|
Delaware
|
| |
5699
|
| |
46-1942864
|
|
|
(State or other jurisdiction of
incorporation or organization) |
| |
(Primary Standard Industrial
Classification Code Number) |
| |
(I.R.S. Employer
Identification Number) |
|
|
Thomas J. Poletti
Veronica Lah Manatt, Phelps & Phillips, LLP 695 Town Center Drive, 14th Floor Costa Mesa, CA 92646 (714) 312-7500 |
| |
Andrew M. Tucker
Nelson Mullins Riley & Scarborough LLP 101 Constitution Avenue, NW Suite 900 Washington, D.C. 20001 (202) 689-2000 |
|
| Large accelerated filer ☐ | | | Accelerated filer ☐ | | | Non-accelerated filer ☒ | | |
Smaller reporting company ☒
Emerging growth company ☒ |
|
| | |
Per Share
and Warrant |
| |
Total
|
| ||||||
Public offering price
|
| | | $ | 5.00 | | | | | $ | 10,000,000 | | |
Underwriting discount and commissions(1)
|
| | | $ | 0.40 | | | | | $ | 800,000 | | |
Proceeds, before expenses, to us
|
| | | $ | 4.60 | | | | | $ | 9,200,000 | | |
| | | | | 6 | | | |
| | | | | 18 | | | |
| | | | | 19 | | | |
| | | | | 39 | | | |
| | | | | 41 | | | |
| | | | | 42 | | | |
| | | | | 43 | | | |
| CAPITALIZATION | | | | | 44 | | |
| DILUTION | | | | | 46 | | |
| | | | | 48 | | | |
| | | | | 49 | | | |
| | | | | 56 | | | |
| BUSINESS | | | | | 75 | | |
| | | | | 88 | | | |
| MANAGEMENT | | | | | 92 | | |
| | | | | 96 | | | |
| | | | | 100 | | | |
| | | | | 102 | | | |
| | | | | 104 | | | |
| | | | | 109 | | | |
| | | | | 111 | | | |
| UNDERWRITING | | | | | 117 | | |
| | | | | 124 | | | |
| EXPERTS | | | | | 125 | | |
| | | | | 125 | | | |
|
FINANCIAL STATEMENTS
|
| |
| | |
Year Ended December 31,
|
| |||||||||||||||
| | |
2020
Pro Forma |
| |
2020
Actual |
| |
2019
Actual |
| |||||||||
| | |
(unaudited)
|
| | | | | | | | | | | | | |||
Net revenues
|
| | | $ | 9,801,981 | | | | | $ | 5,239,437 | | | | | $ | 3,034,216 | | |
Cost of net revenues
|
| | | | 6,603,865 | | | | | | 4,685,755 | | | | | | 1,626,505 | | |
Gross profit
|
| | | | 3,198,116 | | | | | | 553,682 | | | | | | 1,407,711 | | |
Operating expenses
|
| | | | 15,316,886 | | | | | | 9,701,572 | | | | | | 6,255,180 | | |
Operating loss
|
| | | | (12,118,771) | | | | | | (9,147,890) | | | | | | (4,847,469) | | |
Other expenses
|
| | | | (2,214,320) | | | | | | (1,566,764) | | | | | | (805,704) | | |
Loss before provision for income taxes
|
| | | | (14,333,091) | | | | | | (10,714,654) | | | | | | (5,653,173) | | |
Provision for income taxes
|
| | | | 13,641 | | | | | | 13,641 | | | | | | 800 | | |
Net loss
|
| | | $ | (14,346,732) | | | | | $ | (10,728,295) | | | | | $ | (5,653,973) | | |
Pro forma earnings per share – basic and diluted(1)
|
| | | | | | | | | | | | | | | | | | |
Basic
|
| | | $ | (1.50) | | | | | | | | | | | | | | |
Diluted
|
| | | $ | (1.50) | | | | | | | | | | | | | | |
Pro forma number of common shares outstanding – basic and
diluted(1) |
| | | | | | | | | | | | | | | | | | |
Basic
|
| | | | 9,569,349 | | | | | | | | | | | | | | |
Diluted
|
| | | | 9,569,349 | | | | | | | | | | | | | | |
| | |
As of December 31, 2020
|
| |||||||||||||||
| | |
Actual
|
| |
Pro Forma
|
| |
Pro Forma as
Adjusted |
| |||||||||
| | | | | | | | |
(unaudited)
|
| |
(unaudited)
|
| ||||||
Total cash
|
| | | $ | 575,986 | | | | | $ | 627,301 | | | | | $ | 6,047,801 | | |
Total current assets
|
| | | | 2,008,656 | | | | | | 2,226,773 | | | | | | 7,647,273 | | |
Total assets
|
| | | | 16,352,169 | | | | | | 23,832,676 | | | | | | 29,253,176 | | |
Total current liabilities including current portion of long-term debt
|
| | | | 21,494,505 | | | | | | 23,342,302 | | | | | | 20,146,987 | | |
Total long-term obligations
|
| | | | 1,931,124 | | | | | | 2,207,878 | | | | | | 1,207,878 | | |
Total liabilities
|
| | | | 22,209,814 | | | | | | 24,334,365 | | | | | | 21,354,865 | | |
Total stockholders’ deficit
|
| | | | (5,857,645) | | | | | | (501,689) | | | | | | 7,898,311 | | |
Total liabilities and stockholders’ deficit
|
| | | $ | 16,352,169 | | | | | $ | 23,832,676 | | | | | $ | 29,253,176 | | |
| | |
as of December 31, 2020
|
| |||||||||||||||||||||||||||
| | |
DBG
|
| |
H&J
|
| |
Total
|
| |
Pro Forma
|
| |
Pro Forma
as Adjusted |
| |||||||||||||||
Cash and cash equivalents
|
| | | $ | 575,986 | | | | | $ | 51,315 | | | | | $ | 627,301 | | | | | $ | 5,420,500 | | | | | $ | 6,047,801 | | |
Indebtedness, including current portion
|
| | | $ | 22,209,814 | | | | | $ | 1,544,551 | | | | | $ | 23,754,365 | | | | | | | | | | | $ | 21,354,865 | | |
Debt
|
| | | $ | 14,109,041 | | | | | $ | 972,695 | | | | | | 15,081,736 | | | | | $ | (3,415,815) | | | | | | 11,665,921 | | |
DBG preferred stock, $0.0001 par
value, 125,000,000 shares authorized (actual), 10,000,000 shares authorized (pro forma and pro forma as adjusted), 62,924,710 shares issued and outstanding (actual), no shares issued and outstanding (pro forma as adjusted) |
| | | | 6,291 | | | | | | — | | | | | | 6,291 | | | | | | (6,291) | | | | | | — | | |
DBG common stock, $0.0001 par
value: 200,000,000 shares authorized (actual), 100,000,000 shares authorized (pro forma and pro forma as adjusted), 10,377,615 shares issued and outstanding (actual); 7,569,349 issued and outstanding (pro forma); 9,569,349 (pro forma as adjusted) |
| | | | 1,038 | | | | | | — | | | | | | 1,038 | | | | | | (83) | | | | | | 955 | | |
Additional paid-in capital
|
| | | | 27,481,023 | | | | | | 102,083 | | | | | | 27,583,106 | | | | | | 19,422,189 | | | | | | 47,005,295 | | |
Accumulated deficit
|
| | | | (33,345,997) | | | | | | (1,284,027) | | | | | | (34,630,024) | | | | | | — | | | | | | (34,630,024) | | |
Total stockholders’ equity (deficit)
|
| | | $ | (5,857,645) | | | | | $ | (1,181,944) | | | | | $ | (7,039,589) | | | | | $ | 19,415,815 | | | | | $ | 12,376,226 | | |
Total capitalization
|
| | | $ | 8,251,396 | | | | | $ | (209,249) | | | | | $ | 8,042,147 | | | | | $ | 16,000,000 | | | | | $ | 24,042,147 | | |
|
Assumed public offering price per share
|
| | | | | | | | | $ | 5.00 | | |
|
Pro forma net tangible book value per share as of December 31, 2020
|
| | | $ | (2.91) | | | | | | | | |
|
Increase in pro forma net tangible book value in this offering
|
| | | $ | 1.49 | | | | | | | | |
|
Pro forma net tangible book value per share after this offering
|
| | | | | | | | | $ | (1.42) | | |
|
Dilution in pro forma net tangible book value per share to new investors in this
offering |
| | | | | | | | | $ | 3.58 | | |
| | |
Shares Purchased
|
| |
Total Consisderation
|
| |
Average
Price Per Share |
| |||||||||||||||||||||
| | |
Number
|
| |
Percentage
|
| |
Number
|
| |
Percentage
|
| ||||||||||||||||||
Existing Stockholders
|
| | | | 7,569,349 | | | | | | 79.1% | | | | | $ | 19,453,996 | | | | | | 66.0% | | | | | $ | 2.57 | | |
New investors in this offering
|
| | | | 2,000,000 | | | | | | 20.9% | | | | | | 10,000,000 | | | | | | 34.0% | | | | | $ | 5.00 | | |
Total capitalization
|
| | | | 9,569,349 | | | | | | 100.0% | | | | | $ | 29,453,996 | | | | | | 100.0% | | | | | | | | |
| | | | | | | | |
Year Ended
December 31, |
| |||||||||
| | |
2020
Pro Forma |
| |
2020
Actual |
| |
2019
Actual |
| |||||||||
| | | | | (unaudited) | | | | | | | | | | | | | | |
Net revenues
|
| | | $ | 9,801,981 | | | | | $ | 5,239,437 | | | | | $ | 3,034,216 | | |
Cost of net revenues
|
| | | | 6,603,865 | | | | | | 4,685,755 | | | | | | 1,626,505 | | |
Gross profit
|
| | | | 3,198,116 | | | | | | 553,682 | | | | | | 1,407,711 | | |
Operating expenses
|
| | | | 15,316,886 | | | | | | 9,701,572 | | | | | | 6,255,180 | | |
Operating loss
|
| | | | (12,118,771) | | | | | | (9,147,890) | | | | | | (4,847,469) | | |
Other expenses
|
| | | | (2,214,320) | | | | | | (1,566,764) | | | | | | (805,704) | | |
Loss before provision for income taxes
|
| | | | (14,333,091) | | | | | | (10,714,654) | | | | | | (5,653,173) | | |
Provision for income taxes
|
| | | | 13,641 | | | | | | 13,641 | | | | | | 800 | | |
Net loss
|
| | | $ | (14,346,732) | | | | | $ | (10,728,295) | | | | | $ | (5,653,973) | | |
| | |
As of
December 31, 2020 |
| |||||||||
| | |
Actual
|
| |
Pro Forma
|
| ||||||
| | | | | | | | |
(unaudited)
|
| |||
Total cash
|
| | | $ | 575,986 | | | | | $ | 627,301 | | |
Total current assets
|
| | | | 2,008,656 | | | | | | 2,226,773 | | |
Total assets
|
| | | | 16,352,169 | | | | | | 23,832,676 | | |
Total current liabilities including current portion of long-term debt
|
| | | | 20,278,690 | | | | | | 22,126,487 | | |
Total long-term obligations
|
| | | | 1,931,124 | | | | | | 2,207,878 | | |
Total liabilities
|
| | | | 22,209,814 | | | | | | 24,334,365 | | |
Total stockholders’ deficit
|
| | | | (5,857,645) | | | | | | (501,689) | | |
Total liabilities and stockholders’ deficit
|
| | | $ | 16,352,169 | | | | | $ | 23,832,676 | | |
| | |
DBG
|
| |
Bailey
|
| |
H&J
|
| |
Total
|
| |
Pro Forma
Adjustments |
| |
Pro Forma
Combined |
| ||||||||||||||||||
Net revenues
|
| | | $ | 5,239,437 | | | | | $ | 2,019,823 | | | | | $ | 2,542,721 | | | | | $ | 9,801,981 | | | | | $ | — | | | | | $ | 9,801,981 | | |
Cost of net revenues
|
| | | | 4,685,755 | | | | | | 1,020,237 | | | | | | 897,873 | | | | | | 6,603,865 | | | | | | — | | | | | | 6,603,865 | | |
Gross profit
|
| | | | 553,682 | | | | | | 999,586 | | | | | | 1,644,848 | | | | | | 3,198,116 | | | | | | — | | | | | | 3,198,116 | | |
Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
General and administrative
|
| | | | 7,149,210 | | | | | | 1,439,879 | | | | | | 1,044,397 | | | | | | 9,633,486 | | | | | | 1,484,257(a) | | | | | | 11,117,743 | | |
Sales and marketing
|
| | | | 576,469 | | | | | | 483,657 | | | | | | 1,163,124 | | | | | | 2,223,251 | | | | | | — | | | | | | 2,223,251 | | |
Distribution
|
| | | | 342,466 | | | | | | — | | | | | | — | | | | | | 342,466 | | | | | | — | | | | | | 342,466 | | |
Loss on disposal of property and equipment
|
| | | | 848,927 | | | | | | — | | | | | | — | | | | | | 848,927 | | | | | | — | | | | | | 848,927 | | |
Impairment of intangible assets
|
| | | | 784,500 | | | | | | — | | | | | | — | | | | | | 784,500 | | | | | | — | | | | | | 784,500 | | |
Total operating expenses
|
| | | | 9,701,572 | | | | | | 1,923,536 | | | | | | 2,207,521 | | | | | | 13,832,629 | | | | | | 1,484,257 | | | | | | 15,316,886 | | |
Loss from operations
|
| | | | (9,147,890) | | | | | | (923,950) | | | | | | (562,673) | | | | | | (10,634,514) | | | | | | (1,484,257) | | | | | | (12,118,771) | | |
Other income (expense): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense
|
| | | | (1,599,518) | | | | | | (25,396) | | | | | | (92,270) | | | | | | (1,717,184) | | | | | | (540,000)(b) | | | | | | (2,257,184) | | |
Other non-operating income (expenses)
|
| | | | 32,754 | | | | | | — | | | | | | 10,110 | | | | | | 42,864 | | | | | | — | | | | | | 42,864 | | |
Total other income (expense), net
|
| | | | (1,566,764) | | | | | | (25,396) | | | | | | (82,160) | | | | | | (1,674,320) | | | | | | (540,000) | | | | | | (2,214,320) | | |
Provision for income taxes
|
| | | | 13,641 | | | | | | — | | | | | | — | | | | | | 13,641 | | | | | | — | | | | | | 13,641 | | |
Net loss
|
| | | $ | (10,728,295) | | | | | $ | (949,346) | | | | | $ | (644,834) | | | | | $ | (12,322,475) | | | | | $ | (2,024,257) | | | | | $ | (14,346,732) | | |
| | |
DBG
|
| |
Bailey
|
| |
H&J
|
| |
Total
|
| |
Pro Forma
Adjustments |
| |
Pro Forma
Combined |
| ||||||||||||||||||
Net revenues
|
| | | $ | 3,034,216 | | | | | $ | 27,099,718 | | | | | $ | 3,325,761 | | | | | $ | 33,459,695 | | | | | $ | — | | | | | $ | 33,459,695 | | |
Cost of net revenues
|
| | | | 1,626,505 | | | | | | 12,663,514 | | | | | | 1,202,819 | | | | | | 15,492,838 | | | | | | — | | | | | | 15,492,838 | | |
Gross profit
|
| | | | 1,407,711 | | | | | | 14,436,204 | | | | | | 2,122,943 | | | | | | 17,966,858 | | | | | | — | | | | | | 17,966,858 | | |
Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
General and administrative
|
| | | | 4,584,010 | | | | | | 14,524,832 | | | | | | 717,901 | | | | | | 19,826,743 | | | | | | 1,797,781(a) | | | | | | 21,624,524 | | |
Sales and marketing
|
| | | | 869,285 | | | | | | 4,535,276 | | | | | | 1,577,478 | | | | | | 6,982,039 | | | | | | — | | | | | | 6,982,039 | | |
Distribution
|
| | | | 801,885 | | | | | | — | | | | | | — | | | | | | 801,885 | | | | | | — | | | | | | 801,885 | | |
Loss on disposal of property and equipment
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Impairment of intangible assets
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Total operating
expenses |
| | | | 6,255,180 | | | | | | 19,060,108 | | | | | | 2,295,379 | | | | | | 27,610,667 | | | | | | 1,797,781 | | | | | | 29,408,449 | | |
Loss from operations
|
| | | | (4,847,469) | | | | | | (4,623,904) | | | | | | (172,437) | | | | | | (9,643,810) | | | | | | (1,797,781) | | | | | | (11,441,591) | | |
Other income (expense): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest expense
|
| | | | (772,592) | | | | | | (103,520) | | | | | | (53,955) | | | | | | (930,067) | | | | | | (540,000)(b) | | | | | | (1,470,067) | | |
Other non-operating income (expenses)
|
| | | | (33,112) | | | | | | (49,558) | | | | | | 50,000 | | | | | | (32,670) | | | | | | — | | | | | | (32,670) | | |
Total other income (expense), net
|
| | | | (805,704) | | | | | | (153,078) | | | | | | (3,955) | | | | | | (962,737) | | | | | | (540,000) | | | | | | (1,502,737) | | |
Provision for income taxes
|
| | | | 800 | | | | | | 14,890 | | | | | | — | | | | | | 15,690 | | | | | | — | | | | | | 15,690 | | |
Net loss
|
| | | $ | (5,653,973) | | | | | $ | (4,791,872) | | | | | $ | (176,391) | | | | | $ | (10,622,236) | | | | | $ | (2,337,781) | | | | | $ | (12,960,018) | | |
| | |
DBG
|
| |
H&J
|
| |
Total
|
| |
Pro Forma
Adjustments |
| | | | |
Pro Forma
Combined |
| |||||||||||||||
ASSETS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents
|
| | | $ | 575,986 | | | | | $ | 51,315 | | | | | $ | 627,301 | | | | | $ | — | | | | | | | | $ | 627,301 | | |
Accounts receivable, net
|
| | | | 35,532 | | | | | | 38,689 | | | | | | 74,221 | | | | | | — | | | | | | | | | 74,221 | | |
Due from factor, net
|
| | | | 210,033 | | | | | | — | | | | | | 210,033 | | | | | | — | | | | | | | | | 210,033 | | |
Related party receivable
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | | | | — | | |
Inventory
|
| | | | 1,163,279 | | | | | | 73,690 | | | | | | 1,236,969 | | | | | | — | | | | | | | | | 1,236,969 | | |
Prepaid expenses
|
| | | | 23,826 | | | | | | 54,423 | | | | | | 78,249 | | | | | | — | | | | | | | | | 78,249 | | |
Total current assets
|
| | | | 2,008,656 | | | | | | 218,117 | | | | | | 2,226,773 | | | | | | — | | | | | | | | | 2,226,773 | | |
Deferred offering costs
|
| | | | 214,647 | | | | | | — | | | | | | 214,647 | | | | | | — | | | | | | | | | 214,647 | | |
Property, equipment and software, net
|
| | | | 62,313 | | | | | | 140,074 | | | | | | 202,387 | | | | | | (202,387) | | | |
(a)
|
| | | | — | | |
Goodwill
|
| | | | 6,479,218 | | | | | | — | | | | | | 6,479,218 | | | | | | 2,995,407 | | | |
(c)
|
| | | | 9,474,625 | | |
Intangible assets, net
|
| | | | 7,494,667 | | | | | | — | | | | | | 7,494,667 | | | | | | 4,324,880 | | | |
(a), (c)
|
| | | | 11,819,547 | | |
Deposits
|
| | | | 92,668 | | | | | | 4,416 | | | | | | 97,084 | | | | | | — | | | | | | | | | 97,084 | | |
Total assets
|
| | | $ | 16,352,169 | | | | | $ | 362,607 | | | | | $ | 16,714,776 | | | | | $ | 7,117,900 | | | | | | | | $ | 23,832,676 | | |
LIABILITIES AND STOCKHOLDERS’
DEFICIT |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accounts payable
|
| | | $ | 5,668,703 | | | | | $ | 187,516 | | | | | $ | 5,856,219 | | | | | $ | — | | | | | | | | $ | 5,856,219 | | |
Accrued expenses and other liabilities
|
| | | | 1,245,646 | | | | | | 119,538 | | | | | | 1,365,184 | | | | | | — | | | | | | | | | 1,365,184 | | |
Deferred revenue
|
| | | | 1,667 | | | | | | 264,802 | | | | | | 266,469 | | | | | | — | | | | | | | | | 266,469 | | |
Due to related parties
|
| | | | 441,453 | | | | | | — | | | | | | 441,453 | | | | | | — | | | | | | | | | 441,453 | | |
Convertible notes, current
|
| | | | 700,000 | | | | | | — | | | | | | 700,000 | | | | | | — | | | | | | | | | 700,000 | | |
Accrued interest payable
|
| | | | 737,039 | | | | | | — | | | | | | 737,039 | | | | | | 1,080,000 | | | |
(b)
|
| | | | 1,817,039 | | |
Note payable – related party
|
| | | | 137,856 | | | | | | 635,000 | | | | | | 772,856 | | | | | | (500,000) | | | |
(c)
|
| | | | 272,856 | | |
Venture debt, net of discount
|
| | | | 5,854,326 | | | | | | — | | | | | | 5,854,326 | | | | | | — | | | | | | | | | 5,854,326 | | |
Loan payable, current
|
| | | | 992,000 | | | | | | 60,941 | | | | | | 1,052,941 | | | | | | — | | | | | | | | | 1,052,941 | | |
Promissory note payable
|
| | | | 4,500,000 | | | | | | — | | | | | | 4,500,000 | | | | | | — | | | | | | | | | 4,500,000 | | |
Total current liabilities
|
| | | | 20,278,690 | | | | | | 1,267,797 | | | | | | 21,546,487 | | | | | | 580,000 | | | | | | | | | 22,126,487 | | |
Convertible notes
|
| | | | 1,215,815 | | | | | | — | | | | | | 1,215,815 | | | | | | — | | | | | | | | | 1,215,815 | | |
Loan payable
|
| | | | 709,044 | | | | | | 276,754 | | | | | | 985,798 | | | | | | — | | | | | | | | | 985,798 | | |
Warrant liability
|
| | | | 6,265 | | | | | | — | | | | | | 6,265 | | | | | | — | | | | | | | | | 6,265 | | |
Total liabilities
|
| | | | 22,209,814 | | | | | | 1,544,551 | | | | | | 23,754,365 | | | | | | 580,000 | | | | | | | | | 24,334,365 | | |
Commitments and contingencies (Note 13)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Stockholders’ deficit: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Series Seed convertible preferred stock
|
| | | | 2,071 | | | | | | — | | | | | | 2,071 | | | | | | — | | | | | | | | | 2,071 | | |
Series A convertible preferred stock
|
| | | | 565 | | | | | | — | | | | | | 565 | | | | | | — | | | | | | | | | 565 | | |
Series A-2 convertible preferred stock
|
| | | | 593 | | | | | | — | | | | | | 593 | | | | | | — | | | | | | | | | 593 | | |
Series A-3 convertible preferred stock
|
| | | | 904 | | | | | | — | | | | | | 904 | | | | | | — | | | | | | | | | 904 | | |
Series CF convertible preferred stock
|
| | | | 83 | | | | | | — | | | | | | 83 | | | | | | — | | | | | | | | | 83 | | |
Series B convertible preferred stock
|
| | | | 2,075 | | | | | | — | | | | | | 2,075 | | | | | | — | | | | | | | | | 2,075 | | |
Common stock
|
| | | | 1,038 | | | | | | — | | | | | | 1,038 | | | | | | 15,167 | | | |
(c)
|
| | | | 16,205 | | |
Additional paid-in capital
|
| | | | 27,481,023 | | | | | | 102,083 | | | | | | 27,583,106 | | | | | | 8,982,750 | | | |
(c)
|
| | | | 36,565,856 | | |
Accumulated deficit
|
| | | | (33,345,997) | | | | | | (1,284,027) | | | | | | (34,630,024) | | | | | | (2,460,017) | | | | | | | | | (37,090,041) | | |
Total stockholders’ deficit
|
| | | | (5,857,645) | | | | | | (1,181,944) | | | | | | (7,039,589) | | | | | | 6,537,900 | | | | | | | | | (501,689) | | |
Total liabilities and stockholders’ deficit
|
| | | $ | 16,352,169 | | | | | $ | 362,607 | | | | | $ | 16,714,776 | | | | | $ | 7,117,900 | | | | | | | | $ | 23,832,676 | | |
|
Series B preferred stock
|
| | | $ | 11,000,000 | | |
|
Promissory note payable
|
| | | | 4,500,000 | | |
|
Purchase price consideration
|
| | | $ | 15,500,000 | | |
| | |
Preliminary
Purchase Price Allocation |
| |||
Assets acquired
|
| | | $ | 4,705,086 | | |
Goodwill
|
| | | | 6,479,218 | | |
Intangible assets
|
| | | | 8,600,000 | | |
Liabilities assumed
|
| | | | (4,284,304) | | |
Purchase price consideration
|
| | | $ | 15,500,000 | | |
|
Common stock
|
| | | $ | 9,100,000 | | |
|
Purchase price consideration
|
| | | $ | 9,100,000 | | |
| | |
Preliminary
Purchase Price Allocation |
| |||
Assets acquired
|
| | | $ | 362,607 | | |
Goodwill
|
| | | | 2,995,407 | | |
Intangible assets
|
| | | | 6,888,620 | | |
Liabilities assumed
|
| | | | (1,146,634) | | |
Purchase price consideration
|
| | | $ | 9,100,000 | | |
| | |
Year Ended
December 31, |
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Net revenues
|
| | | $ | 5,239,437 | | | | | $ | 3,034,216 | | |
Cost of net revenues
|
| | | | 4,685,755 | | | | | | 1,626,505 | | |
Gross profit
|
| | | | 553,682 | | | | | | 1,407,711 | | |
Operating expenses
|
| | | | 9,701,572 | | | | | | 6,255,180 | | |
Operating loss
|
| | | | (9,147,890) | | | | | | (4,847,469) | | |
Other expenses
|
| | | | (1,566,764) | | | | | | (805,704) | | |
Loss before provision for income taxes
|
| | | | (10,714,654) | | | | | | (5,653,173) | | |
Provision for income taxes
|
| | | | 13,641 | | | | | | 800 | | |
Net loss
|
| | | $ | (10,728,295) | | | | | $ | (5,653,973) | | |
| | |
Year Ended
December 31, |
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Net cash provided by operating activities: | | | | ||||||||||
Net loss
|
| | | $ | (10,728,295) | | | | | $ | (5,653,973) | | |
Non-cash adjustments
|
| | | $ | 2,413,918 | | | | | $ | 371,324 | | |
Change in operating assets and liabilities
|
| | | $ | 6,252,790 | | | | | $ | 1,413,284 | | |
Net cash used in operating activities
|
| | | $ | (2,061,587) | | | | | $ | (3,869,365) | | |
Net cash used in investing activities
|
| | | $ | 204,884 | | | | | $ | 6,642 | | |
Net cash provided by financing activities
|
| | | $ | 2,392,220 | | | | | $ | 3,318,711 | | |
Net change in cash
|
| | | $ | 535,517 | | | | | $ | (544,012) | | |
Statement of Operations
|
| |
December 31,
2019 |
| |||
Net revenue
|
| | | $ | 27,099,718 | | |
Cost of net revenue
|
| | | $ | 12,663,514 | | |
Gross profit
|
| | | $ | 14,436,204 | | |
Operating expenses
|
| | | $ | 19,060,108 | | |
Operating income
|
| | | $ | (4,623,904) | | |
Other expense
|
| | | $ | (153,078) | | |
Loss before provision for income taxes
|
| | | $ | (4,776,982) | | |
Provision for income taxes
|
| | | $ | (14,890) | | |
Net loss
|
| | | $ | (4,791,872) | | |
| | |
December 31,
2019 |
| | |||||
Net cash used in operating activities: | | | | | | | | | | |
Net loss
|
| | | $ | (4,791,872) | | | | ||
Non-cash adjustments
|
| | | $ | 432,268 | | | | ||
Change in operating assets and liabilities
|
| | | $ | 1,571,995 | | | | ||
Net cash used in operating activities
|
| | | $ | (2,787,609) | | | | ||
Net cash used in investing activities
|
| | | $ | (557,328) | | | | ||
Net cash provided by financing activities
|
| | | $ | 2,741,350 | | | | ||
Net change in cash
|
| | | $ | (603,587) | | | |
| | |
Year Ended
December 31, |
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Net revenues
|
| | | $ | 2,542,721 | | | | | $ | 3,325,761 | | |
Cost of net revenues
|
| | | | 897,873 | | | | | | 1,202,819 | | |
Gross profit
|
| | | | 1,644,848 | | | | | | 2,122,943 | | |
Operating expenses
|
| | | | 2,207,521 | | | | | | 2,295,379 | | |
Operating loss
|
| | | | (562,673) | | | | | | (172,437) | | |
Other expenses
|
| | | | 143,228 | | | | | | (3,955) | | |
| | |
Year Ended
December 31, |
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Loss before provision for income taxes
|
| | | | (419,446) | | | | | | (176,391) | | |
Provision for income taxes
|
| | | | — | | | | | | — | | |
Net loss
|
| | | $ | (419,446) | | | | | $ | (176,391) | | |
| | |
Year Ended
December 31, |
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Net cash provided by operating activities: | | | | | | | | | | | | | |
Net Loss
|
| | | $ | (419,446) | | | | | $ | (176,391) | | |
Non-cash adjustments
|
| | | $ | (33,742) | | | | | $ | 82,422 | | |
Change in operating assets and liabilities
|
| | | $ | 61,146 | | | | | $ | 115,377 | | |
Net cash used in operating activities
|
| | | $ | (392,042) | | | | | $ | 21,407 | | |
Net cash used in investing activities
|
| | | $ | (65,750) | | | | | $ | (254,437) | | |
Net cash provided by financing activities
|
| | | $ | 490,598 | | | | | $ | 237,002 | | |
Net change in cash
|
| | | $ | 32,806 | | | | | $ | 3,972 | | |
| | |
Year Ended
December 31, |
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Net revenues
|
| | | $ | 9,801,981 | | | | | $ | 33,459,695 | | |
Cost of net revenues
|
| | | | 6,603,865 | | | | | | 15,492,838 | | |
Gross profit
|
| | | | 3,198,116 | | | | | | 17,966,858 | | |
Operating expenses
|
| | | | 15,316,886 | | | | | | 29,408,449 | | |
Operating loss
|
| | | | (12,118,771) | | | | | | (11,441,591) | | |
Other expenses
|
| | | | (2,214,320) | | | | | | (1,502,737) | | |
Loss before provision for income taxes
|
| | | | (14,333,091) | | | | | | (12,944,328) | | |
Provision for income taxes
|
| | | | 13,641 | | | | | | 15,690 | | |
Net loss
|
| | | $ | (14,346,732) | | | | | $ | (12,960,018) | | |
| | |
Year Ended
December 31, |
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Net cash provided by operating activities: | | | | | | | | | | | | | |
Net Loss
|
| | | $ | (14,121,344) | | | | | $ | (12,960,017) | | |
Non-cash adjustments
|
| | | $ | 3,913,836 | | | | | $ | 2,683,795 | | |
Change in operating assets and liabilities
|
| | | $ | 6,952,663 | | | | | $ | 3,640,655 | | |
Net cash used in operating activities
|
| | | $ | (3,254,845) | | | | | $ | (6,635,567) | | |
Net cash used in investing activities
|
| | | $ | 139,134 | | | | | $ | (805,123) | | |
Net cash provided by financing activities
|
| | | $ | 3,382,818 | | | | | $ | 6,297,063 | | |
Net change in cash
|
| | | $ | 267,107 | | | | | $ | (1,143,627) | | |
Location
|
| |
Type
|
| |
Square
Footage (approximate) |
| |
Lease
Expiration |
| ||||||
Vernon, California
|
| |
Corporate Warehouse and Distribution Center
|
| | | | 42,206 | | | | | | 2023 | | |
Los Angeles, California
|
| | Showroom | | | | | 2,000 | | | | | | 2020(1) | | |
Austin, Texas
|
| | Interim Corporate Headquarters | | | | | 500 | | | | | | 2021(2) | | |
Dallas, Texas
|
| | Office Space and Showroom | | | | | 2,860 | | | | | | 2022 | | |
Houston, Texas
|
| | Showroom | | | | | 1,117 | | | | | | 2021 | | |
New Orleans, Louisiana
|
| | Showroom | | | | | 1,015 | | | | | | 2021 | | |
Name
|
| |
Age
|
| |
Position
|
|
Executive Officers and Directors | | | | | | | |
John “Hil” Davis
|
| | 48 | | | President and Chief Executive Officer | |
Laura Dowling
|
| | 42 | | | Chief Marketing Officer | |
Reid Yeoman
|
| | 38 | | | Chief Financial Officer | |
Mark T. Lynn
|
| | 37 | | | Director | |
Trevor Pettennude
|
| | 53 | | | Director | |
Director Nominees | | | | | | | |
Jameeka Aaron
|
| | 40 | | | Director Nominee | |
Moise Emquies
|
| | 58 | | | Director Nominee | |
Name and Principal Position
|
| |
Fiscal
Year |
| |
Salary(1)
|
| |
Bonus
|
| |
Option
Awards |
| |
All Other
Compensation |
| |
Total
|
| ||||||||||||||||||
John “Hil” Davis
|
| | | | 2020 | | | | | $ | 222,500 | | | | | $ | | | | | $ | | | | | $ | | | | | $ | | | ||||
President and Chief Executive Officer
|
| | | | 2019 | | | | | $ | 180,000 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | | | |
Laura Dowling
|
| | | | 2020 | | | | | $ | 258,231 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | | | |
Chief Marketing Officer
|
| | | | 2019 | | | | | $ | 211,538 | | | | | $ | — | | | | | $ | 16,836 | | | | | $ | — | | | | | $ | | | |
Reid Yeoman
|
| | | | 2020 | | | | | $ | 225,000 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | | | |
Chief Financial Officer(1)
|
| | | | 2019 | | | | | $ | 34,615 | | | | | $ | — | | | | | $ | 12,078 | | | | | $ | — | | | | | $ | | | |
Name
|
| |
Title
|
| |
Description
|
| |
Total amount
owed as of March 2021 |
| |
Cash be paid
with net proceeds |
| |
Amounts to be
converted |
| |
Shares to
be issued upon conversion |
| ||||||||||||
Mark Lynn
|
| | Director | | | Salary owed | | | | $ | 194,568 | | | | | $ | 144,568 | | | | | $ | 50,000 | | | | | | 14,286 | | |
Hil Davis
|
| |
Chief Executive
Officer / Chairman |
| |
Salary / expenses not reimbursed;
short term loan payable |
| | | $ | 369,741 | | | | | | | | | | | $ | 369,741 | | | | | | 105,641 | | |
Laura Dowling
|
| |
Chief Marketing
Officer |
| | Unreimbursed moving / relocation expenses; additional outstanding sign-on bonus | | | | $ | 127,706 | | | | | $ | 127,706 | | | | | | — | | | | | | — | | |
Trevor Pettennude
|
| | Director | | | Short-term loan payable | | | | $ | 22,856 | | | | | | | | | | | $ | 22,856 | | | | | | 6,530 | | |
| | |
Immediately Before Offering
|
| |
Immediately After Offering
|
| ||||||||||||||||||
Name of Beneficial Owner
|
| |
Number of
Shares Beneficially Owned |
| |
Percentage of
Shares Outstanding |
| |
Number of
Shares Beneficially Owned |
| |
Percentage of
Shares Outstanding |
| ||||||||||||
Executive Officers and Directors | | | | | | | | | | | | | | | | | | | | | | | | | |
John “Hil” Davis(1)(2)
|
| | | | 1,713,641 | | | | | | 18.8% | | | | | | 1,713,641 | | | | | | 15.4% | | |
Laura Dowling(1)(3)
|
| | | | 334,667 | | | | | | 4.3% | | | | | | 334,667 | | | | | | 3.4% | | |
Reid Yeoman(1)(4)
|
| | | | 114,000 | | | | | | 1.5% | | | | | | 114,000 | | | | | | 1.2% | | |
Mark Lynn(2)(5)
|
| | | | 507,386 | | | | | | 6.5% | | | | | | 335,297 | | | | | | 5.2% | | |
Trevor Pettennude(2)(6)
|
| | | | 328,625 | | | | | | 4.3% | | | | | | 328,625 | | | | | | 3.4% | | |
Director Nominees(7) | | | | | | | | | | | | | | | | | | | | | | | | | |
Jameeka Aaron
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Moise Emquies
|
| | | | | | | | | | | | | | | | | | | | | | | | |
All executive officers, directors and director nominees as a group (7 persons)(2)(8)
|
| | | | 2,998,319 | | | | | | 30.0% | | | | | | 2,998,319 | | | | | | 25.0% | | |
Additional 5% Stockholders | | | | | | | | | | | | | | | | | | | | | | | | | |
Drew Jones(9)
|
| | | | 1,820,000 | | | | | | 24.2% | | | | | | 1,820,000 | | | | | | 24.2% | | |
2736 Routh Street
Dallas, Texas 75201 |
| | | | | | | | | |
Underwriter
|
| |
Number of
Shares of common stock and warrants |
| |||
Kingswood Capital Markets, division of Benchmark Investments, Inc.
