisite Form 10 disclosure regarding PeerLogix and its subsidiaries.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination .
This Agreement may be terminated at any time prior to the Closing:
(a) by mutual written agreement of Realco and PeerLogix;
(b) by either Realco or Peerlogix if the Transaction shall not have been consummated by August 31, 2015 (“Closing Deadline”) for any reason;
(c) by either Realco or PeerLogix if a Governmental Entity shall have issued an order, decree or ruling or taken any other action, in any case having the effect of permanently restraining, enjoining or otherwise prohibiting the Transaction, which order, decree, ruling or other action is final and nonappealable;
(d) by Peerlogix, upon a material breach of any representation, warranty, covenant or agreement on the part of Realco set forth in this Agreement, or if any representation or warranty of Realco shall have become materially untrue, in either case such that the conditions set forth in Section 6.2(a) or Section 6.2(b) would not be satisfied as of the time of such breach or as of the time such representation or warranty shall have become untrue, provided, that if such inaccuracy in Realco’s representations and warranties or breach by Realco is curable by Realco prior to the Effective Date, then the Shareholders may not terminate this Agreement under this Section 7.1(d) for thirty (30) days after delivery of written notice from Shareholders to REALCO of such breach, provided REALCO continues to exercise commercially reasonable efforts to cure such breach (it being understood that Shareholders may not terminate this Agreement pursuant to this Section 7.1(d) if they shall have also materially breached this Agreement or if such breach by REALCO is cured during such thirty (30)-day period);
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(e) by PeerLogix if Realco has net cash assets of less than $2,000,000 on the Closing Date; or
(f) by Realco, upon a material breach of any representation, warranty, covenant or agreement on the part of Peerlogix set forth in this Agreement, or if any representation or warranty of Peerlogix shall have become materially untrue, in either case such that the conditions set forth in Article V would not be satisfied as of the time of such breach or as of the time such representation or warranty shall have become untrue, provided, that if such inaccuracy in the Peerlogixs' representations and warranties or breach by Peerlogix is curable by Peerlogix prior to the Effective Date, then Realco may not terminate this Agreement under this Section 7.1(e) for thirty (30) days after delivery of written notice from Realco to Peerlogix of such breach, provided Peerlogix continues to exercise commercially reasonable efforts to cure such breach (it being understood that Realco may not terminate this Agreement pursuant to this Section 7.1(e) if it shall have materially breached this Agreement or if such breach by Peerlogix is cured during such thirty (30)-day period).
8.2 Notice of Termination; Effect of Termination . Any termination of this Agreement under Section 7.1 above will be effective immediately upon (or, if the termination is pursuant to Section 7.1(d) or Section 7.1(e) and the proviso therein is applicable, thirty (30) days after the party in breach fails to cure the breach) the delivery of written notice of the terminating party to the other parties hereto. In the event of the termination of this Agreement as provided in Section 7.1, this Agreement shall be of no further force or effect and the Transaction shall be abandoned, except (i) as set forth in this Section 7.2, Section 7.3, and Article VIII (Miscellaneous), each of which shall survive the termination of this Agreement, and (ii) nothing herein shall relieve any party from liability for any intentional or willful breach of this Agreement.
8.3 Fees and Expenses . All fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses whether or not the Transaction is consummated.
8.4 Extension; Waiver . At any time prior to the Effective Date, any party hereto may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties made to such party contained herein or in any document delivered pursuant hereto, and (iii) waive compliance with any of the agreements or conditions for the benefit of such party contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. Delay in exercising any right under this Agreement shall not constitute a waiver of such right.
ARTICLE IX
Miscellaneous
9.1 All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given upon receipt by the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):
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If to Realco, to:
Realco International, Inc.
154 Thames Street
Newport, Rhode Island 02840
Attn: Jay Lasky
with a copy to:
Andrew I. Telsey, P.C.
12835 E. Arapahoe Road
Tower 1 Penthouse #803
Centennial, CO 80112
If to PeerLogix, to:
PeerLogix, Inc.
500 7th Ave., 17th Floor
New York, NY 10018
Attention: Will Gorfein, CEO
with a copy to:
Mitchell L. Lampert, Esq.
Robinson & Cole LLP
1055 Washington Boulevard
Stamford, CT 06901
If to the Shareholders at the addresses set forth in Annex A hereto.
9.2 Amendments; Waivers; No Additional Consideration.
No provision of this Agreement may be waived or amended except in a written instrument signed by PeerLogix, Realco and Shareholders holding a majority in interest of the PeerLogix Securities measured based upon the number of Shares they are expected to receive at the Closing. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any Party to exercise any right hereunder in any manner impair the exercise of any such right. No consideration shall be offered or paid to any Shareholder to amend or consent to a waiver or modification of any provision of this Agreement or any other documents related to the Share Exchange unless the same consideration is also offered to all Shareholders then holding the Shares.
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9.3 Replacement of Securities.
If any certificate or instrument evidencing any Shares is mutilated, lost, stolen or destroyed, Realco shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to Realco of such loss, theft or destruction and customary and reasonable indemnity, if requested. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Shares. If a replacement certificate or instrument evidencing any Shares is requested due to a mutilation thereof, Realco may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement.
9.4 Remedies.
In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Shareholders, Realco and PeerLogix will be entitled to specific performance under this Agreement. The Parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.
9.5 Independent Nature of Shareholders’ Obligations and Rights.
The obligations of each Shareholder under this Agreement are several and not joint with the obligations of any other Shareholder, and no Shareholder shall be responsible in any way for the performance of the obligations of any other Shareholder under this Agreement. The decision of each Shareholder to acquire the Shares pursuant to this Agreement has been made by such Shareholder independently of any other Shareholder. Nothing contained herein, and no action taken by any Shareholder pursuant hereto, shall be deemed to constitute the Shareholders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Shareholders are in any way acting in concert or as a group with respect to such obligations or the Share Exchange. Each Shareholder acknowledges that no other Shareholder has acted as agent for such Shareholder in connection with making its investment hereunder and that no Shareholder will be acting as agent of such Shareholder in connection with monitoring its investment in the Shares or enforcing its rights under this Agreement. Each Shareholder shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Shareholder to be joined as an additional party in any proceeding for such purpose. Each of PeerLogix and Realco acknowledges that each of the Shareholders has been provided with this same Agreement for the purpose of closing a transaction with multiple Shareholders and not because it was required or requested to do so by any Shareholder.
9.6 Limitation of Liability.
Notwithstanding anything herein to the contrary, each of Realco and PeerLogix acknowledges and agrees that the liability of a Shareholder arising directly or indirectly, under this Agreement or any other document related to the Share Exchange of any and every nature whatsoever shall be satisfied solely out of the assets of such Shareholder, and that no trustee, officer, other investment vehicle or any other affiliate of such Shareholder or any investor, shareholder or holder of shares of beneficial interest of such Shareholder shall be personally liable for any liabilities of such Shareholder.
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9.7 Interpretation.
When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”.
9.8 Severability.
If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule or Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Share Exchange is not affected in any manner materially adverse to any Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the Share Exchange are fulfilled to the extent possible.
9.9 Counterparts; Facsimile Execution.
This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Parties. Facsimile execution and delivery of this Agreement is legal, valid and binding for all purposes.
9.10 Entire Agreement; Third Party Beneficiaries.
This Agreement, taken together with the PeerLogix Disclosure Letter and the other agreements and documents referred to herein, (a) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the Parties with respect to the Share Exchange and (b) are not intended to confer upon any person other than the Parties any rights or remedies.
9.11 Governing Law.
This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof, except to the extent the laws of Delaware are mandatorily applicable to the Share Exchange.
9.12 Assignment.
Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the Parties without the prior written consent of each of the other Parties. Any purported assignment without such consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and assigns.
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IN WITNESS WHEREOF, the parties hereto have caused this Securities Exchange Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
REALCO INTERNATIONAL, INC.
By: /s/ Jay Lasky
Name: Jay Lasky
Title: Chief Executive Officer
PEERLOGIX TECHNOLOGIES, INC.
By: /s/ William Gorfein
Name: William Gorfein
Title: Chief Executive Officer
SHAREHOLDERS:
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ANNEX A
Schedule of Securities Exchanged and Other Shares Delivered
Name and Address of Shareholder | Number of Shares of PeerLogix Securities Exchanged | Total Number of Shares of Realco Stock to be Received | |
1 | William Gorfein | 6,662,042 | 6,662,042 |
2 | Joshua Partridge | 6,662,042 | 6,662,042 |
3 | Rafford Bailey | 676,097 | 676,097 |
4 | Offer Attia | 999,821 | 999,821 |
5 | New World Merchant Partners LLC | 1,000,000 | 1,000,000 |
6 | John S.Lemak | 25,000 | 25,000 |
7 | Frederick Daniel Gabel | 25,000 | 25,000 |
8 | Leslie M. Clarke | 100,000 | 100,000 |
9 | GSB Holdings Inc. | 100,000 | 100,000 |
10 | Freeman Management Grp LLC | 100,000 | 100,000 |
11 | Gerald J. Quave Jr. | 100,000 | 100,000 |
12 | Charles Merkel | 100,000 | 100,000 |
13 | Lawrence Silverberg | 100,000 | 100,000 |
14 | Mark & Karen Getelman Fam | 100,000 | 100,000 |
15 | John Forrer | 50,000 | 50,000 |
16 | Francis E. Straw | 100,000 | 100,000 |
17 | Frederic Colman | 50,000 | 50,000 |
18 | Daniel Carty | 100,000 | 100,000 |
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ANNEX B
Definitions
“ Action ” means any action, suit, inquiry, notice of violation, proceeding (including any partial proceeding such as a deposition) or investigation pending or threatened in writing before or by any court, arbitrator, governmental or administrative agency, regulatory authority (federal, state, county, local or foreign), stock market, stock exchange or trading facility.
“ PeerLogix Constituent Instruments ” means the corporate Charter and Bylaws of PeerLogix and such other constituent instruments of PeerLogix as may exist, each as amended to the date of this Agreement.
“ PeerLogix Disclosure Letter ” means the letter delivered from PeerLogix to Realco concurrently herewith.
“ Consent ” means any material consent, approval, license, permit, order or authorization.
“ Contract ” means any contract, lease, license, indenture, note, bond, agreement, permit, concession, franchise or other instrument.
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.
“ Governmental Entity ” means any federal, state, local or foreign government or any court of competent jurisdiction, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, including but not limited to the SEC and FINRA.
“ Intellectual Property Right ” means any patent, patent right, trademark, trademark right, trade name, trade name right, service mark, service mark right, copyright and other proprietary intellectual property right and computer program.
“ Law ” means any statute, law, ordinance, rule, regulation, order, writ, injunction, judgment, or decree.
“ Lien ” means any lien, security interest, pledge, equity and claim of any kind, voting trust, stockholder agreement and other encumbrance.
“ Realco Bylaws ” means the Bylaws of Realco, as amended to the date of this Agreement.
“ Realco Charter ” means the Articles of Incorporation of Realco, as amended to the date of this Agreement.
“ Realco Disclosure Letter ” means the letter delivered from Realco to PeerLogix concurrently herewith.
“ SEC ” means the Securities and Exchange Commission.
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“ Securities Act ” means the Securities Act of 1933, as amended.
“ Taxes ” means all forms of taxation, whenever created or imposed, and whether of the United States or elsewhere, and whether imposed by a local, municipal, governmental, state, foreign, federal or other Governmental Entity, or in connection with any agreement with respect to Taxes, including all interest, penalties and additions imposed with respect to such amounts.
“ Tax Return ” means all federal, state, local, provincial and foreign Tax returns, declarations, statements, reports, schedules, forms and information returns and any amended Tax return relating to Taxes.
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Exhibit 2.2
PLAN OF SHARE EXCHANGE
BETWEEN
REALCO INTERNATIONAL, INC.
(a Nevada corporation)
AND
PEERLOGIX TECHNOLOGIES, INC.
(a Delaware corporation)
This Plan of Share Exchange made and entered into by and between REALCO INTERNATIONAL, INC., a Nevada corporation, and PEERLOGIX TECHNOLOGIES, INC., a Delaware corporation, hereinafter referred to collectively as the "Constituent Corporations," parties hereto,
WITNESSETH:
WHEREAS, the respective Boards of Directors of said corporations deem it advisable that Realco International, Inc. acquire all of the issued and outstanding stock of PeerLogix Technologies, Inc. in exchange for shares of Realco International, Inc., as hereinafter agreed and specified; and
WHEREAS, Realco International, Inc. has an authorized capitalization of 25,000,000 Common Shares, $.00001 par value per share, of which 18,990,000 shares are issued and outstanding; and
WHEREAS, immediately prior to the effective date of the share exchange, the holder of 18,000,000 shares of the Common Stock of Realco International, Inc. will voluntarily surrender such shares to Realco International, Inc. so as to establish the number of issued and outstanding common shares of Realco International, Inc. at 990,000 at the effective date of the share exchange; and
WHEREAS, immediately prior to the effective date of the share exchange, Realco International, Inc. shall effectuate a 4.04 shares for 1 forward split of its remaining issued and outstanding common shares and shall amend and restate its Articles of Incorporation to increase its authorized capitalization and change the par value of its shares so that at the effective date of the share exchange, Realco International, Inc.’s authorized capitalization will consist of 100,000,000 common shares, $.001 par value per share, of which 3,999,600 shares will be issued and outstanding, and 10,000,000 preferred shares, $.001 par value per share, of which no shares are issued and outstanding; and
WHEREAS, PeerLogix Technologies, Inc. has an authorized capitalization of 25,000,000 Common Shares, no par value per share, of which 17,000,000 shares are issued and outstanding;
NOW, THEREFORE, in consideration of the premises, and the mutual covenants, agreements, provisions and grants herein contained, the Constituent Corporations hereby agree and prescribe the terms and conditions of this Plan of Share Exchange, and the mode of carrying the same into effect, as follows:
1. Share Exchange . The Shareholders of PeerLogix Technologies, Inc. (hereinafter referred to as the "Acquired Corporation"), shall exchange all of the shares of the Acquired Corporation for common shares of Realco International, Inc. (hereinafter referred to as the "Acquiring Corporation"), and the Acquired Corporation shall become a wholly owned subsidiary of the Acquiring Corporation.
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2. Exchange of Shares . The manner and basis of exchanging the issued and outstanding shares of the Acquired Corporation into shares of the Acquiring Corporation are:
(a) None of the shares of any class of the capital stock of the Acquiring Corporation issued and outstanding as of the effective date of this Plan of Share Exchange shall be converted as a result of the exchange and all such shares shall remain unchanged.
(b) 17,050,002 shares of the common stock of the Acquired Corporation shall be exchanged for 17,050,002 shares of the common stock of the Acquiring Corporation upon surrender, and shall represent only shares in the Acquiring Corporation for all corporate and legal purposes, subject, however, to the rights of dissenting shareholders; and, such shares shall be called in for exchange for shares in the Acquiring Corporation upon this Plan of Share Exchange taking effect upon the foregoing basis.
(c) No fractional shares shall be issued by reason of the conversion and exchange of shares.
3. Approval of Shareholders and Directors . This Plan of Share Exchange has been submitted for approval to the Board of Directors of the Acquiring Corporation and the Board of Directors and shareholders of the Acquired Corporation in accordance with the provisions of the Nevada Revised Statutes and the Delaware General Corporation Law and pursuant to each of their respective Articles of Incorporation and Bylaws, as appropriate. Should such approvals of the Directors and/or Shareholders, as applicable, of each Constituent Corporation not be secured or effected, and this Plan not approved and adopted as contemplated, then it shall, without any further action by the parties, other than certification to the other party of the results of the vote by the secretary of the corporation which shall not have approved or adopted the Plan of Share Exchange, be cancelled and annulled, and the Constituent Corporations each discharged without liability to the other.
4. Effect of Share Exchange on Acquired Corporation . Upon this Plan of Share Exchange taking effect, the Acquired Corporation shall be and become a wholly owned subsidiary of the Acquiring Corporation.
5. Effect of Share Exchange on Acquiring Corporation . Upon this Plan of Share Exchange taking effect, the Acquiring Corporation shall thereupon own all of the issued and outstanding shares of the Acquired Corporation, and the Acquired Corporation shall be and become a wholly owned subsidiary of the Acquiring Corporation.
6. Officers . Upon this Plan of Share Exchange taking effect, the sole officer of the Acquiring Corporation shall submit his resignation and the following persons shall be appointed to hold the offices opposite their respective names for the remainder of the respective terms of office and until their successors shall have been elected and qualified:
NAME | OFFICE |
William Gorfein | Chief Executive Officer and Chief Financial Officer |
Joshua Partridge | Secretary and Head of Business Development |
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7. Directors . Upon this Plan of Share Exchange taking effect, the sole director of the Acquiring Corporation shall resign, and those persons named below shall be appointed to serve for the remainder of the present term of office of the sole director of the Acquiring Corporation or until the next Annual Meeting of Shareholders, as applicable, and until their successors shall have been elected and qualified:
William Gorfein
Joshua Partridge
Timothy Askew
8. Warranties . The Constituent Corporations hereby agree, and warrant each with the other, that they will cooperate with the other in carrying out the terms and provisions of this Plan; that they and each of them will not issue or sell any shares of capital stock, except shares issued pursuant to rights or warrants outstanding, issue rights to subscribe or options to purchase any shares of their capital stock, amend the Articles of Incorporation or Bylaws of their corporation except as may be required to comply with the terms and provisions of this Plan, issue or contract any funded debt, declare and pay any dividend or make any other distribution of surplus, undertake or incur any obligations or liabilities except in the ordinary course of business and those fees and expenses in connection with the negotiation and consummation of this exchange, mortgage, pledge or encumber any real or personal property, or interest therein held by them, sell assign or dispose of any trademark, trade name, patent or other intangible assets, default in performance of any material contract or other obligation, waive any right of substantial value, invest in or purchase any security, equity or property not in the usual course of business; and each of them represent that all foreign, state, federal and local taxes and assessments, excise taxes, ad valorem taxes and sales taxes, withholding and other employee related obligations are currently paid and not in default.
9. Abandonment of Share Exchange . Notwithstanding anything to the contrary or implied herein, this Plan may be abandoned without further liability and obligation prior to the filing of the Articles of Exchange, even if subsequent to approval being given thereto by the shareholders of either Constituent Corporation and by the Board of Directors of either Constituent Corporation by resolution duly adopted and notice thereof received by the other Constituent Corporation, in the event or upon the contingency that: a material adverse change occurs in the business, properties, operations or financial condition of the other Constituent Corporation; any drastic or substantial change occurs in the economic or political condition generally of the State of Nevada or the United States which would affect the advisability of completing the exchange herein contemplated; upon the discovery that any financial statements, or other information furnished by the other Constituent Corporation is highly inaccurate, misleading in material respect, or omits important relevant data or information; either of the Constituent Corporations becomes involved in any litigation not previously disclosed to the other, either pending or threatened, which would materially affect the financial condition or reputation of the Constituent Corporation so involved; or any action or suit to enjoin or restrain or restrict the exchange herein contemplated has been filed in any court or agency having jurisdiction in this matter.
10. Expenses . Each Constituent Corporation shall bear all of their respective costs and expenses incurred in connection with the negotiation and consummation of the exchange contemplated herein.
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11. Counterpart Agreements . This Plan of Share Exchange may be executed in counterparts, each of which shall be deemed an original document, but together shall be deemed to constitute only one agreement.
12. Notices . Notice or other transmittals to the Constituent Corporations shall be properly made or served if delivered by hand or by certified or registered mail at or to the addresses set forth below:
If to Realco International, Inc.:
Jay Lasky, Chief Executive Officer
154 Thames Street
Newport, Rhode Island 02840
If to PeerLogix Technologies, Inc.:
William Gorfein
500 7th Ave., 17th Floor
New York, New York 10018
Executed this day of August 14, 2015.
REALCO INTERNATIONAL, INC.
By: /s/ Jay Lasky
Jay Lasky, Chief Executive Officer
PEERLOGIX TECHNOLOGIES, INC.
By: /s/ William Gorfein
William Gorfein, Chief Executive Officer
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Exhibit 2.3
Articles of Exchange
(PURSUANT TO NRS 92A.200)
Page 1
1) | Name and jurisdiction of organization of each constituent entity (NRS 92A.200): |
o | If there are more than two constituent entities, please check box and attach an 8 1/2" x 11" blank sheet listing the entities continued from article one. |
PeerLogix Technologies, Inc.
Name of acquired entity
Delaware | corporation |
Jurisdiction | Entity type * |
and,
Realco International, Inc.
Name of acquiring entity
Nevada | corporation |
Jurisdiction | Entity type " |
2) | The undersigned declares that a plan of exchange has been adopted by each constituent entity (NRS 92A.200). |
* Corporation, non-profit corporation, limited partnership, limited-liability limited partnership, limited-liability company or business trust.
FILING FEE: $350.00
This form must be accompanied by appropriate fees.
Nevada Secretary of State 92A Exchange Page 1
Revised: 1-5-15
Articles of Exchange
(PURSUANT TO NRS 92A.200)
Page 2
3) | Owner's approval (NRS 92A.200) (options a, b or c must be used for each entity): |
o | If there are more than two constituent entities, please check box and attach an 8 1/2" x 11" blank sheet listing the entities continued from article three. |
(a) | Owner's approval was not required from |
Name of acquired entity, if applicable
and, or;
Name of acquiring entity, if applicable
(b) | The plan was approved by the required consent of the owners of * |
PeerLogix Technologies, Inc.
Name of acquired entity, if applicable
and, or;
Realco International, Inc.
Name of acquiring entity, if applicable
* Unless otherwise provided in the certificate of trust or governing instrument of a business trust, an exchange must be approved by all the trustees and beneficial owners of each business trust that is a constituent entity in the exchange.
This form must be accompanied by appropriate fees.
Nevada Secretary of State 92A Exchange Page 2
Revised: 1-5-15
Articles of Exchange
(PURSUANT TO NRS 92A.200)
Page 3
(c) | Approval of plan of exchange for Nevada non-profit corporation (NRS 92A.160): |
The plan of exchange has been approved by the directors of the corporation and by each public officer or other person whose approval of the plan of exchange is required by the articles of incorporation of the domestic corporation.
Name of acquired entity, if applicable
and, or;
Name of acquiring entity, if applicable
4) | Location of Plan of Exchange (check a or b): |
o | (a) The entire plan of exchange is attached; |
Or,
x | (b) The entire plan of exchange is on file at the registered office of the acquiring corporation, limited-liability company or business trust, or at the records office address if a limited partnership, or other place of business of the acquiring entity (NRS 92A.200). |
This form must be accompanied by appropriate fees.
Nevada Secretary of State 92A Exchange Page 3
Revised: 1-5-15
Articles of Exchange
(PURSUANT TO NRS 92A.200)
Page 4
5) | Effective date and time of filing: (optional) (must not be later than 90 days after the certificate is filed) |
Date: | Time: |
6) | Signatures - Must be signed by: An officer of each Nevada corporation; All general partners of each Nevada limited partnership; All general partners of each Nevada limited-liability limited partnership; A manager of each Nevada limited-liability company with managers or a member if there are no Managers; A trustee of each Nevada business trust (NRS 92A.230):** |
o | If there are more than two constituent entities, please check box and attach an 8 1/2" x 11" blank sheet listing the entities continued from article six. |
PeerLogix Technologies, Inc.
Name of
acquired
entity
X /s/ William Gorfein | CEO | August 14, 2015 |
Signature | Title | Date |
Realco International, Inc.
Name of
acquiring
entity
X / s/ Jay Lasky | President | August 14, 2015 |
Signature | Title | Date |
* An exchange takes effect upon filing the articles of exchange or upon a later date as specified in the articles, which must not be more than 90 days after the articles are filed (NRS 92A.240).
**The articles of exchange must be signed by each foreign constituent entity in the manner provided by the law governing it (NRS 92A.230). Additional signature blocks may be added to this page or as an attachment, as needed.
IMPORTANT: Failure to include any of the above information and submit with the proper fees may cause this filing to be rejected.
This form must be accompanied by appropriate fees.
Nevada Secretary of State 92A Exchange Page 4
Revised: 1-5-15
Exhibit 3.3
Delaware
The First State
I, JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED ARE TRUE AND CORRECT COPIES OF ALL DOCUMENTS ON FILE OF “PEERLOGIX TECHNOLOGIES, INC.” AS RECEIVED AND FILED IN THIS OFFICE.
THE FOLLOWING DOCUMENTS HAVE BEEN CERTIFIED:
CERTIFICATE OF INCORPORATION, FILED THE NINTH DAY OF DECEMBER, A.D. 2014, AT 4:32 O'CLOCK P.M.
CERTIFICATE OF AMENDMENT, CHANGING ITS NAME FROM "PEERLOGIX, INC." TO "PEERLOGIX TECHNOLOGIES, INC.", FILED THE THIRTEENTH DAY OF JULY, A.D. 2015, AT 11:47 O'CLOCK A.M.
AND I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID CERTIFICATES ARE THE ONLY CERTIFICATES ON RECORD OF THE AFORESAID CORPORATION, "PEERLOGIX TECHNOLOGIES, INC.".
State of Delaware
Secretary of State
Division of Corporations
Delivered 04:56 PM 12/09/2014
FILED 04 : 32 PM 12/09/2014
SRV 141510033 - 5654197 FILE
CERTIFICATE OF INCORPORATION
OF
PEERLOGIX, INC.
FIRST. The name of the corporation is PEERLOGIX, INC. (the "Corporation").
SECOND. The address, including street, number, city, and county of the Corporation's registered office in the State of Delaware is 1811 Silverside Road, Wilmington, New Castle County, Delaware 19810. The name of its registered agent at such address is Vcorp Services, LLC.
THIRD. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.
FOURTH. The aggregate number of shares which the Corporation shall have authority to issue is 20,000,000, par value $0.001 per share, of which 20,000,000 shares shall be designated `Common Shares'.
FIFTH. The name and mailing address of the incorporator is William Gorfein, c/o IP Squared Technologies Holding LLC, 500 Seventh Avenue, 17 th Floor, New York, New York 10018.
SIXTH. Election of directors need not be by written ballot.
SEVENTH. The Board of Directors is authorized to adopt, amend, or repeal By-Laws of the Corporation.
EIGHTH. A. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative (hereinafter a “proceeding”), by reason of the fact that he or she is or was a director, officer, employee, or agent of the Corporation or any of its direct or indirect subsidiaries or is or was serving at the request of the Corporation as a director, officer, employee, or agent of any other corporation or of a partnership, joint venture, trust, or other enterprise, including service with respect to an employee benefit plan (hereinafter an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee, or agent or in any other capacity while serving as a director, officer, employee, or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability, and loss (including attorneys' fees, judgments, fines, excise taxes or penalties under the Employee Retirement Income Security Act of 1974, as amended, and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith, and such indemnification shall continue as to an indemnitee who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the indemnitee's heirs, executors, and administrators; provided, however, that, except as provided in Paragraph C of this Article EIGHTH with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.
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B. The right to indemnification, conferred in. Paragraph A of this Article EIGHTH shall include the right to be paid by the Corporation the expenses incurred in defending any proceeding for which such right to indemnification is applicable in advance of its final disposition (hereinafter an "advancement of expenses"); PROVIDED, HOWEVER, that, if the Delaware General Corporation Law requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a "final adjudication") that such indemnitee is not entitled to be indemnified for such expenses under this Article EIGHTH or otherwise.
C. The rights to indemnification and to the advancement of expenses conferred in Paragraphs A and B of this Article EIGHTH shall be contract rights. If a claim under Paragraph A or B of this Article EIGHTH is not paid in full by the Corporation within sixty days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by an indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) any suit by the Corporation to recover an advancement of expenses pursuant to the teens of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met any applicable standard for indemnification set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article EIGHTH or otherwise, shall be on the Corporation.
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D. The rights to indemnification and to the advancement of expenses conferred in this Article EIGHTH shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, this certificate of incorporation, by-law, agreement, vote of stockholders or disinterested directors, or otherwise. E. The Corporation may maintain insurance, at the Corporation's expense, to protect itself and any director, officer, employee, or agent of the Corporation or another corporation, partnership, joint venture, trust, or other enterprise against any expense, liability, or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability, or loss under the Delaware General Corporation Law. F. The Corporation's obligation, if any, to indemnify any person who was or is serving as a director, officer, employee, or agent of any direct or indirect subsidiary of the Corporation or, at the request of the Corporation, of any other corporation or of a partnership, joint venture, trust, or other enterprise shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust, or other enterprise. G. Any repeal or modification of the foregoing provisions of this Article EIGHTH shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.
NINTH. No director of the Corporation shall be liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, provided that this provision does not eliminate the liability of the director (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of Title 8 of the Delaware Code, or (iv) for any transaction from which the director derived an improper personal benefit. For purposes of the prior sentence, the term "damages" shall, to the extent permitted by law, include without limitation, any judgment, fine, amount paid in settlement, penalty, punitive damages, excise or other tax assessed with respect to an employee benefit plan, or expense of any nature (including, without limitation, counsel fees and disbursements). Each person who serves as a director of the Corporation while this Article NINTH is in effect shall be deemed to be doing so in reliance on the provisions of this Article NINTH, and neither the amendment or repeal of this Article NINTH, nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article NINTH, shall apply to or have any effect on the liability or alleged liability of any director or the Corporation for, arising out of, based upon, or in connection with any acts or omissions of such director occurring prior to such amendment, repeal, or adoption of an inconsistent provision. The provisions of this Article NINTH are cumulative and shall be in addition to and independent of any and all other limitations on or eliminations of the liabilities of directors of the Corporation, as such, whether such limitations or eliminations arise under or are created by any law, rule, regulation, by-law, agreement, vote of shareholders or disinterested directors, or otherwise.
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TENTH. Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation.
IN WITNESS WHEREOF, I have made, signed, and sealed this Certificate of Incorporation this 9 th day of December, 2014.
/S/ William Gorfein | |
William Gorfein | |
Incorporator |
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State of Delaware
Secretary of State
Division of Corporations
Delivered 11:47 AM 07/13/2015
FILED 11:47 AM 07/13/2015
SRV 151039697 - 5654197 FILE
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
PEERLOGIX, INC.
PeerLogix, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY:
1 . This Certificate of Amendment amends the Certificate of Incorporation of the Corporation (the "Certificate of Incorporation") by amending Article First to change the name of the Corporation.
2 . The text of Article First of the Certificate of Incorporation is amended hereby to read as follows:
"FIRST. The name of the corporation is "PeerLogix Technologies, Inc."
3 . The foregoing Amendment to the Certificate of Incorporation was duly adopted by written consent of the stockholders in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware.
4. This Amendment to the Certificate of Incorporation was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by its President this 13th day of July, 2015.
PEERLOGIX, INC. | |
By: /s/ William Gorfein | |
Name: William Gorfein | |
Its: Chief Executive Officer |
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Exhibit 3.4
peerlogix, inc.
Incorporated
under the laws
of the State of Delaware
BY-LAWS
As adopted on may 13, 2015
BY-LAWS
OF
PEERLOGIX, inc.
ARTICLE
I
Identification; Offices
SECTION 1.1 Name . The name of the corporation is PeerLogix, Inc. (the “ Corporation ”).
SECTION 1.2 Registered Offices: Other Offices . The registered office of the Corporation is Vcorp Services, LLC, 1811 Silverside Rd, in the City of Wilmington, County of New Castle, 19810. The Corporation may have such other offices, either within or outside of the State of Delaware, as the business of the Corporation may require from time to time.
ARTICLE
II
Stockholders
SECTION 2.1 Annual Meeting . An annual meeting of the stockholders shall be held each year, on such date as may be determined by resolution of the Board of Directors; provided, however, that if in any year such date is a legal holiday, such meeting shall be held on the next succeeding business day. At each annual meeting, the stockholders shall elect directors to hold office for the term provided in Section 3.1 of these By-laws.
SECTION 2.2 Special Meeting . A special meeting of the stockholders may be called by the Board of Directors, or by such officers or persons as the Board of Directors may designate.
SECTION 2.3 Place of Stockholder Meetings . The Board of Directors may designate any place, either within or without the State of Delaware, as the place of meeting for any annual meeting or for any special meeting. If no such place is designated by the Board of Directors, the place of meeting will be the principal business office of the Corporation.
SECTION 2.4 Notice of Meetings . Unless waived as herein provided, whenever stockholders are required or permitted to take any action at a meeting, written notice of the meeting shall be given stating the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Such written notice shall be given not less than ten (10) days nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at the meeting or in the event of a merger, consolidation, share exchange, dissolution or sale, lease or exchange of all or substantially all of the Corporation’s property, business or assets not less than twenty (20) days before the date of the meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at the stockholder’s address as it appears on the records of the Corporation.
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When a meeting is adjourned to another time or place in accordance with Section 2.5 of these By-laws, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting in which the adjournment is taken. At the adjourned meeting the Corporation may conduct any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
SECTION 2.5 Quorum and Adjourned Meetings . A majority of the shares entitled to vote, present in person or represented by proxy, shall constitute a quorum at a meeting of stockholders. If less than a majority of the shares entitled to vote at a meeting of stockholders is present in person or represented by proxy at such meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the original meeting.
SECTION 2.6 Fixing of Record Date
(a) For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
(b) For the purpose of determining stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is established by the Board of Directors, and which date shall not be more than ten (10) days after the date on which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal office, or an officer or agent of the Corporation having custody of the book in which the proceedings of meetings of stockholders are recorded. Delivery to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by law, the record date for determining stockholders’ consent to corporate action in writing without a meeting shall be the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.
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(c) For the purpose of determining the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect to any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix the record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining the stockholders for any such purpose shall be the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
SECTION 2.7 Voting List . The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
SECTION 2.8 Voting . When a quorum is present at any meeting, the vote of the holders of a majority of the issued and outstanding shares entitled to vote shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation, a different vote is required in which case such express provision shall govern and control the decision of such question.
SECTION 2.9 Proxies . Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by proxy, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may remain irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally.
SECTION 2.10 Ratification of Acts of Directors and Officers . Except as otherwise provided by law, any transaction or contract or act of the Corporation or of the directors or the officers of the Corporation may be ratified by the affirmative vote of the holders of the number of shares which would have been necessary to approve such transaction, contract or act at a meeting of stockholders, or by the written consent of stockholders in lieu of a meeting.
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SECTION 2.11 Informal Action of Stockholders . Any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. In the event that the action which is consented to is such as would have required the filing of a certificate with any governmental body, if such action had been voted on by stockholders at a meeting thereof, the certificate filed shall state, in lieu of any statement required by law concerning any vote of stockholders, that written consent had been given in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware, and that written notice has been given as provided in such section.
SECTION 2.12 Participation by Conference; Telephone . Any stockholder may participate in any meeting by means of conference telephone or similar communications equipment as long as all persons participating in the meeting can speak with and hear each other, and participation by a stockholder pursuant to this Section 2.12 shall constitute presence in person at such meeting.
SECTION 2.13 Organization . Such person as the Board of Directors may designate or, in the absence of such a designation, the Chief Executive Officer of the Corporation or, in his or her absence, such person as may be chosen by the holders of a majority of the shares entitled to vote who are present, in person or by proxy, shall call to order any meeting of the stockholders and act as chairman of such meeting.
ARTICLE III
DIRECTORS
SECTION 3.1 Number and Tenure of Directors . The number of directors of the Corporation shall initially be set at two (2). Thereafter the number of directors shall be fixed from time to time by the directors or shareholders without further amendment of this Section 3.1. Each director shall hold office until such director’s successor is elected and qualified or until such director’s earlier resignation or removal. Any director may resign at any time upon written notice to the Corporation.
SECTION 3.2 Election of Directors . Directors shall be elected at the annual meeting of stockholders, and in all elections for directors, every stockholder shall have the right to vote the number of shares owned by such stockholder for each director to be elected.
SECTION 3.3 Special Meetings . Special meetings of the Board of Directors may be called by or at the request of directors entitled to cast the majority of the votes of the entire Board of Directors. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Delaware, as the place for holding any special meeting of the Board of Directors called by them.
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SECTION 3.4 Notice of Special Meetings of the Board of Directors . Notice of any special meeting of the Board of Directors shall be given at least one (1) day previous thereto by written notice to each director at his or her address. If mailed, such notice shall be deemed to be delivered when deposited in the United States Mail so addressed, with first-class postage thereon prepaid. If sent by any other means (including facsimile, courier, or express mail, etc.), such notice shall be deemed to be delivered when actually delivered to the home or business address of the director.
SECTION 3.5 Quorum . At any meeting of the Board of Directors, directors entitled to cast a majority of the votes of the entire Board of Directors shall constitute a quorum for the transaction of business. If less than the applicable required amount of directors are present at a meeting of the Board of Directors, a majority of the directors present may adjourn the meeting from time to time without further notice.
SECTION 3.6 Voting . Each director shall have one (1) vote on all matters submitted to the Board of Directors or any committees thereof (whether the consideration of such matter is taken at a meeting, by written consent or otherwise) and the act of a majority of the total number of directors shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation.
SECTION 3.7 Vacancies . Vacancies in the Board of Directors may be filled by a majority vote of the Board of Directors or by an election either at an annual meeting or at a special meeting of the stockholders called for that purpose. Any directors elected by the stockholders to fill a vacancy shall hold office for the balance of the term for which he or she was elected. A director appointed by the Board of Directors to fill a vacancy shall serve until the next meeting of stockholders at which directors are elected.
SECTION 3.8 Removal of Directors . A director, or the entire Board of Directors, may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors.
SECTION 3.9 Informal Action of Directors . Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee. Such filings shall be in paper form if the minutes are maintained in paper form and in electronic form if the minutes are maintained in electronic form.
SECTION 3.10 Participation by Conference Telephone . Members of the Board of Directors, or any committee designated by such board, may participate in a meeting of the Board of Directors, or committee thereof, by means of conference telephone or similar communications equipment as long as all persons participating in the meeting can speak with and hear each other, and participation by a director pursuant to this Section 3.10 shall constitute presence in person at such meeting.
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ARTICLE
IV
WAIVER OF NOTICE
SECTION 4.1 Written Waiver of Notice . A written waiver of any required notice, signed by the person entitled to notice, whether before or after the date stated therein, shall be deemed equivalent to notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of stockholders, directors or members of a committee of directors need be specified in any written waiver of notice.
SECTION 4.2 Attendance as Waiver of Notice . Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, and objects at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
ARTICLE
V
COMMITTEES
SECTION 5.1 General Provisions . The Board of Directors may, by resolution passed by a majority vote of the Board of Directors, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member at any meeting of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it.
ARTICLE
VI
OFFICERS
SECTION 6.1 General Provisions . The officers of the Corporation shall be a Chief Executive Officer, a Secretary, a Treasurer, and such additional officers as the Board of Directors may deem necessary or appropriate from time to time. Any two or more offices may be held by the same person. The officers elected by the Board of Directors shall have such duties as are hereafter described and such additional duties as the Board of Directors may from time to time prescribe.
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SECTION 6.2 Election and Term of Office . The officers of the Corporation shall be elected annually by the Board of Directors at the regular meeting of the Board of Directors held after each annual meeting of the stockholders. If the election of officers is not held at such meeting, such election shall be held as soon thereafter as may be convenient. New offices of the Corporation may be created and filled and vacancies in offices may be filled at any time, at a meeting or by the written consent of the Board of Directors. Unless removed pursuant to Section 6.3 of these By-laws, each officer shall hold office until his or her successor has been duly elected and qualified, or until his or her earlier death or resignation. Election or appointment of an officer or agent shall not of itself create contract rights.
SECTION 6.3 Removal of Officers . Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever, in its judgment, the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person(s) so removed.
SECTION 6.4 The Chief Executive Officer . The Chief Executive Officer shall in general supervise and control all of the day-to-day business and affairs of the Corporation, unless otherwise provided by the Board of Directors. The Chief Executive Officer shall see that orders and resolutions of the Board of Directors are carried into effect. The Chief Executive Officer may sign certificates for shares and all other contracts and documents in the ordinary course of business whether or not under the seal of the Corporation except in cases where the signing and execution thereof shall be expressly delegated by law, by the Board of Directors or by these By-laws to some other officer or agent of the Corporation. The Chief Executive Officer shall from time to time make such reports of the affairs of the Corporation as the Board may require and shall perform such other duties as the Board may from time to time determine.
SECTION 6.5 The Secretary . The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the Corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or the Chief Executive Officer, under whose supervision he or she shall be. The Secretary shall have custody of the corporate seal of the Corporation and the Secretary shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his or her signature or by the signature of such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his or her signature.
SECTION 6.6 The Treasurer . The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chief Executive Officer and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his or her transactions as Treasurer and of the financial condition of the Corporation.
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SECTION 6.7 Duties of Officers May be Delegated . In the absence of any officer of the Corporation, or for any other reason the Board of Directors may deem sufficient, the Board of Directors may delegate the powers or duties, or any of such powers or duties, of any officers or officer to any other officer or to any director.