|
| | | | | | |
Total
|
| | | | 2,000,000 | | |
| | |
Per Share
and Warrant |
| |
Total
Without Exercise of Over- Allotment Option |
| |
Total With
Exercise of Over- Allotment Option |
| |||||||||
Public offering price
|
| | | $ | 5.00 | | | | | $ | | | | | $ | | | ||
Underwriting discount and commissions
|
| | | $ | | | | | $ | | | | | $ | | | |||
Proceeds, before expenses, to DBG
|
| | | $ | | | | | $ | | | | | $ | | | |
| | |
Page
|
| |||
| | | | F-2 | | | |
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2020 AND 2019 AND FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019:
|
| | | | | | |
| | | | F-3 – F-4 | | | |
| | | | F-5 | | | |
| | | | F-6 | | | |
| | | | F-7 | | | |
| | | | F-9 – F-31 | | |
|
/s/ dbbmckennon
|
| | | |
| | |
December 31,
|
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
ASSETS | | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | | |
Cash and cash equivalents
|
| | | $ | 575,986 | | | | | $ | 40,469 | | |
Accounts receivable, net
|
| | | | 35,532 | | | | | | — | | |
Due from factor, net
|
| | | | 210,033 | | | | | | — | | |
Inventory
|
| | | | 1,163,279 | | | | | | 1,061,969 | | |
Prepaid expenses
|
| | | | 23,826 | | | | | | 63,516 | | |
Total current assets
|
| | | | 2,008,656 | | | | | | 1,165,954 | | |
Deferred offering costs
|
| | | | 214,647 | | | | | | | | |
Property, equipment and software, net
|
| | | | 62,313 | | | | | | 72,593 | | |
Goodwill
|
| | | | 6,479,218 | | | | | | — | | |
Intangible assets, net
|
| | | | 7,494,667 | | | | | | — | | |
Deposits
|
| | | | 92,668 | | | | | | 43,510 | | |
Total assets
|
| | | $ | 16,352,169 | | | | | $ | 1,282,057 | | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT | | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | | |
Accounts payable
|
| | | $ | 5,668,703 | | | | | $ | 1,597,770 | | |
Accrued expenses and other liabilities
|
| | | | 1,245,646 | | | | | | 1,121,317 | | |
Deferred revenue
|
| | | | 1,667 | | | | | | 15,231 | | |
Due to related parties
|
| | | | 441,453 | | | | | | 263,427 | | |
Convertible notes, current
|
| | | | 700,000 | | | | | | — | | |
Accrued interest payable
|
| | | | 737,039 | | | | | | 129,982 | | |
Note payable – related party
|
| | | | 137,856 | | | | | | 115,000 | | |
Venture debt, net of discount
|
| | | | 5,854,326 | | | | | | 4,382,549 | | |
Loan payable, current
|
| | | | 992,000 | | | | | | — | | |
Promissory note payable
|
| | | | 4,500,000 | | | | | | — | | |
Total current liabilities
|
| | | | 20,278,690 | | | | | | 7,625,276 | | |
Convertible notes
|
| | | | 1,215,815 | | | | | | 799,280 | | |
Loan payable
|
| | | | 709,044 | | | | | | — | | |
Warrant liability
|
| | | | 6,265 | | | | | | 7,700 | | |
Total liabilities
|
| | | | 22,209,814 | | | | | | 8,432,256 | | |
Commitments and contingencies (Note 13) | | | | | | | | | | | | | |
Stockholders’ deficit: | | | | | | | | | | | | | |
Series Seed convertible preferred stock, $0.0001 par, 20,714,518 shares
authorized, 20,714,518 shares issued and outstanding at both December 31, 2020 and 2019. Convertible into one share of common stock. Liquidation preference of $5,633,855 as of both December 31, 2020 and 2019 |
| | | | 2,071 | | | | | | 2,071 | | |
| | |
December 31,
|
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Series A convertible preferred stock, $0.0001 par, 14,481,413 shares
authorized, 5,654,072 shares issued and outstanding at both December 31, 2020 and 2019. Convertible into one share of common stock. Liquidation preference of $2,713,955 as of both December 31, 2020 and 2019 |
| | | | 565 | | | | | | 565 | | |
Series A-2 convertible preferred stock, $0.0001 par, 20,000,000 shares
authorized, 5,932,742 shares issued and outstanding at both December 31, 2020 and 2019. Convertible into one share of common stock. Liquidation preference of $2,966,371 as of both December 31, 2020 and 2019 |
| | | | 593 | | | | | | 593 | | |
Series A-3 convertible preferred stock, $0.0001 par, 18,867,925 shares
authorized, 9,032,330 and 8,223,036 shares issued and outstanding at December 31, 2020 and 2019, respectively. Convertible into one share of common stock. Liquidation preference of $4,787,135 and $4,358,209 as of December 31, 2020 and 2019, respectively |
| | | | 904 | | | | | | 823 | | |
Series CF convertible preferred stock, $0.0001 par, 2,000,000 shares authorized, 836,331 and 126,641 shares
issued and outstanding at December 31, 2020 and 2019, respectively. Convertible into one share of common stock. Liquidation preference of $434,890 and $65,863 as of December 31, 2020 and 2019, respectively |
| | | | 83 | | | | | | 12 | | |
Series B convertible preferred stock, $0.0001 par, 20,754,717 shares authorized, 20,754,717 and no shares
issued and outstanding at December 31, 2020 and 2019, respectively. Convertible into one share of common stock. Liquidation preference of $11,000,000 and $0 as of December 31, 2020 and 2019, respectively |
| | | | 2,075 | | | | | | — | | |
Undesignated preferred stock, $0.0001 par, 936,144 shares authorized, 0 and
0 shares issued and outstanding as of December 31, 2020 and 2019, respectively |
| | | ||||||||||
Common stock, $0.0001 par, 200,000,000 shares authorized, 10,377,615 and
10,377,615 shares issued and outstanding as of both December 31, 2020 and 2019 |
| | | | 1,038 | | | | | | 1,038 | | |
Additional paid-in capital
|
| | | | 27,481,023 | | | | | | 15,485,078 | | |
Subscription receivable
|
| | | | — | | | | | | (22,677) | | |
Accumulated deficit
|
| | | | (33,345,997) | | | | | | (22,617,702) | | |
Total stockholders’ deficit
|
| | | | (5,857,645) | | | | | | (7,150,199) | | |
Total liabilities and stockholders’ deficit
|
| | | $ | 16,352,169 | | | | | $ | 1,282,057 | | |
|
| | |
Years Ended
December 31, |
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Net revenues
|
| | | $ | 5,239,437 | | | | | $ | 3,034,216 | | |
Cost of net revenues
|
| | | | 4,685,755 | | | | | | 1,626,505 | | |
Gross profit
|
| | | | 553,682 | | | | | | 1,407,711 | | |
Operating expenses: | | | | | | | | | | | | | |
General and administrative
|
| | | | 7,149,210 | | | | | | 4,584,010 | | |
Sales and marketing
|
| | | | 576,469 | | | | | | 869,285 | | |
Distribution
|
| | | | 342,466 | | | | | | 801,885 | | |
Loss on disposal of property and equipment
|
| | | | 848,927 | | | | | | — | | |
Impairment of intangible assets
|
| | | | 784,500 | | | | | | — | | |
Total operating expenses
|
| | | | 9,701,572 | | | | | | 6,255,180 | | |
Loss from operations
|
| | | | (9,147,890) | | | | | | (4,847,469) | | |
Other income (expense): | | | | | | | | | | | | | |
Interest expense
|
| | | | (1,599,518) | | | | | | (772,592) | | |
Other non-operating income (expenses)
|
| | | | 32,754 | | | | | | (33,112) | | |
Total other income (expense), net
|
| | | | (1,566,764) | | | | | | (805,704) | | |
Provision for income taxes
|
| | | | 13,641 | | | | | | 800 | | |
Net loss
|
| | | $ | (10,728,295) | | | | | $ | (5,653,973) | | |
Weighted average vested common shares outstanding – basic and diluted
|
| | | | 10,377,615 | | | | | | 10,377,615 | | |
Net loss per common share – basic and diluted
|
| | | $ | (1.03) | | | | | $ | (0.54) | | |
| | |
Series Seed
Preferred Stock |
| |
Series A
Preferred Stock |
| |
Series A-2
Preferred Stock |
| |
Series A-3
Preferred Stock |
| |
Series CF
Preferred Stock |
| |
Series B
Preferred Stock |
| |
Common
Stock |
| |
Additional
Paid-in Capital |
| |
Subscription
Receivable |
| |
Accumulated
Deficit |
| |
Total
Stockholders’ Deficit |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | |
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balances at December 31,
2018 |
| | | | 20,714,518 | | | | | $ | 2,071 | | | | | | 5,650,903 | | | | | $ | 565 | | | | | | 5,932,742 | | | | | $ | 593 | | | | | | 3,447,608 | | | | | $ | 345 | | | | | | 124,204 | | | | | $ | 12 | | | | | | — | | | | | $ | — | | | | | | 10,377,615 | | | | | $ | 1,038 | | | | | $ | 13,241,211 | | | | | $ | (8,283) | | | | | $ | (16,963,729) | | | | | $ | (3,726,177) | | |
Stock-based compensation
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 172,491 | | | | | | — | | | | | | — | | | | | | 172,491 | | |
Issuance of Series CF preferred stock
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 2,437 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 8,283 | | | | | | — | | | | | | 8,283 | | |
Shares issued to holders
in prior offerings |
| | | | — | | | | | | — | | | | | | 3,169 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Issuance of Series A-3 preferred stock
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 4,775,428 | | | | | | 478 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 2,530,499 | | | | | | (22,677) | | | | | | — | | | | | | 2,508,300 | | |
Offering costs
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (509,051) | | | | | | — | | | | | | — | | | | | | (509,051) | | |
Fair value of warrant issuances – venture debt
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 49,928 | | | | | | — | | | | | | — | | | | | | 49,928 | | |
Net loss
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (5,653,973) | | | | | | (5,653,973) | | |
Balances at December 31,
2019 |
| | | | 20,714,518 | | | | | $ | 2,071 | | | | | | 5,654,072 | | | | | $ | 565 | | | | | | 5,932,742 | | | | | $ | 593 | | | | | | 8,223,036 | | | | | $ | 823 | | | | | | 126,641 | | | | | $ | 12 | | | | | | — | | | | | $ | — | | | | | | 10,377,615 | | | | | $ | 1,038 | | | | | $ | 15,485,078 | | | | | $ | (22,677) | | | | | $ | (22,617,702) | | | | | $ | (7,150,199) | | |
Stock-based compensation
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 144,775 | | | | | | — | | | | | | — | | | | | | 144,775 | | |
Issuance of Series CF preferred stock
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 709,690 | | | | | | 71 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 309,679 | | | | | | — | | | | | | — | | | | | | 309,750 | | |
Issuance of Series A-3 preferred stock
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 809,294 | | | | | | 81 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 428,845 | | | | | | 22,677 | | | | | | — | | | | | | 451,603 | | |
Issuance of Series B preferred stock
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 20,754,717 | | | | | | 2,075 | | | | | | — | | | | | | — | | | | | | 10,997,925 | | | | | | — | | | | | | — | | | | | | 11,000,000 | | |
Offering costs
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (69,470) | | | | | | — | | | | | | — | | | | | | (69,470) | | |
Fair value of warrant issuances – venture debt
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 184,191 | | | | | | — | | | | | | — | | | | | | 184,191 | | |
Net loss
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (10,728,295) | | | | | | (10,728,295) | | |
Balances at December 31,
2020 |
| | | | 20,714,518 | | | | | $ | 2,071 | | | | | | 5,654,072 | | | | | $ | 565 | | | | | | 5,932,742 | | | | | $ | 593 | | | | | | 9,032,330 | | | | | $ | 904 | | | | | | 836,331 | | | | | $ | 83 | | | | | | 20,754,717 | | | | | $ | 2,075 | | | | | | 10,377,615 | | | | | $ | 1,038 | | | | | $ | 27,481,023 | | | | | $ | — | | | | | $ | (33,345,997) | | | | | $ | (5,857,645) | | |
| | |
Year Ended
December 31, |
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Cash flows from operating activities: | | | | | | | | | | | | | |
Net loss
|
| | | $ | (10,728,295) | | | | | $ | (5,653,973) | | |
Adjustments to reconcile net loss to net cash used in operating activities:
|
| | | | | | | | | | | | |
Depreciation and amortization
|
| | | | 603,857 | | | | | | 48,885 | | |
Amortization of loan discount and fees
|
| | | | 241,878 | | | | | | 149,948 | | |
Stock-based compensation
|
| | | | 144,775 | | | | | | 172,491 | | |
Change in fair value of warrant liability
|
| | | | (2,353) | | | | | | — | | |
Impairment of intangible assets
|
| | | | 784,500 | | | | | | — | | |
Loss on disposal of property and equipment
|
| | | | 848,927 | | | | | | — | | |
Change in credit reserve
|
| | | | (207,666) | | | | | | — | | |
Changes in operating assets and liabilities:
|
| | | | | | | | | | | | |
Accounts receivable, net
|
| | | | 1,947 | | | | | | — | | |
Due from factor, net
|
| | | | 1,616,939 | | | | | | — | | |
Inventory
|
| | | | 3,202,350 | | | | | | 146,673 | | |
Other current assets
|
| | | | 168,589 | | | | | | 114,898 | | |
Accounts payable
|
| | | | 673,263 | | | | | | 610,216 | | |
Accrued expenses and other liabilities
|
| | | | (591,028) | | | | | | 602,384 | | |
Deferred revenue
|
| | | | (13,564) | | | | | | (259,728) | | |
Accrued compensation – related party
|
| | | | 178,026 | | | | | | 68,859 | | |
Accrued interest
|
| | | | 1,016,268 | | | | | | 129,982 | | |
Net cash used in operating activities
|
| | | | (2,061,587) | | | | | | (3,869,365) | | |
Cash flows from investing activities:
|
| | | | | | | | | | | | |
Cash acquired in business combination
|
| | | | 106,913 | | | | | | — | | |
Purchases of property and equipment
|
| | | | (864) | | | | | | (7,848) | | |
Deposits
|
| | | | 98,835 | | | | | | 14,490 | | |
Net cash provided by investing activities
|
| | | | 204,884 | | | | | | 6,642 | | |
Cash flows from financing activities:
|
| | | | | | | | | | | | |
Proceeds (repayment) – related party advances, net
|
| | | | 22,856 | | | | | | (105,812) | | |
Repayments to factor
|
| | | | (1,931,369) | | | | | | — | | |
Proceeds from venture debt
|
| | | | 1,050,000 | | | | | | 508,249 | | |
Proceeds from loans payable
|
| | | | 1,701,044 | | | | | | — | | |
Proceeds from convertible notes payable
|
| | | | 1,250,308 | | | | | | 799,280 | | |
Proceeds from sale of Series A-3 preferred stock
|
| | | | 428,926 | | | | | | 2,508,300 | | |
Subscription receivable from Series A-3 preferred stock
|
| | | | 22,677 | | | | | | — | | |
Proceeds from sale of Series CF preferred stock, net of fees
|
| | | | 309,750 | | | | | | 8,283 | | |
Offering costs
|
| | | | (461,972) | | | | | | (399,589) | | |
Net cash provided by financing activities
|
| | | | 2,392,220 | | | | | | 3,318,711 | | |
Net increase (decrease) in cash and cash equivalents
|
| | | | 535,517 | | | | | | (544,012) | | |
| | |
Year Ended
December 31, |
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Cash and cash equivalents at beginning of year
|
| | | | 40,469 | | | | | | 584,481 | | |
Cash and cash equivalents at end of year
|
| | | $ | 575,986 | | | | | $ | 40,469 | | |
Supplemental disclosure of cash flow information:
|
| | | | | | | | | | | | |
Cash paid for income taxes
|
| | | $ | — | | | | | $ | — | | |
Cash paid for interest
|
| | | $ | 264,177 | | | | | $ | 90,000 | | |
Supplemental disclosure of non-cash investing and financing activities:
|
| | | | | | | | | | | | |
Warrants issued for offering costs
|
| | | $ | 918 | | | | | $ | 6,600 | | |
Warrants issued with venture debt
|
| | | $ | 184,191 | | | | | $ | 49,928 | | |
Venture debt issued in exchange of forgiveness of accrued interest
|
| | | $ | 409,211 | | | | | $ | — | | |
Issuance of promissory note payable in acquisition
|
| | | $ | 4,500,000 | | | | | $ | — | | |
Issuance of Series B preferred stock in acquisition
|
| | | $ | 11,000,000 | | | | | $ | — | | |
| | |
Warrant
Liability |
| |||
Oustanding as of December 31, 2018
|
| | | $ | — | | |
Warrants granted
|
| | | | 7,700 | | |
Oustanding as of December 31, 2019
|
| | | | 7,700 | | |
Warrants granted
|
| | | | 918 | | |
Change in fair value
|
| | | | (2,353) | | |
Oustanding as of December 31, 2020
|
| | | $ | 6,265 | | |
| | |
December 31,
|
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Computer equipment
|
| | | $ | 57,810 | | | | | $ | 57,004 | | |
Furniture and fixtures
|
| | | | 207,140 | | | | | | 70,108 | | |
Leasehold improvements
|
| | | | 69,274 | | | | | | 40,351 | | |
| | | | | 334,224 | | | | | | 167,463 | | |
Accumulated depreciation
|
| | | | (334,224) | | | | | | (97,703) | | |
Property and equipment, net
|
| | | $ | — | | | | | $ | 69,760 | | |
Software
|
| | | $ | 278,405 | | | | | $ | 56,450 | | |
Accumulated amortization
|
| | | | (216,092) | | | | | | (53,617) | | |
Software, net
|
| | | $ | 62,313 | | | | | $ | 2,833 | | |
|
Customer relationships
|
| |
3 years
|
|
| | |
December 31,
|
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Series Seed Preferred Stock (convertible to common stock)
|
| | | | 20,714,518 | | | | | | 20,714,518 | | |
Series A Preferred Stock (convertible to common stock)
|
| | | | 5,654,072 | | | | | | 5,654,072 | | |
Series A-2 Preferred Stock (convertible to common stock)
|
| | | | 5,932,742 | | | | | | 5,932,742 | | |
Series CF Preferred Stock (convertible to common stock)
|
| | | | 836,331 | | | | | | 126,641 | | |
Series A-3 Preferred Stock (convertible to common stock)
|
| | | | 9,032,330 | | | | | | 8,223,036 | | |
Series B Preferred Stock (convertible to common stock)
|
| | | | 20,754,717 | | | | | | — | | |
Common stock warrants
|
| | | | 14,289,669 | | | | | | 6,530,657 | | |
Preferred stock warrants
|
| | | | 806,903 | | | | | | 806,903 | | |
Stock options
|
| | | | 18,173,479 | | | | | | 16,940,861 | | |
Total potentially dilutive shares
|
| | | | 96,194,761 | | | | | | 64,929,430 | | |
|
Series B preferred stock
|
| | | $ | 11,000,000 | | |
|
Promissory note payable
|
| | | | 4,500,000 | | |
|
Purchase price consideration
|
| | | $ | 15,500,000 | | |
| | |
Purchase Price
Allocation |
| |||
Cash and cash equivalents
|
| | | $ | 106,913 | | |
Accounts receivable
|
| | | | 37,479 | | |
Due from/(to) factor
|
| | | | (312,063) | | |
Inventory
|
| | | | 3,303,660 | | |
Prepaid expenses
|
| | | | 165,856 | | |
Deposits
|
| | | | 187,493 | | |
Property, equipment and software
|
| | | | 1,215,748 | | |
Goodwill
|
| | | | 6,479,218 | | |
Intangible assets (Note 6)
|
| | | | 8,600,000 | | |
Accounts payable
|
| | | | (3,397,547) | | |
Accrued expenses and other liabilities
|
| | | | (886,757) | | |
Purchase price consideration
|
| | | $ | 15,500,000 | | |
| | |
Year Ended December 31,
|
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Net revenues
|
| | | $ | 7,259,260 | | | | | $ | 30,133,934 | | |
Net loss
|
| | | $ | (12,786,695) | | | | | $ | (11,868,423) | | |
Net loss per common share
|
| | | $ | (1.23) | | | | | $ | (1.14) | | |
| | |
December 31,
|
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Outstanding receivables: | | | | | | | | | | | | | |
Without recourse
|
| | | $ | 151,158 | | | | | $ | — | | |
With recourse
|
| | | | 42,945 | | | | | | — | | |
Advances
|
| | | | 56,246 | | | | | | — | | |
Credits due customers
|
| | | | (40,316) | | | | | | — | | |
| | | | $ | 210,033 | | | | | $ | — | | |
| | |
Gross
Amount |
| |
Accumulated
Amortization |
| |
Carrying
Value |
| |||||||||
Amortized: | | | | | | | | | | | | | | | | | | | |
Customer relationships
|
| | | $ | 1,100,000 | | | | | $ | (320,833) | | | | | $ | 779,167 | | |
| | | | | 1,100,000 | | | | | | (320,833) | | | | | | 779,167 | | |
Indefinite-lived: | | | | | | | | | | | | | | | | | | | |
Brand name
|
| | | | 6,715,500 | | | | | | — | | | | | | 6,715,500 | | |
| | | | $ | 7,815,500 | | | | | $ | (320,833) | | | | | $ | 7,494,667 | | |
| Year Ending December 31, | | | | | | | |
|
2021
|
| | | | 366,667 | | |
|
2022
|
| | | | 366,667 | | |
|
2023
|
| | | | 45,833 | | |
| | | | | $ | 779,167 | | |
| | |
December 31,
|
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Accrued expenses
|
| | | $ | 92,074 | | | | | $ | 188,341 | | |
Reserve for returns
|
| | | | 5,229 | | | | | | 100,000 | | |
Payroll related liabilities
|
| | | | 843,704 | | | | | | 412,155 | | |
Sales tax liability
|
| | | | 196,410 | | | | | | 156,707 | | |
Other liabilities
|
| | | | 108,230 | | | | | | 264,114 | | |
| | | | $ | 1,245,646 | | | | | $ | 1,121,317 | | |
| | |
Year Ended December 31,
|
| |||
| | |
2020
|
| |
2019
|
|
Risk Free Interest Rate
|
| |
0.59 – 1.59%
|
| |
1.47 – 2.49%
|
|
Expected Dividend Yield
|
| |
0.00%
|
| |
0.00%
|
|
Expected Volatility
|
| |
58.0 – 100%
|
| |
58.0 – 100%
|
|
Expected Life (years)
|
| |
10.00
|
| |
5.00
|
|
| | |
Common
Stock Warrants |
| |
Weighted
Average Exercise Price |
| ||||||
Outstanding – December 31, 2018
|
| | | | 4,197,745 | | | | | $ | 0.16 | | |
Granted
|
| | | | 2,342,912 | | | | | | 0.21 | | |
Exercised
|
| | | | — | | | | | | — | | |
Forfeited
|
| | | | (10,000) | | | | | | — | | |
Outstanding – December 31, 2019
|
| | | | 6,530,657 | | | | | $ | 0.18 | | |
Granted
|
| | | | 7,759,012 | | | | | | 0.16 | | |
Exercised
|
| | | | — | | | | | | — | | |
Forfeited
|
| | | | — | | | | | | — | | |
Outstanding – December 31, 2020
|
| | | | 14,289,669 | | | | | $ | 0.17 | | |
Exercisable at December 31, 2020
|
| | | | 14,289,669 | | | | | $ | 0.17 | | |
| | |
2019
|
| |||
Risk Free Interest Rate
|
| | | | 2.49% | | |
Expected Dividend Yield
|
| | | | 0.00% | | |
Expected Volatility
|
| | | | 58.00% | | |
Expected Life (years)
|
| | | | 5.00 | | |
| | |
Preferred
Stock Warrants |
| |
Weighted
Average Exercise Price |
| ||||||
Outstanding – December 31, 2018
|
| | | | 545,473 | | | | | $ | 0.47 | | |
Granted
|
| | | | 261,430 | | | | | | 0.53 | | |
Exercised
|
| | | | — | | | | | | — | | |
Forfeited
|
| | | | — | | | | | | — | | |
Outstanding – December 31, 2019
|
| | | | 806,903 | | | | | $ | 0.49 | | |
| | |
Preferred
Stock Warrants |
| |
Weighted
Average Exercise Price |
| ||||||
Exercised
|
| | | | — | | | | | | — | | |
Forfeited
|
| | | | — | | | | | | — | | |
Outstanding – December 31, 2020
|
| | | | 806,903 | | | | | $ | 0.49 | | |
Exercisable at December 31, 2020
|
| | | | 806,903 | | | | | $ | 0.49 | | |
|
| | |
Options
|
| |
Weighted
Average Exercise Price |
| ||||||
Outstanding – December 31, 2018
|
| | | | 17,751,416 | | | | | $ | 0.15 | | |
Granted
|
| | | | 2,633,208 | | | | | | 0.21 | | |
Exercised
|
| | | | — | | | | | | — | | |
Forfeited
|
| | | | (3,443,764) | | | | | | — | | |
Outstanding – December 31, 2019
|
| | | | 16,940,860 | | | | | $ | 0.16 | | |
Granted
|
| | | | 1,432,619 | | | | | | 0.06 | | |
Exercised
|
| | | | — | | | | | | — | | |
Forfeited
|
| | | | (200,000) | | | | | | 0.21 | | |
Outstanding – December 31, 2020
|
| | | | 18,173,479 | | | | | $ | 0.15 | | |
Exercisable at December 31, 2020
|
| | | | 13,764,922 | | | | | $ | 0.15 | | |
Weighted average grant date fair value of options granted during period
|
| | | | | | | | | $ | 0.032 | | |
Weighted average duration (years) to expiration of outstanding options at December 31, 2020
|
| | | | | | | | | | 6.02 | | |
| | |
Year Ended December 31,
|
| |||
| | |
2020
|
| |
2019
|
|
Risk Free Interest Rate
|
| |
0.42% – 0.51%
|
| |
1.59% – 2.55%
|
|
Expected Dividend Yield
|
| |
0%
|
| |
0%
|
|
Expected Volatility
|
| |
58%
|
| |
58%
|
|
Expected Life (years)
|
| |
6.25
|
| |
6.25
|
|
Weighted Average fair value of stock options granted
|
| |
$0.032
|
| |
$0.0164
|
|
| | |
December 31,
|
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Deferred tax assets: | | | | | | | | | | | | | |
Net operating loss carryforwards
|
| | | $ | 9,134,447 | | | | | $ | 6,060,102 | | |
Stock-based compensation
|
| | | | 40,467 | | | | | | 36,829 | | |
| | |
December 31,
|
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Deferred tax liabilities: | | | | | | | | | | | | | |
Depreciation timing differences
|
| | | | (5,103) | | | | | | (5,103) | | |
Other
|
| | | | (41,198) | | | | | | (44,711) | | |
Valuation allowance
|
| | | | (9,128,614) | | | | | | (6,047,117) | | |
Net deferred tax assets
|
| | | $ | — | | | | | $ | — | | |
|
| | |
Pages
|
| |||
| | | | F-33 | | | |
| | | | F-34 | | | |
| | | | F-35 | | | |
| | | | F-36 | | | |
| | | | F-37 | | | |
| | | | F-38 | | |
| | |
2019
|
| |||
Assets | | | | | | | |
Current assets:
|
| | | | | | |
Cash and cash equivalents
|
| | | $ | 358,726 | | |
Accounts receivable, net of allowance of $155,973
|
| | | | 261,190 | | |
Inventory
|
| | | | 3,038,185 | | |
Prepaid and other current assets
|
| | | | 178,888 | | |
Total current assets
|
| | | | 3,836,989 | | |
Property and equipment, net
|
| | | | 1,265,152 | | |
Other assets
|
| | | | 151,049 | | |
Total assets
|
| | | $ | 5,253,190 | | |
Liabilities and members’ deficit | | | | | | | |
Current liabilities: | | | | | | | |
Accounts payable
|
| | | $ | 3,462,200 | | |
Due to factor, net
|
| | | | 101,251 | | |
Accrued liabilities
|
| | | | 595,611 | | |
Total current liabilities
|
| | | | 4,159,062 | | |
Deferred rent
|
| | | | 264,683 | | |
Notes payable – related party member
|
| | | | 850,000 | | |
Total liabilities
|
| | | | 5,273,745 | | |
Members’ deficit
|
| | | | (20,555) | | |
Total liabilities and members’ deficit
|
| | | $ | 5,253,190 | | |
| | |
2019
|
| |||
Net sales
|
| | | $ | 27,099,718 | | |
Cost of sales
|
| | | | 12,663,514 | | |
Gross profit
|
| | | | 14,436,204 | | |
Operating expenses: | | | | | | | |
Design, selling, and shipping
|
| | | | 4,535,276 | | |
General and administrative
|
| | | | 14,524,832 | | |
Total operating expenses
|
| | | | 19,060,108 | | |
Loss from operations
|
| | | | (4,623,904) | | |
Other expense: | | | | | | | |
Loss on disposal of property and equipment
|
| | | | 49,558 | | |
Interest expense, net
|
| | | | 103,520 | | |
Total other expense
|
| | | | 153,078 | | |
Loss before provision for income taxes
|
| | | | (4,776,982) | | |
Income tax expense
|
| | | | 14,890 | | |
Net Loss
|
| | | $ | (4,791,872) | | |
| | |
Members’
Equity (Deficit) |
| |||
December 31, 2018
|
| | | $ | 4,771,317 | | |
Net loss
|
| | | | (4,791,872) | | |
December 31, 2019
|
| | | $ | (20,555) | | |
| | |
2019
|
| |||
| | |
(restated)
|
| |||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
| | | | | | |
Net loss
|
| | | $ | (4,791,872) | | |
Adjustments to reconcile net loss to net cash used in operating activities:
|
| | | | | | |
Depreciation
|
| | | | 484,776 | | |
Decrease in open credit reserve
|
| | | | 102,067 | | |
Loss on sale of property and equipment
|
| | | | 49,558 | | |
Changes in operating assets and liabilities:
|
| | | | | | |
Factor receivable
|
| | | | 321,888 | | |
Accounts receivable
|
| | | | 195,320 | | |
Inventory
|
| | | | 605,113 | | |
Prepaid expenses and other current assets
|
| | | | 57,858 | | |
Other assets
|
| | | | 89,870 | | |
Accounts payable
|
| | | | 868,467 | | |
Accrued liabilities
|
| | | | 50,435 | | |
Deferred rent
|
| | | | 80,222 | | |
Net cash used in operating activities
|
| | | | (1,886,298) | | |
CASH FLOWS FROM INVESTING ACTIVITIES:
|
| | | | | | |
Purchase of property and equipment
|
| | | | (557,328) | | |
Net cash used in investing activities
|
| | | | (557,328) | | |
CASH FLOWS FROM FINANCING ACTIVITIES:
|
| | | | | | |
Proceeds – notes payable – related party member
|
| | | | 850,000 | | |
Advances from Factor
|
| | | | 990,039 | | |
Net cash provided by financing activities
|
| | | | 1,840,039 | | |
Decrease in cash and cash equivalents
|
| | | | (603,587) | | |
Cash and cash equivalents, beginning of year
|
| | | | 962,313 | | |
Cash and cash equivalents, end of year
|
| | | $ | 358,726 | | |
Supplemental disclosures of cash flow information:
|
| | | | | | |
Cash paid for interest
|
| | | $ | 91,887 | | |
Cash paid for income taxes
|
| | | $ | 14,890 | | |
Due to/from factor consist of the following at December 31,:
|
| |
2019
|
| |||
Outstanding receivables: | | | | | | | |
Without recourse
|
| | | $ | 2,058,298 | | |
With recourse
|
| | | | 5,001 | | |
Advances
|
| | | | (1,891,348) | | |
Credits due customers
|
| | | | (273,202) | | |
| | | | $ | (101,251) | | |
Inventories consist of the following at December 31,:
|
| |
2019
|
| |||
Finished goods
|
| | | $ | 2,327,882 | | |
Work-in process
|
| | | | 193,873 | | |
Raw materials
|
| | | | 516,430 | | |
| | | | $ | 3,038,185 | | |
Property and equipment consists of the following at December 31,:
|
| |
2019
|
| |||
Machinery and equipment
|
| | | $ | 265,618 | | |
Furniture and fixtures
|
| | | | 1,064,698 | | |
Leasehold improvements
|
| | | | 1,307,976 | | |
| | | | | 2,638,292 | | |
Less accumulated depreciation and amortization
|
| | | | (1,373,140) | | |
| | | | $ | 1,265,152 | | |
| Year Ending December 31, | | | | | | | |
|
2020
|
| | | $ | 809,939 | | |
|
2021
|
| | | | 795,067 | | |
|
2022
|
| | | | 821,630 | | |
|
2023
|
| | | | 456,202 | | |
|
2024
|
| | | | 394,241 | | |
|
Thereafter
|
| | | | 1,238,998 | | |
| | | | | $ | 4,516,077 | | |
| | | | | F-45 | | | |
| | | | | F-46 | | | |
| | | | | F-47 | | | |
| | | | | F-48 | | | |
| | | | | F-49 | | | |
| | | | | F-50 | | |
| | |
December 31,
|
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
ASSETS | | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | | |
Cash and cash equivalents
|
| | | $ | 51,315 | | | | | $ | 18,509 | | |
Accounts receivable, net
|
| | | | 38,689 | | | | | | 31,995 | | |
Inventory
|
| | | | 73,690 | | | | | | 42,643 | | |
Other current assets
|
| | | | 54,423 | | | | | | 129,162 | | |
Total current assets
|
| | | | 218,117 | | | | | | 222,309 | | |
Fixed assets, net
|
| | | | 138,040 | | | | | | 221,686 | | |
Intangible assets, net
|
| | | | 2,034 | | | | | | 2,206 | | |
Other assets
|
| | | | 4,416 | | | | | | 15,004 | | |
Total assets
|
| | | $ | 362,607 | | | | | $ | 461,205 | | |
LIABILITIES AND MEMBERS’ DEFICIT | | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | | |
Accounts payable
|
| | | $ | 187,516 | | | | | $ | 119,068 | | |
Accrued liabilities
|
| | | | 31,771 | | | | | | 21,297 | | |
Other current liabilities
|
| | | | 68,335 | | | | | | 66,437 | | |
Note payable, current portion
|
| | | | 60,941 | | | | | | 147,562 | | |
Related party notes payable, current portion
|
| | | | — | | | | | | 75,000 | | |
Deferred rent
|
| | | | 19,432 | | | | | | 23,161 | | |
Deferred revenue
|
| | | | 264,802 | | | | | | 286,255 | | |
Total current liabilities
|
| | | | 632,797 | | | | | | 738,780 | | |
Related party notes payable, net of current portion
|
| | | | 635,000 | | | | | | 425,000 | | |
Notes payable, net of current portion
|
| | | | 276,754 | | | | | | 49,441 | | |
Total liabilities
|
| | | | 1,544,551 | | | | | | 1,213,221 | | |
Commitments and contingencies (Note 8) | | | | | | | | | | | | | |
Members’ deficit: | | | | | | | | | | | | | |
Class A members units, $0.00001 par value, 100 authorized; 100 outstanding
at both December 31, 2020 and 2019 |
| | | | — | | | | | | — | | |
Class B members units, $0.00001 par value, 100 authorized; 87 and 100 outstanding at December 31, 2020 and 2019, respectively
|
| | | | — | | | | | | — | | |
Additional paid-in capital
|
| | | | 102,083 | | | | | | 112,565 | | |
Accumulated deficit
|
| | | | (1,284,027) | | | | | | (864,581) | | |
Total members’ deficit
|
| | | | (1,181,944) | | | | | | (752,016) | | |
Total liabilities and members’ deficit
|
| | | $ | 362,607 | | | | | $ | 461,205 | | |
| | |
Year Ended
December 31, |
| | | |||||||||||||
| | |
2020
|
| |
2019
|
| | | ||||||||||
Revenues
|
| | | $ | 2,542,721 | | | | | $ | 3,325,762 | | | | | ||||
Cost of goods sold
|
| | | | 897,873 | | | | | | 1,202,819 | | | | | ||||
Gross profit
|
| | | | 1,644,848 | | | | | | 2,122,943 | | | | | ||||
Operating expenses: | | | | | | | | | | | | | | | | | | | |
General and administrative
|
| | | | 1,044,397 | | | | | | 717,901 | | | | | ||||
Sales and marketing
|
| | | | 1,163,124 | | | | | | 1,577,478 | | | | | ||||
Total operating expenses
|
| | | | 2,207,521 | | | | | | 2,295,379 | | | | | ||||
Loss from operations
|
| | | | (562,673) | | | | | | (172,436) | | | | | ||||
Other income (expense): | | | | | | | | | | | | | | | | | | | |
Interest expense
|
| | | | (92,270) | | | | | | (53,955) | | | | | ||||
Gain on forgiveness of debt
|
| | | | 225,388 | | | | | | — | | | | | ||||
Other income
|
| | | | 10,109 | | | | | | 50,000 | | | | | ||||
Total other income (expense), net
|
| | | | 143,227 | | | | | | (3,955) | | | | | ||||
Provision for income taxes
|
| | | | — | | | | | | — | | | | | ||||
Net loss
|
| | | $ | (419,446) | | | | | $ | (176,391) | | | | |
| | |
Class A
Members’ Units |
| |
Class B
Members’ Units |
| |
Additional
Paid-in Capital |
| |
Accumulated
Deficit |
| |
Total
Members’ Deficit |
| |||||||||||||||||||||||||||
| | |
Shares
|
| |
Amount
|
| |
Shares
|
| |
Amount
|
| ||||||||||||||||||||||||||||||
Balances at December 31, 2018
|
| | | | 100 | | | | | $ | — | | | | | | 100 | | | | | $ | — | | | | | $ | 112,565 | | | | | $ | (688,190) | | | | | $ | (575,625) | | |
Net loss
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (176,391) | | | | | | (176,391) | | |
Balances at December 31, 2019
|
| | | | 100 | | | | | $ | — | | | | | | 100 | | | | | $ | — | | | | | $ | 112,565 | | | | | $ | (864,581) | | | | | $ | (752,016) | | |
Contributions
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 771 | | | | | | — | | | | | | 771 | | |
Repurchase of members’ units
|
| | | | — | | | | | | — | | | | | | (13) | | | | | | — | | | | | | (11,253) | | | | | | — | | | | | | (11,253) | | |
Net loss
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (419,446) | | | | | | (419,446) | | |
Balances at December 31, 2020
|
| | | | 100 | | | | | $ | — | | | | | | 87 | | | | | $ | — | | | | | $ | 102,083 | | | | | $ | (1,284,027) | | | | | $ | (1,181,944) | | |
| | |
Year Ended
December 31, |
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Cash flows from operating activities: | | | | | | | | | | | | | |
Net loss
|
| | | $ | (419,446) | | | | | $ | (176,391) | | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | | | | | | |
Depreciation and amortization
|
| | | | 149,568 | | | | | | 82,422 | | |
Gain on forgiveness of note payable
|
| | | | (225,388) | | | | | | — | | |
Bad debt expense
|
| | | | 42,078 | | | | | | — | | |
Changes in operating assets and liabilities:
|
| | | | | | | | | | | | |
Accounts receivable, net
|
| | | | (48,772) | | | | | | 968 | | |
Inventory
|
| | | | (31,047) | | | | | | (17,577) | | |
Deposits
|
| | | | — | | | | | | (5,438) | | |
Other assets
|
| | | | 85,327 | | | | | | (66,659) | | |
Accounts payable
|
| | | | 68,448 | | | | | | 79,266 | | |
Accrued expenses and other current liabilities
|
| | | | 12,372 | | | | | | (12,130) | | |
Deferrent rent
|
| | | | (3,729) | | | | | | 12,784 | | |
Deferred revenue
|
| | | | (21,453) | | | | | | 124,162 | | |
Net cash provided by (used in) operating activities
|
| | | | (392,042) | | | | | | 21,407 | | |
Cash flows from investing activities: | | | | | | | | | | | | | |
Purchases of property and equipment and intangibles
|
| | | | (65,750) | | | | | | (254,437) | | |
Net cash used in investing activities
|
| | | | (65,750) | | | | | | (254,437) | | |
Cash flows from financing activities: | | | | | | | | | | | | | |
Proceeds from related party notes payable
|
| | | | 210,000 | | | | | | 200,000 | | |
Proceeds from notes payable
|
| | | | 382,600 | | | | | | 200,000 | | |
Principal payments on line of credit
|
| | | | — | | | | | | (160,000) | | |
Proceeds from line of credit
|
| | | | 125,000 | | | | | | — | | |
Principal repayments of notes payable
|
| | | | (141,520) | | | | | | — | | |
Principal payments on related party notes payable
|
| | | | (75,000) | | | | | | (2,998) | | |
Member contributions
|
| | | | 771 | | | | | | — | | |
Repurchase of members’ units
|
| | | | (11,253) | | | | | | — | | |
Net cash provided by financing activities
|
| | | | 490,598 | | | | | | 237,002 | | |
Net increase in cash and cash equivalents
|
| | | | 32,806 | | | | | | 3,972 | | |
Cash and cash equivalents at beginning of year
|
| | | | 18,509 | | | | | | 14,537 | | |
Cash and cash equivalents at end of year
|
| | | $ | 51,315 | | | | | $ | 18,509 | | |
Supplemental disclosure of cash flow information: | | | | | | | | | | | | | |
Cash paid for income taxes
|
| | | $ | — | | | | | $ | — | | |
Cash paid for interest
|
| | | $ | 82,270 | | | | | $ | 53,955 | | |
Non cash investing and financing activities: | | | | ||||||||||
Conversion of line of credit to note payable
|
| | | $ | 125,000 | | | | | | — | | |
| | |
December 31,
|
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Leasehold improvements and showrooms
|
| | | $ | 375,677 | | | | | $ | 309,928 | | |
Accumulated amortization
|
| | | | (237,637) | | | | | | (88,242) | | |
Fixed Assets, net
|
| | | $ | 138,040 | | | | | $ | 221,686 | | |
| | |
December 31,
|
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
Note payable to bank, principal due November 27, 2020 bearing interest at 1.75% over prime (4.75% at December 31, 2019)
|
| | | $ | — | | | | | $ | 123,917 | | |
Note payable to bank, principal due December 2025, bearing interest at 5.526%
|
| | | | 125,000 | | | | | | — | | |
Note payable to majority owner, principal due on or before December 31, 2020, variable monthly payments, interest at 8.5%
|
| | | | — | | | | | | 75,000 | | |
Note payable to a bank, monthly installments of $2,279 through November 26, 2022, bearing interest at 5.85%
|
| | | | 55,483 | | | | | | 73,086 | | |
PPP and EIDL Loans (see below for terms)
|
| | | | 157,212 | | | | | | — | | |
Note payable to a company owned by the majority owner of the Company, due on or before July 10, 2022, bearing interest at 12%
|
| | | | 635,000 | | | | | | 425,000 | | |
| | | | $ | 972,695 | | | | | $ | 697,003 | | |
Year Ending December 31,
|
| | | | | | |
2021
|
| | | $ | 60,941 | | |
2022
|
| | | | 686.007 | | |
2023
|
| | | | 28.119 | | |
2024
|
| | | | 29,654 | | |
2025 | | | | | 31,171 | | |
Thereafter
|
| | | | 136,803 | | |
| | | | | 972,695 | | |
Less: current portion of note payable
|
| | | | (60,941) | | |
Notes payable, long-term
|
| | | $ | 911,754 | | |
|
2021
|
| | | $ | 95,617 | | |
|
2022
|
| | | | 42,996 | | |
| | | | | $ | 138,613 | | |
|
SEC registration fee
|
| | | $ | * | | |
|
FINRA filing fee
|
| | | | * | | |
|
NasdaqCM listing fee
|
| | | | * | | |
|
Blue Sky fees and expenses
|
| | | | * | | |
|
Printing and engraving costs
|
| | | | * | | |
|
Legal fees and expenses
|
| | | | * | | |
|
Accounting fees and expenses
|
| | | | * | | |
|
Transfer Agent and Registrar fees
|
| | | | * | | |
|
Insurance Premiums
|
| | | | * | | |
|
Miscellaneous expenses
|
| | | | * | | |
|
Total
|
| | | | * | | |
Exhibit
Number |
| |
Description
|
|
10.19 | | | | |
10.20 | | | | |
10.21 | | | | |
10.22 | | | | |
10.23 | | | | |
10.24 | | | | |
10.25 | | | | |
10.26 | | | | |
10.27 | | | | |
10.28 | | | | |
21*
|
| | List of Subsidiaries of the Registrant | |
23.1 | | | | |
23.2 | | | | |
23.3 | | | | |
24.1 | | | | |
99.1(a) | | | | |
99.1(b) | | | |
|
Signature
|
| |
Title
|
| |
Date
|
|
|
/s/ John Hilburn Davis IV
John Hilburn Davis IV
|
| |
President and Chief Executive Officer
(Principal Executive Officer) |
| |
April 12, 2021
|
|
|
/s/ Reid Yeoman
Reid Yeoman
|
| |
Chief Financial Officer
(Principal financial and accounting officer) |
| |
April 12, 2021
|
|
|
/s/ Mark T. Lynn
Mark T. Lynn
|
| | Director | | |
April 12, 2021
|
|
|
/s/ Trevor Pettennude
Trevor Pettennude
|
| | Director | | |
April 12, 2021
|
|
Exhibit 2.2
Execution copy
FIRST AMENDMENT
TO THE
MEMBERSHIP INTEREST PURCHASE AGREEMENT
This First Amendment to the Membership Interest Purchase Agreement (this “First Amendment”), effective as of December 31, 2020, is entered into by and between D. Jones Tailored Collection, Ltd., a Texas limited partnership (the “Seller”), and Denim.LA, Inc., a Delaware corporation (“Buyer”). Seller and Buyer are sometimes collectively referred to herein as the “Parties” and individually as a “Party.” All capitalized terms used herein shall have the same meaning ascribed to them in that certain Membership Interest Purchase Agreement, effective as of October 14, 2020, by and between Seller and Buyer (the “MIPA”), unless otherwise provided.
RECITALS
WHEREAS, the Parties desire to amend the MIPA to extend the date upon which the closing conditions must be met by the Parties; and
WHEREAS, the Parties also desire to amend the MIPA to clarify other matters as provided
herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree to the following provisions of this First Amendment.
Notwithstanding anything to the contrary in the MIPA, the Parties understand, agree and acknowledge:
1. Purchase Price. Article II of the MIPA is hereby amended by the deletion of Section 2.02(b) and, in connection therewith, the revised Section 2.02:
“Section 2.02. Purchase Price. The purchase price for the Membership Interests shall be paid in Buyer Shares calculated as follows and subject to adjustment pursuant to Section 2.05 (the “Purchase Price”): that number of Buyer Shares equal to the lesser of (a) Nine Million One Hundred Thousand and No/100 Dollars ($9,100,000.00) at a per share price equal to the IPO Price or Uplisting Price, as the case may be (to the extent the IPO or the Uplisting occurs first), or (b) the number of Subject Acquisition Shares.”
2. Transactions to be Effected at Closing. Article II of the MIPA is hereby amended by the following amended Section 2.04(a)(ii):
“(ii) Deliver immediately available funds to Seller in the amount of Five Hundred Thousand and No/100 Dollars ($500,000.00) for Seller’s payment to creditors for the purpose of strengthening Seller’s financial position after the IPO or Uplisting by the reduction of Seller’s debt, with such amount being a contribution by Buyer to Seller, and is not consideration for the Membership Interests.”
FIRST AMENDMENT TO THE MEMBERSHIP INTEREST PURCHASE AGREEMENT | PAGE 1 OF 2 |
3. | Termination. Article VIII of the MIPA is hereby amended by the following: |
(a) | Section 8.01(b)(ii) is amended as follows: |
“(ii) Any of the conditions set forth in Section 6.01 and Section 6.02 shall not have been, or if it becomes apparent that any of such conditions will not be, fulfilled by April 30, 2021, unless such nonfulfillment shall be due to the failure of Buyer to perform or comply with any of the covenants, agreements or conditions herein to be performed or complied with by it prior to the Closing.”
(b) | Section 8.01(c)(ii) is amended as follows: |
“(ii) Any of the conditions set forth in Section 6.01 and Section 6.02 shall not have been, or if it becomes apparent that any of such conditions will not be, fulfilled by April 30, 2021, unless such nonfulfillment shall be due to the failure of Seller to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing.”
4. Miscellaneous. In the event of any conflict between the terms of the MIPA and this First Amendment, the terms of this First Amendment shall control. Except as modified hereby, the terms and provisions of the MIPA shall remain in full force and effect, unmodified, and the MIPA, as amended hereby, shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. This First Amendment may be executed in a number of identical counterparts which, taken together, shall constitute one agreement.
[Remainder of page intentionally left blank. Signature page follows.]
FIRST AMENDMENT TO THE MEMBERSHIP INTEREST PURCHASE AGREEMENT | PAGE 2 OF 2 |
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date written below each Party’s signature to be effective as of the Effective Date.
SELLER: | ||
D. JONES TAILORED COLLECTION, LTD., | ||
a Texas limited partnership | ||
By: DJONES, LLC, | ||
a Texas limited liability company | ||
Its: General Partner | ||
By: | /s/ Drew Jones | |
Drew Jones | ||
Its: | Managing Member | |
Date: | December 31, 2020 |
BUYER: | ||
DENIM.LA, INC., | ||
a Delaware corporation | ||
By: | /s/ Hil Davis | |
Hil Davis | ||
Its: | Chief Executive Officer | |
Date: | December 31, 2020 |
SIGNATURE PAGE
TO THE
FIRST AMENDMENT
TO THE
MEMBERSHIP INTEREST PURCHASE AGREEMENT
Exhibit 3.2
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
DENIM.LA, INC.
Denim.LA, Inc. (the “Corporation”), a corporation duly organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “General Corporation Law”), does hereby certify:
FIRST: The name of the Corporation is Denim.LA, Inc., and that the Corporation was originally incorporated pursuant to the General Corporation Law on January 30, 2013.
SECOND: ARTICLE FIRST of the Amended and Restated Certificate of Incorporation of the Corporation is hereby amended and restated in its entirety as follows:
“FIRST: The name of this corporation is Digital Brands Group, Inc. (the “Corporation”).”
THIRD: This Certificate of Amendment has been duly adopted in accordance with the applicable provisions of Sections 228 and 242 of the General Corporation Law.
FOURTH: All other provisions of the Amended and Restated Certificate of Incorporation shall remain in full force and effect.
FIFTH: The foregoing amendment shall be effective upon filing with the Secretary of State of the State of Delaware.
[Signature Page Follows]
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IN WITNESS WHEREOF, this Certificate of Amendment was executed by a duly authorized officer of the Corporation on this 30th day of December, 2020.
DENIM.LA, INC., | ||
a Delaware corporation | ||
By: | /s/ John “Hil” Davis | |
Name: | John “Hil” Davis | |
Title: | Chief Executive Officer |
Exhibit 4.5
SERIES SEED PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES SEED PREFERRED STOCK PURCHASE AGREEMENT (this “Agreement”), is made as of October 10, 2014 by and among Denim.LA, a Delaware corporation (the “Company”), the investors listed on Exhibit A attached to this Agreement (each a “Purchaser” and together the “Purchasers”).
The parties hereby agree as follows:
1. Purchase and Sale of Preferred Stock.
1.1 Sale and Issuance of Series Seed Preferred Stock.
(a) The Company shall adopt and file with the Secretary of State of the State of Delaware on or before the Initial Closing (as defined below) the Amended and Restated Certificate of Incorporation in the form of Exhibit B attached to this Agreement (the “Restated Certificate”).
(b) Subject to the terms and conditions of this Agreement, each Purchaser agrees to purchase at the Closing and the Company agrees to sell and issue to each Purchaser at the Closing that number of shares of Series Seed Preferred Stock, $0.0001 par value per share (the “Series Seed Preferred Stock”), set forth opposite each Purchaser’s name on Exhibit A, at a purchase price of $0.271976161108161 per share. The shares of Series Seed Preferred Stock issued to the Purchasers pursuant to this Agreement (including any shares issued at the Initial Closing and any Additional Shares, as defined below) shall be referred to in this Agreement as the “Shares.”
1.2 Closing; Delivery.
(a) The initial purchase and sale of the Shares shall take place remotely via the exchange of documents and signatures, at such time and place as the Company and the Purchasers mutually agree upon, orally or in writing (which time and place are designated as the “Initial Closing”). In the event there is more than one closing, the term “Closing” shall apply to each such closing unless otherwise specified.
(b) At each Closing, the Company shall deliver to each Purchaser a certificate representing the Shares being purchased by such Purchaser at such Closing against payment of the purchase price therefor by check payable to the Company, by wire transfer to a bank account designated by the Company, by cancellation or conversion of indebtedness of the Company to Purchaser, including interest, or by any combination of such methods.
1.3 Sale of Additional Shares of Preferred Stock. After the Initial Closing, the Company may sell, on the same terms and conditions as those contained in this Agreement, additional shares of Series Seed Preferred Stock (the “Additional Shares”), to one or more purchasers (the “Additional Purchasers”), provided that each Additional Purchaser shall become a party to the Transaction Agreements (as defined below), by executing and delivering a counterpart signature page to each of the Transaction Agreements, and provided further that the aggregate number of Shares (including Additional Shares) sold in all Closings shall not exceed 21,209,487 (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or similar recapitalization affecting such shares). Exhibit A to this Agreement shall be updated to reflect the number of Additional Shares purchased at each such Closing and the parties purchasing such Additional Shares. In the event that payment by a Purchaser is made, in whole or in part, by cancellation of indebtedness, then such Purchaser shall surrender to the Company for cancellation at the Closing any evidence of indebtedness or shall execute an instrument of cancellation and lost promissory note and indemnity agreement in form and substance acceptable to the Company.
1.4 Defined Terms Used in this Agreement. In addition to the terms defined above, the following terms used in this Agreement shall be construed to have the meanings set forth or referenced below.
(a) “Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including, without limitation, any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person.
(b) “Code” means the Internal Revenue Code of 1986, as amended.
(c) “Company Covered Person” means, with respect to the Company as an “issuer” for purposes of Rule 506 promulgated under the Securities Act, any Person listed in the first paragraph of Rule 506(d)(1).
(d) “Company Intellectual Property” means all patents, patent applications, trademarks, trademark applications, service marks, service mark applications, tradenames, copyrights, trade secrets, domain names, mask works, information and proprietary rights and processes, similar or other intellectual property rights, subject matter of any of the foregoing, tangible embodiments of any of the foregoing, licenses in, to and under any of the foregoing, and any and all such cases that are owned or used by the Company in the conduct of the Company’s business as now conducted.
(e) “Indemnification Agreement” means the agreement between the Company and the director designated by any Purchaser entitled to designate a member of the Board of Directors pursuant to the Voting Agreement, dated as of the date of the Initial Closing, in the form of Exhibit D attached to this Agreement.
(f) “Investors’ Rights Agreement” means the agreement among the Company and the Purchasers and certain other stockholders of the Company dated as of the date of the Initial Closing, in the form of Exhibit E attached to this Agreement.
(g) “Key Employee” means Corey Epstein and Mark Lynn.
2
(h) “Knowledge” including the phrase “to the Company’s knowledge” shall mean the actual knowledge after reasonable investigation of the Key Employees.
(i) “Material Adverse Effect” means a material adverse effect on the business, assets (including intangible assets), liabilities, financial condition, property or results of operations of the Company.
(j) “Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.
(k) “Purchaser” means each of the Purchasers who is initially a party to this Agreement and any Additional Purchaser who becomes a party to this Agreement at a subsequent Closing under Subsection 1.3.
(l) “Right of First Refusal and Co-Sale Agreement” means the agreement among the Company, the Purchasers, and certain other stockholders of the Company, dated as of the date of the Initial Closing, in the form of Exhibit G attached to this Agreement.
(m) “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
(n) “Shares” means the shares of Series Seed Preferred Stock issued at the Initial Closing and any Additional Shares issued at a subsequent Closing under Subsection 1.3.
(o) “Transaction Agreements” means this Agreement, the Investors’ Rights Agreement, the Right of First Refusal and Co-Sale Agreement and the Voting Agreement.
(p) “Voting Agreement” means the Amended and Restated Voting Agreement among the Company, the Purchasers and certain other stockholders of the Company, dated as of the date of the Initial Closing, in the form of Exhibit H attached to this Agreement.
2. Representations and Warranties of the Company. The Company hereby represents and warrants to each Purchaser that, except as set forth on the Disclosure Schedule attached as Exhibit C to this Agreement (and subject to the provisions set forth on the first page of such Disclosure Schedule), which exceptions shall be deemed to be part of the representations and warranties made hereunder, the following representations are true and complete as of the date of the Initial Closing, except as otherwise indicated.
For purposes of these representations and warranties (other than those in Subsections 2.2, 2.3, 2.4, 2.5, and 2.6), the term the “Company” shall include any subsidiaries of the Company, unless otherwise noted herein.
2.1 Organization, Good Standing, Corporate Power and Qualification. 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 and authority to carry on its business as presently conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect.
3
2.2 Capitalization.
(a) The authorized capital of the Company consists, immediately prior to the Initial Closing, of:
(i) 49,000,000 shares of common stock, $0.0001 par value per share (the “Common Stock”), 9,396,362 shares of which are issued and outstanding immediately prior to the Initial Closing. All of the outstanding shares of Common Stock have been duly authorized, are fully paid and nonassessable and were issued in compliance with all applicable federal and state securities laws.
(ii) 21,209,487 shares of Preferred Stock, all of which shares have been designated Series Seed Preferred Stock, none of which are issued and outstanding immediately prior to the Initial Closing. The rights, privileges and preferences of the Preferred Stock are as stated in the Restated Certificate and as provided by the Delaware General Corporation Law.
(b) The Company has reserved 12,742,395 shares of Common Stock for issuance to officers, directors, employees and consultants of the Company pursuant to its 2013 Stock Plan duly adopted by the Board of Directors and approved by the Company stockholders (the “Stock Plan”). Of such reserved shares of Common Stock, 88,000 shares have been issued pursuant to restricted stock purchase agreements, options to purchase 4,629,319 shares have been granted and are currently outstanding, and 8,025,076 shares of Common Stock remain available for issuance to officers, directors, employees and consultants pursuant to the Stock Plan. The Company has furnished to the Purchasers complete and accurate copies of the Stock Plan and forms of agreements used thereunder.
(c) Except for (A) the conversion privileges of the Shares to be issued under this Agreement, (B) the rights provided in Section 4 of the Investors’ Rights Agreement, and (C) the securities and rights described in Subsections 2.2(a) and 2.2(b) of this Agreement (including without limitation any securities and rights described in Subsections 2.2(a) and 2.2(b) of the Disclosure Schedule), there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal or similar rights) or agreements, orally or in writing, to purchase or acquire from the Company any shares of Common Stock or Series Seed Preferred Stock, or any securities convertible into or exchangeable for shares of Common Stock or Series Seed Preferred Stock. All outstanding shares of the Company’s Common Stock and all shares of the Company’s Common Stock underlying outstanding options are subject to (i) a right of first refusal in favor of the Company upon any proposed transfer (other than transfers for estate planning purposes); and (ii) a lock-up or market standoff agreement of not less than one hundred eighty (180) days following the Company’s initial public offering pursuant to a registration statement filed with the Securities and Exchange Commission under the Securities Act.
4
(d) None of the Company’s stock purchase agreements or stock option documents contains a provision for acceleration of vesting (or lapse of a repurchase right) or other changes in the vesting provisions or other terms of such agreement or understanding upon the occurrence of any event or combination of events, including without limitation in the case where the Company’s Stock Plan is not assumed in an acquisition. The Company has never adjusted or amended the exercise price of any stock options previously awarded, whether through amendment, cancellation, replacement grant, repricing, or any other means. Except as set forth in the Restated Certificate, the Company has no obligation (contingent or otherwise) to purchase or redeem any of its capital stock.
(e) The Company has obtained valid waivers of any rights by other parties to purchase any of the Shares covered by this Agreement.
2.3 Subsidiaries. The Company does not currently own or control, directly or indirectly, any interest in any other corporation, partnership, trust, joint venture, limited liability company, association, or other business entity. The Company is not a participant in any joint venture, partnership or similar arrangement.
2.4 Authorization. All corporate action required to be taken by the Company’s Board of Directors and stockholders in order to authorize the Company to enter into the Transaction Agreements, and to issue the Shares at the Closing and the Common Stock issuable upon conversion of the Shares pursuant to the Restated Certificate (the “Conversion Shares”), has been taken or will be taken prior to the Closing. All action on the part of the officers of the Company necessary for the execution and delivery of the Transaction Agreements, the performance of all obligations of the Company under the Transaction Agreements to be performed as of the Closing, and the issuance and delivery of the Shares has been taken or will be taken prior to the Closing. The Transaction Agreements, when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or affecting the enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, or (iii) to the extent the indemnification provisions contained in the Investors’ Rights Agreement and the Indemnification Agreement may be limited by applicable federal or state securities laws.
2.5 Valid Issuance of Shares.
(a) The Shares, when issued, sold and delivered in accordance with the terms and for the consideration set forth in this Agreement, will be validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under the Transaction Agreements, applicable state and federal securities laws and liens or encumbrances created by or imposed by a Purchaser. Assuming the accuracy of the representations of the Purchasers in Section 3 of this Agreement and subject to the filings described in Subsection 2.6(ii) below, the Shares will be issued in compliance with all applicable federal and state securities laws. The Common Stock issuable upon conversion of the Shares pursuant to the Restated Certificate has been duly reserved for issuance, and upon issuance in accordance with the terms of the Restated Certificate, will be validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under the Transaction Agreements, applicable federal and state securities laws and liens or encumbrances created by or imposed by a Purchaser. Based in part upon the representations of the Purchasers in Section 3 of this Agreement, and subject to Subsection 2.6 below, the Common Stock issuable upon conversion of the Shares will pursuant to the Restated Certificate be issued in compliance with all applicable federal and state securities laws.
5
(b) No “bad actor” disqualifying event described in Rule 506(d)(1)(i)-(viii) of the Securities Act (a “Disqualification Event”) is applicable to the Company or, to the Company’s knowledge, any Company Covered Person, except for a Disqualification Event as to which Rule 506(d)(2)(ii–iv) or (d)(3), is applicable.
2.6 Governmental Consents and Filings. Assuming the accuracy of the representations made by the Purchasers in Section 3 of this Agreement, no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority is required on the part of the Company in connection with the consummation of the transactions contemplated by this Agreement, except for (i) the filing of the Restated Certificate, which will have been filed as of the Initial Closing, and (ii) filings pursuant to Regulation D of the Securities Act, and applicable state securities laws, which have been made or will be made in a timely manner.
2.7 Litigation. There is no claim, action, suit, proceeding, arbitration, complaint, charge or (to the Company’s knowledge) investigation pending or to the Company’s knowledge, currently threatened (i) against the Company or, to the Company’s knowledge, any officer, director or Key Employee of the Company arising out of their employment or board relationship with the Company; (ii) to the Company’s knowledge, that questions the validity of the Transaction Agreements or the right of the Company to enter into them, or to consummate the transactions contemplated by the Transaction Agreements; or (iii) to the Company’s knowledge, that would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. Neither the Company nor, to the Company’s knowledge, any of its officers, directors or Key Employees is a party or is named as subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality (in the case of officers, directors or Key Employees, such as would affect the Company). There is no action, suit, proceeding or investigation by the Company pending or which the Company intends to initiate. The foregoing sentence includes, without limitation, actions, suits, proceedings or investigations pending or threatened in writing involving the prior employment of any of the Company’s employees, their services provided in connection with the Company’s business, or any information or techniques allegedly proprietary to any of their former employers, or their obligations under any agreements with prior employers.
6
2.8 Intellectual Property. To the Company’s knowledge (other than with respect to patents, patent applications, trademarks, trademark applications), the Company owns or possesses or can acquire on commercially reasonable terms sufficient legal rights to all Company Intellectual Property without any known conflict with, or infringement of, the rights of others. To the Company’s knowledge, no product or service marketed or sold by the Company violates any license or infringes any intellectual property rights of any other party. Other than with respect to commercially available software products under standard end-user object code license agreements, there are no outstanding options, licenses, agreements, claims, encumbrances or shared ownership interests of any kind relating to the Company Intellectual Property, nor is the Company bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, proprietary rights and processes of any other Person. The Company has not received any communications alleging that the Company has violated, or by conducting its business, would violate any of the patents, trademarks, service marks, tradenames, copyrights, trade secrets, mask works or other proprietary rights or processes of any other Person. The Company owns, or has obtained and possesses valid licenses to use, all of the software programs present on the computers and other software-enabled electronic devices that it owns or leases or that it has otherwise provided to its employees for their use in connection with the Company’s business. To the Company’s knowledge, it will not be necessary to use any inventions of any of its employees or consultants (or Persons it currently intends to hire) made prior to their employment by the Company, except for inventions that have been assigned to the Company. Each employee and consultant has assigned to the Company all intellectual property rights he or she owns that are related to the Company’s business as now conducted. Subsection 2.8 of the Disclosure Schedule lists all registered patents, patent applications, trademarks, trademark applications, service marks, service mark applications, trade names and copyrights owned by the Company. The Company has not embedded in any of its publicly-released products any open source, copyleft or community source code distributed under any license that imposes specified obligations upon the Company, including but not limited to any libraries or code licensed under any General Public License or Lesser General Public License. For purposes of this Subsection 2.8, the Company shall be deemed to have knowledge of a patent right if the Company has actual knowledge (as defined in Section 1.4(h) of this Agreement) of the patent right.
2.9 Compliance with Other Instruments. The Company is not in violation or default (i) of any provisions of its Restated Certificate or Bylaws, (ii) of any judgment, order, writ or decree, (iii) under any note, indenture or mortgage, (iv) under any lease, agreement, contract, instrument or purchase order to which it is a party or by which it is bound that is required to be listed on the Disclosure Schedule, or, (v) any provision of federal or state statute, rule or regulation applicable to the Company, in the case of each of subsections (i) through (v) the violation of which would have a Material Adverse Effect. The execution, delivery and performance of the Transaction Agreements on the part of the Company and the consummation of the transactions contemplated by the Transaction Agreements on the part of the Company will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either (i) a default under any such provision, instrument, contract, agreement, judgment, order, writ or decree, or (ii) an event which results in the creation of any lien, charge or encumbrance upon any assets of the Company or the suspension, revocation, forfeiture, or nonrenewal of any material permit or license applicable to the Company.
2.10 Agreements; Actions.
(a) Except for the Transaction Agreements, there are no agreements, understandings, instruments, contracts or transactions to which the Company is a party or by which it is bound that involve (i) obligations (contingent or otherwise) of, or payments to, the Company individually in excess of $50,000 per annum, (ii) the license of any patent, copyright, trademark, trade secret or other proprietary right to or from the Company, (iii) the grant of rights to manufacture, produce, assemble, license, market, or sell its products to any other Person that limit the Company’s exclusive right to develop, manufacture, assemble, distribute, market or sell its products, or (iv) indemnification by the Company with respect to infringements of proprietary rights.
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(b) The Company has not (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock, (ii) incurred any indebtedness for money borrowed or incurred any other liabilities individually in excess of $50,000 or in excess of $250,000 in the aggregate, (iii) made any loans or advances to any Person, other than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of its inventory in the ordinary course of business. For the purposes of (a) and (b) of this Subsection 2.10, all indebtedness, liabilities, agreements, understandings, instruments, contracts and transactions involving the same Person (including Persons the Company has reason to believe are affiliated with each other) shall be aggregated for the purpose of meeting the individual minimum dollar amounts of such subsection.
(c) The Company is not a guarantor or indemnitor of any indebtedness of any other Person.
2.11 Certain Transactions.
(a) Other than (i) standard employment offer letters and consulting services agreements, (ii) standard employee benefits generally made available to all employees, (iii) standard director and officer indemnification agreements approved by the Board of Directors, and (iv) the purchase of shares of the Company’s capital stock and the issuance of options to purchase shares of the Company’s Common Stock, in each instance, approved in the written minutes of the Board of Directors, there are no agreements, understandings or transactions between the Company and any of its officers, directors, consultants or Key Employees, or any Affiliate thereof.
(b) The Company is not indebted, directly or indirectly, to any of its directors, officers or employees or to their respective spouses or children or to any Affiliate of any of the foregoing, other than in connection with expenses or advances of expenses incurred in the ordinary course of business or employee relocation expenses and for other customary employee benefits made generally available to all employees. None of the Company’s directors, officers or employees, or to the Company’s knowledge any members of their immediate families, or to the Company’s knowledge any Affiliate of the foregoing are, directly or indirectly, indebted to the Company.
2.12 Rights of Registration and Voting Rights. Except as provided in the Investors’ Rights Agreement, the Company is not under any obligation to register under the Securities Act any of its currently outstanding securities or any securities issuable upon exercise or conversion of its currently outstanding securities. To the Company’s knowledge, except as contemplated in the Voting Agreement, no stockholder of the Company has entered into any agreements with respect to the voting of capital shares of the Company.
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2.13 Property. The property and assets that the Company owns are free and clear of all mortgages, deeds of trust, liens, loans and encumbrances, except for statutory liens for the payment of current taxes that are not yet delinquent and encumbrances and liens that arise in the ordinary course of business and do not materially impair the Company’s ownership or use of such property or assets. With respect to the property and assets it leases, the Company is in compliance with such leases and, to its knowledge, holds a valid leasehold interest free of any liens, claims or encumbrances other than those of the lessors of such property or assets. The Company does not own any real property.
2.14 Financial Statements. The Company has delivered to each Purchaser its unaudited financial statements as of August 30, 2014 (the “Balance Sheet Date”) and for the fiscal year ended December 31, 2013 (collectively, the “Financial Statements”). The Financial Statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods indicated, except that the unaudited Financial Statements may not contain all footnotes required by GAAP. The Financial Statements fairly present in all material respects the financial condition and operating results of the Company as of the dates, and for the periods, indicated therein, subject in the case of the unaudited Financial Statements to normal year-end audit adjustments. Except as set forth in the Financial Statements, the Company has no material liabilities or obligations, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to the Balance Sheet Date; (ii) obligations under contracts and commitments incurred in the ordinary course of business; and (iii) liabilities and obligations of a type or nature not required under GAAP to be reflected in the Financial Statements, which, in all such cases, individually and in the aggregate would not have a Material Adverse Effect. The Company maintains and will continue to maintain a standard system of accounting established and administered in accordance with GAAP.
2.15 Changes. Since the Balance Sheet Date there has not been:
(a) any change in the assets, liabilities, financial condition or operating results of the Company from that reflected in the Financial Statements, except changes in the ordinary course of business that have not caused, in the aggregate, a Material Adverse Effect;
(b) any damage, destruction or loss, whether or not covered by insurance, that would have a Material Adverse Effect;
(c) any waiver or compromise by the Company 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 the Company, except in the ordinary course of business and the satisfaction or discharge of which would not have a Material Adverse Effect;
(e) any material change to a material contract or agreement by which the Company or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or agreement with any Key Employee, officer, director or stockholder;
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(g) any resignation or termination of employment of any officer or Key Employee of the Company;
(h) any mortgage, pledge, transfer of a security interest in, or lien, created by the Company, 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 do not materially impair the Company’s ownership or use of such property or assets;
(i) any loans or guarantees made by the Company to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business;
(j) any declaration, setting aside or payment or other distribution in respect of any of the Company’s capital stock, or any direct or indirect redemption, purchase, or other acquisition of any of such stock by the Company;
(k) any sale, assignment or transfer of any Company Intellectual Property that could reasonably be expected to result in a Material Adverse Effect; or
(l) any arrangement or commitment by the Company to do any of the things described in this Subsection 2.15.
2.16 Employee Matters.
To the Company’s knowledge, none of its 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 materially interfere with such employee’s ability to promote the interest of the Company or that would conflict with the Company’s business. Neither the execution or delivery of the Transaction Agreements, nor the carrying on of the Company’s business by the employees of the Company, nor the conduct of the Company’s business as now conducted and as presently proposed to be conducted, will, to the Company’s knowledge, conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract, covenant or instrument under which any such employee is now obligated. The Company has complied in all material respects with all applicable state and federal equal employment opportunity laws and with other laws related to employment, including those related to wages, hours, worker classification and collective bargaining.
To the Company’s knowledge, no Key Employee intends to terminate employment with the Company or is otherwise likely to become unavailable to continue as a Key Employee, nor does the Company have a present intention to terminate the employment of any of the foregoing. The employment of each employee of the Company is terminable at the will of the Company.
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To the Company’s knowledge, none of the Key Employees or directors of the Company has been (a) convicted in a criminal proceeding or named as a subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); (b) subject to any order, judgment or decree (not subsequently reversed, suspended, or vacated) of any court of competent jurisdiction permanently or temporarily enjoining him from engaging, or otherwise imposing limits or conditions on his engagement in any securities, investment advisory, banking, insurance, or other type of business or acting as an officer or director of a public company; or (c) found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated any federal or state securities, commodities, or unfair trade practices law, which such judgment or finding has not been subsequently reversed, suspended, or vacated.
2.17 Tax Returns and Payments. There are no federal, state, county, local or foreign taxes due and payable by the Company which have not been timely paid (other than in an aggregate amount not material to the Company). There are no accrued and unpaid federal, state, country, local or foreign taxes of the Company which are due, whether or not assessed or disputed (other than in an aggregate amount not material to the Company). There have been no examinations or audits of any tax returns or reports by any applicable federal, state, local or foreign governmental agency. The Company has duly and timely filed, or has obtained presently effective extensions with respect to, all federal, state, county, local and foreign tax returns required to have been filed by it, and there are in effect no waivers of applicable statutes of limitations with respect to taxes for any year.
2.18 Insurance. The Company has in full force and effect fire and casualty insurance policies with extended coverage, sufficient in amount (subject to reasonable deductions) to allow it to replace any of its properties that might be damaged or destroyed.
2.19 Employee Agreements. Each current and former employee, consultant and officer of the Company has executed an agreement with the Company regarding confidentiality and proprietary information substantially in the form or forms delivered to the counsel for the Purchasers (the “Confidential Information Agreements”). No current or former Key Employee has excluded works or inventions from his or her assignment of inventions pursuant to such Key Employee’s Confidential Information Agreement. Each current and former Key Employee has executed a non-solicitation agreement substantially in the form or forms delivered to counsel for the Purchasers. To the Company’s knowledge, none of the Key Employees is in violation of any agreement covered by this Subsection 2.19.
2.20 Permits. The Company has all franchises, permits, licenses and any similar authority necessary for the conduct of its business as now being conducted, the lack of which could reasonably be expected to have a Material Adverse Effect. The Company is not in default in any material respect under any of such franchises, permits, licenses or other similar authority.
2.21 Corporate Documents. The Restated Certificate and Bylaws of the Company are in the form provided to the Purchasers. The copy of the minute books of the Company provided to the Purchasers contains minutes of all meetings of directors and stockholders and all actions by written consent without a meeting by the directors and stockholders since the date of incorporation and accurately reflects in all material respects all actions by the directors (and any committee of directors) and stockholders with respect to all transactions referred to in such minutes.
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2.22 83(b) Elections. To the Company’s knowledge, all elections and notices under Section 83(b) of the Code have been or will be timely filed by all individuals who have acquired unvested shares of the Company’s Common Stock at or before the Initial Closing.
2.23 Real Property Holding Corporation. The Company is not now and has never been a “United States real property holding corporation” as defined in the Code and any applicable regulations promulgated thereunder. The Company has filed with the Internal Revenue Service all statements, if any, with its United States income tax returns which are required under such regulations.
2.24 Environmental and Safety Laws. Except as could not reasonably be expected to have a Material Adverse Effect, to the best of its knowledge, (a) the Company is and has been in compliance with all Environmental Laws; (b) there has been no release or, to the Company’s knowledge, threatened release of any pollutant, contaminant or toxic or hazardous material, substance or waste or petroleum or any fraction thereof (each a “Hazardous Substance”), on, upon, into or from any site currently or heretofore owned, leased or otherwise used by the Company; (c) there have been no Hazardous Substances generated by the Company that have been disposed of or come to rest at any site that has been included in any published U.S. federal, state or local “superfund” site list or any other similar list of hazardous or toxic waste sites published by any governmental authority in the United States; and (d) there are no underground storage tanks located on, no polychlorinated biphenyls (“PCBs”) or PCB-containing equipment used or stored on, and no hazardous waste as defined by the Resource Conservation and Recovery Act, as amended, stored on, any site owned or operated by the Company, except for the storage of hazardous waste in compliance with Environmental Laws. The Company has made available to the Purchasers true and complete copies of all material environmental records, reports, notifications, certificates of need, permits, pending permit applications, correspondence, engineering studies and environmental studies or assessments.
For purposes of this Subsection 2.24, “Environmental Laws” means any law, regulation, or other applicable requirement relating to (a) releases or threatened release of Hazardous Substance; (b) pollution or protection of employee health or safety, public health or the environment; or (c) the manufacture, handling, transport, use, treatment, storage, or disposal of Hazardous Substances.
2.25 Disclosure. No representation or warranty of the Company contained in this Agreement, as qualified by the Disclosure Schedule, and no certificate furnished or to be furnished to Purchasers at the Closing, contains any untrue statement of a material fact or, to the Company’s knowledge, omits to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances under which they were made. It is understood that this representation is qualified by the fact that the Company has not delivered to the Purchasers, and has not been requested to deliver, a private placement or similar memorandum or any written disclosure of the types of information customarily furnished to purchasers of securities.
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2.26 Foreign Corrupt Practices Act. Neither the Company nor, to the Company’s knowledge, any of the Company’s directors, officers, employees or agents have, directly or indirectly, made, offered, promised or authorized any payment or gift of any money or anything of value to or for the benefit of any “foreign official” (as such term is defined in the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”)), foreign political party or official thereof or candidate for foreign political office for the purpose of (i) influencing any official act or decision of such official, party or candidate, (ii) inducing such official, party or candidate to use his, her or its influence to affect any act or decision of a foreign governmental authority, or (iii) securing any improper advantage, in the case of (i), (ii) and (iii) above in order to assist the Company or any of its affiliates in obtaining or retaining business for or with, or directing business to, any person. Neither the Company nor, to the Company’s knowledge, any of its directors, officers, employees or agents have made or authorized any bribe, rebate, payoff, influence payment, kickback or other unlawful payment of funds or received or retained any funds in violation of any law, rule or regulation. The Company further represents that it has maintained, and has caused each of its subsidiaries and affiliates to maintain, systems of internal controls (including, but not limited to, accounting systems, purchasing systems and billing systems) to ensure compliance with the FCPA or any other applicable anti-bribery or anti-corruption law. Neither the Company nor, to the Company’s knowledge, any of its officers, directors or employees are the subject of any allegation, voluntary disclosure, investigation, prosecution or other enforcement action related to the FCPA or any other anti-corruption law (collectively, “Enforcement Action”).
2.27 Data Privacy. In connection with its collection, storage, transfer (including, without limitation, any transfer across national borders) and/or use of any personally identifiable information from any individuals, including, without limitation, any customers, prospective customers, employees and/or other third parties (collectively “Personal Information”), the Company is, and has been, to the Company’s knowledge, in material compliance with all applicable laws in all relevant jurisdictions, the Company’s privacy policies and the requirements of any contract or codes of conduct to which the Company is a party. The Company has commercially reasonable security measures in place to protect Personal Information collected by it or on its behalf from and against unauthorized access, use and/or disclosure. The Company is and has been, to the Company’s knowledge, in compliance in all material respects with all laws relating to notification obligations with respect to unauthorized disclosure of private Personal Information.
3. Representations and Warranties of the Purchasers. Each Purchaser hereby represents and warrants to the Company, severally and not jointly, that:
3.1 Authorization. The Purchaser has full power and authority to enter into the Transaction Agreements. The Transaction Agreements to which the Purchaser is a party, when executed and delivered by the Purchaser, will constitute valid and legally binding obligations of the Purchaser, enforceable in accordance with their terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and any other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies, or (b) to the extent the indemnification provisions contained in the Investors’ Rights Agreement may be limited by applicable federal or state securities laws.
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3.2 Purchase Entirely for Own Account. This Agreement is made with the Purchaser in reliance upon the Purchaser’s representation to the Company, which by the Purchaser’s execution of this Agreement, the Purchaser hereby confirms, that the Shares and the Conversion Shares (collectively, the “Securities”) to be acquired by the Purchaser will be acquired for investment for the Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Purchaser further represents that the Purchaser does not presently have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third Person, with respect to any of the Securities. The Purchaser has not been formed for the specific purpose of acquiring the Securities.
3.3 Disclosure of Information. The Purchaser has had an opportunity to discuss the Company’s business, management, financial affairs and the terms and conditions of the offering of the Securities with the Company’s management and has had an opportunity to review the Company’s facilities and such books and records and material contracts as the Purchaser deemed necessary to its determination to purchase the Securities. The Purchaser has relied only upon the information provided to him or her in writing by the Company, or information from books and records of the Company. No oral representations have been made to Purchaser or his or her advisor(s) by the Company in connection with the offering of Securities which were not contained in, or were inconsistent with, Section 2 of this Agreement. The foregoing, however, does not limit or modify the representations and warranties of the Company in Section 2 of this Agreement or the right of the Purchasers to rely thereon.
3.4 Restricted Securities. The Purchaser understands that the Securities have not been, and will not be, registered under the Securities Act, 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 Purchaser’s representations as expressed herein. The Purchaser understands that the Securities are “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Purchaser must hold the Securities indefinitely unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available. The Purchaser acknowledges that the Company has no obligation to register or qualify the Securities for resale except as set forth in the Investors’ Rights Agreement. The Purchaser further acknowledges that (a) there is no assurance that any exemption from registration or qualification will be available, and (b) if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to the Company which are outside of the Purchaser’s control, and which the Company is under no obligation and may not be able to satisfy, and therefore that there is no assurance that any such exemption will allow the Purchaser to dispose of, or otherwise transfer, all or any portion of the Securities.
3.5 No Public Market. The Purchaser understands that no public market now exists for the Securities, and that the Company has made no assurances that a public market will ever exist for the Securities.
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3.6 Legends. The Purchaser understands that the Securities and any securities issued in respect of or exchange for the Securities, may bear one or all of the following legends:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SALE, TRANSFER, ASSIGNMENT, PLEDGE OR HYPOTHOCATION OF SUCH SECURITIES MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT, PLEDGE OR HYPOTHOCATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE SECURITIES ACT OF 1933, AS AMENDED.”
(a) Any legend set forth in, or required by, the other Transaction Agreements.
(b) Any legend required by the securities laws of any state to the extent such laws are applicable to the Securities represented by the certificate so legended.
3.7 Relationship to Company; Sophistication; Experience. The Purchaser either (i) has a preexisting business or personal relationship with the Company and/or any of its officers, directors or controlling persons or (ii) such Purchaser, either alone or with his or her purchaser representative(s), has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment in the Securities. Each purchaser representative, if any, in connection with the Purchaser’s investment in the Securities, has confirmed in writing the specific details of any and all past, present or future relationships, actual or contemplated, between the Purchaser or the Purchaser’s affiliates and the Company or any of the Company’s affiliates.
3.8 Accredited Investor. The Purchaser is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
3.9 Purchaser’s Liquidity. The Purchaser (i) has no need for liquidity in the Purchaser’s investment, (ii) is able to bear the substantial economic risks of an investment in the Securities for an indefinite period and (iii) at the present time, can afford a complete loss of such investment. The Purchaser’s current commitments to illiquid investments is not disproportionate to the Purchaser’s net worth, and the Purchaser’s investment in the Securities will not cause such commitment to become disproportionate.
3.10 Risks. The Purchaser is aware that the Securities are highly speculative and that there can be no assurance as to what return, if any, there may be. The Purchaser is aware that the Company may issue additional securities in the future which could result in the dilution of the Purchaser’s ownership interest in the Company.
3.11 Foreign Investors. If the Purchaser is not a United States person (as defined by Section 7701(a)(30) of the Code), the Purchaser hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Securities or any use of this Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the Securities, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, or transfer of the Securities. The Purchaser’s subscription and payment for and continued beneficial ownership of the Securities will not violate any applicable securities or other laws of the Purchaser’s jurisdiction
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3.12 No General Solicitation. Neither the Purchaser, nor any of its officers, directors, employees, agents, stockholders or partners has either directly or indirectly, including through a broker or finder (a) engaged in any general solicitation, or (b) published any advertisement in connection with the offer and sale of the Securities. Further, the Purchaser was not offered or sold the Securities, directly or indirectly, by means of any form of general solicitation or general advertisement, including (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar medium or broadcast over television, radio or the Internet or (ii) any seminar or other meeting whose attendees had been invited by general solicitation or general advertising.
3.13 Exculpation Among Purchasers. The Purchaser acknowledges that it is not relying upon any Person, other than the Company and its officers and directors, in making its investment or decision to invest in the Company. The Purchaser agrees that neither any Purchaser nor the respective controlling Persons, officers, directors, partners, agents, or employees of any Purchaser shall be liable to any other Purchaser for any action heretofore taken or omitted to be taken by any of them in connection with the purchase of the Securities.
3.14 Residence. If the Purchaser is an individual, then the Purchaser is at least 21 years of age and resides in the state or province identified in the address of the Purchaser set forth on Exhibit A; if the Purchaser is a partnership, corporation, limited liability company or other entity, then the Purchaser is authorized and otherwise duly qualified to purchase and hold the Securities, and the office or offices of the Purchaser in which its principal place of business is identified in the address or addresses of the Purchaser set forth on Exhibit A.
3.15 Consent to Promissory Note Conversion and Termination. Each Purchaser, to the extent that such Purchaser, as set forth on the Schedule of Purchasers, is a holder of any promissory note of the Company being converted and/or cancelled in consideration of the issuance hereunder of Shares to such Purchaser, hereby agrees that the entire amount owed to such Purchaser under such note is being tendered to the Company in exchange for the applicable Shares set forth on the Schedule of Purchasers, and effective upon the Company’s and such Purchaser’s execution and delivery of this Agreement, without any further action required by the Company or such Purchaser, such note and all obligations set forth therein shall be immediately deemed repaid in full and terminated in their entirety, including, but not limited to, any security interest effected therein.
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4. Conditions to the Purchasers’ Obligations at Closing. The obligations of each Purchaser to purchase Shares at the Initial Closing are subject to the fulfillment, on or before such Initial Closing, of each of the following conditions, unless otherwise waived by the Purchasers of more than fifty percent (50%) of the Shares sold at the Closing, which consent may be given by written, email, oral or telephone communication to the Company or its counsel:
4.1 Representations and Warranties. The representations and warranties of the Company contained in Section 2 shall be true and correct in all respects as of such Closing.
4.2 Performance. The Company shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by the Company on or before such Closing.
4.3 Qualifications. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Shares pursuant to this Agreement shall be obtained and effective as of such Closing, other than those filings pursuant to Regulation D of the Securities Act and applicable state securities laws that are permitted to be made after the Closing, which will be made in a timely manner.
4.4 Board of Directors. As of the Initial Closing, the authorized size of the Board shall be five (5), and the Board shall be comprised of Corey Epstein, Mark Lynn, Trevor Pettennude, John Tomich and one vacancy.
4.5 Indemnification Agreement. The Company shall have executed and delivered the Indemnification Agreements.
4.6 Investors’ Rights Agreement. The Company and each Purchaser (other than the Purchaser relying upon this condition to excuse such Purchaser’s performance hereunder) and the other stockholders of the Company named as parties thereto shall have executed and delivered the Investors’ Rights Agreement.
4.6 Right of First Refusal and Co-Sale Agreement. The Company, each Purchaser (other than the Purchaser relying upon this condition to excuse such Purchaser’s performance hereunder), and the other stockholders of the Company named as parties thereto shall have executed and delivered the Right of First Refusal and Co-Sale Agreement.
4.7 Voting Agreement. The Company, each Purchaser (other than the Purchaser relying upon this condition to excuse such Purchaser’s performance hereunder), and the other stockholders of the Company named as parties thereto shall have executed and delivered the Voting Agreement.
4.8 Restated Certificate. The Company shall have filed the Restated Certificate with the Secretary of State of Delaware on or prior to the Closing, which shall continue to be in full force and effect as of the Closing.
4.9 Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to each Purchaser, and each Purchaser (or its counsel) shall have received all such counterpart original and certified or other copies of such documents as reasonably requested.
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5. Conditions of the Company’s Obligations at Closing. The obligations of the Company to sell Shares to the Purchasers at the Initial Closing or any subsequent Closing are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived by the Company, which consent may be given by written, email, oral or telephone communication to the Purchasers of more than fifty percent (50%) of the Shares sold at the Closing or their counsel:
5.1 Representations and Warranties. The representations and warranties of each Purchaser contained in Section 3 shall be true and correct in all respects as of such Closing.
5.2 Performance. The Purchasers shall have performed and complied in all material respects with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by them on or before such Closing.
5.3 Qualifications. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Shares pursuant to this Agreement shall be obtained and effective as of the Closing, other than those filings pursuant to Regulation D of the Securities Act and applicable state securities laws that are permitted to be made after the Closing, which will be made in a timely manner.
5.4 Investors’ Rights Agreement. Each Purchaser shall have executed and delivered the Investors’ Rights Agreement.
5.5 Right of First Refusal and Co-Sale Agreement. Each Purchaser and the other stockholders of the Company named as parties thereto shall have executed and delivered the Right of First Refusal and Co-Sale Agreement.
5.6 Voting Agreement. Each Purchaser and the other stockholders of the Company named as parties thereto shall have executed and delivered the Voting Agreement.
5.7 Restated Certificate. The Company, using its reasonable best efforts, shall have filed the Restated Certificate with the Secretary of State of Delaware on or prior to the Closing, which shall continue to be in full force and effect as of the Closing.
6. Miscellaneous.
6.1 Survival of Warranties. Unless otherwise set forth in this Agreement, the representations and warranties of the Company and the Purchasers contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing and shall in no way be affected by any investigation or knowledge of the subject matter thereof made by or on behalf of the Purchasers or the Company.
6.2 Successors and Assigns. Except as otherwise set forth herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties hereto. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
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6.3 Governing Law. This Agreement and any controversy arising out of or relating to this Agreement shall be governed by and construed in accordance with the internal law of the State of Delaware, without regard to conflict of law principles.
6.4 Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes, and enforceable against the parties actually executing such counterparts.
6.5 Titles and Subtitles; References. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs, exhibits and schedules shall, unless otherwise provided, refer to sections and paragraphs hereof and exhibits and schedules attached hereto, all of which exhibits and schedules are incorporated herein by this reference
6.6 Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt, or (a) personal delivery to the party to be notified, (b) when sent, if sent by electronic mail or facsimile during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) business day after deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their address as set forth on the signature page or Exhibit A or to such e-mail address, facsimile number or address as subsequently modified by written notice given in accordance with this Subsection 6.6.
6.7 No Finder’s Fees. Each party represents that it neither is nor will be obligated for any finder’s fee or commission in connection with this transaction. Each Purchaser agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finder’s or broker’s fee arising out of this transaction (and the costs and expenses of defending against such liability or asserted liability) for which each Purchaser or any of its officers, employees or representatives is responsible. The Company agrees to indemnify and hold harmless each Purchaser from any liability for any commission or compensation in the nature of a finder’s or broker’s fee arising out of this transaction (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible.
6.8 Fees and Expenses. Each party to this Agreement shall pay its own fees, expenses and administrative costs related to the preparation, negotiation, execution and delivery of the Transaction Agreements and the other agreements contemplated therein, and the consummation of the transactions contemplated therein, except as otherwise expressly set forth in the Transaction Agreements.
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6.9 Costs and Attorneys’ Fees. Notwithstanding any other provision herein, if any action at law or in equity (including arbitration) is instituted under or in relation to the Transaction Agreements, including without limitation to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to recover from the losing party all fees, costs and expenses of enforcing or interpreting the terms of the Transaction Agreements, including without limitation reasonable attorneys’ and accountants’ fees, costs and necessary disbursements (including with respect to appeals) in addition to any other relief to which such party may be entitled.
6.10 Amendments and Waivers. Except as set forth in Subsection 1.3 of this Agreement, any term of this Agreement may be amended, terminated or waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company, and (i) the holders of at least a majority of the then-outstanding Shares, or (ii) for an amendment, termination or waiver effected prior to the Initial Closing, Purchasers obligated to purchase at least a majority of the Shares to be issued at the Initial Closing. Any amendment or waiver effected in accordance with this Subsection 6.10 shall be binding upon the Purchasers and each transferee of the Shares (or any Common Stock issuable upon conversion thereof), each future holder of all such securities, and the Company.
6.11 Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.
6.12 Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter 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 party of any breach or default under this Agreement, or any waiver on the part of any party 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 party, shall be cumulative and not alternative.
6.13 Entire Agreement. This Agreement (including the Exhibits hereto), the Restated Certificate and the other Transaction Agreements constitute the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties are expressly canceled.
6.14 Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON THE QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.
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6.15 Dispute Resolution. Any unresolved controversy or claim arising out of or relating to this Agreement, except as (i) otherwise provided in this Agreement, or (ii) any such controversies or claims arising out of either party’s intellectual property rights for which a provisional remedy or equitable relief is sought, shall be submitted to arbitration by one arbitrator mutually agreed upon by the parties, and if no agreement can be reached within thirty (30) days after names of potential arbitrators have been proposed by the American Arbitration Association (the “AAA”), then by one arbitrator having reasonable experience in corporate finance transactions of the type provided for in this Agreement and who is chosen by the AAA. The arbitration shall take place in Los Angeles, California, in accordance with the AAA rules then in effect, and judgment upon any award rendered in such arbitration will be binding and may be entered in any court having jurisdiction thereof. There shall be limited discovery prior to the arbitration hearing as follows: (a) exchange of witness lists and copies of documentary evidence and documents relating to or arising out of the issues to be arbitrated, (b) depositions of all party witnesses, and (c) such other depositions as may be allowed by the arbitrators upon a showing of good cause. Depositions shall be conducted in accordance with the California Code of Civil Procedure, the arbitrator shall be required to provide in writing to the parties the basis for the award or order of such arbitrator, and a court reporter shall record all hearings, with such record constituting the official transcript of such proceedings.
6.16 No Commitment for Additional Financing. The Company acknowledges and agrees that no Purchaser has made any representation, undertaking, commitment or agreement to provide or assist the Company in obtaining any financing, investment or other assistance, other than the purchase of the Shares as set forth herein and subject to the conditions set forth herein. In addition, the Company acknowledges and agrees that (i) no statements, whether written or oral, made by any Purchaser or its representatives on or after the date of this Agreement shall create an obligation, commitment or agreement to provide or assist the Company in obtaining any financing or investment, (ii) the Company shall not rely on any such statement by any Purchaser or its representatives, and (iii) an obligation, commitment or agreement to provide or assist the Company in obtaining any financing or investment may only be created by a written agreement, signed by such Purchaser and the Company, setting forth the terms and conditions of such financing or investment and stating that the parties intend for such writing to be a binding obligation or agreement. Each Purchaser shall have the right, in its sole and absolute discretion, to refuse or decline to participate in any other financing of or investment in the Company, and shall have no obligation to assist or cooperate with the Company in obtaining any financing, investment or other assistance.
6.17 Waiver of Conflicts. Each party to this Agreement acknowledges that Strategic Law Partners, LLP (“SLP”), outside legal counsel to the Company, has in the past performed and is or may now or in the future represent one or more Purchasers or their Affiliates in matters unrelated to the transactions contemplated by this Agreement (the “Financing”), including representation of such Purchasers or their Affiliates in matters of a similar nature to the Financing. SLP believes that its representation of the Company in the Financing will not adversely affect its relationship with those of the Purchasers who are clients of SLP, and that its representation of those Purchasers in matters unrelated to the Financing will not adversely affect SLP’s representation of the Company in the Financing. The applicable rules of professional conduct require that SLP inform the parties hereunder of this dual representation and obtain their consent to SLP’s representation of the Company, and their waiver of the conflict of interest which arises from their representation of the Company adverse to any of the Purchaser who are clients of SLP. SLP has served as outside legal counsel to the Company and has negotiated the terms of the Financing solely on behalf of the Company. The Company and each Purchaser hereby (a) acknowledge that they have had an opportunity to ask for and have obtained information relevant to such representation, including disclosure of the reasonably foreseeable adverse consequences of such representation; (b) acknowledge that with respect to the Financing, SLP has represented solely the Company, and not any Purchaser or any stockholder, director or employee of the Company or any Purchaser; (c) gives its informed consent to SLP’s representation of the Company in the Financing; and (d) represents that it has had the opportunity to be, or has been, represented by independent counsel in giving the waivers contained in this Section 6.17.
[signature pages follow]
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IN WITNESS WHEREOF, the parties have executed this Series Seed Preferred Stock Purchase Agreement as of the date first written above.
COMPANY: | ||
By: | ||
Name: | ||
(print) | ||
Title: | ||
Address: | ||
with a copy to (which shall not constitute notice): | ||
Strategic Law Partners, LLP | ||
Attn: Bradley Schwartz | ||
500 S. Grand Avenue, Suite 2050 | ||
Los Angeles, California 90071 |
Signature Page to Stock Purchase Agreement
IN WITNESS WHEREOF, the parties have executed this Series Seed Preferred Stock Purchase Agreement as of the date first written above.
PURCHASERS: | ||
(Print Name of Purchaser) | ||
By: | ||
Name: | ||
(print) | ||
Title: | ||
Address: | ||
Signature Page to Stock Purchase Agreement
EXHIBITS
Exhibit A – SCHEDULE OF PURCHASERS
Exhibit B – FORM OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Exhibit C – DISCLOSURE SCHEDULE
Exhibit D – FORM OF INDEMNIFICATION AGREEMENT
Exhibit E – FORM OF INVESTORS’ RIGHTS AGREEMENT
Exhibit F – FORM OF RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT
Exhibit G – FORM OF AMENDED AND RESTATED VOTING AGREEMENT
Exhibit 4.9
StartEngine Capital LLC.
Subscription Agreement
THE SECURITIES ARE BEING OFFERED PURSUANT TO SECTION 4(A)(6) OF THE SECURITIES ACT OF 1933 (THE “ACT”) AND HAVE NOT BEEN REGISTERED UNDER THE ACT OR THE SECURITIES LAWS OF ANY STATE OR ANY OTHER JURISDICTION. NO FEDERAL OR STATE SECURITIES ADMINISTRATOR HAS REVIEWED OR PASSED ON THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS FOR THESE SECURITIES. THERE ARE SIGNIFICANT RESTRICTIONS ON THE TRANSFERABILITY OF THE SECURITIES DESCRIBED HEREIN AND NO RESALE MARKET MAY BE AVAILABLE AFTER RESTRICTIONS EXPIRE. THE PURCHASE OF THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN BEAR THE RISK OF THE LOSS OF THEIR ENTIRE INVESTMENT WITHOUT A CHANGE IN THEIR LIFESTYLE.
Denim.LA, Inc.
8899 Beverly Blvd., Suite 600
West Hollywood, CA 90069
Ladies and Gentlemen:
The undersigned understands that Denim.LA, Inc., a corporation organized under the laws of Delaware (the “Company”), is offering up to $1,070,000.00 of shares of Series CF Preferred Stock (the “Securities”) in a Regulation Crowdfunding offering. This offering is made pursuant to the Form C, dated [DATE OF LAUNCH] the “Form C”). The undersigned further understands that the offering is being made pursuant to Section 4(a)(6) of the Act and Regulation Crowdfunding under the Act (“Regulation Crowdfunding”) and without registration of the Securities under the Act.
1. Subscription.
(a) | Subject to the terms and conditions hereof and the provisions of the Form C, the undersigned hereby subscribes for the Securities set forth on the signature page hereto for the aggregate purchase price set forth on the signature page hereto, which is payable as described in Section 4 hereof. Subscriber understands and acknowledges that the subscription may not be revoked within the 48 hour period prior to a closing (as described below) of the Offering. The undersigned acknowledges that the Securities will be subject to restrictions on transfer as set forth in this subscription agreement (the “Subscription Agreement”). |
(b) | By executing this Subscription Agreement, the undersigned (and, if the undersigned is purchasing the Securities subscribed for hereby in a fiduciary capacity, the person or persons for whom the undersigned is so purchasing) hereby joins as a party that is designated (a) as an “Investor” under each of (i) the Amended and Restated Investors’ Rights Agreement to be dated as of the initial Closing, in substantially the form attached hereto as Exhibit A (the “Investors’ Rights Agreement”), and (ii) the Amended and Restated Right of First Refusal Agreement and Co-Sale Agreement to be dated as of the initial Closing, in substantially the form attached hereto as Exhibit B (the “First Refusal Agreement”), and (b) as a “Rights Holder” under the Amended and Restated Voting Agreement to be dated as of the initial Closing, in substantially the form attached hereto as Exhibit C (the “Voting Agreement”), in each case as entered into by and among the Company, the investors in the Company’s Series Seed Preferred Stock, Series A Preferred Stock, Series A-2 Preferred Stock and Series CF Preferred Stock and certain other stockholders of the Company. The Investors’ Rights Agreement, First Refusal Agreement and Voting Agreement collectively are referred to herein as the “Investment Agreements”. Any notice required or permitted to be given to the undersigned under any of the Investment Agreements shall be given to the undersigned at the address provided with the undersigned’s subscription. The undersigned confirms that the undersigned has reviewed the Investment Agreements and will be bound by the terms thereof as a party who is designated as an “Investor” under the Investors’ Rights Agreement and the First Refusal Agreement, and as a “Rights Holder” under the Voting Agreement. |
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2. Acceptance of Subscription and Issuance of Securities. It is understood and agreed that the Company shall have the sole right, at its complete discretion, to accept or reject this subscription, in whole or in part, for any reason and that the same shall be deemed to be accepted by the Company only when it is signed by a duly authorized officer of the Company and delivered to the undersigned at the Closing referred to in Section 3 hereof. Subscriptions need not be accepted in the order received, and the Securities may be allocated among subscribers.
3. The Closing. The closing of the purchase and sale of the Securities (the “Closing”) shall take place at [TIME] a.m. New York time on [EXPIRATION DATE], or at such other time and place as the Company may designate by notice to the undersigned.
4. Payment for Securities. Payment for the Securities shall be received by [NAME OF ESCROW] (the “Escrow Agent”) from the undersigned by [%PaymentMethod%] of immediately available funds or other means approved by the Escrow Agent prior to the Offering campaign deadline, in the amount as set forth on the signature page hereto. Upon the Closing, the Escrow Agent shall release such funds to the Company. The undersigned shall receive notice and evidence of the entry of the number of the Securities owned by undersigned reflected on the books and records of the Company and verified by Fund America Stock Transfer (the “Transfer Agent”), which shall bear a notation that the Securities were sold in reliance upon an exemption from registration under the Securities Act.
5. Representations and Warranties of the Company. The Company represents and warrants to the undersigned that the following representations and warranties are true and complete in all material respects as of the date of each Closing:
a) The Company is duly formed and validly existing under the laws of Delaware, with full power and authority to conduct its business as it is currently being conducted and to own its assets; and has secured any other authorizations, approvals, permits and orders required by law for the conduct by the Company of its business as it is currently being conducted, except as would not have a material adverse effect on the Company or its business.
b) The Securities have been duly authorized and, when issued, delivered and paid for in the manner set forth in this Subscription Agreement, will be validly issued, fully paid and nonassessable, and will conform in all material respects to the description thereof set forth in the Form C.
c) The execution and delivery by the Company of this Subscription Agreement and the consummation of the transactions contemplated hereby (including the issuance, sale and delivery of the Securities) are within the Company’s powers and have been duly authorized by all necessary corporate action on the part of the Company. Upon full execution hereof, this Subscription Agreement shall constitute a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies and (iii) with respect to provisions relating to indemnification and contribution, as limited by considerations of public policy and by federal or state securities laws.
d) Assuming the accuracy of the undersigned’s representations and warranties set forth in Section 6 hereof, no order, license, consent, authorization or approval of, or exemption by, or action by or in respect of, or notice to, or filing or registration with, any governmental body, agency or official is required by or with respect to the Company in connection with the execution, delivery and performance by the Company of this Subscription Agreement except (i) for such filings as may be required under Regulation Crowdfunding, or under any applicable state securities laws, (ii) for such other filings and approvals as have been made or obtained, or (iii) where the failure to obtain any such order, license, consent, authorization, approval or exemption or give any such notice or make any filing or registration would not have a material adverse effect on the ability of the Company to perform its obligations hereunder.
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6. Representations and Warranties of the Undersigned. The undersigned hereby represents and warrants to and covenants with the Company that:
a) General.
i. The undersigned has all requisite authority (and in the case of an individual, the capacity) to purchase the Securities, enter into this Subscription Agreement, to join as a party to each of the Investment Agreements, and to perform all the obligations required to be performed by the undersigned hereunder and thereunder, and such purchase, such entry into this Subscription Agreement, and such joinder with such Investment Agreements will not contravene any law, rule or regulation binding on the undersigned or any investment guideline or restriction applicable to the undersigned. This Subscription Agreement and each of the Investment Agreements will be valid and binding obligations of the undersigned, enforceable in accordance with their respective terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights and (ii) as limited by general principles of equity that restrict the availability of equitable remedies.
ii. The undersigned is a resident of the state set forth on the signature page hereto and is not acquiring the Securities as a nominee or agent or otherwise for any other person.
iii. The undersigned will comply with all applicable laws and regulations in effect in any jurisdiction in which the undersigned purchases or sells Securities and obtain any consent, approval or permission required for such purchases or sales under the laws and regulations of any jurisdiction to which the undersigned is subject or in which the undersigned makes such purchases or sales, and the Company shall have no responsibility therefor.
iv. Including the amount set forth on the signature page hereto, in the past 12 month period, the undersigned has not exceeded the investment limit as set forth in Rule 100(a)(2) of Regulation Crowdfunding.
b) Information Concerning the Company.
i. The undersigned has received and reviewed a copy of the Form C. With respect to information provided by the Company, the undersigned has relied solely on the information contained in the Form C to make the decision to purchase the Securities.
ii. The undersigned understands and accepts that the purchase of the Securities involves various risks, including the risks outlined in the Form C and in this Subscription Agreement. The undersigned represents that it is able to bear any and all loss associated with an investment in the Securities.
iii. The undersigned confirms that it is not relying and will not rely on any communication (written or oral) of the Company, StartEngine, or any of their respective affiliates, as investment advice or as a recommendation to purchase the Securities. It is understood that information and explanations related to the terms and conditions of the Securities provided in the Form C or otherwise by the Company, StartEngine or any of their respective affiliates shall not be considered investment advice or a recommendation to purchase the Securities, and that neither the Company, StartEngine nor any of their respective affiliates is acting or has acted as an advisor to the undersigned in deciding to invest in the Securities. The undersigned acknowledges that neither the Company, StartEngine nor any of their respective affiliates have made any representation regarding the proper characterization of the Securities for purposes of determining the undersigned's authority or suitability to invest in the Securities.
iv. The undersigned is familiar with the business and financial condition and operations of the Company, all as generally described in the Form C. The undersigned has had access to such information concerning the Company and the Securities as it deems necessary to enable it to make an informed investment decision concerning the purchase of the Securities.
v. The undersigned understands that, unless the undersigned notifies the Company in writing to the contrary at or before the Closing, each of the undersigned's representations and warranties contained in this Subscription Agreement will be deemed to have been reaffirmed and confirmed as of the Closing, taking into account all information received by the undersigned.
vi. The undersigned acknowledges that the Company has the right in its sole and absolute discretion to abandon this offering at any time prior to the completion of the offering. This Subscription Agreement and the Investment Agreements shall thereafter have no force or effect and the Company shall return any previously paid subscription price of the Securities, without interest thereon, to the undersigned.
vii. The undersigned understands that no federal or state agency has passed upon the merits or risks of an investment in the Securities or made any finding or determination concerning the fairness or advisability of this investment.
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viii. Undersigned has up to 48 hours before a campaign close to cancel the purchase and get a full refund.
c) No Guaranty.
i. The undersigned confirms that the Company has not (A) given any guarantee or representation as to the potential success, return, effect or benefit (either legal, regulatory, tax, financial, accounting or otherwise) an of investment in the Securities or (B) made any representation to the undersigned regarding the legality of an investment in the Securities under applicable legal investment or similar laws or regulations. In deciding to purchase the Securities, the undersigned is not relying on the advice or recommendations of the Company and the undersigned has made its own independent decision, alone or in consultation with its investment advisors, that the investment in the Securities is suitable and appropriate for the undersigned.
d) Status of Undersigned.
i. The undersigned has such knowledge, skill and experience in business, financial and investment matters that the undersigned is capable of evaluating the merits and risks of an investment in the Securities. With the assistance of the undersigned's own professional advisors, to the extent that the undersigned has deemed appropriate, the undersigned has made its own legal, tax, accounting and financial evaluation of the merits and risks of an investment in the Securities and the consequences of this Subscription Agreement and the Investment Agreements. The undersigned has considered the suitability of the Securities as an investment in light of its own circumstances and financial condition and the undersigned is able to bear the risks associated with an investment in the Securities and its authority to invest in the Securities.
e) Restrictions on Transfer or Sale of Securities.
i. The undersigned is acquiring the Securities solely for the undersigned’s own beneficial account, for investment purposes, and not with a view to, or for resale in connection with, any distribution of the Securities. The undersigned understands that the Securities have not been, and are not being, registered under the Securities Act or any state securities laws by reason of specific exemptions under the provisions thereof which depend in part upon the investment intent of the undersigned and of the other representations made by the undersigned in this Subscription Agreement. The undersigned understands that the Company is relying upon the representations and agreements contained in this Subscription Agreement (and any supplemental information) for the purpose of determining whether this transaction meets the requirements for such exemptions.
ii. The undersigned understands that the Securities are restricted from transfer for a period of time under applicable federal securities laws and that the Securities Act and the rules of the U.S. Securities and Exchange Commission (the "Commission") provide in substance that the undersigned may dispose of the Securities only pursuant to an effective registration statement under the Securities Act, an exemption therefrom or as further described in Section 227.501 of Regulation Crowdfunding, after which certain state restrictions may apply. The undersigned understands that the Company has no obligation or intention to register any of the Securities, or to take action so as to permit sales pursuant to the Securities Act. Even when the Securities become freely transferrable, a secondary market in the Securities may not develop. Consequently, the undersigned understands that the undersigned must bear the economic risks of the investment in the Securities for an indefinite period of time.
iii. The undersigned agrees: (A) that the undersigned will not sell, assign, pledge, give, transfer or otherwise dispose of the Securities or any interest therein, or make any offer or attempt to do any of the foregoing, except pursuant to Section 227.501 of Regulation Crowdfunding.
7. Conditions to Obligations of the Undersigned and the Company. The obligations of the undersigned to purchase and pay for the Securities specified on the signature page hereto and of the Company to sell the Securities are subject to the satisfaction at or prior to the Closing of the following conditions precedent: the representations and warranties of the Company contained in Section 5 hereof and of the undersigned contained in Section 6 hereof shall be true and correct as of the Closing in all respects with the same effect as though such representations and warranties had been made as of the Closing.
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8. Future Offerings under Regulation A of the Act.
In the event the Company elects to make an offering of securities (a) of the same class as the Securities, or (b) securities that the Board of Directors in its sole discretion determines to be the economic equivalent of the Securities (“Equivalent Securities”) under Regulation A of the Act, the undersigned agrees that, at the sole discretion of the Board of Directors of the Company, the Securities (or some portion of the Securities) may be exchanged for an equivalent number of securities of the same class or Equivalent Securities of the Company, at no cost to the undersigned. The undersigned agrees to provide any information necessary to effect such exchange, and to hold the securities issued under Regulation A in the manner prescribed in such offering, including holding the securities to be issued in “street name” in a brokerage account. The undersigned agrees that in the event the undersigned does not provide information sufficient to effect such exchange in a timely manner, the Company may repurchase the Securities at a price to be determined by the Board of Directors.