SECTION 6.8 Compensation . The Board of Directors shall have the authority to establish reasonable compensation of all officers for services to the Corporation.
ARTICLE
VII
CERTIFICATES FOR SHARES
SECTION 7.1 Certificates of Shares . The shares of the Corporation may be certificated or uncertificated, as provided under the General Corporation Law of the State of Delaware, and the Corporation may adopt a system of issuance, recordation and transfer of its shares by electronic means provided, however, any system so adopted shall not become effective as to issued and outstanding securities until the certificates therefore have been surrendered to the Corporation. Every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the Corporation by the Board of Directors, the Chief Executive Officer, the Treasurer or the Secretary of the Corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile.
SECTION 7.2 Signatures of Former Officer, Transfer Agent or Registrar . In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person or entity were such officer, transfer agent or registrar at the date of issue.
SECTION 7.3 Transfer of Shares . Transfers of shares of the Corporation shall be made only on the books of the Corporation by the holder of record thereof or by his or her legal representative, who shall furnish proper evidence of authority to transfer, or by his or her attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, and on surrender for cancellation of certificate for such shares. Prior to due presentment of a certificate for shares for registration of transfer, the Corporation may treat a registered owner of such shares as the person exclusively entitled to vote, to receive notifications and otherwise have and exercise all of the right and powers of an owner of shares.
SECTION 7.4 Lost, Destroyed or Stolen Certificates . Whenever a certificate representing shares of the Corporation has been lost, destroyed or stolen, the holder thereof may file in the office of the Corporation an affidavit setting forth, to the best of his or her knowledge and belief, the time, place, and circumstance of such loss, destruction or theft together with a statement of indemnity sufficient in the opinion of the Board of Directors to indemnify the Corporation against any claim that may be made against it on account of the alleged loss of any such certificate. Thereupon the Board may cause to be issued to such person or such person’s legal representative a new certificate or a duplicate of the certificate alleged to have been lost, destroyed or stolen. In the exercise of its discretion, the Board of Directors may waive the indemnification requirements provided herein.
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ARTICLE
VIII
DIVIDENDS
SECTION 8.1 Dividends . The Board of Directors of the Corporation may declare and pay dividends upon the shares of the Corporation’s capital stock in any form determined by the Board of Directors and not inconsistent with the Certificate, in the manner and upon the terms and conditions provided by law.
ARTICLE
IX
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 9.1 Contracts . The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances.
SECTION 9.2 Loans . No loans shall be contracted on behalf of the Corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances.
SECTION 9.3 Checks, Drafts, Etc . All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by one or more officers or agents of the Corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors.
SECTION 9.4 Deposits . The funds of the Corporation may be deposited or invested in such bank account, in such investments or with such other depositaries as determined by the Board of Directors.
ARTICLE
X
Indemnification
SECTION 10.1 Indemnification . The corporation shall indemnify its directors and officers according to the provisions set forth in its Certificate of Incorporation.
SECTION 10.2 Insurance . The Corporation may, but need not, maintain insurance insuring the Corporation or persons entitled to indemnification under Section 10.1 for liabilities against which they are entitled to indemnification under this Article or insuring such persons for liabilities against which they are not entitled to indemnification under this Article.
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ARTICLE
XI
Miscellaneous
SECTION 11.1 Fiscal Year . The fiscal year of the Corporation shall be determined by the Board of Directors.
SECTION 11.2 Seal . The Corporation may have, but it is not required to have, a corporate seal which shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors.
SECTION 11.3 Interested Directors; Officers; Quorum . No contract or transaction between the Corporation and one or more of its directors or officers, between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, or between the Corporation and any relative of any of its directors or officers, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or her or their votes are counted for such purpose, if: (a) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors may be less than a quorum; (b) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.
SECTION 11.4 Books and Records . The books and records of the Corporation may be kept within or without the State of Delaware at such place or places as may be designated from time to time by the Board of Directors. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs or any other information storage device provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the same.
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Exhibit 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT (“ Agreement ”) is made as of August 14 , 2015 and effective as of the Closing Date (as defined in the Purchase Agreement), by and between PeerLogix Technologies, Inc., a Delaware Corporation, (together with its successors and assigns, the “ Company ”) and William Gorfein (“ Executive ”).
R E C I T A L S
WHEREAS, the Company desires to employ Executive and Executive desires to be employed by the Company as the Company’s Chief Executive Officer.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual covenants and conditions herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereby agree as follows:
A G R E E M E N T
1. Employment and Term . The Company hereby agrees to employ Executive and Executive hereby accepts employment by the Company on the terms and conditions herein set forth. Executive’s term of employment by the Company under this Agreement (the “ Term ”) shall commence on the date hereof and shall terminate on the day immediately following the third (3rd) anniversary of the date hereof; provided , however , that the Term will thereafter be extended for additional one-year periods unless the Company or the Executive gives six (6) months’ notice of the intention to terminate this Agreement. The definition of “Term” shall include any extensions pursuant to this Agreement. Notwithstanding the foregoing, Executive’s employment may be earlier terminated in accordance with the provisions of Section 5 below.
2. Position, Duties and Responsibilities; Location .
2.1 Position and Duties . Executive shall be employed as Chief Executive Officer of the Company and Executive shall report to the Board of Directors of the Company and shall have such duties, powers and responsibilities as are customarily assigned to a like executive of a similarly situated company, including exercising creative and operational control of the Company, which duties, powers and responsibilities shall include day to day management of the Company and events that are managed, promoted and/or controlled by the Company or its subsidiaries. In addition, Executive shall have such other duties and responsibilities, consistent with his position as the may reasonably assign .
2.2 Exclusive Services and Efforts . Executive agrees to devote his efforts, energies, and skill to the discharge of the duties and responsibilities attributable to his position and, except as set forth herein, agrees to devote substantially all of his professional time and attention during the Term exclusively to the business and affairs of the Company. It is expressly understood and agreed that, during the Term, Executive will not be employed by, render services to, or represent, any other person, firm or company engaged in a business of a similar nature or in competition with the Company without the prior written consent of the Company. Notwithstanding the foregoing, Executive shall be entitled to engage in (a) service on the board of directors of not-for-profit organizations, (b) other charitable activities and community affairs, and (c) management of his personal and family investments and affairs, in each case to the extent such activities do not either individually or in the aggregate, materially interfere with the performance of his duties and responsibilities to the Company.
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2.3 Compliance with Policies . Executive shall be subject to the Bylaws, policies, codes of conduct, policies, practices, procedures and rules of the Company.
2.4 Location . Executive’s principal places of business will be at the principal offices of the Company.
3. Compensation .
3.1 Base Salary . During the Term, the Company hereby agrees to pay to Executive an annualized base salary initially of One Hundred and Twenty Thousand Dollars ($120,000) (the “ Salary ”), with annual increases of 10% per year commencing one year, subject to all applicable federal, state and local income and employment taxes and other required or elected withholdings and deductions, payable in equal installments on the Company’s regularly-scheduled paydays as it is earned. Executive’s Salary will be reviewed from time to time by the Board and may be increased based upon such factors as the Board may deem relevant.
3.2 Bonuses . On an annual basis, the Board may grant Executive cash or equity bonuses in amounts to be determined by the Board should the Board, in its sole discretion, deem the same appropriate in light of Executive’s performance or the Company’s financial performance; provided , however , that the failure of the Board to award any such bonus shall not give rise to any claim against the Company.
3.3 Long-Term Incentive Compensation . Executive shall be entitled to participate in such equity incentive plans of the Company to the extent that other senior executives of the Company participate in such equity incentive plans. The grant of any equity incentive awards shall be at the discretion of the Board of Directors of Company.
4. Employee Benefits; Etc .
4.1 Participation in Benefit Plans . During the Term, Executive shall be entitled to participate in all such health, 401k, group insurance, welfare, pension, vacation, sick-leave, long-term disability and other employee benefit plans, programs and arrangements as are made generally available from time to time to senior executives of the Company (which shall include all customary health, life insurance and disability plans), such participation in each case to be on terms and conditions no less favorable to Executive than to other senior executives of the Company generally. Executive’s rights and entitlements with respect to any benefits shall be subject to the provisions of the relevant plans, contracts or policies providing such benefits. Nothing contained herein shall be deemed to impose any obligation on the Company to maintain or adopt any such plans, policies or contracts or to limit the Company’s right to modify or eliminate such plans, policies or contracts in its sole discretion.
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4.2 Vacation . During the Term, Executive shall be entitled to three (3) weeks paid vacation per calendar year in accordance with, and subject to, the Company’s vacation policy, as it may change from time to time, with the timing of any such vacation to be agreed upon. Executive shall additionally be permitted such other vacation time as the Executive may request, without pay, so long as such additional vacation time doesn’t negatively affect Executive’s ability to carry out his duties hereunder.
4.3 Expenses . The Company shall reimburse Executive for all necessary and reasonable out-of-pocket travel and other business expenses incurred by Executive, which relate to Executive’s duties hereunder, in accordance with the in effect from time to time.
5. Termination .
5.1 General . The Board may terminate Executive’s employment for any reason or no reason, and Executive may terminate his employment for any reason or no reason, in either case subject to the terms of this Agreement. In the event of the termination (i) by Executive of his employment hereunder for any reason other than for Good Reason; or (ii) in the event Executive’s employment is terminated by the Board for Cause, he shall promptly resign from any board, committee, and/or any other position he then holds that is affiliated with the Company. For purposes of this Agreement, the following terms have the following meanings:
(a) “ Accrued Obligations ” shall mean: any unpaid expense or other reimbursements due pursuant to Section 4.3 hereof or otherwise.
(b) “ Cause ” shall mean any of the following: (i) deliberate failure to devote substantially all of Executive’s business time and best efforts to his duties, except as otherwise provided herein; (ii) Executive is indicted for a felony; (iii) in carrying out his duties hereunder, Executive engages in conduct that constitutes gross misconduct, or gross neglect and that, in either case, results in material economic or reputational harm to the Company or its future business prospects or which otherwise materially impairs Executive’s ability to effectively carry out his duties hereunder; or (iv) Executive’s material violation of this Agreement or any material Company policy. For purposes of this Agreement, Cause shall not be deemed to exist unless, following the initial existence of one of the conditions specified in clauses (i) or (iv) above and only to the extent such condition can be remedied, the Executive fails to remedy the condition within thirty (30) days after receipt of notice thereof.
(c) “ Disability ” shall mean Executive’s inability to substantially fulfill his duties on behalf of the Company for a continuous period of six (6) months. If there is any disagreement between the Company and Executive as to Executive’s Disability or as to the date any such Disability began or ended, the same shall be determined by a physician mutually acceptable to the Company and Executive whose determination shall be conclusive evidence of any such Disability and of the date any such Disability began or ended.
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(d) “ Good Reason ” shall mean any of the following:
(i) the assignment to the Executive by the Company of duties in connection with, or a substantial alteration in the nature or status of, Executive's responsibility on the later of the date of this Agreement or on the last date on which such responsibilities are increased;
(ii) a reduction by the Company in the Executive's base salary as in effect on the later of the date of this Agreement or the last date on which such base salary is increased:
(iii) any material breach by the Company of any provision of this Agreement; provided, however, that the Executive shall give written notice to the Company which shall indicate those specified provisions in this Agreement relied upon and which shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for such termination;
(iv) any failure by the Company to obtain the assumption of this Agreement by any successors or assigns of the Company; or
(v) the Company’s material breach of any term or condition of this Agreement, except to the extent that such breach was caused by malfeasance or negligence by the Executive.
(e) For purposes of this Agreement, Good Reason shall not be deemed to exist unless the termination of Executive’s employment for Good Reason occurs within one hundred twenty (120) days following the Executive’s actual knowledge of the initial existence of one of the conditions specified in clauses (i) through (v) above, Executive provides the Company with written notice of the existence of such condition within thirty (30) days after becoming aware of the initial existence of the condition, and the Company fails to remedy the condition within thirty (30) days after its receipt of such notice.
(f) “ Termination Date ” shall mean the date on which Executive’s employment hereunder terminates in accordance with this Agreement.
5.2 Termination by the Company Without Cause . Subject to Section 5.7, in the event that Executive’s employment is terminated by the Company without Cause, Executive shall be entitled to receive the Accrued Obligations plus a lump sum payment, payable within thirty (30) days of the Termination Date, in an amount equal to
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5.3 Termination for Good Reason.
(a) Subject to Section 5.7, if the Executive's employment shall be terminated by the Executive for Good Reason, then the Company shall pay to the Executive as severance pay, the Accrued Obligations plus a lump sum payment, payable within thirty (30) days of the Termination Date, in an amount equal to
(b) The Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by the Executive as a result of employment by another employer or by retirement benefits, after the date of termination, or otherwise.
(c) The provisions of this Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish the Executive's existing rights, or rights which would accrue solely as a result of the passage of time, under any benefit plan of the Company, or other contract, plan or arrangement, or pursuant to applicable law.
5.4 Death . Executive’s employment shall terminate in the event of his death. Subject to Section 5.7, in the event that Executive’s employment hereunder is terminated due to his death, the Term shall expire on the Termination Date and he and/or his estate or beneficiaries (as the case may be) shall be entitled to the Accrued Obligations plus a lump sum payment, payable within thirty (30) days following the Termination Date, in an amount equal to six (6) months’ of Executive's base salary as in effect immediately prior to the Termination Date.
5.5 Disability . Either Executive or the Company may terminate Executive’s employment in the event of his Disability (provided that no termination of Executive’s employment hereunder for Disability shall be effective unless the party terminating Executive’s employment first gives at least five (5) days’ written notice of such termination to the other party). Subject to Section 5.7, in the event that Executive’s employment hereunder is terminated due to his Disability, the Term shall expire on the Termination Date and he and/or his estate or beneficiaries (as the case may be) shall be entitled to the Accrued Obligations plus a lump sum payment, payable within thirty (30) days following the Termination Date, in an amount equal to six (6) months’ of Executive's base salary as in effect immediately prior to the Termination Date.
5.6 Termination by the Company For Cause, by Executive not for Good Reason, or Nonrenewal of Term by Executive . In the event that Executive’s employment hereunder is terminated by the Company for Cause, by Executive for any reason other than for Good Reason, or Executive elects not to renew or extend the Term, the Term shall expire as of the Termination Date and Executive shall be entitled to the Accrued Obligations to be paid by December 31 of the year in which the Termination Date occurs.
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5.7 Release . Executive’s entitlement to the payments described in Sections 5.2, 5.3, 5.4, 5.5 and 5.6 (other than the Accrued Obligations) is expressly contingent upon Executive (or, in the event of Executive’s death, Executive’s beneficiaries) first providing the Company with a signed general release of claims arising out of the Executive’s employment and termination of the Executive’s employment, but excluding claims and causes of action relating to (i) the Company’s obligations to make payments after termination of employment pursuant to the express terms of this Agreement or (i) the Purchase Agreement or any other agreement entered into in connection with the transactions contemplated thereby, in favor of the Company substantially in the form attached hereto as Exhibit A (the “ Release ”) and not revoking such Release for a period of seven days after its execution or thereafter. In order to be effective, the Release must be delivered by Executive to the Company no later than forty-five (45) days following the Termination Date.
6. Other Tax Matters .
6.1 The Company shall withhold all applicable federal, state and local taxes, social security and workers’ compensation contributions and other amounts as may be required by law with respect to compensation payable to Executive pursuant to this Agreement.
6.2 Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and applied so that the payment of the benefits set forth herein either shall either be exempt from the requirements of Section 409A of the Code (“ Section 409A ”) or shall comply with the requirements of such provision. Notwithstanding any provision of this Agreement to the contrary, if Executive is a “specified employee” within the meaning of Section 409A, any payments or arrangements due upon a termination of Executive’s employment under any arrangement that constitute a “nonqualified deferral of compensation” within the meaning of Section 409A and which do not otherwise qualify under the exemptions under Treas. Regs. Section 1.409A-1 (including without limitation, the short-term deferral exemption or the permitted payments under Treas. Regs. Section 1.409A-1(b)(9)(iii)(A)), shall be delayed and paid or provided on the earlier of (i) the date which is six months after Executive’s “separation from service” (as such term is defined in Section 409A and the regulations and other published guidance thereunder) for any reason other than death, and (ii) the date of Executive’s death.
6.3 After any Termination Date, Executive shall have no duties or responsibilities that are inconsistent with having a “separation from service” within the meaning of Section 409A as of the Termination Date and, notwithstanding anything in the Agreement to the contrary, distributions upon termination of employment of nonqualified deferred compensation may only be made upon a “separation from service” as determined under Section 409A and such date shall be the Termination Date for purposes of this Agreement. Each payment under this Agreement or otherwise shall be treated as a separate payment for purposes of Section 409A. In no event may Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement which constitutes a “nonqualified deferral of compensation” within the meaning of Section 409A and to the extent an amount is payable within a time period, the time during which such amount is paid shall be in the discretion of the Company.
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6.4 To the extent that any reimbursements pursuant to Section 4 or otherwise are taxable to Executive, any reimbursement payment due to Executive pursuant to such Section shall be paid to Executive on or before the last day of Executive’s taxable year following the taxable year in which the related expense was incurred. The reimbursements pursuant to Section 4 or otherwise are not subject to liquidation or exchange for another benefit and the amount of such reimbursements that Executive receives in one taxable year shall not affect the amount of such reimbursements that Executive receives in any other taxable year.
7. Confidentiality . Other than in the ordinary course of his duties for the Company, unless he obtains the prior written consent of the Company, Executive shall at all times keep confidential and shall refrain from using, disclosing, disseminating, publishing, or causing to be used, disclosed, disseminated or published, for the benefit of himself, or any person or entity other than the Company or its subsidiaries, any Confidential Information (unless such Confidential Information is readily ascertainable from public or published information or trade sources or has otherwise been made available to the public through no fault of his own) until the same ceases to be material (or becomes so ascertainable or available); provided , however , that nothing in this Section 7 shall prevent Executive, with or without the Company’s consent, from participating in or disclosing Confidential Information in connection with (i) any judicial or administrative investigation, inquiry or proceeding pursuant to which Executive is required by law or by a court, government agency or legislative body to divulge, disclose or make accessible such information, in which case Executive shall provide the Company with prompt written notice or (ii) the Company’s (or any parent company resulting from a reverse merger transaction) public reporting requirements to the extent that such participation or disclosure is required under applicable law. “ Confidential Information ” means (A) confidential or proprietary information or trade secrets of or relating to the Company or any of its subsidiaries or affiliates (collectively, the “ Company Group ”) including, without limitation, intellectual property in the form of patents, trademarks and copyrights and applications thereof, ideas, inventions, works discoveries, improvements, information, documents, formulae, practices, processes, methods, developments, source code, modifications, technology, techniques, data, programs, other know-how or materials, in each case, that are confidential and/or proprietary and owned, developed or possessed by the Company Group, whether in tangible or intangible form or (B) confidential or proprietary information with respect to the Company Group’s operations, processes, products, inventions, business practices, strategies, business plans, finances, principals, vendors, suppliers, customers, potential customers, marketing methods, costs, prices, contractual relationships, regulatory status, prospects and compensation paid to employees or other terms of employment.
8. Non-Disparagement . During and after the Term, Executive and Company Group each agree not to make, publish or communicate to any person or entity or in any public forum (including, without limitation, on the internet, to the media, via published material, to analysts or in comparable forums) any comments or statements (written or oral) that criticize, denigrate or disparage, or are detrimental to, the reputation or stature of any member of the Company Group or the Executive, respectively, or their businesses, or any of their respective affiliates, officers, directors, employees or agents; provided , however , that nothing in this Agreement shall restrict Executive or the Company Group from making truthful statements (a) when required by law, subpoena, court order or the like; (b) when requested by a governmental, regulatory, or similar body or entity; (c) in confidence to a professional advisor for the purpose of securing professional advice; (d) in the course of performing his duties during the Term; (e) from rebutting any statement made or written about him or it; or (f) from making normal competitive statements about the business or products of any member of the Company Group.
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9. Non-Competition . During the Term, Executive shall not, directly or indirectly, (as defined in the Purchase Agreement) in each case with respect to the Business (as defined in the Purchase Agreement) or any portion of the business of the Company, or any of its Affiliates or their successors or assigns in which the Executive actually participatesparticipates“ Restricted Activity ” means any activity that is, or would reasonably be deemed to be, competitive with any material aspect of the Company.
10. Non-Solicitation . During the Term and for a period of twelve (12) months following the Termination Date, Executive shall neither, directly nor indirectly, hire, solicit, or recruit any Restricted Person, other than accountants, attorneys and other professionals that have provided services to , or attempt to persuade any Restricted Person to terminate such Restricted Person’s employment, consulting, advisory, or other services contract or arrangement with any member of the Company Group or any of their affiliates. Notwithstanding the foregoing, Executive shall not be deemed to have breached this Section by soliciting his executive assistant to leave his employment with the Company Group.
11. Notices . Except as otherwise specifically provided herein, any notice, consent, demand or other communication to be given under or in connection with this Agreement shall be in writing and shall be deemed duly given when delivered personally, when transmitted by facsimile transmission, one (1) day after being deposited with Federal Express or other nationally recognized overnight delivery service or three (3) days after being mailed by first class mail, charges or postage prepaid, properly addressed, if to the Company, at its principal office, and, if to Executive, at his last address on file with the Company. Any party may change such address from time to time by notice to the others.
12. Governing Law . This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New York, exclusive of any choice of law rules.
13. Arbitration; Legal Fees . To ensure the timely and economical resolution of disputes that may arise in connection with Executive’s employment with the Company, Executive and the Company each agree that any and all disputes, claims, or causes of action arising from or relating to the enforcement, breach, performance, negotiation, execution, or interpretation of this Agreement, Executive’s employment, or the termination of Executive’s employment, including but not limited to statutory, contractual and other claims, other than a dispute relating to the restrictions in Sections 7, 8, 9 and 10 in which the exclusive relief sought is an equitable remedy such as an injunction, shall be resolved to the fullest extent permitted by law by final, binding and confidential arbitration, by a single arbitrator, in New York, New York, conducted by JAMS, Inc. (“ JAMS ”). The arbitration shall be conducted in accordance with the applicable employment rules of JAMS then in effect and the requirements of New York law and the Federal Arbitration Act (9 U.S.C., Sections 1-14) regarding the terms and enforcement of arbitration agreements. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law, and (b) issue a written arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the award. The arbitrator shall be authorized to award any or all remedies that Executive or the Company would be entitled to seek in a court of law. In the event of any material contest or dispute relating to this Agreement or the termination of Executive’s employment hereunder, each of the parties shall bear its own costs and expenses unless the arbitrator determines otherwise.
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14. Amendments; Waivers . This Agreement may not be modified or amended or terminated except by an instrument in writing, signed by Executive and a duly-authorized officer of the Company (other than Executive). By an instrument in writing similarly executed, either party may waive compliance by the other party with any provision of this Agreement that such other party was or is obligated to comply with or perform; provided , however , that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure.
15. Assignment . Except as otherwise specifically provided herein, this Agreement, and Executive’s rights and obligations hereunder, may not be assigned by Executive or the Company and any attempt to do so shall be null and void. The Company may assign its rights, together with its obligations, hereunder to an affiliate or subject to the Termination provisions of Section 5 hereof, in connection with any sale, transfer or other disposition of all or substantially all of its business or assets of the Company; in any event the rights and obligations of the Company hereunder shall be binding on its successors or assigns, whether by merger, consolidation or acquisition of all or substantially all of its business or assets. This Agreement shall inure to the benefit of, and be binding upon, Executive and his executors, administrators, heirs and legal representatives.
16. Headings . The headings of the Sections and sub-sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.
17. Severability . Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but the invalidity or unenforceability of any provision or portion of any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of this Agreement, including that provision or portion of any provision, in any other jurisdiction. Moreover, if any of the provisions contained in this Agreement are determined by a court of competent jurisdiction to be excessively broad as to duration, activity, geographic application or subject, it shall be construed, by limiting or reducing it to the extent legally permitted, so as to be enforceable to the extent compatible with then applicable law.
18. Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all such counterparts shall together constitute one and the same instrument. Signatures delivered by facsimile or e-mail (as a .pdf, .tif or similar un-editable attachment) shall be effective for all purposes.
19. Entire Agreement . This Agreement contains the entire agreement of the parties and supersedes all prior or contemporaneous negotiations, correspondence, understandings and agreements between the parties regarding the subject matter of this Agreement.
[ Remainder of page intentionally left bank. Signature page follows. ]
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IN WITNESS WHEREOF, this Agreement has been duly executed by or on behalf of the parties hereto as of the date first above written.
PEERLOGIX TECHNOLOGIES , INC.
By: /s/ Joshua Partridge
Name: Joshua Partridge
Title: Secretary
EXECUTIVE:
/s/ William Gorfein
Name: William Gorfein
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Exhibit A
Release
(see attached.)
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GENERAL RELEASE OF CLAIMS
1. _______________ (“ Employee ”), for himself and his family, heirs, executors, administrators, legal representatives and their respective successors and assigns, in exchange for the consideration received pursuant to Section 5 of the Employment Agreement to which this release is attached as Exhibit A (the “ Agreement ”), does hereby release and forever discharge PeerLogix Technologies, Inc. (the “ Company ”) and its subsidiaries, affiliated companies, successors and assigns, and their current or former directors, officers, employees, shareholders or agents in such capacities (collectively with the Company, the “ Released Parties ”) from any and all actions, causes of action, suits, controversies, claims and demands whatsoever, whether known or unknown (“ Claims ”), under any applicable laws arising solely under or in connection with Employee’s employment or termination thereof, whether for tort, breach of express or implied employment contract, wrongful discharge, intentional infliction of emotional distress, or defamation or injuries incurred on the job or incurred as a result of loss of employment. Employee acknowledges that the Company encouraged him to consult with an attorney of his choosing, and through this General Release of Claims encourages him to consult with his attorney with respect to possible claims under the Age Discrimination in Employment Act (“ ADEA ”) and that he understands that the ADEA is a Federal statute that, among other things, prohibits discrimination on the basis of age in employment and employee benefits and benefit plans. Without limiting the generality of the release provided above, Employee expressly waives any and all claims under ADEA that he may have as of the date hereof. Employee further understands that by signing this General Release of Claims he is in fact waiving, releasing and forever giving up any claim under the ADEA as well as all other laws within the scope of this paragraph 1 that may have existed on or prior to the date hereof. Notwithstanding anything in this paragraph 1 to the contrary, this General Release of Claims shall not apply to (i) any Claims or rights to receive any payments or benefits pursuant to Section 5 of the Agreement, (ii) any rights or Claims that may arise as a result of events occurring after the date this General Release of Claims is executed, (iii) any Claims or rights to indemnification the Employee may have as a former officer or director of the Company or its subsidiaries or affiliated companies, (iv) any Claims or rights to benefits under any employee benefit plan maintained by the Company or its subsidiaries or affiliated companies that is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended, (v) any Claims or rights for benefits under any directors’ and officers’ liability policy maintained by the Company or its subsidiaries or affiliated companies in accordance with the terms of such policy, and (vi) any Claims or rights as a holder of equity securities of the Company.
2. Employee represents that he has not filed against the Released Parties any complaints, charges, or lawsuits arising out of his employment, or any other matter arising on or prior to the date of this General Release of Claims, and covenants and agrees that he will never individually or with any person file, or commence the filing of, any charges, lawsuits, complaints or proceedings with any governmental agency, or against the Released Parties with respect to any of the matters released by Employee pursuant to paragraph 1 hereof (a “ Proceeding ”); provided , however , Employee shall not have relinquished his right to commence a Proceeding to challenge whether Employee knowingly and voluntarily waived his rights under ADEA.
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3. Employee hereby acknowledges that the Company has informed him that he has up to twenty-one (21) days to sign this General Release of Claims and he may knowingly and voluntarily waive that twenty-one (21) day period by signing this General Release of Claims earlier. Employee also understands that he shall have seven (7) days following the date on which he signs this General Release of Claims within which to revoke it by providing a written notice of his revocation to the Company.
4. Employee acknowledges that this General Release of Claims will be governed by and construed and enforced in accordance with the internal laws of the State of New York applicable to contracts made and to be performed entirely within such State.
5. Employee acknowledges that he has read this General Release of Claims, that he has been advised that he should consult with an attorney before he executes this general release of claims, and that he understands all of its terms and executes it voluntarily and with full knowledge of its significance and the consequences thereof.
6. This General Release of Claims shall take effect on the eighth day following Employee’s execution of this General Release of Claims unless Employee’s written revocation is delivered to the Company within seven (7) days after such execution.
_______________________________
_______________, 20__
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Exhibit 10.2
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT (“ Agreement ”) is made as of August 14, 2015 and effective as of the Closing Date (as defined in the Purchase Agreement), by and between PeerLogix Technologies, Inc., a Delaware Corporation, (together with its successors and assigns, the “ Company ”) and Joshua Partridge (“ Executive ”).
R E C I T A L S
WHEREAS, the Company desires to employ Executive and Executive desires to be employed by the Company as the Company’s Chief Executive Officer.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual covenants and conditions herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereby agree as follows:
A G R E E M E N T
1. Employment and Term . The Company hereby agrees to employ Executive and Executive hereby accepts employment by the Company on the terms and conditions herein set forth. Executive’s term of employment by the Company under this Agreement (the “ Term ”) shall commence on the date hereof and shall terminate on the day immediately following the third (3rd) anniversary of the date hereof; provided , however , that the Term will thereafter be extended for additional one-year periods unless the Company or the Executive gives six (6) months’ notice of the intention to terminate this Agreement. The definition of “Term” shall include any extensions pursuant to this Agreement. Notwithstanding the foregoing, Executive’s employment may be earlier terminated in accordance with the provisions of Section 5 below.
2. Position, Duties and Responsibilities; Location .
2.1 Position and Duties . Executive shall be employed as Chief Executive Officer of the Company and Executive shall report to the Board of Directors of the Company and shall have such duties, powers and responsibilities as are customarily assigned to a like executive of a similarly situated company, including exercising creative and operational control of the Company, which duties, powers and responsibilities shall include day to day management of the Company and events that are managed, promoted and/or controlled by the Company or its subsidiaries. In addition, Executive shall have such other duties and responsibilities, consistent with his position as the may reasonably assign .
2.2 Exclusive Services and Efforts . Executive agrees to devote his efforts, energies, and skill to the discharge of the duties and responsibilities attributable to his position and, except as set forth herein, agrees to devote substantially all of his professional time and attention during the Term exclusively to the business and affairs of the Company. It is expressly understood and agreed that, during the Term, Executive will not be employed by, render services to, or represent, any other person, firm or company engaged in a business of a similar nature or in competition with the Company without the prior written consent of the Company. Notwithstanding the foregoing, Executive shall be entitled to engage in (a) service on the board of directors of not-for-profit organizations, (b) other charitable activities and community affairs, and (c) management of his personal and family investments and affairs, in each case to the extent such activities do not either individually or in the aggregate, materially interfere with the performance of his duties and responsibilities to the Company.
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2.3 Compliance with Policies . Executive shall be subject to the Bylaws, policies, codes of conduct, policies, practices, procedures and rules of the Company.
3. Compensation .
3.1 Base Salary . During the Term, the Company hereby agrees to pay to Executive an annualized base salary initially of One Hundred and Twenty Thousand Dollars ($120,000) (the “ Salary ”), with annual increases of 10% per year commencing one year, subject to all applicable federal, state and local income and employment taxes and other required or elected withholdings and deductions, payable in equal installments on the Company’s regularly-scheduled paydays as it is earned. Executive’s Salary will be reviewed from time to time by the Board and may be increased based upon such factors as the Board may deem relevant.
3.2 Bonuses . On an annual basis, the Board may grant Executive cash or equity bonuses in amounts to be determined by the Board should the Board, in its sole discretion, deem the same appropriate in light of Executive’s performance or the Company’s financial performance; provided , however , that the failure of the Board to award any such bonus shall not give rise to any claim against the Company.
3.3 Long-Term Incentive Compensation . Executive shall be entitled to participate in such equity incentive plans of the Company to the extent that other senior executives of the Company participate in such equity incentive plans. The grant of any equity incentive awards shall be at the discretion of the Board of Directors of Company.
4. Employee Benefits; Etc .
4.1 Participation in Benefit Plans . During the Term, Executive shall be entitled to participate in all such health, 401k, group insurance, welfare, pension, vacation, sick-leave, long-term disability and other employee benefit plans, programs and arrangements as are made generally available from time to time to senior executives of the Company (which shall include all customary health, life insurance and disability plans), such participation in each case to be on terms and conditions no less favorable to Executive than to other senior executives of the Company generally. Executive’s rights and entitlements with respect to any benefits shall be subject to the provisions of the relevant plans, contracts or policies providing such benefits. Nothing contained herein shall be deemed to impose any obligation on the Company to maintain or adopt any such plans, policies or contracts or to limit the Company’s right to modify or eliminate such plans, policies or contracts in its sole discretion.
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4.2 Vacation . During the Term, Executive shall be entitled to three (3) weeks paid vacation per calendar year in accordance with, and subject to, the Company’s vacation policy, as it may change from time to time, with the timing of any such vacation to be agreed upon. Executive shall additionally be permitted such other vacation time as the Executive may request, without pay, so long as such additional vacation time doesn’t negatively affect Executive’s ability to carry out his duties hereunder.
4.3 Expenses . The Company shall reimburse Executive for all necessary and reasonable out-of-pocket travel and other business expenses incurred by Executive, which relate to Executive’s duties hereunder, in accordance with the in effect from time to time.
5. Termination .
5.1 General . The Board may terminate Executive’s employment for any reason or no reason, and Executive may terminate his employment for any reason or no reason, in either case subject to the terms of this Agreement. In the event of the termination (i) by Executive of his employment hereunder for any reason other than for Good Reason; or (ii) in the event Executive’s employment is terminated by the Board for Cause, he shall promptly resign from any board, committee, and/or any other position he then holds that is affiliated with the Company. For purposes of this Agreement, the following terms have the following meanings:
(a) “ Accrued Obligations ” shall mean: any unpaid expense or other reimbursements due pursuant to Section 4.3 hereof or otherwise.
(b) “ Cause ” shall mean any of the following: (i) deliberate failure to devote substantially all of Executive’s business time and best efforts to his duties, except as otherwise provided herein; (ii) Executive is indicted for a felony; (iii) in carrying out his duties hereunder, Executive engages in conduct that constitutes gross misconduct, or gross neglect and that, in either case, results in material economic or reputational harm to the Company or its future business prospects or which otherwise materially impairs Executive’s ability to effectively carry out his duties hereunder; or (iv) Executive’s material violation of this Agreement or any material Company policy. For purposes of this Agreement, Cause shall not be deemed to exist unless, following the initial existence of one of the conditions specified in clauses (i) or (iv) above and only to the extent such condition can be remedied, the Executive fails to remedy the condition within thirty (30) days after receipt of notice thereof.
(c) “ Disability ” shall mean Executive’s inability to substantially fulfill his duties on behalf of the Company for a continuous period of six (6) months. If there is any disagreement between the Company and Executive as to Executive’s Disability or as to the date any such Disability began or ended, the same shall be determined by a physician mutually acceptable to the Company and Executive whose determination shall be conclusive evidence of any such Disability and of the date any such Disability began or ended.
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(d) “ Good Reason ” shall mean any of the following:
(i) the assignment to the Executive by the Company of duties in connection with, or a substantial alteration in the nature or status of, Executive's responsibility on the later of the date of this Agreement or on the last date on which such responsibilities are increased;
(ii) a reduction by the Company in the Executive's base salary as in effect on the later of the date of this Agreement or the last date on which such base salary is increased:
(iii) any material breach by the Company of any provision of this Agreement; provided, however, that the Executive shall give written notice to the Company which shall indicate those specified provisions in this Agreement relied upon and which shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for such termination;
(iv) any failure by the Company to obtain the assumption of this Agreement by any successors or assigns of the Company; or
(v) the Company’s material breach of any term or condition of this Agreement, except to the extent that such breach was caused by malfeasance or negligence by the Executive.
(e) For purposes of this Agreement, Good Reason shall not be deemed to exist unless the termination of Executive’s employment for Good Reason occurs within one hundred twenty (120) days following the Executive’s actual knowledge of the initial existence of one of the conditions specified in clauses (i) through (v) above, Executive provides the Company with written notice of the existence of such condition within thirty (30) days after becoming aware of the initial existence of the condition, and the Company fails to remedy the condition within thirty (30) days after its receipt of such notice.
(f) “ Termination Date ” shall mean the date on which Executive’s employment hereunder terminates in accordance with this Agreement.
5.2 Termination by the Company Without Cause . Subject to Section 5.7, in the event that Executive’s employment is terminated by the Company without Cause, Executive shall be entitled to receive the Accrued Obligations plus a lump sum payment, payable within thirty (30) days of the Termination Date, in an amount equal to
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5.3 Termination for Good Reason.
(a) Subject to Section 5.7, if the Executive's employment shall be terminated by the Executive for Good Reason, then the Company shall pay to the Executive as severance pay, the Accrued Obligations plus a lump sum payment, payable within thirty (30) days of the Termination Date, in an amount equal to
(b) The Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by the Executive as a result of employment by another employer or by retirement benefits, after the date of termination, or otherwise.
(c) The provisions of this Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish the Executive's existing rights, or rights which would accrue solely as a result of the passage of time, under any benefit plan of the Company, or other contract, plan or arrangement, or pursuant to applicable law.
5.4 Death . Executive’s employment shall terminate in the event of his death. Subject to Section 5.7, in the event that Executive’s employment hereunder is terminated due to his death, the Term shall expire on the Termination Date and he and/or his estate or beneficiaries (as the case may be) shall be entitled to the Accrued Obligations plus a lump sum payment, payable within thirty (30) days following the Termination Date, in an amount equal to six (6) months’ of Executive's base salary as in effect immediately prior to the Termination Date.
5.5 Disability . Either Executive or the Company may terminate Executive’s employment in the event of his Disability (provided that no termination of Executive’s employment hereunder for Disability shall be effective unless the party terminating Executive’s employment first gives at least five (5) days’ written notice of such termination to the other party). Subject to Section 5.7, in the event that Executive’s employment hereunder is terminated due to his Disability, the Term shall expire on the Termination Date and he and/or his estate or beneficiaries (as the case may be) shall be entitled to the Accrued Obligations plus a lump sum payment, payable within thirty (30) days following the Termination Date, in an amount equal to six (6) months’ of Executive's base salary as in effect immediately prior to the Termination Date.
5.6 Termination by the Company For Cause, by Executive not for Good Reason, or Nonrenewal of Term by Executive . In the event that Executive’s employment hereunder is terminated by the Company for Cause, by Executive for any reason other than for Good Reason, or Executive elects not to renew or extend the Term, the Term shall expire as of the Termination Date and Executive shall be entitled to the Accrued Obligations to be paid by December 31 of the year in which the Termination Date occurs.
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5.7 Release . Executive’s entitlement to the payments described in Sections 5.2, 5.3, 5.4, 5.5 and 5.6 (other than the Accrued Obligations) is expressly contingent upon Executive (or, in the event of Executive’s death, Executive’s beneficiaries) first providing the Company with a signed general release of claims arising out of the Executive’s employment and termination of the Executive’s employment, but excluding claims and causes of action relating to (i) the Company’s obligations to make payments after termination of employment pursuant to the express terms of this Agreement or (i) the Purchase Agreement or any other agreement entered into in connection with the transactions contemplated thereby, in favor of the Company substantially in the form attached hereto as Exhibit A (the “ Release ”) and not revoking such Release for a period of seven days after its execution or thereafter. In order to be effective, the Release must be delivered by Executive to the Company no later than forty-five (45) days following the Termination Date.
6. Other Tax Matters .
6.1 The Company shall withhold all applicable federal, state and local taxes, social security and workers’ compensation contributions and other amounts as may be required by law with respect to compensation payable to Executive pursuant to this Agreement.
6.2 Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and applied so that the payment of the benefits set forth herein either shall either be exempt from the requirements of Section 409A of the Code (“ Section 409A ”) or shall comply with the requirements of such provision. Notwithstanding any provision of this Agreement to the contrary, if Executive is a “specified employee” within the meaning of Section 409A, any payments or arrangements due upon a termination of Executive’s employment under any arrangement that constitute a “nonqualified deferral of compensation” within the meaning of Section 409A and which do not otherwise qualify under the exemptions under Treas. Regs. Section 1.409A-1 (including without limitation, the short-term deferral exemption or the permitted payments under Treas. Regs. Section 1.409A-1(b)(9)(iii)(A)), shall be delayed and paid or provided on the earlier of (i) the date which is six months after Executive’s “separation from service” (as such term is defined in Section 409A and the regulations and other published guidance thereunder) for any reason other than death, and (ii) the date of Executive’s death.