9. Revisions to Manner of Holding.
In the event that statutory or regulatory changes are adopted such that it becomes possible for companies whose purpose is limited to acquiring, holding and disposing of securities issued by a single company (“Crowdfunding SPVs”) to make offerings under Section 4(a)(6), the undersigned agrees to exchange the Securities for securities issued by a Crowdfunding SPV in a transaction complying with the requirements of Section 3(a)(9) of the Act. The undersigned agrees that in the event the undersigned does not provide information sufficient to effect such exchange in a timely manner, the Company may repurchase the Securities at a price to be determined by the Board of Directors.
10. Obligations Irrevocable. Following the Closing, the obligations of the undersigned shall be irrevocable.
11. Waiver, Amendment. Neither this Subscription Agreement nor any provisions hereof shall be modified, changed, discharged or terminated except by an instrument in writing, signed by the party against whom any waiver, change, discharge or termination is sought. No failure or delay by any party in exercising any right, power or privilege under this Subscription Agreement shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
12. Assignability. Neither this Subscription Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the undersigned without the prior written consent of the Company.
13. Waiver of Jury Trial. THE UNDERSIGNED IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING ARISING OUT OF THE TRANSACTIONS CONTEMPLATED BY THIS SUBSCRIPTION AGREEMENT.
14. Submission to Jurisdiction. With respect to any suit, action or proceeding relating to any offers, purchases or sales of the Securities by the undersigned (“Proceedings”), the undersigned irrevocably submits to the jurisdiction of the federal or state courts located in Los Angeles, California, which submission shall be exclusive unless none of such courts has lawful jurisdiction over such Proceedings.
15. Governing Law. This Subscription Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflict of law principles thereof.
16. Section and Other Headings. The section and other headings contained in this Subscription Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Subscription Agreement.
17. Counterparts. This Subscription Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which together shall be deemed to be one and the same agreement.
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18. Notices. All notices and other communications provided for herein shall be in writing and shall be deemed to have been duly given if delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid or email to the following addresses (or such other address as either party shall have specified by notice in writing to the other):
If to the Company: |
Denim.LA, Inc. 8899 Beverly Blvd., Suite 600 West Hollywood, CA 90069 E-mail: [E-MAIL ADDRESS] Attention: President |
with a copy to: |
Attention:
[ATTORNEY NAME]
E-mail: [E-MAIL ADDRESS] |
If to the Purchaser: |
[PURCHASER ADDRESS] E-mail: [E-MAIL ADDRESS] Attention: [TITLE OF OFFICER TO RECEIVE NOTICES] |
19. Binding Effect. The provisions of this Subscription Agreement shall be binding upon and accrue to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns, and it is not the intention of the parties to confer, and no provision hereof shall confer, third-party beneficiary rights upon any other person.
20. Survival. All representations, warranties and covenants contained in this Subscription Agreement shall survive (i) the acceptance of the subscription by the Company, (ii) changes in the transactions, documents and instruments described in the Form C which are not material or which are to the benefit of the undersigned and (iii) the death or disability of the undersigned.
21. Notification of Changes. The undersigned hereby covenants and agrees to notify the Company upon the occurrence of any event prior to the closing of the purchase of the Securities pursuant to this Subscription Agreement, which would cause any representation, warranty, or covenant of the undersigned contained in this Subscription Agreement to be false or incorrect.
22. Severability. If any term or provision of this Subscription Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Subscription Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction.
23. Entire Agreement. This Subscription Agreement and the Investment Agreements supersede all prior discussions and agreements between the parties with respect to the subject matter hereof and contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof.
24. Recapitalization. If any recapitalization or other transaction affecting the stock of the Company is effected, then any new, substituted or additional securities or other property which is distributed with respect to the Securities shall be immediately subject to this Subscription Agreement, to the same extent that the Securities, immediately prior thereto, shall have been covered by this Subscription Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement this [DAY] OF [MONTH], [YEAR].
PURCHASER (if an individual): | ||
By | ||
Name: |
PURCHASER (if an entity): |
Legal Name of Entity | ||
By | ||
Name: | ||
Title: |
State/Country of Domicile or Formation: |
The offer to purchase Securities as set forth above is confirmed and accepted by the Company as to [AMOUNT OF SECURITIES TO BE ACQUIRED BY PURCHASER] for [TOTAL AMOUNT TO BE PAID BY PURCHASER].
Denim.LA, Inc. | ||
By | ||
Name: Mark Lynn | ||
Title: Co-President |
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Exhibit 10.1
INDEMNITY AGREEMENT
This Indemnity Agreement (this “Agreement”), effective as of , is made by and between Digital Brands Group, Inc., a Delaware corporation with executive offices located at __________________ (the “Company”), and , __________of the Company residing at (the “Indemnitee”).
RECITALS
A. The Company is aware that competent and experienced persons are increasingly reluctant to serve as directors or officers of corporations unless they are protected by comprehensive liability insurance or indemnification, due to increased exposure to litigation costs and risks resulting from their service to such corporations, and due to the fact that the exposure frequently bears no reasonable relationship to the compensation of such directors and officers;
B. The statutes and judicial decisions regarding the duties of directors and officers are often difficult to apply, ambiguous, or conflicting, and therefore fail to provide such directors and officers with adequate, reliable knowledge of legal risks to which they are exposed or information regarding the proper course of action to take;
C. Plaintiffs often seek damages in such large amounts and the costs of litigation may be so substantial (whether or not the case is meritorious), that the defense and/or settlement of such litigation is often beyond the personal resources of officers and directors;
D. The Company believes that it is unfair for its directors and officers and the directors and officers of its subsidiaries to assume the risk of large judgments and other expense that may be incurred in cases in which the director or officer received no personal profit and in cases where the director or officer was not culpable;
E. The Company recognizes that the issues in controversy in litigation against a director or officer of a corporation such as the Company or a subsidiary of the Company are often related to the knowledge, motives and intent of such director or officer, that he or she is usually the only witness with knowledge of the essential facts and exculpating circumstances regarding such matters and that the long period of time which usually elapses before the trial or other disposition of which litigation often extends beyond the time that the director or officer can reasonably recall such matters; and may extend beyond the normal time for retirement or in the event of his or her death, his or her spouse, heirs, executors or administrators, may be faced with limited ability and undue hardship in maintaining an adequate defense, which may discourage such a director or officer from serving in that position;
F. Based upon their experience as business managers, the Board of Directors of the Company (the “Board”) has concluded that, to retain and attract talented and experienced individuals to serve as officers and directors of the Company and its subsidiaries and to encourage such individuals to take the business risks necessary for the success of the Company and its subsidiaries, it is necessary for the Company to contractually indemnify its officers and directors and the officers and directors of its subsidiaries, and to assume for itself maximum liability for expenses and damages in connection with claims against such officers and directors in connection with their service to the Company and its subsidiaries, and has further concluded that the failure to provide such contractual indemnification could result in great harm to the Company and its subsidiaries and the Company’s stockholders;
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G. Section 145 of the General Corporation Law of Delaware, under which the Company is organized (“Section 145”), empowers the Company to indemnify by agreement its officers, directors, employees and agents, and persons who serve, at the request of the Company, as directors, officers, employees or agents of other corporations or enterprises, and expressly provides that the indemnification provided by Section 145 is not exclusive;
H. The Company, after reasonable investigation prior to the date hereof, has determined that the liability insurance coverage available to the Company and its subsidiaries as of the date hereof is inadequate and/or unreasonably expensive. The Company believes, therefore, that the interest of the Company’s stockholders would best be served by a combination of such insurance as the Company may obtain, or request a subsidiary to obtain, pursuant to the Company’s obligations hereunder, and the indemnification by the Company of the directors and officers of the Company and its subsidiaries;
I. The Company desires and has requested the Indemnitee to serve or continue to serve as a director or officer of the Company and/or the subsidiaries of the Company free from undue concern for claims for damages arising out of or related to such services to the Company and/or a subsidiary of the Company; and
J. The Indemnitee is willing to serve, or to continue to serve, the Company and/or the subsidiaries of the Company, provided that he or she is furnished the indemnity provided for herein.
AGREEMENT
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions.
(a) Agent. For the purposes of this Agreement, “agent” of the Company means any person who is or was a director, officer, employee or other agent of the Company or a subsidiary of the Company; or is or was serving at the request of, for the convenience of or to represent the interest of the Company or a subsidiary of the Company as a director, officer, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise; or was a director, officer, employee or agent of a foreign or domestic corporation which was a predecessor corporation of the Company or a subsidiary of the Company, or was a director, officer, employee or agent of another enterprise at the request of, for the convenience of or to represent the interests of such predecessor corporation.
(b) Expenses. For purposes of this Agreement, “expenses” includes all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees and related disbursements, and other out-of-pocket costs) actually and reasonably incurred by the Indemnitee in connection with either the investigation, defense or appeal of a proceeding or establishing or enforcing a right to indemnification under this Agreement, Section 145 or otherwise; provided, however, that expenses shall not include any judgments, fines, ERISA excise taxes or penalties or amounts paid in settlement of a proceeding.
(c) Proceeding. For the purposes of this Agreement, “proceeding” means any threatened, pending, or completed action, suit or other proceeding, whether civil, criminal, administrative, investigative or any other type whatsoever.
(d) Subsidiary. For purposes of this Agreement, “subsidiary” means any corporation of which more than 50% of the outstanding voting securities is owned directly or indirectly by the Company, by the Company and one or more other subsidiaries, or by one or more other subsidiaries.
2. Agreement to Serve. The Indemnitee agrees to serve and/or continue to serve as an agent of the Company, at its will (or under separate agreement, if such agreement exists), in the capacity the Indemnitee currently serves as an agent of the Company, so long as he or she is duly appointed or elected and qualified in accordance with the applicable provisions of the Bylaws of the Company or any subsidiary of the Company or until such time as he or she tenders his or her resignation in writing or he or she is removed from such position, provided, however, that nothing contained in this Agreement is intended to create any right to continued employment by the Indemnitee.
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3. Maintenance of Liability Insurance.
(a) The Company hereby covenants and agrees that, so long as the Indemnitee shall continue to serve as an agent of the Company and thereafter so long as the Indemnitee shall be subject to any possible proceeding by reason of the fact that the Indemnitee was an agent of the Company, the Company, subject to Section 3(b), shall use reasonable efforts to obtain and maintain in full force and effect directors’ and officers’ liability insurance (“D&O Insurance”) in reasonable amounts from established and reputable insurers.
(b) Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain D&O Insurance if the Company determines in good faith that such insurance is not reasonably available, the premium costs for such insurance are disproportionate to the amount of coverage provided, the coverage is reduced by exclusions so as to provide an insufficient benefit, or the Indemnitee is covered by similar insurance maintained by a subsidiary of the Company.
4. Mandatory Indemnification. The Company shall indemnify the Indemnitee from:
(a) Third Party Actions. If the Indemnitee is a person who was or is a party or is threatened to be made a party to any proceeding (other than an action by or in the right of the Company) by reason of the fact that he or she is or was an agent of the Company, or by reason of anything done or not done by him or her in any such capacity, against any and all expenses and liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) actually and reasonably incurred by him or her in connection with the investigation, defense, settlement or appeal of such proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful; and
(b) Derivative Actions. If the Indemnitee is a person who was or is a party or is threatened to be made a party to any proceeding by or in the right of the Company to procure a judgment in its favor by reason of the fact that he or she is or was an agent of the Company, or by reason of anything done or not done by him or her in any such capacity, against any amounts paid in settlement of any such proceeding and all expenses actually and reasonably incurred by him or her in connection with the investigation, defense, settlement, or appeal of such proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company; except that no indemnification under this subsection shall be made in respect of any claim, issue or matter as to which such person shall have been finally adjudged to be liable to the Company after the time for an appeal has expired by a court of competent jurisdiction due to willful misconduct of a culpable nature in the performance of his or her duty to the Company unless and only to the extent that the Court of Chancery or the court in which such proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such amounts which the Court of Chancery or such other court shall deem proper; and
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(c) Actions Where Indemnitee is Deceased. If the Indemnitee is a person who was or is a party or is threatened to be made a party to any proceeding by reason of the fact that he or she is or was an agent of the Company, or by reason of anything done or not done by him or her in any such capacity, against any and all expenses and liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) actually and reasonably incurred by him or her in connection with the investigation, defense, settlement or appeal of such proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company, and prior to, during the pendency or after completion of such proceeding the Indemnitee is deceased, except that in a proceeding by or in the right of the Company no indemnification shall be due under the provisions of this subsection in respect of any claim, issue or matter as to which such person shall have been finally adjudged to be liable to the Company after the time for an appeal has expired, by a court of competent jurisdiction due to willful misconduct of a culpable nature in the performance of his or her duty to the Company, unless and only to the extent that the Court of Chancery or the court in which such proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such amounts which the Court of Chancery or such other court shall deem proper; and
(d) Exception for Amounts Covered by Insurance. Notwithstanding the foregoing, the Company shall not be obligated to indemnify the Indemnitee for expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fees, ERISA excise taxes or penalties, and amounts paid in settlement) which have been paid directly to Indemnitee under D&O Insurance.
5. Partial Indemnification. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) incurred by him or her in the investigation, defense, settlement or appeal of a proceeding but not entitled, however, to indemnification for all of the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for such total amount except as to the portion thereof to which the Indemnitee is not entitled.
6. Mandatory Advancement of Expenses. Subject to Section 10 below, the Company shall advance all expenses incurred by the Indemnitee in connection with the investigation, defense, settlement or appeal of any proceeding to which the Indemnitee is a party or is threatened to be made a party by reason of the fact that the Indemnitee is or was an agent of the Company or by reason of anything done or not done by him or her in any such capacity. Indemnitee hereby undertakes to repay such amounts advanced only if, and to the extent that, it shall ultimately be determined that the Indemnitee is not entitled to be indemnified by the Company as authorized hereby. The advances to be made hereunder shall be paid by the Company to the Indemnitee within twenty (20) days following delivery of a written request therefor by the Indemnitee to the Company.
7. Notice and Other Indemnification Procedures.
(a) Promptly after receipt by the Indemnitee of notice of the commencement of or the threat of commencement of any proceeding, the Indemnitee shall, if the Indemnitee believes that indemnification with respect thereto may be sought from the Company under this Agreement, notify the Company of the commencement or threat of commencement thereof.
(b) If, at the time of the receipt of a notice of the commencement of a proceeding pursuant to Section 7(a) hereof, the Company has D&O Insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.
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(c) In the event the Company shall be obligated to advance the expenses for any proceeding against the Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel approved by the Indemnitee, upon the delivery to the Indemnitee of written notice of its election so to do. After delivery of such notice, approval of such counsel by the Indemnitee and the retention of such counsel by the Company, the Company will not be liable to the Indemnitee under this Agreement for any fees of counsel subsequently incurred by the Indemnitee with respect to the same proceeding, provided that (i) the Indemnitee shall have the right to employ his or her counsel in any such proceeding at the Indemnitee’s expense; and (ii) if (A) the employment of counsel by the Indemnitee has been previously authorized by the Company, (B) the Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and the Indemnitee in the conduct of any such defense or (C) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding, the fees and expenses of the Indemnitee’s counsel shall be at the expense of the Company.
8. Determination of Right to Indemnification.
(a) To the extent the Indemnitee has been successful on the merits or otherwise in defense of any proceeding referred to in Section 4(a), 4(b) or 4(c) of this Agreement or in the defense of any claim, issue or matter described therein, the Company shall indemnify the Indemnitee against expenses actually and reasonably incurred by him or her in connection therewith.
(b) In the event that Section 8(a) is inapplicable, the Company shall also indemnify the Indemnitee unless, and only to the extent that, the Company shall prove by clear and convincing evidence to a forum listed in Section 8(c) below that the Indemnitee has not met the applicable standard of conduct required to entitle the Indemnitee to such indemnification.
(c) The Indemnitee shall be entitled to select the forum in which the validity of the Company’s claim under Section 8(b) hereof that the Indemnitee is not entitled to indemnification will be heard from among the following:
(1) A quorum of the Board consisting of directors who are not parties to the proceeding for which indemnification is being sought;
(2) The stockholders of the Company;
(3) Legal counsel selected by the Indemnitee and reasonably approved by the Board, which counsel shall make such determination in a written opinion;
(4) A panel of three arbitrators, one of whom is selected by the Company, another of whom is selected by the Indemnitee and the last of whom is selected by the first two arbitrators so selected.
(d) As soon as practicable, and in no event later than 30 days after written notice of the Indemnitee’s choice of forum pursuant to Section 8(c) above, the Company shall, at its own expense, submit to the selected forum in such manner as the Indemnitee or the Indemnitee’s counsel may reasonably request, its claim that the Indemnitee is not entitled to indemnification; and the Company shall act in the utmost good faith to assure the Indemnitee a complete opportunity to defend against such claim.
(e) Notwithstanding a determination by any forum listed in Section 8(c) hereof that the Indemnitee is not entitled to indemnification with respect to a specific proceeding, the Indemnitee shall have the right to apply to the Court of Chancery of Delaware, the court in which that proceeding is or was pending or any other court of competent jurisdiction, for the purpose of enforcing the Indemnitee’s right to indemnification pursuant to the Agreement.
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(f) The Company shall indemnify the Indemnitee against all expenses incurred by the Indemnitee in connection with any hearing or proceeding under this Section 8 involving the Indemnitee and against all expenses incurred by the Indemnitee in connection with any other proceeding between the Company and the Indemnitee involving the interpretation or enforcement of the rights of the Indemnitee under this Agreement unless a court of competent jurisdiction finds that each of the material claims and/or defenses of the Indemnitee in any such proceeding was frivolous or not made in good faith.
9. Limitation of Actions and Release of Claims. No proceeding shall be brought and no cause of action shall be asserted by or on behalf of the Company or any subsidiary against the Indemnitee, his or her spouse, heirs, estate, executors or administrators after the expiration of one year from the act or omission of the Indemnitee upon which such proceeding is based; however, in a case where the Indemnitee fraudulently conceals the facts underlying such cause of action, no proceeding shall be brought and no cause of action shall be asserted after the expiration of one year from the earlier of (i) the date the Company or any subsidiary of the Company discovers such facts, or (ii) the date the Company or any subsidiary of the Company could have discovered such facts by the exercise of reasonable diligence. Any claim or cause of action of the Company or any subsidiary of the Company, including claims predicated upon the negligent act or omission of the Indemnitee, shall be extinguished and deemed released unless asserted by filing of a legal action within such period. This Section 9 shall not apply to any cause of action which has accrued on the date hereof and of which the Indemnitee is aware on the date hereof, but as to which the Company has no actual knowledge apart from the Indemnitee’s knowledge.
10. Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance expenses to the Indemnitee with respect to proceedings or claims initiated or brought voluntarily by the Indemnitee and not by way of defense, except with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under Section 145, but such indemnification or advancement of expenses may be provided by the Company in specific cases if the Board of Directors finds it to be appropriate; or
(b) Lack of Good Faith. To indemnify the Indemnitee for any expenses incurred by the Indemnitee with respect to any proceeding instituted by the Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by the Indemnitee in such proceeding was not made in good faith or was frivolous; or
(c) Unauthorized Settlements. To indemnify the Indemnitee under this Agreement for any amounts paid in settlement of a proceeding unless the Company consents to such settlement; or
(d) Claims by the Company for Willful Misconduct. To indemnify or advance expenses to the Indemnitee under this Agreement for any expenses incurred by the Indemnitee with respect to any proceeding or claim brought by the Company against the Indemnitee for willful misconduct, unless a court of competent jurisdiction determines that each of such claims was not made in good faith or was frivolous; or
(e) Section 16(b). To indemnify Indemnitee for expenses and the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute; or
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(f) Willful Misconduct. To indemnify the Indemnitee on account of the Indemnitee’s conduct which is finally adjudged to have been knowingly fraudulent or deliberately dishonest, or to constitute willful misconduct; or
(g) Unlawful Indemnification. To indemnify the Indemnitee if a final decision by a court having jurisdiction in the matter shall determine that such indemnification is not lawful; or
(h) Forfeiture of Certain Bonuses and Profits. To indemnify Indemnitee for the payment of amounts required to be reimbursed to the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, as amended, or any similar successor statute.
11. Nonexclusivity. The provisions for indemnification and advancement of expenses set forth in this Agreement shall not be deemed exclusive of any other rights which the Indemnitee may have under any provision of law, the Company’s Certificate of Incorporation or Bylaws, the vote of the Company’s stockholders or disinterested directors, other agreements, or otherwise, both as to actions in his or her official capacity and to actions in another capacity while occupying his or her position as an agent of the Company, and the Indemnitee’s rights hereunder shall continue after the Indemnitee has ceased acting as an agent of the Company and shall inure to the benefit of the heirs, executors and administrators of the Indemnitee.
12. Interpretation of Agreement. It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification to the Indemnitee to the fullest extent now or hereafter permitted by law.
13. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (i) the validity, legality and enforceability of the remaining provisions of the Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable and to give effect to Section 12 hereof.
14. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
15. Successors and Assigns. The terms of this Agreement shall bind, and shall inure to the benefit of, the successors, heirs, executors, and administrators and assigns of the parties hereto.
16. Notice. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and receipted for by the party addressee or (ii) if mailed by certified or registered mail with postage prepaid, on the third business day after the mailing date. Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice.
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17. Governing Law. This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware.
18. Consent to Jurisdiction. The Company and the Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement.
The parties hereto have entered into this Indemnity Agreement effective as of the date first above written.
COMPANY:
Digital Brands Group, Inc. |
||
By: | ||
Its: | ||
INDEMNITEE: | ||
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Exhibit 10.2
Dear Hil:
This letter is to confirm our offer to you as Chief Executive Officer, Denim.la Inc. (“the Company” or “Denim.la Inc.”). You will report directly to the Company’s Board of Directors (the “Board”) and be given such duties, authorities, and responsibilities commensurate with that of chief executive officers of public companies of comparable size and such other duties, responsibilities and authorities, not inconsistent with your position, assigned to you by the Board. All employees of the Company shall report to you or your designee.
Start Date: The effective date of your new position has been ongoing.
Salary: Effective October 1, 2020, your annual salary will be $350,000, payable every two weeks. You are scheduled to receive a compensation review in November 2021 as it relates to the Company’s revenues, EBITDA and market capitalization, especially relative to your peer group.
Board Service: The Board will appoint you as a Director of the Board effective November 30, 2020 without prejudice to the shareholders’ ability to remove or not re-elect you.
Annual Bonus: You will be eligible for an annual bonus based on Denim.la Inc. and/or Division financial and operational objectives as well as individual performance. Effective January 1, 2021, your annual target bonus will be 175% of your base salary. Depending on results and your individual performance, your actual bonus can range from 0 – 225% of target. Bonuses for fiscal 2021 are scheduled for payment in March 2022. Bonus payments are subject to supplemental income tax withholding.
Stock Option Awards: You will be eligible to participate in the Company’s stock option plan. The Board has approved an option grant of 33,500,000. 75% of the option grant will be vested at issuance, and 25% of the option grant will vest according to the Company’s 2020 stock plan.
Benefits: You will be eligible to participate in the Company’s employee benefit plans on terms and conditions generally applicable to other senior executives of the Company.
Termination/Severance: In the event that your employment is involuntarily terminated by the Company for reasons other than For Cause (as defined below) prior to June 30, 2021, the Company will provide you the following after your "separation from service" within the meaning of Section 409A of the Internal Revenue Code (the "Separation from Service”), provided you sign a general release of claims in the form requested by the Company and it becomes effective within 45 calendar days after such Separation from Service (such 45th day, the “Release Deadline”):
(1) Your then current salary, at regular pay cycle intervals, for eighteen months commencing in the first regular pay cycle following the Release Deadline (the “severance period”). Payments will cease if you accept other employment or professional relationship with a competitor of the Company (defined as another company primarily engaged in the apparel design or apparel retail business or any retailer with apparel sales in excess of $250 million annually), or if you breach your remaining obligations to the Company (e.g., your duty to protect confidential information, agreement not to solicit Company employees). Payments will be reduced by any compensation you receive (as received) during the severance period from other employment or professional relationship with a non-competitor. Each payment will be treated as a separate payment for purposes of Section 409A of the Internal Revenue Code, to the maximum extent possible.
(2) Through the end of the period in which you are receiving payments under paragraph (1) above, if you properly elect and maintain COBRA coverage, payment of a portion of your COBRA premium in a method as determined by the Company. This payment may be taxable income to you and subject to tax withholding. Notwithstanding the foregoing, the Company’s payment of the monthly COBRA premium shall cease immediately if the Company determines in its discretion that paying such monthly COBRA premium would result in the Company being in violation of, or incurring any fine, penalty, or excise tax under, applicable law (including, without limitation, any penalty imposed for violation of the nondiscrimination requirements under the Patient Protection and Affordable Care Act or guidance issued thereunder).
(3) Prorated Annual Bonus for the fiscal year in which the termination occurs, on the condition that you have worked at least 1 month of the fiscal year in which you are terminated, based on actual financial results and 100% standard for the individual component. Such bonus will paid in March of the year following termination at the time Annual Bonuses for the year of termination are paid, but in no event later than the 15th day of the third month following the later of the end of the Company’s taxable year or the end of the calendar year in which such termination occurs.
(4) Accelerated vesting (but not settlement) of stock options that remain subject only to time vesting conditions, regardless of the vesting schedule. Shares of the Company stock in settlement of any stock options under this section will be delivered on the applicable regularly scheduled vesting dates subject to the terms and conditions of the applicable award agreement including, without limitation, the Internal Revenue Code Section 409A six-month delay language thereunder to the extent necessary to avoid taxation under Section 409A of the Internal Revenue Code.
The payments in (1), (3) and (4) above are, and the payment described in (2) above may be, taxable income to you and are subject to tax withholding. If the aggregate amount that would be payable to you under paragraphs (1), (2) and (3) above through the date which is six months after your Separation from Service (excluding amounts exempt from Section 409A of the Internal Revenue Code under the short-term deferral rule thereunder or Treas. Reg. Section 1.409A-1(b)(9)(v)) exceeds the limit under Treas. Reg. Section 1.409A-1(b)(9)(iii)(A) and you are a “specified employee” under Treas. Reg. Section 1.409A-1(i) on the date of your Separation from Service, then the excess will be paid to you no earlier than the date which is six months after the date of such separation (or such earlier time permitted under Section 409A(a)(2)(B)(i) of the Internal Revenue Code). This delay will only be imposed to the extent required to avoid the tax for which you would otherwise be liable under Section 409A(a)(1)(B) of the Internal Revenue Code. Any delayed payment instead will be made on the first business day following the expiration of the six-month period, as applicable (or such earlier time permitted under Section 409A(a)(2)(B)(i) of the Internal Revenue Code). Payments that are not delayed will be paid in accordance with their terms determined without regard to such delay.
The term “For Cause” shall mean a good faith determination by the Company that your employment be terminated for any of the following reasons: (1) indictment, conviction or admission of any crimes involving theft, fraud or moral turpitude or (2) engaging in gross neglect of duties, including willfully failing or refusing to implement or follow direction of the Company.
At any time, if you voluntarily resign your employment from Denim.la Inc. or your employment is terminated For Cause, you will receive no compensation, payment or benefits after your last day of employment. If your employment terminates for any reason, you will not be entitled to any payments, benefits or compensation other than as provided in this letter.
After June 30, 2021, you will be eligible for severance, if any, as approved by the Committee under the same terms as similarly situated executive officers.
Recoupment Policy: The Company’s recoupment policy will apply to you. Under the current policy, subject to the discretion and approval of the Board, Denim.la Inc. will, to the extent permitted by governing law, in all appropriate cases as determined by the Board, require reimbursement and/or cancellation of any bonus or other incentive compensation, including stock-based compensation, awarded to an executive officer or other member of the Denim.la Inc.’s executive leadership team where all of the following factors are present: (a) the award was predicated upon the achievement of certain financial results that were subsequently the subject of a restatement, (b) in the Board’s view, the executive engaged in fraud or intentional misconduct that was a substantial contributing cause to the need for the restatement, and (c) a lower award would have been made to the executive based upon the restated financial results. In each such instance, Denim.la Inc. will seek to recover the individual executive’s entire annual bonus or award for the relevant period, plus a reasonable rate of interest.
Abide by Denim.la Inc. Policies: You agree to abide by all Denim.la Inc. policies including, but not limited to, policies contained in the Code of Business Conduct. Following your employment, you agree to cooperate with the Company to: (i) provide information reasonably requested by the Company in order to respond to disclosure or other obligations; and (ii) testify truthfully regarding any matters involving the Company about which you have any relevant information, or which arise from your employment with the Company.
Insider Trading Policies: This position will subject you to the requirements of Section 16 of the United States Securities and Exchange Act of 1934, as amended.
Confidentiality: You acknowledge that you will be in a relationship of confidence and trust with Denim.la Inc. As a result, during your employment with Denim.la Inc., you will acquire “Confidential Information,” which is information (whether in electronic or any other format) that people outside Denim.la Inc. never see, such as unannounced product information or designs, business or strategic plans, financial information and organizational charts, and other materials.
You agree that you will keep the Confidential Information in strictest confidence and trust. You will not, without the prior written consent of Denim.la Inc.’s Legal Counsel, directly or indirectly use or disclose to any person or entity any Confidential Information, during or after your employment, except as is necessary in the ordinary course of performing your duties while employed by Denim.la Inc., or if required to be disclosed by order of a court of competent jurisdiction, administrative agency or governmental body, or by subpoena, summons or other legal process, provided that prior to such disclosure, Denim.la Inc. is given reasonable advance notice of such order and an opportunity to object to such disclosure. Notwithstanding this agreement, nothing in this letter prevents you from reporting, in confidence, potential violations of law to relevant governmental authorities or courts.
You agree that in the event your employment terminates for any reason, you will immediately deliver to Denim.la Inc. all company property, including all documents, materials or property of any description, or any reproduction of such materials, containing or pertaining to any Confidential Information.
Non-Solicitation of Employees: In order to protect Confidential Information, you agree that so long as you are employed by Denim.la Inc., and for a period of one year thereafter, you will not directly or indirectly, on behalf of yourself, any other person or entity, solicit, call upon, recruit, or attempt to solicit any of Denim.la Inc.’s employees or in any way encourage any Denim.la Inc. employee to leave their employment with Denim.la Inc. You further agree that you will not directly or indirectly, on behalf of yourself, any other person or entity, interfere or attempt to interfere with Denim.la Inc.’s relationship with any person who at any time was an employee, consultant, customer or vendor or otherwise has or had a business relationship with Denim.la Inc.
Non-disparagement: You agree now, and after your employment with the Denim.la Inc. terminates not to, directly or indirectly, disparage Denim.la Inc. in any way or to make negative, derogatory or untrue statements about Denim.la Inc., its business activities, or any of its directors, managers, officers, employees, affiliates, agents or representatives to any person or entity.
Employment Status: You understand that your employment is “at-will”. This means that you do not have a contract of employment for any particular duration or limiting the grounds for your termination in any way. You are free to resign at any time. Similarly, Denim.la Inc. is free to terminate your employment at any time for any reason. The only way your at-will status can be changed is through a written agreement with Denim.la Inc., signed by an authorized officer of Denim.la Inc. In the event that there is any dispute over the terms, enforcement or obligations in this letter, the prevailing party shall be entitled to recover from the other party reasonable attorney fees and costs incurred to enforce any agreements.
Please note that except for those agreements or plans referenced in this letter and attachments, this letter contains the entire understanding of the parties with respect to this offer of employment and supersedes any other agreements, representations or understandings (whether oral or written and whether express or implied) with respect to this offer. Please review and sign this letter. You may keep one original for your personal records.
Hil, welcome to your new position and congratulations on this latest achievement in your career path at Denim.la Inc.
Exhibit 10.3
Dear Laura:
This letter is to confirm our offer to you as Chief Marketing Officer, Denim.la Inc. (“the Company” or “Denim.la Inc.”). You will report directly to the Company’s Chief Executive Officer and be given such duties, authorities, and responsibilities commensurate with that of Chief Marketing Officers of public companies of comparable size and such other duties, responsibilities and authorities, not inconsistent with your position, assigned to you by the Chief Executive Officer.
Start Date: The effective date of your new position has been ongoing.
Salary: Effective at the IPO, your annual salary will be $300,000, payable every two weeks. You are scheduled to receive a compensation review in November 2021 as it relates to the Company’s revenues, EBITDA and market capitalization, especially relative to your peer group.
Annual Bonus: You will be eligible for an annual bonus based on Denim.la Inc. and/or Division financial and operational objectives as well as individual performance. Effective January 1, 2021, your annual target bonus will be 100% of your base salary. Depending on results and your individual performance, your actual bonus can range from 0 – 125% of target. Bonuses for fiscal 2021 are scheduled for payment in March 2022. Bonus payments are subject to supplemental income tax withholding.
Stock Option Awards: You will be eligible to participate in the Company’s stock option plan. The Company’s Board of Directors (the “Board”) approved an option grant of 4,500,000. 75% of the option grant will be vested at issuance, and 25% of the option grant will vest according to the Company’s 2020 stock plan.
Benefits: You will be eligible to participate in the Company’s employee benefit plans on terms and conditions generally applicable to other senior executives of the Company.
Termination/Severance: In the event that your employment is involuntarily terminated by the Company for reasons other than For Cause (as defined below) prior to June 30, 2021, the Company will provide you the following after your "separation from service" within the meaning of Section 409A of the Internal Revenue Code (the "Separation from Service”), provided you sign a general release of claims in the form requested by the Company and it becomes effective within 45 calendar days after such Separation from Service (such 45th day, the “Release Deadline”):
(1) Your then current salary, at regular pay cycle intervals, for twelve months commencing in the first regular pay cycle following the Release Deadline (the “severance period”). Payments will cease if you accept other employment or professional relationship with a competitor of the Company (defined as another company primarily engaged in the apparel design or apparel retail business or any retailer with apparel sales in excess of $250 million annually), or if you breach your remaining obligations to the Company (e.g., your duty to protect confidential information, agreement not to solicit Company employees). Payments will be reduced by any compensation you receive (as received) during the severance period from other employment or professional relationship with a non-competitor. Each payment will be treated as a separate payment for purposes of Section 409A of the Internal Revenue Code, to the maximum extent possible.
(2) Through the end of the period in which you are receiving payments under paragraph (1) above, if you properly elect and maintain COBRA coverage, payment of a portion of your COBRA premium in a method as determined by the Company. This payment may be taxable income to you and subject to tax withholding. Notwithstanding the foregoing, the Company’s payment of the monthly COBRA premium shall cease immediately if the Company determines in its discretion that paying such monthly COBRA premium would result in the Company being in violation of, or incurring any fine, penalty, or excise tax under, applicable law (including, without limitation, any penalty imposed for violation of the nondiscrimination requirements under the Patient Protection and Affordable Care Act or guidance issued thereunder).
(3) Prorated Annual Bonus for the fiscal year in which the termination occurs, on the condition that you have worked at least 1 month of the fiscal year in which you are terminated, based on actual financial results and 100% standard for the individual component. Such bonus will paid in March of the year following termination at the time Annual Bonuses for the year of termination are paid, but in no event later than the 15th day of the third month following the later of the end of the Company’s taxable year or the end of the calendar year in which such termination occurs.
(4) Accelerated vesting (but not settlement) of stock options that remain subject only to time vesting conditions, regardless of the vesting schedule. Shares of the Company stock in settlement of any stock options under this section will be delivered on the applicable regularly scheduled vesting dates subject to the terms and conditions of the applicable award agreement including, without limitation, the Internal Revenue Code Section 409A six-month delay language thereunder to the extent necessary to avoid taxation under Section 409A of the Internal Revenue Code.
The payments in (1), (3) and (4) above are, and the payment described in (2) above may be, taxable income to you and are subject to tax withholding. If the aggregate amount that would be payable to you under paragraphs (1), (2) and (3) above through the date which is six months after your Separation from Service (excluding amounts exempt from Section 409A of the Internal Revenue Code under the short-term deferral rule thereunder or Treas. Reg. Section 1.409A-1(b)(9)(v)) exceeds the limit under Treas. Reg. Section 1.409A-1(b)(9)(iii)(A) and you are a “specified employee” under Treas. Reg. Section 1.409A-1(i) on the date of your Separation from Service, then the excess will be paid to you no earlier than the date which is six months after the date of such separation (or such earlier time permitted under Section 409A(a)(2)(B)(i) of the Internal Revenue Code). This delay will only be imposed to the extent required to avoid the tax for which you would otherwise be liable under Section 409A(a)(1)(B) of the Internal Revenue Code. Any delayed payment instead will be made on the first business day following the expiration of the six-month period, as applicable (or such earlier time permitted under Section 409A(a)(2)(B)(i) of the Internal Revenue Code). Payments that are not delayed will be paid in accordance with their terms determined without regard to such delay.
The term “For Cause” shall mean a good faith determination by the Company that your employment be terminated for any of the following reasons: (1) indictment, conviction or admission of any crimes involving theft, fraud or moral turpitude or (2) engaging in gross neglect of duties, including willfully failing or refusing to implement or follow direction of the Company.
At any time, if you voluntarily resign your employment from Denim.la Inc. or your employment is terminated For Cause, you will receive no compensation, payment or benefits after your last day of employment. If your employment terminates for any reason, you will not be entitled to any payments, benefits or compensation other than as provided in this letter.
After June 30, 2021, you will be eligible for severance, if any, as approved by the Committee under the same terms as similarly situated executive officers.
Recoupment Policy: The Company’s recoupment policy will apply to you. Under the current policy, subject to the discretion and approval of the Board, Denim.la Inc. will, to the extent permitted by governing law, in all appropriate cases as determined by the Board, require reimbursement and/or cancellation of any bonus or other incentive compensation, including stock-based compensation, awarded to an executive officer or other member of the Denim.la Inc.’s executive leadership team where all of the following factors are present: (a) the award was predicated upon the achievement of certain financial results that were subsequently the subject of a restatement, (b) in the Board’s view, the executive engaged in fraud or intentional misconduct that was a substantial contributing cause to the need for the restatement, and (c) a lower award would have been made to the executive based upon the restated financial results. In each such instance, Denim.la Inc. will seek to recover the individual executive’s entire annual bonus or award for the relevant period, plus a reasonable rate of interest.
Abide by Denim.la Inc. Policies: You agree to abide by all Denim.la Inc. policies including, but not limited to, policies contained in the Code of Business Conduct. Following your employment, you agree to cooperate with the Company to: (i) provide information reasonably requested by the Company in order to respond to disclosure or other obligations; and (ii) testify truthfully regarding any matters involving the Company about which you have any relevant information, or which arise from your employment with the Company.
Insider Trading Policies: This position will subject you to the requirements of Section 16 of the United States Securities and Exchange Act of 1934, as amended.
Confidentiality: You acknowledge that you will be in a relationship of confidence and trust with Denim.la Inc. As a result, during your employment with Denim.la Inc., you will acquire “Confidential Information,” which is information (whether in electronic or any other format) that people outside Denim.la Inc. never see, such as unannounced product information or designs, business or strategic plans, financial information and organizational charts, and other materials.
You agree that you will keep the Confidential Information in strictest confidence and trust. You will not, without the prior written consent of Denim.la Inc.’s Legal Counsel, directly or indirectly use or disclose to any person or entity any Confidential Information, during or after your employment, except as is necessary in the ordinary course of performing your duties while employed by Denim.la Inc., or if required to be disclosed by order of a court of competent jurisdiction, administrative agency or governmental body, or by subpoena, summons or other legal process, provided that prior to such disclosure, Denim.la Inc. is given reasonable advance notice of such order and an opportunity to object to such disclosure. Notwithstanding this agreement, nothing in this letter prevents you from reporting, in confidence, potential violations of law to relevant governmental authorities or courts.
You agree that in the event your employment terminates for any reason, you will immediately deliver to Denim.la Inc. all company property, including all documents, materials or property of any description, or any reproduction of such materials, containing or pertaining to any Confidential Information.
Non-Solicitation of Employees: In order to protect Confidential Information, you agree that so long as you are employed by Denim.la Inc., and for a period of one year thereafter, you will not directly or indirectly, on behalf of yourself, any other person or entity, solicit, call upon, recruit, or attempt to solicit any of Denim.la Inc.’s employees or in any way encourage any Denim.la Inc. employee to leave their employment with Denim.la Inc. You further agree that you will not directly or indirectly, on behalf of yourself, any other person or entity, interfere or attempt to interfere with Denim.la Inc.’s relationship with any person who at any time was an employee, consultant, customer or vendor or otherwise has or had a business relationship with Denim.la Inc.
Non-disparagement: You agree now, and after your employment with the Denim.la Inc. terminates not to, directly or indirectly, disparage Denim.la Inc. in any way or to make negative, derogatory or untrue statements about Denim.la Inc., its business activities, or any of its directors, managers, officers, employees, affiliates, agents or representatives to any person or entity.
Employment Status: You understand that your employment is “at-will”. This means that you do not have a contract of employment for any particular duration or limiting the grounds for your termination in any way. You are free to resign at any time. Similarly, Denim.la Inc. is free to terminate your employment at any time for any reason. The only way your at-will status can be changed is through a written agreement with Denim.la Inc., signed by an authorized officer of Denim.la Inc. In the event that there is any dispute over the terms, enforcement or obligations in this letter, the prevailing party shall be entitled to recover from the other party reasonable attorney fees and costs incurred to enforce any agreements.
Please note that except for those agreements or plans referenced in this letter and attachments, this letter contains the entire understanding of the parties with respect to this offer of employment and supersedes any other agreements, representations or understandings (whether oral or written and whether express or implied) with respect to this offer. Please review and sign this letter. You may keep one original for your personal records.
Laura, welcome to your new position and congratulations on this latest achievement in your career path at Denim.la Inc.
Exhibit 10.4
Dear Reid:
This letter is to confirm our offer to you as Chief Financial Officer, Denim.la Inc. (“the Company” or “Denim.la Inc.”). You will report directly to the Company’s Chief Executive Officer and be given such duties, authorities, and responsibilities commensurate with that of Chief Financial Officers of public companies of comparable size and such other duties, responsibilities and authorities, not inconsistent with your position, assigned to you by the Chief Executive Officer.
Start Date: The effective date of your new position has been ongoing.
Salary: Effective at the IPO, your annual salary will be $250,000, payable every two weeks. You are scheduled to receive a compensation review in November 2021 as it relates to the Company’s revenues, EBITDA and market capitalization, especially relative to your peer group.
Annual Bonus: You will be eligible for an annual bonus based on Denim.la Inc. and/or Division financial and operational objectives as well as individual performance. Effective January 1, 2021, your annual target bonus will be 50% of your base salary. Depending on results and your individual performance, your actual bonus can range from 0 – 75% of target. Bonuses for fiscal 2021 are scheduled for payment in March 2022. Bonus payments are subject to supplemental income tax withholding.
Stock Option Awards: You will be eligible to participate in the Company’s stock option plan. The Company’s Board of Directors (the “Board”) has approved an option grant of 2,000,000. 75% of the option grant will be vested at issuance, and 25% of the option grant will vest according to the Company’s 2020 stock plan.
Benefits: You will be eligible to participate in the Company’s employee benefit plans on terms and conditions generally applicable to other senior executives of the Company.
Termination/Severance: In the event that your employment is involuntarily terminated by the Company for reasons other than For Cause (as defined below) prior to June 30, 2021, the Company will provide you the following after your "separation from service" within the meaning of Section 409A of the Internal Revenue Code (the "Separation from Service”), provided you sign a general release of claims in the form requested by the Company and it becomes effective within 45 calendar days after such Separation from Service (such 45th day, the “Release Deadline”):
(1) Your then current salary, at regular pay cycle intervals, for six months commencing in the first regular pay cycle following the Release Deadline (the “severance period”). Payments will cease if you accept other employment or professional relationship with a competitor of the Company (defined as another company primarily engaged in the apparel design or apparel retail business or any retailer with apparel sales in excess of $250 million annually), or if you breach your remaining obligations to the Company (e.g., your duty to protect confidential information, agreement not to solicit Company employees). Payments will be reduced by any compensation you receive (as received) during the severance period from other employment or professional relationship with a non-competitor. Each payment will be treated as a separate payment for purposes of Section 409A of the Internal Revenue Code, to the maximum extent possible.
(2) Through the end of the period in which you are receiving payments under paragraph (1) above, if you properly elect and maintain COBRA coverage, payment of a portion of your COBRA premium in a method as determined by the Company. This payment may be taxable income to you and subject to tax withholding. Notwithstanding the foregoing, the Company’s payment of the monthly COBRA premium shall cease immediately if the Company determines in its discretion that paying such monthly COBRA premium would result in the Company being in violation of, or incurring any fine, penalty, or excise tax under, applicable law (including, without limitation, any penalty imposed for violation of the nondiscrimination requirements under the Patient Protection and Affordable Care Act or guidance issued thereunder).
(3) Prorated Annual Bonus for the fiscal year in which the termination occurs, on the condition that you have worked at least 1 month of the fiscal year in which you are terminated, based on actual financial results and 100% standard for the individual component. Such bonus will paid in March of the year following termination at the time Annual Bonuses for the year of termination are paid, but in no event later than the 15th day of the third month following the later of the end of the Company’s taxable year or the end of the calendar year in which such termination occurs.
(4) Accelerated vesting (but not settlement) of stock options that remain subject only to time vesting conditions, regardless of the vesting schedule. Shares of the Company stock in settlement of any stock options under this section will be delivered on the applicable regularly scheduled vesting dates subject to the terms and conditions of the applicable award agreement including, without limitation, the Internal Revenue Code Section 409A six-month delay language thereunder to the extent necessary to avoid taxation under Section 409A of the Internal Revenue Code.
The payments in (1), (3) and (4) above are, and the payment described in (2) above may be, taxable income to you and are subject to tax withholding. If the aggregate amount that would be payable to you under paragraphs (1), (2) and (3) above through the date which is six months after your Separation from Service (excluding amounts exempt from Section 409A of the Internal Revenue Code under the short-term deferral rule thereunder or Treas. Reg. Section 1.409A-1(b)(9)(v)) exceeds the limit under Treas. Reg. Section 1.409A-1(b)(9)(iii)(A) and you are a “specified employee” under Treas. Reg. Section 1.409A-1(i) on the date of your Separation from Service, then the excess will be paid to you no earlier than the date which is six months after the date of such separation (or such earlier time permitted under Section 409A(a)(2)(B)(i) of the Internal Revenue Code). This delay will only be imposed to the extent required to avoid the tax for which you would otherwise be liable under Section 409A(a)(1)(B) of the Internal Revenue Code. Any delayed payment instead will be made on the first business day following the expiration of the six-month period, as applicable (or such earlier time permitted under Section 409A(a)(2)(B)(i) of the Internal Revenue Code). Payments that are not delayed will be paid in accordance with their terms determined without regard to such delay.
The term “For Cause” shall mean a good faith determination by the Company that your employment be terminated for any of the following reasons: (1) indictment, conviction or admission of any crimes involving theft, fraud or moral turpitude or (2) engaging in gross neglect of duties, including willfully failing or refusing to implement or follow direction of the Company.
At any time, if you voluntarily resign your employment from Denim.la Inc. or your employment is terminated For Cause, you will receive no compensation, payment or benefits after your last day of employment. If your employment terminates for any reason, you will not be entitled to any payments, benefits or compensation other than as provided in this letter.
After June 30, 2021, you will be eligible for severance, if any, as approved by the Committee under the same terms as similarly situated executive officers.
Recoupment Policy: The Company’s recoupment policy will apply to you. Under the current policy, subject to the discretion and approval of the Board, Denim.la Inc. will, to the extent permitted by governing law, in all appropriate cases as determined by the Board, require reimbursement and/or cancellation of any bonus or other incentive compensation, including stock-based compensation, awarded to an executive officer or other member of the Denim.la Inc.’s executive leadership team where all of the following factors are present: (a) the award was predicated upon the achievement of certain financial results that were subsequently the subject of a restatement, (b) in the Board’s view, the executive engaged in fraud or intentional misconduct that was a substantial contributing cause to the need for the restatement, and (c) a lower award would have been made to the executive based upon the restated financial results. In each such instance, Denim.la Inc. will seek to recover the individual executive’s entire annual bonus or award for the relevant period, plus a reasonable rate of interest.
Abide by Denim.la Inc. Policies: You agree to abide by all Denim.la Inc. policies including, but not limited to, policies contained in the Code of Business Conduct. Following your employment, you agree to cooperate with the Company to: (i) provide information reasonably requested by the Company in order to respond to disclosure or other obligations; and (ii) testify truthfully regarding any matters involving the Company about which you have any relevant information, or which arise from your employment with the Company.
Insider Trading Policies: This position will subject you to the requirements of Section 16 of the United States Securities and Exchange Act of 1934, as amended.
Confidentiality: You acknowledge that you will be in a relationship of confidence and trust with Denim.la Inc. As a result, during your employment with Denim.la Inc., you will acquire “Confidential Information,” which is information (whether in electronic or any other format) that people outside Denim.la Inc. never see, such as unannounced product information or designs, business or strategic plans, financial information and organizational charts, and other materials.
You agree that you will keep the Confidential Information in strictest confidence and trust. You will not, without the prior written consent of Denim.la Inc.’s Legal Counsel, directly or indirectly use or disclose to any person or entity any Confidential Information, during or after your employment, except as is necessary in the ordinary course of performing your duties while employed by Denim.la Inc., or if required to be disclosed by order of a court of competent jurisdiction, administrative agency or governmental body, or by subpoena, summons or other legal process, provided that prior to such disclosure, Denim.la Inc. is given reasonable advance notice of such order and an opportunity to object to such disclosure. Notwithstanding this agreement, nothing in this letter prevents you from reporting, in confidence, potential violations of law to relevant governmental authorities or courts.