6.3 After any Termination Date, Executive shall have no duties or responsibilities that are inconsistent with having a “separation from service” within the meaning of Section 409A as of the Termination Date and, notwithstanding anything in the Agreement to the contrary, distributions upon termination of employment of nonqualified deferred compensation may only be made upon a “separation from service” as determined under Section 409A and such date shall be the Termination Date for purposes of this Agreement. Each payment under this Agreement or otherwise shall be treated as a separate payment for purposes of Section 409A. In no event may Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement which constitutes a “nonqualified deferral of compensation” within the meaning of Section 409A and to the extent an amount is payable within a time period, the time during which such amount is paid shall be in the discretion of the Company.
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6.4 To the extent that any reimbursements pursuant to Section 4 or otherwise are taxable to Executive, any reimbursement payment due to Executive pursuant to such Section shall be paid to Executive on or before the last day of Executive’s taxable year following the taxable year in which the related expense was incurred. The reimbursements pursuant to Section 4 or otherwise are not subject to liquidation or exchange for another benefit and the amount of such reimbursements that Executive receives in one taxable year shall not affect the amount of such reimbursements that Executive receives in any other taxable year.
7. Confidentiality . Other than in the ordinary course of his duties for the Company, unless he obtains the prior written consent of the Company, Executive shall at all times keep confidential and shall refrain from using, disclosing, disseminating, publishing, or causing to be used, disclosed, disseminated or published, for the benefit of himself, or any person or entity other than the Company or its subsidiaries, any Confidential Information (unless such Confidential Information is readily ascertainable from public or published information or trade sources or has otherwise been made available to the public through no fault of his own) until the same ceases to be material (or becomes so ascertainable or available); provided , however , that nothing in this Section 7 shall prevent Executive, with or without the Company’s consent, from participating in or disclosing Confidential Information in connection with (i) any judicial or administrative investigation, inquiry or proceeding pursuant to which Executive is required by law or by a court, government agency or legislative body to divulge, disclose or make accessible such information, in which case Executive shall provide the Company with prompt written notice or (ii) the Company’s (or any parent company resulting from a reverse merger transaction) public reporting requirements to the extent that such participation or disclosure is required under applicable law. “ Confidential Information ” means (A) confidential or proprietary information or trade secrets of or relating to the Company or any of its subsidiaries or affiliates (collectively, the “ Company Group ”) including, without limitation, intellectual property in the form of patents, trademarks and copyrights and applications thereof, ideas, inventions, works discoveries, improvements, information, documents, formulae, practices, processes, methods, developments, source code, modifications, technology, techniques, data, programs, other know-how or materials, in each case, that are confidential and/or proprietary and owned, developed or possessed by the Company Group, whether in tangible or intangible form or (B) confidential or proprietary information with respect to the Company Group’s operations, processes, products, inventions, business practices, strategies, business plans, finances, principals, vendors, suppliers, customers, potential customers, marketing methods, costs, prices, contractual relationships, regulatory status, prospects and compensation paid to employees or other terms of employment.
8. Non-Disparagement . During and after the Term, Executive and Company Group each agree not to make, publish or communicate to any person or entity or in any public forum (including, without limitation, on the internet, to the media, via published material, to analysts or in comparable forums) any comments or statements (written or oral) that criticize, denigrate or disparage, or are detrimental to, the reputation or stature of any member of the Company Group or the Executive, respectively, or their businesses, or any of their respective affiliates, officers, directors, employees or agents; provided , however , that nothing in this Agreement shall restrict Executive or the Company Group from making truthful statements (a) when required by law, subpoena, court order or the like; (b) when requested by a governmental, regulatory, or similar body or entity; (c) in confidence to a professional advisor for the purpose of securing professional advice; (d) in the course of performing his duties during the Term; (e) from rebutting any statement made or written about him or it; or (f) from making normal competitive statements about the business or products of any member of the Company Group.
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9. Non-Competition . During the Term, Executive shall not, directly or indirectly, (as defined in the Purchase Agreement) in each case with respect to the Business (as defined in the Purchase Agreement) or any portion of the business of the Company, or any of its Affiliates or their successors or assigns in which the Executive actually participatesparticipates “ Restricted Activity ” means any activity that is, or would reasonably be deemed to be, competitive with any material aspect of the Company.
10. Non-Solicitation . During the Term and for a period of twelve (12) months following the Termination Date, Executive shall neither, directly nor indirectly, hire, solicit, or recruit any Restricted Person, other than accountants, attorneys and other professionals that have provided services to , or attempt to persuade any Restricted Person to terminate such Restricted Person’s employment, consulting, advisory, or other services contract or arrangement with any member of the Company Group or any of their affiliates. Notwithstanding the foregoing, Executive shall not be deemed to have breached this Section by soliciting his executive assistant to leave his employment with the Company Group.
11. Notices . Except as otherwise specifically provided herein, any notice, consent, demand or other communication to be given under or in connection with this Agreement shall be in writing and shall be deemed duly given when delivered personally, when transmitted by facsimile transmission, one (1) day after being deposited with Federal Express or other nationally recognized overnight delivery service or three (3) days after being mailed by first class mail, charges or postage prepaid, properly addressed, if to the Company, at its principal office, and, if to Executive, at his last address on file with the Company. Any party may change such address from time to time by notice to the others.
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12. Governing Law . This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New York, exclusive of any choice of law rules.
13. Arbitration; Legal Fees . To ensure the timely and economical resolution of disputes that may arise in connection with Executive’s employment with the Company, Executive and the Company each agree that any and all disputes, claims, or causes of action arising from or relating to the enforcement, breach, performance, negotiation, execution, or interpretation of this Agreement, Executive’s employment, or the termination of Executive’s employment, including but not limited to statutory, contractual and other claims, other than a dispute relating to the restrictions in Sections 7, 8, 9 and 10 in which the exclusive relief sought is an equitable remedy such as an injunction, shall be resolved to the fullest extent permitted by law by final, binding and confidential arbitration, by a single arbitrator, in New York, New York, conducted by JAMS, Inc. (“ JAMS ”). The arbitration shall be conducted in accordance with the applicable employment rules of JAMS then in effect and the requirements of New York law and the Federal Arbitration Act (9 U.S.C., Sections 1-14) regarding the terms and enforcement of arbitration agreements. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law, and (b) issue a written arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the award. The arbitrator shall be authorized to award any or all remedies that Executive or the Company would be entitled to seek in a court of law. In the event of any material contest or dispute relating to this Agreement or the termination of Executive’s employment hereunder, each of the parties shall bear its own costs and expenses unless the arbitrator determines otherwise.
14. Amendments; Waivers . This Agreement may not be modified or amended or terminated except by an instrument in writing, signed by Executive and a duly-authorized officer of the Company (other than Executive). By an instrument in writing similarly executed, either party may waive compliance by the other party with any provision of this Agreement that such other party was or is obligated to comply with or perform; provided , however , that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure.
15. Assignment . Except as otherwise specifically provided herein, this Agreement, and Executive’s rights and obligations hereunder, may not be assigned by Executive or the Company and any attempt to do so shall be null and void. The Company may assign its rights, together with its obligations, hereunder to an affiliate or subject to the Termination provisions of Section 5 hereof, in connection with any sale, transfer or other disposition of all or substantially all of its business or assets of the Company; in any event the rights and obligations of the Company hereunder shall be binding on its successors or assigns, whether by merger, consolidation or acquisition of all or substantially all of its business or assets. This Agreement shall inure to the benefit of, and be binding upon, Executive and his executors, administrators, heirs and legal representatives.
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16. Headings . The headings of the Sections and sub-sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.
17. Severability . Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but the invalidity or unenforceability of any provision or portion of any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of this Agreement, including that provision or portion of any provision, in any other jurisdiction. Moreover, if any of the provisions contained in this Agreement are determined by a court of competent jurisdiction to be excessively broad as to duration, activity, geographic application or subject, it shall be construed, by limiting or reducing it to the extent legally permitted, so as to be enforceable to the extent compatible with then applicable law.
18. Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all such counterparts shall together constitute one and the same instrument. Signatures delivered by facsimile or e-mail (as a .pdf, .tif or similar un-editable attachment) shall be effective for all purposes.
19. Entire Agreement . This Agreement contains the entire agreement of the parties and supersedes all prior or contemporaneous negotiations, correspondence, understandings and agreements between the parties regarding the subject matter of this Agreement.
[ Remainder of page intentionally left bank. Signature page follows. ]
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IN WITNESS WHEREOF, this Agreement has been duly executed by or on behalf of the parties hereto as of the date first above written.
PEERLOGIX TECHNOLOGIES , INC. | |
By: /s/ William Gorfein | |
Name: William Gorfein | |
Title: CEO | |
EXECUTIVE: | |
/s/ Joshua Partridge | |
Name: Joshua Partridge |
[Signature Page to Joshua Partridge Employment Agreement]
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Exhibit A
Release
(see attached.)
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GENERAL RELEASE OF CLAIMS
1. _______________ (“ Employee ”), for himself and his family, heirs, executors, administrators, legal representatives and their respective successors and assigns, in exchange for the consideration received pursuant to Section 5 of the Employment Agreement to which this release is attached as Exhibit A (the “ Agreement ”), does hereby release and forever discharge PeerLogix Technologies, Inc. (the “ Company ”) and its subsidiaries, affiliated companies, successors and assigns, and their current or former directors, officers, employees, shareholders or agents in such capacities (collectively with the Company, the “ Released Parties ”) from any and all actions, causes of action, suits, controversies, claims and demands whatsoever, whether known or unknown (“ Claims ”), under any applicable laws arising solely under or in connection with Employee’s employment or termination thereof, whether for tort, breach of express or implied employment contract, wrongful discharge, intentional infliction of emotional distress, or defamation or injuries incurred on the job or incurred as a result of loss of employment. Employee acknowledges that the Company encouraged him to consult with an attorney of his choosing, and through this General Release of Claims encourages him to consult with his attorney with respect to possible claims under the Age Discrimination in Employment Act (“ ADEA ”) and that he understands that the ADEA is a Federal statute that, among other things, prohibits discrimination on the basis of age in employment and employee benefits and benefit plans. Without limiting the generality of the release provided above, Employee expressly waives any and all claims under ADEA that he may have as of the date hereof. Employee further understands that by signing this General Release of Claims he is in fact waiving, releasing and forever giving up any claim under the ADEA as well as all other laws within the scope of this paragraph 1 that may have existed on or prior to the date hereof. Notwithstanding anything in this paragraph 1 to the contrary, this General Release of Claims shall not apply to (i) any Claims or rights to receive any payments or benefits pursuant to Section 5 of the Agreement, (ii) any rights or Claims that may arise as a result of events occurring after the date this General Release of Claims is executed, (iii) any Claims or rights to indemnification the Employee may have as a former officer or director of the Company or its subsidiaries or affiliated companies, (iv) any Claims or rights to benefits under any employee benefit plan maintained by the Company or its subsidiaries or affiliated companies that is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended, (v) any Claims or rights for benefits under any directors’ and officers’ liability policy maintained by the Company or its subsidiaries or affiliated companies in accordance with the terms of such policy, and (vi) any Claims or rights as a holder of equity securities of the Company.
2. Employee represents that he has not filed against the Released Parties any complaints, charges, or lawsuits arising out of his employment, or any other matter arising on or prior to the date of this General Release of Claims, and covenants and agrees that he will never individually or with any person file, or commence the filing of, any charges, lawsuits, complaints or proceedings with any governmental agency, or against the Released Parties with respect to any of the matters released by Employee pursuant to paragraph 1 hereof (a “ Proceeding ”); provided , however , Employee shall not have relinquished his right to commence a Proceeding to challenge whether Employee knowingly and voluntarily waived his rights under ADEA.
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3. Employee hereby acknowledges that the Company has informed him that he has up to twenty-one (21) days to sign this General Release of Claims and he may knowingly and voluntarily waive that twenty-one (21) day period by signing this General Release of Claims earlier. Employee also understands that he shall have seven (7) days following the date on which he signs this General Release of Claims within which to revoke it by providing a written notice of his revocation to the Company.
4. Employee acknowledges that this General Release of Claims will be governed by and construed and enforced in accordance with the internal laws of the State of New York applicable to contracts made and to be performed entirely within such State.
5. Employee acknowledges that he has read this General Release of Claims, that he has been advised that he should consult with an attorney before he executes this general release of claims, and that he understands all of its terms and executes it voluntarily and with full knowledge of its significance and the consequences thereof.
6. This General Release of Claims shall take effect on the eighth day following Employee’s execution of this General Release of Claims unless Employee’s written revocation is delivered to the Company within seven (7) days after such execution.
____________, 20__. |
Exhibit 10.3
Registration Rights Agreement
This Registration Rights Agreement (this “ Agreement ”) is made and entered into effective as of August 14, 2015 (the “ Effective Date ”) between Realco International, Inc., a Nevada corporation (the “ Company ”), and the persons who have executed the signature page(s) hereto (each, a “ Purchaser ” and collectively, the “ Purchasers ”).
RECITALS:
WHEREAS, the Company has entered into an Agreement and Plan of Reorganization with PeerLogix, Inc., a Delaware corporation (“ PeerLogix ”), pursuant to which shareholders of PeerLogix will exchange their shares of PeerLogix for shares of the Company’s common stock (the “ Reorganization ”);
WHEREAS, simultaneously with the Reorganization and to provide the capital required by the Company for working capital and other purposes, the Company has offered in compliance with Rule 506 of Regulation D of the Securities Act (as defined herein), to investors in a private placement transaction (the “ PPO ”), units (“ Units ”) of its securities, each Unit consisting of one share of Common Stock (the “ Investor Shares ”) and a common stock purchase warrant (the “ Investor Warrants ”) to purchase one share of Common Stock;
WHEREAS, in connection with the Reorganization and the PPO, the Company agrees to provide certain registration rights related to the Investor Shares and the shares of Common Stock issuable upon exercise of the Investor Warrants, on the terms set forth herein;
Now, Therefore , in consideration of the mutual promises, representations, warranties, covenants, and conditions set forth herein, the parties mutually agree as follows:
1. Certain Definitions . As used in this Agreement, the following terms shall have the following respective meanings:
“ Approved Market ” means the Over-the-Counter Bulletin Board, the Nasdaq Stock Market, the New York Stock Exchange or the American Stock Exchange.
“ Blackout Period ” means, with respect to a registration, a period, in each case commencing on the day immediately after the Company notifies the Purchasers that they are required, because of the occurrence of an event of the kind described in Section 4(f) hereof, to suspend offers and sales of Registrable Securities during which the Company, in the good faith judgment of its board of directors, determines (because of the existence of, or in anticipation of, any acquisition, financing activity, or other transaction involving the Company, or the unavailability for reasons beyond the Company’s control of any required financial statements, disclosure of information which is in its best interest not to publicly disclose, or any other event or condition of similar significance to the Company) that the registration and distribution of the Registrable Securities to be covered by such Registration Statement, if any, would be seriously detrimental to the Company and its stockholders and ending on the earlier of (1) the date upon which the material non-public information commencing the Blackout Period is disclosed to the public or ceases to be material and (2) such time as the Company notifies the selling Holders that the Company will no longer delay such filing of the Registration Statement, recommence taking steps to make such Registration Statement effective, or allow sales pursuant to such Registration Statement to resume.
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“ Business Day ” means any day of the year, other than a Saturday, Sunday, or other day on which the Commission is required or authorized to close.
“ Commission ” means the U. S. Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.
“ Common Stock ” means the common stock, par value $0.00001 per share, of the Company and any and all shares of capital stock or other equity securities of: (i) the Company which are added to or exchanged or substituted for the Common Stock by reason of the declaration of any stock dividend or stock split, the issuance of any distribution or the reclassification, readjustment, recapitalization or other such modification of the capital structure of the Company; and (ii) any other corporation, now or hereafter organized under the laws of any state or other governmental authority, with which the Company is merged, which results from any consolidation or reorganization to which the Company is a party, or to which is sold all or substantially all of the shares or assets of the Company, if immediately after such merger, consolidation, reorganization or sale, the Company or the stockholders of the Company own equity securities having in the aggregate more than 50% of the total voting power of such other corporation.
“ Effective Date ” means the date of the final closing of the PPO.
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.
“ Family Member ” means (a) with respect to any individual, such individual’s spouse, any descendants (whether natural or adopted), any trust all of the beneficial interests of which are owned by any of such individuals or by any of such individuals together with any organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, the estate of any such individual, and any corporation, association, partnership or limited liability company all of the equity interests of which are owned by those above described individuals, trusts or organizations and (b) with respect to any trust, the owners of the beneficial interests of such trust.
“ Holder ” means each Purchaser or any of such Purchaser’s respective successors and Permitted Assignees who acquire rights in accordance with this Agreement with respect to any Registrable Securities directly or indirectly from a Purchaser or from any Permitted Assignee.
“ Initial Registration Statement ” means the initial Registration Statement filed pursuant to this Agreement.
“ Investor Shares ” has the meaning given it in the recitals of this Agreement.
“ Investor Warrants ” has the meaning given it in the recitals of this Agreement.
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“ Majority Holders ” means at any time Holders representing a majority of the Registrable Securities.
“ Permitted Assignee ” means (a) with respect to a partnership, its partners or former partners in accordance with their partnership interests, (b) with respect to a corporation, its stockholders in accordance with their interest in the corporation, (c) with respect to a limited liability company, its members or former members in accordance with their interest in the limited liability company, (d) with respect to an individual party, any Family Member of such party, (e) an entity that is controlled by, controls, or is under common control with a transferor, or (f) a party to this Agreement.
“ Piggyback Registration ” means, in any registration of Common Stock as set forth in Section 3(b), the ability of holders of Registrable Securities to include Registrable Securities in such registration.
The terms “ register ,” “ registered ,” and “ registration ” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement.
“ Registrable Securities ” means the Investor Shares and the Registrable Warrant Shares but excluding (i) any Registrable Securities that have been publicly sold or may be sold immediately without registration under the Securities Act either pursuant to Rule 144 of the Securities Act or otherwise; (ii) any Registrable Securities sold by a person in a transaction pursuant to a registration statement filed under the Securities Act, or (iii) any Registrable Securities that are at the time subject to an effective registration statement under the Securities Act.
“ Registrable Warrant Shares ” means the shares of Common Stock issued or issuable to each Purchaser upon exercise of the Investor Warrants.
“ Registration Filing Date ” means the date that is 60 days after date of the final closing of the PPO.
“ Registration Statement ” means the registration statement that the Company is required to file pursuant to this Agreement to register the Registrable Securities.
“ Rule 144 ” means Rule 144 promulgated by the Commission under the Securities Act.
“ Rule 145 ” means Rule 145 promulgated by the Commission under the Securities Act.
“ Rule 415 ” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same purpose and effect as such Rule.
“ Securities Act ” means the Securities Act of 1933, as amended, or any similar federal statute promulgated in replacement thereof, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.
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“ SEC Effective Date ” means the date the Registration Statement is declared effective by the Commission.
“ Trading Day ” means (a) if the Common Stock is listed or quoted on an Approved Market, then any day during which securities are generally eligible for trading on the Approved Market, or (b) if the Common Stock is not then listed or quoted and traded on an Approved Market, then any business day.
2. Term . This Agreement shall continue in full force and effect for a period of one year from the SEC Effective Date, unless terminated sooner hereunder.
3. Registration .
(a) Registration on Form S-1 . Not later than the Registration Filing Date, the Company shall file with the Commission a Registration Statement on Form S-1, or other applicable form, relating to the resale by the Holders of all of the Registrable Securities, and the Company shall use its commercially reasonably efforts to cause such Registration Statement to be declared effective within ninety (90) days of filing with the Commission.
(b) Piggyback Registration . In addition to the Company agreement pursuant to Section 3(a) above, if the Company shall determine to register for sale for cash any of its Common Stock, for its own account or for the account of others (other than the Holders), other than (i) a registration relating solely to employee benefit plans or securities issued or issuable to employees, consultants (to the extent the securities owned or to be owned by such consultants could be registered on Form S-8) or any of their Family Members (including a registration on Form S-8) or (ii) a registration relating solely to a Securities Act Rule 145 transaction or a registration on Form S-4 in connection with a merger, acquisition, divestiture, reorganization or similar event, the Company shall promptly give to the Holders written notice thereof (and in no event shall such notice be given less than 20 calendar days prior to the filing of such registration statement), and shall, subject to Section 3(c), include as a Piggyback Registration all of the Registrable Securities specified in a written request delivered by the Holder thereof within 10 calendar days after receipt of such written notice from the Company. However, the Company may, without the consent of the Holders, withdraw such registration statement prior to its becoming effective if the Company or such other stockholders have elected to abandon the proposal to register the securities proposed to be registered thereby.
(c) Underwriting . If a Piggyback Registration is for a registered public offering that is to be made by an underwriting, the Company shall so advise the Holders of the Registrable Securities eligible for inclusion in such Registration Statement pursuant to Sections 3(b)(i) and (ii), respectively. In that event, the right of any Holder to Piggyback Registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to sell any of their Registrable Securities through such underwriting shall (together with the Company and any other stockholders of the Company selling their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter selected for such underwriting by the Company or the selling stockholders, as applicable. Notwithstanding any other provision of this Section, if the underwriter or the Company determines that marketing factors require a limitation on the number of shares of Common Stock or the amount of other securities to be underwritten, the underwriter may exclude some or all Registrable Securities from such registration and underwriting. The Company shall so advise all Holders (except those Holders who failed to timely elect to include their Registrable Securities through such underwriting or have indicated to the Company their decision not to do so), and indicate to each such Holder the number of shares of Registrable Securities that may be included in the registration and underwriting, if any. The number of shares of Registrable Securities to be included in such registration and underwriting shall be allocated among such Holders as follows:
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(i) If the Piggyback Registration was initiated by the Company, the number of shares that may be included in the registration and underwriting shall be allocated first to the Company and then, subject to obligations and commitments existing as of the date hereof, to all selling stockholders, including the Holders, who have requested to sell in the registration on a pro rata basis according to the number of shares requested to be included therein; and
(ii) If the Piggyback Registration was initiated by the exercise of demand registration rights by a stockholder or stockholders of the Company (other than the Holders), then the number of shares that may be included in the registration and underwriting shall be allocated first to such selling stockholders who exercised such demand and then, subject to obligations and commitments existing as of the date hereof, to all other selling stockholders, including the Holders, who have requested to sell in the registration on a pro rata basis according to the number of shares requested to be included therein.
No Registrable Securities excluded from the underwriting by reason of the underwriter’s marketing limitation shall be included in such registration. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw such Holder’s Registrable Securities therefrom by delivering a written notice to the Company and the underwriter. The Registrable Securities so withdrawn from such underwriting shall also be withdrawn from such registration; provided , however , that, if by the withdrawal of such Registrable Securities, a greater number of Registrable Securities held by other Holders may be included in such registration (up to the maximum of any limitation imposed by the underwriters), then the Company shall offer to all Holders who have included Registrable Securities in the registration the right to include additional Registrable Securities pursuant to the terms and limitations set forth herein in the same proportion used above in determining the underwriter limitation.
4. Registration Procedures for Registrable Securities . The Company will keep each Holder reasonably advised as to the filing and effectiveness of the Registration Statement. At its expense with respect to the Registration Statement, the Company will:
(a) prepare and file with the Commission with respect to the Registrable Securities, a Registration Statement on Form S-1, or any other form for which the Company then qualifies or which counsel for the Company shall deem appropriate and which form shall be available for the sale of the Registrable Securities in accordance with the intended methods of distribution thereof, and use its commercially reasonable efforts to cause such Registration Statement to become effective and shall remain effective for a period of one year or for such shorter period ending on the earlier to occur of (i) the date as of which all of the Holders as selling stockholders thereunder may sell all of the Registrable Securities registered for resale thereon without restriction pursuant to Rule 144 (or any successor rule thereto) promulgated under the Securities Act or (ii) the date when all of the Registrable Securities registered thereunder shall have been sold (the “ Effectiveness Period ”). Thereafter, the Company shall be entitled to withdraw such Registration Statement and the Investors shall have no further right to offer or sell any of the Registrable Securities registered for resale thereon pursuant to the respective Registration Statement (or any prospectus relating thereto);
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(b) if the Registration Statement is subject to review by the Commission, promptly respond to all comments and diligently pursue resolution of any comments to the satisfaction of the Commission;
(c) prepare and file with the Commission such amendments and supplements to such Registration Statement as may be necessary to keep such Registration Statement effective during the Effectiveness Period;
(d) furnish, without charge, to each Holder of Registrable Securities covered by such Registration Statement (i) a reasonable number of copies of such Registration Statement (including any exhibits thereto other than exhibits incorporated by reference), each amendment and supplement thereto as such Holder may reasonably request, (ii) such number of copies of the prospectus included in such Registration Statement (including each preliminary prospectus and any other prospectus filed under Rule 424 of the Securities Act) as such Holders may reasonably request, in conformity with the requirements of the Securities Act, and (iii) such other documents as such Holder may require to consummate the disposition of the Registrable Securities owned by such Holder, but only during the Effectiveness Period;
(e) use its commercially reasonable efforts to register or qualify such registration under such other applicable securities laws of such jurisdictions as any Holder of Registrable Securities covered by such Registration Statement reasonably requests and as may be necessary for the marketability of the Registrable Securities (such request to be made by the time the applicable Registration Statement is deemed effective by the Commission) and do any and all other acts and things necessary to enable such Holder to consummate the disposition in such jurisdictions of the Registrable Securities owned by such Holder; provided , that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph, (ii) subject itself to taxation in any such jurisdiction, or (iii) consent to general service of process in any such jurisdiction.
(f) notify each Holder of Registrable Securities, the disposition of which requires delivery of a prospectus relating thereto under the Securities Act, of the happening of any event (as promptly as practicable after becoming aware of such event), which comes to the Company’s attention, that will after the occurrence of such event cause the prospectus included in such Registration Statement, if not amended or supplemented, to contain an untrue statement of a material fact or an omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading and the Company shall promptly thereafter prepare and furnish to such Holder a supplement or amendment to such prospectus (or prepare and file appropriate reports under the Exchange Act) so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, unless suspension of the use of such prospectus otherwise is authorized herein or in the event of a Blackout Period, in which case no supplement or amendment need be furnished (or Exchange Act filing made) until the termination of such suspension or Blackout Period;
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(g) comply, and continue to comply during the Effectiveness Period, in all material respects with the Securities Act and the Exchange Act and with all applicable rules and regulations of the Commission with respect to the disposition of all securities covered by such Registration Statement;
(h) as promptly as practicable after becoming aware of such event, notify each Holder of Registrable Securities being offered or sold pursuant to the Registration Statement of the issuance by the Commission of any stop order or other suspension of effectiveness of the Registration Statement;
(i) use its commercially reasonable efforts to cause all the Registrable Securities covered by the Registration Statement to be quoted on the OTC Bulletin Board, OTC Markets or such other principal securities market on which securities of the same class or series issued by the Company are then listed or traded;
(j) provide a transfer agent and registrar, which may be a single entity, for the shares of Common Stock at all times;
(k) If requested by the Holders, cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to the Registration Statement, which certificates shall be free, to the extent permitted by applicable law, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holders may request;
(l) during the Effectiveness Period, refrain from bidding for or purchasing any Common Stock or any right to purchase Common Stock or attempting to induce any person to purchase any such security or right if such bid, purchase or attempt would in any way limit the right of the Holders to sell Registrable Securities by reason of the limitations set forth in Regulation M of the Exchange Act; and
(m) take all other reasonable actions necessary to expedite and facilitate the disposition by the Holders of the Registrable Securities pursuant to the Registration Statement.
5. Suspension of Offers and Sales . Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4(f) hereof or of the commencement of a Blackout Period, such Holder shall discontinue the disposition of Registrable Securities included in the Registration Statement until such Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 4(f) hereof or notice of the end of the Blackout Period, and, if so directed by the Company, such Holder shall deliver to the Company (at the Company’s expense) all copies (including, without limitation, any and all drafts), other than permanent file copies, then in such Holder’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice.
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6. Registration Expenses . The Company shall pay all expenses in connection with any registration obligation provided herein, including, without limitation, all registration, filing, stock exchange fees, printing expenses, all fees and expenses of complying with applicable securities laws, and the fees and disbursements of counsel for the Company and of its independent accountants; provided , that, in any registration, each party shall pay for its own underwriting discounts and commissions and transfer taxes. Except as provided in this Section and Section 9, the Company shall not be responsible for the expenses of any attorney or other advisor employed by a Holder.
7. Assignment of Rights . No Holder may assign its rights under this Agreement to any party without the prior written consent of the Company; provided , however , that any Holder may assign its rights under this Agreement without such consent to a Permitted Assignee as long as (a) such transfer or assignment is effected in accordance with applicable securities laws; (b) such transferee or assignee agrees in writing to become subject to the terms of this Agreement; and (c) such Holder notifies the Company in writing of such transfer or assignment, stating the name and address of the transferee or assignee and identifying the Registrable Securities with respect to which such rights are being transferred or assigned.
8. Information by Holder . A Holder with Registrable Securities included in any registration shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required in order to comply with any applicable law or regulation in connection with the registration of such Holder’s Registrable Securities or any qualification or compliance with respect to such Holder’s Registrable Securities and referred to in this Agreement.
9. Indemnification .
(a) In the event of the offer and sale of Registrable Securities under the Securities Act, the Company shall, and hereby does, indemnify and hold harmless, to the fullest extent permitted by law, each Holder, its directors, officers, partners, each other person who participates as an underwriter in the offering or sale of such securities, and each other person, if any, who controls or is under common control with such Holder or any such underwriter within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, and expenses to which the Holder or any such director, officer, partner or underwriter or controlling person may become subject under the Securities Act, the Exchange Act, or any other federal or state law, insofar as such losses, claims, damages, liabilities or expenses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement of any material fact contained in any registration statement prepared and filed by the Company under which Registrable Securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission to state therein a material fact required to be stated or necessary to make the statements therein in light of the circumstances in which they were made not misleading, or any violation or alleged violation of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with this Agreement; and the Company shall reimburse the Holder, and each such director, officer, partner, underwriter and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating, defending or settling any such loss, claim, damage, liability, action or proceeding; provided , that such indemnity agreement found in this Section 9(a) shall in no event exceed the net proceeds from the PPO, as applicable, received by the Company; and provided further , that the Company shall not be liable in any such case (i) to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement in or omission from such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company by the Holder specifically for use in the preparation thereof or (ii) if the person asserting any such loss, claim, damage, liability (or action or proceeding in respect thereof) who purchased the Registrable Securities that are the subject thereof did not receive a copy of an amended preliminary prospectus or the final prospectus (or the final prospectus as amended or supplemented) at or prior to the written confirmation of the sale of such Registrable Securities to such person because of the failure of such Holder or underwriter to so provide such amended preliminary or final prospectus and the untrue statement or omission of a material fact made in such preliminary prospectus was corrected in the amended preliminary or final prospectus (or the final prospectus as amended or supplemented). Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Holders, or any such director, officer, partner, underwriter or controlling person and shall survive the transfer of such shares by the Holder.
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(b) As a condition to including Registrable Securities in any registration statement filed pursuant to this Agreement, each Holder agrees to be bound by the terms of this Section 9 and to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors and officers, and each other person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which the Company or any such director or officer or controlling person may become subject under the Securities Act, the Exchange Act, or any other federal or state law, to the extent arising out of or based solely upon: (x) such Holder’s failure to comply with the prospectus delivery requirements of the Securities Act or (y) any untrue or alleged untrue statement of a material fact contained in any registration statement, any prospectus, or any form of prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company specifically for inclusion in the registration statement or such prospectus or (ii) to the extent that (1) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement, such prospectus or such form of prospectus or in any amendment or supplement thereto or (2) in the case of an occurrence of an event of the type specified in Section 4(f) hereof, the use by such Holder of an outdated or defective prospectus after the Company has notified such Holder in writing that the prospectus is outdated or defective and prior to the receipt by such Holder of the advice contemplated in Section 4(f). In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.
(c) Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in this Section (including any governmental action), such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the indemnifying party of the commencement of such action; provided , that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Section, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in the reasonable judgment of counsel to such indemnified party a conflict of interest between such indemnified and indemnifying parties may exist or the indemnified party may have defenses not available to the indemnifying party in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof, unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties arises in respect of such claim after the assumption of the defenses thereof or the indemnifying party fails to defend such claim in a diligent manner, other than reasonable costs of investigation. Neither an indemnified nor an indemnifying party shall be liable for any settlement of any action or proceeding effected without its consent. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement, which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. Notwithstanding anything to the contrary set forth herein, and without limiting any of the rights set forth above, in any event any party shall have the right to retain, at its own expense, counsel with respect to the defense of a claim.
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(d) If an indemnifying party does or is not permitted to assume the defense of an action pursuant to Sections 9(c) or in the case of the expense reimbursement obligation set forth in Sections 9(a) and (b), the indemnification required by Sections 9(a) and 9(b) shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills received or expenses, losses, damages, or liabilities are incurred.
(e) If the indemnification provided for in Section 9(a) or 9(b) is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall (i) contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense as is appropriate to reflect the proportionate relative fault of the indemnifying party on the one hand and the indemnified party on the other (determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission relates to information supplied by the indemnifying party or the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission), or (ii) if the allocation provided by clause (i) above is not permitted by applicable law or provides a lesser sum to the indemnified party than the amount hereinafter calculated, not only the proportionate relative fault of the indemnifying party and the indemnified party, but also the relative benefits received by the indemnifying party on the one hand and the indemnified party on the other, as well as any other relevant equitable considerations. No indemnified party guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any indemnifying party who was not guilty of such fraudulent misrepresentation.
(f) Other Indemnification . Indemnification similar to that specified in this Section (with appropriate modifications) shall be given by the Company and each Holder of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation or governmental authority other than the Securities Act.
10. Rule 144 . With a view to making available to the Holders the benefits of Rule 144 and any other rule or regulation of the Commission that may at any time permit the Holders to sell the Registrable Securities to the public without registration, the Company agrees: (i) to make and keep public information available as those terms are understood in Rule 144, (ii) to file with the Commission in a timely manner all reports and other documents required to be filed by an issuer of securities registered under the Securities Act or the Exchange Act pursuant to Rule 144, (iii) as long as any Holder owns any Registrable Securities, to furnish in writing upon such Holder’s request a written statement by the Company that it has complied with the reporting requirements of Rule 144 and of the Securities Act and the Exchange Act, and to furnish to such Holder a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as may be reasonably requested in availing such Holder of any rule or regulation of the Commission permitting the selling of any such Registrable Securities without registration and (iv) undertake any additional actions commercially reasonably necessary to maintain the availability of the use of Rule 144.
11. Corporate Existence . So long as any Holder owns any Registrable Securities, the Company shall not directly or indirectly consummate any merger, reorganization, restructuring, reverse stock split, consolidation, sale of all or substantially all of the Company’s assets or any similar transaction or related transactions (each such transaction, an “ Organizational Change ”), unless, prior to the consummation of an Organizational Change, the Company obtains the written consent of its Board of Directors.
12. Independent Nature of Each Purchaser’s Obligations and Rights . The obligations of each Purchaser under this Agreement are several and not joint with the obligations of any other Purchaser, and each Purchaser shall not be responsible in any way for the performance of the obligations of any other Purchaser under this Agreement. Nothing contained herein and no action taken by any Purchaser pursuant hereto, shall be deemed to constitute such Purchasers as a partnership, an association, a joint venture, or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement. Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.
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13. Other Registration Rights . The Company shall not grant any registration rights without the consent of the Board of Directors prior to the effectiveness of the Registration Statement.
14. Miscellaneous .
(a) Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the United States of America and the State of New York, both substantive and remedial, without regard to New York conflicts of law principles. Any judicial proceeding brought against either of the parties to this Agreement or any dispute arising out of this Agreement or any matter related hereto shall be brought in the courts of the State of New York, New York County, or in the United States District Court for the Southern District of New York and, by its execution and delivery of this Agreement, each party to this Agreement accepts the jurisdiction of such courts. The foregoing consent to jurisdiction shall not be deemed to confer rights on any person other than the parties to this Agreement.
(b) Remedies . In the event of a breach by the Company or by a Holder of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate.
(c) Successors and Assigns . Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, Permitted Assignees, executors and administrators of the parties hereto.
(d) No Inconsistent Agreements . The Company has not entered, as of the date hereof, and shall not enter, on or after the date of this Agreement, into any agreement with respect to its securities that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof.
(e) Entire Agreement . This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof.
(f) Notices, etc . All notices or other communications which are required or permitted under this Agreement shall be in writing and sufficient if delivered by hand, by facsimile transmission, by registered or certified mail, postage pre-paid, by electronic mail, or by courier or overnight carrier, to the persons at the addresses set forth below (or at such other address as may be provided hereunder), and shall be deemed to have been delivered as of the date so delivered:
If to the Company to:
PeerLogix, Inc.
500 7th Ave., 17th Floor
New York, NY 10018
Attention: William Gorfein, Chief Executive Officer
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with copy to:
Robinson & Cole, LLP
1055 Washington Blvd.
Stamford, Ct. 06901
Attention: Mitchell L. Lampert, Esq.
Facsimile: (203) 462-7599
If to the Purchasers:
To each Purchaser at the address set forth on the signature page hereto
or at such other address as any party shall have furnished to the other parties in writing.
(g) Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any Holder, upon any breach or default of the Company under this Agreement, shall impair any such right, power or remedy of such Holder nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of any similar breach or default thereunder occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any Holder of any breach or default under this Agreement, or any waiver on the part of any Holder of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, or by law or otherwise afforded to any holder, shall be cumulative and not alternative.
(h) Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.
(i) Severability . In the case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
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(j) Amendments . The provisions of this Agreement may be amended at any time and from time to time, and particular provisions of this Agreement may be waived, with and only with an agreement or consent in writing signed by the Company and the Majority Holders. The Purchasers acknowledge that by the operation of this Section, the Majority Holders may have the right and power to diminish or eliminate all rights of the Purchasers under this Agreement.
(k) Limitation on Subsequent Registration Rights . After the date of this Agreement, the Company shall not, without the prior written consent of the Majority Holders, enter into any agreement with any holder or prospective holder of any securities of the Company that would grant such holder registration rights senior or equal to those granted to the Holders hereunder.
[SIGNATURE PAGES FOLLOW]
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This Registration Rights Agreement is hereby executed as of the date first above written.
COMPANY:
Realco International, Inc.
By: /s/ William Gorfein
Name: William Gorfein
Title: Chief Executive Officer
THE PURCHASER’S SIGNATURE TO THE SUBSCRIPTION AGREEMENT TO THE PPO DATED JUNE 10, 2015 SHALL CONSTITUTE THE PURCHASER’S SIGNATURE TO THIS REGISTRATION RIGHTS AGREEMENT.
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Exhibit 10.4
Registration Rights Agreement
This Registration Rights Agreement (this “ Agreement ”) is made and entered into effective as of August 13, 2015 (the “ Effective Date ”) between Realco International, Inc., a Nevada corporation (the “ Company ”), and [________], or its permitted registered assigns.
RECITALS:
WHEREAS, the Company has entered into an Agreement and Plan of Reorganization with PeerLogix, Inc., a Delaware corporation (“ PeerLogix ”), pursuant to which shareholders of PeerLogix will exchange their shares of PeerLogix for shares of the Company’s common stock (the “ Reorganization ”);
WHEREAS, simultaneously with the Reorganization and to provide the capital required by the Company for working capital and other purposes, the Company has engaged [______] to act as its Placement Agent for its offering pursuant to Rule 506 of Regulation D of the Securities Act (as defined herein) (the “ PPO ”), and in connection therewith has issued to [______]a warrant to purchase units (“ Units ”) of its securities, each Unit consisting of one share of Common Stock (the “ Unit Shares ”) and a common stock purchase warrant (the “ Unit Warrants ”) to purchase one share of Common Stock;
WHEREAS, in connection with its retention of [______]as its Placement Agent for the PPO, the Company agrees to provide certain registration rights related to the Unit Shares and the shares of Common Stock issuable upon exercise of the Unit Warrants, on the terms set forth herein;
Now, Therefore , in consideration of the mutual promises, representations, warranties, covenants, and conditions set forth herein, the parties mutually agree as follows:
1. Certain Definitions . As used in this Agreement, the following terms shall have the following respective meanings:
“ Approved Market ” means the Over-the-Counter Bulletin Board, the Nasdaq Stock Market, the New York Stock Exchange or the American Stock Exchange.
“ Blackout Period ” means, with respect to a registration, a period, in each case commencing on the day immediately after the Company notifies [______]that they are required, because of the occurrence of an event of the kind described in Section 4(f) hereof, to suspend offers and sales of Registrable Securities during which the Company, in the good faith judgment of its board of directors, determines (because of the existence of, or in anticipation of, any acquisition, financing activity, or other transaction involving the Company, or the unavailability for reasons beyond the Company’s control of any required financial statements, disclosure of information which is in its best interest not to publicly disclose, or any other event or condition of similar significance to the Company) that the registration and distribution of the Registrable Securities to be covered by such Registration Statement, if any, would be seriously detrimental to the Company and its stockholders and ending on the earlier of (1) the date upon which the material non-public information commencing the Blackout Period is disclosed to the public or ceases to be material and (2) such time as the Company notifies the selling Holders that the Company will no longer delay such filing of the Registration Statement, recommence taking steps to make such Registration Statement effective, or allow sales pursuant to such Registration Statement to resume.