You agree that in the event your employment terminates for any reason, you will immediately deliver to Denim.la Inc. all company property, including all documents, materials or property of any description, or any reproduction of such materials, containing or pertaining to any Confidential Information.
Non-Solicitation of Employees: In order to protect Confidential Information, you agree that so long as you are employed by Denim.la Inc., and for a period of one year thereafter, you will not directly or indirectly, on behalf of yourself, any other person or entity, solicit, call upon, recruit, or attempt to solicit any of Denim.la Inc.’s employees or in any way encourage any Denim.la Inc. employee to leave their employment with Denim.la Inc. You further agree that you will not directly or indirectly, on behalf of yourself, any other person or entity, interfere or attempt to interfere with Denim.la Inc.’s relationship with any person who at any time was an employee, consultant, customer or vendor or otherwise has or had a business relationship with Denim.la Inc.
Non-disparagement: You agree now, and after your employment with the Denim.la Inc. terminates not to, directly or indirectly, disparage Denim.la Inc. in any way or to make negative, derogatory or untrue statements about Denim.la Inc., its business activities, or any of its directors, managers, officers, employees, affiliates, agents or representatives to any person or entity.
Employment Status: You understand that your employment is “at-will”. This means that you do not have a contract of employment for any particular duration or limiting the grounds for your termination in any way. You are free to resign at any time. Similarly, Denim.la Inc. is free to terminate your employment at any time for any reason. The only way your at-will status can be changed is through a written agreement with Denim.la Inc., signed by an authorized officer of Denim.la Inc. In the event that there is any dispute over the terms, enforcement or obligations in this letter, the prevailing party shall be entitled to recover from the other party reasonable attorney fees and costs incurred to enforce any agreements.
Please note that except for those agreements or plans referenced in this letter and attachments, this letter contains the entire understanding of the parties with respect to this offer of employment and supersedes any other agreements, representations or understandings (whether oral or written and whether express or implied) with respect to this offer. Please review and sign this letter. You may keep one original for your personal records.
Reid, welcome to your new position and congratulations on this latest achievement in your career path at Denim.la Inc.
Exhibit 10.6
DIGITAL BRANDS GROUP, INC.
2020 OMNIBUS INCENTIVE PLAN
DIGITAL BRANDS GROUP, INC.
2020 OMNIBUS INCENTIVE PLAN
ARTICLE I
PURPOSE AND ADOPTION OF THE PLAN
1.01. Purpose. The purpose of the Digital Brands Group, Inc. 2020 Omnibus Incentive Plan (as amended from time to time, the “Plan”) is to assist in attracting and retaining highly competent employees, directors and consultants to act as an incentive in motivating selected employees, directors and consultants of Digital Brands Group, Inc. (the “Company”) and its Subsidiaries to achieve long-term corporate objectives.
1.02. Adoption and Term. The Plan has been duly adopted and approved to be effective as of the effective date of the Company’s initial public offering. The Plan shall remain in effect until the tenth anniversary of the Effective Date, or until terminated by action of the Board, whichever occurs sooner.
ARTICLE II
DEFINITIONS
For the purpose of this Plan, capitalized terms shall have the following meanings:
2.01. Affiliate means an entity in which, directly or indirectly through one or more intermediaries, the Company has at least a fifty percent (50%) ownership interest or, where permissible under Section 409A of the Code, at least a twenty percent (20%) ownership interest; provided, however, for purposes of any grant of an Incentive Stock Option, “Affiliate” means a corporation which, for purposes of Section 424 of the Code, is a parent or subsidiary of the Company, directly or indirectly.
2.02. Award means any one or a combination of Non-Qualified Stock Options or Incentive Stock Options described in Article VI, Stock Appreciation Rights described in Article VI, Restricted Shares and Restricted Stock Units described in Article VII, Performance Awards described in Article VIII, other stock-based Awards described in Article IX, short-term cash incentive Awards described in Article X or any other Award made under the terms of the Plan.
2.03. Award Agreement means a written agreement between the Company and a Participant or a written acknowledgment from the Company to a Participant specifically setting forth the terms and conditions of an Award granted under the Plan.
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2.04. Award Period means, with respect to an Award, the period of time, if any, set forth in the Award Agreement during which specified target performance goals must be achieved or other conditions set forth in the Award Agreement must be satisfied.
2.05. Beneficiary means an individual, trust or estate who or which, by a written designation of the Participant filed with the Company, or if no such written designation is filed, by operation of law, succeeds to the rights and obligations of the Participant under the Plan and the Award Agreement upon the Participant's death.
2.06. Board means the Board of Directors of the Company.
2.07. Change in Control means, and shall be deemed to have occurred upon the occurrence of, any one of the following events:
(a) The acquisition in one or more transactions, other than from the Company, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act), other than the Company, an Affiliate or any employee benefit plan (or related trust) sponsored or maintained by the Company or an Affiliate, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of a number of Company Voting Securities in excess of 25% of the Company Voting Securities unless such acquisition has been approved by the Board;
(b) Any election has occurred of persons to the Board that causes two-thirds of the Board to consist of persons other than (i) persons who were members of the Board on the effective date of the Plan and (ii) persons who were nominated for elections as members of the Board at a time when two-thirds of the Board consisted of persons who were members of the Board on the effective date of the Plan, provided, however, that any person nominated for election by a Board at least two-thirds of whom constituted persons described in clauses (i) and/or (ii) or by persons who were themselves nominated by such Board shall, for this purpose, be deemed to have been nominated by a Board composed of persons described in clause (i);
(c) The consummation (i.e. closing) of a reorganization, merger or consolidation involving the Company, unless, following such reorganization, merger or consolidation, all or substantially all of the individuals and entities who were the respective beneficial owners of the Outstanding Common Stock and Company Voting Securities immediately prior to such reorganization, merger or consolidation, following such reorganization, merger or consolidation beneficially own, directly or indirectly, more than 75% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors or trustees, as the case may be, of the entity resulting from such reorganization, merger or consolidation in substantially the same proportion as their ownership of the Outstanding Common Stock and Company Voting Securities immediately prior to such reorganization, merger or consolidation, as the case may be;
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(d) The consummation (i.e. closing) of a sale or other disposition of all or substantially all the assets of the Company, unless, following such sale or disposition, all or substantially all of the individuals and entities who were the respective beneficial owners of the Outstanding Common Stock and Company Voting Securities immediately prior to such sale or disposition, following such sale or disposition beneficially own, directly or indirectly, more than 75% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors or trustees, as the case may be, of the entity purchasing such assets in substantially the same proportion as their ownership of the Outstanding Common Stock and Company Voting Securities immediately prior to such sale or disposition, as the case may be; or
(e) a complete liquidation or dissolution of the Company.
2.08. Code means the Internal Revenue Code of 1986, as amended. References to a section of the Code shall include that section and any comparable section or sections of any future legislation that amends, supplements or supersedes said section.
2.09. Committee means the Compensation Committee of the Board.
2.10. Common Stock means the common stock of the Company, par value $0.001 per share.
2.11. Company means Digital Brands Group, Inc., a Delaware corporation, and its successors.
2.12. Company Voting Securities means the combined voting power of all outstanding voting securities of the Company entitled to vote generally in the election of directors to the Board.
2.13. Date of Grant means the date designated by the Committee as the date as of which it grants an Award, which shall not be earlier than the date on which the Committee approves the granting of such Award.
2.14. Dividend Equivalent Account means a bookkeeping account in accordance with under Section 11.17 and related to an Award that is credited with the amount of any cash dividends or stock distributions that would be payable with respect to the shares of Common Stock subject to such Awards had such shares been outstanding shares of Common Stock.
2.15 Exchange Act means the Securities Exchange Act of 1934, as amended.
2.16. Exercise Price means, with respect to a Stock Appreciation Right, the amount established by the Committee in the Award Agreement which is to be subtracted from the Fair Market Value on the date of exercise in order to determine the amount of the payment to be made to the Participant, as further described in Section 6.02(b).
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2.17. Fair Market Value means, as of any applicable date: (i) if the Common Stock is listed on a national securities exchange or is authorized for quotation on the Nasdaq Capital Market System (“NASDAQ”), the closing sales price of the Common Stock on the exchange or NASDAQ, as the case may be, on that date, or if no price was reported for that date, on the next preceding date for which a price was reported; or (iii) if (i) does not apply, the last reported bid price published in the “pink sheets” or displayed on the National Association of Securities Dealers, Inc. (“NASD”), Electronic Bulletin Board, as the case may be; or (iii) if none of the above apply, the fair market value of the Common Stock as determined under procedures established by the Committee.
2.18. Incentive Stock Option means a stock option within the meaning of Section 422 of the Code.
2.19. Merger means any merger, reorganization, consolidation, exchange, transfer of assets or other transaction having similar effect involving the Company.
2.20. Non-Qualified Stock Option means a stock option which is not an Incentive Stock Option.
2.21 Non-Vested Share means shares of the Company Common Stock issued to a Participant in respect of the non-vested portion of an Option in the event of the early exercise of such Participant’s Options pursuant to such Participant’s Award Agreement, as permitted in Section 6.06 below.
2.22. Options means all Non-Qualified Stock Options and Incentive Stock Options granted at any time under the Plan.
2.23. Outstanding Common Stock means, at any time, the issued and outstanding shares of Common Stock.
2.24. Participant means a person designated to receive an Award under the Plan in accordance with Section 5.01.
2.25. Performance Awards means Awards granted in accordance with Article VIII.
2.26. Performance Goals means net sales, units sold or growth in units sold, return on stockholders' equity, customer satisfaction or retention, return on investment or working capital, operating income, economic value added (the amount, if any, by which net operating income after tax exceeds a reference cost of capital), EBITDA (as net income (loss) before net interest expense, provision (benefit) for income taxes, and depreciation and amortization), expense targets, net income, earnings per share, share price, reductions in inventory, inventory turns, on-time delivery performance, operating efficiency, productivity ratios, market share or change in market share, any one of which may be measured with respect to the Company or any one or more of its Subsidiaries and divisions and either in absolute terms or as compared to another company or companies, and quantifiable, objective measures of individual performance relevant to the particular individual's job responsibilities.
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2.27. Plan has the meaning given to such term in Section 1.01.
2.28. Purchase Price, with respect to Options, shall have the meaning set forth in Section 6.01(b).
2.29. Restricted Shares means Common Stock subject to restrictions imposed in connection with Awards granted under Article VII.
2.30. Restricted Stock Unit means a unit representing the right to receive Common Stock or the value thereof in the future subject to restrictions imposed in connection with Awards granted under Article VII.
2.31. Rule 16b-3 means Rule 16b-3 promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act, as the same may be amended from time to time, and any successor rule.
2.32. Stock Appreciation Rights means awards granted in accordance with Article VI.
2.33 Termination of Service means the voluntary or involuntary termination of a Participant’s service as an employee, director or consultant with the Company or an Affiliate for any reason, including death, disability, retirement or as the result of the divestiture of the Participant's employer or any similar transaction in which the Participant's employer ceases to be the Company or one of its Subsidiaries. Whether entering military or other government service shall constitute Termination of Service, or whether and when a Termination of Service shall occur as a result of disability, shall be determined in each case by the Committee in its sole discretion.
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ARTICLE III
ADMINISTRATION
3.01. Committee.
(a) Duties and Authority. The Plan shall be administered by the Committee and the Committee shall have exclusive and final authority in each determination, interpretation or other action affecting the Plan and its Participants. The Committee shall have the sole discretionary authority to interpret the Plan, to establish and modify administrative rules for the Plan, to impose such conditions and restrictions on Awards as it determines appropriate, and to make all factual determinations with respect to and take such steps in connection with the Plan and Awards granted hereunder as it may deem necessary or advisable. The Committee may delegate such of its powers and authority under the Plan as it deems appropriate to a subcommittee of the Committee or designated officers or employees of the Company. In addition, the full Board may exercise any of the powers and authority of the Committee under the Plan. In the event of such delegation of authority or exercise of authority by the Board, references in the Plan to the Committee shall be deemed to refer, as appropriate, to the delegate of the Committee or the Board. Actions taken by the Committee or any subcommittee thereof, and any delegation by the Committee to designated officers or employees, under this Section 3.01 shall comply with Section 16(b) of the Exchange Act and the regulations promulgated under such statutory provisions, or the successors to such statutory provisions or regulations, as in effect from time to time, to the extent applicable.
(b) Indemnification. Each person who is or shall have been a member of the Board or the Committee, or an officer or employee of the Company to whom authority was delegated in accordance with the Plan shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such individual in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf; provided, however, that the foregoing indemnification shall not apply to any loss, cost, liability, or expense that is a result of his or her own willful misconduct. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Certificate of Incorporation or Bylaws, conferred in a separate agreement with the Company, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
ARTICLE IV
SHARES
4.01. Number of Shares Issuable. The total number of shares initially authorized to be issued under the Plan shall be 61,112,700 shares (pre-split, 3,300,000 shares approximately post-split) of Common Stock. The foregoing share limit shall be subject to adjustment in accordance with Section 11.07. The shares to be offered under the Plan shall be authorized and unissued Common Stock, or issued Common Stock that shall have been reacquired by the Company.
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4.02. Shares Subject to Terminated Awards. Common Stock covered by any unexercised portions of terminated or forfeited Options (including canceled Options) granted under Article VI, Restricted Stock or Restricted Stock Units forfeited as provided in Article VII, other stock-based Awards terminated or forfeited as provided under the Plan, and Common Stock subject to any Awards that are otherwise surrendered by the Participant may again be subject to new Awards under the Plan. Shares of Common Stock surrendered to or withheld by the Company in payment or satisfaction of the Purchase Price of an Option or tax withholding obligation with respect to an Award shall be available for the grant of new Awards under the Plan. In the event of the exercise of Stock Appreciation Rights, whether or not granted in tandem with Options, only the number of shares of Common Stock actually issued in payment of such Stock Appreciation Rights shall be charged against the number of shares of Common Stock available for the grant of Awards hereunder.
ARTICLE V
PARTICIPATION
5.01. Eligible Participants. Participants in the Plan shall be such employees, directors and consultants of the Company and its Subsidiaries as the Committee, in its sole discretion, may designate from time to time. The Committee's designation of a Participant in any year shall not require the Committee to designate such person to receive Awards or grants in any other year. The designation of a Participant to receive Awards or grants under one portion of the Plan does not require the Committee to include such Participant under other portions of the Plan. The Committee shall consider such factors as it deems pertinent in selecting Participants and in determining the type and amount of their respective Awards.
ARTICLE VI
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
6.01. Option Awards.
(a) Grant of Options. The Committee may grant, to such Participants as the Committee may select, Options entitling the Participant to purchase shares of Common Stock from the Company in such number, at such price, and on such terms and subject to such conditions, not inconsistent with the terms of this Plan, as may be established by the Committee. The terms of any Option granted under this Plan shall be set forth in an Award Agreement.
(b) Purchase Price of Options. Subject to the requirements applicable to Incentive Stock Options under Section 6.01(d), the Purchase Price of each share of Common Stock which may be purchased upon exercise of any Option granted under the Plan shall be determined by the Committee.
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(c) Designation of Options. The Committee shall designate, at the time of the grant of each Option, the Option as an Incentive Stock Option or a Non-Qualified Stock Option; provided, however, that an Option may be designated as an Incentive Stock Option only if the applicable Participant is an employee of the Company on the Date of Grant.
(d) Special Incentive Stock Option Rules. No Participant may be granted Incentive Stock Options under the Incentive Plan (or any other plans of the Company) that would result in Incentive Stock Options to purchase shares of Common Stock with an aggregate Fair Market Value (measured on the Date of Grant) of more than $100,000 first becoming exercisable by the Participant in any one calendar year. Notwithstanding any other provision of the Incentive Plan to the contrary, the Exercise Price of each Incentive Stock Option shall be equal to or greater than the Fair Market Value of the Common Stock subject to the Incentive Stock Option as of the Date of Grant of the Incentive Stock Option; provided, however, that no Incentive Stock Option shall be granted to any person who, at the time the Option is granted, owns stock (including stock owned by application of the constructive ownership rules in Section 424(d) of the Code) possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, unless at the time the Incentive Stock Option is granted the price of the Option is at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock subject to the Incentive Stock Option and the Incentive Stock Option by its terms is not exercisable for more than five years from the Date of Grant.
(e) Rights As a Stockholder. A Participant or a transferee of an Option pursuant to Section 11.04 shall have no rights as a stockholder with respect to Common Stock covered by an Option until the Participant or transferee shall have become the holder of record of any such shares, and no adjustment shall be made for dividends in cash or other property or distributions or other rights with respect to any such Common Stock for which the record date is prior to the date on which the Participant or a transferee of the Option shall have become the holder of record of any such shares covered by the Option; provided, however, that Participants are entitled to share adjustments to reflect capital changes under Section 11.07.
6.02. Stock Appreciation Rights.
(a) Stock Appreciation Right Awards. The Committee is authorized to grant to any Participant one or more Stock Appreciation Rights. Such Stock Appreciation Rights may be granted either independent of or in tandem with Options granted to the same Participant. Stock Appreciation Rights granted in tandem with Options may be granted simultaneously with, or, in the case of Non-Qualified Stock Options, subsequent to, the grant to such Participant of the related Option; provided however, that: (i) any Option covering any share of Common Stock shall expire and not be exercisable upon the exercise of any Stock Appreciation Right with respect to the same share, (ii) any Stock Appreciation Right covering any share of Common Stock shall expire and not be exercisable upon the exercise of any related Option with respect to the same share, and (iii) an Option and Stock Appreciation Right covering the same share of Common Stock may not be exercised simultaneously. Upon exercise of a Stock Appreciation Right with respect to a share of Common Stock, the Participant shall be entitled to receive an amount equal to the excess, if any, of (A) the Fair Market Value of a share of Common Stock on the date of exercise over (B) the Exercise Price of such Stock Appreciation Right established in the Award Agreement, which amount shall be payable as provided in Section 6.02(c).
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(b) Exercise Price. The Exercise Price established under any Stock Appreciation Right granted under this Plan shall be determined by the Committee, but in the case of Stock Appreciation Rights granted in tandem with Options shall not be less than the Purchase Price of the related Option. Upon exercise of Stock Appreciation Rights granted in tandem with options, the number of shares subject to exercise under any related Option shall automatically be reduced by the number of shares of Common Stock represented by the Option or portion thereof which are surrendered as a result of the exercise of such Stock Appreciation Rights.
(c) Payment of Incremental Value. Any payment which may become due from the Company by reason of a Participant's exercise of a Stock Appreciation Right may be paid to the Participant as determined by the Committee (i) all in cash, (ii) all in Common Stock, or (iii) in any combination of cash and Common Stock. In the event that all or a portion of the payment is made in Common Stock, the number of shares of Common Stock delivered in satisfaction of such payment shall be determined by dividing the amount of such payment or portion thereof by the Fair Market Value on the Exercise Date. No fractional share of Common Stock shall be issued to make any payment in respect of Stock Appreciation Rights; if any fractional share would be issuable, the combination of cash and Common Stock payable to the Participant shall be adjusted as directed by the Committee to avoid the issuance of any fractional share.
6.03. Terms of Stock Options and Stock Appreciation Rights.
(a) Conditions on Exercise. An Award Agreement with respect to Options or Stock Appreciation Rights may contain such waiting periods, exercise dates and restrictions on exercise (including, but not limited to, periodic installments) as may be determined by the Committee at the time of grant. In the event the Committee grants an Option or Stock Appreciation Right that would be subject to Section 409A of the Code, the Committee may include such additional terms, conditions and restrictions on the exercise of such Option or Stock Appreciation Right as the Committee deems necessary or advisable in order to comply with the requirements of Section 409A of the Code.
(b) Duration of Options and Stock Appreciation Rights. Options and Stock Appreciation Rights shall terminate upon the first to occur of the following events:
(i) Expiration of the Option or Stock Appreciation Right as provided in the Award Agreement; or
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(ii) Termination of the Award in the event of a Participant's disability, Retirement, death or other Termination of Service as provided in the Award Agreement; or
(iii) In the case of an Incentive Stock Option, ten years from the Date of Grant (five years in certain cases, as described in Section 6.01(d)); or
(iv) Solely in the case of a Stock Appreciation Right granted in tandem with an Option, upon the expiration of the related Option.
(c) Acceleration or Extension of Exercise Time. The Committee, in its sole discretion, shall have the right (but shall not be obligated), exercisable on or at any time after the Date of Grant, to permit the exercise of an Option or Stock Appreciation Right (i) prior to the time such Option or Stock Appreciation Right would become exercisable under the terms of the Award Agreement, (ii) after the termination of the Option or Stock Appreciation Right under the terms of the Award Agreement, or (iii) after the expiration of the Option or Stock Appreciation Right.
6.04. Exercise Procedures. Each Option and Stock Appreciation Right granted under the Plan shall be exercised under such procedures and by such methods as the Board may establish or approve from time to time. The Purchase Price of shares purchased upon exercise of an Option granted under the Plan shall be paid in full in cash by the Participant pursuant to the Award Agreement; provided, however, that the Committee may (but shall not be required to) permit payment to be made (a) by delivery to the Company of shares of Common Stock held by the Participant, (b) by a “net exercise” method under which the Company reduces the number of shares of Common Stock issued upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate Exercise Price, or (c) such other consideration as the Committee deems appropriate and in compliance with applicable law (including payment under an arrangement constituting a brokerage transaction as permitted under the provisions of Regulation T applicable to cashless exercises promulgated by the Federal Reserve Board, unless prohibited by Section 402 of the Sarbanes-Oxley Act of 2002). In the event that any Common Stock shall be transferred to the Company to satisfy all or any part of the Purchase Price, the part of the Purchase Price deemed to have been satisfied by such transfer of Common Stock shall be equal to the product derived by multiplying the Fair Market Value as of the date of exercise times the number of shares of Common Stock transferred to the Company. The Participant may not transfer to the Company in satisfaction of the Purchase Price any fractional share of Common Stock. Any part of the Purchase Price paid in cash upon the exercise of any Option shall be added to the general funds of the Company and may be used for any proper corporate purpose. Unless the Committee shall otherwise determine, any Common Stock transferred to the Company as payment of all or part of the Purchase Price upon the exercise of any Option shall be held as treasury shares.
6.05. Change in Control. Unless otherwise provided by the Committee in the applicable Award Agreement, in the event of a Change in Control, no accelerated vesting of any Options or Stock Appreciation Rights outstanding on the date of such Change in Control shall occur.
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6.06 Early Exercise. An Option may, but need not, include a provision by which the Participant may elect to exercise the Option in whole or in part prior to the date the Option is fully vested. The provision may be included in the Award Agreement at the time of grant of the Option or may be added to the Award Agreement by amendment at a later time. In the event of an early exercise of an Option, any shares of Common Stock received shall be subject to a special repurchase right in favor of the Company with terms established by the Board. The Board shall determine the time and/or the event that causes the repurchase right to terminate and fully vest the Common Stock in the Participant. Alternatively, in the sole discretion of the Board, one or more Participants may be granted stock purchase rights allowing them to purchase shares of Common Stock outright, subject to conditions and restrictions as the Board may determine.
ARTICLE VII
RESTRICTED SHARES AND RESTRICTED STOCK UNITS
7.01. Award of Restricted Stock and Restricted Stock Units. The Committee may grant to any Participant an Award of Restricted Shares consisting of a specified number of shares of Common Stock issued to the Participant subject to such terms, conditions and forfeiture and transfer restrictions, whether based on performance standards, periods of service, retention by the Participant of ownership of specified shares of Common Stock or other criteria, as the Committee shall establish. The Committee may also grant Restricted Stock Units representing the right to receive shares of Common Stock in the future subject to such terms, conditions and restrictions, whether based on performance standards, periods of service, retention by the Participant of ownership of specified shares of Common Stock or other criteria, as the Committee shall establish. The terms of any Restricted Share and Restricted Stock Unit Awards granted under this Plan shall be set forth in an Award Agreement which shall contain provisions determined by the Committee and not inconsistent with this Plan.
7.02 Restricted Shares.
(a) Issuance of Restricted Shares. As soon as practicable after the Date of Grant of a Restricted Share Award by the Committee, the Company shall cause to be transferred on the books of the Company, or its agent, Common Stock, registered on behalf of the Participant, evidencing the Restricted Shares covered by the Award, but subject to forfeiture to the Company as of the Date of Grant if an Award Agreement with respect to the Restricted Shares covered by the Award is not duly executed by the Participant and timely returned to the Company. All Common Stock covered by Awards under this Article VII shall be subject to the restrictions, terms and conditions contained in the Plan and the Award Agreement entered into by the Participant. Until the lapse or release of all restrictions applicable to an Award of Restricted Shares, the share certificates representing such Restricted Shares may be held in custody by the Company, its designee, or, if the certificates bear a restrictive legend, by the Participant. Upon the lapse or release of all restrictions with respect to an Award as described in Section 7.02(d), one or more share certificates, registered in the name of the Participant, for an appropriate number of shares as provided in Section 7.02(d), free of any restrictions set forth in the Plan and the Award Agreement shall be delivered to the Participant.
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(b) Stockholder Rights. Beginning on the Date of Grant of the Restricted Share Award and subject to execution of the Award Agreement as provided in Section 7.02(a), the Participant shall become a stockholder of the Company with respect to all shares subject to the Award Agreement and shall have all of the rights of a stockholder, including, but not limited to, the right to vote such shares and the right to receive dividends; provided, however, that any Common Stock distributed as a dividend or otherwise with respect to any Restricted Shares as to which the restrictions have not yet lapsed, shall be subject to the same restrictions as such Restricted Shares and held or restricted as provided in Section 7.02(a).
(c) Restriction on Transferability. None of the Restricted Shares may be assigned or transferred (other than by will or the laws of descent and distribution, or to an inter vivos trust with respect to which the Participant is treated as the owner under Sections 671 through 677 of the Code, except to the extent that Section 16 of the Exchange Act limits a Participant's right to make such transfers), pledged or sold prior to lapse of the restrictions applicable thereto.
(d) Delivery of Shares Upon Vesting. Upon expiration or earlier termination of the forfeiture period without a forfeiture and the satisfaction of or release from any other conditions prescribed by the Committee, or at such earlier time as provided under the provisions of Section 7.04, the restrictions applicable to the Restricted Shares shall lapse. As promptly as administratively feasible thereafter, subject to the requirements of Section 11.05, the Company shall deliver to the Participant or, in case of the Participant's death, to the Participant's Beneficiary, one or more share certificates for the appropriate number of shares of Common Stock, free of all such restrictions, except for any restrictions that may be imposed by law.
(e) Forfeiture of Restricted Shares. Subject to Sections 7.02(f) and 7.04, all Restricted Shares shall be forfeited and returned to the Company and all rights of the Participant with respect to such Restricted Shares shall terminate unless the Participant continues in the service of the Company or an Affiliate as an employee until the expiration of the forfeiture period for such Restricted Shares and satisfies any and all other conditions set forth in the Award Agreement. The Committee shall determine the forfeiture period (which may, but need not, lapse in installments) and any other terms and conditions applicable with respect to any Restricted Share Award.
(f) Waiver of Forfeiture Period. Notwithstanding anything contained in this Article VII to the contrary, the Committee may, in its sole discretion, waive the forfeiture period and any other conditions set forth in any Award Agreement under appropriate circumstances (including the death, disability or Retirement of the Participant or a material change in circumstances arising after the date of an Award) and subject to such terms and conditions (including forfeiture of a proportionate number of the Restricted Shares) as the Committee shall deem appropriate.
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7.03. Restricted Stock Units.
(a) Settlement of Restricted Stock Units. Payments shall be made to Participants with respect to their Restricted Stock Units as soon as practicable after the Committee has determined that the terms and conditions applicable to such Award have been satisfied or at a later date if distribution has been deferred. Payments to Participants with respect to Restricted Stock Units shall be made in the form of Common Stock, or cash or a combination of both, as the Committee may determine. The amount of any cash to be paid in lieu of Common Stock shall be determined on the basis of the Fair Market Value of the Common Stock on the date any such payment is processed. As to shares of Common Stock which constitute all or any part of such payment, the Committee may impose such restrictions concerning their transferability and/or their forfeiture as may be provided in the applicable Award Agreement or as the Committee may otherwise determine, provided such determination is made on or before the date certificates for such shares are first delivered to the applicable Participant.
(b) Shareholder Rights. Until the lapse or release of all restrictions applicable to an Award of Restricted Stock Units, no shares of Common Stock shall be issued in respect of such Awards and no Participant shall have any rights as a shareholder of the Company with respect to the shares of Common Stock covered by such Award of Restricted Stock Units.
(c) Waiver of Forfeiture Period. Notwithstanding anything contained in this Section 7.03 to the contrary, the Committee may, in its sole discretion, waive the forfeiture period and any other conditions set forth in any Award Agreement under appropriate circumstances (including the death, disability or retirement of the Participant or a material change in circumstances arising after the date of an Award) and subject to such terms and conditions (including forfeiture of a proportionate number of shares issuable upon settlement of the Restricted Stock Units constituting an Award) as the Committee shall deem appropriate.
(d) Deferral of Payment. If approved by the Committee and set forth in the applicable Award Agreement, a Participant may elect to defer the amount payable with respect to the Participant’s Restricted Stock Units in accordance with such terms as may be established by the Committee, subject to the requirements of Section 409A of the Code.
7.04 Change in Control. Unless otherwise provided by the Committee in the applicable Award Agreement, no acceleration of the termination of any of the restrictions applicable to Restricted Shares and Restricted Stock Unit Awards shall occur in the event of a Change in Control.
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ARTICLE VIII
PERFORMANCE AWARDS
8.01. Performance Awards.
(a) Award Periods and Calculations of Potential Incentive Amounts. The Committee may grant Performance Awards to Participants. A Performance Award shall consist of the right to receive a payment (measured by the Fair Market Value of a specified number of shares of Common Stock, increases in such Fair Market Value during the Award Period and/or a fixed cash amount) contingent upon the extent to which certain predetermined performance targets have been met during an Award Period. The Award Period shall be two or more fiscal or calendar years as determined by the Committee. The Committee, in its discretion and under such terms as it deems appropriate, may permit newly eligible Participants, such as those who are promoted or newly hired, to receive Performance Awards after an Award Period has commenced.
(b) Performance Targets. Subject to Section 11.18, the performance targets applicable to a Performance Award may include such goals related to the performance of the Company or, where relevant, any one or more of its Subsidiaries or divisions and/or the performance of a Participant as may be established by the Committee in its discretion. The performance targets established by the Committee may vary for different Award Periods and need not be the same for each Participant receiving a Performance Award in an Award Period.
(c) Earning Performance Awards. The Committee, at or as soon as practicable after the Date of Grant, shall prescribe a formula to determine the percentage of the Performance Award to be earned based upon the degree of attainment of the applicable performance targets.
(d) Payment of Earned Performance Awards. Subject to the requirements of Section 11.05, payments of earned Performance Awards shall be made in cash or Common Stock, or a combination of cash and Common Stock, in the discretion of the Committee. The Committee, in its sole discretion, may define, and set forth in the applicable Award Agreement, such terms and conditions with respect to the payment of earned Performance Awards as it may deem desirable.
8.02. Termination of Service. In the event of a Participant’s Termination of Service during an Award Period, the Participant’s Performance Awards shall be forfeited except as may otherwise be provided in the applicable Award Agreement.
8.03. Change in Control. Unless otherwise provided by the Committee in the applicable Award Agreement, in the event of a Change in Control, no accelerated vesting of any Performance Awards outstanding on the date of such Change in Control shall occur.
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ARTICLE IX
OTHER STOCK-BASED AWARDS
9.01. Grant of Other Stock-Based Awards. Other stock-based awards, consisting of stock purchase rights (with or without loans to Participants by the Company containing such terms as the Committee shall determine), Awards of Common Stock, or Awards valued in whole or in part by reference to, or otherwise based on, Common Stock, may be granted either alone or in addition to or in conjunction with other Awards under the Plan. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the persons to whom and the time or times at which such Awards shall be made, the number of shares of Common Stock to be granted pursuant to such Awards, and all other conditions of the Awards. Any such Award shall be confirmed by an Award Agreement executed by the Committee and the Participant, which Award Agreement shall contain such provisions as the Committee determines to be necessary or appropriate to carry out the intent of this Plan with respect to such Award.
9.02. Terms of Other Stock-Based Awards. In addition to the terms and conditions specified in the Award Agreement, Awards made pursuant to this Article IX shall be subject to the following:
(a) Any Common Stock subject to Awards made under this Article IX may not be sold, assigned, transferred, pledged or otherwise encumbered prior to the date on which the shares are issued, or, if later, the date on which any applicable restriction, performance or deferral period lapses; and
(b) If specified by the Committee in the Award Agreement, the recipient of an Award under this Article IX shall be entitled to receive, currently or on a deferred basis, interest or dividends or dividend equivalents with respect to the Common Stock or other securities covered by the Award; and
(c) The Award Agreement with respect to any Award shall contain provisions dealing with the disposition of such Award in the event of a Termination of Service prior to the exercise, payment or other settlement of such Award, whether such termination occurs because of Retirement, disability, death or other reason, with such provisions to take account of the specific nature and purpose of the Award.
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ARTICLE X
SHORT-TERM CASH INCENTIVE AWARDS
10.01. Eligibility. Executive officers of the Company who are from time to time selected by the Committee will be eligible to receive short-term cash incentive awards under this Article X.
10.02. Awards.
(a) Performance Targets. The Committee shall establish objective performance targets based on specified levels of one or more of the Performance Goals. Such performance targets shall be established by the Committee no later than 90 days following the commencement of the applicable performance period.
(b) Amounts of Awards. In conjunction with the establishment of performance targets for a fiscal year or such other short-term performance period established by the Committee, the Committee shall adopt an objective formula (on the basis of percentages of Participants' salaries, shares in a bonus pool or otherwise) for computing the respective amounts payable under the Plan to Participants if and to the extent that the performance targets are attained. To the extent such formula is based on percentages of a bonus pool, such percentages shall not exceed 100% in the aggregate.
(c) Payment of Awards. Awards will be payable to Participants in cash each year upon prior written certification by the Committee of attainment of the specified performance targets for the preceding fiscal year or other applicable performance period.
(d) Negative Discretion. Notwithstanding the attainment by the Company of the specified performance targets, the Committee shall have the discretion, which need not be exercised uniformly among the Participants, to reduce or eliminate the award that would be otherwise paid.
(e) Guidelines. The Committee may adopt from time to time written policies for its implementation of this Article X.
(f) Non-Exclusive Arrangement. The adoption and operation of this Article X shall not preclude the Board or the Committee from approving other short-term incentive compensation arrangements for the benefit of individuals who are Participants hereunder as the Board or Committee, as the case may be, deems appropriate and in the best of the Company.
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ARTICLE XI
TERMS APPLICABLE GENERALLY TO AWARDS
GRANTED UNDER THE PLAN
11.01. Plan Provisions Control Award Terms. Except as provided in Section 11.16, the terms of the Plan shall govern all Awards granted under the Plan, and in no event shall the Committee have the power to grant any Award under the Plan which is contrary to any of the provisions of the Plan. In the event any provision of any Award granted under the Plan shall conflict with any term in the Plan as constituted on the Date of Grant of such Award, the term in the Plan as constituted on the Date of Grant of such Award shall control. Except as provided in Section 11.03 and Section 11.07, the terms of any Award granted under the Plan may not be changed after the Date of Grant of such Award so as to materially decrease the value of the Award without the express written approval of the holder.
11.02. Award Agreement. No person shall have any rights under any Award granted under the Plan unless and until the Company and the Participant to whom such Award shall have been granted shall have executed and delivered an Award Agreement or received any other Award acknowledgment authorized by the Committee expressly granting the Award to such person and containing provisions setting forth the terms of the Award.
11.03. Modification of Award After Grant. No Award granted under the Plan to a Participant may be modified (unless such modification does not materially decrease the value of the Award) after the Date of Grant except by express written agreement between the Company and the Participant, provided that any such change (a) shall not be inconsistent with the terms of the Plan, and (b) shall be approved by the Committee.
11.04. Limitation on Transfer. Except as provided in Section 7.01(c) in the case of Restricted Shares, a Participant's rights and interest under the Plan may not be assigned or transferred other than by will or the laws of descent and distribution, and during the lifetime of a Participant, only the Participant personally (or the Participant's personal representative) may exercise rights under the Plan. The Participant's Beneficiary may exercise the Participant's rights to the extent they are exercisable under the Plan following the death of the Participant. Notwithstanding the foregoing, to the extent permitted under Section 16(b) of the Exchange Act with respect to Participants subject to such Section, the Committee may grant Non-Qualified Stock Options that are transferable, without payment of consideration, to immediate family members of the Participant or to trusts or partnerships for such family members, and the Committee may also amend outstanding Non-Qualified Stock Options to provide for such transferability.
11.05. Taxes. The Company shall be entitled, if the Committee deems it necessary or desirable, to withhold (or secure payment from the Participant in lieu of withholding) the amount of any withholding or other tax required by law to be withheld or paid by the Company with respect to any amount payable and/or shares issuable under such Participant's Award, or with respect to any income recognized upon a disqualifying disposition of shares received pursuant to the exercise of an Incentive Stock Option, and the Company may defer payment or issuance of the cash or shares upon exercise or vesting of an Award unless indemnified to its satisfaction against any liability for any such tax. The amount of such withholding or tax payment shall be determined by the Committee and shall be payable by the Participant at such time as the Committee determines in accordance with the following rules:
(a) The Participant shall have the right to elect to meet his or her withholding requirement (i) by having withheld from such Award at the appropriate time that number of shares of Common Stock, rounded down to the nearest whole share, whose Fair Market Value is equal to the amount of withholding taxes due, (ii) by direct payment to the Company in cash of the amount of any taxes required to be withheld with respect to such Award or (iii) by a combination of shares and cash.
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(b) In the case of Participants who are subject to Section 16 of the Exchange Act, the Committee may impose such limitations and restrictions as it deems necessary or appropriate with respect to the delivery or withholding of shares of Common Stock to meet tax withholding obligations.
11.06. Surrender of Awards; Authorization of Repricing. Any Award granted under the Plan may be surrendered to the Company for cancellation on such terms as the Committee and the holder approve. Without requiring shareholder approval, the Committee may substitute a new Award under this Plan in connection with the surrender by the Participant of an equity compensation award previously granted under this Plan or any other plan sponsored by the Company, including the substitution or grant of (i) an Option or Stock Appreciation Right with a lower exercise price than the Option or Stock Appreciation Right being surrendered, (ii) a different type of Award upon the surrender or cancellation of an Option or Stock Appreciation Right with an exercise price above the Fair Market Value of the underlying Common Stock on the date of such substitution or grant, or (iii) any other Award constituting a repricing of an Option or Stock Appreciation Right.
11.07. Adjustments to Reflect Capital Changes.
(a) Recapitalization. In the event of any corporate event or transaction (including, but not limited to, a change in the Common Stock or the capitalization of the Company) such as a merger, consolidation, reorganization, recapitalization, separation, partial or complete liquidation, stock dividend, stock split, reverse stock split, split up, spin-off, or other distribution of stock or property of the Company, a combination or exchange of Common Stock, dividend in kind, or other like change in capital structure, number of outstanding shares of Common Stock, distribution (other than normal cash dividends) to shareholders of the Company, or any similar corporate event or transaction, the Committee, in order to prevent dilution or enlargement of Participants’ rights under this Plan, shall make equitable and appropriate adjustments and substitutions, as applicable, to or of the number and kind of shares subject to outstanding Awards, the Purchase Price or Exercise Price for such shares, the number and kind of shares available for future issuance under the Plan and the maximum number of shares in respect of which Awards can be made to any Participant in any calendar year, and other determinations applicable to outstanding Awards. The Committee shall have the power and sole discretion to determine the amount of the adjustment to be made in each case.
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(b) Merger. In the event that the Company is a party to a Merger, outstanding Awards shall be subject to the agreement of merger or reorganization. Such agreement may provide, without limitation, for the continuation of outstanding Awards by the Company (if the Company is a surviving corporation), for their assumption by the surviving corporation or its parent or subsidiary, for the substitution by the surviving corporation or its parent or subsidiary of its own awards for such Awards, for accelerated vesting and accelerated expiration, or for settlement in cash or cash equivalents.
(c) Options to Purchase Shares or Stock of Acquired Companies. After any Merger in which the Company or an Affiliate shall be a surviving corporation, the Committee may grant substituted options under the provisions of the Plan, pursuant to Section 424 of the Code, replacing old options granted under a plan of another party to the Merger whose shares or stock subject to the old options may no longer be issued following the Merger. The foregoing adjustments and manner of application of the foregoing provisions shall be determined by the Committee in its sole discretion. Any such adjustments may provide for the elimination of any fractional shares which might otherwise become subject to any Options.
11.08. No Right to Continued Service. No person shall have any claim of right to be granted an Award under this Plan. Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the service of the Company or any of its Subsidiaries.
11.09. Awards Not Includable for Benefit Purposes. Payments received by a Participant pursuant to the provisions of the Plan shall not be included in the determination of benefits under any pension, group insurance or other benefit plan applicable to the Participant which is maintained by the Company or any of its Subsidiaries, except as may be provided under the terms of such plans or determined by the Board.
11.10. Governing Law. All determinations made and actions taken pursuant to the Plan shall be governed by the laws of Delaware and construed in accordance therewith.
11.11. No Strict Construction. No rule of strict construction shall be implied against the Company, the Committee, or any other person in the interpretation of any of the terms of the Plan, any Award granted under the Plan or any rule or procedure established by the Committee.
11.12. Compliance with Rule 16b-3. It is intended that, unless the Committee determines otherwise, Awards under the Plan be eligible for exemption under Rule 16b-3. The Board is authorized to amend the Plan and to make any such modifications to Award Agreements to comply with Rule 16b-3, as it may be amended from time to time, and to make any other such amendments or modifications as it deems necessary or appropriate to better accomplish the purposes of the Plan in light of any amendments made to Rule 16b-3.
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11.13. Captions. The captions (i.e., all Section headings) used in the Plan are for convenience only, do not constitute a part of the Plan, and shall not be deemed to limit, characterize or affect in any way any provisions of the Plan, and all provisions of the Plan shall be construed as if no captions have been used in the Plan.
11.14. Severability. Whenever possible, each provision in the Plan and every Award at any time granted under the Plan shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of the Plan or any Award at any time granted under the Plan shall be held to be prohibited by or invalid under applicable law, then (a) such provision shall be deemed amended to accomplish the objectives of the provision as originally written to the fullest extent permitted by law and (b) all other provisions of the Plan and every other Award at any time granted under the Plan shall remain in full force and effect.
11.15. Amendment and Termination.
(a) Amendment. The Board shall have complete power and authority to amend the Plan at any time; provided, however, that the Board shall not, without the requisite affirmative approval of stockholders of the Company, make any amendment which requires stockholder approval under the Code or under any other applicable law or rule of any stock exchange which lists Common Stock or Company Voting Securities. No termination or amendment of the Plan may, without the consent of the Participant to whom any Award shall theretofore have been granted under the Plan, adversely affect the right of such individual under such Award.
(b) Termination. The Board shall have the right and the power to terminate the Plan at any time. No Award shall be granted under the Plan after the termination of the Plan, but the termination of the Plan shall not have any other effect and any Award outstanding at the time of the termination of the Plan may be exercised after termination of the Plan at any time prior to the expiration date of such Award to the same extent such Award would have been exercisable had the Plan not terminated.
11.16. Foreign Qualified Awards. Awards under the Plan may be granted to such employees of the Company and its Subsidiaries who are residing in foreign jurisdictions as the Committee in its sole discretion may determine from time to time. The Committee may adopt such supplements to the Plan as may be necessary or appropriate to comply with the applicable laws of such foreign jurisdictions and to afford Participants favorable treatment under such laws; provided, however, that no Award shall be granted under any such supplement with terms or conditions inconsistent with the provision set forth in the Plan.
11.17. Dividend Equivalents. For any Award granted under the Plan, the Committee shall have the discretion, upon the Date of Grant or thereafter, to establish a Dividend Equivalent Account with respect to the Award, and the applicable Award Agreement or an amendment thereto shall confirm such establishment. If a Dividend Equivalent Account is established, the following terms shall apply:
(a) Terms and Conditions. Dividend Equivalent Accounts shall be subject to such terms and conditions as the Committee shall determine and as shall be set forth in the applicable Award Agreement. Such terms and conditions may include, without limitation, for the Participant’s Account to be credited as of the record date of each cash dividend on the Common Stock with an amount equal to the cash dividends which would be paid with respect to the number of shares of Common Stock then covered by the related Award if such shares of Common Stock had been owned of record by the Participant on such record date.
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(b) Unfunded Obligation. Dividend Equivalent Accounts shall be established and maintained only on the books and records of the Company and no assets or funds of the Company shall be set aside, placed in trust, removed from the claims of the Company's general creditors, or otherwise made available until such amounts are actually payable as provided hereunder.
11.18 Adjustment of Performance Goals and Targets. Notwithstanding any provision of the Plan to the contrary, the Committee shall have the authority to adjust any Performance Goal, performance target or other performance-based criteria established with respect to any Award under the Plan if circumstances occur (including, but not limited to, unusual or nonrecurring events, changes in tax laws or accounting principles or practices or changed business or economic conditions) that cause any such Performance Goal, performance target or performance-based criteria to be inappropriate in the judgment of the Committee.
11.19 Legality of Issuance. Notwithstanding any provision of this Plan or any applicable Award Agreement to the contrary, the Committee shall have the sole discretion to impose such conditions, restrictions and limitations (including suspending exercises of Options or Stock Appreciation Rights and the tolling of any applicable exercise period during such suspension) on the issuance of Common Stock with respect to any Award unless and until the Committee determines that such issuance complies with (i) any applicable registration requirements under the Securities Act of 1933 or the Committee has determined that an exemption therefrom is available, (ii) any applicable listing requirement of any stock exchange on which the Common Stock is listed, (iii) any applicable Company policy or administrative rules, and (iv) any other applicable provision of state, federal or foreign law, including foreign securities laws where applicable.
11.20 Restrictions on Transfer. Regardless of whether the offering and sale of Common Stock under the Plan have been registered under the Securities Act of 1933 or have been registered or qualified under the securities laws of any state, the Company may impose restrictions upon the sale, pledge, or other transfer of such Common Stock (including the placement of appropriate legends on stock certificates) if, in the judgment of the Company and its counsel, such restrictions are necessary or desirable to achieve compliance with the provisions of the Securities Act of 1933, the securities laws of any state, the United States or any other applicable foreign law.
11.21 Further Assurances. As a condition to receipt of any Award under the Plan, a Participant shall agree, upon demand of the Company, to do all acts and execute, deliver and perform all additional documents, instruments and agreements which may be reasonably required by the Company, to implement the provisions and purposes of the Plan.