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“ Business Day ” means any day of the year, other than a Saturday, Sunday, or other day on which the Commission is required or authorized to close.
“ Commission ” means the U. S. Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.
“ Common Stock ” means the common stock, par value $0.00001 per share, of the Company and any and all shares of capital stock or other equity securities of: (i) the Company which are added to or exchanged or substituted for the Common Stock by reason of the declaration of any stock dividend or stock split, the issuance of any distribution or the reclassification, readjustment, recapitalization or other such modification of the capital structure of the Company; and (ii) any other corporation, now or hereafter organized under the laws of any state or other governmental authority, with which the Company is merged, which results from any consolidation or reorganization to which the Company is a party, or to which is sold all or substantially all of the shares or assets of the Company, if immediately after such merger, consolidation, reorganization or sale, the Company or the stockholders of the Company own equity securities having in the aggregate more than 50% of the total voting power of such other corporation.
“ Effective Date ” means the date of the final closing of the PPO.
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.
“ Family Member ” means (a) with respect to any individual, such individual’s spouse, any descendants (whether natural or adopted), any trust all of the beneficial interests of which are owned by any of such individuals or by any of such individuals together with any organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, the estate of any such individual, and any corporation, association, partnership or limited liability company all of the equity interests of which are owned by those above described individuals, trusts or organizations and (b) with respect to any trust, the owners of the beneficial interests of such trust.
“ Holder ” means [______], or its permitted registered assigns or any of [______]’s respective successors and Permitted Assignees who acquire rights in accordance with this Agreement with respect to any Registrable Securities directly or indirectly from [______]or from any Permitted Assignee.
“ Initial Registration Statement ” means the initial Registration Statement filed pursuant to this Agreement.
“ Majority Holders ” means at any time Holders representing a majority of the Registrable Securities.
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“ Permitted Assignee ” means (a) with respect to a partnership, its partners or former partners in accordance with their partnership interests, (b) with respect to a corporation, its stockholders in accordance with their interest in the corporation, (c) with respect to a limited liability company, its members or former members in accordance with their interest in the limited liability company, (d) with respect to an individual party, any Family Member of such party, (e) an entity that is controlled by, controls, or is under common control with a transferor, or (f) a party to this Agreement.
“ Piggyback Registration ” means, in any registration of Common Stock as set forth in Section 3(b), the ability of holders of Registrable Securities to include Registrable Securities in such registration.
The terms “ register ,” “ registered ,” and “ registration ” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement.
“ Registrable Securities ” means the Unit Shares and the Registrable Warrant Shares but excluding (i) any Registrable Securities that have been publicly sold or may be sold immediately without registration under the Securities Act either pursuant to Rule 144 of the Securities Act or otherwise; (ii) any Registrable Securities sold by a person in a transaction pursuant to a registration statement filed under the Securities Act, or (iii) any Registrable Securities that are at the time subject to an effective registration statement under the Securities Act.
“ Registrable Warrant Shares ” means the shares of Common Stock issued or issuable to the Holder upon exercise of the Unit Warrants.
“ Registration Filing Date ” means the date that is 60 days after date of the final closing of the PPO.
“ Registration Statement ” means the registration statement that the Company is required to file pursuant to this Agreement to register the Registrable Securities.
“ Rule 144 ” means Rule 144 promulgated by the Commission under the Securities Act.
“ Rule 145 ” means Rule 145 promulgated by the Commission under the Securities Act.
“ Rule 415 ” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same purpose and effect as such Rule.
“ Securities Act ” means the Securities Act of 1933, as amended, or any similar federal statute promulgated in replacement thereof, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.
“ SEC Effective Date ” means the date the Registration Statement is declared effective by the Commission.
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“ Trading Day ” means (a) if the Common Stock is listed or quoted on an Approved Market, then any day during which securities are generally eligible for trading on the Approved Market, or (b) if the Common Stock is not then listed or quoted and traded on an Approved Market, then any business day.
“ Unit Shares ” has the meaning given it in the recitals of this Agreement.
“ Unit Warrants ” has the meaning given it in the recitals of this Agreement.
2. Term . This Agreement shall continue in full force and effect for a period of one year from the SEC Effective Date, unless terminated sooner hereunder.
3. Registration .
(a) Registration on Form S-1 . Not later than the Registration Filing Date, the Company shall file with the Commission a Registration Statement on Form S-1, or other applicable form, relating to the resale by the Holders of all of the Registrable Securities, and the Company shall use its commercially reasonably efforts to cause such Registration Statement to be declared effective within ninety (90) days of filing with the Commission.
(b) Piggyback Registration . In addition to the Company agreement pursuant to Section 3(a) above, if the Company shall determine to register for sale for cash any of its Common Stock, for its own account or for the account of others (other than the Holders), other than (i) a registration relating solely to employee benefit plans or securities issued or issuable to employees, consultants (to the extent the securities owned or to be owned by such consultants could be registered on Form S-8) or any of their Family Members (including a registration on Form S-8) or (ii) a registration relating solely to a Securities Act Rule 145 transaction or a registration on Form S-4 in connection with a merger, acquisition, divestiture, reorganization or similar event, the Company shall promptly give to the Holders written notice thereof (and in no event shall such notice be given less than 20 calendar days prior to the filing of such registration statement), and shall, subject to Section 3(c), include as a Piggyback Registration all of the Registrable Securities specified in a written request delivered by the Holder thereof within 10 calendar days after receipt of such written notice from the Company. However, the Company may, without the consent of the Holders, withdraw such registration statement prior to its becoming effective if the Company or such other stockholders have elected to abandon the proposal to register the securities proposed to be registered thereby.
(c) Underwriting . If a Piggyback Registration is for a registered public offering that is to be made by an underwriting, the Company shall so advise the Holders of the Registrable Securities eligible for inclusion in such Registration Statement pursuant to Sections 3(b)(i) and (ii), respectively. In that event, the right of any Holder to Piggyback Registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to sell any of their Registrable Securities through such underwriting shall (together with the Company and any other stockholders of the Company selling their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter selected for such underwriting by the Company or the selling stockholders, as applicable. Notwithstanding any other provision of this Section, if the underwriter or the Company determines that marketing factors require a limitation on the number of shares of Common Stock or the amount of other securities to be underwritten, the underwriter may exclude some or all Registrable Securities from such registration and underwriting. The Company shall so advise all Holders (except those Holders who failed to timely elect to include their Registrable Securities through such underwriting or have indicated to the Company their decision not to do so), and indicate to each such Holder the number of shares of Registrable Securities that may be included in the registration and underwriting, if any. The number of shares of Registrable Securities to be included in such registration and underwriting shall be allocated among such Holders as follows:
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(i) If the Piggyback Registration was initiated by the Company, the number of shares that may be included in the registration and underwriting shall be allocated first to the Company and then, subject to obligations and commitments existing as of the date hereof, to all selling stockholders, including the Holders, who have requested to sell in the registration on a pro rata basis according to the number of shares requested to be included therein; and
(ii) If the Piggyback Registration was initiated by the exercise of demand registration rights by a stockholder or stockholders of the Company (other than the Holders), then the number of shares that may be included in the registration and underwriting shall be allocated first to such selling stockholders who exercised such demand and then, subject to obligations and commitments existing as of the date hereof, to all other selling stockholders, including the Holders, who have requested to sell in the registration on a pro rata basis according to the number of shares requested to be included therein.
No Registrable Securities excluded from the underwriting by reason of the underwriter’s marketing limitation shall be included in such registration. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw such Holder’s Registrable Securities therefrom by delivering a written notice to the Company and the underwriter. The Registrable Securities so withdrawn from such underwriting shall also be withdrawn from such registration; provided , however , that, if by the withdrawal of such Registrable Securities, a greater number of Registrable Securities held by other Holders may be included in such registration (up to the maximum of any limitation imposed by the underwriters), then the Company shall offer to all Holders who have included Registrable Securities in the registration the right to include additional Registrable Securities pursuant to the terms and limitations set forth herein in the same proportion used above in determining the underwriter limitation.
4. Registration Procedures for Registrable Securities . The Company will keep each Holder reasonably advised as to the filing and effectiveness of the Registration Statement. At its expense with respect to the Registration Statement, the Company will:
(a) prepare and file with the Commission with respect to the Registrable Securities, a Registration Statement on Form S-1, or any other form for which the Company then qualifies or which counsel for the Company shall deem appropriate and which form shall be available for the sale of the Registrable Securities in accordance with the intended methods of distribution thereof, and use its commercially reasonable efforts to cause such Registration Statement to become effective and shall remain effective for a period of one year or for such shorter period ending on the earlier to occur of (i) the date as of which all of the Holders as selling stockholders thereunder may sell all of the Registrable Securities registered for resale thereon without restriction pursuant to Rule 144 (or any successor rule thereto) promulgated under the Securities Act or (ii) the date when all of the Registrable Securities registered thereunder shall have been sold (the “ Effectiveness Period ”). Thereafter, the Company shall be entitled to withdraw such Registration Statement and the Investors shall have no further right to offer or sell any of the Registrable Securities registered for resale thereon pursuant to the respective Registration Statement (or any prospectus relating thereto);
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(b) if the Registration Statement is subject to review by the Commission, promptly respond to all comments and diligently pursue resolution of any comments to the satisfaction of the Commission;
(c) prepare and file with the Commission such amendments and supplements to such Registration Statement as may be necessary to keep such Registration Statement effective during the Effectiveness Period;
(d) furnish, without charge, to each Holder of Registrable Securities covered by such Registration Statement (i) a reasonable number of copies of such Registration Statement (including any exhibits thereto other than exhibits incorporated by reference), each amendment and supplement thereto as such Holder may reasonably request, (ii) such number of copies of the prospectus included in such Registration Statement (including each preliminary prospectus and any other prospectus filed under Rule 424 of the Securities Act) as such Holders may reasonably request, in conformity with the requirements of the Securities Act, and (iii) such other documents as such Holder may require to consummate the disposition of the Registrable Securities owned by such Holder, but only during the Effectiveness Period;
(e) use its commercially reasonable efforts to register or qualify such registration under such other applicable securities laws of such jurisdictions as any Holder of Registrable Securities covered by such Registration Statement reasonably requests and as may be necessary for the marketability of the Registrable Securities (such request to be made by the time the applicable Registration Statement is deemed effective by the Commission) and do any and all other acts and things necessary to enable such Holder to consummate the disposition in such jurisdictions of the Registrable Securities owned by such Holder; provided , that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph, (ii) subject itself to taxation in any such jurisdiction, or (iii) consent to general service of process in any such jurisdiction.
(f) notify each Holder of Registrable Securities, the disposition of which requires delivery of a prospectus relating thereto under the Securities Act, of the happening of any event (as promptly as practicable after becoming aware of such event), which comes to the Company’s attention, that will after the occurrence of such event cause the prospectus included in such Registration Statement, if not amended or supplemented, to contain an untrue statement of a material fact or an omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading and the Company shall promptly thereafter prepare and furnish to such Holder a supplement or amendment to such prospectus (or prepare and file appropriate reports under the Exchange Act) so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, unless suspension of the use of such prospectus otherwise is authorized herein or in the event of a Blackout Period, in which case no supplement or amendment need be furnished (or Exchange Act filing made) until the termination of such suspension or Blackout Period;
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(g) comply, and continue to comply during the Effectiveness Period, in all material respects with the Securities Act and the Exchange Act and with all applicable rules and regulations of the Commission with respect to the disposition of all securities covered by such Registration Statement;
(h) as promptly as practicable after becoming aware of such event, notify each Holder of Registrable Securities being offered or sold pursuant to the Registration Statement of the issuance by the Commission of any stop order or other suspension of effectiveness of the Registration Statement;
(i) use its commercially reasonable efforts to cause all the Registrable Securities covered by the Registration Statement to be quoted on the OTC Bulletin Board, OTC Markets or such other principal securities market on which securities of the same class or series issued by the Company are then listed or traded;
(j) provide a transfer agent and registrar, which may be a single entity, for the shares of Common Stock at all times;
(k) If requested by the Holders, cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to the Registration Statement, which certificates shall be free, to the extent permitted by applicable law, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holders may request;
(l) during the Effectiveness Period, refrain from bidding for or purchasing any Common Stock or any right to purchase Common Stock or attempting to induce any person to purchase any such security or right if such bid, purchase or attempt would in any way limit the right of the Holders to sell Registrable Securities by reason of the limitations set forth in Regulation M of the Exchange Act; and
(m) take all other reasonable actions necessary to expedite and facilitate the disposition by the Holders of the Registrable Securities pursuant to the Registration Statement.
5. Suspension of Offers and Sales . Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4(f) hereof or of the commencement of a Blackout Period, such Holder shall discontinue the disposition of Registrable Securities included in the Registration Statement until such Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 4(f) hereof or notice of the end of the Blackout Period, and, if so directed by the Company, such Holder shall deliver to the Company (at the Company’s expense) all copies (including, without limitation, any and all drafts), other than permanent file copies, then in such Holder’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice.
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6. Registration Expenses . The Company shall pay all expenses in connection with any registration obligation provided herein, including, without limitation, all registration, filing, stock exchange fees, printing expenses, all fees and expenses of complying with applicable securities laws, and the fees and disbursements of counsel for the Company and of its independent accountants; provided , that, in any registration, each party shall pay for its own underwriting discounts and commissions and transfer taxes. Except as provided in this Section and Section 9, the Company shall not be responsible for the expenses of any attorney or other advisor employed by a Holder.
7. Assignment of Rights . No Holder may assign its rights under this Agreement to any party without the prior written consent of the Company; provided , however , that any Holder may assign its rights under this Agreement without such consent to a Permitted Assignee as long as (a) such transfer or assignment is effected in accordance with applicable securities laws; (b) such transferee or assignee agrees in writing to become subject to the terms of this Agreement; and (c) such Holder notifies the Company in writing of such transfer or assignment, stating the name and address of the transferee or assignee and identifying the Registrable Securities with respect to which such rights are being transferred or assigned.
8. Information by Holder . A Holder with Registrable Securities included in any registration shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required in order to comply with any applicable law or regulation in connection with the registration of such Holder’s Registrable Securities or any qualification or compliance with respect to such Holder’s Registrable Securities and referred to in this Agreement.
9. Indemnification .
(a) In the event of the offer and sale of Registrable Securities under the Securities Act, the Company shall, and hereby does, indemnify and hold harmless, to the fullest extent permitted by law, each Holder, its directors, officers, partners, each other person who participates as an underwriter in the offering or sale of such securities, and each other person, if any, who controls or is under common control with such Holder or any such underwriter within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, and expenses to which the Holder or any such director, officer, partner or underwriter or controlling person may become subject under the Securities Act, the Exchange Act, or any other federal or state law, insofar as such losses, claims, damages, liabilities or expenses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement of any material fact contained in any registration statement prepared and filed by the Company under which Registrable Securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission to state therein a material fact required to be stated or necessary to make the statements therein in light of the circumstances in which they were made not misleading, or any violation or alleged violation of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with this Agreement; and the Company shall reimburse the Holder, and each such director, officer, partner, underwriter and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating, defending or settling any such loss, claim, damage, liability, action or proceeding; provided , that such indemnity agreement found in this Section 9(a) shall in no event exceed the net proceeds from the PPO, as applicable, received by the Company; and provided further , that the Company shall not be liable in any such case (i) to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement in or omission from such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company by the Holder specifically for use in the preparation thereof or (ii) if the person asserting any such loss, claim, damage, liability (or action or proceeding in respect thereof) who purchased the Registrable Securities that are the subject thereof did not receive a copy of an amended preliminary prospectus or the final prospectus (or the final prospectus as amended or supplemented) at or prior to the written confirmation of the sale of such Registrable Securities to such person because of the failure of such Holder or underwriter to so provide such amended preliminary or final prospectus and the untrue statement or omission of a material fact made in such preliminary prospectus was corrected in the amended preliminary or final prospectus (or the final prospectus as amended or supplemented). Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Holders, or any such director, officer, partner, underwriter or controlling person and shall survive the transfer of such shares by the Holder.
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(b) As a condition to including Registrable Securities in any registration statement filed pursuant to this Agreement, each Holder agrees to be bound by the terms of this Section 9 and to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors and officers, and each other person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which the Company or any such director or officer or controlling person may become subject under the Securities Act, the Exchange Act, or any other federal or state law, to the extent arising out of or based solely upon: (x) such Holder’s failure to comply with the prospectus delivery requirements of the Securities Act or (y) any untrue or alleged untrue statement of a material fact contained in any registration statement, any prospectus, or any form of prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company specifically for inclusion in the registration statement or such prospectus or (ii) to the extent that (1) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement, such prospectus or such form of prospectus or in any amendment or supplement thereto or (2) in the case of an occurrence of an event of the type specified in Section 4(f) hereof, the use by such Holder of an outdated or defective prospectus after the Company has notified such Holder in writing that the prospectus is outdated or defective and prior to the receipt by such Holder of the advice contemplated in Section 4(f). In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.
(c) Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in this Section (including any governmental action), such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the indemnifying party of the commencement of such action; provided , that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Section, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in the reasonable judgment of counsel to such indemnified party a conflict of interest between such indemnified and indemnifying parties may exist or the indemnified party may have defenses not available to the indemnifying party in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof, unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties arises in respect of such claim after the assumption of the defenses thereof or the indemnifying party fails to defend such claim in a diligent manner, other than reasonable costs of investigation. Neither an indemnified nor an indemnifying party shall be liable for any settlement of any action or proceeding effected without its consent. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement, which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. Notwithstanding anything to the contrary set forth herein, and without limiting any of the rights set forth above, in any event any party shall have the right to retain, at its own expense, counsel with respect to the defense of a claim.
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(d) If an indemnifying party does or is not permitted to assume the defense of an action pursuant to Sections 9(c) or in the case of the expense reimbursement obligation set forth in Sections 9(a) and (b), the indemnification required by Sections 9(a) and 9(b) shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills received or expenses, losses, damages, or liabilities are incurred.
(e) If the indemnification provided for in Section 9(a) or 9(b) is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall (i) contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense as is appropriate to reflect the proportionate relative fault of the indemnifying party on the one hand and the indemnified party on the other (determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission relates to information supplied by the indemnifying party or the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission), or (ii) if the allocation provided by clause (i) above is not permitted by applicable law or provides a lesser sum to the indemnified party than the amount hereinafter calculated, not only the proportionate relative fault of the indemnifying party and the indemnified party, but also the relative benefits received by the indemnifying party on the one hand and the indemnified party on the other, as well as any other relevant equitable considerations. No indemnified party guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any indemnifying party who was not guilty of such fraudulent misrepresentation.
(f) Other Indemnification . Indemnification similar to that specified in this Section (with appropriate modifications) shall be given by the Company and each Holder of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation or governmental authority other than the Securities Act.
10. Rule 144 . With a view to making available to the Holders the benefits of Rule 144 and any other rule or regulation of the Commission that may at any time permit the Holders to sell the Registrable Securities to the public without registration, the Company agrees: (i) to make and keep public information available as those terms are understood in Rule 144, (ii) to file with the Commission in a timely manner all reports and other documents required to be filed by an issuer of securities registered under the Securities Act or the Exchange Act pursuant to Rule 144, (iii) as long as any Holder owns any Registrable Securities, to furnish in writing upon such Holder’s request a written statement by the Company that it has complied with the reporting requirements of Rule 144 and of the Securities Act and the Exchange Act, and to furnish to such Holder a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as may be reasonably requested in availing such Holder of any rule or regulation of the Commission permitting the selling of any such Registrable Securities without registration and (iv) undertake any additional actions commercially reasonably necessary to maintain the availability of the use of Rule 144.
11. Corporate Existence . So long as any Holder owns any Registrable Securities, the Company shall not directly or indirectly consummate any merger, reorganization, restructuring, reverse stock split, consolidation, sale of all or substantially all of the Company’s assets or any similar transaction or related transactions (each such transaction, an “ Organizational Change ”), unless, prior to the consummation of an Organizational Change, the Company obtains the written consent of its Board of Directors.
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12. Independent Nature of Each Holder’s Obligations and Rights . The obligations of each Holder under this Agreement are several and not joint with the obligations of any other Holder, and each Holder shall not be responsible in any way for the performance of the obligations of any other Holder under this Agreement. Nothing contained herein and no action taken by any Holder pursuant hereto, shall be deemed to constitute such Purchasers as a partnership, an association, a joint venture, or any other kind of entity, or create a presumption that the Holders are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement. Each Holder shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose.
13. Other Registration Rights . The Company shall not grant any registration rights without the consent of the Board of Directors prior to the effectiveness of the Registration Statement.
14. Miscellaneous .
(a) Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the United States of America and the State of New York, both substantive and remedial, without regard to New York conflicts of law principles. Any judicial proceeding brought against either of the parties to this Agreement or any dispute arising out of this Agreement or any matter related hereto shall be brought in the courts of the State of New York, New York County, or in the United States District Court for the Southern District of New York and, by its execution and delivery of this Agreement, each party to this Agreement accepts the jurisdiction of such courts. The foregoing consent to jurisdiction shall not be deemed to confer rights on any person other than the parties to this Agreement.
(b) Remedies . In the event of a breach by the Company or by a Holder of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate.
(c) Successors and Assigns . Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, Permitted Assignees, executors and administrators of the parties hereto.
(d) No Inconsistent Agreements . The Company has not entered, as of the date hereof, and shall not enter, on or after the date of this Agreement, into any agreement with respect to its securities that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof.
(e) Entire Agreement . This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof.
(f) Notices, etc . All notices or other communications which are required or permitted under this Agreement shall be in writing and sufficient if delivered by hand, by facsimile transmission, by registered or certified mail, postage pre-paid, by electronic mail, or by courier or overnight carrier, to the persons at the addresses set forth below (or at such other address as may be provided hereunder), and shall be deemed to have been delivered as of the date so delivered:
If to the Company to:
PeerLogix, Inc.
500 7th Ave., 17th Floor
New York, NY 10018
Attention: William Gorfein, Chief Executive Officer
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with copy to:
Robinson & Cole, LLP
1055 Washington Blvd.
Stamford, Ct. 06901
Attention: Mitchell L. Lampert, Esq.
Facsimile: (203) 462-7599
If to _________
___________________
or at such other address as any party shall have furnished to the other parties in writing.
(g) Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any Holder, upon any breach or default of the Company under this Agreement, shall impair any such right, power or remedy of such Holder nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of any similar breach or default thereunder occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any Holder of any breach or default under this Agreement, or any waiver on the part of any Holder of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, or by law or otherwise afforded to any holder, shall be cumulative and not alternative.
(h) Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.
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(i) Severability . In the case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
(j) Amendments . The provisions of this Agreement may be amended at any time and from time to time, and particular provisions of this Agreement may be waived, with and only with an agreement or consent in writing signed by the Company and the Majority Holders. Each Holder acknowledges that by the operation of this Section, the Majority Holders may have the right and power to diminish or eliminate all rights of such Holder under this Agreement.
[SIGNATURE PAGES FOLLOW]
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This Registration Rights Agreement is hereby executed as of the date first above written.
COMPANY:
Realco International, Inc.
By: /s/ William Gorfein
Name: William Gorfein
Title: Chief Executive Officer
HOLDER:
By: /s/ Richard Rappaport
Name: Richard Rappaport
Title: CEO
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Exhibit 10.5
Registration Rights Agreement
This Registration Rights Agreement (this “ Agreement ”) is made and entered into effective as of August 14, 2015 (the “ Effective Date ”) between Realco International, Inc., a Nevada corporation (the “ Company ”), and each of the stockholders (each, a “ Stockholder ” and collectively the “ Stockholders ”) identified in Schedule A (attached).
RECITALS:
WHEREAS, the Company has entered into an Agreement and Plan of Reorganization with PeerLogix, Inc., a Delaware corporation (“ PeerLogix ”), pursuant to which shareholders of PeerLogix will exchange their shares of PeerLogix for shares of the Company’s common stock (the “ Reorganization ”);
WHEREAS, the Stockholders are stockholders of the Company; and
WHEREAS, in connection with their ownership of share of the Company’s common stock, the Company agrees to provide certain registration rights related to the such shares, on the terms set forth herein;
Now, Therefore , in consideration of the mutual promises, representations, warranties, covenants, and conditions set forth herein, the parties mutually agree as follows:
1. Certain Definitions . As used in this Agreement, the following terms shall have the following respective meanings:
“ Approved Market ” means the Over-the-Counter Bulletin Board, the Nasdaq Stock Market, the New York Stock Exchange or the American Stock Exchange.
“ Blackout Period ” means, with respect to a registration, a period, in each case commencing on the day immediately after the Company notifies the Stockholder that it is required, because of the occurrence of an event of the kind described in Section 4(f) hereof, to suspend offers and sales of Registrable Securities during which the Company, in the good faith judgment of its board of directors, determines (because of the existence of, or in anticipation of, any acquisition, financing activity, or other transaction involving the Company, or the unavailability for reasons beyond the Company’s control of any required financial statements, disclosure of information which is in its best interest not to publicly disclose, or any other event or condition of similar significance to the Company) that the registration and distribution of the Registrable Securities to be covered by such Registration Statement, if any, would be seriously detrimental to the Company and its stockholders and ending on the earlier of (1) the date upon which the material non-public information commencing the Blackout Period is disclosed to the public or ceases to be material and (2) such time as the Company notifies the selling Holders that the Company will no longer delay such filing of the Registration Statement, recommence taking steps to make such Registration Statement effective, or allow sales pursuant to such Registration Statement to resume.
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“ Business Day ” means any day of the year, other than a Saturday, Sunday, or other day on which the Commission is required or authorized to close.
“ Commission ” means the U. S. Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.
“ Common Stock ” means the common stock, par value $0.00001 per share, of the Company and any and all shares of capital stock or other equity securities of: (i) the Company which are added to or exchanged or substituted for the Common Stock by reason of the declaration of any stock dividend or stock split, the issuance of any distribution or the reclassification, readjustment, recapitalization or other such modification of the capital structure of the Company; and (ii) any other corporation, now or hereafter organized under the laws of any state or other governmental authority, with which the Company is merged, which results from any consolidation or reorganization to which the Company is a party, or to which is sold all or substantially all of the shares or assets of the Company, if immediately after such merger, consolidation, reorganization or sale, the Company or the stockholders of the Company own equity securities having in the aggregate more than 50% of the total voting power of such other corporation.
“ Effective Date ” means the date of the final closing of the PPO.
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.
“ Family Member ” means (a) with respect to any individual, such individual’s spouse, any descendants (whether natural or adopted), any trust all of the beneficial interests of which are owned by any of such individuals or by any of such individuals together with any organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, the estate of any such individual, and any corporation, association, partnership or limited liability company all of the equity interests of which are owned by those above described individuals, trusts or organizations and (b) with respect to any trust, the owners of the beneficial interests of such trust.
“ Holder ” means Stockholder, or its permitted registered assigns or any of Stockholder’s respective successors and Permitted Assignees who acquire rights in accordance with this Agreement with respect to any Registrable Securities directly or indirectly from Stockholder or from any Permitted Assignee.
“ Initial Registration Statement ” means the initial Registration Statement filed pursuant to this Agreement.
“ Majority Holders ” means at any time Holders representing a majority of the Registrable Securities.
“ Permitted Assignee ” means (a) with respect to a partnership, its partners or former partners in accordance with their partnership interests, (b) with respect to a corporation, its stockholders in accordance with their interest in the corporation, (c) with respect to a limited liability company, its members or former members in accordance with their interest in the limited liability company, (d) with respect to an individual party, any Family Member of such party, (e) an entity that is controlled by, controls, or is under common control with a transferor, or (f) a party to this Agreement.
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“ Piggyback Registration ” means, in any registration of Common Stock as set forth in Section 3(b), the ability of holders of Registrable Securities to include Registrable Securities in such registration.
The terms “ register ,” “ registered ,” and “ registration ” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement.
“PPO” means that certain offering pursuant to Rule 506 of Regulation D of the Securities Act (as defined herein) being placed by WestPart capital, Inc.
“ Registrable Securities ” means the shares of Common Stock owned by the Shareholders but excluding (i) any Registrable Securities that have been publicly sold or may be sold immediately without registration under the Securities Act either pursuant to Rule 144 of the Securities Act or otherwise; (ii) any Registrable Securities sold by a person in a transaction pursuant to a registration statement filed under the Securities Act, or (iii) any Registrable Securities that are at the time subject to an effective registration statement under the Securities Act.
“ Registration Filing Date ” means the date that is 60 days after date of the final closing of the PPO.
“ Registration Statement ” means the registration statement that the Company is required to file pursuant to this Agreement to register the Registrable Securities.
“ Rule 144 ” means Rule 144 promulgated by the Commission under the Securities Act.
“ Rule 145 ” means Rule 145 promulgated by the Commission under the Securities Act.
“ Rule 415 ” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same purpose and effect as such Rule.
“ Securities Act ” means the Securities Act of 1933, as amended, or any similar federal statute promulgated in replacement thereof, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.
“ SEC Effective Date ” means the date the Registration Statement is declared effective by the Commission.
“ Trading Day ” means (a) if the Common Stock is listed or quoted on an Approved Market, then any day during which securities are generally eligible for trading on the Approved Market, or (b) if the Common Stock is not then listed or quoted and traded on an Approved Market, then any business day.
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2. Term . This Agreement shall continue in full force and effect for a period of one year from the SEC Effective Date, unless terminated sooner hereunder.
3. Registration .
(a) Registration on Form S-1 . Not later than the Registration Filing Date, the Company shall file with the Commission a Registration Statement on Form S-1, or other applicable form, relating to the resale by the Holders of all of the Registrable Securities, and the Company shall use its commercially reasonably efforts to cause such Registration Statement to be declared effective within ninety (90) days of filing with the Commission.
(b) Piggyback Registration . In addition to the Company agreement pursuant to Section 3(a) above, if the Company shall determine to register for sale for cash any of its Common Stock, for its own account or for the account of others (other than the Holders), other than (i) a registration relating solely to employee benefit plans or securities issued or issuable to employees, consultants (to the extent the securities owned or to be owned by such consultants could be registered on Form S-8) or any of their Family Members (including a registration on Form S-8) or (ii) a registration relating solely to a Securities Act Rule 145 transaction or a registration on Form S-4 in connection with a merger, acquisition, divestiture, reorganization or similar event, the Company shall promptly give to the Holders written notice thereof (and in no event shall such notice be given less than 20 calendar days prior to the filing of such registration statement), and shall, subject to Section 3(c), include as a Piggyback Registration all of the Registrable Securities specified in a written request delivered by the Holder thereof within 10 calendar days after receipt of such written notice from the Company. However, the Company may, without the consent of the Holders, withdraw such registration statement prior to its becoming effective if the Company or such other stockholders have elected to abandon the proposal to register the securities proposed to be registered thereby.
(c) Underwriting . If a Piggyback Registration is for a registered public offering that is to be made by an underwriting, the Company shall so advise the Holders of the Registrable Securities eligible for inclusion in such Registration Statement pursuant to Sections 3(b)(i) and (ii), respectively. In that event, the right of any Holder to Piggyback Registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to sell any of their Registrable Securities through such underwriting shall (together with the Company and any other stockholders of the Company selling their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter selected for such underwriting by the Company or the selling stockholders, as applicable. Notwithstanding any other provision of this Section, if the underwriter or the Company determines that marketing factors require a limitation on the number of shares of Common Stock or the amount of other securities to be underwritten, the underwriter may exclude some or all Registrable Securities from such registration and underwriting. The Company shall so advise all Holders (except those Holders who failed to timely elect to include their Registrable Securities through such underwriting or have indicated to the Company their decision not to do so), and indicate to each such Holder the number of shares of Registrable Securities that may be included in the registration and underwriting, if any. The number of shares of Registrable Securities to be included in such registration and underwriting shall be allocated among such Holders as follows:
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(i) If the Piggyback Registration was initiated by the Company, the number of shares that may be included in the registration and underwriting shall be allocated first to the Company and then, subject to obligations and commitments existing as of the date hereof, to all selling stockholders, including the Holders, who have requested to sell in the registration on a pro rata basis according to the number of shares requested to be included therein; and
(ii) If the Piggyback Registration was initiated by the exercise of demand registration rights by a stockholder or stockholders of the Company (other than the Holders), then the number of shares that may be included in the registration and underwriting shall be allocated first to such selling stockholders who exercised such demand and then, subject to obligations and commitments existing as of the date hereof, to all other selling stockholders, including the Holders, who have requested to sell in the registration on a pro rata basis according to the number of shares requested to be included therein.
No Registrable Securities excluded from the underwriting by reason of the underwriter’s marketing limitation shall be included in such registration. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw such Holder’s Registrable Securities therefrom by delivering a written notice to the Company and the underwriter. The Registrable Securities so withdrawn from such underwriting shall also be withdrawn from such registration; provided , however , that, if by the withdrawal of such Registrable Securities, a greater number of Registrable Securities held by other Holders may be included in such registration (up to the maximum of any limitation imposed by the underwriters), then the Company shall offer to all Holders who have included Registrable Securities in the registration the right to include additional Registrable Securities pursuant to the terms and limitations set forth herein in the same proportion used above in determining the underwriter limitation.
4. Registration Procedures for Registrable Securities . The Company will keep each Holder reasonably advised as to the filing and effectiveness of the Registration Statement. At its expense with respect to the Registration Statement, the Company will:
(a) prepare and file with the Commission with respect to the Registrable Securities, a Registration Statement on Form S-1, or any other form for which the Company then qualifies or which counsel for the Company shall deem appropriate and which form shall be available for the sale of the Registrable Securities in accordance with the intended methods of distribution thereof, and use its commercially reasonable efforts to cause such Registration Statement to become effective and shall remain effective for a period of one year or for such shorter period ending on the earlier to occur of (i) the date as of which all of the Holders as selling stockholders thereunder may sell all of the Registrable Securities registered for resale thereon without restriction pursuant to Rule 144 (or any successor rule thereto) promulgated under the Securities Act or (ii) the date when all of the Registrable Securities registered thereunder shall have been sold (the “ Effectiveness Period ”). Thereafter, the Company shall be entitled to withdraw such Registration Statement and the Investors shall have no further right to offer or sell any of the Registrable Securities registered for resale thereon pursuant to the respective Registration Statement (or any prospectus relating thereto);
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(b) if the Registration Statement is subject to review by the Commission, promptly respond to all comments and diligently pursue resolution of any comments to the satisfaction of the Commission;
(c) prepare and file with the Commission such amendments and supplements to such Registration Statement as may be necessary to keep such Registration Statement effective during the Effectiveness Period;
(d) furnish, without charge, to each Holder of Registrable Securities covered by such Registration Statement (i) a reasonable number of copies of such Registration Statement (including any exhibits thereto other than exhibits incorporated by reference), each amendment and supplement thereto as such Holder may reasonably request, (ii) such number of copies of the prospectus included in such Registration Statement (including each preliminary prospectus and any other prospectus filed under Rule 424 of the Securities Act) as such Holders may reasonably request, in conformity with the requirements of the Securities Act, and (iii) such other documents as such Holder may require to consummate the disposition of the Registrable Securities owned by such Holder, but only during the Effectiveness Period;
(e) use its commercially reasonable efforts to register or qualify such registration under such other applicable securities laws of such jurisdictions as any Holder of Registrable Securities covered by such Registration Statement reasonably requests and as may be necessary for the marketability of the Registrable Securities (such request to be made by the time the applicable Registration Statement is deemed effective by the Commission) and do any and all other acts and things necessary to enable such Holder to consummate the disposition in such jurisdictions of the Registrable Securities owned by such Holder; provided , that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph, (ii) subject itself to taxation in any such jurisdiction, or (iii) consent to general service of process in any such jurisdiction.
(f) notify each Holder of Registrable Securities, the disposition of which requires delivery of a prospectus relating thereto under the Securities Act, of the happening of any event (as promptly as practicable after becoming aware of such event), which comes to the Company’s attention, that will after the occurrence of such event cause the prospectus included in such Registration Statement, if not amended or supplemented, to contain an untrue statement of a material fact or an omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading and the Company shall promptly thereafter prepare and furnish to such Holder a supplement or amendment to such prospectus (or prepare and file appropriate reports under the Exchange Act) so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, unless suspension of the use of such prospectus otherwise is authorized herein or in the event of a Blackout Period, in which case no supplement or amendment need be furnished (or Exchange Act filing made) until the termination of such suspension or Blackout Period;
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(g) comply, and continue to comply during the Effectiveness Period, in all material respects with the Securities Act and the Exchange Act and with all applicable rules and regulations of the Commission with respect to the disposition of all securities covered by such Registration Statement;
(h) as promptly as practicable after becoming aware of such event, notify each Holder of Registrable Securities being offered or sold pursuant to the Registration Statement of the issuance by the Commission of any stop order or other suspension of effectiveness of the Registration Statement;
(i) use its commercially reasonable efforts to cause all the Registrable Securities covered by the Registration Statement to be quoted on the OTC Bulletin Board, OTC Markets or such other principal securities market on which securities of the same class or series issued by the Company are then listed or traded;
(j) provide a transfer agent and registrar, which may be a single entity, for the shares of Common Stock at all times;
(k) If requested by the Holders, cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to the Registration Statement, which certificates shall be free, to the extent permitted by applicable law, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holders may request;
(l) during the Effectiveness Period, refrain from bidding for or purchasing any Common Stock or any right to purchase Common Stock or attempting to induce any person to purchase any such security or right if such bid, purchase or attempt would in any way limit the right of the Holders to sell Registrable Securities by reason of the limitations set forth in Regulation M of the Exchange Act; and
(m) take all other reasonable actions necessary to expedite and facilitate the disposition by the Holders of the Registrable Securities pursuant to the Registration Statement.
5. Suspension of Offers and Sales . Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4(f) hereof or of the commencement of a Blackout Period, such Holder shall discontinue the disposition of Registrable Securities included in the Registration Statement until such Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 4(f) hereof or notice of the end of the Blackout Period, and, if so directed by the Company, such Holder shall deliver to the Company (at the Company’s expense) all copies (including, without limitation, any and all drafts), other than permanent file copies, then in such Holder’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice.
6. Registration Expenses . The Company shall pay all expenses in connection with any registration obligation provided herein, including, without limitation, all registration, filing, stock exchange fees, printing expenses, all fees and expenses of complying with applicable securities laws, and the fees and disbursements of counsel for the Company and of its independent accountants; provided , that, in any registration, each party shall pay for its own underwriting discounts and commissions and transfer taxes. Except as provided in this Section and Section 9, the Company shall not be responsible for the expenses of any attorney or other advisor employed by a Holder.
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7. Assignment of Rights . No Holder may assign its rights under this Agreement to any party without the prior written consent of the Company; provided , however , that any Holder may assign its rights under this Agreement without such consent to a Permitted Assignee as long as (a) such transfer or assignment is effected in accordance with applicable securities laws; (b) such transferee or assignee agrees in writing to become subject to the terms of this Agreement; and (c) such Holder notifies the Company in writing of such transfer or assignment, stating the name and address of the transferee or assignee and identifying the Registrable Securities with respect to which such rights are being transferred or assigned.
8. Information by Holder . A Holder with Registrable Securities included in any registration shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required in order to comply with any applicable law or regulation in connection with the registration of such Holder’s Registrable Securities or any qualification or compliance with respect to such Holder’s Registrable Securities and referred to in this Agreement.
9. Indemnification .
(a) In the event of the offer and sale of Registrable Securities under the Securities Act, the Company shall, and hereby does, indemnify and hold harmless, to the fullest extent permitted by law, each Holder, its directors, officers, partners, each other person who participates as an underwriter in the offering or sale of such securities, and each other person, if any, who controls or is under common control with such Holder or any such underwriter within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, and expenses to which the Holder or any such director, officer, partner or underwriter or controlling person may become subject under the Securities Act, the Exchange Act, or any other federal or state law, insofar as such losses, claims, damages, liabilities or expenses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement of any material fact contained in any registration statement prepared and filed by the Company under which Registrable Securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission to state therein a material fact required to be stated or necessary to make the statements therein in light of the circumstances in which they were made not misleading, or any violation or alleged violation of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with this Agreement; and the Company shall reimburse the Holder, and each such director, officer, partner, underwriter and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating, defending or settling any such loss, claim, damage, liability, action or proceeding; provided , that such indemnity agreement found in this Section 9(a) shall in no event exceed the net proceeds from the PPO, as applicable, received by the Company; and provided further , that the Company shall not be liable in any such case (i) to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement in or omission from such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company by the Holder specifically for use in the preparation thereof or (ii) if the person asserting any such loss, claim, damage, liability (or action or proceeding in respect thereof) who purchased the Registrable Securities that are the subject thereof did not receive a copy of an amended preliminary prospectus or the final prospectus (or the final prospectus as amended or supplemented) at or prior to the written confirmation of the sale of such Registrable Securities to such person because of the failure of such Holder or underwriter to so provide such amended preliminary or final prospectus and the untrue statement or omission of a material fact made in such preliminary prospectus was corrected in the amended preliminary or final prospectus (or the final prospectus as amended or supplemented). Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Holders, or any such director, officer, partner, underwriter or controlling person and shall survive the transfer of such shares by the Holder.