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Exhibit 10.7
DENIM.LA, INC. 2013 STOCK PLAN ADOPTED ON JANUARY 30, 2013 |
TABLE OF CONTENTS Page ESTABLISHMENT AND PURPOSE1 ADMINISTRATION1 Committees of the Board of Directors.1 Authority of the Board of Directors1 ELIGIBILITY.1 General Rule1 Ten-Percent Stockholders1 STOCK SUBJECT TO PLAN2 Basic Limitation2 Additional Shares2 TERMS AND CONDITIONS OF AWARDS OR SALES2 Stock Grant or Purchase Agreement2 Duration of Offers and Nontransferability of Rights2 Purchase Price2 TERMS AND CONDITIONS OF OPTIONS3 Stock Option Agreement3 Number of Shares3 Exercise Price3 Exercisability3 Basic Term3 Termination of Service (Except by Death)3 Leaves of Absence4 Death of Optionee.4 Pre-Exercise Restrictions on Transfer of Options or Shares4 No Rights as a Stockholder5 Modification, Extension and Assumption of Options5 Company’s Right to Cancel Certain Options5 PAYMENT FOR SHARES5 General Rule5 Services Rendered6 Promissory Note6 Surrender of Stock6 Exercise/Sale6 Net Exercise6 Other Forms of Payment6 ADJUSTMENT OF SHARES6 General6 |
Corporate Transactions7 Reservation of Rights8 PRE-EXERCISE INFORMATION REQUIREMENT8 Application of Requirement8 Scope of Requirement9 MISCELLANEOUS PROVISIONS9 Securities Law Requirements9 No Retention Rights9 Treatment as Compensation9 Governing Law9 Conditions and Restrictions on Shares9 Tax Matters10 DURATION AND AMENDMENTS; STOCKHOLDER APPROVAL10 Term of the Plan10 Right to Amend or Terminate the Plan11 Effect of Amendment or Termination11 Stockholder Approval11 DEFINITIONS11 |
DENIM.LA, INC. 2013 STOCK PLAN SECTION 1.ESTABLISHMENT AND PURPOSE. The purpose of this Plan is to offer persons selected by the Company an opportunity to acquire a proprietary interest in the success of the Company, or to increase such interest, by acquiring Shares of the Company’s Stock. The Plan provides both for the direct award or sale of Shares and for the grant of Options to purchase Shares. Options granted under the Plan may be ISOs intended to qualify under Code Section 422 or Nonstatutory Options which are not intended to so qualify. Capitalized terms are defined in Section 12. SECTION 2.ADMINISTRATION. Committees of the Board of Directors. The Plan may be administered by one or more Committees. Each Committee shall consist, as required by applicable law, of one or more members of the Board of Directors who have been appointed by the Board of Directors. Each Committee shall have such authority and be responsible for such functions as the Board of Directors has assigned to it. If no Committee has been appointed, the entire Board of Directors shall administer the Plan. Any reference to the Board of Directors in the Plan shall be construed as a reference to the Committee (if any) to whom the Board of Directors has assigned a particular function. Authority of the Board of Directors. Subject to the provisions of the Plan, the Board of Directors shall have full authority and discretion to take any actions it deems necessary or advisable for the administration of the Plan. Notwithstanding anything to the contrary in the Plan, with respect to the terms and conditions of awards granted to Participants outside the United States, the Board of Directors may vary from the provisions of the Plan to the extent it determines it necessary and appropriate to do so; provided that it may not vary from those Plan terms requiring stockholder approval pursuant to Section 11(d) below. All decisions, interpretations and other actions of the Board of Directors shall be final and binding on all Purchasers, all Optionees and all persons deriving their rights from a Purchaser or Optionee. SECTION 3.ELIGIBILITY. General Rule. Only Employees, Outside Directors and Consultants shall be eligible for the grant of Nonstatutory Options or the direct award or sale of Shares. Only Employees shall be eligible for the grant of ISOs. Ten-Percent Stockholders. A person who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company, its Parent or any of its Subsidiaries shall not be eligible for the grant of an ISO unless (i) the Exercise Price is at least 110% of the Fair Market Value of a Share on the Date of Grant and (ii) such ISO by its |
terms is not exercisable after the expiration of five years from the Date of Grant. For purposes of this Subsection (b), in determining stock ownership, the attribution rules of Code Section 424(d) shall be applied. SECTION 4. STOCK SUBJECT TO PLAN. Basic Limitation. Not more than 1,500,000 Shares may be issued under the Plan, subject to Subsection (b) below and Section 8(a).1 All of these Shares may be issued upon the exercise of ISOs. The number of Shares that are subject to Options or other rights outstanding at any time under the Plan may not exceed the number of Shares that then remain available for issuance under the Plan. The Company, during the term of the Plan, shall at all times reserve and keep available sufficient Shares to satisfy the requirements of the Plan. Shares offered under the Plan may be authorized but unissued Shares or treasury Shares. Additional Shares. In the event that Shares previously issued under the Plan are reacquired by the Company, such Shares shall be added to the number of Shares then available for issuance under the Plan. In the event that Shares that otherwise would have been issuable under the Plan are withheld by the Company in payment of the Purchase Price, Exercise Price or withholding taxes, such Shares shall remain available for issuance under the Plan. In the event that an outstanding Option or other right for any reason expires or is canceled, the Shares allocable to the unexercised portion of such Option or other right shall be added to the number of Shares then available for issuance under the Plan. SECTION 5. TERMS AND CONDITIONS OF AWARDS OR SALES. Stock Grant or Purchase Agreement. Each award of Shares under the Plan shall be evidenced by a Stock Grant Agreement between the Grantee and the Company. Each sale of Shares under the Plan (other than upon exercise of an Option) shall be evidenced by a Stock Purchase Agreement between the Purchaser and the Company. Such award or sale shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions which are not inconsistent with the Plan and which the Board of Directors deems appropriate for inclusion in a Stock Grant Agreement or Stock Purchase Agreement. The provisions of the various Stock Grant Agreements and Stock Purchase Agreements entered into under the Plan need not be identical. Duration of Offers and Nontransferability of Rights. Any right to purchase Shares under the Plan (other than an Option) shall automatically expire if not exercised by the Purchaser within 30 days (or such other period as may be specified in the Award Agreement) after the grant of such right was communicated to the Purchaser by the Company. Such right is not transferable and may be exercised only by the Purchaser to whom such right was granted. Purchase Price. The Board of Directors shall determine the Purchase Price of Shares to be offered under the Plan at its sole discretion. The Purchase Price shall be payable in a form described in Section 7. 1 Please refer to Exhibit A for a schedule of the initial share reserve and any subsequent increases in the reserve. |
SECTION 6.TERMS AND CONDITIONS OF OPTIONS. Stock Option Agreement. Each grant of an Option under the Plan shall be evidenced by a Stock Option Agreement between the Optionee and the Company. The Option shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions that are not inconsistent with the Plan and that the Board of Directors deems appropriate for inclusion in a Stock Option Agreement. The provisions of the various Stock Option Agreements entered into under the Plan need not be identical. Number of Shares. Each Stock Option Agreement shall specify the number of Shares that are subject to the Option and shall provide for the adjustment of such number in accordance with Section 8. The Stock Option Agreement shall also specify whether the Option is an ISO or a Nonstatutory Option. Exercise Price. Each Stock Option Agreement shall specify the Exercise Price. The Exercise Price of an Option shall not be less than 100% of the Fair Market Value of a Share on the Date of Grant, and in the case of an ISO a higher percentage may be required by Section 3(b). Subject to the preceding sentence, the Exercise Price shall be determined by the Board of Directors at its sole discretion. The Exercise Price shall be payable in a form described in Section 7. This Subsection (c) shall not apply to an Option granted pursuant to an assumption of, or substitution for, another option in a manner that complies with Code Section 424(a) (whether or not the Option is an ISO). Exercisability. Each Stock Option Agreement shall specify the date when all or any installment of the Option is to become exercisable. No Option shall be exercisable unless the Optionee (i) has delivered an executed copy of the Stock Option Agreement to the Company or (ii) otherwise agrees to be bound by the terms of the Stock Option Agreement. The Board of Directors shall determine the exercisability provisions of the Stock Option Agreement at its sole discretion. Basic Term. The Stock Option Agreement shall specify the term of the Option. The term shall not exceed 10 years from the Date of Grant, and in the case of an ISO, a shorter term may be required by Section 3(b). Subject to the preceding sentence, the Board of Directors at its sole discretion shall determine when an Option is to expire. Termination of Service (Except by Death). If an Optionee’s Service terminates for any reason other than the Optionee’s death, then the Optionee’s Options shall expire on the earliest of the following dates: above; The expiration date determined pursuant to Subsection (e) The date three months after the termination of the Optionee’s Service for any reason other than Disability, or such earlier or later date as the Board of Directors may determine (but in no event earlier than 30 days after the termination of the Optionee’s Service); or |
The date six months after the termination of the Optionee’s Service by reason of Disability, or such later date as the Board of Directors may determine. The Optionee may exercise all or part of the Optionee’s Options at any time before the expiration of such Options under the preceding sentence, but only to the extent that such Options had become exercisable before the Optionee’s Service terminated (or became exercisable as a result of the termination) and the underlying Shares had vested before the Optionee’s Service terminated (or vested as a result of the termination). The balance of such Options shall lapse when the Optionee’s Service terminates. In the event that the Optionee dies after the termination of the Optionee’s Service but before the expiration of the Optionee’s Options, all or part of such Options may be exercised (prior to expiration) by the executors or administrators of the Optionee’s estate or by any person who has acquired such Options directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that such Options had become exercisable before the Optionee’s Service terminated (or became exercisable as a result of the termination) and the underlying Shares had vested before the Optionee’s Service terminated (or vested as a result of the termination). Leaves of Absence. For purposes of Subsection (f) above, Service shall be deemed to continue while the Optionee is on a bona fide leave of absence, if such leave was approved by the Company in writing and if continued crediting of Service for this purpose is expressly required by the terms of such leave or by applicable law (as determined by the Company). Death of Optionee. If an Optionee dies while the Optionee is in Service, then the Optionee’s Options shall expire on the earlier of the following dates: above; or The expiration date determined pursuant to Subsection (e) The date 12 months after the Optionee’s death, or such earlier or later date as the Board of Directors may determine (but in no event earlier than six months after the Optionee’s death). All or part of the Optionee’s Options may be exercised at any time before the expiration of such Options under the preceding sentence by the executors or administrators of the Optionee’s estate or by any person who has acquired such Options directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that such Options had become exercisable before the Optionee’s death (or became exercisable as a result of the death) and the underlying Shares had vested before the Optionee’s death (or vested as a result of the Optionee’s death). The balance of such Options shall lapse when the Optionee dies. Pre-Exercise Restrictions on Transfer of Options or Shares.An Option shall be transferable by the Optionee only by (i) a beneficiary designation, (ii) a will or the laws of descent and distribution, except as provided in the next sentence. If the applicable Stock Option Agreement so provides, a Nonstatutory Option shall also be transferable by gift or domestic relations order to a Family Member of the Optionee. An ISO may be |
exercised during the lifetime of the Optionee only by the Optionee or by the Optionee’s guardian or legal representative. In addition, an Option shall comply with all conditions of Rule 12h-1(f)(1) under the Exchange Act until the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act. Such conditions include, without limitation, the transferability restrictions set forth in Rule 12h-1(f)(1)(iv) and (v) under the Exchange Act, which shall apply to an Option and, prior to exercise, to the Shares to be issued upon exercise of such Option during the period commencing on the Date of Grant and ending on the earlier of (i) the date when the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act or (ii) the date when the Company makes a determination that it will cease to rely on the exemption afforded by Rule 12h-1(f)(1) under the Exchange Act. During such period, an Option and, prior to exercise, the Shares to be issued upon exercise of such Option shall be restricted as to any pledge, hypothecation or other transfer by the Optionee, including any short position, any “put equivalent position” (as defined in Rule 16a-1(h) under the Exchange Act) or any “call equivalent position” (as defined in Rule 16a-1(b) under the Exchange Act). No Rights as a Stockholder. An Optionee, or a transferee of an Optionee, shall have no rights as a stockholder with respect to any Shares covered by the Optionee’s Option until such person becomes entitled to receive such Shares by filing a notice of exercise and paying the Exercise Price pursuant to the terms of such Option. Modification, Extension and Assumption of Options. Within the limitations of the Plan, the Board of Directors may modify, extend or assume outstanding Options or may accept the cancellation of outstanding Options (whether granted by the Company or another issuer) in return for the grant of new Options or a different type of award for the same or a different number of Shares and at the same or a different Exercise Price (if applicable). The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, impair the Optionee’s rights or increase the Optionee’s obligations under such Option. Company’s Right to Cancel Certain Options. Any other provision of the Plan or a Stock Option Agreement notwithstanding, the Company shall have the right at any time to cancel an Option that was not granted in compliance with Rule 701 under the Securities Act. Prior to canceling such Option, the Company shall give the Optionee not less than 30 days’ notice in writing. If the Company elects to cancel such Option, it shall deliver to the Optionee consideration with an aggregate Fair Market Value equal to the excess of (i) the Fair Market Value of the Shares subject to such Option as of the time of the cancellation over (ii) the Exercise Price of such Option. The consideration may be delivered in the form of cash or cash equivalents, in the form of Shares, or a combination of both. If the consideration would be a negative amount, such Option may be cancelled without the delivery of any consideration. SECTION 7. PAYMENT FOR SHARES. General Rule. The entire Purchase Price or Exercise Price of Shares issued under the Plan shall be payable in cash or cash equivalents at the time when such Shares are purchased, except as otherwise provided in this Section 7. In addition, the Board of Directors in its sole discretion may also permit payment through any of the methods described in (b) through (g) below: |
Services Rendered. Shares may be awarded under the Plan in consideration of services rendered to the Company, a Parent or a Subsidiary prior to the award. Promissory Note. All or a portion of the Purchase Price or Exercise Price (as the case may be) of Shares issued under the Plan may be paid with a full-recourse promissory note. The Shares shall be pledged as security for payment of the principal amount of the promissory note and interest thereon. The interest rate payable under the terms of the promissory note shall not be less than the minimum rate (if any) required to avoid the imputation of additional interest under the Code. Subject to the foregoing, the Board of Directors (at its sole discretion) shall specify the term, interest rate, amortization requirements (if any) and other provisions of such note. Surrender of Stock. All or any part of the Exercise Price may be paid by surrendering, or attesting to the ownership of, Shares that are already owned by the Optionee. Such Shares shall be surrendered to the Company in good form for transfer and shall be valued at their Fair Market Value as of the date when the Option is exercised. Exercise/Sale. If the Stock is publicly traded, all or part of the Exercise Price and any withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver all or part of the sales proceeds to the Company. Net Exercise. An Option may permit exercise through a “net exercise” arrangement pursuant to which the Company will reduce the number of Shares issued upon exercise by the largest whole number of Shares having an aggregate Fair Market Value (determined by the Board of Directors as of the exercise date) that does not exceed the aggregate Exercise Price or the sum of the aggregate Exercise Price plus all or a portion of the minimum amount required to be withheld under applicable tax law (with the Company accepting from the Optionee payment of cash or cash equivalents to satisfy any remaining balance of the aggregate Exercise Price and, if applicable, any additional withholding obligation not satisfied through such reduction in Shares); provided that to the extent Shares subject to an Option are withheld in this manner, the number of Shares subject to the Option following the net exercise will be reduced by the sum of the number of Shares withheld and the number of Shares delivered to the Optionee as a result of the exercise. Other Forms of Payment. To the extent that an Award Agreement so provides, the Purchase Price or Exercise Price of Shares issued under the Plan may be paid in any other form permitted by the Delaware General Corporation Law, as amended. SECTION 8.ADJUSTMENT OF SHARES. General. In the event of a subdivision of the outstanding Stock, a declaration of a dividend payable in Shares, a combination or consolidation of the outstanding Stock into a lesser number of Shares, a reclassification, or any other increase or decrease in the number of issued shares of Stock effected without receipt of consideration by the Company, proportionate adjustments shall automatically be made in each of (i) the number and kind of Shares available for future grants under Section 4, (ii) the number and kind of Shares covered by |
each outstanding Option and any outstanding and unexercised right to purchase Shares that has not yet expired pursuant to Section 5(b), (iii) the Exercise Price under each outstanding Option and the Purchase Price applicable to any unexercised stock purchase right described in clause (ii) above, and (iv) any repurchase price that applies to Shares granted under the Plan pursuant to the terms of a Company repurchase right under the applicable Award Agreement. In the event of a declaration of an extraordinary dividend payable in a form other than Shares in an amount that has a material effect on the Fair Market Value of the Stock, a recapitalization, a spin-off, or a similar occurrence, the Board of Directors at its sole discretion may make appropriate adjustments in one or more of the items listed in clauses (i) through (iv) above; provided, however, that the Board of Directors shall in any event make such adjustments as may be required by Section 25102(o) of the California Corporations Code. No fractional Shares shall be issued under the Plan as a result of an adjustment under this Section 8(a), although the Board of Directors in its sole discretion may make a cash payment in lieu of fractional Shares. Corporate Transactions. In the event that the Company is a party to a merger or consolidation, or in the event of a sale of all or substantially all of the Company’s stock or assets, all Shares acquired under the Plan and all Options and other Plan awards outstanding on the effective date of the transaction shall be treated in the manner described in the definitive transaction agreement (or, in the event the transaction does not entail a definitive agreement to which the Company is party, in the manner determined by the Board of Directors in its capacity as administrator of the Plan, with such determination having final and binding effect on all parties), which agreement or determination need not treat all Options and awards (or all portions of an Option or an award) in an identical manner. The treatment specified in the transaction agreement may include (without limitation) one or more of the following with respect to each outstanding Option or award: Continuation of the Option or award by the Company (if the Company is the surviving corporation). Assumption of the Option by the surviving corporation or its parent in a manner that complies with Code Section 424(a) (whether or not the Option is an ISO). Substitution by the surviving corporation or its parent of a new option for the Option in a manner that complies with Code Section 424(a) (whether or not the Option is an ISO). Cancellation of the Option and a payment to the Optionee with respect to each Share subject to the portion of the Option that is vested as of the transaction date equal to the excess of (A) the value, as determined by the Board of Directors in its absolute discretion, of the property (including cash) received by the holder of a share of Stock as a result of the transaction, over (B) the per-Share Exercise Price of the Option (such excess, the “Spread”). Such payment shall be made in the form of cash, cash equivalents, or securities of the surviving corporation or its parent having a value equal to the Spread. In addition, any escrow, holdback, earn-out or similar provisions in the transaction agreement may apply to such payment to the same extent and in the same manner |
as such provisions apply to the holders of Stock. If the Spread applicable to an Option is zero or a negative number, then the Option may be cancelled without making a payment to the Optionee. Cancellation of the Option without the payment of any consideration; provided that the Optionee shall be notified of such treatment and given an opportunity to exercise the Option (to the extent the Option is vested or becomes vested as of the effective date of the transaction) during a period of not less than five (5) business days preceding the effective date of the transaction, unless (A) a shorter period is required to permit a timely closing of the transaction and (B) such shorter period still offers the Optionee a reasonable opportunity to exercise the Option. Any exercise of the Option during such period may be contingent upon the closing of the transaction. Suspension of the Optionee’s right to exercise the Option during a limited period of time preceding the closing of the transaction if such suspension is administratively necessary to permit the closing of the transaction. Termination of any right the Optionee has to exercise the Option prior to vesting in the Shares subject to the Option (i.e., “early exercise”), such that following the closing of the transaction the Option may only be exercised to the extent it is vested. For the avoidance of doubt, the Board of Directors has discretion to accelerate, in whole or part, the vesting and exercisability of an Option or other Plan award in connection with a corporate transaction covered by this Section 8(b). Reservation of Rights. Except as provided in this Section 8, a Participant shall have no rights by reason of (i) any subdivision or consolidation of shares of stock of any class, (ii) the payment of any dividend or (iii) any other increase or decrease in the number of shares of stock of any class. Any issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or Exercise Price of Shares subject to an Option. The grant of an Option pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets. SECTION 9. PRE-EXERCISE INFORMATION REQUIREMENT. Application of Requirement. This Section 9 shall apply only during a period that (i) commences when the Company begins to rely on the exemption described in Rule 12h-1(f)(1) under the Exchange Act, as determined by the Company in its sole discretion, and (ii) ends on the earlier of (A) the date when the Company ceases to rely on such exemption, as determined by the Company in its sole discretion, or (B) the date when the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act. In addition, |
this Section 9 shall in no event apply to an Optionee after he or she has fully exercised all of his or her Options. Scope of Requirement. The Company shall provide to each Optionee the information described in Rule 701(e)(3), (4) and (5) under the Securities Act. Such information shall be provided at six-month intervals, and the financial statements included in such information shall not be more than 180 days old. The foregoing notwithstanding, the Company shall not be required to provide such information unless the Optionee has agreed in writing, on a form prescribed by the Company, to keep such information confidential. SECTION 10. MISCELLANEOUS PROVISIONS. Securities Law Requirements. Shares shall not be issued under the Plan unless, in the opinion of counsel acceptable to the Board of Directors, the issuance and delivery of such Shares comply with (or are exempt from) all applicable requirements of law, including (without limitation) the Securities Act, the rules and regulations promulgated thereunder, state securities laws and regulations, and the regulations of any stock exchange or other securities market on which the Company’s securities may then be traded. The Company shall not be liable for a failure to issue Shares as a result of such requirements. No Retention Rights. Nothing in the Plan or in any right or Option granted under the Plan shall confer upon the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining the Participant) or of the Participant, which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without cause. Treatment as Compensation. Any compensation that an individual earns or is deemed to earn under this Plan shall not be considered a part of his or her compensation for purposes of calculating contributions, accruals or benefits under any other plan or program that is maintained or funded by the Company, a Parent or a Subsidiary. Governing Law. The Plan and all awards, sales and grants under the Plan shall be governed by, and construed in accordance with, the laws of the State of Delaware, as such laws are applied to contracts entered into and performed in such State. Conditions and Restrictions on Shares. Shares issued under the Plan shall be subject to such forfeiture conditions, rights of repurchase, rights of first refusal, other transfer restrictions and such other terms and conditions as the Board of Directors may determine. Such conditions and restrictions shall be set forth in the applicable Award Agreement and shall apply in addition to any restrictions that may apply to holders of Shares generally. In addition, Shares issued under the Plan shall be subject to conditions and restrictions imposed either by applicable law or by Company policy, as adopted from time to time, designed to ensure compliance with applicable law or laws with which the Company determines in its sole discretion to comply including in order to maintain any statutory, regulatory or tax advantage. |
Tax Matters. As a condition to the award, grant, issuance, vesting, purchase, exercise or transfer of any award, or Shares issued pursuant to any award, granted under this Plan, the Participant shall make such arrangements as the Board of Directors may require or permit for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such event. Unless otherwise expressly set forth in an Award Agreement, it is intended that awards granted under the Plan shall be exempt from Code Section 409A, and any ambiguity in the terms of an Award Agreement and the Plan shall be interpreted consistently with this intent. To the extent an award is not exempt from Code Section 409A (any such award, a “409A Award”), any ambiguity in the terms of such award and the Plan shall be interpreted in a manner that to the maximum extent permissible supports the award’s compliance with the requirements of that statute. Notwithstanding anything to the contrary permitted under the Plan, in no event shall a modification of an Award not already subject to Code Section 409A be given effect if such modification would cause the Award to become subject to Code Section 409A unless the parties explicitly acknowledge and consent to the modification as one having that effect. A 409A Award shall be subject to such additional rules and requirements as specified by the Board of Directors from time to time in order for it to comply with the requirements of Code Section 409A. In this regard, if any amount under a 409A Award is payable upon a “separation from service” to an individual who is considered a “specified employee” (as each term is defined under Code Section 409A), then no such payment shall be made prior to the date that is the earlier of six months and one day after the Participant’s separation from service or (ii) the Participant’s death, but only to the extent such delay is necessary to prevent such payment from being subject to Section 409A(a)(1). In addition, if a transaction subject to Section 8(b) constitutes a payment event with respect to any 409A Award, then the transaction with respect to such award must also constitute a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5) to the extent required by Code Section 409A. (iii) Neither the Company nor any member of the Board of Directors shall have any liability to a Participant in the event an award held by the Participant fails to achieve its intended characterization under applicable tax law. SECTION 11. DURATION AND AMENDMENTS; STOCKHOLDER APPROVAL. Term of the Plan. The Plan, as set forth herein, shall become effective on the date of its adoption by the Board of Directors, subject to approval of the Company’s stockholders under Subsection (d) below. The Plan shall terminate automatically 10 years after the later of (i) the date when the Board of Directors adopted the Plan or (ii) the date when the Board of Directors approved the most recent increase in the number of Shares reserved under |
Section 4 that was also approved by the Company’s stockholders. The Plan may be terminated on any earlier date pursuant to Subsection (b) below. Right to Amend or Terminate the Plan. Subject to Subsection (d) below, the Board of Directors may amend, suspend or terminate the Plan at any time and for any reason. Effect of Amendment or Termination. No Shares shall be issued or sold and no Option granted under the Plan after the termination thereof, except upon exercise of an Option (or any other right to purchase Shares) granted under the Plan prior to such termination. The termination of the Plan, or any amendment thereof, shall not affect any Share previously issued or any Option previously granted under the Plan. Stockholder Approval. To the extent required by applicable law, the Plan will be subject to approval of the Company’s stockholders within 12 months of its adoption date. To the extent required by applicable law, any amendment of the Plan will be subject to the approval of the Company’s stockholders within 12 months of the amendment date if it increases the number of Shares available for issuance under the Plan (except as provided in Section 8), or (ii) materially changes the class of persons who are eligible for the grant of ISOs. In addition, an amendment effecting any other material change to the Plan terms will be subject to approval of the Company’s stockholder only if required by applicable law. Stockholder approval shall not be required for any other amendment of the Plan. SECTION 12. DEFINITIONS. “Award Agreement” means a Stock Grant Agreement, Stock Option Agreement or Stock Purchase Agreement. “Board of Directors” means the Board of Directors of the Company, as constituted from time to time. “Code” means the Internal Revenue Code of 1986, as amended. “Committee” means a committee of the Board of Directors, as described in Section 2(a). “Company” means Denim.LA, Inc., a Delaware corporation. “Consultant” means a person, excluding Employees and Outside Directors, who performs bona fide services for the Company, a Parent or a Subsidiary as a consultant or advisor and who qualifies as a consultant or advisor under Rule 701(c)(1) of the Securities Act or under Instruction A.1.(a)(1) of Form S-8 under the Securities Act. “Date of Grant” means the date of grant specified in the applicable Stock Option Agreement, which date shall be the later of (i) the date on which the Board of Directors resolved to grant the Option or (ii) the first day of the Optionee’s Service. |
“Disability” means that the Optionee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment. “Employee” means any individual who is a common-law employee of the Company, a Parent or a Subsidiary. “Exchange Act” means the Securities Exchange Act of 1934, as amended. “Exercise Price” means the amount for which one Share may be purchased upon exercise of an Option, as specified by the Board of Directors in the applicable Stock Option Agreement. “Fair Market Value” means the fair market value of a Share, as determined by the Board of Directors in good faith. Such determination shall be conclusive and binding on all persons. “Family Member” means (i) any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships, (ii) any person sharing the Optionee’s household (other than a tenant or employee), (iii) a trust in which persons described in Clause (i) or (ii) have more than 50% of the beneficial interest, (iv) a foundation in which persons described in Clause (i) or (ii) or the Optionee control the management of assets and (v) any other entity in which persons described in Clause (i) or (ii) or the Optionee own more than 50% of the voting interests. “Grantee” means a person to whom the Board of Directors has awarded Shares under the Plan. “ISO” means an Option that qualifies as an incentive stock option as described in Code Section 422(b). Notwithstanding its designation as an ISO, an Option that does not qualify as an ISO under applicable law shall be treated for all purposes as a Nonstatutory Option. “Nonstatutory Option” means an Option that does not qualify as an incentive stock option as described in Code Section 422(b) or 423(b). “Option” means an ISO or Nonstatutory Option granted under the Plan and entitling the holder to purchase Shares. “Optionee” means a person who holds an Option. an Employee. “Outside Director” means a member of the Board of Directors who is not “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes |
of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date. “Participant” means a Grantee, Optionee or Purchaser. “Plan” means this Denim.LA, Inc. 2013 Stock Plan. “Purchase Price” means the consideration for which one Share may be acquired under the Plan (other than upon exercise of an Option), as specified by the Board of Directors. “Purchaser” means a person to whom the Board of Directors has offered the right to purchase Shares under the Plan (other than upon exercise of an Option). “Securities Act” means the Securities Act of 1933, as amended. “Service” means service as an Employee, Outside Director or Consultant. (aa)“Share” means one share of Stock, as adjusted in accordance with Section 8 (if applicable). (bb)“Stock” means the Common Stock of the Company. (cc) “Stock Grant Agreement” means the agreement between the Company and a Grantee who is awarded Shares under the Plan that contains the terms, conditions and restrictions pertaining to the award of such Shares. (dd) “Stock Option Agreement” means the agreement between the Company and an Optionee that contains the terms, conditions and restrictions pertaining to the Optionee’s Option. (ee) “Stock Purchase Agreement” means the agreement between the Company and a Purchaser who purchases Shares under the Plan that contains the terms, conditions and restrictions pertaining to the purchase of such Shares. (ff) “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date. |
EXHIBIT A SCHEDULE OF SHARES RESERVED FOR ISSUANCE UNDER THE PLAN Date of Board Approval Date of Stockholder Approval Number of Shares Added Cumulative Number of Shares January 30, 2013January 30, 2013Not Applicable1,500,000 |
Exhibit 10.9
AMENDMENT NO. 1 TO SENIOR CREDIT AG REEMENT This AMENDMENT NO. I TO SENIOR CREDIT AGREEMENT is made as of July 1 , 2017, by and among Denim.LA, Inc., a Delaware corporation d/b/a DSTLD ("Borrower"), the stockholders of Borrower signatories below (the "Stockholders"), and bocm3-DSTLD-Senior Debt, LLC, a Utah limited liability company ("Lender"). Jn consideration of the mutual covenants, conditions and agreements set forth herein, and for other good and valuable consideration , the receipt and sufficiency of which are ·hereby acknowledged , it is hereby agreed that: ARTICLE I. DEFINITIONS When used herein, the following terms shall have the following meanings specified: "Amendment" shall mean this Amendment No. I to Senior Cred it Agreement. "Credit Agreement" shall mean the Senior Credit Agreement dated as of March IO, 20 17, by and among Borrower, Lender and the Stockholders, as further amended, modified, supplemented , extended or restated from time to time. I .3 Other Capitalized Terms. All capitalized terms used in this Amendment and not specifically defined herein shall have the definitions assigned to such terms in the Credit Agreement. ARTICLE II. AMENDMENTS TO CREDIT AGREEMENT Amendments. The Credit Agreement is hereby amended as follows: (a) its entirety : Section I .I . The following replace the existing definition in Section I .I in "Closing Date"means each of the Initial Closing Date, Second Closing Date, and the date or dates Lender makes any Remaining Loans. Section 2.l(b) Amendment. Section 2.l(b) is hereby deleted in its entirety and replaced with the following: Remaining Loan s. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Borrower herein set forth, Lender further may loan Borrower an amount such that the First Loan plus the Second Loan plus the additional loan total up to $4,000,000.00 (each, a "Remaining Loan", and together with the First Loan and the Second Loan, the "Loans") at any time after Borrower delivers to Lender a monthly financial statement showing that Borrower's |
TTM Gross Sales totaled at least $5,000,000.00 and upon Borrower providing Lender with at least forty-five (45) days' prior written notice of Borrower's request for the Remaining Loans, and provided that (i) Lender has funding for the Remaining Loans which Lender has sought on a best- efforts basis and (ii) Borrower has received an additional $1,000,000 .00 from sales of Borrower equity after the Subsequent Initial Funding Date. Lender may make the Remaining Loans in one or more installments in multiples of $50,000.00 at any time or times until August 31, 2017 . Concurrent with the delivery by Lender of Remaining Loan proceeds to Borrower, Borrower shall execute and deliver to Lender a Note dated as of the date of such funding in the principal amount of such Remaining Loan. Section 2.4. Section 2.4 is hereby deleted in its entirety and replaced with the following : Fees. Borrower shall pay to bocm3, LLC a nonrefundable closing fee of 5% of the amount of the First Loan plus all accounting and legal fees arising out of the Loan and the preparation of this Agreement (the "First Closing Fee") to offset transaction costs of bocm3, LLC and its Affiliates; provided , however, that Lender's accounting and legal fees arising out of the Loan and the preparation of this Agreement prior to the Effective Date shall not exceed $40,000.00. The First Closing Fee shall be payable on the Initial Closing Date, and may be withheld from the proceeds of the First Loan. The First Closing Fee, once paid , shall be nonrefundable under all circumstances . Upon the funding of the Second Loan on the Second Closing Date and the funding of each Remaining Loan, if any, Borrower shall pay to bocm3, LLC a nonrefundable closing fee of 5% of the amount of the Second Loan and each Remaining Loan, if any (the "Subsequent Closing Fees") to offset transaction costs of bocm3, LLC and its Affiliates. The Subsequent Closing Fees shall be payable on the applicable Closing Date, and may be withheld from the proceeds of the applicable Loan. Section 2.6. Section 2.6 is hereby deleted in its entirety and replaced with the following: Warrants. Borrower has duly authorized the issuance to Lender of warrants to purchase Borrower 's common stock representing 1% of the Capital Stock of Borrower on a fully-diluted basis on the Closing Date of the Second Loan (the "First Warrant") for each $1 million of the principal amount of the Loans on the Closing Date of the Second Loan, which shall be pro rated based on the actual amount of the Loans, at an exercise price of $0.16 per share. The First Warrant shall be in the form attached hereto as Exhibit B and shall be issued even in the event the Initial Committed Amount is not loaned to Borrower in full. Upon making each Remaining 2 |
Loan, Borrower shall issue to Lender warrants to purchase Borrower's common stock such that Lender shall have warrants to purchase I % of the Capital Stock of Borrower on a fully-diluted basis on the Closing Date of each Remaining Loan, if any (the "Second Warrant") for each $1 million of the principal amount of each Remaining Loan on the Closing Date of such Remaining Loan, which shall be pro rated based on the actual amount of the Remaining Loan, at an exercise price of $0.16 per share. The Second Warrant shall be in the form attached hereto as Exhibit B. Miscellaneous Amendment s. The Credit Agreement, the Notes, and all other agreements and instruments executed and delivered heretofore or hereafter pursuant to the Credit Agreement are amended hereby so that any reference therein to the Credit Agreement shall be deemed to be a reference to such agreements and instruments as amended by or pursuant to this Amendment. ARTICLE III. REPRESENTATIONS AND WARRANTIES OF BORROWER Borrower hereby represents and warrants to Lender that: Credit Agreement. All of the representations and warranties made by Borrower in the Credit Agreement are true and correct on the date of this Amendment, except to the extent such representation or warranty relates to a specified earlier date, in which case it continues to be true and correct as of such date. No Event of Default under the Credit Agreement has occurred and is continuing as of the date of this Amendment. Authorization; Enforceability . The making, execution and delivery of this Amendment and performance of and compliance with the terms of this Amendment and the terms of the Credit Agreement , as amended hereby, has been duly authorized by all necessary company action by Borrower. This Amendment is the valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. Absence of Conflicting Obligations. The making, execution and delivery of this Amendment and performance of and compliance with the terms of this Amendment and the terms of the Credit Agreement, as amended hereby, do not violate any presently existing provision of law or the articles or certificate of formation, certificate of organization or operating agreement of Borrower or any agreement to which Borrower is a party or by which it or any of its assets is bound. 3 |
ARTICLE IV. MISCELLANEOUS Continuance of Credit Agreement. Except as specifically amended by this Amendment, the Credit Agreement shall remain in full force and effect. Survival. All agreements, representations and warranties made in this Amendment or in any documents delivered pursuant to this Amendment shall survive the execution of this Amendment and the delivery of any such document. Governing Law. This Amendment shall be governed by, and construed and interpreted in accordance with, the Jaws of the State of Utah applicable to agreements made and wholly performed within such state. The parties hereto acknowledge that this Amendment was negotiated with the assistance of counsel and, accordingly, such laws shall be applied without reference to any rules of construction regarding the draftsman hereof. Counteroarts; Headings. This Amendment may be executed in several counterparts, each of which shall be deemed an original, but such counterparts shall together constitute but one and the same agreement. Article and section headings in this Amendment are inserted for convenience of reference only and shall not constitute a part hereof. Severabilitv. Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such juri sdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provision s of this Amendment in such juri sdiction or affecting the validity or enforceability of any provision in any other jurisdiction . Conditions. The effectiveness of this Amendment is subject to Lender having received from Borrower such documents and other materials as Lender shall request, in form and substance satisfactory to Lender and its counsel, including without limitation duly executed copies of this Amendment, and the payment of all fees and expenses pursuant to Section 5.9 of this Amendment. Course of Dealing; Consent. Borrower acknowledges that neither previous waivers, extensions, and amendments granted to Borrower by Lender, nor the amendments and waivers granted herein, create any course of dealing or expectation with respect to any further waivers, extensions, or amendments, and Borrower further acknowledges that Lender has no obligation whatsoever to grant any additional waivers, extensions, amendments, or forbearance. No Defenses. Borrower acknowledges it has no defenses, rights of setoff, or rights of recoupment to the enforceability or payment of any of its obligations under the Credit Agreement as amended hereby. Expenses and Attorneys' Fees. Borrower shall pay (a) all fees and expenses (including attorney's fees) incurred by Lender in connection with the preparation , execution, and delivery of this Amendment, and all prior legal fees and expenses (including attorney's fees) incurred by each Lender in connection with the Credit Agreement and (b) all fees and expenses 4 |
(including attorney's fees) incurred by Borrower in connection with the preparation , execution, and delivery of this Amendment on the date hereof, all subject to the restriction set forth in Section 2.4 of the Credit Agreement. Further Assurances. Borrower shall promptly execute and deliver or cause to be executed and delivered to Lenders within a reasonable time following Lender's request, and at the expense of Borrower, such other documents or instruments as Lender may reasonably require to in order to give effect to the intent and purposes of this Amendment. [Signature page follows ] 5 |
DocuSign Envelope ID: C099A547-0D1F-4476-B4F6-A5AA44088109 Mark Lynn Co-ceo |
Exhibit 10.10
AMENDMENT NO. 2 TO CREDIT AGREEMENT, SECURITY AGREEMENT AND MANAGEMENT AGREEMENT This AMENDMENT NO. 2 TO CREDIT AGREEMENT, SECURITY AGREEMENT and MANAGEMENT AGREEMENT is made as of March 30, 2018, by and among Denim.LA, Inc., a Delaware corporation doing business as “DSTLD” (“Borrower”), the stockholders of Borrower signatories below (the “Stockholders”), bocm3-DSTLD-Senior Debt, LLC, a Utah limited liability company (“First Lender”) and bocm3-DSTLD-Senior Debt 2, LLC, a Utah limited liability company (“Second Lender” and together with the First Lender, the “Lenders”). In consideration of the mutual covenants, conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed that: ARTICLE I. DEFINITIONS When used herein, the following terms shall have the following meanings specified: “Amendment” shall mean this Amendment No. 2 to Credit Agreement, Security Agreement and Management Agreement. “Credit Agreement” shall mean the Senior Credit Agreement dated as of March 10, 2017, by and among the Borrower, Stockholders and First Lender, as amended by that certain Ame3ndment No. 1 to Senior Credit Agreement, dated as of July , 2017, and as further amended, modified, supplemented, extended or restated from time to time. “Management Agreement” shall mean the Management Advisory Services Agreement dated as of March 10, 2017, by and among the Borrower and First Lender, as further amended, modified, supplemented, extended or restated from time to time. “Security Agreement” shall mean the Security Agreement dated as of March 10, 2017, by and among the Borrower and First Lender, as further amended, modified, supplemented, extended or restated from time to time. Other Capitalized Terms. All capitalized terms used in this Amendment and not specifically defined herein shall have the definitions assigned to such terms in the Credit Agreement. ARTICLE II. AMENDMENTS TO CREDIT AGREEMENT Amendments. The Credit Agreement is hereby amended as follows: Recitals.The following is added as the second Recital to the Credit Agreement: |
WHEREAS Borrower has requested that Second Lender lend to Borrower up to an additional $1,000,000 in the form of a term loan to provide working capital to maintain and expand the operations of Borrower and to pay fees and expenses, and Second Lender is willing to agree to lend such amount on the terms and conditions of this Agreement. Section 1.1.The following are added as a definition to Section 1.1 or replace the existing definitions in their entirety: “Second Lender” means bocm3-DSTLD-Senior Debt 2, LLC, a Utah limited liability company. “Note Maturity Date” means the third anniversary of the Closing Date of the Fourth Additional Loan. “Closing Date” means each of the Initial Closing Date, Second Closing Date and the dates First Lender made any Remaining Loans and the date or Dates Second Lender made any Additional Loans. “Lender” means First Lender and Second Senior and shall include any assignees of a Loan or a Note pursuant to the terms and conditions of Section 8.1 hereof. Section 2.1(d). The following Section 2.1(d) is hereby added: Additional Loans. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Borrower herein set forth, Second Lender hereby agrees to make additional loans to Borrower (the “Additional Loans”, and together with the First Loan, Second Loan and Remaining Loans, the “Loans”) on the terms and conditions set forth in this Section 2.1(d). Second Lender shall make the first Additional Loan on or about March 30, 2018 in the amount of $50,000 (the “First Additional Loan”). Second Lender shall make the second Additional Loan on or about April 13, 2018 in the amount of $400,000 (the “Second Additional Loan”). Second Lender shall make the third Additional Loan on or about April 27, 2018 in the amount of $275,000 (the “Third Additional Loan”). Second Lender shall make the fourth Additional Loan on or about May 11, 2018 in the amount of $275,000 (the “Fourth Additional Loan”). Concurrent with the delivery by Second Lender of Additional Loan proceeds to the Borrower, Borrower shall execute and deliver to Second Lender a Note dated as of the date of such funding in the principal amount of such Additional Loan. (e) Section 2.3(a)(i). The following is added at the end of Section 2.3(a)(i): If a prepayment is made on or before the first anniversary of the Closing Date of the Fourth Additional Loan, such prepayment shall include a prepayment fee equal to the greater of (A) all interest that would have been |
paid on such amount prepaid on or prior to the first anniversary of the applicable Closing Date as if such prepayment had not been made or (B) the principal amount being repaid multiplied by 2.50%. If a prepayment is made after the first anniversary of the Closing Date of the Fourth Additional Loan but before the second anniversary of such Closing Date, such prepayment shall include a prepayment fee equal to the principal amount being repaid multiplied by 2.00%. Section 2.4. The following is added at the end of Section 2.4: With respect to each Additional Loan, (as and if made), Borrower shall pay to bocm3, LLC, with respect to any Additional Loans made by Second Lender a nonrefundable closing fee of 5% of the amount of such Loan (the “Additional Loan Closing Fee”) to offset transaction costs of bocm3, LLC and its Affiliates. The Additional Loan Closing Fee with respect to each Additional Loan shall be payable on the date each such Additional Loan is made, and may be withheld from the proceeds of such Additional Loan. The Additional Loan Closing Fee, once paid, shall be nonrefundable under all circumstances. Section 2.6. The following is added at the end of Section 2.6 Borrower shall issue to Second Lender warrants to purchase Borrower’s common stock representing 1% of the Capital Stock of the Borrower on a fully-diluted basis on the Closing Date of the each Additional Loan (each an “Additional Warrant”) for each $1 million of the principal amount of each Additional Loan on the Closing Date of each Additional Loan, which shall be pro rated based on the actual amount of the Additional Loan, at an exercise price of $0.16 per share. Each Additional Warrant shall be in the form attached hereto as Exhibit B. (j)Section 5.10.Section 5.10 is hereby deleted in its entirety and replaced with the following: Monitoring Fee. Borrower shall pay to bocm3, LLC an annual monitoring fee of $60,000.00 (the “Monitoring Fee”) so long as any portion of a Loan is outstanding. The Monitoring Fee shall be payable monthly and continuing on the first day of each calendar month thereafter in equal installments of $5,000. Miscellaneous Amendments. The Credit Agreement, the Notes, and all other agreements and instruments executed and delivered heretofore or hereafter pursuant to the Credit Agreement are amended hereby so that any reference therein to the Credit Agreement shall be deemed to be a reference to such agreements and instruments as amended by or pursuant to this Amendment. |
ARTICLE III. AMENDMENT TO SECURITY AGREEMENT 3.1Amendment. The Security Agreement is hereby amended to add Second Lender as a “Secured Party” to the Security Agreement. ARTICLE IV. AMENDMENT TO MANAGEMENT AGREEMENT Amendment. The Management Agreement is hereby amended as follows: Section 5. Section 5 is hereby deleted in its entirety and replaced with the following: Compensation of BOCM. DSTLD shall pay to BOCM a cash and consulting management fee equal to $60,000 per annum beginning on April 1, 2018, payable on a monthly basis in arrears in equal installments of $5,000 and the first calendar day of every month thereafter. Section 6. Section 6 is hereby deleted in its entirety and replaced with the following: Term. This Agreement will commence as of the date hereof and will remain in effect until May 11, 2021; provided, however, that this Agreement shall be automatically terminated upon the repayment of all amounts payable by DSTLD pursuant to that certain Senior Credit Agreement, of even date herewith, by and among DSTLD, bocm3-DSTLD-Senior Debt, LLC and certain shareholders of DSTLD. ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE BORROWERS The Borrower hereby represents and warrants to the Lender that: Credit Agreement. Except as previously discussed between Lender and Borrower, all of the representations and warranties made by Borrower in the Credit Agreement are true and correct on the date of this Amendment, except to the extent such representation or warranty relates to a specified earlier date, in which case it continues to be true and correct as of such date. No Event of Default under the Credit Agreement has occurred and is continuing as of the date of this Amendment. Authorization; Enforceability. The making, execution and delivery of this Amendment and performance of and compliance with the terms of this Amendment and the terms of the Credit Agreement, as amended hereby, has been duly authorized by all necessary company action by Borrower. This Amendment is the valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. |
Absence of Conflicting Obligations. The making, execution and delivery of this Amendment and performance of and compliance with the terms of this Amendment and the terms of the Credit Agreement, as amended hereby, do not violate any presently existing provision of law or the articles or certificate of formation, certificate of organization or operating agreement of Borrower or any agreement to which Borrower is a party or by which it or any of its assets is bound. ARTICLE VI. MISCELLANEOUS Continuance of Credit Agreement, Security Agreement and Management Agreement. Except as specifically amended by this Amendment, the Credit Agreement, Security Agreement and Management Agreement shall remain in full force and effect. Survival. All agreements, representations and warranties made in this Amendment or in any documents delivered pursuant to this Amendment shall survive the execution of this Amendment and the delivery of any such document. Governing Law. This Amendment shall be governed by, and construed and interpreted in accordance with, the laws of the State of Utah applicable to agreements made and wholly performed within such state. The parties hereto acknowledge that this Amendment was negotiated with the assistance of counsel and, accordingly, such laws shall be applied without reference to any rules of construction regarding the draftsman hereof. Counterparts; Headings. This Amendment may be executed in several counterparts, each of which shall be deemed an original, but such counterparts shall together constitute but one and the same agreement. Article and section headings in this Amendment are inserted for convenience of reference only and shall not constitute a part hereof. Severability. Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Amendment in such jurisdiction or affecting the validity or enforceability of any provision in any other jurisdiction. Conditions. The effectiveness of this Amendment is subject to Lender having received from Borrower such documents and other materials as Lender shall request, in form and substance satisfactory to Lender and its counsel, including without limitation duly executed copies of this Amendment, and the payment of all fees and expenses pursuant to Section 5.9 of this Amendment. Course of Dealing; Consent. Borrower acknowledges that neither previous waivers, extensions, and amendments granted to Borrower by Lender, nor the amendments and waivers granted herein, create any course of dealing or expectation with respect to any further waivers, extensions, or amendments, and Borrower further acknowledges that Lender has no obligation whatsoever to grant any additional waivers, extensions, amendments, or forbearance. |
No Defenses. Borrower acknowledges it has no defenses, rights of setoff, or rights of recoupment to the enforceability or payment of any of its obligations under the Credit Agreement as amended hereby. Ex penses and Attorneys’ Fees . Borrower shall pay (a) all fees and expenses (including attorney’s fees) incurred by Lender in connection with the preparation, execution, and delivery of this Amendment, and all prior legal fees and expenses (including attorney’s fees) incurred by each Lender in connection with the Credit Agreement and (b) all fees and expenses (including attorney’s fees) incurred by Borrower in connection with the preparation, execution, and delivery of this Amendment on the date hereof, all subject to the restriction set forth in Section 2.4 of the Credit Agreement. Further Assurances. Borrower shall promptly execute and deliver or cause to be executed and delivered to Lenders within a reasonable time following Lender’s request, and at the expense of Borrower, such other documents or instruments as Lender may reasonably require to in order to give effect to the intent and purposes of this Amendment. [Signature page follows] |
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 2 to Credit Agreement & Security Agreement and Management Agreement as of the day and year first written above.
DENIM.LA, INC. | ||
By: | ||
Name: | Mark T. Lynn | |
Title: | CO-CEO | |
BOCM3-DSTLD-SENIOR DEBT, LLC | ||
By: | /s/ Gregory David Seare | |
Name: | Gregory David Seare | |
Title: | Founder and Managing Director. | |
BOCM3-DSTLD-SENIOR DEBT 2, LLC | ||
By: | /s/ Gregory David Seare | |
Name: | Gregory David Seare | |
Title: | Founder and Managing Director. | |
STOCKHOLDERS | ||
Mark Lynn | ||
Corey Epstein | ||
[Signature page to Amendment No. 2 to Credit Agreement & Security Agreement and Management Agreement]
Exhibit 10.11
LIMITED WAIVER AND AMENDMENT NO. 3 TO SENIOR CREDIT AGREEMENT This Limited Waiver and Amendment No. 3 to Senior Credit Agreement (this "Limited Waiver") is made and entered into as of April _, 2018 by and among Denim.LA, Inc., a Delaware corporation d/b/a DSTLD ("DSTLD"), the stockholders of DSTLD signatories below ("Stockholders"), and bocm3-DSTLD-Senior Debt, LLC, a Utah limited liability company ("Lender"). RECITALS A. DSTLD, Stockholders and Lenders entered into that certain Senior Credit Agreement , dated March 10, 2017 (the "Credit Agreement"), as amended. DSTLD has requested that Lenders temporarily waive certain covenants of the Credit Agreement, which Lenders have agreed to do on the terms and conditions set forth herein. NOW THEREFORE, the parties agree as follows: Through December 31, 2017 (such date the "Expiration Date"), the Lender hereby consents and permits DSTLD to maintain a ratio of total current assets of DSTLD as of the last day of each calendar month to total current liabilities of Borrower as of the last day of such calendar month (a "Minimum Current Ratio") of 1.10, notwithstanding anything to the contrary set forth in Section 5.13 of the Credit Agreement. Lender hereby waives any default by DSTLD solely under Section 5.13 of the Credit Agreement arising from DSTLD having a Minimum Current Ratio of less than 1.25. From and after the Expiration Date, so long as the Credit Agreement is in effect, DSTLD shall maintain a Minimum Current Ratio of 1.25. DSTLD hereby acknowledges and agrees that all of its obligations under the Credit Agreement, except as specifically set forth herein, shall remain in full force and effect. DSTLD agrees to pay those professional fees owing to Lenders pursuant to the Credit Agreement and in connection with preparing this Limited Waiver. This Limited Waiver shall be governed and construed in accordance with the provisions of the Credit Agreement. DSTLD acknowledges that neither previous waivers, extensions, and amendments granted to DSTLD by any Lender, nor the amendments and waivers granted herein, create any course of dealing or expectation with respect to any further waivers, extensions, or amendments, and DSTLD further acknowledges that Lenders have no obligation whatsoever to grant any additional waivers, extensions, amendments, or forbearance. DSTLD acknowledges it has no defenses, rights of setoff, or rights of recoupment to the enforceability or payment of any of its obligations under the Credit Agreement as amended hereby. No Event of Default under the Credit Agreement has occurred and is continuing as of the date of this Amendment. |
This Limited Waiver 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. This Limited Waiver may be executed by facsimile or scanned electronic signature. |
DocuSign Envelope ID: C099A547-0D1F-4476-B4F6-A5AA44088109 Mark Lynn Mark T. Lynn, Co-CEO |
Exhibit 10.12
AMENDMENT NO. 4 TO SENIOR CREDIT AGREEMENT This Amendment No. 4 to Senior Credit Agreement (this “Amendment”) is made and entered into as of February 28, 2019 by and among Denim.LA, Inc., a Delaware corporation d/b/a DSTLD (“DSTLD”), the stockholders of DSTLD signatories below (“Stockholders”), bocm3-DSTLD-Senior Debt, LLC, a Utah limited liability company (“First Lender”) and bocm3-DSTLD-Senior Debt 2, LLC, a Utah limited liability company (“Second Lender” and together with the First Lender, the “Lenders”). In consideration of the mutual covenants, conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged; it is hereby agreed that: ARTICLE I. DEFINITIONS When used herein, the following terms shall have the following specified meanings: “Amendment” shall mean this Amendment No. 4 to Senior Credit Agreement. “Credit Agreement” shall mean the Senior Credit Agreement dated as of March 10, 2017, by and among the Borrower, Stockholders and First Lender, as amended by that certain Amendment No. 1 to Senior Credit Agreement, dated as of July , 2017, that certain Amendment No. 2 to Credit Agreement, Security Agreement and Management, dated as of March , 2018, and that certain Limited Waiver and Amendment No. 3 to Senior Credit Agreement, dated as of April , 2018, and as further amended, modified, supplemented, extended or restated from time to time. Other Capitalized Terms. All capitalized terms used in this Amendment and not specifically defined herein shall have the definitions assigned to such terms in the Credit Agreement. ARTICLE II. AMENDMENTS TO CREDIT AGREEMENT Amendments. The Credit Agreement is hereby amended as follows: Section 2.1(d). Section 2.1(d) is hereby deleted in its entirety and replaced with the following. Additional Loans. Subject to the terms and conditions of this Agreement and in reliance upon the representations of Borrower herein set forth, Second Lender hereby agrees to make an additional loan to Borrower (the “Additional Loan”, and together with the First Loan, Second Loan and Remaining Loans, the “Loans”) on the terms and conditions set forth in this Section 2.1(d). Second Lender agrees hereby agrees to lend to Borrower an Additional Loan of up to $1,000,000 on or about February 28, 2019, provided that Second Lender has funding for the |
Additional Loan which Second Lender has sought on a best-efforts basis. Concurrent with the delivery by Second Lender of the Additional Loan proceeds to the Borrower, Borrower shall execute and deliver to Second Lender a note dated as of the date of such funding in the principal amount of such Additional Loan. Section 2.3(a)(ii). The following is hereby added at the end of Section 2.3(a)(ii): Following the occurrence of an initial public offering of the Capital Stock of Borrower raising more than $11,000,000 in equity, Second Lender shall have the right, but not the obligation, to require Borrower to repay the Loans pro rata in increments of $250,000 per each additional $1,000,000 in equity raised (the date such additional funds are raised, an “Additional Funding Date”). No fewer than five (5) Business Days after an Additional Funding Date, Borrower shall give a written notice to Second Lender stating that such funds have been raised. Second Lender shall, within ten (10) Business Days of receipt of such notice, notify Borrower if it will require a prepayment hereunder. Such prepayment shall be due within thirty (30) days of an Additional Funding Date. Section 2.4. The following is hereby added at the end of Section 2.4: With respect to the Additional Loan, borrower shall pay to bocm3, LLC, a nonrefundable closing fee of 5% of the amount of the Additional Loan (the “Additional Loan Closing Fee”), with such fee payable on a pro rata basis relative to the amount of any Additional Loan actually funded, plus all accounting, legal fees and third party consultant fees arising out of the Additional Loan to offset transaction costs of bocm3, LLC and its Affiliates. A pro rata portion of the Additional Loan Closing Fee shall be payable on the date of funding of each draw of the Additional Loan is made, and may be withheld from the proceeds of such Additional Loan proceeds. Section 2.6. The last sentence of Section 2.6 is hereby deleted in its entirety and replaced with the following: Borrower shall issue to Second Lender warrants to purchase Borrower’s common stock representing 1.358% of the Capital Stock of Borrower on a fully-diluted basis on the Closing Date of the Additional Loan (each an “Additional Warrant’) for each $250,000 of the principal amount of the Additional Loan on the Closing date of such Additional Loan, which shall be pro rate based on the actual amount of the Additional Loan, at an exercise price of $0.16 per share. Each Additional Warrant shall be in the form attached hereto as Exhibit B. Miscellaneous Amendments. The Credit Agreement, the Notes, and all other agreements and instruments executed and delivered heretofore or hereafter pursuant to the Credit Agreement are amended hereby so that any reference therein to the Credit Agreement shall be |
deemed to be a reference to such agreements and instruments as amended by or pursuant to this Amendment. ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE BORROWERS The Borrower hereby represents and warrants to the Lenders that: Credit Agreement. All of the representations and warranties made by Borrower in the Credit Agreement are true and correct on the date of this Amendment, except to the extent such representation or warranty relates to a specified earlier date, in which case it continues to be true and correct as of such date. No Event of Default under the Credit Agreement has occurred and is continuing as of the date of this Amendment. Authorization; Enforceability. The making, execution and delivery of this Amendment and performance of and compliance with the terms of this Amendment and the terms of the Credit Agreement, as amended hereby, has been duly authorized by all necessary company action by Borrower. This Amendment is the valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. Absence of Conflicting Obligations. The making, execution and delivery of this Amendment and performance of and compliance with the terms of this Amendment and the terms of the Credit Agreement, as amended hereby, do not violate any presently existing provision of law or the articles or certificate of formation, certificate of organization or operating agreement of Borrower or any agreement to which Borrower is a party or by which it or any of its assets is bound. ARTICLE IV. MISCELLANEOUS Continuance of Credit Agreement. Except as specifically amended by this Amendment, the Credit Agreement shall remain in full force and effect. Survival. All agreements, representations and warranties made in this Amendment or in any documents delivered pursuant to this Amendment shall survive the execution of this Amendment and the delivery of any such document. Governing Law. This Amendment shall be governed by, and construed and interpreted in accordance with, the laws of the State of Utah applicable to agreements made and wholly performed within such state. The parties hereto acknowledge that this Amendment was negotiated with the assistance of counsel and, accordingly, such laws shall be applied without reference to any rules of construction regarding the draftsman hereof. Counterparts; Headings. This Amendment may be executed in several counterparts, each of which shall be deemed an original, but such counterparts shall together |
constitute but one and the same agreement. Article and section headings in this Amendment are inserted for convenience of reference only and shall not constitute a part hereof. Severability. Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Amendment in such jurisdiction or affecting the validity or enforceability of any provision in any other jurisdiction. Conditions. The effectiveness of this Amendment is subject to Lender having received from Borrower such documents and other materials as Lender shall request, in form and substance satisfactory to Lender and its counsel, including without limitation duly executed copies of this Amendment, and the payment of all fees and expenses pursuant to Section 5.9 of this Amendment. Course of Dealing; Consent. Borrower acknowledges that neither previous waivers, extensions, and amendments granted to Borrower by Lender, nor the amendments and waivers granted herein, create any course of dealing or expectation with respect to any further waivers, extensions, or amendments, and Borrower further acknowledges that Lender has no obligation whatsoever to grant any additional waivers, extensions, amendments, or forbearance. No Defenses. Borrower acknowledges it has no defenses, rights of setoff, or rights of recoupment to the enforceability or payment of any of its obligations under the Credit Agreement as amended hereby. Expenses and Attorneys’ Fees. Borrower shall pay (a) all fees and expenses (including attorney’s fees) incurred by Lender in connection with the preparation, execution, and delivery of this Amendment, and all prior legal fees and expenses (including attorney’s fees) incurred by each Lender in connection with the Credit Agreement and (b) all fees and expenses (including attorney’s fees) incurred by Borrower in connection with the preparation, execution, and delivery of this Amendment on the date hereof, all subject to the restriction set forth in Section 2.4 of the Credit Agreement. Further Assurances. Borrower shall promptly execute and deliver or cause to be executed and delivered to Lenders within a reasonable time following Lender’s request, and at the expense of Borrower, such other documents or instruments as Lender may reasonably require to in order to give effect to the intent and purposes of this Amendment. [Signature page follows] |
DocuSign Envelope ID: 0DC23B1E-4A8F-42E2-AF2E-1191621134F5 IN WITNESS WHEREOF, the parties have executed this Amendment No. 4 to Senior Credit Agreement as of the date first written above. DENIM.LA, INC. d/b/a DSTLD By: Name:Mark T. Lynn Title: Chariman BOCM3-DSTLD-SENIOR DEBT, LLC By: Name:Gregory David seare Title: Founder + Managing Director BOCM3-DSTLD-SENIOR DEBT 2, LLC By: Name:Gregory David seare Title: Founder + Managing Director STOCKHOLDERS Mark Lynn Corey Epstein |
Exhibit 10.13
AMENDMENT
NO. 5 TO SENIOR CREDIT AGREEMENT & SECURITY
AGREEMENT
This Amendment No. 5 to Senior Credit Agreement & Security Agreement (this “Amendment”) is made and entered into as of February 7, 2020, by and among Denim.LA, Inc., a Delaware corporation d/b/a DSTLD (the “Borrower”), the stockholders of the Borrower signatories below (“Stockholders”), bocm3-DSTLD-Senior Debt, LLC, a Utah limited liability company (“First Lender”) and bocm3-DSTLD-Senior Debt 2, LLC, a Utah limited liability company (“Second Lender” and together with the First Lender, the “Lenders”).
In consideration of the mutual covenants, conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged; it is hereby agreed that:
ARTICLE I.
DEFINITIONS
When used herein, the following terms shall have the following specified meanings:
1.1 | “Amendment” shall mean this Amendment No. 5 to Senior Credit Agreement & Security Agreement, as amended, restated, supplemented or otherwise modified from time to time. |
1.2 “Credit Agreement” shall mean the Senior Credit Agreement dated as of March 10, 2017, by and among the Borrower, Stockholders and First Lender, as amended by that certain Amendment No. 1 to Senior Credit Agreement, dated as of July 1 , 2017 (“Amendment No. 1”), that certain Amendment No. 2 to Credit Agreement, Security Agreement and Management, dated as of March 30, 2018 (“Amendment No. 2”), and that certain Limited Waiver and Amendment No. 3 to Senior Credit Agreement, dated as of April 30, 2018 (“Amendment No. 3”), that certain Amendment No. 4 to Senior Credit Agreement, dated as of February 28, 2019 (“Amendment No. 4” and, together with Amendment No. 1, Amendment No. 2 and Amendment No. 3, collectively, the “Amendments”), and as further amended, modified, supplemented, extended or restated from time to time.
1.3 “Security Agreement” shall mean the Security Agreement dated as of March 10, 2017, by and among the Borrower and Lenders, as amended by the applicable Amendments and as further amended, modified, supplemented, extended or restated from time to time
1.4 Other Capitalized Terms. All capitalized terms used in this Amendment and not specifically defined herein shall have the definitions assigned to such terms in the Credit Agreement or the Security Agreement, as applicable.
ARTICLE II.
AMENDMENTS TO CREDIT AGREEMENT
2.1 Amendments. The Credit Agreement is hereby amended as follows:
(a) | Section 1.1. The following replaces the existing definition of such term in Section 1.1 in its entirety or adds such definition to Section 1.1: |
“Bailey Collateral” means the “Collateral” (as such term is defined in the Norwest Pledge Agreement as of the date hereof).
“Norwest Note” means that certain Secured Promissory Note, dated as of the date hereof, by Borrower in favor of Norwest Venture Partners XI, LP and Norwest Venture Partners XII, LP, in the initial principal amount of $4,500,000, as in existence on the date hereof.
“Norwest Pledge Agreement” means that certain Pledge Agreement, dated as of the date hereof, by Borrower in favor of Norwest Venture Partners XI, LP and Norwest Venture Partners XII, LP, as Secured Parties, pledging the Bailey Collateral, as in existence on the date hereof.
“Norwest Permitted Lien” means the Liens on the Bailey Collateral in connection with the Norwest Pledge Agreement.
(b) | Section 1.1. The definition of “Permitted Liens” shall be amended by adding a new Section (f) which shall read as follows: |
(e) the Norwest Permitted Lien.
“Note Maturity Date” means the earliest to occur of (i) the closing date of the IPO (as defined in the Norwest Note), (ii) the closing date of a Denim Sale (as defined in the Norwest Note) or (iii) September 30, 2020.
(c) | Section 6.1. Section 6.1 shall be amended in its entire to read as follows: |
Indebtedness. Borrower shall not, directly or indirectly, create, incur, assume, or otherwise become directly or indirectly liable with respect to, any Indebtedness other than (i) Indebtedness under this Agreement, (ii) Indebtedness incurred after the date hereof in the ordinary course of Borrower’s operations, consistent with past practice, in an aggregate amount less than $25,000 or (iii) Indebtedness incurred pursuant to the Norwest Note or the Norwest Pledge Agreement; provided, however, that neither the Norwest Note nor the Norwest Pledge Agreement may be amended without Lenders’ prior written consent.
2.2 Miscellaneous Amendments. The Credit Agreement, the Notes, and all other agreements and instruments executed and delivered heretofore or hereafter pursuant to the Credit Agreement are amended hereby so that any reference therein to the Credit Agreement shall be deemed to be a reference to such agreements and instruments as amended by or pursuant to this Amendment.
ARTICLE III.
AMENDMENTS TO SECURITY AGREEMENT
3.1 Amendment. The Security Agreement is hereby amended to add the following as Section 2(e):
Notwithstanding anything contrary herein or in any other Loan Document, the “Collateral” shall not include any part of the Bailey Collateral, and the Bailey Collateral shall be expressly excluded from the Collateral.
3.2 Filing Authorization. The Secured Party hereby authorizes the Borrower or any of its designees to file UCC-3 financing statement amendments to any UCC-1 financing statement on public record in favor of the Secured Party or any Lender in the form approved by Lenders.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
The Borrower hereby represents and warrants to the Lenders that:
4.1 Credit Agreement. All of the representations and warranties made by Borrower in the Credit Agreement are true and correct on the date of this Amendment, except to the extent such representation or warranty relates to a specified earlier date, in which case it continues to be true and correct as of such date. No Event of Default under the Credit Agreement has occurred and is continuing as of the date of this Amendment.
4.2 Capitalization. As of the date hereof, all outstanding Capital Stock of Borrower is held as set forth on Schedule 4.2 All outstanding shares of Capital Stock were duly authorized and validly issued, and are fully paid and nonassessable. As of the Closing Date, except as set forth on Schedule4.2, there are no outstanding securities, options, warrants, rights, or other agreements of any nature that require Borrower to issue any additional Capital Stock.
4.3 Authorization; Enforceability. The making, execution and delivery of this Amendment and performance of and compliance with the terms of this Amendment and the terms of the Credit Agreement, as amended hereby, has been duly authorized by all necessary company action by Borrower. This Amendment is the valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.
4.4 Absence of Conflicting Obligations. The making, execution and delivery of this Amendment and performance of and compliance with the terms of this Amendment and the terms of the Credit Agreement, as amended hereby, do not violate any presently existing provision of law or the articles or certificate of formation, certificate of organization or operating agreement of Borrower or any agreement to which Borrower is a party or by which it or any of its assets is bound.
4.5 | Loan Balance. As of the date hereof, the balance of the Loans is $4,667,543.86. |
ARTICLE V. MISCELLANEOUS
5.1 Continuance of Credit Agreement. Except as specifically amended by this Amendment, the Credit Agreement shall remain in full force and effect.
5.2 Survival. All agreements, representations and warranties made in this Amendment or in any documents delivered pursuant to this Amendment shall survive the execution of this Amendment and the delivery of any such document.
5.3 Governing Law. This Amendment shall be governed by, and construed and enforced in accordance with, the laws of the State of Utah without regarding to principles of conflicts of laws.. The parties hereto acknowledge that this Amendment was negotiated with the assistance of counsel and, accordingly, such laws shall be applied without reference to any rules of construction regarding the draftsman hereof.
5.4 Counterparts; Headings. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Article and section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect.
5.5 Severability. In case any provision in or obligation under this Amendment shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
5.6 Course of Dealing; Consent. Borrower acknowledges that neither previous waivers, extensions, and amendments granted to Borrower by Lender, nor the amendments and waivers granted herein, create any course of dealing or expectation with respect to any further waivers, extensions, or amendments, and Borrower further acknowledges that Lender has no obligation whatsoever to grant any additional waivers, extensions, amendments, or forbearance.
5.7 No Defenses. Borrower acknowledges it has no defenses, rights of setoff, or rights of recoupment to the enforceability or payment of any of its obligations under the Credit Agreement as amended hereby.
5.8 Ex penses and Attorneys ’ Fees . Borrower shall pay (a) all fees and expenses (including attorney’s fees) incurred by Lender in connection with the preparation, execution, and delivery of this Amendment, and all prior legal fees and expenses (including attorney’s fees) incurred by each Lender in connection with the Credit Agreement and (b) all fees and expenses (including attorney’s fees) incurred by Borrower in connection with the preparation, execution, and delivery of this Amendment on the date hereof.
5.9 Further Assurances. Borrower shall promptly execute and deliver or cause to be executed and delivered to Lenders within a reasonable time following Lender’s request, and at the expense of Borrower, such other documents or instruments as Lender may reasonably require to in order to give effect to the intent and purposes of this Amendment.
[Signature page follows]
IN WITNESS WHEREOF, the parties have executed this Amendment No. 5 to Senior Credit Agreement & Security Agreement as of the date first written above.
DENIM.LA, INC. d/b/a DSTLD | ||
By: | ||
Name: | ||
Title: | ||
BOCM3-DSTLD-SENIOR DEBT, LLC | ||
By: | /s/ Gregory David Seare | |
Name: | Gregory David Seare | |
Title: | Founder and Managing Director. | |
BOCM3-DSTLD-SENIOR DEBT 2, LLC | ||
By: | /s/ Gregory David Seare | |
Name: | Gregory David Seare | |
Title: | Founder and Managing Director. | |
STOCKHOLDERS | ||
Mark Lynn | ||
/s/ Mark Lynn | ||
Corey Epstein | ||
/s/ Corey Epstein |
[Signature page to Amendment No. 5 to Credit Agreement & Security Agreement]
Schedule 4.2
Capitalization
Security Type | Shares | |||
Common | 10,377,615 | |||
Preferred | 40,911,690 | |||
Options | 20,044,624 | |||
Warants | 9,684,197 | |||
Total | 81,018,126 |
ID | Shareholder | Date | Shares | ||||||||
CS-1 | Corey Epstein | 1/30/2013 | 6,050,000 | ||||||||
CS-2 | Ryan Jaleh | 1/30/2013 | 245,060 | ||||||||
CS-3 | Marcus Martinez | 1/30/2013 | 241,289 | ||||||||
CS-4 | Anthony Pu | 1/30/2013 | 88,000 | ||||||||
CS-5 | Amplify.LA Capital II, LLC | 1/31/2013 | 83,124 | ||||||||
CS-6 | Mark Lynn | 10/14/2013 | 2,688,889 | ||||||||
CS-24 | Amplify.LA Capital II, LLC | 09/12/2016 | 51,587 | ||||||||
CS-25 | Baroda Ventures LLC | 09/12/2016 | 36,111 | ||||||||
CS-26 | Plus Capital, L.P. | 09/12/2016 | 41,269 | ||||||||
CS-27 | 3-4 Surf, GP | 09/12/2016 | 4,578 | ||||||||
CS-28 | TenOneTen Ventures, LLC | 09/12/2016 | 11,802 | ||||||||
CS-29 | Randy Nichols | 09/12/2016 | 23,302 | ||||||||
CS-30 | Dan Brown | 09/12/2016 | 2,927 | ||||||||
CS-31 | William Essin | 09/12/2016 | 2,343 | ||||||||
CS-32 | Viking Power | 09/12/2016 | 10,479 | ||||||||
CS-33 | Scott C. Steigerwald | 09/12/2016 | 18,313 | ||||||||
CS-34 | Patrick M. Falle | 09/12/2016 | 10,983 | ||||||||
CS-35 | Siemer Ventures II LP | 09/12/2016 | 55,668 | ||||||||
CS-36 | North Rim Investments, LLC (Joh | 09/12/2016 | 25,793 | ||||||||
CS-37 | Unicorn Ventures, LLC | 09/12/2016 | 10,317 | ||||||||
CS-38 | Yobin Capital, Inc. | 09/12/2016 | 25,793 | ||||||||
CS-39 | Andrea Berkholtz | 09/12/2016 | 10,317 | ||||||||
CS-40 | Dan Zigmond | 09/12/2016 | 10,317 | ||||||||
CS-41 | Sean Brecker | 09/12/2016 | 10,317 | ||||||||
CS-42 | Everlast Investments, LLC | 09/12/2016 | 257,932 | ||||||||
CS-43 | SI Selections Fund I, L.P. | 09/12/2016 | 206,346 | ||||||||
CS-44 | TRIPLE 8 HOLDINGS, LLC | 09/12/2016 | 154,759 | ||||||||
10,377,615 |
[Signature page to Amendment No. 5 to Credit Agreement & Security Agreement]
ID | Shareholder | Round | Date | Shares | |||||||||
PS-125 | The Academy, LLC | Series Seed Preferred | 10/06/2014 | 117,284 | |||||||||
PS-134 | Amplify.LA Capital II, LLC | Series A | 09/12/2016 | 104,166 | |||||||||
PS-135 | Baroda Ventures LLC | Series A | 09/12/2016 | 72,916 | |||||||||
PS-136 | Plus Capital, L.P. | Series A | 09/12/2016 | 83,333 | |||||||||
PS-137 | 3-4 Surf, GP | Series A | 09/12/2016 | 9,244 | |||||||||
PS-139 | Randy Nichols | Series A | 09/12/2016 | 47,054 | |||||||||
PS-140 | Viking Power | Series A | 09/12/2016 | 21,158 | |||||||||
PS-141 | Dan Brown | Series A | 09/12/2016 | 5,911 | |||||||||
PS-142 | Scott C. Steigerwald | Series A | 09/12/2016 | 36,978 | |||||||||
PS-143 | William Essin | Series A | 09/12/2016 | 4,731 | |||||||||
PS-144 | Patrick M. Falle | Series A | 09/12/2016 | 22,179 | |||||||||
PS-145 | Siemer Ventures II LP | Series A | 09/12/2016 | 112,409 | |||||||||
PS-146 | North Rim Investments, LLC (John Victor | Series A | 09/12/2016 | 52,083 | |||||||||
PS-147 | Unicorn Ventures, LLC | Series A | 09/12/2016 | 20,833 | |||||||||
PS-148 | Yobin Capital, Inc. | Series A | 09/12/2016 | 52,083 | |||||||||
PS-149 | Andrea Berkholtz | Series A | 09/12/2016 | 20,833 | |||||||||
PS-150 | Dan Zigmond | Series A | 09/12/2016 | 20,833 | |||||||||
PS-151 | Sean Brecker | Series A | 09/12/2016 | 20,833 | |||||||||
PS-152 | Everlast Investments, LLC | Series A | 09/12/2016 | 520,833 | |||||||||
PS-153 | SI Selections Fund I, L.P. | Series A | 09/12/2016 | 416,666 | |||||||||
PS-154 | TRIPLE 8 HOLDINGS, LLC | Series A | 09/12/2016 | 312,500 | |||||||||
PS-155 | Seedinvest | Series A | 09/12/2016 | 1,217,548 | |||||||||
PS-156 | Mark Epstein | Series A | 03/31/2017 | 98,388 | |||||||||
PS-157 | Seth Elken | Series A | 01/27/2017 | 52,083 | |||||||||
PS-158 | Seedinvest | Series A | 10/10/2016 | 403,991 | |||||||||
PS-159 | Seedinvest | Series A | 11/09/2016 | 284,476 | |||||||||
PS-160 | Seedinvest | Series A | 12/12/2016 | 164,724 | |||||||||
PS-161 | Seedinvest | Series A | 01/30/2017 | 144,244 | |||||||||
PS-162 | Seedinvest | Series A | 02/14/2017 | 107,908 | |||||||||
PS-163 | Seedinvest | Series A | 01/09/2017 | 179,836 | |||||||||
PS-164 | Seedinvest | Series A | 02/27/2017 | 244,714 | |||||||||
PS-165 | Seedinvest | Series A | 03/13/2017 | 519,914 | |||||||||
PS-166 | Seedinvest | Series A | 05/12/2017 | 147,165 | |||||||||
PS-167 | Seedinvest | Series A | 06/02/2017 | 55,302 | |||||||||
PS-168 | Seedinvest | Series A | 06/08/2017 | 35,030 | |||||||||
PS-169 | TenOneTen Ventures, LLC | Series A | 09/12/2016 | 23,829 | |||||||||
PS-170 | Amplify.LA Capital II, LLC | Series A | 06/09/2017 | 3,555 | |||||||||
PS-171 | Baroda Ventures LLC | Series A | 06/09/2017 | 2,372 | |||||||||
PS-172 | Yobin Capital, Inc. | Series A | 06/09/2017 | 1,003 | |||||||||
PS-173 | Seedinvest | Series A | 06/11/2017 | 5,207 | |||||||||
PS-174 | Seedinvest | Series A-2 | 09/20/2017 | 691,440 | |||||||||
PS-175 | Seedinvest | Series A-2 | 10/03/2017 | 444,600 | |||||||||
PS-176 | Seedinvest | Series A-2 | 10/17/2017 | 342,850 | |||||||||
PS-177 | Seedinvest | Series A-2 | 10/31/2017 | 173,999 | |||||||||
PS-178 | Seedinvest | Series A-2 | 11/14/2017 | 270,646 | |||||||||
PS-179 | Seedinvest | Series A-2 | 11/28/2017 | 330,000 | |||||||||
PS-180 | Seedinvest | Series A-2 | 12/11/2017 | 148,900 | |||||||||
PS-181 | Seedinvest | Series A-2 | 12/21/2017 | 182,331 | |||||||||
PS-182 | Seedinvest | Series A-2 | 01/08/2018 | 203,802 | |||||||||
PS-183 | Seedinvest | Series A-2 | 01/22/2018 | 161,000 | |||||||||
PS-184 | Seedinvest | Series A-2 | 02/02/2018 | 224,000 | |||||||||
PS-185 | Seedinvest | Series A-2 | 02/20/2018 | 103,250 | |||||||||
PS-186 | Seedinvest | Series A-2 | 03/02/2018 | 214,950 | |||||||||
PS-187 | Seedinvest | Series A-2 | 03/16/2018 | 350,200 | |||||||||
PS-188 | Seedinvest | Series A-2 | 03/30/2018 | 851,316 | |||||||||
PS-189 | Seedinvest | Series A-2 | 04/13/2018 | 1,172,158 | |||||||||
PS-190 | Seedinvest | Series A-2 | 05/04/2018 | 67,300 | |||||||||
PS-191 | StartEngine | Series CF | 08/09/2018 | 124,204 | |||||||||
PS-192 | Patrick M. Falle | Series A-3 | 08/24/2018 | 94,340 | |||||||||
PS-193 | CherryTree VC | Series A-3 | 10/18/2018 | 188,680 | |||||||||
PS-194 | Seedinvest | Series A-3 | 10/10/2018 | 607,367 | |||||||||
PS-195 | Seedinvest | Series A-3 | 10/26/2018 | 1,077,054 | |||||||||
PS-196 | Seedinvest | Series A-3 | 11/08/2018 | 315,910 | |||||||||
PS-197 | Oswaldo Nascimiento | Series A-3 | 11/08/2018 | 300,000 |
PS-198 | Seedinvest | Series A-3 | 11/21/2018 | 83,973 | |||||||||
PS-199 | Seedinvest | Series A-3 | 12/06/2018 | 157,960 | |||||||||
PS-200 | Seedinvest | Series A-3 | 12/27/2018 | 449,336 | |||||||||
PS-201 | Seedinvest | Series A-3 | 12/30/2018 | 61,667 | |||||||||
PS-202 | Scott C. Steigerwald | Series A-3 | 12/26/2018 | 111,321 | |||||||||
PS-203 | Seedinvest | Series A-3 | 01/10/2019 | 152,795 | |||||||||
PS-204 | Seedinvest | Series A-3 | 01/24/2019 | 804,814 | |||||||||
PS-205 | Seedinvest | Series A-3 | 02/05/2019 | 1,105,360 | |||||||||
PS-206 | Seedinvest | Series A-3 | 02/26/2019 | 112,365 | |||||||||
PS-207 | Crowdcube Nominees | Series A-3 | 02/26/2019 | 341,056 | |||||||||
PS-S40 | Zillion, LLC | Series Seed Preferred | 10/06/2014 | 1,838,396 | |||||||||
PS-S41 | Plus Capital, L.P. | Series Seed Preferred | 10/06/2014 | 367,679 | |||||||||
PS-S42 | The Kevin Yorn Trust | Series Seed Preferred | 10/06/2014 | 110,303 | |||||||||
PS-S43 | 3-4 Surf, GP | Series Seed Preferred | 10/06/2014 | 183,839 | |||||||||
PS-S44 | Baroda Ventures LLC | Series Seed Preferred | 10/06/2014 | 183,839 | |||||||||
PS-S45 | Amplify.LA Capital II, LLC | Series Seed Preferred | 10/06/2014 | 240,400 | |||||||||
PS-S46 | QueensBridge Fund I, L.P. | Series Seed Preferred | 10/06/2014 | 91,919 | |||||||||
PS-S47 | Viking Power | Series Seed Preferred | 10/06/2014 | 183,839 | |||||||||
PS-S48 | Siemer Ventures II LP | Series Seed Preferred | 10/06/2014 | 183,839 | |||||||||
PS-S49 | Clark W. Landry | Series Seed Preferred | 10/06/2014 | 91,919 | |||||||||
PS-S50 | Structure Fund LP | Series Seed Preferred | 10/06/2014 | 91,919 | |||||||||
PS-S51 | Scott C. Steigerwald | Series Seed Preferred | 10/06/2014 | 735,358 | |||||||||
PS-S52 | Patrick M. Falle | Series Seed Preferred | 10/06/2014 | 441,215 | |||||||||
PS-S53 | William Essin | Series Seed Preferred | 10/06/2014 | 91,919 | |||||||||
PS-S54 | Brad Zions | Series Seed Preferred | 10/06/2014 | 91,919 | |||||||||
PS-S55 | Equity Trust Company Custodian FBO W | Series Seed Preferred | 10/06/2014 | 91,919 | |||||||||
PS-S56 | Arena Ventures Fund, LP. | Series Seed Preferred | 05/21/2015 | 773,335 | |||||||||
PS-S-1 | Corey Epstein | Series Seed Preferred | 10/06/2014 | 617,122 | |||||||||
PS-S-2 | Ryan Jaleh | Series Seed Preferred | 10/06/2014 | 101,847 | |||||||||
PS-S-3 | Amplify.LA Capital II, LLC | Series Seed Preferred | 10/06/2014 | 1,222,364 | |||||||||
PS-S-4 | Paige Craig | Series Seed Preferred | 10/06/2014 | 0 | |||||||||
PS-S-5 | Siemer Ventures II LP | Series Seed Preferred | 10/06/2014 | 1,004,400 | |||||||||
PS-S-6 | Baroda Ventures LLC | Series Seed Preferred | 10/06/2014 | 773,335 | |||||||||
PS-S-7 | Plus Capital, L.P. | Series Seed Preferred | 10/06/2014 | 773,139 | |||||||||
PS-S-8 | Siemer Ventures II LP | Series Seed Preferred | 10/06/2014 | 338,019 | |||||||||
PS-S-9 | Baroda Ventures LLC | Series Seed Preferred | 10/06/2014 | 241,667 | |||||||||
PS-S-10 | Dennis Phelps | Series Seed Preferred | 10/06/2014 | 241,381 | |||||||||
PS-S-11 | CAA Ventures I, L.P. | Series Seed Preferred | 10/06/2014 | 480,470 | |||||||||
PS-S-12 | SLP Ventures II, LLC | Series Seed Preferred | 10/06/2014 | 238,885 | |||||||||
PS-S-13 | Crunch Fund I, L.P. | Series Seed Preferred | 10/06/2014 | 713,462 | |||||||||
PS-S-14 | Welle Family Trust | Series Seed Preferred | 10/06/2014 | 237,022 | |||||||||
PS-S-15 | SC Worldwide Enterprises LLC | Series Seed Preferred | 10/06/2014 | 237,022 | |||||||||
PS-S-16 | TenOneTen Ventures, LLC | Series Seed Preferred | 10/06/2014 | 473,881 | |||||||||
PS-S-17 | Viking Power | Series Seed Preferred | 10/06/2014 | 236,920 | |||||||||
PS-S-18 | Dennis Phelps | Series Seed Preferred | 10/06/2014 | 236,920 | |||||||||
PS-S-19 | Amplify.LA Capital II, LLC | Series Seed Preferred | 10/06/2014 | 236,900 | |||||||||
PS-S-20 | Amplify.LA Capital II, LLC | Series Seed Preferred | 10/06/2014 | 118,450 | |||||||||
PS-S-21 | Crunch Fund I, L.P. | Series Seed Preferred | 10/06/2014 | 236,879 | |||||||||
PS-S-22 | Michael Lastoria | Series Seed Preferred | 10/06/2014 | 236,859 | |||||||||
PS-S-23 | Mark Epstein | Series Seed Preferred | 10/06/2014 | 236,797 | |||||||||
PS-S-24 | Lanoha Ventures LLC | Series Seed Preferred | 10/06/2014 | 236,756 | |||||||||
PS-S-25 | Siemer Ventures II LP | Series Seed Preferred | 10/06/2014 | 709,103 | |||||||||
PS-S-26 | Demarest Films, LLC | Series Seed Preferred | 10/06/2014 | 235,713 | |||||||||
PS-S-27 | Tom McInerney | Series Seed Preferred | 10/06/2014 | 235,365 | |||||||||
PS-S-28 | Glenn E. Montgomery | Series Seed Preferred | 10/06/2014 | 117,611 | |||||||||
PS-S-29 | Dan Brown | Series Seed Preferred | 10/06/2014 | 117,550 | |||||||||
PS-S-30 | Mark Epstein | Series Seed Preferred | 10/06/2014 | 117,324 | |||||||||
PS-S-31 | The Bernhard J. and Diane H. Welle Fam | Series Seed Preferred | 10/06/2014 | 234,588 | |||||||||
PS-S-33 | Dave Berlin | Series Seed Preferred | 10/06/2014 | 234,362 | |||||||||
PS-S-34 | Randy Nichols | Series Seed Preferred | 10/06/2014 | 935,731 | |||||||||
PS-S-35 | Plus Capital, L.P. | Series Seed Preferred | 10/06/2014 | 185,771 | |||||||||
PS-S-36 | The Mandel Company | Series Seed Preferred | 10/06/2014 | 185,722 | |||||||||
PS-S-37 | Zillion, LLC | Series Seed Preferred | 10/06/2014 | 539,088 | |||||||||
PS-S-38 | Zillion, LLC | Series Seed Preferred | 10/06/2014 | 1,113,940 | |||||||||
PS-S-39 | Zillion, LLC | Series Seed Preferred | 10/06/2014 | 371,313 | |||||||||
PS-S57 | StartEngine Broker Dealer | Series A-3 | 1/30/2020 | 1,158,931 | |||||||||
PS-S58 | StartEngine Crowd | Series A-3 | 1/30/2020 | 1,368,432 | |||||||||
Total | 40,911,690 |
ID | Shareholder | Shares | Strike Price | Grant Date | |||||||||
OG-2 | Steve Shaw | 100,000 | $ | 0.15 | 6/17/2014 | ||||||||
OG-3 | Dave Kuehl | - | $ | 0.15 | 6/17/2014 | ||||||||
OG-4 | Anton Jusufi | - | $ | 0.15 | 6/17/2014 | ||||||||
OG-5 | Jordan Posell | - | $ | 0.15 | 6/17/2014 | ||||||||
OG-6 | Nika Battle | - | $ | 0.15 | 6/17/2014 | ||||||||
OG-7 | Mark Lynn | 1,344,444 | $ | 0.15 | 6/17/2014 | ||||||||
OG-8 | Mark Lynn | 2,016,667 | $ | 0.15 | 6/17/2014 | ||||||||
OG-9 | Isadora Hu | 25,000 | $ | 0.15 | 6/17/2014 | ||||||||
OG-10 | Steffen Hoffman | - | $ | 0.15 | 8/1/2013 | ||||||||
OG-11 | John Tomich | 276,541 | $ | 0.15 | 6/17/2014 | ||||||||
OG-12 | William Brian Smith | - | $ | 0.15 | 6/17/2014 | ||||||||
OG-13 | Anh Vu | - | $ | 0.15 | 6/17/2014 | ||||||||
OG-14 | Carlos Moscat | - | $ | 0.15 | 6/17/2014 | ||||||||
OG-15 | Thomas Ocampo | - | $ | 0.15 | 6/17/2014 | ||||||||
OG-16 | Eleanor Victorioso | - | $ | 0.15 | 6/17/2014 | ||||||||
OG-17 | Trevor Pettennude | 350,000 | $ | 0.15 | 6/17/2014 | ||||||||
OG-18 | Brent Mitchell | - | $ | 0.15 | 6/17/2014 | ||||||||
OG-19 | Hannah Laverty | 25,000 | $ | 0.15 | 6/17/2014 | ||||||||
OG-20 | Damien Sutevski | - | $ | 0.10 | 8/7/2015 | ||||||||
OG-21 | Eleanor Victorioso | - | $ | 0.10 | 8/7/2015 | ||||||||
OG-22 | Corey Epstein | 1,800,000 | $ | 0.10 | 8/7/2015 | ||||||||
OG-23 | Mark Lynn | 1,800,000 | $ | 0.10 | 8/7/2015 | ||||||||
OG-24 | John Tomich | 520,000 | $ | 0.10 | 8/7/2015 | ||||||||
OG-25 | Trevor Pettennude | 520,000 | $ | 0.10 | 8/7/2015 | ||||||||
OG-26 | Conrad Steenberg | - | $ | 0.10 | 4/1/2015 | ||||||||
OG-27 | Kevin Morris | - | $ | 0.10 | 8/7/2015 | ||||||||
OG-28 | Brad Zions | 15,000 | $ | 0.10 | 8/7/2015 | ||||||||
OG-29 | Sam Shaffer | 25,000 | $ | 0.10 | 8/7/2015 | ||||||||
OG-30 | Kevin Morris | - | $ | 0.16 | 1/1/2016 | ||||||||
OG-31 | Paul Roughley | 500,000 | $ | 0.16 | 7/1/2016 | ||||||||
OG-32 | Laura Sokol | 25,000 | $ | 0.16 | 2/27/2017 | ||||||||
OG-33 | Shervin Lalezari | - | $ | 0.16 | 7/5/2016 | ||||||||
OG-34 | Laura Gramlich | - | $ | 0.16 | 1/28/2016 | ||||||||
OG-35 | Tiffany Chen | - | $ | 0.16 | 1/1/2017 | ||||||||
OG-36 | Michelle Finney | 25,000 | $ | 0.16 | 1/1/2017 | ||||||||
OG-37 | Micheal Uytengsu | 250,000 | $ | 0.16 | 2/2/2016 | ||||||||
OG-38 | Zack Wilson | 25,000 | $ | 0.16 | 2/2/2016 | ||||||||
OG-39 | Brock Pierce | 15,000 | $ | 0.16 | 12/1/2016 | ||||||||
OG-40 | Nick Lehman (re:DSTLD.com sale) | 300,000 | $ | 0.16 | 1/1/2016 | ||||||||
OG-41 | Jordan Isenberg | - | $ | 0.16 | 2/2/2016 | ||||||||
OG-42 | Seth Elken | 25,000 | $ | 0.16 | 2/2/2016 | ||||||||
OG-43 | Mark Epstein | 35,000 | $ | 0.16 | 2/2/2016 | ||||||||
OG-44 | Sarah Zapp | 25,000 | $ | 0.16 | 2/2/2016 | ||||||||
OG-45 | Hil Davis | 1 | $ | 0.21 | 3/1/2018 | ||||||||
OG-46 | Kevin Morris | - | $ | 0.21 | 5/23/2018 | ||||||||
OG-47 | Geoff McFarlane | 100,000 | $ | 0.21 | 5/23/2018 | ||||||||
OG-48 | Trevor Pettennude | 50,000 | $ | 0.21 | 5/23/2018 | ||||||||
OG-49 | John Tomich | - | $ | 0.21 | 5/23/2018 | ||||||||
OG-50 | Mark Lynn | 50,000 | $ | 0.21 | 5/23/2018 | ||||||||
OG-51 | Corey Epstein | 50,000 | $ | 0.21 | 5/23/2018 | ||||||||
OG-52 | Jennifer Stein | - | $ | 0.21 | 5/23/2018 | ||||||||
OG-53 | Jennifer Stein | - | $ | 0.21 | 8/8/2018 | ||||||||
OG-54 | Aaron Lifton | - | $ | 0.21 | 8/8/2018 | ||||||||
OG-55 | Yilin Wang | 5,000 | $ | 0.21 | 8/8/2018 | ||||||||
OG-56 | Caitlin Zenisek | 5,000 | $ | 0.21 | 8/8/2018 | ||||||||
OG-57 | Amit Shah | - | $ | 0.21 | 8/8/2018 | ||||||||
OG-58 | Cinthya Alvarado | 5,000 | $ | 0.21 | 8/8/2018 | ||||||||
OG-59 | Patrick M. Falle | 37,736 | $ | 0.21 | 8/24/2018 | ||||||||
OG-60 | CherryTree VC | 75,472 | $ | 0.21 | 10/18/2018 | ||||||||
OG-61 | Oswaldo Nascimiento | 120,000 | $ | 0.21 | 10/8/2018 | ||||||||
OG-62 | Trevor Pettennude | 125,000 | $ | 0.21 | 8/1/2019 | ||||||||
OG-63 | Laura Dowling | 1,000,000 | $ | 0.21 | 2/18/2019 | ||||||||
OG-64 | Reid Yoeman | 750,000 | $ | 0.21 | 10/1/2019 | ||||||||
OG-65 | John Wagner | 200,000 | $ | 0.21 | 11/4/2019 | ||||||||
OG-66 | Jon Patrick | 200,000 | $ | 0.21 | 12/1/2019 | ||||||||
OG-67 | Megan McElwee | 1,333,333 | $ | 0.21 | 3/1/2018 | ||||||||
OG-68 | Marc Croggon | 1,333,333 | $ | 0.21 | 3/1/2018 | ||||||||
OG-69 | Trevor Pettennude | 125,000 | $ | 0.21 | 10/1/2019 | ||||||||
OG-70 | Holly Davis | 1,333,334 | $ | 0.21 | 3/1/2018 | ||||||||
Not Assigned | 3,103,763 | ||||||||||||
Total | 20,044,624 |
ID | Shareholder | Type | Grant Date | Shares | |||||||
2014-1 | G Squared Media Holdings, LLC | Common | 6/17/2014 | 10,000 | |||||||
WG-2 | TRIPLE 8 HOLDINGS, LLC | Common | 6/6/2016 | 1,800,000 | |||||||
WG-3 | SI Securities, LLC | Series A | 8/3/2016 | 157,953 | |||||||
WG-4 | bocm3-DSTLD-Senior Debt, LLC | Common | 4/7/2017 | 1,139,398 | |||||||
WG-5 | bocm3-DSTLD-Senior Debt, LLC | Common | 1/2/2018 | 610,578 | |||||||
WG-6 | bocm3-DSTLD-Senior Debt, LLC | Common | 4/9/2018 | 637,769 | |||||||
WG-7 | SI Securities, LLC | Series A-2 | 7/7/2017 | 296,637 | |||||||
WG-8 | SI Securities, LLC | Series A | 1/28/2016 | 66,000 | |||||||
WG-9 | North Capital Private Securities Corporation | Series A | 1/28/2016 | 7,333 | |||||||
WG-10 | North Capital Private Securities Corporation | Series A | 8/3/2016 | 17,550 | |||||||
WG-11 | bocm4-DSTLD-Senior Debt, LLC | Common | 3/12/2019 | 1,082,973 | |||||||
Total | 5,826,191 | ||||||||||
WG-12 | bocm4-DSTLD-Senior Debt, LLC | Common | 2/7/2020 | 1,929,003 | |||||||
WG-13 | bocm4-DSTLD-Senior Debt, LLC | Common | 2/7/2020 | 1,929,003 | |||||||
Total | 9,684,197 |
Denim intends to issue stock options to each of its Chief Executive Office and Chief Operating Officer – the number of shares subject to such stock options, and the date of issuance and exercise price of such options has not yet been determined but it is expected that such options could equal up to 30% of the outstanding shares of Denim on a fully converted, fully diluted basis measured as of the effective date of its proposed IPO.