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(b) As a condition to including Registrable Securities in any registration statement filed pursuant to this Agreement, each Holder agrees to be bound by the terms of this Section 9 and to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors and officers, and each other person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which the Company or any such director or officer or controlling person may become subject under the Securities Act, the Exchange Act, or any other federal or state law, to the extent arising out of or based solely upon: (x) such Holder’s failure to comply with the prospectus delivery requirements of the Securities Act or (y) any untrue or alleged untrue statement of a material fact contained in any registration statement, any prospectus, or any form of prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company specifically for inclusion in the registration statement or such prospectus or (ii) to the extent that (1) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement, such prospectus or such form of prospectus or in any amendment or supplement thereto or (2) in the case of an occurrence of an event of the type specified in Section 4(f) hereof, the use by such Holder of an outdated or defective prospectus after the Company has notified such Holder in writing that the prospectus is outdated or defective and prior to the receipt by such Holder of the advice contemplated in Section 4(f). In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.
(c) Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in this Section (including any governmental action), such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the indemnifying party of the commencement of such action; provided , that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Section, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in the reasonable judgment of counsel to such indemnified party a conflict of interest between such indemnified and indemnifying parties may exist or the indemnified party may have defenses not available to the indemnifying party in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof, unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties arises in respect of such claim after the assumption of the defenses thereof or the indemnifying party fails to defend such claim in a diligent manner, other than reasonable costs of investigation. Neither an indemnified nor an indemnifying party shall be liable for any settlement of any action or proceeding effected without its consent. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement, which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. Notwithstanding anything to the contrary set forth herein, and without limiting any of the rights set forth above, in any event any party shall have the right to retain, at its own expense, counsel with respect to the defense of a claim.
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(d) If an indemnifying party does or is not permitted to assume the defense of an action pursuant to Sections 9(c) or in the case of the expense reimbursement obligation set forth in Sections 9(a) and (b), the indemnification required by Sections 9(a) and 9(b) shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills received or expenses, losses, damages, or liabilities are incurred.
(e) If the indemnification provided for in Section 9(a) or 9(b) is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall (i) contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense as is appropriate to reflect the proportionate relative fault of the indemnifying party on the one hand and the indemnified party on the other (determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission relates to information supplied by the indemnifying party or the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission), or (ii) if the allocation provided by clause (i) above is not permitted by applicable law or provides a lesser sum to the indemnified party than the amount hereinafter calculated, not only the proportionate relative fault of the indemnifying party and the indemnified party, but also the relative benefits received by the indemnifying party on the one hand and the indemnified party on the other, as well as any other relevant equitable considerations. No indemnified party guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any indemnifying party who was not guilty of such fraudulent misrepresentation.
(f) Other Indemnification . Indemnification similar to that specified in this Section (with appropriate modifications) shall be given by the Company and each Holder of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation or governmental authority other than the Securities Act.
10. Rule 144 . With a view to making available to the Holders the benefits of Rule 144 and any other rule or regulation of the Commission that may at any time permit the Holders to sell the Registrable Securities to the public without registration, the Company agrees: (i) to make and keep public information available as those terms are understood in Rule 144, (ii) to file with the Commission in a timely manner all reports and other documents required to be filed by an issuer of securities registered under the Securities Act or the Exchange Act pursuant to Rule 144, (iii) as long as any Holder owns any Registrable Securities, to furnish in writing upon such Holder’s request a written statement by the Company that it has complied with the reporting requirements of Rule 144 and of the Securities Act and the Exchange Act, and to furnish to such Holder a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as may be reasonably requested in availing such Holder of any rule or regulation of the Commission permitting the selling of any such Registrable Securities without registration and (iv) undertake any additional actions commercially reasonably necessary to maintain the availability of the use of Rule 144.
11. Corporate Existence . So long as any Holder owns any Registrable Securities, the Company shall not directly or indirectly consummate any merger, reorganization, restructuring, reverse stock split, consolidation, sale of all or substantially all of the Company’s assets or any similar transaction or related transactions (each such transaction, an “ Organizational Change ”), unless, prior to the consummation of an Organizational Change, the Company obtains the written consent of its Board of Directors.
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12. Independent Nature of Each Holder’s Obligations and Rights . The obligations of each Holder under this Agreement are several and not joint with the obligations of any other Holder, and each Holder shall not be responsible in any way for the performance of the obligations of any other Holder under this Agreement. Nothing contained herein and no action taken by any Holder pursuant hereto, shall be deemed to constitute such Purchasers as a partnership, an association, a joint venture, or any other kind of entity, or create a presumption that the Holders are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement. Each Holder shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose.
13. Reserved .
14. Miscellaneous .
(a) Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the United States of America and the State of New York, both substantive and remedial, without regard to New York conflicts of law principles. Any judicial proceeding brought against either of the parties to this Agreement or any dispute arising out of this Agreement or any matter related hereto shall be brought in the courts of the State of New York, New York County, or in the United States District Court for the Southern District of New York and, by its execution and delivery of this Agreement, each party to this Agreement accepts the jurisdiction of such courts. The foregoing consent to jurisdiction shall not be deemed to confer rights on any person other than the parties to this Agreement.
(b) Remedies . In the event of a breach by the Company or by a Holder of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate.
(c) Successors and Assigns . Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, Permitted Assignees, executors and administrators of the parties hereto.
(d) No Inconsistent Agreements . The Company has not entered, as of the date hereof, and shall not enter, on or after the date of this Agreement, into any agreement with respect to its securities that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof.
(e) Entire Agreement . This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof.
(f) Notices, etc . All notices or other communications which are required or permitted under this Agreement shall be in writing and sufficient if delivered by hand, by facsimile transmission, by registered or certified mail, postage pre-paid, by electronic mail, or by courier or overnight carrier, to the persons at the addresses set forth below (or at such other address as may be provided hereunder), and shall be deemed to have been delivered as of the date so delivered:
If to the Company to:
PeerLogix, Inc.
500 7th Ave., 17th Floor
New York, NY 10018
Attention: William Gorfein, Chief Executive Officer
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with copy to:
Robinson & Cole, LLP
1055 Washington Blvd.
Stamford, Ct. 06901
Attention: Mitchell L. Lampert, Esq.
Facsimile: (203) 462-7599
If to the Stockholders:
To each Stockholder at the address set forth on the signature page hereto.
or at such other address as any party shall have furnished to the other parties in writing.
(g) Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any Holder, upon any breach or default of the Company under this Agreement, shall impair any such right, power or remedy of such Holder nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of any similar breach or default thereunder occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any Holder of any breach or default under this Agreement, or any waiver on the part of any Holder of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, or by law or otherwise afforded to any holder, shall be cumulative and not alternative.
(h) Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.
(i) Severability . In the case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
(j) Amendments . The provisions of this Agreement may be amended at any time and from time to time, and particular provisions of this Agreement may be waived, with and only with an agreement or consent in writing signed by the Company and the Majority Holders. Each Holder acknowledges that by the operation of this Section, the Majority Holders may have the right and power to diminish or eliminate all rights of such Holder under this Agreement.
[SIGNATURE PAGES FOLLOW]
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This Registration Rights Agreement is hereby executed as of the date first above written.
COMPANY:
Realco International, Inc.
By: /s/ William Gorfein
Name: William Gorfein
Title: Chief Executive Officer
HOLDER:
By: . /s/ Robert Steven Brown
Name: Robert Steven Brown
Title: Managing Director
Address:
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SCHEDULE A
The following sets forth the individual stockholders with which Realco International, Inc. makes this Registration Rights Agreement.
Stockholder Name | Shares of Common Stock |
Offer Attia | 999,821 |
New World Merchant Partners LLC | 1,000,000 |
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Exhibit 10.6
[Form of]
REALCO INTERNATIONAL, INC.
SUBSCRIPTION AGREEMENT
PLEASE READ CAREFULLY BEFORE SIGNING
ALL SUBSCRIPTIONS ARE SUBJECT TO ACCEPTANCE BY THE OFFICERS. ALL INFORMATION REQUIRED TO BE PROVIDED HEREIN BY SUBSCRIBERS FOR DETERMINING PURCHASER QUALIFICATION WILL BE KEPT STRICTLY CONFIDENTIAL.
1. Subscription for Common Stock and Warrants. The undersigned ________________________ (“ Holder ”) hereby irrevocably agrees to acquire $______________ of the “Units” of Realco International, Inc., a public Nevada shell corporation (the “ Company ”). A “Unit” consists of one (1) share of Company common stock (the “ Common Stock ”) and one (1) warrant to purchase one (1) share of Common Stock (the “ Warrant ”). The Common Stock and Warrants acquired hereby are referred to hereinafter as the “ Units , ” " Securities " or the “ Interests .”
2. Acceptance. The undersigned agrees that, upon the acceptance of this Subscription by the Company, the undersigned shall become a shareholder in the Company.
3. Representations and Warranties. To induce the Company to accept this Subscription Agreement, the undersigned hereby represents, warrants and covenants to the Company as follows:
A. The undersigned acknowledges that the undersigned has been furnished with the Private Placement Memorandum (the “ Memorandum ”) which sets forth the relevant terms and conditions of this investment and such other documents, materials and information as the undersigned (and the undersigned's purchaser representative, if any) deems necessary or appropriate for evaluating an investment in the Company. The undersigned confirms that the undersigned (and the undersigned's purchaser representative, if any) carefully has read and understands these materials and has made such further investigation of the Company as was deemed appropriate to obtain additional information to verify the accuracy of such materials and to evaluate the merits and risks of this investment. The undersigned acknowledges that the undersigned (and the undersigned's purchaser representative, if any) has had the opportunity to ask questions of, and receive answers from, the officers of the Company and persons acting on their and the Company's behalf, concerning the terms and conditions of the offering and the information contained in the offering materials, and all such questions have been answered to the undersigned's full satisfaction.
B. The undersigned has had an opportunity to review and, in fact, meets the suitability standards required for this investment, as set forth in the Memorandum.
C. The undersigned understands that the Interests have not been registered under the Securities Act of 1933, as amended (" Act ") or the securities or similar laws of any state, and are offered in reliance on exemptions therefrom.
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D. The undersigned understands that neither the Securities and Exchange Commission nor any other federal or state agency has recommended, approved or endorsed the purchase of the Interests as an investment or passed on the accuracy or adequacy of the information set forth in the Memorandum or any other Company documents.
E. The undersigned is in a financial position to afford to hold the Interests indefinitely, the undersigned's financial condition being such that the undersigned is not presently under (and does not contemplate any future) necessity or constraint to dispose of such Interests, other than through redemption, to satisfy any existing or contemplated debt or undertaking.
F. The undersigned recognizes that the Company is a highly speculative venture involving a high degree of risk, and the undersigned can bear the economic risk of losing the undersigned's entire investment in Interests. The undersigned's overall commitment to investments which are not readily marketable is not disproportionate to the undersigned's net worth and investment in the Interests will not cause the undersigned's overall commitment to become excessive. The undersigned is familiar with the nature of, and risks attendant to, investments in securities of the type being subscribed for and has determined, in consultation with the undersigned's purchaser representative, if any, that the purchase of such securities is consistent with the undersigned's investment objectives.
G. The undersigned, either alone or together with the undersigned's purchaser representative, if any, has the requisite knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of this investment and to be capable of protecting the undersigned's interests in connection with this transaction.
H. The undersigned is acquiring the Interests subscribed for herein solely for the undersigned's own account, for investment, and not with a view to the distribution or resale of such Interests.
I. The undersigned understands that: there are substantial restrictions on the transferability of the Interests; investors in the Company have no rights to require the Interests to be registered under the Act or the securities laws of any state; there will be no public market for the Interests; and it will not be possible for the undersigned to liquidate the undersigned's investment in the Company at any given time and accordingly, the undersigned may have to hold the Interests, and bear the economic risk of this investment, indefinitely.
J. If the undersigned is an individual, the undersigned has the legal capacity and authority to execute, deliver, and perform the undersigned's obligations under this Subscription Agreement. If the undersigned is a corporation, partnership, trust, or other entity, the person executing this Subscription Agreement has the full power and authority to execute and deliver this Subscription Agreement on behalf of the subscribing entity, and such entity is duly formed and organized, validly existing, and in good standing under the laws of its jurisdiction of formation, and such entity is authorized by its governing documents to execute, deliver, and perform its obligations under this Subscription Agreement and to become a shareholder in the Company. Furthermore, such investment is in accordance with all laws applicable to the undersigned's operations.
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K. If the undersigned is an entity, it has not been organized for the specific purpose of acquiring the Interests or if it has been organized for the specific purpose of acquiring Interests, each of its beneficial owners is separately an "accredited investor" as such term is defined in Rule 501(a) of Regulation D under the Act.
L. If the undersigned is subject to the Employee Retirement Income Security Act of 1974, as amended (" ERISA "), in making the proposed investment he is aware of and has taken into consideration the applicable fiduciary standards of conduct under ERISA, including, but not limited to the prudence and diversification requirements of Section 404(a)(1) of ERISA.
M. Any person who renders services to, maintains, or contributes to any "Employee Benefit Plan" that is a shareholder is referred to as an "Interested Person." If the undersigned is not itself an Employee Benefit Plan (as defined in the Memorandum), the undersigned warrants and represents to the officers and the Company that it is not and will not become an Interested Person, is not a 10%-or-more owner of an Interested Person and is not owned 50%-or-more by an Interested Person. If the undersigned is subject to ERISA, in making the proposed investment the undersigned is aware of and has taken into consideration the diversification requirements of Section 404(a)(1)(C) of ERISA.
N. Under penalties of perjury, the undersigned represents, warrants, and certifies that the undersigned is not subject to "back up withholding" pursuant to Section 3406 of the Internal Revenue Code of 1986, as amended, and that the undersigned has provided the undersigned's correct tax identification number below.
O. The undersigned confirms that Interests were not offered to the undersigned by any means of general solicitation or general advertising, that the undersigned has received no representations, warranties or written communications with respect to the offering of Interests other than those contained in the Memorandum, and in entering into this transaction the undersigned is not relying upon any information other than that contained in the Memorandum and the results of the undersigned's own independent investigation.
P. The undersigned acknowledges that the undersigned has been advised to consult with the undersigned's own attorney regarding legal matters concerning the Company and to consult with the undersigned's tax advisor regarding the tax consequences of participating in the Company.
Q. In the event that this subscription is accepted, the undersigned agrees that the representations, warranties and agreements set forth in this Subscription Agreement and in the Suitability Questionnaire shall survive the acceptance of this subscription.
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R. Special Representation and Warranty by New York Residents :
The undersigned understands that the offering of these securities has not been reviewed by the Attorney General of the state of New York because of the Company’s representations that this is intended to be a non-public offering pursuant to SEC Regulation D, and that if all the conditions and limitations of Regulation D are not complied with, the offering will be resubmitted to the Attorney General for amended exemption. The undersigned further understands that any offering literature used in connection with this Offering has not been reviewed by the Attorney General. The securities are being purchased for the undersigned's own account for investment, and not for distribution or resale to others. The undersigned agrees that the undersigned will not sell or otherwise transfer these securities unless they are registered under the Federal Securities Act of 1933 or unless an exemption from such registration is available. The undersigned represents that the undersigned has adequate means of providing for his current needs and possible personal contingencies and that the undersigned has no need for liquidity of this investment.
The undersigned further understands that all documents, records, and books pertaining to the investment have been made available for inspection by his attorney, his accountant and/or his offeree representative and himself, and that the books and records of the Company will be available upon reasonable notice, for inspection by investors at reasonable hours at its principal place of business.
4. Reliance on Representations and Warranties; Notification Requirements. The undersigned understands the meaning of the representations and warranties contained in this Subscription Agreement and in the Purchaser Questionnaire (the " Suitability Questionnaire ") and understands and acknowledges that the Company and the officers are relying upon the representations and warranties contained in this Subscription Agreement and in the Suitability Questionnaire in determining whether the offering is eligible for exemption from the registration requirements contained in the Act and in determining whether to accept the subscription tendered hereby. The undersigned represents and warrants that the information contained in this Subscription Agreement and in the Suitability Questionnaire is true and correct as of the date hereof and agrees to notify immediately the officers of any changes in such information (or, if there have been any changes in the information provided to the Company by the undersigned in the Suitability Questionnaire since the date the Suitability Questionnaire was furnished, the undersigned has advised the Company in writing of such changes). The undersigned hereby agrees to indemnify and hold harmless the Company, the officers and each shareholder of the Company, and its and their officers, directors, agents and employees from and against any and all losses, damages, expenses, liabilities or reasonable attorneys' fees (including attorneys' fees and expenses incurred in a securities or other action in which no judgment in favor of the undersigned is rendered) due to or arising out of a breach of any representation or warranty of the undersigned, whether contained in this Subscription Agreement or the Suitability Questionnaire. Notwithstanding any of the representations, warranties, acknowledgments, or agreements made in this Subscription Agreement and in the Suitability Questionnaire by the undersigned, the undersigned does not thereby or in any other manner waive any rights granted to the undersigned under federal or state securities law, except the right to a trial by jury, the right to bring a class action, and all other rights waived by agreeing to the arbitration provision herein.
5. Special Risk Disclosure. The undersigned understands that an investment in the Securities involves special risks, the undersigned understands those risks (including without limitation the risks set forth in the Memorandum), and the undersigned is assuming such risks. The undersigned acknowledges and is aware that the Securities are speculative investments which involve a high degree of risk of loss by Holder of his, her or its entire investment in the Company. The undersigned agrees and acknowledges that it is the undersigned’s sole responsibility for "due diligence" investigation of the Company and the financial prospects of the Company.
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6. Representations, Warranties and Covenants of the Company. The Company hereby makes the following representations and warranties to Holder:
A. The Company is a Nevada corporation duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation and has all powers and all material governmental licenses, authorizations, consents, and approvals required to carry on its business as now conducted and the Company is duly qualified as a foreign entity, licensed, and in good standing in each jurisdiction where qualification or licensing is required by the nature of its business, or the character and location of its property, business, or customers.
B. The execution and delivery by the Company of this Agreement, the offer, issuance, and delivery of the Securities, and the performance by the Company of its obligations hereunder: (a) are within the corporate power or legal capacity of the Company; (b) have been duly authorized by all necessary corporate action; and (c) do not contravene, or constitute a default under, any provision of applicable law or regulation, or of the charter or bylaws of the Company, or of any agreement, judgment, injunction, order, decree, or other instrument binding upon the Company.
C. The Securities offered hereunder, when issued and paid for pursuant to the terms of this Agreement, will be duly authorized, validly issued, fully paid and non-assessable, will have the rights, preferences and privileges specified in the Articles of Organization and will be free and clear of all liens and restrictions.
D. Subject to the accuracy of Holder’s representations appearing herein and any post
closing filings as may be required, the offer, issue and sale of the Securities are and will be exempt from the registration and prospectus delivery requirements of the Securities Act, and have been registered or qualified (or are exempt from registration and qualification) under the registration, permit or qualification requirements of all applicable state securities laws.
E No Person has, or as a result of the transactions contemplated herein will have, any right or valid claim against the Company or any Investor for any commission, fee or other compensation as a finder or broker, or in any similar capacity.
F. The Company has not agreed to register under the Securities Act any of its authorized or outstanding securities.
G. This Agreement constitutes a valid and binding agreement of the Company.
H. Except as otherwise disclosed to Holder, there is no action, suit, or proceeding pending against, or to the knowledge of the Company threatened against the Company either before any court or arbitrator, or any governmental body, agency, or official which could reasonably be expected to question the validity of any investment in the Securities hereunder.
I. The Company has filed all material tax returns that are required to be filed by it and has paid all taxes due pursuant to such returns before any such taxes become delinquent or any penalty accrued with respect thereto, or pursuant to any assessment received by it, except for any such taxes being diligently contested in good faith and by appropriate proceedings.
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J. To the best of its knowledge, the Company is in compliance in all material respects with all applicable laws, rules, and regulations, other than such laws, rules or regulations: (i) the validity or applicability of which the Company is contesting in good faith by appropriate proceedings, or (ii) failure to comply with which cannot reasonably be expected to have material adverse consequences to the Company.
K. The Company owns or possesses sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, and proprietary rights and processes necessary for its business as now conducted and as proposed to be conducted without any conflict with, or infringement of the rights of, others. The Company has not received any communications alleging that the Company has violated or, by conducting its business as proposed, would violate any of the copyrights, trade secrets, or other proprietary rights or processes of any other person or entity. The Company is not aware that any of its officers or employees is obligated under any contract (including licenses, covenants, or commitments of any nature) or other agreement, or subject to any judgment, decree, or order of any court or administrative agency, that would interfere with the use of such officers or employee’s best efforts to promote the interests of the Company or that would conflict with the Company’s business as proposed to be conducted. Neither the execution nor delivery of this Agreement, nor the carrying on of the Company’s business by the employees of the Company, nor the conduct of the Company’s business as proposed, will, to the best of the Company’s knowledge, conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract, covenant, or instrument under which any of such employees is now obligated.
L. To the best of the Company’s knowledge, the Company is not in violation of, or in default under, any term or provision of any charter, by law, mortgage, indenture, agreement, instrument, statute, rule, regulation, judgment, decree, order, writ, or injunction applicable to it.
7. Assignability. The undersigned agrees not to transfer or assign this Subscription Agreement, or any interest of the undersigned therein. This Subscription Agreement and the representations and warranties contained herein shall be binding upon the heirs, executors, administrators, and other successors of the undersigned and this Subscription Agreement shall inure to the benefit of and be enforceable by the Company. If there is more than one signatory hereto, the obligations, representations, warranties, and agreements of the undersigned are made jointly and severally.
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8. Applicable Law and Arbitration. This Agreement shall be construed in accordance with the laws of the State of California, without regard to principles of conflicts of law. The Parties agree that any dispute arising out of or relating to an investment pursuant to this Agreement or concerning this Agreement, including but not limited to disputes as to arbitrability and all disputes with the Company or any of its Placement Agents or Dealers, or any employee, agent, representative, officer, director or attorney of the Company or any Placement Agent or Dealer, shall be resolved through final, binding, non-appealable arbitration, before a single, neutral arbitrator, at JAMS, in Los Angeles County, California in accordance with the rules and regulations of the American Arbitration Association. Venue of all arbitration shall be JAMS Dispute Resolution Center, Los Angeles County, California. The Parties agree that each side will pay fifty percent (50%) of the cost of any arbitration proceedings. Judgment on any arbitration award may be entered in any Court having jurisdiction. Any arbitration award shall be in United States Dollars and may be enforced in any jurisdiction in which the party against whom enforcement is sought maintains assets. The Parties agree that the arbitrator shall enforce the plain terms of this Agreement, notwithstanding any law or policy to the contrary. The Parties agree to limit their respective testimony at any arbitration hearing to three hours per side. HOLDER HEREBY WAIVES ANY RIGHT TO SEEK ANY TYPE OF DAMAGES OTHER THAN COMPENSATORY DAMAGES, INCLUDING BUT NOT LIMITED TO CONSEQUENTIAL DAMAGES AND PUNITIVE DAMAGES. HOLDER HEREBY FURTHER WAIVES THE RIGHT TO A TRIAL BY JURY, THE RIGHT TO BRING A CLASS ACTION SUIT, AND OTHER POTENTIAL REMEDIES THAT OTHERWISE MAY BE AFFORDED BY LAW. THIS IS A CLASS ACTION WAIVER THAT APPLIES TO ALL DISPUTES ARISING OUT OF THIS INVESTMENT, INCLUDING BUT NOT LIMITED TO ANY DISPUTES WITH THE COMPANY, ITS PLACEMENT AGENT, OR ITS DEALERS, AND ALL OF THEIR EMPLOYEES, AGENTS, REPRESENTATIVES, OFFICERS, DIRECTORS, OR ATTORNEYS.
9. Power of Attorney. In connection with the undersigned's subscription for Interests, the undersigned hereby irrevocably constitutes and appoints the officers with full power of substitution, as the undersigned's true and lawful representative and attorneys-in-fact, granting unto such attorneys-in-fact full power of substitution and with full power and authority in the undersigned's name, place and stead to make, execute, acknowledge, deliver, swear to, file and record in all necessary or appropriate places: (a) all documents, certificates or instruments that the officers deems appropriate to qualify, continue or terminate the Company as a shareholder in the jurisdictions in which the Company may conduct business; (b) all instruments that the officers deem appropriate to reflect a change or modification of the Company in accordance with the terms of the Company’s governing documents; (c) all other certificates, documents and instruments with any jurisdiction that the officers deems appropriate to carry out the business of the Company; and (d) all conveyances and other instruments that the officers deem appropriate to effect the dissolution and liquidation of the Company.
This Power of Attorney is coupled with an interest, is irrevocable, and shall survive the death, dissolution, incompetence or incapacity of the undersigned or an assignment by the undersigned of the undersigned's Interests except that where the assignee thereof has been admitted to the Company as a substituted shareholder, this Power of Attorney shall survive such assignment for the sole purpose of enabling the officers to execute, acknowledge and file any certificate, instrument, or document necessary or appropriate to effect such substitution.
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The undersigned hereby agrees to be bound by all of the representations of the attorney-in-fact and waives any and all defenses that may be available to the undersigned to contest, negate or disaffirm the actions of the attorney-in-fact or its successors under this Power of Attorney, and hereby ratifies and confirms all acts that said attorney-in-fact may tax as attorney-in-fact hereunder in all respects, as though performed by the undersigned.
IN WITNESS WHEREOF, the parties have executed this Subscription Agreement as of the day and year first written above.
Subscriber
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To subscribe to REALCO INTERNATIONAL, INC.:
1 Read the Confidential Private Placement Memorandum and consult with your advisors.
2. Accredited Individual Investors : Complete the following instruments annexed hereto:
– | Accredited Individual Investor Questionnaire |
– | If represented by a purchaser representative, that representative must complete the Purchaser Representative Questionnaire, annexed hereto. |
3. Read the Subscription Agreement and, together with your advisors, complete fully.
4. Return completed documentation, with payment pursuant to the following instructions:
Payment of the purchase price may be made by bank wire transfer to:
Signature Bank, Escrow Agent
261 Madison Avenue
New York, NY 10016
For credit to: “Realco International, Inc.”
Account Number: 1502567264
ABA Number: 026013576
Swift Code: SIGNUS33
5. Return of Documents . Copies of the signed Subscription Agreement, Investor Questionnaire and other subscription-related documents should be delivered to the Company c/o
_____________
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ALL SUBSCRIBERS MUST COMPLETE THIS PAGE
IN WITNESS WHEREOF, the undersigned has executed this Agreement on the ____ day of ____________ 2015.
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Units subscribed for | Aggregate Purchase Price |
Manner in which Title is to be held (Please Check One ):
1. | ¨ | Individual | 7. | ¨ |
Trust/Estate/Pension or Profit sharing Plan Date Opened:______________
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2. | ¨ | Joint Tenants with Right of Survivorship | 8. | ¨ |
As a Custodian for ________________________________ Under the Uniform Gift to Minors Act of the State of ________________________________
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3. | ¨ | Community Property | 9. | ¨ |
Married with Separate Property
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4. | ¨ | Tenants in Common | 10. | ¨ |
Keogh
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5. | ¨ | Corporation/Partnership/ Limited Liability Company | 11. | ¨ |
Tenants by the Entirety
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6. | ¨ | IRA |
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ALTERNATIVE DISTRIBUTION INFORMATION
To direct distribution to a party other than the registered owner, complete the information below. YOU MUST COMPLETE THIS SECTION IF THIS IS AN IRA INVESTMENT.
Name of Firm (Bank, Brokerage, Custodian): |
Account Name: |
Account Number: |
Representative Name: |
Representative Phone Number: |
Address: |
City, State, Zip: |
IF MORE THAN ONE SUBSCRIBER, EACH SUBSCRIBER
MUST SIGN.
INDIVIDUAL SUBSCRIBERS MUST COMPLETE THE NEXT PAGE.
SUBSCRIBERS WHICH ARE ENTITIES MUST COMPLETE THE PAGE THEREAFTER.
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EXECUTION BY NATURAL PERSONS
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EXECUTION BY SUBSCRIBER WHICH IS AN ENTITY
(Corporation, Partnership, LLC, Trust, Etc.)
_____________________________________________________________________________ Name of Entity (Please Print)
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Date of Incorporation or Organization: _____________________________________________________________________________________
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State of Principal Office: ________________________________________________________________________________________________
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Federal Taxpayer Identification Number: ____________________________________________________________________________________
____________________________________________ Office Address ____________________________________________ City, State and Zip Code ____________________________________________ Telephone Number ____________________________________________ Fax Number (if available) ____________________________________________ E-Mail (if available)
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By: _________________________________
Name: Title: |
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[seal]
Attest: _________________________________ (If Entity is a Corporation) |
____________________________________
____________________________________ Address
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ACCEPTED this _______ day of _______________ 2015, on behalf of the Company. | |
By: _________________________________ |
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Chief Executive Officer |
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VERIFICATION OF INVESTMENT ADVISOR/BROKER
I state that I am familiar with the financial affairs and investment objectives of the investor named above and reasonably believe that a purchase of the Securities is a suitable investment for this investor and that the investor, either individually or together with his or her purchaser representative, understands the terms of an is able to evaluate the merits of this Offering. I acknowledge:
(a) |
that I have reviewed the Memorandum, Subscription Agreement and forms of securities presented to
me, and attachments (if any) thereto;
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(b) | that the Subscription Agreement and attachments thereto have been fully completed and executed by the appropriate party; and | |
(c) | that the subscription will be deemed received by the Company upon acceptance of the Subscription Agreement. |
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Exhibit 10.7
Warrant Certificate No. ___
NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) AN EXEMPTION FROM SUCH REGISTRATION EXISTS AND THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
Effective Date: [ ], 2015 | Void After: [ ], 2020 |
Realco International, Inc .
[Form of]
WARRANT TO PURCHASE COMMON STOCK
Realco International, Inc . , a Nevada corporation (the “ Company ”), for value received on [ ], 2015 (the “ Effective Date ”), hereby issues to [ ] (the “ Holder ” or “ Warrant Holder ”) this Warrant (the “ Warrant ”) to purchase, [ ] shares (each such share as from time to time adjusted as hereinafter provided being a “ Warrant Share ” and all such shares being the “ Warrant Shares ”) of the Company’s Common Stock (as defined below), at the Exercise Price (as defined below), as adjusted from time to time as provided herein, on or before [ ], 2020 (the “ Expiration Date ”), all subject to the following terms and conditions. This Warrant is one of a series of warrants of like tenor that have been issued in connection with the Company’s private offering solely to accredited investors of units in accordance with, and subject to, the terms and conditions described in the Subscription Agreement, attached to the Confidential Private Placement Memorandum of the Company dated June 10, 2015, as the same may be amended and supplemented from time to time (the “ Subscription Agreement ” and the “ Private Placement Memorandum ” respectively).
As used in this Warrant, (i) “ Business Day ” means any day other than Saturday, Sunday or any other day on which commercial banks in the City of New York, New York, are authorized or required by law or executive order to close; (ii) “ Common Stock ” means the common stock of the Company, par value $0.00001 per share, including any securities issued or issuable with respect thereto or into which or for which such shares may be exchanged for, or converted into, pursuant to any stock dividend, stock split, stock combination, recapitalization, reclassification, reorganization or other similar event; (iii) “ Exercise Price ” means $.72 per share of Common Stock, subject to adjustment as provided herein; (iv) “ Trading Day ” means any day on which the Common Stock is traded (or available for trading) on its principal trading market; (v) “ Affiliate ” means any person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, a person, as such terms are used and construed in Rule 144 promulgated under the Securities Act of 1933, as amended (the “ Securities Act ”) and (vi) “ Warrantholders ” means the holders of Warrants issued pursuant to the Subscription Agreement and Private Placement Memorandum.
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1. | DURATION AND EXERCISE OF WARRANTS |
(a) Exercise Period . The Holder may exercise this Warrant in whole or in part on any Business Day on or before 5:00 P.M., Eastern Time, on the Expiration Date, at which time this Warrant shall become void and of no value.
(b) | Exercise Procedures . |
(i) While this Warrant remains outstanding and exercisable in accordance with Section 1(a), in addition to the manner set forth in Section 1(b)(ii) below, the Holder may exercise this Warrant in whole or in part at any time and from time to time by:
(A) delivery to the Company of a duly executed copy of the Notice of Exercise attached as Exhibit A ;
(B) surrender of this Warrant to the Secretary of the Company at its principal offices or at such other office or agency as the Company may specify in writing to the Holder; and
(C) payment of the then-applicable Exercise Price per share multiplied by the number of Warrant Shares being purchased upon exercise of the Warrant (such amount, the “ Aggregate Exercise Price ”) made in the form of cash, or by certified check, bank draft or money order payable in lawful money of the United States of America or in the form of a Cashless Exercise to the extent permitted in Section 1(b)(ii) below.
(ii) In addition to the provisions of Section 1(b)(i) above, if any time after the first anniversary of the date of the filing of the Current Report on Form 8-K reporting the reverse merger/reorganization with PeerLogix, Inc., a registration statement covering the resale of the Warrant Shares by the Holder is not effective with the Securities and Exchange Commission (the “ SEC ”), the Holder may, in its sole discretion, exercise all or any part of the Warrant in a “cashless” or “net-issue” exercise (a “ Cashless Exercise ”) by delivering to the Company (1) the Notice of Exercise and (2) the original Warrant, pursuant to which the Holder shall surrender the right to receive upon exercise of this Warrant, a number of Warrant Shares having a value (as determined below) equal to the Aggregate Exercise Price, in which case, the number of Warrant Shares to be issued to the Holder upon such exercise shall be calculated using the following formula:
X | = | Y * (A - B) | ||
A |
with: | X = | the number of Warrant Shares to be issued to the Holder | |
Y = | the number of Warrant Shares with respect to which the Warrant is being exercised | ||
A = | the fair value per share of Common Stock on the date of exercise of this Warrant | ||
B = | the then-current Exercise Price of the Warrant |
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Solely for the purposes of this paragraph, “ fair value ” per share of Common Stock shall mean the average Closing Price (as defined below) per share of Common Stock for the twenty (20) trading days immediately preceding the date on which the Notice of Exercise is deemed to have been sent to the Company. “ Closing Price ” 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 the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market or the NASDAQ Capital Market or any other national securities exchange, the closing price per share of the Common Stock for such date (or the nearest preceding date) on the primary eligible market or exchange on which the Common Stock is then listed or quoted; (b) if prices for the Common Stock are then quoted on the OTC Bulletin Board or OTC Markets, the closing bid price per share of the Common Stock for such date (or the nearest preceding date) so quoted; or (c) if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Links LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent closing bid price per share of the Common Stock so reported. If the Common Stock is not publicly traded as set forth above, the “fair value” per share of Common Stock shall be reasonably and in good faith determined by the Board of Directors of the Company as of the date which the Notice of Exercise is deemed to have been sent to the Company.
Notwithstanding the foregoing, provided that a registration statement covering the resale of the Warrant Shares by the Holder has (x) been declared effective by the SEC and (y) remained effective for a period of one year, any Cashless Exercise right hereunder shall thereupon terminate.
For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Registered Holder, and the holding period for such shares shall be deemed to have commenced, on the date this Warrant was originally issued.
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(iii) Upon the exercise of this Warrant in compliance with the provisions of this Section 1(b), and except as limited pursuant to the last paragraph of Section 1(b)(ii), the Company shall promptly issue and cause to be delivered to the Holder a certificate for the Warrant Shares purchased by the Holder. Each exercise of this Warrant shall be effective immediately prior to the close of business on the date (the “ Date of Exercise ”) that the conditions set forth in Section 1(b) have been satisfied, as the case may be. On the first Business Day following the date on which the Company has received each of the Notice of Exercise and the Aggregate Exercise Price (or notice of a Cashless Exercise in accordance with Section 1(b)(ii)) (the “ Exercise Delivery Documents ”), the Company shall transmit an acknowledgment of receipt of the Exercise Delivery Documents to the Company’s transfer agent (the “ Transfer Agent ”). On or before the third Business Day following the date on which the Company has received all of the Exercise Delivery Documents (the “ Share Delivery Date ”), the Company shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“ DTC ”) Fast Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and dispatch by overnight courier to the address as specified in the Notice of Exercise, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise. Upon delivery of the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the certificates evidencing such Warrant Shares.
(iv) If the Company shall fail for any reason or for no reason to issue to the Holder, within three (3) Business Days of receipt of the Exercise Delivery Documents, a certificate for the number of shares of Common Stock to which the Holder is entitled and register such shares of Common Stock on the Company’s share register or to credit the Holder’s balance account with DTC for such number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise of this Warrant, and if on or after such Business Day the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of shares of Common Stock issuable upon such exercise that the Holder anticipated receiving from the Company (a “ Buy-In ”), then the Company shall, within three (3) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the “ Buy-In Price ”), at which point the Company’s obligation to deliver such certificate (and to issue such shares of Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such shares of Common Stock and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the closing bid price on the date of exercise.
(c) Partial Exercise . This Warrant shall be exercisable, either in its entirety or, from time to time, for part only of the number of Warrant Shares referenced by this Warrant. If this Warrant is submitted in connection with any exercise pursuant to Section 1 and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the actual number of Warrant Shares being acquired upon such an exercise, then the Company shall as soon as practicable and in no event later than five (5) Business Days after any exercise and at its own expense, issue a new Warrant of like tenor representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised.
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(d) Disputes . In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute in accordance with Section 16.
2. | ISSUANCE OF WARRANT SHARES |
(a) The Company covenants that all Warrant Shares will, upon issuance in accordance with the terms of this Warrant, be (i) duly authorized, fully paid and non-assessable, and (ii) free from all liens, charges and security interests, with the exception of claims arising through the acts or omissions of any Holder and except as arising from applicable Federal and state securities laws.
(b) The Company shall register this Warrant upon records to be maintained by the Company for that purpose in the name of the record holder of such Warrant from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner thereof for the purpose of any exercise thereof, any distribution to the Holder thereof and for all other purposes.
(c) The Company will not, by amendment of its certificate of incorporation, by-laws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all action necessary or appropriate in order to protect the rights of the Holder to exercise this Warrant, or against impairment of such rights.
3. | ADJUSTMENTS OF EXERCISE PRICE, NUMBER AND TYPE OF WARRANT SHARES |
(a) The Exercise Price and the number of shares purchasable upon the exercise of this Warrant shall be subject to adjustment from time to time upon the occurrence of certain events described in this Section 3; provided , that notwithstanding the provisions of this Section 3, the Company shall not be required to make any adjustment if and to the extent that such adjustment would require the Company to issue a number of shares of Common Stock in excess of its authorized but unissued shares of Common Stock, less all amounts of Common Stock that have been reserved for issue upon the conversion of all outstanding securities convertible into shares of Common Stock and the exercise of all outstanding options, warrants and other rights exercisable for shares of Common Stock. If the Company does not have the requisite number of authorized but unissued shares of Common Stock to make any adjustment, the Company shall use its commercially best efforts to obtain the necessary stockholder consent to increase the authorized number of shares of Common Stock to make such an adjustment pursuant to this Section 3.
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(i) Subdivision or Combination of Stock . In case the Company shall at any time subdivide (whether by way of stock dividend, stock split or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision shall be proportionately reduced and the number of Warrant Shares shall be proportionately increased, and conversely, in case the outstanding shares of Common Stock of the Company shall be combined (whether by way of stock combination, reverse stock split or otherwise) into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of Warrant Shares shall be proportionately decreased. The Exercise Price and the Warrant Shares, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described in this Section 3(a)(i).
(ii) Dividends in Stock, Property, Reclassification . If at any time, or from time to time, all of the holders of Common Stock (or any shares of stock or other securities at the time receivable upon the exercise of this Warrant) shall have received or become entitled to receive, without payment therefore:
(A) any shares of stock or other securities that are at any time directly or indirectly convertible into or exchangeable for Common Stock, or any rights or options to subscribe for, purchase or otherwise acquire any of the foregoing by way of dividend or other distribution, or
(B) additional stock or other securities or property (including cash) by way of spin-off, split-up, reclassification, combination of shares or similar corporate rearrangement (other than shares of Common Stock issued as a stock split or adjustments in respect of which shall be covered by the terms of Section 3(a)(i) above),
then and in each such case, the Exercise Price and the number of Warrant Shares to be obtained upon exercise of this Warrant shall be adjusted proportionately, and the Holder hereof shall, upon the exercise of this Warrant, be entitled to receive, in addition to the number of shares of Common Stock receivable thereupon, and without payment of any additional consideration therefor, the amount of stock and other securities and property (including cash in the cases referred to above) that such Holder would hold on the date of such exercise had such Holder been the holder of record of such Common Stock as of the date on which holders of Common Stock received or became entitled to receive such shares or all other additional stock and other securities and property. The Exercise Price and the Warrant Shares, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described in this Section 3(a)(ii) .
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(iii) Reorganization, Reclassification, Consolidation, Merger or Sale . If any recapitalization, reclassification or reorganization of the capital stock of the Company, or any consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets or other transaction shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities, or other assets or property (an “ Organic Change ”), then, as a condition of such Organic Change, lawful and adequate provisions shall be made by the Company whereby the Holder hereof shall thereafter have the right to purchase and receive (in lieu of the shares of the Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented by this Warrant) such shares of stock, securities or other assets or property as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such stock immediately theretofore purchasable and receivable assuming the full exercise of the rights represented by this Warrant. In the event of any Organic Change, appropriate provision shall be made by the Company with respect to the rights and interests of the Holder of this Warrant to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Exercise Price and of the number of shares purchasable and receivable upon the exercise of this Warrant and registration rights) shall thereafter be applicable, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof. The Company will not effect any such consolidation, merger or sale unless, prior to the consummation thereof, the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall assume by written instrument reasonably satisfactory in form and substance to the Holder executed and mailed or delivered to the registered Holder hereof at the last address of such Holder appearing on the books of the Company, the obligation to deliver to such Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such Holder may be entitled to purchase. If there is an Organic Change, then the Company shall cause to be mailed to the Holder at its last address as it shall appear on the books and records of the Company, at least 10 calendar days before the effective date of the Organic Change, a notice stating the date on which such Organic Change is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares for securities, cash, or other property delivered upon such Organic Change; provided, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to exercise this Warrant during the 10-day period commencing on the date of such notice to the effective date of the event triggering such notice. In any event, the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall be deemed to assume such obligation to deliver to such Holder such shares of stock, securities or assets even in the absence of a written instrument assuming such obligation to the extent such assumption occurs by operation of law.
(b) Certificate as to Adjustments . Upon the occurrence of each adjustment or readjustment pursuant to this Section 3, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each Holder of this Warrant a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall promptly furnish or cause to be furnished to such Holder a like certificate setting forth: (i) such adjustments and readjustments; and (ii) the number of shares and the amount, if any, of other property which at the time would be received upon the exercise of the Warrant.
(c) Certain Events . If any event occurs as to which the other provisions of this Section 3 are not strictly applicable but the lack of any adjustment would not fairly protect the purchase rights of the Holder under this Warrant in accordance with the basic intent and principles of such provisions, or if strictly applicable would not fairly protect the purchase rights of the Holder under this Warrant in accordance with the basic intent and principles of such provisions, then the Company's Board of Directors will, in good faith, make an appropriate adjustment to protect the rights of the Holder; provided , that no such adjustment pursuant to this Section 3(c) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 3.
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4. | REDEMPTION OF WARRANTS |
(a) General . Prior to the Expiration Date, the Company shall have the option, subject to the conditions set forth herein, to redeem all of the Warrants then outstanding upon not less than thirty (30) days nor more than sixty (60) days prior written notice to the Warrant Holders at any time provided that, at the time of delivery of such notice (i) there is an effective registration statement covering the resale of the Warrant Shares; and (ii) the closing bid price of the Company’s Common Stock for 20 of the 30 consecutive trading days prior to the date of the notice of redemption is at least $1.44 as proportionately adjusted to reflect any stock splits, stock dividends, combination of shares or like events.
(b) Notice . Notice of redemption will be effective upon mailing in accordance with this Section and such date may be referred to below as the “ Notice Date. ” Notice of redemption shall be mailed by first class mail, postage prepaid, by the Company not less than 30 days prior to the date fixed for redemption to the Holders of the Warrants to be redeemed at their last addresses as they shall appear on the registration books. Any notice mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the Holder received such notice.
(c) Redemption Date and Redemption Price . The notice of redemption shall state the date set for redemption, which date shall be not less than thirty (30) days, or more than sixty (60) days, from the Notice Date (the “ Redemption Date ”). The Company shall not mail the notice of redemption unless all funds necessary to pay for redemption of the Warrants to be redeemed shall have first been set aside by the Company for the benefit of the Warrant Holders so as to be and continue to be available therefor. The redemption price to be paid to the Warrant Holders will be $0.00001 for each share of Common Stock of the Company to which the Warrant Holder would then be entitled upon exercise of the Warrant being redeemed, as adjusted from time to time as provided herein (the “ Redemption Price ”).
(d) Exercise . Following the Notice Date, the Warrant Holders may exercise their Warrants in accordance with Section 1 of this Warrant between the Notice Date and 5:00 p.m. Eastern Time on the Redemption Date and such exercise shall be timely if the form of election to purchase duly executed and the Warrant Exercise Price for the shares of Common Stock to be purchased are actually received by the Company at its principal offices prior to 5:00 p.m. Eastern Time on the Redemption Date.
(e) Mailing . If any Warrant Holder does not wish to exercise any Warrant being redeemed, he should mail such Warrant to the Company at its principal offices after receiving the notice of redemption. On and after 5:00 p.m. Eastern Time on the Redemption Date, notwithstanding that any Warrant subject to redemption shall not have been surrendered for redemption, the obligation evidenced by all Warrants not surrendered for redemption or effectively exercised shall be deemed no longer outstanding, and all rights with respect thereto shall forthwith cease and terminate, except only the right of the holder of each Warrant subject to redemption to receive the Redemption Price for each share of Common Stock to which he would be entitled if he exercised the Warrant upon receiving notice of redemption of the Warrant subject to redemption held by him.
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5. | TRANSFERS AND EXCHANGES OF WARRANT AND WARRANT SHARES |
(a) Registration of Transfers and Exchanges . Subject to Section 5(c), upon the Holder’s surrender of this Warrant, with a duly executed copy of the Form of Assignment attached as Exhibit B , to the Secretary of the Company at its principal offices or at such other office or agency as the Company may specify in writing to the Holder, the Company shall register the transfer of all or any portion of this Warrant. Upon such registration of transfer, the Company shall issue a new Warrant, in substantially the form of this Warrant, evidencing the acquisition rights transferred to the transferee and a new Warrant, in similar form, evidencing the remaining acquisition rights not transferred, to the Holder requesting the transfer.
(b) Warrant Exchangeable for Different Denominations . The Holder may exchange this Warrant for a new Warrant or Warrants, in substantially the form of this Warrant, evidencing in the aggregate the right to purchase the number of Warrant Shares which may then be purchased hereunder, each of such new Warrants to be dated the date of such exchange and to represent the right to purchase such number of Warrant Shares as shall be designated by the Holder. The Holder shall surrender this Warrant with duly executed instructions regarding such re-certification of this Warrant to the Secretary of the Company at its principal offices or at such other office or agency as the Company may specify in writing to the Holder.
(c) Restrictions on Transfers . This Warrant may not be transferred at any time without (i) registration under the Securities Act or (ii) an exemption from such registration and a written opinion of legal counsel addressed to the Company that the proposed transfer of the Warrant may be effected without registration under the Securities Act, which opinion will be in form and from counsel reasonably satisfactory to the Company.
(d) Permitted Transfers and Assignments . Notwithstanding any provision to the contrary in this Section 5, the Holder may transfer, with or without consideration, this Warrant or any of the Warrant Shares (or a portion thereof) to the Holder’s Affiliates (as such term is defined under Rule 144 of the Securities Act) without obtaining the opinion from counsel that may be required by Section 5(c)(ii), provided, that the Holder delivers to the Company and its counsel certification, documentation, and other assurances reasonably required by the Company’s counsel to enable the Company’s counsel to render an opinion to the Company’s Transfer Agent that such transfer does not violate applicable securities laws.
6. | MUTILATED OR MISSING WARRANT CERTIFICATE |
If this Warrant is mutilated, lost, stolen or destroyed, upon request by the Holder, the Company will, at its expense, issue, in exchange for and upon cancellation of the mutilated Warrant, or in substitution for the lost, stolen or destroyed Warrant, a new Warrant, in substantially the form of this Warrant, representing the right to acquire the equivalent number of Warrant Shares; provided , that, as a prerequisite to the issuance of a substitute Warrant, the Company may require satisfactory evidence of loss, theft or destruction as well as an indemnity from the Holder of a lost, stolen or destroyed Warrant.
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7. | PAYMENT OF TAXES |
The Company will pay all transfer and stock issuance taxes attributable to the preparation, issuance and delivery of this Warrant and the Warrant Shares (and replacement Warrants) including, without limitation, all documentary and stamp taxes; provided , however , that the Company shall not be required to pay any tax in respect of the transfer of this Warrant, or the issuance or delivery of certificates for Warrant Shares or other securities in respect of the Warrant Shares to any person or entity other than to the Holder.
8. | FRACTIONAL WARRANT SHARES |
No fractional Warrant Shares shall be issued upon exercise of this Warrant. The Company, in lieu of issuing any fractional Warrant Share, shall round up the number of Warrant Shares issuable to nearest whole share.
9. | NO STOCK RIGHTS AND LEGEND |
No holder of this Warrant, as such, shall be entitled to vote or be deemed the holder of any other securities of the Company that may at any time be issuable on the exercise hereof, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, the rights of a stockholder of the Company or the right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or give or withhold consent to any corporate action or to receive notice of meetings or other actions affecting stockholders (except as provided herein), or to receive dividends or subscription rights or otherwise (except as provide herein).
Each certificate for Warrant Shares initially issued upon the exercise of this Warrant, and each certificate for Warrant Shares issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with a legend in substantially the following form:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) AN EXEMPTION FROM SUCH REGISTRATION EXISTS AND THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.”
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10. | REGISTRATION RIGHTS |
The Holder shall be entitled to the registration rights as are contained in the Registration Rights Agreement of even date herewith, by and among the Company, the Holder and the other subscribers of the Company’s securities pursuant to the Subscription Agreements, the provisions of which are deemed incorporated herein by reference.
11. | NOTICES |
All notices, consents, waivers, and other communications under this Warrant must be in writing and will be deemed given to a party when (a) delivered to the appropriate address by hand or by nationally recognized overnight courier service (costs prepaid); (b) sent by facsimile or e-mail with confirmation of transmission by the transmitting equipment; (c) received or rejected by the addressee, if sent by certified mail, return receipt requested, if to the registered Holder hereof; or (d) seven days after the placement of the notice into the mails (first class postage prepaid), to the Holder at the address, facsimile number, or e-mail address furnished by the registered Holder to the Company in accordance with the Subscription Agreement by and between the Company and the Holder, or if to the Company, to it at:
PeerLogix, Inc.
500 7th Ave., 17th Floor
New York, NY 10018
Attention: William Gorfein, Chief Executive Officer
with copy to:
Robinson & Cole, LLP
1055 Washington Blvd.
Stamford, Ct. 06901
Attention: Mitchell L. Lampert, Esq.
Facsimile: (203) 462-7599
12. | SEVERABILITY |
If a court of competent jurisdiction holds any provision of this Warrant invalid or unenforceable, the other provisions of this Warrant will remain in full force and effect. Any provision of this Warrant held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.
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13. | BINDING EFFECT |
This Warrant shall be binding upon and inure to the sole and exclusive benefit of the Company, its successors and assigns, the registered Holder or Holders from time to time of this Warrant and the Warrant Shares.
14. | SURVIVAL OF RIGHTS AND DUTIES |
This Warrant shall terminate and be of no further force and effect on the earlier of 5:00 P.M., Eastern Time, on the Expiration Date or the date on which this Warrant has been exercised in full.
15. | GOVERNING LAW |
This Warrant will be governed by and construed under the laws of the State of New York without regard to conflicts of laws principles that would require the application of any other law.
16. | DISPUTE RESOLUTION |
In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within two Business Days of receipt of the Notice of Exercise giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation of the Exercise Price or the Warrant Shares within three Business Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within two Business Days, submit via facsimile (a) the disputed determination of the Exercise Price to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant. The Company shall cause at its expense the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than ten (10) Business Days from the time it receives the disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.
17. | NOTICES OF RECORD DATE |
Upon (a) any establishment by the Company of a record date of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or right or option to acquire securities of the Company, or any other right, or (b) any capital reorganization, reclassification, recapitalization, merger or consolidation of the Company with or into any other corporation, any transfer of all or substantially all the assets of the Company, or any voluntary or involuntary dissolution, liquidation or winding up of the Company, or the sale, in a single transaction, of a majority of the Company’s voting stock (whether newly issued, or from treasury, or previously issued and then outstanding, or any combination thereof), the Company shall mail to the Holder at least ten (10) Business Days, or such longer period as may be required by law, prior to the record date specified therein, a notice specifying (i) the date established as the record date for the purpose of such dividend, distribution, option or right and a description of such dividend, option or right, (ii) the date on which any such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up, or sale is expected to become effective and (iii) the date, if any, fixed as to when the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, transfer, consolation, merger, dissolution, liquidation or winding up.
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18. | RESERVATION OF SHARES |
The Company shall reserve and keep available out of its authorized but unissued shares of Common Stock for issuance upon the exercise of this Warrant, free from pre-emptive rights, such number of shares of Common Stock for which this Warrant shall from time to time be exercisable. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation. Without limiting the generality of the foregoing, the Company covenants that it will use commercially reasonable efforts to take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and use commercially reasonable efforts to obtain all such authorizations, exemptions or consents, including but not limited to consents from the Company’s stockholders or Board of Directors or any public regulatory body, as may be necessary to enable the Company to perform its obligations under this Warrant.
19. | NO THIRD PARTY RIGHTS |
This Warrant is not intended, and will not be construed, to create any rights in any parties other than the Company and the Holder, and no person or entity may assert any rights as third-party beneficiary hereunder.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the date first set forth above.
Realco International, Inc. | ||
By: /s/ William Gorfein | ||
Name:William Gorfein | ||
Title: Chief Executive Officer |
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EXHIBIT A
NOTICE OF EXERCISE
(To be executed by the Holder of Warrant if such Holder desires to exercise Warrant)
To Realco International, Inc.:
The undersigned hereby irrevocably elects to exercise this Warrant and to purchase thereunder, ___________________ full shares of Realco International, Inc. common stock issuable upon exercise of the Warrant and delivery of:
(1) $_________ (in cash as provided for in the foregoing Warrant) and any applicable taxes payable by the undersigned pursuant to such Warrant; and
(2) __________ shares of Common Stock (pursuant to a Cashless Exercise in accordance with Section 1(b)(ii) of the Warrant) (check here if the undersigned desires to deliver an unspecified number of shares equal the number sufficient to effect a Cashless Exercise [___]).
The undersigned requests that certificates for such shares be issued in the name of:
_________________________________________
(Please print name, address and social security
or federal employer
identification number (if applicable))
_________________________________________
_________________________________________
If the shares issuable upon this exercise of the Warrant are not all of the Warrant Shares which the Holder is entitled to acquire upon the exercise of the Warrant, the undersigned requests that a new Warrant evidencing the rights not so exercised be issued in the name of and delivered to:
_________________________________________
(Please print name, address and social security or federal employer
identification number (if applicable))
_________________________________________
_________________________________________
Name of Holder (print): | ||
(Signature): | ||
(By): | ||
(Title): | ||
Dated: |
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EXHIBIT B
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, ___________________________________ hereby sells, assigns and transfers to each assignee set forth below all of the rights of the undersigned under the Warrant (as defined in and evidenced by the attached Warrant) to acquire the number of Warrant Shares set opposite the name of such assignee below and in and to the foregoing Warrant with respect to said acquisition rights and the shares issuable upon exercise of the Warrant:
Name of Assignee | Address | Number of Shares |
|
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||
|
||
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If the total of the Warrant Shares are not all of the Warrant Shares evidenced by the foregoing Warrant, the undersigned requests that a new Warrant evidencing the right to acquire the Warrant Shares not so assigned be issued in the name of and delivered to the undersigned.
Name of Holder (print): | ||
(Signature): | ||
(By): | ||
(Title): | ||
Dated: |
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Exhibit 10.8
THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, AND ALL SHARES OF COMMON STOCK ISSUABLE HEREUNDER, HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii) THE SALE OF SUCH SECURITIES IS MADE PURSUANT TO SEC RULE 144.
[Form of]
WARRANT
TO PURCHASE UNITS
OF
Realco International, Inc
.
NO. PAW-____ | _______, 2015 |
THIS CERTIFIES THAT, for $____ and other valuable consideration received by Realco International, Inc . , a Nevada corporation (the “ Company ”), [__________], or its permitted registered assigns (“ Holder ”), is entitled, subject to the terms and conditions of this Warrant, at any time or from time to time after the issuance date of this Warrant (the “ Effective Date ”), and before 5:00 p.m. Pacific Time on the seventh (7 th ) anniversary of the Effective Date (the “ Expiration Date ”), to purchase from the Company, ______ Units, each Unit consisting of one share of the Company’s common stock, par value $0.00001 per share (the “Common Stock”), and a warrant to purchase one share of Common Stock at a price of $0.72 per share during the five (5) year period commencing on the date of this Warrant (the “Unit Warrants”) at a price per Unit equal to $.01 (the “ Purchase Price ”). Both the number of Units purchasable upon exercise of this Warrant and the Purchase Price are subject to adjustment and change as provided herein.
1. CERTAIN DEFINITIONS. As used in this Warrant the following terms shall have the following respective meanings:
1.1 “ Fair Market Value ” of a share of Common Stock as of a particular date shall mean:
(a) If traded on a securities exchange or the Nasdaq Stock Market, the Fair Market Value shall be deemed to be the average of the closing prices of the Common Stock of the Company on such exchange or market over the five (5) trading days ending immediately prior to the applicable date of valuation;
(b) If actively traded over-the-counter, the Fair Market Value shall be deemed to be the average of the closing bid prices over the thirty (30)-day period ending immediately prior to the applicable date of valuation; and
(c) If there is no active public market, the Fair Market Value shall be the value thereof, as agreed upon by the Company and the Holder; provided , however , that if the Company and the Holder cannot agree on such value, such value shall be determined by an independent valuation firm experienced in valuing businesses such as the Company and jointly selected in good faith by the Company and the Holder. Fees and expenses of the valuation firm shall be paid for by the Company.
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1.2 “ Registered Holder ” shall mean any Holder in whose name this Warrant is registered upon the books and records maintained by the Company.
1.3 “ Warrant ” as used herein, shall include this Warrant and any warrant delivered in substitution or exchange therefor as provided herein.
1.4 “ Common Stock ” shall mean the Common Stock of the Company.
2. EXERCISE OF WARRANT.
2.1 Payment . Subject to compliance with the terms and conditions of this Warrant and applicable securities laws, this Warrant may be exercised, in whole or in part at any time or from time to time, on or before the Expiration Date by the delivery (including, without limitation, delivery by facsimile or email) of the form of Notice of Exercise attached hereto as Exhibit A (the “ Notice of Exercise ”), duly executed by the Holder, at the principal office of the Company, and as soon as practicable after such date, surrendering
(a) this Warrant at the principal office of the Company, and
(b) payment, (i) in cash (by check) or by wire transfer, (ii) by cancellation by the Holder of indebtedness of the Company to the Holder; or (iii) by a combination of (i) and (ii), of an amount equal to the product obtained by multiplying the number of Units being purchased upon such exercise by the then effective Purchase Price (the “ Exercise Amount ”).
2.2 Stock Certificates; Fractional Shares . As soon as practicable on or after the date of any exercise of this Warrant, the Company shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of Units issuable upon such exercise, together with cash in lieu of any fraction of a share equal to such fraction of the current Fair Market Value of one whole share of Common Stock as of such date of exercise. No fractional shares or scrip representing fractional shares shall be issued upon an exercise of this Warrant.
2.3 Partial Exercise; Effective Date of Exercise . In case of any partial exercise of this Warrant, the Company shall cancel this Warrant upon surrender hereof and shall execute and deliver a new Warrant of like tenor and date for the balance of the Units purchasable hereunder. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above. The person entitled to receive the Units issuable upon exercise of this Warrant shall be treated for all purposes as the holder of record of such Units as of the close of business on the date the Holder is deemed to have exercised this Warrant.
2.4 Vesting . This Warrant shall vest fully upon issuance.
3. VALID ISSUANCE: TAXES . All Units and shares of Common Stock and Unit Warrants issued upon the exercise of this Warrant shall be validly issued, fully paid and nonassessable, and the Company shall pay all taxes and other governmental charges that may be imposed in respect of the issue or delivery thereof. The Company shall not be required to pay any tax or other charge imposed in connection with any transfer involved in the issuance of any certificate for shares of Common Stock or Unit Warrants in any name other than that of the Registered Holder of this Warrant, and in such case the Company shall not be required to issue or deliver any stock certificate or security until such tax or other charge has been paid, or it has been established to the Company’s reasonable satisfaction that no tax or other charge is due.
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4. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF UNITS. The number of Units issuable upon exercise of this Warrant (or any shares of stock, Unit Warrants or other securities or property receivable or issuable upon exercise of this Warrant) and the Purchase Price are subject to adjustment upon occurrence of the following events:
4.1 Adjustment for Stock Splits, Stock Subdivisions or Combinations of Shares . The Purchase Price of this Warrant shall be proportionally decreased and the number of shares of Units issuable upon exercise of this Warrant (or any shares of stock, Unit Warrants or other securities at the time issuable upon exercise of this Warrant) shall be proportionally increased to reflect any stock split or subdivision of the Company’s Common Stock. The Purchase Price of this Warrant shall be proportionally increased and the number of Units issuable upon exercise of this Warrant (or any shares of stock, Unit Warrants or other securities at the time issuable upon exercise of this Warrant) shall be proportionally decreased to reflect any combination of the Company’s Common Stock.
4.2 Adjustment for Dividends or Distributions of Stock or Other Securities or Property . In case the Company shall make or issue, or shall fix a record date for the determination of eligible holders entitled to receive, a dividend or other distribution with respect to the Common Stock (or any shares of stock or other securities at the time issuable upon exercise of the Warrant) payable in (a) securities of the Company or (b) assets (excluding cash dividends paid or payable solely out of retained earnings), then, in each such case, the Holder of this Warrant on exercise hereof at any time after the consummation, effective date or record date of such dividend or other distribution, shall receive, in addition to the shares of Common Stock and Unit Warrants (or such other stock or securities) issuable on such exercise prior to such date, and without the payment of additional consideration therefor, the securities or such other assets of the Company to which such Holder would have been entitled upon such date if such Holder had exercised this Warrant on the date hereof and had thereafter, during the period from the date hereof to and including the date of such exercise, retained such shares and all such additional securities or other assets distributed with respect to such shares as aforesaid during such period giving effect to all adjustments called for by this Section 4 .
4.3 Reclassification . If the Company, by reclassification of securities or otherwise, shall change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities that were subject to the purchase rights under this Warrant immediately prior to such reclassification or other change, and the Purchase Price therefor shall be appropriately adjusted, all subject to further adjustment as provided in this Section 4 . No adjustment shall be made pursuant to this Section 4.3 upon any conversion or redemption of the Common Stock which is the subject of Section 4.5 .
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4.4 Adjustment for Capital Reorganization, Merger or Consolidation . In case of any capital reorganization of the capital stock of the Company (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), or any merger or consolidation of the Company with or into another corporation, or the sale of all or substantially all the assets of the Company then, and in each such case, as a part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be made so that the Holder of this Warrant shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Purchase Price then in effect, the number of shares of stock or other securities or property of the successor corporation resulting from such reorganization, merger, consolidation, sale or transfer that a holder of the shares deliverable upon exercise of this Warrant would have been entitled to receive in such reorganization, consolidation, merger, sale or transfer if this Warrant had been exercised immediately before such reorganization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 4 . The foregoing provisions of this Section 4.4 shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers and to the stock or securities of any other corporation that are at the time receivable upon the exercise of this Warrant. If the per-share consideration payable to the Holder hereof for shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the Company’s Board of Directors. In all events, appropriate adjustment (as determined in good faith by the Company’s Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the transaction, to the end that the provisions of this Warrant shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Warrant.
4.5 Conversion of Common Stock . In case all or any portion of the authorized and outstanding shares of Common Stock of the Company are redeemed or converted or reclassified into other securities or property pursuant to the Company’s Certificate of Incorporation or otherwise, or the Common Stock otherwise ceases to exist, then, in such case, the Holder of this Warrant, upon exercise hereof at any time after the date on which the Common Stock is so redeemed or converted, reclassified or ceases to exist (the “ Termination Date ”), shall receive, in lieu of the number of shares of Common Stock and Unit Warrants that would have been issuable upon such exercise immediately prior to the Termination Date, the securities or property that would have been received if this Warrant had been exercised in full and the Common Stock and Unit Warrants received thereupon had been simultaneously converted immediately prior to the Termination Date, all subject to further adjustment as provided in this Warrant. Additionally, the Purchase Price shall be immediately adjusted to equal the quotient obtained by dividing (x) the aggregate Purchase Price of the maximum number of Units for which this Warrant was exercisable immediately prior to the Termination Date by (y) the number of Units of the Company for which this Warrant is exercisable immediately after the Termination Date, all subject to further adjustment as provided herein.
5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in the Purchase Price, or number or type of shares issuable upon exercise of this Warrant, the Chief Financial Officer or Controller of the Company shall compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment and showing in detail the facts upon which such adjustment is based, including a statement of the adjusted Purchase Price. The Company shall promptly send (by facsimile or email and by either first class mail, postage prepaid or overnight delivery) a copy of each such certificate to the Holder.
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6. LOSS OR MUTILATION. Upon receipt of evidence reasonably satisfactory to the Company of the ownership of and the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to it, and (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will execute and deliver in lieu thereof a new Warrant of like tenor as the lost, stolen, destroyed or mutilated Warrant.
7. RESERVATION OF COMMON STOCK. The Company hereby covenants that at all times there shall be reserved for issuance and delivery upon exercise of this Warrant such number of shares of Common Stock or other shares of capital stock of the Company as are from time to time issuable upon exercise of this Warrant and the Unit Warrants and, from time to time, will take all steps necessary to amend its Certificate of Incorporation to provide sufficient reserves of shares of Common Stock issuable upon exercise of this Warrant and the Unit Warrants. All such shares shall be duly authorized, and when issued upon such exercise, shall be validly issued, fully paid and non-assessable, free and clear of all liens, security interests, charges and other encumbrances or restrictions on sale and free and clear of all preemptive rights, except encumbrances or restrictions arising under federal or state securities laws. Issuance of this Warrant shall constitute full authority to the Company’s Officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock and Unit Warrants upon the exercise of this Warrant.
8. TRANSFER AND EXCHANGE. Subject to the terms and conditions of this Warrant and compliance with all applicable securities laws, this Warrant and all rights hereunder may be transferred to any Registered Holder’s parent, subsidiary or affiliate, or, if the Registered Holder is a partnership, to any partner of such Registered Holder, in whole or in part, on the books of the Company maintained for such purpose at the principal office of the Company referred to above, by the Registered Holder hereof in person, or by duly authorized attorney, upon surrender of this Warrant properly endorsed and upon payment of any necessary transfer tax or other governmental charge imposed upon such transfer. Upon any permitted partial transfer, the Company will issue and deliver to the Registered Holder a new Warrant or Warrants with respect to the Units not so transferred. Each taker and holder of this Warrant, by taking or holding the same, consents and agrees that when this Warrant shall have been so endorsed, the person in possession of this Warrant may be treated by the Company, and all other persons dealing with this Warrant, as the absolute owner hereof for any purpose and as the person entitled to exercise the rights represented hereby, any notice to the contrary notwithstanding; provided , however , that until a transfer of this Warrant is duly registered on the books of the Company, the Company may treat the Registered Holder hereof as the owner for all purposes.
9. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS. The Holder shall be entitled to the registration rights as are contained in the Registration Rights Agreement of even date herewith, by and among the Company and the Holder, the provisions of which are deemed incorporated herein by reference. The Holder, by acceptance hereof, agrees that, absent an effective registration statement filed with the Securities and Exchange Commission (the “ SEC ”) under the Securities Act of 1933, as amended (the “ Securities Act ”) covering the disposition or sale of this Warrant or the Common Stock and Unit Warrants issued or issuable upon exercise hereof, as the case may be, and registration or qualification under applicable state securities laws, such Holder will not sell, transfer, pledge, or hypothecate any or all of this Warrant or such Common Stock or Units Warrants (or shares of Common Stock issuable upon exercise of the Unit Warrants), as the case may be, unless either (i) the Company has received an opinion of counsel, in form and substance reasonably satisfactory to the Company, to the effect that such registration is not required in connection with such disposition or (ii) the sale of such securities is made pursuant to SEC Rule 144.
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10. COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Warrant, the Holder hereby represents, warrants and covenants that any shares of stock purchased upon exercise of this Warrant shall be acquired for investment only and not with a view to, or for sale in connection with, any distribution thereof; that the Holder has had such opportunity as such Holder has deemed adequate to obtain from representatives of the Company such information as is necessary to permit the Holder to evaluate the merits and risks of its investment in the Company; that the Holder is able to bear the economic risk of holding such shares as may be acquired pursuant to the exercise of this Warrant for an indefinite period; that the Holder understands that the shares of stock acquired pursuant to the exercise of this Warrant will not be registered under the Securities Act (unless otherwise required pursuant to exercise by the Holder of the registration rights, if any, granted to the Registered Holder) and will be “restricted securities” within the meaning of Rule 144 under the Securities Act and that the exemption from registration under Rule 144 will not be available for at least one (1) year from the date of exercise of this Warrant, subject to any special treatment by the SEC for exercise of this Warrant pursuant to Section 2.2 , and even then will not be available unless a public market then exists for the Company’s securities, adequate information concerning the Company is then available to the public, and other terms and conditions of Rule 144 are complied with; and that all stock certificates and Unit Warrant certificates representing shares of stock or Unit Warrants issued to the Holder upon exercise of this Warrant or upon conversion of such shares may have affixed thereto a legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
11. NO RIGHTS OR LIABILITIES AS STOCKHOLDERS. This Warrant shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company. In the absence of affirmative action by such Holder to purchase Units by exercise of this Warrant or Common Stock upon conversion thereof (or upon conversion of the Unit Warrants), no provisions of this Warrant, and no enumeration herein of the rights or privileges of the Holder hereof shall cause such Holder hereof to be a stockholder of the Company for any purpose.
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12. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to Holder that:
12.1 Due Authorization; Consents . All corporate action on the part of the Company, its officers, directors and stockholders necessary for (a) the authorization, execution and delivery of, and the performance of all obligations of the Company under, this Warrant, and (b) the authorization, issuance, reservation for issuance and delivery of all of the Units issuable upon exercise of this Warrant, has been duly taken. This Warrant constitutes a valid and binding obligation of the Company enforceable in accordance with its terms, subject, as to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar laws affecting creditors’ rights generally and to general equitable principles. All consents, approvals and authorizations of, and registrations, qualifications and filings with, any federal or state governmental agency, authority or body, or any third party, required in connection with the execution, delivery and performance of this Warrant and the consummation of the transactions contemplated hereby and thereby have been obtained.
12.2 Organization . The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power to own, lease and operate its property and to carry on its business as now being conducted and as currently proposed to be conducted.
12.3 Valid Issuance of Stock . The outstanding shares of the capital stock of the Company are duly and validly issued, fully paid and nonassessable, and such shares, and all outstanding options and other securities of the Company, have been issued in full compliance with the registration and prospectus delivery requirements of the Securities Act and the registration and qualification requirements of all applicable state securities laws, or in compliance with applicable exemptions therefrom, and all other provisions of applicable federal and state securities laws, including without limitation, anti-fraud provisions.
12.4 Governmental Consents . All consents, approvals, orders, authorizations or registrations, qualifications, declarations or filings with any federal or state governmental authority on the part of the Company required in connection with the consummation of the transactions contemplated herein shall have been obtained prior to and be effective as of the Effective Date.
13. 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) when received when sent by facsimile or email at the address and number set forth below; (c) 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 as set forth below; or (d) 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.
To the Company : | To the Holder : |
500 7 th Ave, 17 th Floor New York, NY 10018 Attn: William Gorfein |
[_______________] |
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Each person making a communication hereunder by facsimile or email shall promptly confirm by telephone to the person to whom such communication was addressed each communication made by it by facsimile or email 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 13 by giving the other party written notice of the new address in the manner set forth above.
14. HEADINGS. The headings in this Warrant are for purposes of convenience in reference only, and shall not be deemed to constitute a part hereof.
15. LAW GOVERNING. This Warrant shall be construed and enforced in accordance with, and governed by, the laws of the State of New York, without regard to conflict of law principles of such state.
16. NO IMPAIRMENT. The Company will not, by amendment of its Certificate of Incorporation or bylaws, or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets 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 action as may be necessary or appropriate in order to protect the rights of the Registered Holder of this Warrant against impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any shares of stock issuable upon the exercise of this Warrant above the amount payable therefor upon such exercise, and (b) will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon exercise of this Warrant.
17. NOTICES OF RECORD DATE. In case:
17.1 the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time receivable upon the exercise of this Warrant), for the purpose of entitling them to receive any dividend or other distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities or to receive any other right; or
17.2 of any consolidation or merger of the Company with or into another corporation, any capital reorganization of the Company, any reclassification of the capital stock of the Company, or any conveyance of all or substantially all of the assets of the Company to another corporation in which holders of the Company’s stock are to receive stock, securities or property of another corporation; or
17.3 of any voluntary dissolution, liquidation or winding-up of the Company; or
17.4 of any redemption or conversion of all outstanding Common Stock;
then, and in each such case, the Company will mail or cause to be mailed to the Registered Holder of this Warrant a notice specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, or (ii) the date on which such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation, winding-up, redemption or conversion is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock or (such stock or securities as at the time are receivable upon the exercise of this Warrant), shall be entitled to exchange their shares of Common Stock (or such other stock or securities), for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up. The Company shall use all reasonable efforts to ensure such notice shall be delivered at least thirty (30) days prior to the date therein specified.
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18. SEVERABILITY. If any term, provision, covenant or restriction of this Warrant is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Warrant shall remain in full force and effect and shall in no way be affected, impaired or invalidated.
19. COUNTERPARTS. For the convenience of the parties, any number of counterparts of this Warrant may be executed by the parties hereto and each such executed counterpart shall be, and shall be deemed to be, an original instrument.
20. NO INCONSISTENT AGREEMENTS. The Company will not on or after the date of this Warrant enter into any agreement with respect to its securities which is inconsistent with the rights granted to the Holders of this Warrant or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to holders of the Company’s securities under any other agreements, except rights that have been waived.
21. SATURDAYS, SUNDAYS AND HOLIDAYS. If the Expiration Date falls on a Saturday, Sunday or legal holiday, the Expiration Date shall automatically be extended until 5:00 p.m. the next business day.
22. ENTIRE AGREEMENT. This Warrant contains the sole and entire agreement and understanding of the parties with respect to the entire subject matter of this Warrant, and any and all prior discussions, negotiations, commitments and understandings, whether oral or otherwise, related to the subject matter of this Warrant are hereby merged herein.
[Signatures appear on following page.]
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IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the Effective Date.
[HOLDER]
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REALCO INTERNATIONAL, INC. | |
By: | By: | |
Its: | Its: |
SIGNATURE PAGE TO WARRANT TO PURCHASE COMMON STOCK
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EXHIBIT A
NOTICE OF EXERCISE
(To be executed upon exercise of Warrant)
[COMPANY]
The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant Certificate for, and to purchase thereunder, the securities of the Company, as provided for therein, and (check the applicable box):
[_] | tenders herewith payment of the exercise price in full in the form of cash or a certified or official bank check in same-day funds in the amount of $____________ for _________ such securities. |
Please issue a certificate or certificates for such securities in the name of, and pay any cash for any fractional share to (please print name, address and social security number):
Name: | |
Address: | |
Signature: |
Note: The above signature should correspond exactly with the name on the first page of this Warrant Certificate or with the name of the assignee appearing in the assignment form below.
If said number of Units shall not be all the Units purchasable under the within Warrant Certificate, a new Warrant is to be issued in the name of said undersigned for the balance remaining of the Units purchasable thereunder rounded up to the next higher whole number of Units.
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EXHIBIT B
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, hereby sells, assigns and transfers unto ____________________________ the within Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ____________________________ attorney, to transfer said Warrant Certificate on the books of the within-named Company with respect to the number of Warrants set forth below, with full power of substitution in the premises:
Name(s) of Assignee(s) | Address | # of Warrants |
And if said number of Warrants shall not be all the Warrants represented by the Warrant Certificate, a new Warrant Certificate is to be issued in the name of said undersigned for the balance remaining of the Warrants registered by said Warrant Certificate.
Dated: | |
Signature: |
Notice: The signature to the foregoing Assignment must correspond to the name as written upon the face of this security in every particular, without alteration or any change whatsoever; signature(s) must be guaranteed by an eligible guarantor institution (banks, stock brokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program) pursuant to Securities and Exchange Commission Rule 17Ad-15.
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Exhibit 10.9
ESCROW DEPOSIT AGREEMENT
This ESCROW DEPOSIT AGREEMENT (this “ Agreement ”) dated as of this 9th day of June 2015 by and among REALCO INTERNATIONAL, INC. , a Nevada corporation (the “ Company ”), having an address at 154 Thames Street, Newport, Rhode Island 02840, [______] (the “ Placement Agent ”), having an address at 1900 Avenue of the Stars, Suite 310, Los Angeles, California 90067 and SIGNATURE BANK (the “ Escrow Agent ”), a New York State chartered bank, having an office at 261 Madison Avenue, New York, New York 10016. All capitalized terms not herein defined shall have the meaning ascribed to them in that certain Confidential Private Placement Memorandum, dated June 10, 2015, as amended or supplemented from time-to-time, including all attachments, schedules and exhibits thereto (the “ Memorandum ”).
W I T N E S S E T H :
WHEREAS , pursuant to the terms of the Memorandum, the Company desires to sell (the “ Offering ”) a minimum of $2,500,000 (the “ Minimum Amount ”) of Units (the “ Units ”) and a maximum of $3,000,000 of Units at a per Unit price of $0.60. Each Unit consists of one share (a “ Share ”) of common stock, $0.00001 par value per share (“ Common Stock ”), and one Common Stock purchase warrant to purchase a Share at an exercise price of $0.72 per Share; and
WHEREAS , unless the Minimum Amount is sold by July 17, 2015 (the “ Termination Date ”), the Offering shall terminate and all funds shall be returned to the subscribers in the Offering; provided , however , that, in the event that the Minimum Amount is not sold on or before the Termination Date, the Termination Date may be extended by the Company and the Placement Agent for an additional 30 calendar days (the “ Final Termination Date ”); and
WHEREAS , the Company and Placement Agent desire to establish an escrow account with the Escrow Agent into which the Company and Placement Agent shall instruct subscribers introduced to the Company by the Placement Agent (the “ Subscribers ”) to deliver funds by wire transfer to the order of “Realco International, Inc., Signature Bank as Escrow Agent” pursuant to the instructions herein and Escrow Agent is willing to accept said funds in accordance with the terms hereinafter set forth; and
WHEREAS , the Company, as issuer, and Placement Agent, as an introducing broker-dealer, each, severally and not jointly, represents and warrants to the Escrow Agent that it will comply with all of their respective obligations under applicable state and federal securities laws and regulations with respect to sale of the Offering; and
WHEREAS , the Placement Agent represents and warrants to the Escrow Agent that it has performed due diligence on all Subscribers and complied with all applicable state and federal securities laws and regulations with respect to sale of the Offering; and
WHEREAS , the Company and Placement Agent each, severally and not jointly, represents and warrants to the Escrow Agent that it has not stated to any individual or entity that the Escrow Agent’s duties will include anything other than those duties stated in this Agreement; and
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WHEREAS , the Company and Placement Agent each, severally and not jointly, represents and warrants to the Escrow Agent that a copy of each document that has been delivered to Subscribers and third parties that include Escrow Agent’s name and duties, has been attached hereto as Schedule I .
NOW, THEREFORE, IT IS AGREED as follows:
1. Delivery of Escrow Funds .
(a) Placement Agent and the Company shall instruct Subscribers to deliver to Escrow Agent funds by wire transfer to Signature Bank, 261 Madison Avenue, New York, New York 10016, ABA No. 026013576 (Swift Code: SIGNUS33) for credit to Realco International, Inc., Signature Bank as Escrow Agent, Account No. 1502567264, in each case, with the name and address of the individual or entity making payment. In the event that any Subscriber’s address is not provided to Escrow Agent by the Subscriber, then Placement Agent and/or the Company agree to promptly provide Escrow Agent with such information in writing. The funds shall be deposited into a non interest-bearing account at Signature Bank entitled “Realco International, Inc., Signature Bank as Escrow Agent” (the “ Escrow Account ”).
(b) The collected funds deposited into the Escrow Account are referred to as the “ Escrow Funds .”
(c) The Escrow Agent shall have no duty or responsibility to enforce the collection or demand payment of any funds deposited into the Escrow Account.
2. Release of Escrow Funds . The Escrow Funds shall be paid by the Escrow Agent in accordance with the following:
(a) In the event that the Company and Placement Agent advise the Escrow Agent in writing that the Offering has been terminated (the “ Termination Notice ”), the Escrow Agent shall promptly return the funds paid by each Subscriber to said Subscriber without interest or offset.
(b) If prior to 3:00 p.m. (New York City time) on the Termination Date, the Escrow Agent receives written notice, in the form of Exhibit B , attached hereto and made a part hereof, and signed by the Company and Placement Agent, stating that the Termination Date has been extended to the Final Termination Date (“ Extension Notice ”), then the Termination Date shall be so extended.
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(c) Provided that the Escrow Agent does not receive the Termination Notice in accordance with paragraph 2(a), and there is the Minimum Amount deposited in the Escrow Account on or prior to the later of the Termination Date or the date stated in an Extension Notice, if any, received by the Escrow Agent in accordance with paragraph 2(b) above, the Escrow Agent shall, upon receipt of written instructions, in the form of Exhibit A , attached hereto and made a part hereof, or in a form and substance satisfactory to the Escrow Agent, received from the Company and Placement Agent, pay the Escrow Funds in accordance with such written instructions, which instructions shall be limited to payments to the Placement Agent and service providers in the Offering, payment to the Escrow Agent and payment of the balance of funds to the Company. Such payment or payments shall be made by wire transfer on the same day as receipt of such written instructions or, if the day of receipt of such instructions is not a Business Day, on the first Business Day following the day of receipt of such instructions. Such instructions must be received by the Escrow Agent no later than 3:00 p.m. (New York City time) on a Business Day for the Escrow Agent to process such instructions on that Business Day.
(d) If by 3:00 p.m. (New York City time) on the Termination Date or the Final Termination Date, as applicable, the total amount of the Escrow Funds is less than the Minimum Amount, then the Escrow Agent shall promptly return the Escrow Funds to the Subscribers without interest or offset. The Escrow Funds returned to each Subscriber shall be free and clear of any and all claims of the Escrow Agent.
(e) The Escrow Agent shall not be required to pay any uncollected funds or any funds that are not available for withdrawal.
(f) If the Termination Date, the Final Termination Date or any date that is a deadline under this Agreement for giving the Escrow Agent notice or instructions or for the Escrow Agent to take action is not a Business Day, then such date shall be the Business Day that immediately precedes that date. A “ Business Day ” is any day other than a Saturday, Sunday or a Bank holiday.
3. Acceptance by Escrow Agent . The Escrow Agent hereby accepts and agrees to perform its obligations hereunder, provided that:
(a) The Escrow Agent may act in reliance upon any signature believed by it to be genuine, and may assume that any person who has been designated by Placement Agent or the Company to give any written instructions, notice or receipt, or make any statements in connection with the provisions hereof has been duly authorized to do so. Escrow Agent shall have no duty to make inquiry as to the genuineness, accuracy or validity of any statements or instructions or any signatures on statements or instructions. The names and true signatures of each individual authorized to act singly on behalf of the Company and Placement Agent are stated in Schedule II , which is attached hereto and made a part hereof. The Company and Placement Agent may each remove or add one or more of its authorized signers stated on Schedule II by notifying the Escrow Agent of such change in accordance with this Agreement, which notice shall include the true signature for any new authorized signatories.
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(b) The Escrow Agent may act relative hereto in reliance upon advice of counsel in reference to any matter connected herewith. The Escrow Agent shall not be liable for any mistake of fact or error of judgment or law, or for any acts or omissions of any kind, unless caused by its willful misconduct or gross negligence.
(c) Placement Agent and the Company agree to indemnify and hold the Escrow Agent harmless from and against any and all claims, losses, costs, liabilities, damages, suits, demands, judgments or expenses (including but not limited to reasonable attorney’s fees) claimed against or incurred by Escrow Agent arising out of or related, directly or indirectly, to this Escrow Agreement unless caused by the Escrow Agent’s gross negligence or willful misconduct.
(d) In the event that the Escrow Agent shall be uncertain as to its duties or rights hereunder, the Escrow Agent shall be entitled to (i) refrain from taking any action other than to keep safely the Escrow Funds until it shall be directed otherwise by a court of competent jurisdiction, or (ii) deliver the Escrow Funds to a court of competent jurisdiction.
(e) The Escrow Agent shall have no duty, responsibility or obligation to interpret or enforce the terms of any agreement other than Escrow Agent’s obligations hereunder, and the Escrow Agent shall not be required to make a request that any monies be delivered to the Escrow Account, it being agreed that the sole duties and responsibilities of the Escrow Agent shall be to the extent not prohibited by applicable law (i) to accept checks or other instruments for the payment of money and wire transfers delivered to the Escrow Agent for the Escrow Account and deposit said checks and wire transfers into the non-interest bearing Escrow Account, and (ii) to disburse or refrain from disbursing the Escrow Funds as stated above, provided that the checks received by the Escrow Agent have been collected and are available for withdrawal.
4. Escrow Account Statements and Information. The Escrow Agent agrees to send to the Company and/or the Placement Agent a copy of the Escrow Account periodic statement, upon request in accordance with the Escrow Agent’s regular practices for providing account statements to its non-escrow clients and to also provide the Company and/or Placement Agent, or their designee, upon request other deposit account information, including Escrow Account balances, by telephone or by computer communication, to the extent practicable. The Company and Placement Agent agree to complete and sign all forms or agreements required by the Escrow Agent for that purpose. The Company and Placement Agent each consent to the Escrow Agent’s release of such Escrow Account information to any of the individuals designated by Company or Placement Agent, which designation has been signed in accordance with paragraph 3(a) by any of the persons in Schedule II . Further, the Company and Placement Agent have an option to receive e-mail notification of incoming and outgoing wire transfers. If this e-mail notification service is requested and subsequently approved by the Escrow Agent, the Company and Placement Agent agrees to provide a valid e-mail address and other information necessary to set-up this service and sign all forms and agreements required for such service. The Company and Placement Agent each consent to the Escrow Agent’s release of wire transfer information to the designated e-mail address(es). The Escrow Agent’s liability for failure to comply with this section shall not exceed the cost of providing such information.
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5. Resignation and Termination of the Escrow Agent . The Escrow Agent may resign at any time by giving 30 days’ prior written notice of such resignation to the Placement Agent and the Company. Upon providing such notice, the Escrow Agent shall have no further obligation hereunder except to hold as depository the Escrow Funds that it receives until the end of such 30-day period. In such event, the Escrow Agent shall not take any action, other than receiving and depositing Subscribers checks and wire transfers in accordance with this Agreement, until the Company has designated a banking corporation, trust company, attorney or other person as successor. Upon receipt of such written designation signed by Placement Agent and the Company, the Escrow Agent shall promptly deliver the Escrow Funds to such successor and shall thereafter have no further obligations hereunder. If such instructions are not received within 30 days following the effective date of such resignation, then the Escrow Agent may deposit the Escrow Funds held by it pursuant to this Agreement with a clerk of a court of competent jurisdiction pending the appointment of a successor. In either case provided for in this paragraph, the Escrow Agent shall be relieved of all further obligations and released from all liability thereafter arising with respect to the Escrow Funds.
6. Termination . The Company and Placement Agent may terminate the appointment of the Escrow Agent hereunder upon written notice specifying the date upon which such termination shall take effect, which date shall be at least 30 days from the date of such notice. In the event of such termination, the Company and Placement Agent shall, within 30 days of such notice, appoint a successor escrow agent and the Escrow Agent shall, upon receipt of written instructions signed by the Company and Placement Agent, turn over to such successor escrow agent all of the Escrow Funds; provided , however , that if the Company and Placement Agent fail to appoint a successor escrow agent within such 30-day period, such termination notice shall be null and void and the Escrow Agent shall continue to be bound by all of the provisions hereof. Upon receipt of the Escrow Funds, the successor escrow agent shall become the escrow agent hereunder and shall be bound by all of the provisions hereof and the Escrow Agent shall be relieved of all further obligations and released from all liability thereafter arising with respect to the Escrow Funds and under this Agreement.
7. Investment . All funds received by the Escrow Agent shall be held only in non-interest bearing bank accounts at Escrow Agent.
8. Compensation . Escrow Agent shall be entitled, for the duties to be performed by it hereunder, to a fee of $4,000, which fee shall be paid by the Company upon the signing of this Agreement. In addition, the Company shall be obligated to reimburse Escrow Agent for all fees, costs and expenses incurred or that become due in connection with this Agreement or the Escrow Account, including reasonable attorney’s fees. Neither the modification, cancellation, termination or rescission of this Agreement nor the resignation or termination of the Escrow Agent shall affect the right of Escrow Agent to retain the amount of any fee which has been paid, or to be reimbursed or paid any amount which has been incurred or becomes due, prior to the effective date of any such modification, cancellation, termination, resignation or rescission. To the extent the Escrow Agent has incurred any such expenses, or any such fee becomes due, prior to any closing, the Escrow Agent shall advise the Company and the Company shall direct all such amounts to be paid directly at any such closing. Escrow Agent shall be entitled to a fee of $1,000 in the event that this Agreement is amended for any reason in accordance with Section 10(d) other than an amendment that solely relates to the extension of the Termination Date.
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9. Notices . All notices, requests, demands and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given if sent by hand-delivery, by facsimile (followed by first-class mail), by nationally recognized overnight courier service or by prepaid registered or certified mail, return receipt requested, to the addresses set forth below:
If to Placement Agent:
[________________________] | ||
If to the Company:
Realco International, Inc. | ||
154 Thames Street | ||
Newport, Rhode Island 02840 | ||
Attention: _____________ | ||
Facsimile: _____________ |
If to Escrow Agent:
Signature Bank | ||
261 Madison Avenue | ||
New York, New York, 10016 | ||
Attention: Cliff Broder, Group Director and Senior Vice President | ||
Fax: (646) 822-1359 |
10. General .
(a) This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to agreements made and to be entirely performed within such State, without regard to choice of law principles and any action brought hereunder shall be brought in the courts of the State of New York, located in the County of New York. Each party hereto irrevocably waives any objection on the grounds of venue, forum nonconveniens or any similar grounds and irrevocably consents to service of process by mail or in any manner permitted by applicable law and consents to the jurisdiction of said courts. Each of the parties hereto hereby waives all right to trial by jury in any action, proceeding or counterclaim arising out of the transactions contemplated by this Agreement.
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(b) This Agreement sets forth the entire agreement and understanding of the parties with respect to the matters contained herein and supersedes all prior agreements, arrangements and understandings relating thereto.
(c) All of the terms and conditions of this Agreement shall be binding upon, and inure to the benefit of and be enforceable by, the parties hereto, as well as their respective successors and assigns.
(d) This Agreement may be amended, modified, superseded or canceled, and any of the terms or conditions hereof may be waived, only by a written instrument executed by each party hereto or, in the case of a waiver, by the party waiving compliance. The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect its right at a later time to enforce the same. No waiver of any party of any condition, or of the breach of any term contained in this Agreement, whether by conduct or otherwise, in any one or more instances shall be deemed to be or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition or of the breach of any other term of this Agreement. No party may assign any rights, duties or obligations hereunder unless all other parties have given their prior written consent.
(e) If any provision included in this Agreement proves to be invalid or unenforceable, it shall not affect the validity of the remaining provisions.
(f) This Agreement and any modification or amendment of this Agreement may be executed in several counterparts or by separate instruments and all of such counterparts and instruments shall constitute one agreement, binding on all of the parties hereto.
11. Form of Signature. The parties hereto agree to accept a facsimile transmission copy of their respective actual signatures as evidence of their actual signatures to this Agreement and any modification or amendment of this Agreement; provided , however , that each party who produces a facsimile signature agrees, by the express terms hereof, to place, promptly after transmission of his or her signature by fax, a true and correct original copy of his or her signature in overnight mail to the address of the other party.
12. No Third-Party Beneficiaries . This Agreement is solely for the benefit of the parties and their respective successors and permitted assigns, and no other person has any right, benefit, priority or interest under or because of the existence of this Agreement.
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IN WITNESS WHEREOF , the parties have duly executed this Agreement as of the date first set forth above.
REALCO INTERNATIONAL, INC. | [_____________________] | ||||
By: | /s/ Jay M. Lasky | By: | |||
Name: Jay M. Lasky | Name: | ||||
Title: CEO | Title: |
SIGNATURE BANK
By: | /s/ Steven Deneff | |
Name: Steven Deneff | ||
Title: VP | ||
By: | /s/ Cliff Broder | |
Name: Cliff Broder | ||
Title: Senior VP |
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Schedule I
OFFERING DOCUMENTS
Confidential Private Placement Memorandum, dated June 10, 2015.
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Schedule II
The Escrow Agent is authorized to accept instructions signed or believed by the Escrow Agent to be signed by any one of the following on behalf of the Company and Placement Agent.
REALCO INTERNATIONAL, INC.
Name | True Signature | |||
Jay M. Lasky | /s/ Jay M. Lasky | |||
[______________________________]
Name | True Signature | |||
Richard Rappaport | ||||
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Exhibit A
FORM OF ESCROW RELEASE NOTICE
Date: ________ ___, 2015
Signature Bank
261 Madison Avenue,
New York, New York 10016
Attention: Cliff Broder, Group Director and Senior Vice President
Fax: (646) 822-1359
Dear Mr. Broder:
In accordance with the terms of paragraph 2(b) of the Escrow Deposit Agreement, dated as of June 9, 2015, by and among Realco International, Inc. (the "Company"), Signature Bank (the "Escrow Agent") and [________________] ("Placement Agent"), the Company and Placement Agent hereby notify the Escrow Agent that the closing will be held on ______ ___, 2015 for gross proceeds of $__________________.
PLEASE DISTRIBUTE FUNDS BY WIRE TRANSFER AS FOLLOWS (wire instructions attached):
: | $ | ||
: | $ | ||
: | $ | ||
Signature Bank (Escrow Fee): | $4,000 |
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Very truly yours,
Realco International, Inc.
By: | ||
Name: | ||
Title: |
[_________________]
By: | ||
Name: | ||
Title: |
[ Signature Page to Realco Escrow Release Notice ]
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Exhibit B
EXTENSION NOTICE
Date: __________________
Signature Bank
261 Madison Avenue,
New York, New York 10016
Attention: Cliff Broder, Group Director and Senior Vice President
Fax: (646) 822-1359
Dear Mr. Broder:
In accordance with the terms of paragraph 2(b) of an Escrow Deposit Agreement dated June 9, 2015, by and among Realco International, Inc. (the "Company"), Signature Bank (the "Escrow Agent") and [________________] ("Placement Agent"), the Company and Placement Agent hereby notifies the Escrow Agent that the Termination Date has been extended to __________ __, 2015, the Final Termination Date.
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Very truly yours,
Realco International, Inc.
By: | ||
Name: | ||
Title: |
[_____________]
By: | ||
Name: | ||
Title: |
[ Signature Page to Realco Escrow Extension Notice ]
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Exhibit 10.10
EXTENSION NOTICE
Date: July 20, 2015
Signature Bank
261 Madison Avenue,
New York, New York 10016
Attention: Cliff Broder, Group Director and Senior Vice President
Fax: (646) 822-1359
Dear Mr. Broder:
In accordance with the terms of paragraph 2(b) of the Escrow Deposit Agreement dated June 9, 2015, by and among Realco International, Inc. (the "Company"), Signature Bank (the "Escrow Agent") and [__________] ("Placement Agent"), the Company and Placement Agent hereby notifies the Escrow Agent that the Termination Date has been extended to August 17, 2015, the Final Termination Date.
[remainder of page intentionally blank]
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Very truly yours,
Realco International, Inc.
By: /s/ Jay M. Lasky
Name: Jay M. Lasky
Title: CEO
[___________]
By:
Name:
Title:
[ Signature Page to Realco Escrow Extension Notice ]
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Exhibit 10.11
PEERLOGIX, INC.
2015 EQUITY INCENTIVE PLAN
1. Purposes of the Plan . The purposes of this Plan are:
· | to attract and retain the best available personnel for positions of substantial responsibility, |
· | to provide incentives to individuals who perform services for the Company, and |
· | to promote the success of the Company’s business. |
The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares and other stock or cash awards as the Administrator may determine.
2. Definitions . As used herein, the following definitions will apply:
(a) “ Administrator ” means the Board or any of its Committees as will be administering the Plan, in accordance with Section 4 hereof.
(b) “ Affiliate ” means any corporation or any other entity (including, but not limited to, partnerships and joint ventures) controlling, controlled by, or under common control with the Company.
(c) “ Applicable Laws ” means the requirements relating to the administration of equity-based awards under U.S. federal and state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.
(d) “ Award ” means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares and other stock or cash awards as the Administrator may determine.
(e) “ Award Agreement ” means the written or electronic agreement setting forth the terms and provisions applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan.
(f) “ Board ” means the Board of Directors of the Company.
(g) “ Change in Control ” means the occurrence of any of the following events:
(i) A change in the ownership of the Company which occurs on the date that any one person, or more than one person acting as a group (“ Person ”), acquires ownership of stock in the Company that, together with the stock already held by such Person, constitutes more than 50% of the total voting power of the stock of the Company; provided, however, that for purposes of this subsection (i), the acquisition of additional stock by any Person who is considered to own more than 50% of the total voting power of the stock of the Company before the acquisition will not be considered a Change in Control; or
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(ii) A change in the effective control of the Company, which occurs on the date that a majority of the members of the Board are replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purposes of this subsection (ii), if any Person is considered to effectively control the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change in Control; or
(iii) A change in the ownership of a substantial portion of the Company’s assets, which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such Person) assets from the Company that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; provided, however, that for purposes of this subsection (iii), the following will not constitute a change in the ownership of a substantial portion of the Company’s assets or a Change in Control: (A) a transfer to an entity that is controlled by the Company’s stockholders immediately after the transfer, or (B) a transfer of assets by the Company to: (1) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company’s stock, (2) an entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by the Company, (3) a Person that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding stock of the Company, or (4) an entity, at least 50% of the total equity or voting power of which is owned, directly or indirectly, by a Person described in subsection (iii)(B)(3) above. For purposes of this subsection (iii), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
Notwithstanding the foregoing, as to any Award under the Plan that consists of deferred compensation subject to Section 409A of the Code, the definition of “Change in Control” shall be deemed modified to the extent necessary to comply with Section 409A of the Code.
For purposes of this Section 2(g), persons will be considered to be acting as a group if they are owners of a corporation or other entity that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.
(h) “ Code ” means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code herein will be a reference to any successor or amended section of the Code.
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(i) “ Committee ” means a committee of Directors or of other individuals satisfying Applicable Laws appointed by the Board in accordance with Section 4 hereof.
(j) “ Common Stock ” means the common stock, $.001 par value per share, of the Company.
(k) “ Company ” means PeerLogix, Inc., a Delaware corporation, or any successor thereto.
(l) “ Consultant ” means any person, including an advisor, engaged by the Company or a Parent, Subsidiary or Affiliate to render services to the Company or a Subsidiary.
(m) “ Determination Date ” means the latest possible date that will not jeopardize the qualification of an Award granted under the Plan as “performance-based compensation” under Section 162(m) of the Code.
(n) “ Director ” means a member of the Board.
(o) “ Disability ” means permanent and total disability as defined in Section 22(e)(3) of the Code, provided that in the case of Awards other than Incentive Stock Options, the Administrator in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator from time to time.
(p) “ Employee ” means any person, including Officers and Directors, employed by the Company or any Parent, Subsidiary or Affiliate of the Company. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company.
(q) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.
(r) “ Exchange Program ” means a program under which (i) outstanding Awards are surrendered or cancelled in exchange for Awards of the same type (which may have lower exercise prices and different terms), Awards of a different type, and/or cash, (ii) Participants would have the opportunity to transfer any outstanding Awards to a financial institution or other person or entity selected by the Administrator, and/or (iii) the exercise price of an outstanding Award is reduced. The Administrator will determine the terms and conditions of any Exchange Program in its sole discretion.
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(s) “ Fair Market Value ” means, as of any date, the value of the Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market of The Nasdaq Stock Market, its Fair Market Value will be the closing sales price for such stock (or if no closing sales price was reported on that date, as applicable, on the last trading date such closing sales price was reported) as quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share will be the mean between the high bid and low asked prices for the Common Stock on the day of determination (or, if no bids and asks were reported on that date, as applicable, on the last trading date such bids and asks were reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock, or if such Common Stock is not regularly quoted or does not have sufficient trades or bid prices which would accurately reflect the actual Fair Market Value of the Common Stock, the Fair Market Value will be determined in good faith by the Administrator upon the advice of a qualified valuation expert.
(t) “ Fiscal Year ” means the fiscal year of the Company.
(u) “ Incentive Stock Option ” means an Option that by its terms qualifies and is otherwise intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.
(v) “ Nonstatutory Stock Option ” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.
(w) “ Officer ” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
(x) “ Option ” means a stock option granted pursuant to Section 6 hereof.
(y) “ Parent ” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.
(z) “ Participant ” means the holder of an outstanding Award.
(aa) “ Performance Goals ” will have the meaning set forth in Section 11 hereof.
(bb) “ Performance Period ” means any Fiscal Year of the Company or such other period as determined by the Administrator in its sole discretion.
(cc) “ Performance Share ” means an Award denominated in Shares which may be earned in whole or in part upon attainment of Performance Goals or other vesting criteria as the Administrator may determine pursuant to Section 10 hereof.
(dd) “ Performance Unit ” means an Award which may be earned in whole or in part upon attainment of Performance Goals or other vesting criteria as the Administrator may determine and which may be settled for cash, Shares or other securities or a combination of the foregoing pursuant to Section 10 hereof.
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(ee) “ Period of Restriction ” means the period during which transfers of Shares of Restricted Stock are subject to restrictions and, therefore, the Shares are subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of target levels of performance, or the occurrence of other events as determined by the Administrator.
(ff) “ Plan ” means this 2015 Equity Incentive Plan.
(gg) “ Restricted Stock ” means Shares issued pursuant to an Award of Restricted Stock under Section 8 hereof, or issued pursuant to the early exercise of an Option.
(hh) “ Restricted Stock Unit ” means a bookkeeping entry representing an amount equal to the Fair Market Value of one Share, granted pursuant to Section 9 hereof. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the Company.
(ii) “ Rule 16b-3 ” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.
(jj) “ Section 16(b) ” means Section 16(b) of the Exchange Act.
(kk) “ Service Provider ” means an Employee, Director, or Consultant.
(ll) “ Share ” means a share of the Common Stock, as adjusted in accordance with Section 15 hereof.
(mm) “ Stock Appreciation Right ” means an Award, granted alone or in connection with an Option, that pursuant to Section 7 is designated as a Stock Appreciation Right.
(nn) “ Subsidiary ” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan .
(a) Subject to the provisions of Section 15 hereof, the maximum aggregate number of Shares that may be awarded and sold under the Plan is 3,000,000 Shares. The Shares may be authorized, but unissued, or reacquired Common Stock.
(b) Lapsed Awards . If an Award expires or becomes unexercisable without having been exercised in full, is surrendered pursuant to an Exchange Program, or, with respect to Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units, is forfeited to or repurchased by the Company, the unpurchased Shares (or for Awards other than Options and Stock Appreciation Rights, the forfeited or repurchased Shares) which were subject thereto will become available for future grant or sale under the Plan (unless the Plan has terminated). Upon exercise of a Stock Appreciation Right settled in Shares, the gross number of Shares covered by the portion of the Award so exercised will cease to be available under the Plan. Shares that have actually been issued under the Plan under any Award will not be returned to the Plan and will not become available for future distribution under the Plan; provided, however, that if unvested Shares of Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units are repurchased by the Company or are forfeited to the Company, such Shares will become available for future grant under the Plan. Shares used to pay the tax and/or exercise price of an Award will become available for future grant or sale under the Plan. To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan. Notwithstanding the foregoing provisions of this Section 3(b), subject to adjustment provided in Section 14 hereof, the maximum number of Shares that may be issued upon the exercise of Incentive Stock Options will equal the aggregate Share number stated in Section 3(a) above, plus, to the extent allowable under Section 422 of the Code, any Shares that become available for issuance under the Plan under this Section 3(b).
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(c) Share Reserve . The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of the Plan.
(d) Limitation on Number of Shares Subject to Awards . Notwithstanding any provision in the Plan to the contrary, the maximum aggregate number of Shares with respect to one or more Awards that may be granted to any one person during any calendar year (measured from the date of any grant) shall be 300,000 and the maximum aggregate amount of cash that may be paid in cash during any calendar year (measured from the date of any payment) with respect to one or more Awards payable in cash shall be $100,000.
4. Administration of the Plan .
(a) Procedure .
(i) Multiple Administrative Bodies . Different Committees with respect to different groups of Service Providers may administer the Plan.
(ii) Section 162(m) . To the extent that the Administrator determines it to be desirable to qualify Awards granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of the Code, the Plan will be administered by a Committee of two (2) or more “outside directors” within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3 . To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) Other Administration . Other than as provided above, the Plan will be administered by (A) the Board or (B) a Committee, which committee will be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator . Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator will have the authority, in its discretion:
(i) to determine the Fair Market Value;
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(ii) to select the Service Providers to whom Awards may be granted hereunder;
(iii) to determine the number of Shares to be covered by each Award granted hereunder;
(iv) to approve forms of Award Agreements for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder;
(vi) to institute an Exchange Program and to determine the terms and conditions, not inconsistent with the terms of the Plan, for (1) the surrender or cancellation of outstanding Awards in exchange for Awards of the same type, Awards of a different type, and/or cash, (2) the transfer of outstanding Awards to a financial institution or other person or entity, or (3) the reduction of the exercise price of outstanding Awards;
(vii) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan;
(viii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws or for qualifying for favorable tax treatment under applicable foreign laws;
(ix) to modify or amend each Award (subject to Section 20(c) hereof), including but not limited to the discretionary authority to extend the post-termination exercisability period of Awards;
(x) to allow Participants to satisfy withholding tax obligations in a manner described in Section 16 hereof;
(xi) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator;
(xii) to allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant under an Award pursuant to such procedures as the Administrator may determine; and
(xiii) to make all other determinations deemed necessary or advisable for administering the Plan.
(c) Effect of Administrator’s Decision . The Administrator’s decisions, determinations, and interpretations will be final and binding on all Participants and any other holders of Awards.
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5. Eligibility . Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Units, Performance Shares, and such other cash or stock awards as the Administrator determines may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.
6. Stock Options .
(a) Limitations .
(i) Each Option will be designated in the Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000 (U.S.), such Options will be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted.
(ii) The Administrator will have complete discretion to determine the number of Shares subject to an Option granted to any Participant.
(b) Term of Option . The Administrator will determine the term of each Option in its sole discretion; provided, however, that the term will be no more than ten (10) years from the date of grant thereof. Moreover, in the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns stock representing more than 10% of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option will be five (5) years from the date of grant or such shorter term as may be provided in the Award Agreement.
(c) Option Exercise Price and Consideration .
(i) Exercise Price . The per share exercise price for the Shares to be issued pursuant to exercise of an Option will be determined by the Administrator, but will be no less than 100% of the Fair Market Value per Share on the date of grant. In addition, in the case of an Incentive Stock Option granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price will be no less than 110% of the Fair Market Value per Share on the date of grant. Notwithstanding the foregoing provisions of this Section 6(c), Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code.
(ii) Waiting Period and Exercise Dates . At the time an Option is granted, the Administrator will fix the period within which the Option may be exercised and will determine any conditions that must be satisfied before the Option may be exercised.
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(iii) Form of Consideration . The Administrator will determine the acceptable form(s) of consideration for exercising an Option, including the method of payment, to the extent permitted by Applicable Laws. In the case of an Incentive Stock Option, the Administrator will determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of: (1) cash; (2) check; (3) promissory note, to the extent permitted by Applicable Laws, (4) other Shares, provided that such Shares have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option will be exercised and provided further that accepting such Shares will not result in any adverse accounting consequences to the Company, as the Administrator determines in its sole discretion; (5) consideration received by the Company under cashless exercise program (whether through a broker or otherwise) implemented by the Company in connection with the Plan; (6) by net exercise, (7) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws, or (8) any combination of the foregoing methods of payment. In making its determination as to the type of consideration to accept, the Administrator will consider if acceptance of such consideration may be reasonably expected to benefit the Company.
(d) Exercise of Option .
(i) Procedure for Exercise; Rights as a Stockholder . Any Option granted hereunder will be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share.
An Option will be deemed exercised when the Company receives: (i) notice of exercise (in such form as the Administrator specifies from time to time) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised (together with any applicable withholding taxes). Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares subject to an Option, notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 15 hereof.
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(ii) Termination of Relationship as a Service Provider . If a Participant ceases to be a Service Provider, other than upon the Participant’s termination as the result of the Participant’s death or Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for three (3) months following the Participant’s termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified by the Administrator, the Option will terminate, and the Shares covered by such Option will revert to the Plan.
(iii) Disability of Participant . If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for six (6) months following the Participant’s termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.
(iv) Death of Participant . If a Participant dies while a Service Provider, the Option may be exercised within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of death (but in no event may the option be exercised later than the expiration of the term of such Option as set forth in the Award Agreement), by the Participant’s designated beneficiary, provided such beneficiary has been designated prior to Participant’s death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Participant, then such Option may be exercised by the personal representative of the Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution. In the absence of a specified time in the Award Agreement, the Option will remain exercisable for six (6) months following Participant’s death. Unless otherwise provided by the Administrator, if at the time of death Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will continue to vest in accordance with the Award Agreement. If the Option is not so exercised within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.
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7. Stock Appreciation Rights .
(a) Grant of Stock Appreciation Rights . Subject to the terms and conditions of the Plan, a Stock Appreciation Right may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion.
(b) Number of Shares . The Administrator will have complete discretion to determine the number of Stock Appreciation Rights granted to any Participant.
(c) Exercise Price and Other Terms . The Administrator, subject to the provisions of the Plan, will have complete discretion to determine the terms and conditions of Stock Appreciation Rights granted under the Plan; provided, however, that the exercise price will be not less than 100% of the Fair Market Value of a Share on the date of grant.
(d) Stock Appreciation Rights Agreement . Each Stock Appreciation Right grant will be evidenced by an Award Agreement that will specify the exercise price, the term of the Stock Appreciation Right, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, will determine.
(e) Expiration of Stock Appreciation Rights . A Stock Appreciation Right granted under the Plan will expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement; provided, however, that the term will be no more than ten (10) years from the date of grant thereof. Notwithstanding the foregoing, the rules of Section 6(d) above also will apply to Stock Appreciation Rights.
(f) Payment of Stock Appreciation Right Amount . Upon exercise of a Stock Appreciation Right, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying:
(i) The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times
(ii) The number of Shares with respect to which the Stock Appreciation Right is exercised.
At the discretion of the Administrator, the payment upon Stock Appreciation Right exercise may be in cash, in Shares of equivalent value, or in some combination thereof.
8. Restricted Stock .
(a) Grant of Restricted Stock . Subject to the terms and provisions of the Plan, the Administrator, at any time and from time to time, may grant Shares of Restricted Stock to Service Providers in such amounts as the Administrator, in its sole discretion, will determine.
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(b) Restricted Stock Agreement . Each Award of Restricted Stock will be evidenced by an Award Agreement that will specify the Period of Restriction, the number of Shares granted, and such other terms and conditions as the Administrator, in its sole discretion, will determine. Unless the Administrator determines otherwise, the Company as escrow agent will hold Shares of Restricted Stock until the restrictions on such Shares have lapsed.
(c) Transferability . Except as provided in this Section 8, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction.
(d) Other Restrictions . The Administrator, in its sole discretion, may impose such other restrictions on Shares of Restricted Stock as it may deem advisable or appropriate.
(e) Removal of Restrictions . Except as otherwise provided in this Section 8, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan will be released from escrow as soon as practicable after the last day of the Period of Restriction. The Administrator, in its discretion, may accelerate the time at which any restrictions will lapse or be removed.
(f) Voting Rights . During the Period of Restriction, Service Providers holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise.
(g) Dividends and Other Distributions . During the Period of Restriction, Service Providers holding Shares of Restricted Stock will be entitled to receive all dividends and other distributions paid with respect to such Shares unless otherwise provided in the Award Agreement. If any such dividends or distributions are paid in Shares, the Shares will be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid.
(h) Return of Restricted Stock to Company . On the date set forth in the Award Agreement, the Restricted Stock for which restrictions have not lapsed will revert to the Company and again will become available for grant under the Plan.
(i) Section 162(m) Performance Restrictions . For purposes of qualifying grants of Restricted Stock as “performance-based compensation” under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals will be set by the Administrator on or before the Determination Date. In granting Restricted Stock which is intended to qualify under Section 162(m) of the Code, the Administrator will follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code (e.g., in determining the Performance Goals).
9. Restricted Stock Units .
(a) Grant . Restricted Stock Units may be granted at any time and from time to time as determined by the Administrator. Each Restricted Stock Unit grant will be evidenced by an Award Agreement that will specify such other terms and conditions as the Administrator, in its sole discretion, will determine, including all terms, conditions, and restrictions related to the grant, the number of Restricted Stock Units and the form of payout, which, subject to Section 9(d) hereof, may be left to the discretion of the Administrator.
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(b) Vesting Criteria and Other Terms . The Administrator will set vesting criteria in its discretion, which, depending on the extent to which the criteria are met, will determine the number of Restricted Stock Units that will be paid out to the Participant. After the grant of Restricted Stock Units, the Administrator, in its sole discretion, may reduce or waive any restrictions for such Restricted Stock Units. Each Award of Restricted Stock Units will be evidenced by an Award Agreement that will specify the vesting criteria, and such other terms and conditions as the Administrator, in its sole discretion will determine. The Administrator, in its discretion, may accelerate the time at which any restrictions will lapse or be removed.
(c) Earning Restricted Stock Units . Upon meeting the applicable vesting criteria, the Participant will be entitled to receive a payout as specified in the Award Agreement.
(d) Form and Timing of Payment . Payment of earned Restricted Stock Units will be made as soon as practicable after the date(s) set forth in the Award Agreement. The Administrator, in its sole discretion, may pay earned Restricted Stock Units in cash, Shares, or a combination thereof. Shares represented by Restricted Stock Units that are fully paid in cash again will be available for grant under the Plan.
(e) Cancellation . On the date set forth in the Award Agreement, all unearned Restricted Stock Units will be forfeited to the Company.
(f) Section 162(m) Performance Restrictions . For purposes of qualifying grants of Restricted Stock Units as “performance-based compensation” under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals will be set by the Administrator on or before the Determination Date. In granting Restricted Stock Units which are intended to qualify under Section 162(m) of the Code, the Administrator will follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code (e.g., in determining the Performance Goals).
10. Performance Units and Performance Shares .
(a) Grant of Performance Units/Shares . Performance Units and Performance Shares may be granted to Service Providers at any time and from time to time, as will be determined by the Administrator, in its sole discretion. The Administrator will have complete discretion in determining the number of Performance Units/Shares granted to each Participant.
(b) Value of Performance Units/Shares . Each Performance Unit will have an initial value that is established by the Administrator on or before the date of grant. Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the date of grant.
(c) Performance Objectives and Other Terms . The Administrator will set performance objectives or other vesting provisions. The Administrator may set vesting criteria based upon the achievement of Company-wide, business unit, or individual goals (including, but not limited to, continued employment), or any other basis determined by the Administrator in its discretion. Each Award of Performance Units/Shares will be evidenced by an Award Agreement that will specify the Performance Period, and such other terms and conditions as the Administrator, in its sole discretion, will determine.
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(d) Earning of Performance Units/Shares . After the applicable Performance Period has ended, the holder of Performance Units/Shares will be entitled to receive a payout of the number of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance objectives or other vesting provisions have been achieved. After the grant of a Performance Unit/Share, the Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such Performance Unit/Share.
(e) Form and Timing of Payment of Performance Units/Shares . Payment of earned Performance Units/Shares will be made as soon as practicable after the expiration of the applicable Performance Period. The Administrator, in its sole discretion, may pay earned Performance Units/Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares at the close of the applicable Performance Period) or in a combination thereof.
(f) Cancellation of Performance Units/Shares . On the date set forth in the Award Agreement, all unearned or unvested Performance Units/Shares will be forfeited to the Company, and again will be available for grant under the Plan.
(g) Section 162(m) Performance Restrictions . For purposes of qualifying grants of Performance Units/Shares as “performance-based compensation” under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals will be set by the Administrator on or before the Determination Date. In granting Performance Units/Shares which are intended to qualify under Section 162(m) of the Code, the Administrator will follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code (e.g., in determining the Performance Goals).
11. Performance-Based Compensation Under Code Section 162(m) .
(a) General . If the Administrator, in its discretion, decides to grant an Award intended to qualify as “performance-based compensation” under Code Section 162(m), the provisions of this Section 11 will control over any contrary provision in the Plan; provided, however, that the Administrator may in its discretion grant Awards that are not intended to qualify as “performance-based compensation” under Section 162(m) of the Code to such Participants that are based on Performance Goals or other specific criteria or goals but that do not satisfy the requirements of this Section 11.
(b) Performance Goals . The granting and/or vesting of Awards of Restricted Stock, Restricted Stock Units, Performance Shares and Performance Units and other incentives under the Plan may be made subject to the attainment of performance goals relating to one or more business criteria within the meaning of Code Section 162(m) and may provide for a targeted level or levels of achievement (“ Performance Goals ”) including (i) earnings per Share, (ii) operating cash flow, (iii) operating income, (iv) profit after-tax, (v) profit before-tax, (vi) return on assets, (vii) return on equity, (viii) return on sales, (ix) revenue, and (x) total shareholder return. Any Performance Goals may be used to measure the performance of the Company as a whole or a business unit of the Company and may be measured relative to a peer group or index. The Performance Goals may differ from Participant to Participant and from Award to Award. Prior to the Determination Date, the Administrator will determine whether any significant element(s) will be included in or excluded from the calculation of any Performance Goal with respect to any Participant.
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(c) Procedures . To the extent necessary to comply with the performance-based compensation provisions of Code Section 162(m), with respect to any Award granted subject to Performance Goals, within the first twenty-five percent (25%) of the Performance Period, but in no event more than ninety (90) days following the commencement of any Performance Period (or such other time as may be required or permitted by Code Section 162(m)), the Administrator will, in writing, (i) designate one or more Participants to whom an Award will be made, (ii) select the Performance Goals applicable to the Performance Period, (iii) establish the Performance Goals, and amounts of such Awards, as applicable, which may be earned for such Performance Period, and (iv) specify the relationship between Performance Goals and the amounts of such Awards, as applicable, to be earned by each Participant for such Performance Period. Following the completion of each Performance Period, the Administrator will certify in writing whether the applicable Performance Goals have been achieved for such Performance Period. In determining the amounts earned by a Participant, the Administrator will have the right to reduce or eliminate (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Administrator may deem relevant to the assessment of individual or corporate performance for the Performance Period. A Participant will be eligible to receive payment pursuant to an Award for a Performance Period only if the Performance Goals for such period are achieved.
(d) Additional Limitations . Notwithstanding any other provision of the Plan, any Award which is granted to a Participant and is intended to constitute qualified performance based compensation under Code Section 162(m) will be subject to any additional limitations set forth in the Code (including any amendment to Section 162(m)) or any regulations and ruling issued thereunder that are requirements for qualification as qualified performance-based compensation as described in Section 162(m) of the Code, and the Plan will be deemed amended to the extent necessary to conform to such requirements.
12. Compliance with Code Section 409A . Awards will be designed and operated in such a manner that they are either exempt from the application of, or comply with, the requirements of Code Section 409A, except as otherwise determined in the sole discretion of the Administrator. The Plan and each Award Agreement under the Plan is intended to meet the requirements of Code Section 409A and will be construed and interpreted in accordance with such intent, except as otherwise determined in the sole discretion of the Administrator. To the extent that an Award or payment, or the settlement or deferral thereof, is subject to Code Section 409A the Award will be granted, paid, settled or deferred in a manner that will meet the requirements of Code Section 409A, such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under Code Section 409A.
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13. Leaves of Absence . Unless the Administrator provides otherwise, vesting of Awards granted hereunder will be suspended during any unpaid leave of absence. A Service Provider will not cease to be an Employee in the case of (i) any leave of absence approved by the Company, or (ii) transfers between locations of the Company or between the Company, its Parent, or any Subsidiary. For purposes of Incentive Stock Options, no such leave may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then six (6) months and one day following the commencement of such leave any Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option.
14. Transferability of Awards . Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant. If the Administrator makes an Award transferable, such Award may only be transferred (i) by will, (ii) by the laws of descent and distribution, (iii) to a revocable trust, or (iii) as permitted by Rule 701 of the Securities Act of 1933, as amended.
15. Adjustments; Dissolution or Liquidation; Merger or Change in Control .
(a) Adjustments . In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, will adjust the number and class of Shares that may be delivered under the Plan and/or the number, class, and price of Shares covered by each outstanding Award, and the numerical Share limits set forth in Sections 3, 6, 7, 8, 9 and 10 hereof.
(b) Dissolution or Liquidation . In the event of the proposed dissolution or liquidation of the Company, the Administrator will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised, an Award will terminate immediately prior to the consummation of such proposed action.
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(c) Change in Control . In the event of a merger of the Company with or into another corporation or other entity or a Change in Control, each outstanding Award will be treated as the Administrator determines (subject to the provisions of the proceeding paragraph) without a Participant’s consent, including, without limitation, that (i) Awards will be assumed, or substantially equivalent Awards will be substituted, by the acquiring or succeeding corporation (the “ Successor Corporation ”) (or an affiliate thereof) with appropriate adjustments as to the number and kind of shares and prices; (ii) upon written notice to a Participant, that the Participant’s Awards will terminate upon or immediately prior to the consummation of such merger or Change in Control; (iii) outstanding Awards will vest and become exercisable, realizable, or payable, or restrictions applicable to an Award will lapse, in whole or in part prior to or upon consummation of such merger or Change in Control, and, to the extent the Administrator determines, terminate upon or immediately prior to the effectiveness of such merger or Change in Control; (iv) (A) the termination of an Award in exchange for an amount of cash and/or property, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Participant’s rights as of the date of the occurrence of the transaction (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction the Administrator determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company without payment), or (B) the replacement of such Award with other rights or property selected by the Administrator in its sole discretion; or (v) any combination of the foregoing. In taking any of the actions permitted under this subsection (c), the Administrator will not be obligated to treat all Awards, all Awards held by a Participant, or all Awards of the same type, similarly.
In the event that the Successor Corporation does not assume or substitute for the Award, the Participant will fully vest in and have the right to exercise all of his or her outstanding Options and Stock Appreciation Rights, including Shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on Restricted Stock will lapse, and, with respect to Restricted Stock Units, Performance Shares and Performance Units, all Performance Goals or other vesting criteria will be deemed achieved at target levels and all other terms and conditions met. In addition, if an Option or Stock Appreciation Right is not assumed or substituted for in the event of a Change in Control, the Administrator will notify the Participant in writing or electronically that the Option or Stock Appreciation Right will be fully vested and exercisable for a period of time determined by the Administrator in its sole discretion, and the Option or Stock Appreciation Right will terminate upon the expiration of such period.
For the purposes of this subsection (c), an Award will be considered assumed if, following the Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) or, in the case of a Stock Appreciation Right upon the exercise of which the Administrator determines to pay cash or a Performance Share or Performance Unit which the Administrator can determine to pay in cash, the fair market value of the consideration received in the merger or Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change in Control is not solely common stock of the Successor Corporation, the Administrator may, with the consent of the Successor Corporation, provide for the consideration to be received upon the exercise of an Option or Stock Appreciation Right or upon the payout of a Performance Share or Performance Unit, for each Share subject to such Award (or in the case of Performance Units, the number of implied shares determined by dividing the value of the Performance Units by the per share consideration received by holders of Common Stock in the Change in Control), to be solely common stock of the Successor Corporation equal in fair market value to the per share consideration received by holders of Common Stock in the Change in Control.
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Notwithstanding anything in this Section 15(c) to the contrary, an Award that vests, is earned or paid-out upon the satisfaction of one or more Performance Goals will not be considered assumed if the Company or its successor modifies any of such Performance Goals without the Participant’s consent; provided, however, a modification to such Performance Goals only to reflect the Successor Corporation’s post-Change in Control corporate structure will not be deemed to invalidate an otherwise valid Award assumption. In the case of an Award providing for the payment of deferred compensation subject to Section 409A of the Code, any payment of such deferred compensation by reason of a Change in Control shall be made only if the Change in Control is one described in subsection (a)(2)(A)(v) of Section 409A and the guidance thereunder and shall be paid consistent with the requirements of Section 409A. If any deferred compensation that would otherwise be payable by reason of a Change in Control cannot be paid by reason of the immediately preceding sentence, it shall be paid as soon as practicable thereafter consistent with the requirements of Section 409A, as determined by the Administrator.
16. Tax Withholding .
(a) Withholding Requirements . Prior to the delivery of any Shares or cash pursuant to an Award (or exercise thereof), the Company will have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local, foreign or other taxes (including the Participant’s FICA obligation) required to be withheld with respect to such Award (or exercise thereof).
(b) Withholding Arrangements . The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part by (without limitation) (i) paying cash, (ii) electing to have the Company withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the minimum amount required to be withheld, (iii) delivering to the Company already-owned Shares having a Fair Market Value equal to the amount required to be withheld, or (iv) selling a sufficient number of Shares otherwise deliverable to the Participant through such means as the Administrator may determine in its sole discretion (whether through a broker or otherwise) equal to the amount required to be withheld. The amount of the withholding requirement will be deemed to include any amount which the Administrator agrees may be withheld at the time the election is made, not to exceed the amount determined by using the maximum federal, state or local marginal income tax rates applicable to the Participant with respect to the Award on the date that the amount of tax to be withheld is to be determined. The Fair Market Value of the Shares to be withheld or delivered will be determined as of the date that the taxes are required to be withheld.
17. No Effect on Employment or Service . Neither the Plan nor any Award will confer upon a Participant any right with respect to continuing the Participant’s relationship as a Service Provider with the Company, nor will they interfere in any way with the Participant’s right or the Company’s right to terminate such relationship at any time, with or without cause, to the extent permitted by Applicable Laws.
18. Date of Grant . The date of grant of an Award will be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination will be provided to each Participant within a reasonable time after the date of such grant.
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19. Term of Plan . Subject to Section 23 hereof, the Plan will become effective upon its adoption by the Board. It will continue in effect for a term of ten (10) years unless terminated earlier under Section 20 hereof.
20. Amendment and Termination of the Plan .
(a) Amendment and Termination . The Administrator may at any time amend, alter, suspend or terminate the Plan.
(b) Stockholder Approval . The Company will obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.
(c) Effect of Amendment or Termination . No amendment, alteration, suspension, or termination of the Plan will impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of the Plan will not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.
21. Conditions Upon Issuance of Shares .
(a) Legal Compliance . Shares will not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares will comply with Applicable Laws and will be further subject to the approval of counsel for the Company with respect to such compliance.
(b) Investment Representations . As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.
(c) Restrictive Legends . All Award Agreements and all securities of the Company issued pursuant thereto shall bear such legends regarding restrictions on transfer and such other legends as the appropriate officer of the Corporation shall determine to be necessary or advisable to comply with applicable securities and other laws.
22. Inability to Obtain Authority . The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, will relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority will not have been obtained.
23. Stockholder Approval . The Plan will be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted by the Board. Such stockholder approval will be obtained in the manner and to the degree required under Applicable Laws. In the event that stockholder approval is not obtained within twelve (12) months after the date the Plan is adopted by the Board, the Plan and all Awards granted hereunder shall be void ab initio and of no effect. Notwithstanding any other provisions of the Plan, no Awards shall be exercisable until the date of such stockholder approval.
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23. Notification of Election Under Section 83(b) of the Code. If any Service Provider shall, in connection with the acquisition of Shares under the Plan, make the election permitted under Section 83(b) of the Code, such Service Provider shall notify the Company of such election within ten (10) days of filing notice of the election with the Internal Revenue Service and provide the Company with a copy thereof, in addition to any filing and a notification required pursuant to regulations issued under the authority of Section 83(b) of the Code. A Service Provider shall not be permitted to make a Section 83(b) election with respect to an Award of a Restricted Stock Unit.
24. Notification Upon Disqualifying Disposition Under Section 421(b) of the Code. Each Service Provider shall notify the Company of any disposition of Shares issued pursuant to the exercise of an Incentive Stock Option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), within ten (10) days of such disposition.
25. Choice of Law. The Plan and all rules and determinations made and taken pursuant hereto will be governed by the laws of the State of Delaware, to the extent not preempted by federal law, and construed accordingly.
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Exhibit 10.12
PEERLOGIX TECHNOLOGIES, INC.
2015 EQUITY INCENTIVE PLAN
1. Purposes of the Plan . The purposes of this Plan are:
· | to attract and retain the best available personnel for positions of substantial responsibility, |
· | to provide incentives to individuals who perform services for the Company, and |
· | to promote the success of the Company’s business. |
The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares and other stock or cash awards as the Administrator may determine.
2. Definitions . As used herein, the following definitions will apply:
(a) “ Administrator ” means the Board or any of its Committees as will be administering the Plan, in accordance with Section 4 hereof.
(b) “ Affiliate ” means any corporation or any other entity (including, but not limited to, partnerships and joint ventures) controlling, controlled by, or under common control with the Company.
(c) “ Applicable Laws ” means the requirements relating to the administration of equity-based awards under U.S. federal and state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.
(d) “ Award ” means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares and other stock or cash awards as the Administrator may determine.
(e) “ Award Agreement ” means the written or electronic agreement setting forth the terms and provisions applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan.
(f) “ Board ” means the Board of Directors of the Company.
(g) “ Change in Control ” means the occurrence of any of the following events:
(i) A change in the ownership of the Company which occurs on the date that any one person, or more than one person acting as a group (“ Person ”), acquires ownership of stock in the Company that, together with the stock already held by such Person, constitutes more than 50% of the total voting power of the stock of the Company; provided, however, that for purposes of this subsection (i), the acquisition of additional stock by any Person who is considered to own more than 50% of the total voting power of the stock of the Company before the acquisition will not be considered a Change in Control; or
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(ii) A change in the effective control of the Company, which occurs on the date that a majority of the members of the Board are replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purposes of this subsection (ii), if any Person is considered to effectively control the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change in Control; or
(iii) A change in the ownership of a substantial portion of the Company’s assets, which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such Person) assets from the Company that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; provided, however, that for purposes of this subsection (iii), the following will not constitute a change in the ownership of a substantial portion of the Company’s assets or a Change in Control: (A) a transfer to an entity that is controlled by the Company’s stockholders immediately after the transfer, or (B) a transfer of assets by the Company to: (1) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company’s stock, (2) an entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by the Company, (3) a Person that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding stock of the Company, or (4) an entity, at least 50% of the total equity or voting power of which is owned, directly or indirectly, by a Person described in subsection (iii)(B)(3) above. For purposes of this subsection (iii), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
Notwithstanding the foregoing, as to any Award under the Plan that consists of deferred compensation subject to Section 409A of the Code, the definition of “Change in Control” shall be deemed modified to the extent necessary to comply with Section 409A of the Code.
For purposes of this Section 2(g), persons will be considered to be acting as a group if they are owners of a corporation or other entity that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.
(h) “ Code ” means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code herein will be a reference to any successor or amended section of the Code.
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(i) “ Committee ” means a committee of Directors or of other individuals satisfying Applicable Laws appointed by the Board in accordance with Section 4 hereof.
(j) “ Common Stock ” means the common stock, $.001 par value per share, of the Company.
(k) “ Company ” means PeerLogix Technologies, Inc., a Delaware corporation, or any successor thereto.
(l) “ Consultant ” means any person, including an advisor, engaged by the Company or a Parent, Subsidiary or Affiliate to render services to the Company or a Subsidiary.
(m) “ Determination Date ” means the latest possible date that will not jeopardize the qualification of an Award granted under the Plan as “performance-based compensation” under Section 162(m) of the Code.
(n) “ Director ” means a member of the Board.
(o) “ Disability ” means permanent and total disability as defined in Section 22(e)(3) of the Code, provided that in the case of Awards other than Incentive Stock Options, the Administrator in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator from time to time.
(p) “ Employee ” means any person, including Officers and Directors, employed by the Company or any Parent, Subsidiary or Affiliate of the Company. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company.
(q) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.
(r) “ Exchange Program ” means a program under which (i) outstanding Awards are surrendered or cancelled in exchange for Awards of the same type (which may have lower exercise prices and different terms), Awards of a different type, and/or cash, (ii) Participants would have the opportunity to transfer any outstanding Awards to a financial institution or other person or entity selected by the Administrator, and/or (iii) the exercise price of an outstanding Award is reduced. The Administrator will determine the terms and conditions of any Exchange Program in its sole discretion.
(s) “ Fair Market Value ” means, as of any date, the value of the Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market of The Nasdaq Stock Market, its Fair Market Value will be the closing sales price for such stock (or if no closing sales price was reported on that date, as applicable, on the last trading date such closing sales price was reported) as quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;
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(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share will be the mean between the high bid and low asked prices for the Common Stock on the day of determination (or, if no bids and asks were reported on that date, as applicable, on the last trading date such bids and asks were reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock, or if such Common Stock is not regularly quoted or does not have sufficient trades or bid prices which would accurately reflect the actual Fair Market Value of the Common Stock, the Fair Market Value will be determined in good faith by the Administrator upon the advice of a qualified valuation expert.
(t) “ Fiscal Year ” means the fiscal year of the Company.
(u) “ Incentive Stock Option ” means an Option that by its terms qualifies and is otherwise intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.
(v) “ Nonstatutory Stock Option ” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.
(w) “ Officer ” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
(x) “ Option ” means a stock option granted pursuant to Section 6 hereof.
(y) “ Parent ” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.
(z) “ Participant ” means the holder of an outstanding Award.
(aa) “ Performance Goals ” will have the meaning set forth in Section 11 hereof.
(bb) “ Performance Period ” means any Fiscal Year of the Company or such other period as determined by the Administrator in its sole discretion.
(cc) “ Performance Share ” means an Award denominated in Shares which may be earned in whole or in part upon attainment of Performance Goals or other vesting criteria as the Administrator may determine pursuant to Section 10 hereof.
(dd) “ Performance Unit ” means an Award which may be earned in whole or in part upon attainment of Performance Goals or other vesting criteria as the Administrator may determine and which may be settled for cash, Shares or other securities or a combination of the foregoing pursuant to Section 10 hereof.
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(ee) “ Period of Restriction ” means the period during which transfers of Shares of Restricted Stock are subject to restrictions and, therefore, the Shares are subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of target levels of performance, or the occurrence of other events as determined by the Administrator.
(ff) “ Plan ” means this 2015 Equity Incentive Plan.
(gg) “ Restricted Stock ” means Shares issued pursuant to an Award of Restricted Stock under Section 8 hereof, or issued pursuant to the early exercise of an Option.
(hh) “ Restricted Stock Unit ” means a bookkeeping entry representing an amount equal to the Fair Market Value of one Share, granted pursuant to Section 9 hereof. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the Company.
(ii) “ Rule 16b-3 ” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.
(jj) “ Section 16(b) ” means Section 16(b) of the Exchange Act.
(kk) “ Service Provider ” means an Employee, Director, or Consultant.
(ll) “ Share ” means a share of the Common Stock, as adjusted in accordance with Section 15 hereof.
(mm) “ Stock Appreciation Right ” means an Award, granted alone or in connection with an Option, that pursuant to Section 7 is designated as a Stock Appreciation Right.
(nn) “ Subsidiary ” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan .
(a) Subject to the provisions of Section 15 hereof, the maximum aggregate number of Shares that may be awarded and sold under the Plan is 3,000,000 Shares. The Shares may be authorized, but unissued, or reacquired Common Stock.
(b) Lapsed Awards . If an Award expires or becomes unexercisable without having been exercised in full, is surrendered pursuant to an Exchange Program, or, with respect to Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units, is forfeited to or repurchased by the Company, the unpurchased Shares (or for Awards other than Options and Stock Appreciation Rights, the forfeited or repurchased Shares) which were subject thereto will become available for future grant or sale under the Plan (unless the Plan has terminated). Upon exercise of a Stock Appreciation Right settled in Shares, the gross number of Shares covered by the portion of the Award so exercised will cease to be available under the Plan. Shares that have actually been issued under the Plan under any Award will not be returned to the Plan and will not become available for future distribution under the Plan; provided, however, that if unvested Shares of Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units are repurchased by the Company or are forfeited to the Company, such Shares will become available for future grant under the Plan. Shares used to pay the tax and/or exercise price of an Award will become available for future grant or sale under the Plan. To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan. Notwithstanding the foregoing provisions of this Section 3(b), subject to adjustment provided in Section 14 hereof, the maximum number of Shares that may be issued upon the exercise of Incentive Stock Options will equal the aggregate Share number stated in Section 3(a) above, plus, to the extent allowable under Section 422 of the Code, any Shares that become available for issuance under the Plan under this Section 3(b).
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(c) Share Reserve . The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of the Plan.
(d) Limitation on Number of Shares Subject to Awards . Notwithstanding any provision in the Plan to the contrary, the maximum aggregate number of Shares with respect to one or more Awards that may be granted to any one person during any calendar year (measured from the date of any grant) shall be 300,000 and the maximum aggregate amount of cash that may be paid in cash during any calendar year (measured from the date of any payment) with respect to one or more Awards payable in cash shall be $100,000.
4. Administration of the Plan .
(a) Procedure .
(i) Multiple Administrative Bodies . Different Committees with respect to different groups of Service Providers may administer the Plan.
(ii) Section 162(m) . To the extent that the Administrator determines it to be desirable to qualify Awards granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of the Code, the Plan will be administered by a Committee of two (2) or more “outside directors” within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3 . To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) Other Administration . Other than as provided above, the Plan will be administered by (A) the Board or (B) a Committee, which committee will be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator . Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator will have the authority, in its discretion:
(i) to determine the Fair Market Value;
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(ii) to select the Service Providers to whom Awards may be granted hereunder;
(iii) to determine the number of Shares to be covered by each Award granted hereunder;
(iv) to approve forms of Award Agreements for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder;
(vi) to institute an Exchange Program and to determine the terms and conditions, not inconsistent with the terms of the Plan, for (1) the surrender or cancellation of outstanding Awards in exchange for Awards of the same type, Awards of a different type, and/or cash, (2) the transfer of outstanding Awards to a financial institution or other person or entity, or (3) the reduction of the exercise price of outstanding Awards;
(vii) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan;
(viii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws or for qualifying for favorable tax treatment under applicable foreign laws;
(ix) to modify or amend each Award (subject to Section 20(c) hereof), including but not limited to the discretionary authority to extend the post-termination exercisability period of Awards;
(x) to allow Participants to satisfy withholding tax obligations in a manner described in Section 16 hereof;
(xi) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator;
(xii) to allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant under an Award pursuant to such procedures as the Administrator may determine; and
(xiii) to make all other determinations deemed necessary or advisable for administering the Plan.
(c) Effect of Administrator’s Decision . The Administrator’s decisions, determinations, and interpretations will be final and binding on all Participants and any other holders of Awards.
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5. Eligibility . Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Units, Performance Shares, and such other cash or stock awards as the Administrator determines may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.
6. Stock Options .
(a) Limitations .
(i) Each Option will be designated in the Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000 (U.S.), such Options will be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted.
(ii) The Administrator will have complete discretion to determine the number of Shares subject to an Option granted to any Participant.
(b) Term of Option . The Administrator will determine the term of each Option in its sole discretion; provided, however, that the term will be no more than ten (10) years from the date of grant thereof. Moreover, in the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns stock representing more than 10% of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option will be five (5) years from the date of grant or such shorter term as may be provided in the Award Agreement.
(c) Option Exercise Price and Consideration .
(i) Exercise Price . The per share exercise price for the Shares to be issued pursuant to exercise of an Option will be determined by the Administrator, but will be no less than 100% of the Fair Market Value per Share on the date of grant. In addition, in the case of an Incentive Stock Option granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price will be no less than 110% of the Fair Market Value per Share on the date of grant. Notwithstanding the foregoing provisions of this Section 6(c), Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code.
(ii) Waiting Period and Exercise Dates . At the time an Option is granted, the Administrator will fix the period within which the Option may be exercised and will determine any conditions that must be satisfied before the Option may be exercised.
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(iii) Form of Consideration . The Administrator will determine the acceptable form(s) of consideration for exercising an Option, including the method of payment, to the extent permitted by Applicable Laws. In the case of an Incentive Stock Option, the Administrator will determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of: (1) cash; (2) check; (3) promissory note, to the extent permitted by Applicable Laws, (4) other Shares, provided that such Shares have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option will be exercised and provided further that accepting such Shares will not result in any adverse accounting consequences to the Company, as the Administrator determines in its sole discretion; (5) consideration received by the Company under cashless exercise program (whether through a broker or otherwise) implemented by the Company in connection with the Plan; (6) by net exercise, (7) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws, or (8) any combination of the foregoing methods of payment. In making its determination as to the type of consideration to accept, the Administrator will consider if acceptance of such consideration may be reasonably expected to benefit the Company.
(d) Exercise of Option .
(i) Procedure for Exercise; Rights as a Stockholder . Any Option granted hereunder will be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share.
An Option will be deemed exercised when the Company receives: (i) notice of exercise (in such form as the Administrator specifies from time to time) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised (together with any applicable withholding taxes). Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares subject to an Option, notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 15 hereof.
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(ii) Termination of Relationship as a Service Provider . If a Participant ceases to be a Service Provider, other than upon the Participant’s termination as the result of the Participant’s death or Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for three (3) months following the Participant’s termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified by the Administrator, the Option will terminate, and the Shares covered by such Option will revert to the Plan.
(iii) Disability of Participant . If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for six (6) months following the Participant’s termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.
(iv) Death of Participant . If a Participant dies while a Service Provider, the Option may be exercised within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of death (but in no event may the option be exercised later than the expiration of the term of such Option as set forth in the Award Agreement), by the Participant’s designated beneficiary, provided such beneficiary has been designated prior to Participant’s death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Participant, then such Option may be exercised by the personal representative of the Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution. In the absence of a specified time in the Award Agreement, the Option will remain exercisable for six (6) months following Participant’s death. Unless otherwise provided by the Administrator, if at the time of death Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will continue to vest in accordance with the Award Agreement. If the Option is not so exercised within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.
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7. Stock Appreciation Rights .
(a) Grant of Stock Appreciation Rights . Subject to the terms and conditions of the Plan, a Stock Appreciation Right may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion.
(b) Number of Shares . The Administrator will have complete discretion to determine the number of Stock Appreciation Rights granted to any Participant.
(c) Exercise Price and Other Terms . The Administrator, subject to the provisions of the Plan, will have complete discretion to determine the terms and conditions of Stock Appreciation Rights granted under the Plan; provided, however, that the exercise price will be not less than 100% of the Fair Market Value of a Share on the date of grant.
(d) Stock Appreciation Rights Agreement . Each Stock Appreciation Right grant will be evidenced by an Award Agreement that will specify the exercise price, the term of the Stock Appreciation Right, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, will determine.
(e) Expiration of Stock Appreciation Rights . A Stock Appreciation Right granted under the Plan will expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement; provided, however, that the term will be no more than ten (10) years from the date of grant thereof. Notwithstanding the foregoing, the rules of Section 6(d) above also will apply to Stock Appreciation Rights.
(f) Payment of Stock Appreciation Right Amount . Upon exercise of a Stock Appreciation Right, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying:
(i) The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times
(ii) The number of Shares with respect to which the Stock Appreciation Right is exercised.
At the discretion of the Administrator, the payment upon Stock Appreciation Right exercise may be in cash, in Shares of equivalent value, or in some combination thereof.
8. Restricted Stock .
(a) Grant of Restricted Stock . Subject to the terms and provisions of the Plan, the Administrator, at any time and from time to time, may grant Shares of Restricted Stock to Service Providers in such amounts as the Administrator, in its sole discretion, will determine.
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(b) Restricted Stock Agreement . Each Award of Restricted Stock will be evidenced by an Award Agreement that will specify the Period of Restriction, the number of Shares granted, and such other terms and conditions as the Administrator, in its sole discretion, will determine. Unless the Administrator determines otherwise, the Company as escrow agent will hold Shares of Restricted Stock until the restrictions on such Shares have lapsed.
(c) Transferability . Except as provided in this Section 8, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction.
(d) Other Restrictions . The Administrator, in its sole discretion, may impose such other restrictions on Shares of Restricted Stock as it may deem advisable or appropriate.
(e) Removal of Restrictions . Except as otherwise provided in this Section 8, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan will be released from escrow as soon as practicable after the last day of the Period of Restriction. The Administrator, in its discretion, may accelerate the time at which any restrictions will lapse or be removed.
(f) Voting Rights . During the Period of Restriction, Service Providers holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise.
(g) Dividends and Other Distributions . During the Period of Restriction, Service Providers holding Shares of Restricted Stock will be entitled to receive all dividends and other distributions paid with respect to such Shares unless otherwise provided in the Award Agreement. If any such dividends or distributions are paid in Shares, the Shares will be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid.
(h) Return of Restricted Stock to Company . On the date set forth in the Award Agreement, the Restricted Stock for which restrictions have not lapsed will revert to the Company and again will become available for grant under the Plan.
(i) Section 162(m) Performance Restrictions . For purposes of qualifying grants of Restricted Stock as “performance-based compensation” under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals will be set by the Administrator on or before the Determination Date. In granting Restricted Stock which is intended to qualify under Section 162(m) of the Code, the Administrator will follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code (e.g., in determining the Performance Goals).
9. Restricted Stock Units .
(a) Grant . Restricted Stock Units may be granted at any time and from time to time as determined by the Administrator. Each Restricted Stock Unit grant will be evidenced by an Award Agreement that will specify such other terms and conditions as the Administrator, in its sole discretion, will determine, including all terms, conditions, and restrictions related to the grant, the number of Restricted Stock Units and the form of payout, which, subject to Section 9(d) hereof, may be left to the discretion of the Administrator.
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(b) Vesting Criteria and Other Terms . The Administrator will set vesting criteria in its discretion, which, depending on the extent to which the criteria are met, will determine the number of Restricted Stock Units that will be paid out to the Participant. After the grant of Restricted Stock Units, the Administrator, in its sole discretion, may reduce or waive any restrictions for such Restricted Stock Units. Each Award of Restricted Stock Units will be evidenced by an Award Agreement that will specify the vesting criteria, and such other terms and conditions as the Administrator, in its sole discretion will determine. The Administrator, in its discretion, may accelerate the time at which any restrictions will lapse or be removed.
(c) Earning Restricted Stock Units . Upon meeting the applicable vesting criteria, the Participant will be entitled to receive a payout as specified in the Award Agreement.
(d) Form and Timing of Payment . Payment of earned Restricted Stock Units will be made as soon as practicable after the date(s) set forth in the Award Agreement. The Administrator, in its sole discretion, may pay earned Restricted Stock Units in cash, Shares, or a combination thereof. Shares represented by Restricted Stock Units that are fully paid in cash again will be available for grant under the Plan.
(e) Cancellation . On the date set forth in the Award Agreement, all unearned Restricted Stock Units will be forfeited to the Company.
(f) Section 162(m) Performance Restrictions . For purposes of qualifying grants of Restricted Stock Units as “performance-based compensation” under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals will be set by the Administrator on or before the Determination Date. In granting Restricted Stock Units which are intended to qualify under Section 162(m) of the Code, the Administrator will follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code (e.g., in determining the Performance Goals).
10. Performance Units and Performance Shares .
(a) Grant of Performance Units/Shares . Performance Units and Performance Shares may be granted to Service Providers at any time and from time to time, as will be determined by the Administrator, in its sole discretion. The Administrator will have complete discretion in determining the number of Performance Units/Shares granted to each Participant.
(b) Value of Performance Units/Shares . Each Performance Unit will have an initial value that is established by the Administrator on or before the date of grant. Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the date of grant.
(c) Performance Objectives and Other Terms . The Administrator will set performance objectives or other vesting provisions. The Administrator may set vesting criteria based upon the achievement of Company-wide, business unit, or individual goals (including, but not limited to, continued employment), or any other basis determined by the Administrator in its discretion. Each Award of Performance Units/Shares will be evidenced by an Award Agreement that will specify the Performance Period, and such other terms and conditions as the Administrator, in its sole discretion, will determine.
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(d) Earning of Performance Units/Shares . After the applicable Performance Period has ended, the holder of Performance Units/Shares will be entitled to receive a payout of the number of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance objectives or other vesting provisions have been achieved. After the grant of a Performance Unit/Share, the Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such Performance Unit/Share.
(e) Form and Timing of Payment of Performance Units/Shares . Payment of earned Performance Units/Shares will be made as soon as practicable after the expiration of the applicable Performance Period. The Administrator, in its sole discretion, may pay earned Performance Units/Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares at the close of the applicable Performance Period) or in a combination thereof.
(f) Cancellation of Performance Units/Shares . On the date set forth in the Award Agreement, all unearned or unvested Performance Units/Shares will be forfeited to the Company, and again will be available for grant under the Plan.
(g) Section 162(m) Performance Restrictions . For purposes of qualifying grants of Performance Units/Shares as “performance-based compensation” under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals will be set by the Administrator on or before the Determination Date. In granting Performance Units/Shares which are intended to qualify under Section 162(m) of the Code, the Administrator will follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code (e.g., in determining the Performance Goals).
11. Performance-Based Compensation Under Code Section 162(m) .
(a) General . If the Administrator, in its discretion, decides to grant an Award intended to qualify as “performance-based compensation” under Code Section 162(m), the provisions of this Section 11 will control over any contrary provision in the Plan; provided, however, that the Administrator may in its discretion grant Awards that are not intended to qualify as “performance-based compensation” under Section 162(m) of the Code to such Participants that are based on Performance Goals or other specific criteria or goals but that do not satisfy the requirements of this Section 11.
(b) Performance Goals . The granting and/or vesting of Awards of Restricted Stock, Restricted Stock Units, Performance Shares and Performance Units and other incentives under the Plan may be made subject to the attainment of performance goals relating to one or more business criteria within the meaning of Code Section 162(m) and may provide for a targeted level or levels of achievement (“ Performance Goals ”) including (i) earnings per Share, (ii) operating cash flow, (iii) operating income, (iv) profit after-tax, (v) profit before-tax, (vi) return on assets, (vii) return on equity, (viii) return on sales, (ix) revenue, and (x) total shareholder return. Any Performance Goals may be used to measure the performance of the Company as a whole or a business unit of the Company and may be measured relative to a peer group or index. The Performance Goals may differ from Participant to Participant and from Award to Award. Prior to the Determination Date, the Administrator will determine whether any significant element(s) will be included in or excluded from the calculation of any Performance Goal with respect to any Participant.
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(c) Procedures . To the extent necessary to comply with the performance-based compensation provisions of Code Section 162(m), with respect to any Award granted subject to Performance Goals, within the first twenty-five percent (25%) of the Performance Period, but in no event more than ninety (90) days following the commencement of any Performance Period (or such other time as may be required or permitted by Code Section 162(m)), the Administrator will, in writing, (i) designate one or more Participants to whom an Award will be made, (ii) select the Performance Goals applicable to the Performance Period, (iii) establish the Performance Goals, and amounts of such Awards, as applicable, which may be earned for such Performance Period, and (iv) specify the relationship between Performance Goals and the amounts of such Awards, as applicable, to be earned by each Participant for such Performance Period. Following the completion of each Performance Period, the Administrator will certify in writing whether the applicable Performance Goals have been achieved for such Performance Period. In determining the amounts earned by a Participant, the Administrator will have the right to reduce or eliminate (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Administrator may deem relevant to the assessment of individual or corporate performance for the Performance Period. A Participant will be eligible to receive payment pursuant to an Award for a Performance Period only if the Performance Goals for such period are achieved.
(d) Additional Limitations . Notwithstanding any other provision of the Plan, any Award which is granted to a Participant and is intended to constitute qualified performance based compensation under Code Section 162(m) will be subject to any additional limitations set forth in the Code (including any amendment to Section 162(m)) or any regulations and ruling issued thereunder that are requirements for qualification as qualified performance-based compensation as described in Section 162(m) of the Code, and the Plan will be deemed amended to the extent necessary to conform to such requirements.
12. Compliance with Code Section 409A . Awards will be designed and operated in such a manner that they are either exempt from the application of, or comply with, the requirements of Code Section 409A, except as otherwise determined in the sole discretion of the Administrator. The Plan and each Award Agreement under the Plan is intended to meet the requirements of Code Section 409A and will be construed and interpreted in accordance with such intent, except as otherwise determined in the sole discretion of the Administrator. To the extent that an Award or payment, or the settlement or deferral thereof, is subject to Code Section 409A the Award will be granted, paid, settled or deferred in a manner that will meet the requirements of Code Section 409A, such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under Code Section 409A.
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13. Leaves of Absence . Unless the Administrator provides otherwise, vesting of Awards granted hereunder will be suspended during any unpaid leave of absence. A Service Provider will not cease to be an Employee in the case of (i) any leave of absence approved by the Company, or (ii) transfers between locations of the Company or between the Company, its Parent, or any Subsidiary. For purposes of Incentive Stock Options, no such leave may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then six (6) months and one day following the commencement of such leave any Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option.
14. Transferability of Awards . Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant. If the Administrator makes an Award transferable, such Award may only be transferred (i) by will, (ii) by the laws of descent and distribution, (iii) to a revocable trust, or (iii) as permitted by Rule 701 of the Securities Act of 1933, as amended.
15. Adjustments; Dissolution or Liquidation; Merger or Change in Control .
(a) Adjustments . In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, will adjust the number and class of Shares that may be delivered under the Plan and/or the number, class, and price of Shares covered by each outstanding Award, and the numerical Share limits set forth in Sections 3, 6, 7, 8, 9 and 10 hereof.
(b) Dissolution or Liquidation . In the event of the proposed dissolution or liquidation of the Company, the Administrator will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised, an Award will terminate immediately prior to the consummation of such proposed action.
(c) Change in Control . In the event of a merger of the Company with or into another corporation or other entity or a Change in Control, each outstanding Award will be treated as the Administrator determines (subject to the provisions of the proceeding paragraph) without a Participant’s consent, including, without limitation, that (i) Awards will be assumed, or substantially equivalent Awards will be substituted, by the acquiring or succeeding corporation (the “ Successor Corporation ”) (or an affiliate thereof) with appropriate adjustments as to the number and kind of shares and prices; (ii) upon written notice to a Participant, that the Participant’s Awards will terminate upon or immediately prior to the consummation of such merger or Change in Control; (iii) outstanding Awards will vest and become exercisable, realizable, or payable, or restrictions applicable to an Award will lapse, in whole or in part prior to or upon consummation of such merger or Change in Control, and, to the extent the Administrator determines, terminate upon or immediately prior to the effectiveness of such merger or Change in Control; (iv) (A) the termination of an Award in exchange for an amount of cash and/or property, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Participant’s rights as of the date of the occurrence of the transaction (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction the Administrator determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company without payment), or (B) the replacement of such Award with other rights or property selected by the Administrator in its sole discretion; or (v) any combination of the foregoing. In taking any of the actions permitted under this subsection (c), the Administrator will not be obligated to treat all Awards, all Awards held by a Participant, or all Awards of the same type, similarly.
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In the event that the Successor Corporation does not assume or substitute for the Award, the Participant will fully vest in and have the right to exercise all of his or her outstanding Options and Stock Appreciation Rights, including Shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on Restricted Stock will lapse, and, with respect to Restricted Stock Units, Performance Shares and Performance Units, all Performance Goals or other vesting criteria will be deemed achieved at target levels and all other terms and conditions met. In addition, if an Option or Stock Appreciation Right is not assumed or substituted for in the event of a Change in Control, the Administrator will notify the Participant in writing or electronically that the Option or Stock Appreciation Right will be fully vested and exercisable for a period of time determined by the Administrator in its sole discretion, and the Option or Stock Appreciation Right will terminate upon the expiration of such period.
For the purposes of this subsection (c), an Award will be considered assumed if, following the Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) or, in the case of a Stock Appreciation Right upon the exercise of which the Administrator determines to pay cash or a Performance Share or Performance Unit which the Administrator can determine to pay in cash, the fair market value of the consideration received in the merger or Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change in Control is not solely common stock of the Successor Corporation, the Administrator may, with the consent of the Successor Corporation, provide for the consideration to be received upon the exercise of an Option or Stock Appreciation Right or upon the payout of a Performance Share or Performance Unit, for each Share subject to such Award (or in the case of Performance Units, the number of implied shares determined by dividing the value of the Performance Units by the per share consideration received by holders of Common Stock in the Change in Control), to be solely common stock of the Successor Corporation equal in fair market value to the per share consideration received by holders of Common Stock in the Change in Control.
Notwithstanding anything in this Section 15(c) to the contrary, an Award that vests, is earned or paid-out upon the satisfaction of one or more Performance Goals will not be considered assumed if the Company or its successor modifies any of such Performance Goals without the Participant’s consent; provided, however, a modification to such Performance Goals only to reflect the Successor Corporation’s post-Change in Control corporate structure will not be deemed to invalidate an otherwise valid Award assumption. In the case of an Award providing for the payment of deferred compensation subject to Section 409A of the Code, any payment of such deferred compensation by reason of a Change in Control shall be made only if the Change in Control is one described in subsection (a)(2)(A)(v) of Section 409A and the guidance thereunder and shall be paid consistent with the requirements of Section 409A. If any deferred compensation that would otherwise be payable by reason of a Change in Control cannot be paid by reason of the immediately preceding sentence, it shall be paid as soon as practicable thereafter consistent with the requirements of Section 409A, as determined by the Administrator.
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16. Tax Withholding .
(a) Withholding Requirements . Prior to the delivery of any Shares or cash pursuant to an Award (or exercise thereof), the Company will have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local, foreign or other taxes (including the Participant’s FICA obligation) required to be withheld with respect to such Award (or exercise thereof).
(b) Withholding Arrangements . The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part by (without limitation) (i) paying cash, (ii) electing to have the Company withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the minimum amount required to be withheld, (iii) delivering to the Company already-owned Shares having a Fair Market Value equal to the amount required to be withheld, or (iv) selling a sufficient number of Shares otherwise deliverable to the Participant through such means as the Administrator may determine in its sole discretion (whether through a broker or otherwise) equal to the amount required to be withheld. The amount of the withholding requirement will be deemed to include any amount which the Administrator agrees may be withheld at the time the election is made, not to exceed the amount determined by using the maximum federal, state or local marginal income tax rates applicable to the Participant with respect to the Award on the date that the amount of tax to be withheld is to be determined. The Fair Market Value of the Shares to be withheld or delivered will be determined as of the date that the taxes are required to be withheld.
17. No Effect on Employment or Service . Neither the Plan nor any Award will confer upon a Participant any right with respect to continuing the Participant’s relationship as a Service Provider with the Company, nor will they interfere in any way with the Participant’s right or the Company’s right to terminate such relationship at any time, with or without cause, to the extent permitted by Applicable Laws.
18. Date of Grant . The date of grant of an Award will be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination will be provided to each Participant within a reasonable time after the date of such grant.
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19. Term of Plan . Subject to Section 23 hereof, the Plan will become effective upon its adoption by the Board. It will continue in effect for a term of ten (10) years unless terminated earlier under Section 20 hereof.
20. Amendment and Termination of the Plan .
(a) Amendment and Termination . The Administrator may at any time amend, alter, suspend or terminate the Plan.
(b) Stockholder Approval . The Company will obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.
(c) Effect of Amendment or Termination . No amendment, alteration, suspension, or termination of the Plan will impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of the Plan will not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.
21. Conditions Upon Issuance of Shares .
(a) Legal Compliance . Shares will not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares will comply with Applicable Laws and will be further subject to the approval of counsel for the Company with respect to such compliance.
(b) Investment Representations . As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.
(c) Restrictive Legends . All Award Agreements and all securities of the Company issued pursuant thereto shall bear such legends regarding restrictions on transfer and such other legends as the appropriate officer of the Corporation shall determine to be necessary or advisable to comply with applicable securities and other laws.
22. Inability to Obtain Authority . The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, will relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority will not have been obtained.
23. Stockholder Approval . The Plan will be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted by the Board. Such stockholder approval will be obtained in the manner and to the degree required under Applicable Laws. In the event that stockholder approval is not obtained within twelve (12) months after the date the Plan is adopted by the Board, the Plan and all Awards granted hereunder shall be void ab initio and of no effect. Notwithstanding any other provisions of the Plan, no Awards shall be exercisable until the date of such stockholder approval.
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23. Notification of Election Under Section 83(b) of the Code. If any Service Provider shall, in connection with the acquisition of Shares under the Plan, make the election permitted under Section 83(b) of the Code, such Service Provider shall notify the Company of such election within ten (10) days of filing notice of the election with the Internal Revenue Service and provide the Company with a copy thereof, in addition to any filing and a notification required pursuant to regulations issued under the authority of Section 83(b) of the Code. A Service Provider shall not be permitted to make a Section 83(b) election with respect to an Award of a Restricted Stock Unit.
24. Notification Upon Disqualifying Disposition Under Section 421(b) of the Code. Each Service Provider shall notify the Company of any disposition of Shares issued pursuant to the exercise of an Incentive Stock Option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), within ten (10) days of such disposition.
25. Choice of Law. The Plan and all rules and determinations made and taken pursuant hereto will be governed by the laws of the State of Delaware, to the extent not preempted by federal law, and construed accordingly.
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Exhibit 21
SUBSIDIARIES OF REALCO INTERNATIONAL, INC.
PeerLogix Technologies, Inc., a Delaware corporation, is a subsidiary of Realco International, Inc (“Realco”). Realco has no other subsidiaries.