Exhibit 10.14
AMENDMENT NO. 6 TO SENIOR CREDIT AGREEMENT This Amendment No. 6 to Senior Credit Agreement (this “Amendment”) is made and entered into as of September 9, 2020, by and among Denim.LA, Inc., a Delaware corporation d/b/a DSTLD (the “Borrower”), the stockholders of the Borrower signatories below (“Stockholders”), bocm3-DSTLD-Senior Debt, LLC, a Utah limited liability company (“First Lender”) and bocm3-DSTLD-Senior Debt 2, LLC, a Utah limited liability company (“Second Lender” and together with the First Lender, the “Lenders”). In consideration of the mutual covenants, conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged; it is hereby agreed that: ARTICLE I. DEFINITIONS When used herein, the following terms shall have the following specified meanings: “Amendment” shall mean this Amendment No. 6 to Senior Credit Agreement, as amended, restated, supplemented or otherwise modified from time to time. “Credit Agreement” shall mean that certain Senior Credit Agreement, dated as of March 10, 2017, by and among the Borrower, Stockholders and First Lender, as amended by that certain Amendment No. 1 to Senior Credit Agreement, dated as of July 1, 2017 (“Amendment No. 1”), that certain Amendment No. 2 to Credit Agreement, Security Agreement and Management, dated as of March 30, 2018 (“Amendment No. 2”), and that certain Limited Waiver and Amendment No. 3 to Senior Credit Agreement, dated as of April 30, 2018 (“Amendment No. 3”), that certain Amendment No. 4 to Senior Credit Agreement, dated as of February 28, 2019 (“Amendment No. 4”), and that certain Amendment No. 5 to Senior Credit Agreement and Security Agreement, dated as of February 7, 2020 (“Amendment No. 5”, and, together with Amendment No. 1, Amendment No. 2, Amendment No. 3 and Amendment No. 4, collectively, the “Amendments”), and as further amended, modified, supplemented, extended or restated from time to time. Other Capitalized Terms. All capitalized terms used in this Amendment and not specifically defined herein shall have the definitions assigned to such terms in the Credit Agreement. ARTICLE II. AMENDMENTS TO CREDIT AGREEMENT Amendments. The Credit Agreement is hereby amended as follows: Section 1.1. The definition of “Note Maturity Date” in Section 1.1 of the Credit Agreement is hereby deleted and replaced with the following: |
“Note Maturity Date” means June 30, 2021. Section 2.1(d). Section 2.1(d) is hereby deleted in its entirety and replaced with the following. Additional Loans. Subject to the terms and conditions of this Agreement and in reliance upon the representations of Borrower herein set forth, Second Lender hereby agrees to make one or more additional loans to Borrower (the “Additional Loans”, and together with the First Loan, Second Loan and Remaining Loans, the “Loans”), as set forth in this Section 2.1(d). Second Lender agrees hereby agrees to lend to Borrower (i) an Additional Loan of up to $1,000,000 on or about February 28, 2019, (ii) an Additional Loan of up to $1,000,000 on or about August [∙], 2020, provided, in each case, that Second Lender has funding for each such Additional Loan, which Second Lender has sought on a best-efforts basis. Second Lender may make up to $2,000,000 of Additional Loans in Second Lender’s sole discretion; provided, however, that Second Lender shall waive the carried interest payable by any investor introduced to Second Lender by Borrower that provides at least $250,000 to Second Lender. Concurrent with the delivery by Second Lender of the Additional Loan proceeds to the Borrower set forth in the preceding sentence, Borrower shall execute and deliver to Second Lender a note dated as of the applicable date of such funding in the principal amount of such Additional Loan. The use of proceeds for any such Additional Loans shall be as agreed by Second Lender and Borrower. Section 2.3(b). The following is hereby appended to the end of the final sentence of Section 2.3(b) of the Credit Agreement: provided, however, that, notwithstanding anything in this Agreement to the contrary, for the Interest Payment Dates that would otherwise occur with respect to the calendar months of July 2020 through and including September 2020 Borrower shall not be required to pay interest in cash; provided, however that a total of $172,260.59 shall be added to the principal balance of the Loans as a result of such deferral. Section 2.4. The last sentence of Section 2.4 is hereby deleted in its entirety and replaced with the following: With respect to each Additional Loan, borrower shall pay to bocm3, LLC, a nonrefundable closing fee of 5% of the amount of such Additional Loan (the “Additional Loan Closing Fee”), with such fee payable on a pro rata basis relative to the amount of any Additional Loan actually funded, plus all accounting, legal fees and third party consultant fees arising out of such Additional Loan to offset transaction costs of bocm3, LLC and its Affiliates; provided, however, that Second Lender shall waive the Additional Loan Closing Fee with respect to any investor introduced to Second Lender by Borrower that provides at least $250,000 to Second Lender. A pro rata portion of the Additional Loan Closing Fee shall be |
payable on the date of funding of each draw of the Additional Loan is made, and may be withheld from the proceeds of such Additional Loan proceeds. Section 2.6. The last sentence of Section 2.6 is hereby deleted in its entirety and replaced with the following: Borrower shall issue to Second Lender warrants to purchase Borrower’s common stock representing 1.358% of the Capital Stock of Borrower on a fully-diluted basis on the Closing Date of each Additional Loan (each an “Additional Warrant’) for each $250,000 of the principal amount of the Additional Loans funded on the Closing date of such Additional Loan, which shall be prorated based on the actual amount of such Additional Loan, at an exercise price of $0.16 per share. Each Additional Warrant shall be in the form attached hereto as Exhibit B. Miscellaneous Amendments. The Credit Agreement, the Notes, and all other agreements and instruments executed and delivered heretofore or hereafter pursuant to the Credit Agreement are amended hereby so that any reference therein to the Credit Agreement shall be deemed to be a reference to such agreements and instruments as amended by or pursuant to this Amendment. ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE BORROWERS The Borrower hereby represents and warrants to the Lenders that: Credit Agreement. All of the representations and warranties made by Borrower in the Credit Agreement are true and correct on the date of this Amendment, except to the extent such representation or warranty relates to a specified earlier date, in which case it continues to be true and correct as of such date. No Event of Default under the Credit Agreement has occurred and is continuing as of the date of this Amendment. Authorization; Enforceability. The making, execution and delivery of this Amendment and performance of and compliance with the terms of this Amendment and the terms of the Credit Agreement, as amended hereby, has been duly authorized by all necessary company action by Borrower. This Amendment is the valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. Absence of Conflicting Obligations. The making, execution and delivery of this Amendment and performance of and compliance with the terms of this Amendment and the terms of the Credit Agreement, as amended hereby, do not violate any presently existing provision of law or the articles or certificate of formation, certificate of organization or operating agreement of Borrower or any agreement to which Borrower is a party or by which it or any of its assets is bound. |
ARTICLE IV. MISCELLANEOUS Continuance of Credit Agreement. Except as specifically amended by this Amendment, the Credit Agreement shall remain in full force and effect. Survival. All agreements, representations and warranties made in this Amendment or in any documents delivered pursuant to this Amendment shall survive the execution of this Amendment and the delivery of any such document. Governing Law. This Amendment shall be governed by, and construed and interpreted in accordance with, the laws of the State of Utah applicable to agreements made and wholly performed within such state. The parties hereto acknowledge that this Amendment was negotiated with the assistance of counsel and, accordingly, such laws shall be applied without reference to any rules of construction regarding the draftsman hereof. Counterparts; Headings. This Amendment may be executed in several counterparts, each of which shall be deemed an original, but such counterparts shall together constitute but one and the same agreement. Article and section headings in this Amendment are inserted for convenience of reference only and shall not constitute a part hereof. Severability. Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Amendment in such jurisdiction or affecting the validity or enforceability of any provision in any other jurisdiction. Conditions. The effectiveness of this Amendment is subject to Lender having received from Borrower such documents and other materials as Lender shall request, in form and substance satisfactory to Lender and its counsel, including without limitation duly executed copies of this Amendment, and the payment of all fees and expenses pursuant to Section 4.9 of this Amendment. Course of Dealing; Consent. Borrower acknowledges that neither previous waivers, extensions, and amendments granted to Borrower by Lender, nor the amendments and waivers granted herein, create any course of dealing or expectation with respect to any further waivers, extensions, or amendments, and Borrower further acknowledges that Lender has no obligation whatsoever to grant any additional waivers, extensions, amendments, or forbearance. No Defenses. Borrower acknowledges it has no defenses, rights of setoff, or rights of recoupment to the enforceability or payment of any of its obligations under the Credit Agreement as amended hereby. Ex penses and Attorneys ’ Fees . Borrower shall pay (a) all fees and expenses (including attorney’s fees) incurred by Lender in connection with the preparation, execution, and delivery of this Amendment, and all prior legal fees and expenses (including attorney’s fees) incurred by each Lender in connection with the Credit Agreement and (b) all fees and expenses (including attorney’s fees) incurred by Borrower in connection with the preparation, execution, |
and delivery of this Amendment on the date hereof, all subject to the restriction set forth in Section 2.4 of the Credit Agreement. Further Assurances. Borrower shall promptly execute and deliver or cause to be executed and delivered to Lenders within a reasonable time following Lender’s request, and at the expense of Borrower, such other documents or instruments as Lender may reasonably require to in order to give effect to the intent and purposes of this Amendment. [Signature page follows] |
IN WITNESS WHEREOF, the parties have executed this Amendment No. 6 to Senior Credit Agreement as of the date first written above. DENIM.LA, INC. d/b/a DSTLD By: Name:Hil davis Title: CEO BOCM3-DSTLD-SENIOR DEBT, LLC By: Name: Gregory D. Seare Title: Manager BOCM3-DSTLD-SENIOR DEBT 2, LLC By: Name: Gregory D. Seare Title: Manager STOCKHOLDERS Mark Lynn Corey Epstein [Signature page to Amendment No. 6 to Credit Agreement] |
Exhibit 10.15
AMENDMENT NO. 7 TO SENIOR CREDIT AGREEMENT
This Amendment No. 7 to Senior Credit Agreement (this “Amendment”) is made and entered into as of March __, 2021, by and among Denim.LA, Inc., a Delaware corporation d/b/a DSTLD (the “Borrower”), the stockholders of the Borrower signatories below (“Stockholders”), bocm3-DSTLD-Senior Debt, LLC, a Utah limited liability company (“First Lender”) and bocm3-DSTLD-Senior Debt 2, LLC, a Utah limited liability company (“Second Lender” and together with the First Lender, the “Lenders”).
In consideration of the mutual covenants, conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged; it is hereby agreed that:
ARTICLE I.
DEFINITIONS
When used herein, the following terms shall have the following specified meanings:
1.1 “Amendment” shall mean this Amendment No. 7 to Senior Credit Agreement, as amended, restated, supplemented or otherwise modified from time to time.
1.2 “Credit Agreement” shall mean that certain Senior Credit Agreement, dated as of March 10, 2017, by and among the Borrower, Stockholders and First Lender, as amended by that certain Amendment No. 1 to Senior Credit Agreement, dated as of July 1, 2017 (“Amendment No. 1”), that certain Amendment No. 2 to Credit Agreement, Security Agreement and Management, dated as of March 30, 2018 (“Amendment No. 2”), and that certain Limited Waiver and Amendment No. 3 to Senior Credit Agreement, dated as of April 30, 2018 (“Amendment No. 3”), that certain Amendment No. 4 to Senior Credit Agreement, dated as of February 28, 2019 (“Amendment No. 4”), that certain Amendment No. 5 to Senior Credit Agreement and Security Agreement, dated as of February 7, 2020 (“Amendment No. 5”), and that certain Amendment No. 6 to Senior Credit Agreement, dated as of September 9, 2020 (“Amendment No. 6” and, together with Amendment No. 1, Amendment No. 2, Amendment No. 3 Amendment No. 4 and Amendment No. 5, collectively, the “Amendments”), and as further amended, modified, supplemented, extended or restated from time to time.
1.3 Other Capitalized Terms. All capitalized terms used in this Amendment and not specifically defined herein shall have the definitions assigned to such terms in the Credit Agreement.
ARTICLE II.
AMENDMENTS TO CREDIT AGREEMENT
2.1 | Amendments. The Credit Agreement is hereby amended as follows: |
(a) | Section 1.1. The following definition is added to Section 1.1 of the Credit Agreement: |
“Public Offering” means a secondary public offering of Borrower stock in which Borrower receives at least $5,000,000.
(b) | Section 1.1. The definition of “Note Maturity Date” in Section 1.1 of the Credit Agreement is hereby deleted and replaced with the following: |
“Note Maturity Date” means December 31, 2022.
(c) | Section 2.3(a)(ii). The following is hereby appended to the end of Section 2.3(a)(ii) of the Credit Agreement: |
Provided that the Public Offering occurs on or before July 31, 2021, Borrower shall pay the Lenders $3,000,000 (the “Public Offering Payment”) within five (5) Business Days of the Public Offering in partial repayment of the Loans. If Borrower has an additional public offering of stock on or before September 30, 2021 in which the Company raises at least $3,000,000, Borrower shall repay the Loans within five (5) Business Days of such additional public offering of stock. If after timely making the Public Offering Payment Borrower does not have an additional public offering of stock on or before September 30, 2021 in which the Company raises at least $3,000,000, Borrower shall repay $300,000 of the Loans on or before September 30, 2021.
(d) | Section 2.3(b). The following shall be added as the last sentence of Section 2.3(b) of the Credit Agreement: |
Borrower shall pay to the Lenders $337,744.88 on or before April 30, 2021, which shall be allocated to prior payments of accrued interest and the Monitoring Fee.
2.2 Limited Waiver. From March 1, 2021 until the Note Maturity Date, provided no Event of Default has occurred and is continuing, the Lenders waive Borrower’s obligations under Sections 5.1(a)-5.1(e) of the Credit Agreement.
2.3 Miscellaneous Amendments. The Credit Agreement, the Notes, and all other agreements and instruments executed and delivered heretofore or hereafter pursuant to the Credit Agreement are amended hereby so that any reference therein to the Credit Agreement shall be deemed to be a reference to such agreements and instruments as amended by or pursuant to this Amendment.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE BORROWERS
The Borrower hereby represents and warrants to the Lenders that:
3.1 Credit Agreement. All of the representations and warranties made by Borrower in the Credit Agreement are true and correct on the date of this Amendment, except to the extent such representation or warranty relates to a specified earlier date, in which case it continues to be true and correct as of such date. No Event of Default under the Credit Agreement has occurred and is continuing as of the date of this Amendment.
3.2 Authorization; Enforceability. The making, execution and delivery of this Amendment and performance of and compliance with the terms of this Amendment and the terms of the Credit Agreement, as amended hereby, has been duly authorized by all necessary company action by Borrower. This Amendment is the valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.
3.3 Absence of Conflicting Obligations. The making, execution and delivery of this Amendment and performance of and compliance with the terms of this Amendment and the terms of the Credit Agreement, as amended hereby, do not violate any presently existing provision of law or the articles or certificate of formation, certificate of organization or operating agreement of Borrower or any agreement to which Borrower is a party or by which it or any of its assets is bound.
ARTICLE IV.
MISCELLANEOUS
4.1 Continuance of Credit Agreement. Except as specifically amended by this Amendment, the Credit Agreement shall remain in full force and effect.
4.2 Survival. All agreements, representations and warranties made in this Amendment or in any documents delivered pursuant to this Amendment shall survive the execution of this Amendment and the delivery of any such document.
4.3 Governing Law. This Amendment shall be governed by, and construed and interpreted in accordance with, the laws of the State of Utah applicable to agreements made and wholly performed within such state. The parties hereto acknowledge that this Amendment was negotiated with the assistance of counsel and, accordingly, such laws shall be applied without reference to any rules of construction regarding the draftsman hereof.
4.4 Counterparts; Headings. This Amendment may be executed in several counterparts, each of which shall be deemed an original, but such counterparts shall together constitute but one and the same agreement. Article and section headings in this Amendment are inserted for convenience of reference only and shall not constitute a part hereof.
4.5 Severability. Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Amendment in such jurisdiction or affecting the validity or enforceability of any provision in any other jurisdiction.
4.6 Conditions. The effectiveness of this Amendment is subject to Lender having received from Borrower such documents and other materials as Lender shall request, in form and substance satisfactory to Lender and its counsel, including without limitation duly executed copies of this Amendment, and the payment of all fees and expenses pursuant to Section 4.9 of this Amendment.
4.7 Course of Dealing; Consent. Borrower acknowledges that neither previous waivers, extensions, and amendments granted to Borrower by Lender, nor the amendments and waivers granted herein, create any course of dealing or expectation with respect to any further waivers, extensions, or amendments, and Borrower further acknowledges that Lender has no obligation whatsoever to grant any additional waivers, extensions, amendments, or forbearance.
4.8 No Defenses. Borrower acknowledges it has no defenses, rights of setoff, or rights of recoupment to the enforceability or payment of any of its obligations under the Credit Agreement as amended hereby.
4.9 Expenses and Attorneys’ Fees. Borrower shall pay (a) all fees and expenses (including attorney’s fees) incurred by Lender in connection with the preparation, execution, and delivery of this Amendment, and all prior legal fees and expenses (including attorney’s fees) incurred by each Lender in connection with the Credit Agreement and (b) all fees and expenses (including attorney’s fees) incurred by Borrower in connection with the preparation, execution, and delivery of this Amendment on the date hereof, all subject to the restriction set forth in Section 2.4 of the Credit Agreement.
4.10 Further Assurances. Borrower shall promptly execute and deliver or cause to be executed and delivered to Lenders within a reasonable time following Lender’s request, and at the expense of Borrower, such other documents or instruments as Lender may reasonably require to in order to give effect to the intent and purposes of this Amendment.
[Signature page follows]
IN WITNESS WHEREOF, the parties have executed this Amendment No. 7 to Senior Credit Agreement as of the date first written above.
[Signature page to Amendment No. 7 to Credit Agreement]
Exhibit 10.16
NOTE PROMISE TO PAY. Borrower promises to pay to the order of Lender the Note Amount, plus interest on the unpaid principal balance at the Note Rate, and all other amounts required by this Note. DEFINITIONS. “CARES Act” means the Coronavirus Aid, Relief, and Economic Security Act. “Deferral Period” means the six month period beginning on the date of this Note. "Loan" means the loan evidenced by this Note. “Maturity Date” means twenty-four (24) months from the date of this Note. “Note Rate” means an interest rate of 0.98% Per Annum and interest shall accrue on the unpaid principal balance computed on the basis of the actual number of days elapsed in a year of 360 days. “Per Annum” means for a year deemed to be comprised of 360 days. "SBA" means the Small Business Administration, an Agency of the United States of America. CONDITIONS PRECEDENT TO FUNDING OF LOAN. Before the funding of the Loan, the following conditions must be satisfied: Lender has approved the request for the Loan. Lender has received approval from SBA to fund the Loan. PAYMENT TERMS. Borrower will pay this Note as follows: No Payments During Deferral Period. There shall be no payments due by Borrower during the Deferral Period. |
Principal and Interest Payments. Commencing one month after the expiration of the Deferral Period, and continuing on the same day of each month thereafter until the Maturity Date, Borrower shall pay to Lender monthly payments of principal and interest, each in such equal amount required to fully amortize the principal amount outstanding on the Note on the last day of the Deferral Period by the Maturity Date. Maturity Date. On the Maturity Date, Borrower shall pay to Lender any and all unpaid principal plus accrued and unpaid interest plus interest accrued during the Deferral Period. This Note will mature on the Maturity Date. If any payment is due on a date for which there is no numerical equivalent in a particular calendar month then it shall be due on the last day of such month. If any payment is due on a day that is not a Business Day, the payment will be made on the next Business Day. The term "Business Day" means a day other than a Saturday, Sunday or any other day on which national banking associations are authorized to be closed. Payments shall be allocated among principal and interest at the discretion of Lender unless otherwise agreed or required by applicable law. Notwithstanding, in the event the Loan, or any portion thereof, is forgiven pursuant to the Paycheck Protection Program under the federal CARES Act, the amount so forgiven shall be applied to principal. Borrower may prepay this Note at any time without payment of any premium. CERTIFICATIONS. Borrower certifies as follows: Current economic uncertainty makes this Loan necessary to support the ongoing operations of Borrower. Loan funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments. During the period beginning on February 15, 2020 and ending on December 31, 2020, Borrower has not and will not receive another loan under this program. Borrower was in operation on February 15, 2020 and (i) had employees for whom it paid salaries and payroll taxes, or (ii) paid independent contractors as reported on a 1099-Misc. AGREEMENTS. Borrower understands and agrees, and waives and releases Lender, as follows: The Loan would be made under the SBA’s Paycheck Protection Program. Accordingly, it must be submitted to and approved by the SBA. There is limited funding available under the Paycheck Protection Program and so all applications submitted will not be approved by the SBA. |
Lender is participating in the Payroll Protection Program to help businesses impacted by the economic impact from COVID-19. However, Lender anticipates high volume and there may be processing delays and system failures along with other issues that interfere with submission of your application to SBA. Lender does not represent or guarantee that it will submit the application before SBA funding is no longer available or at all. You agree that Lender is not responsible or liable to you if the application is not submitted to the SBA until after SBA stops approving applications, for any reason or (ii) if the application is not processed. You forever release and waive any claims against Lender concerning failure to obtain the Loan. This release and waiver applies to but is not limited to any claims concerning Lender’s (i) pace, manner or systems for processing or prioritizing applications, or (ii) representations by Lender regarding the application process, the Paycheck Protection Program, or availability of funding. This agreed to release and waiver supersedes any prior communications, understandings, agreements or communications on the issues set forth herein. Forgiveness of the Loan is only available for principal that is used for the limited purposes that qualify for forgiveness under SBA requirements, and that to obtain forgiveness, Borrower must request it and must provide documentation in accordance with the SBA requirements, and certify that the amounts Borrower is requesting to be forgiven qualify under those requirements. Borrower also understands that Borrower shall remain responsible under the Loan for any amounts not forgiven, and that interest payable under the Loan will not be forgiven but that the SBA may pay the Loan interest on forgiven amounts. Forgiveness is not automatic and Borrower must request it. Borrower is not relying on Lender for its understanding of the requirements for forgiveness such as eligible expenditures, necessary records/documentation, or possible reductions due to changes in number of employees or compensation. Rather Borrower will consult the SBA’s program materials. The application for this Loan is subject to review and that Borrower may not receive the Loan. The Loan also remains subject to availability of funds under the SBA’s Payment Protection Program, and to the SBA issuing an SBA loan number. DEFAULT. Borrower is in default under this Note if Borrower: Fails to make a payment when due under the Note or otherwise fails to comply with any provision of this Note. Does not disclose, or anyone acting on its behalf does not disclose, any material fact to Lender or SBA. Makes, or anyone acting on its behalf makes, a materially false or misleading representation, attestation or certification to Lender or SBA in connection with Borrower’s request for this Loan under the CARES Act, or makes a false certification under paragraph 5 of this Note. Fails to comply with all of the provisions of this Note. Becomes the subject of a proceeding under any bankruptcy or insolvency law, has a receiver or liquidator appointed for any part of its business or property, or makes an assignment for the benefit of creditors. |
Reorganizes, merges, consolidates, or otherwise changes ownership or business structure without Lender's prior written consent. Becomes the subject of a civil or criminal action that Lender believes may materially affect Borrower's ability to pay this Note. LENDER'S RIGHTS IF THERE IS A DEFAULT. Without notice or demand and without giving up any of its rights, Lender may: Require immediate payment of all amounts owing under this Note. Collect all amounts owing from Borrower. File suit and obtain judgment. LENDER'S GENERAL POWERS. Without notice or Borrower's consent, Lender may incur expenses to collect amounts due under this Note and enforce the terms of this Note. Among other things, the expenses may include reasonable attorney's fees and costs. If Lender incurs such expenses, it may demand immediate repayment from Borrower or add the expenses to the principal balance. GOVERNING LAW AND VENUE; WHEN FEDERAL LAW APPLIES. When SBA is the holder, this Note shall be interpreted and enforced under federal law, including SBA regulations. Lender or SBA may use state or local procedures for filing papers, recording documents, giving notice, foreclosing liens, and other purposes. By using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax, or liability. As to this Note, Borrower may not claim or assert against SBA any local or state law to deny any obligation, defeat any claim of SBA, or preempt federal law. If the SBA is not the holder, this Note shall be governed by and construed in accordance with the laws of the State of Ohio where the main office of Lender is located. MATTERS REGARDING INTEREST TO BE CHARGED BY LENDER AND THE EXPORTATION OF INTEREST SHALL BE GOVERNED BY FEDERAL LAW (INCLUDING WITHOUT LIMITATION 12 U.S.C. SECTIONS 85 AND 1831u) AND THE LAW OF THE STATE OF OHIO. Borrower agrees that any legal action or proceeding with respect to any of its obligations under this Note may be brought by Lender in any state or federal court located in the State of Ohio, as Lender in its sole discretion may elect. Borrower submits to and accepts in respect of its property, generally and unconditionally, the non-exclusive jurisdiction of those courts. Borrower waives any claim that the State of Ohio is not a convenient forum or the proper venue for any such suit, action or proceeding. The extension of credit that is the subject of this Note is being made by Lender in Ohio. SUCCESSORS AND ASSIGNS. Under this Note, Borrower includes its successors, and Lender includes its successors and assigns. |
GENERAL PROVISIONS. Borrower must sign all documents necessary at any time to comply with the Loan. Borrower’s execution of this Note has been duly authorized by all necessary actions of its governing body. The person signing this Note is duly authorized to do so on behalf of Borrower. This Note shall not be governed by any existing or future credit agreement or loan agreement with Lender. The liabilities guaranteed pursuant to any existing or future guaranty in favor of Lender shall not include this Note. The liabilities secured by any existing or future security instrument in favor Lender shall not include this Note. Lender may exercise any of its rights separately or together, as many times and in any order it chooses. Lender may delay or forgo enforcing any of its rights without giving up any of them. Borrower may not use an oral statement of Lender or SBA to contradict or alter the written terms of this Note. If any part of this Note is unenforceable, all other parts remain in effect. To the extent allowed by law, Borrower waives all demands and notices in connection with this Note, including presentment, demand, protest, and notice of dishonor. Borrower's liability under this Note will continue with respect to any amounts SBA may pay Bank based on an SBA guarantee of this Note. Any agreement with Bank under which SBA may guarantee this Note does not create any third party rights or benefits for Borrower and, if SBA pays Bank under such an agreement, SBA or Bank may then seek recovery from Borrower of amounts paid by SBA. Lender reserves the right to modify the Note Amount based on documentation received from Borrower. |
ELECTRONIC SIGNATURES. Borrower’s electronic signature shall have the same force and effect as an original signature and shall be deemed (i) to be "written" or "in writing" or an “electronic record”, (ii) to have been signed and (iii) to constitute a record established and maintained in the ordinary course of business and an original written record when printed from electronic files. Such paper copies or "printouts," if introduced as evidence in any judicial, arbitral, mediation or administrative proceeding, will be admissible as between the parties to the same extent and under the same conditions as other original business records created and maintained in documentary form. BORROWER’S NAME AND SIGNATURE: Borrower: Denim.LA, Inc By: Printed Name: John Hilburn Davis Title: CEO Date Signed: April 13, 2020 | 11:52 AM EDT |
Exhibit 10.17
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U.S. Small Business Administration NOTE (SECURED DISASTER LOANS) Date: 06.25.2020 Loan Amount: $150,000.00 Annual Interest Rate: 3.75% SBA Loan # 4007348010 Application #3303986708 1. PROMISE TO PAY: In return for a loan, Borrower promises to pay to the order of SBA the amount of one hundred and fifty thousand and 00/100 Dollars ($150,000.00), interest on the unpaid principal balance, and all other amounts required by this Note. 2. DEFINITIONS: A) “Collateral” means any property taken as security for payment of this Note or any guarantee of this Note. B) “Guarantor” means each person or entity that signs a guarantee of payment of this Note. C) “Loan Documents” means the documents related to this loan signed by Borrower, any Guarantor, or anyone who pledges collateral. 3. PAYMENT TERMS: Borrower must make all payments at the place SBA designates. Borrower may prepay this Note in part or in full at any time, without notice or penalty. Borrower must pay principal and interest payments of $731.00 every month beginning Twelve (12) months from the date of the Note. SBA will apply each installment payment first to pay interest accrued to the day SBA receives the payment and will then apply any remaining balance to reduce principal. All remaining principal and accrued interest is due and payable Thirty (30) years from the date of the Note. 4. DEFAULT: Borrower is in default under this Note if Borrower does not make a payment when due under this Note, or if Borrower: A) Fails to comply with any provision of this Note, the Loan Authorization and Agreement, or other Loan Documents; B) Defaults on any other SBA loan; C) Sells or otherwise transfers, or does not preserve or account to SBA’s satisfaction for, any of the Collateral or its proceeds; D) Does not disclose, or anyone acting on their behalf does not disclose, any material fact to SBA; E) Makes, or anyone acting on their behalf makes, a materially false or misleading representation to SBA; F) Defaults on any loan or agreement with another creditor, if SBA believes the default may materially affect Borrower’s ability to pay this Note; G) Fails to pay any taxes when due; H) Becomes the subject of a proceeding under any bankruptcy or insolvency law; I) Has a receiver or liquidator appointed for any part of their business or property; J) Makes an assignment for the benefit of creditors; K) Has any adverse change in financial condition or business operation that SBA believes may materially affect Borrower’s ability to pay this Note; L) Dies; M) Reorganizes, merges, consolidates, or otherwise changes ownership or business structure without SBA’s prior written consent; or, N) Becomes the subject of a civil or criminal action that SBA believes may materially affect Borrower’s ability to pay this Note. 5. SBA’S RIGHTS IF THERE IS A DEFAULT: Without notice or demand and without giving up any of its rights, SBA may: A) Require immediate payment of all amounts owing under this Note; B) Have recourse to collect all amounts owing from any Borrower or Guarantor (if any); C) File suit and obtain judgment; D) Take possession of any Collateral; or E) Sell, lease, or otherwise dispose of, any Collateral at public or private sale, with or without advertisement. 6. SBA’S GENERAL POWERS: Without notice and without Borrower’s consent, SBA may: A) Bid on or buy the Collateral at its sale or the sale of another lienholder, at any price it chooses; B) Collect amounts due under this Note, enforce the terms of this Note or any other Loan Document, and preserve or dispose of the Collateral. Among other things, the expenses may include payments for property taxes, prior liens, insurance, appraisals, environmental remediation costs, and reasonable attorney’s fees and costs. If SBA incurs such expenses, it may demand immediate reimbursement from Borrower or add the expenses to the principal balance; C) Release anyone obligated to pay this Note; D) Compromise, release, renew, extend or substitute any of the Collateral; and E) Take any action necessary to protect the Collateral or collect amounts owing on this Note. Page 2 of 3 SBA FORM 147 B (5-00) Doc # L-01-5413218-01 SBA Loan #4007348010 Application #3303986708 DocuSign Envelope ID: 725AA93E-9C13-4B4F-82F9-2DD28E2E9568 |
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7. FEDERAL LAW APPLIES: When SBA is the holder, this Note will be interpreted and enforced under federal law, including SBA regulations. SBA may use state or local procedures for filing papers, recording documents, giving notice, foreclosing liens, and other purposes. By using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax, or liability. As to this Note, Borrower may not claim or assert against SBA any local or state law to deny any obligation, defeat any claim of SBA, or preempt federal law. 8. GENERAL PROVISIONS: A) All individuals and entities signing this Note are jointly and severally liable. B) Borrower waives all suretyship defenses. C) Borrower must sign all documents required at any time to comply with the Loan Documents and to enable SBA to acquire, perfect, or maintain SBA’s liens on Collateral. D) SBA may exercise any of its rights separately or together, as many times and in any order it chooses. SBA may delay or forgo enforcing any of its rights without giving up any of them. E) Borrower may not use an oral statement of SBA to contradict or alter the written terms of this Note. F) If any part of this Note is unenforceable, all other parts remain in effect. G) To the extent allowed by law, Borrower waives all demands and notices in connection with this Note, including presentment, demand, protest, and notice of dishonor. Borrower also waives any defenses based upon any claim that SBA did not obtain any guarantee; did not obtain, perfect, or maintain a lien upon Collateral; impaired Collateral; or did not obtain the fair market value of Collateral at a sale. H) SBA may sell or otherwise transfer this Note. 9. MISUSE OF LOAN FUNDS: Anyone who wrongfully misapplies any proceeds of the loan will be civilly liable to SBA for one and one- half times the proceeds disbursed, in addition to other remedies allowed by law. 10. BORROWER’S NAME(S) AND SIGNATURE(S): By signing below, each individual or entity acknowledges and accepts personal obligation and full liability under the Note as Borrower. Denim.LA Reid Yeoman, Owner/Officer {{0_SH}} Page 3 of 3 SBA FORM 147 B (5-00) Doc # L-01-5413218-01 SBA Loan #4007348010 Application #3303986708 DocuSign Envelope ID: 725AA93E-9C13-4B4F-82F9-2DD28E2E9568 |
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SECURITY AGREEMENT Read this document carefully. It grants the SBA a security interest (lien) in all the property described in paragraph 4. This document is predated. DO NOT CHANGE THE DATE ON THIS DOCUMENT. Doc # L-01-5413218-01 SBA Loan #4007348010 Application #3303986708 DocuSign Envelope ID: 725AA93E-9C13-4B4F-82F9-2DD28E2E9568 |
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U.S. Small Business Administration SECURITY AGREEMENT SBA Loan #: 4007348010 Borrower: Denim.LA Secured Party: The Small Business Administration, an Agency of the U.S. Government Date: 06.25.2020 Note Amount: $150,000.00 1. DEFINITIONS. Unless otherwise specified, all terms used in this Agreement will have the meanings ascribed to them under the Official Text of the Uniform Commercial Code, as it may be amended from time to time, (“UCC”). “SBA” means the Small Business Administration, an Agency of the U.S. Government. 2. GRANT OF SECURITY INTEREST. For value received, the Borrower grants to the Secured Party a security interest in the property described below in paragraph 4 (the “Collateral”). 3. OBLIGATIONS SECURED. This Agreement secures the payment and performance of: (a) all obligations under a Note dated 06.25.2020, made by Denim.LA , made payable to Secured Lender, in the amount of $150,000.00 (“Note”), including all costs and expenses (including reasonable attorney’s fees), incurred by Secured Party in the disbursement, administration and collection of the loan evidenced by the Note; (b) all costs and expenses (including reasonable attorney’s fees), incurred by Secured Party in the protection, maintenance and enforcement of the security interest hereby granted; (c) all obligations of the Borrower in any other agreement relating to the Note; and (d) any modifications, renewals, refinancings, or extensions of the foregoing obligations. 4. COLLATERAL DESCRIPTION. The Collateral in which this security interest is granted includes the following property that Borrower now owns or shall acquire or create immediately upon the acquisition or creation thereof: all tangible Page 2 of 5 SBA Form 1059 (09-19) Previous Editions are obsolete. Doc # L-01-5413218-01 SBA Loan #4007348010 Application #3303986708 DocuSign Envelope ID: 725AA93E-9C13-4B4F-82F9-2DD28E2E9568 |
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and intangible personal property, including, but not limited to: (a) inventory, (b) equipment, (c) instruments, including promissory notes (d) chattel paper, including tangible chattel paper and electronic chattel paper, (e) documents, (f) letter of credit rights, (g) accounts, including health-care insurance receivables and credit card receivables, (h) deposit accounts, (i) commercial tort claims, (j) general intangibles, including payment intangibles and software and (k) as-extracted collateral as such terms may from time to time be defined in the Uniform Commercial Code. The security interest Borrower grants includes all accessions, attachments, accessories, parts, supplies and replacements for the Collateral, all products, proceeds and collections thereof and all records and data relating thereto. 5. RESTRICTIONS ON COLLATERAL TRANSFER. Borrower will not sell, lease, license or otherwise transfer (including by granting security interests, liens, or other encumbrances in) all or any part of the Collateral or Borrower’s interest in the Collateral without Secured Party’s written or electronically communicated approval, except that Borrower may sell inventory in the ordinary course of business on customary terms. Borrower may collect and use amounts due on accounts and other rights to payment arising or created in the ordinary course of business, until notified otherwise by Secured Party in writing or by electronic communication. 6. MAINTENANCE AND LOCATION OF COLLATERAL; INSPECTION; INSURANCE. Borrower must promptly notify Secured Party by written or electronic communication of any change in location of the Collateral, specifying the new location. Borrower hereby grants to Secured Party the right to inspect the Collateral at all reasonable times and upon reasonable notice. Borrower must: (a) maintain the Collateral in good condition; (b) pay promptly all taxes, judgments, or charges of any kind levied or assessed thereon; (c) keep current all rent or mortgage payments due, if any, on premises where the Collateral is located; and (d) maintain hazard insurance on the Collateral, with an insurance company and in an amount approved by Secured Party (but in no event less than the replacement cost of that Collateral), and including such terms as Secured Party may require including a Lender’s Loss Payable Clause in favor of Secured Party. Borrower hereby assigns to Secured Party any proceeds of such policies and all unearned premiums thereon and authorizes and empowers Secured Party to collect such sums and to execute and endorse in Borrower’s name all proofs of loss, drafts, checks and any other documents necessary for Secured Party to obtain such payments. 7. CHANGES TO BORROWER’S LEGAL STRUCTURE, PLACE OF BUSINESS, JURISDICTION OF ORGANIZATION, OR NAME. Borrower must notify Secured Party by written or electronic communication not less than 30 days before taking any of the following actions: (a) changing or reorganizing the type of organization or form under which it does business; (b) moving, changing its place of business or adding a place of business; (c) changing its jurisdiction of organization; or (d) changing its name. Borrower will pay for the preparation and filing of all documents Secured Party deems necessary to maintain, perfect and continue the perfection of Secured Party’s security interest in the event of any such change. 8. PERFECTION OF SECURITY INTEREST. Borrower consents, without further notice, to Secured Party’s filing or recording of any documents necessary to perfect, continue, amend or terminate its security interest. Upon request of Secured Party, Borrower must sign or otherwise authenticate all documents that Secured Party deems necessary at any time to allow Secured Party to acquire, perfect, continue or amend its security interest in the Collateral. Borrower will pay the filing and recording costs of any documents relating to Secured Party’s security interest. Borrower ratifies all previous filings and recordings, including financing statements and Page 3 of 5 SBA Form 1059 (09-19) Previous Editions are obsolete. Doc # L-01-5413218-01 SBA Loan #4007348010 Application #3303986708 DocuSign Envelope ID: 725AA93E-9C13-4B4F-82F9-2DD28E2E9568 |
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notations on certificates of title. Borrower will cooperate with Secured Party in obtaining a Control Agreement satisfactory to Secured Party with respect to any Deposit Accounts or Investment Property, or in otherwise obtaining control or possession of that or any other Collateral. 9. DEFAULT. Borrower is in default under this Agreement if: (a) Borrower fails to pay, perform or otherwise comply with any provision of this Agreement; (b) Borrower makes any materially false representation, warranty or certification in, or in connection with, this Agreement, the Note, or any other agreement related to the Note or this Agreement; (c) another secured party or judgment creditor exercises its rights against the Collateral; or (d) an event defined as a “default” under the Obligations occurs. In the event of default and if Secured Party requests, Borrower must assemble and make available all Collateral at a place and time designated by Secured Party. Upon default and at any time thereafter, Secured Party may declare all Obligations secured hereby immediately due and payable, and, in its sole discretion, may proceed to enforce payment of same and exercise any of the rights and remedies available to a secured party by law including those available to it under Article 9 of the UCC that is in effect in the jurisdiction where Borrower or the Collateral is located. Unless otherwise required under applicable law, Secured Party has no obligation to clean or otherwise prepare the Collateral for sale or other disposition and Borrower waives any right it may have to require Secured Party to enforce the security interest or payment or performance of the Obligations against any other person. 10. FEDERAL RIGHTS. When SBA is the holder of the Note, this Agreement will be construed and enforced under federal law, including SBA regulations. Secured Party or SBA may use state or local procedures for filing papers, recording documents, giving notice, enforcing security interests or liens, and for any other purposes. By using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax or liability. As to this Agreement, Borrower may not claim or assert any local or state law against SBA to deny any obligation, defeat any claim of SBA, or preempt federal law. 11. GOVERNING LAW. Unless SBA is the holder of the Note, in which case federal law will govern, Borrower and Secured Party agree that this Agreement will be governed by the laws of the jurisdiction where the Borrower is located, including the UCC as in effect in such jurisdiction and without reference to its conflicts of laws principles. 12. SECURED PARTY RIGHTS. All rights conferred in this Agreement on Secured Party are in addition to those granted to it by law, and all rights are cumulative and may be exercised simultaneously. Failure of Secured Party to enforce any rights or remedies will not constitute an estoppel or waiver of Secured Party’s ability to exercise such rights or remedies. Unless otherwise required under applicable law, Secured Party is not liable for any loss or damage to Collateral in its possession or under its control, nor will such loss or damage reduce or discharge the Obligations that are due, even if Secured Party’s actions or inactions caused or in any way contributed to such loss or damage. 13. SEVERABILITY. If any provision of this Agreement is unenforceable, all other provisions remain in effect. Page 4 of 5 SBA Form 1059 (09-19) Previous Editions are obsolete. Doc # L-01-5413218-01 SBA Loan #4007348010 Application #3303986708 DocuSign Envelope ID: 725AA93E-9C13-4B4F-82F9-2DD28E2E9568 |
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14. BORROWER CERTIFICATIONS. Borrower certifies that: (a) its Name (or Names) as stated above is correct; (b) all Collateral is owned or titled in the Borrower’s name and not in the name of any other organization or individual; (c) Borrower has the legal authority to grant the security interest in the Collateral; (d) Borrower’s ownership in or title to the Collateral is free of all adverse claims, liens, or security interests (unless expressly permitted by Secured Party); (e) none of the Obligations are or will be primarily for personal, family or household purposes; (f) none of the Collateral is or will be used, or has been or will be bought primarily for personal, family or household purposes; (g) Borrower has read and understands the meaning and effect of all terms of this Agreement. 15. BORROWER NAME(S) AND SIGNATURE(S). By signing or otherwise authenticating below, each individual and each organization becomes jointly and severally obligated as a Borrower under this Agreement. Denim.LA Reid Yeoman, Owner/Officer Date: 06.25.2020 {{0_SH}} Page 5 of 5 SBA Form 1059 (09-19) Previous Editions are obsolete. Doc # L-01-5413218-01 SBA Loan #4007348010 Application #3303986708 DocuSign Envelope ID: 725AA93E-9C13-4B4F-82F9-2DD28E2E9568 |
Exhibit 10.18
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NOTE Date Note Amount $ Borrower Lender JPMorgan Chase Bank, N.A. 1. PROMISE TO PAY. Borrower promises to pay to the order of Lender the N o t e A mount, plus interest on the unpaid principal balance at the Note Rate, and all other amounts required by this Note. 2. DEFINITIONS. “CARES Act” means the Coronavirus Aid, Relief, and Economic Security Act. “Deferral Period” means the six month period beginning on the date of this Note. "Loan" means the loan evidenced by this Note. “Maturity Date” means twenty-four (24) months from the date of this Note. “Note Rate” means an interest rate of 0.98% Per Annum and interest shall accrue on the unpaid principal balance computed on the basis of the actual number of days elapsed in a year of 360 days. “Per Annum” means for a year deemed to be comprised of 360 days. "SBA" means the Small Business Administration, an Agency of the United States of America. 3. CONDITIONS PRECEDENT TO FUNDING OF LOAN. Before the funding of the Loan, the following conditions must be satisfied: A. Lender has approved the request for the Loan. DocuSign Envelope ID: 68412346-E3C0-4A29-9495-F886B42C9325 4/5/2020 1347050 BAILEY 44, LLC |
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B. Lender has received approval from SBA to fund the Loan. 4. PAYMENT TERMS. Borrower will pay this Note as follows: A. No Payments During Deferral Period. There shall be no payments due by Borrower during the Deferral Period. B. Principal and Interest Payments. Commencing one month after the expiration of the Deferral Period, and continuing on the same day of each month thereafter until the Maturity Date, Borrower shall pay to Lender monthly payments of principal and interest, each in such equal amount required to fully amortize the principal amount outstanding on the Note on the last day of the Deferral Period by the Maturity Date. C. Maturity Date. On the Maturity Date, Borrower shall pay to Lender any and all unpaid principal plus accrued and unpaid interest plus interest accrued during the Deferral Period. This Note will mature on the Maturity Date. D. If any payment is due on a date for which there is no numerical equivalent in a particular calendar month then it shall be due on the last day of such month. If any payment is due on a day that is not a Business Day, the payment will be made on the next Business Day. The term "Business Day" means a day other than a Saturday, Sunday or any other day on which national banking associations are authorized to be closed. E. Payments shall be allocated among principal and interest at the discretion of Lender unless otherwise agreed or required by applicable law. Notwithstanding, in the event the Loan, or any portion thereof, is forgiven pursuant to the Paycheck Protection Program under the federal CARES Act, the amount so forgiven shall be applied to principal. F. Borrower may prepay this Note at any time without payment of any premium. 5. CERTIFICATIONS. Borrower certifies as follows: A. Current economic uncertainty makes this Loan necessary to support the ongoing operations of Borrower. B. Loan funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments. DocuSign Envelope ID: 68412346-E3C0-4A29-9495-F886B42C9325 |
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C. During the period beginning on February 15, 2020 and ending on December 31, 2020, Borrower has not and will not receive another loan under this program. D. Borrower was in operation on February 15, 2020 and (i) had employees for whom it paid salaries and payroll taxes, or (ii) paid independent contractors as reported on a 1099-Misc. 6. AGREEMENTS. Borrower understands and agrees, and waives and releases Lender, as follows: A. The Loan would be made under the SBA’s Paycheck Protection Program. Accordingly, it must be submitted to and approved by the SBA. There is limited funding available under the Paycheck Protection Program and so all applications submitted will not be approved by the SBA. B. Lender is participating in the Payroll Protection Program to help businesses impacted by the economic impact from COVID-19. However, Lender anticipates high volume and there may be processing delays and system failures along with other issues that interfere with submission of your application to SBA. Lender does not represent or guarantee that it will submit the application before SBA funding is no longer available or at all. You agree that Lender is not responsible or liable to you (i) if the application is not submitted to the SBA until after SBA stops approving applications, for any reason or (ii) if the application is not processed. You forever release and waive any claims against Lender concerning failure to obtain the Loan. This release and waiver applies to but is not limited to any claims concerning Lender’s (i) pace, manner or systems for processing or prioritizing applications, or (ii) representations by Lender regarding the application process, the Paycheck Protection Program, or availability of funding. This agreed to release and waiver supersedes any prior communications, understandings, agreements or communications on the issues set forth herein. C. Forgiveness of the Loan is only available for principal that is used for the limited purposes that qualify for forgiveness under SBA requirements, and that to obtain forgiveness, Borrower must request it and must provide documentation in accordance with the SBA requirements, and certify that the amounts Borrower is requesting to be forgiven qualify under those requirements. Borrower also understand that Borrower shall remain responsible under the Loan for any amounts not forgiven, and that interest payable under the Loan will not be forgiven but that the SBA may pay the Loan interest on forgiven amounts. D. Forgiveness is not automatic and Borrower must request it. Borrower is not relying on Lender for its understanding of the requirements for forgiveness such as eligible expenditures, necessary records/documentation, or possible reductions due to changes in number of employees or compensation. Rather Borrower will consult the SBA’s program materials. DocuSign Envelope ID: 68412346-E3C0-4A29-9495-F886B42C9325 |
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E. The application for this Loan is subject to review and that Borrower may not receive the Loan. The Loan also remains subject to availability of funds under the SBA’s Payment Protection Program, and to the SBA issuing an SBA loan number. 7. DEFAULT. Borrower is in default under this Note if Borrower: A. Fails to make a payment when due under the Note or otherwise fails to comply with any provision of this Note. B. Does not disclose, or anyone acting on its behalf does not disclose, any material fact to Lender or SBA. C. Makes, or anyone acting on its behalf makes, a materially false or misleading representation, attestation or certification to Lender or SBA in connection with Borrower’s request for this Loan under the CARES Act, or makes a false certification under paragraph 5 of this Note. D. Fails to comply with all of the provisions of this Note. E. Becomes the subject of a proceeding under any bankruptcy or insolvency law, has a receiver or liquidator appointed for any part of its business or property, or makes an assignment for the benefit of creditors. F. Reorganizes, merges, consolidates, or otherwise changes ownership or business structure without Lender's prior written consent. G. Becomes the subject of a civil or criminal action that Lender believes may materially affect Borrower's ability to pay this Note. 8. LENDER'S RIGHTS IF THERE IS A DEFAULT. Without notice or demand and without giving up any of its rights, Lender may: A. Require immediate payment of all amounts owing under this Note. B. Collect all amounts owing from Borrower. C. File suit and obtain judgment. 9. LENDER'S GENERAL POWERS. Without notice or Borrower's consent, Lender may incur expenses to collect amounts due under this Note and enforce the terms of this Note. Among other things, the expenses may include reasonable DocuSign Envelope ID: 68412346-E3C0-4A29-9495-F886B42C9325 |
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attorney's fees and costs. If Lender incurs such expenses, it may demand immediate repayment from Borrower or add the expenses to the principal balance; 10. GOVERNING LAW AND VENUE; WHEN FEDERAL LAW APPLIES. When SBA is the holder, this Note shall be interpreted and enforced under federal law, including SBA regulations. Lender or SBA may use state or local procedures for filing papers, recording documents, giving notice, foreclosing liens, and other purposes. By using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax, or liability. As to this Note, Borrower may not claim or assert against SBA any local or state law to deny any obligation, defeat any claim of SBA, or preempt federal law. If the SBA is not the holder, this Note shall be governed by and construed in accordance with the laws of the State of Ohio where the main office of Lender is located. MATTERS REGARDING INTEREST TO BE CHARGED BY LENDER AND THE EXPORTATION OF INTEREST SHALL BE GOVERNED BY FEDERAL LAW (INCLUDING WITHOUT LIMITATION 12 U.S.C. SECTIONS 85 AND 1831u) AND THE LAW OF THE STATE OF OHIO. Borrower agrees that any legal action or proceeding with respect to any of its obligations under this Note may be brought by Lender in any state or federal court located in the State of Ohio, as Lender in its sole discretion may elect. Borrower submits to and accepts in respect of its property, generally and unconditionally, the non-exclusive jurisdiction of those courts. Borrower waives any claim that the State of Ohio is not a convenient forum or the proper venue for any such suit, action or proceeding. The extension of credit that is the subject of this Note is being made by Lender in Ohio. 11. SUCCESSORS AND ASSIGNS. Under this Note, Borrower includes its successors, and Lender includes its successors and assigns. 12. GENERAL PROVISIONS. A. Borrower must sign all documents necessary at any time to comply with the Loan. B. Borrower’s execution of this Note has been duly authorized by all necessary actions of its governing body. The person signing this Note is duly authorized to do so on behalf of Borrower. C. This Note shall not be governed by any existing or future credit agreement or loan agreement with Lender. The liabilities guaranteed pursuant to any existing or future guaranty in favor of Lender shall not include this Note. The liabilities secured by any existing or future security instrument in favor Lender shall not include this Note. D. Lender may exercise any of its rights separately or together, as many times and in any order it chooses. Lender may delay or forgo enforcing any of its rights without giving up any of them. E. Borrower may not use an oral statement of Lender or SBA to contradict or alter the written terms of this Note. F. If any part of this Note is unenforceable, all other parts remain in effect. DocuSign Envelope ID: 68412346-E3C0-4A29-9495-F886B42C9325 |
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G. To the extent allowed by law, Borrower waives all demands and notices in connection with this Note, including presentment, demand, protest, and notice of dishonor. H. Borrower's liability under this Note will continue with respect to any amounts SBA may pay Bank based on an SBA guarantee of this Note. Any agreement with Bank under which SBA may guarantee this Note does not create any third party rights or benefits for Borrower and, if SBA pays Bank under such an agreement, SBA or Bank may then seek recovery from Borrower of amounts paid by SBA. I. Lender reserves the right to modify the Note Amount based on documentation received from Borrower. 13. ELECTRONIC SIGNATURES. Borrower’s electronic signature shall have the same force and effect as an original signature and shall be deemed (i) to be "written" or "in writing" or an “electronic record”, (ii) to have been signed and (iii) to constitute a record established and maintained in the ordinary course of business and an original written record when printed from electronic files. Such paper copies or "printouts," if introduced as evidence in any judicial, arbitral, mediation or administrative proceeding, will be admissible as between the parties to the same extent and under the same conditions as other original business records created and maintained in documentary form. 14. BORROWER’S NAME AND SIGNATURE: Borrower: By:________________________________________________ Printed Name:____________________________________ Title:_____________________________________ Date Signed: ______ DocuSign Envelope ID: 68412346-E3C0-4A29-9495-F886B42C9325 Joe Traboulsi BAILEY 44, LLC Chief Operating Officer 4/5/2020 |
Exhibit 10.19
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Initials: _______ _________ Landlord Tenant Page 1 of 11 TRIPLE NET COMMERCIAL LEASE AGREEMENT This commercial lease is entered into between 3926 Magazine Street Properties, LLC (hereinafter referred to as “Landlord”) and Harper & Jones LLC, an entity organized and existing under the laws of the State of Texas (hereinafter referred to as “Tenant”), and Drew Thomas Jones, who appears herein as guarantor of the obligations of the Tenant, relating to that certain commercial premises having the municipal address of 3932 Magazine Street, New Orleans, Louisiana 70115, (the "Leased Premises"), on the following terms and conditions: 1. INITIAL TERM AND OPTION TERMS: The Initial Term of this Lease shall be for a period of three years and ninety days, commencing July 1, 2018 and ending at midnight, September 30, 2021. If Tenant is currently not in material default under the provisions of this Lease, Tenant shall have the option to renew this Lease for two (2) additional Option Terms of three (3) years each if Tenant gives Landlord written notice of its intention to renew at least one hundred twenty (120) days prior to the expiration of the Initial Term or the First Option Term of this Lease, as applicable. Although the initial term of this lease does not commence until July 1, 2018, Landlord has agreed to allow Tenant to occupy the leased premises immediately upon performance of the following: 1) delivery of executed lease, 2) payment of the first and last month’s rent, 3) payment of the security deposit, and 4) payment of the first month’s taxes and insurance. Said occupancy shall be subject to the terms and conditions of this lease. Subject to Tenant’s renewal option rights as defined above, if either party desires the Lease to terminate at its expiration date, a thirty (30) day written notice shall be given to the other party. If no notice is given, the Lease shall not be re-conducted for a specific term, except that it shall continue a month to month basis. In such event, either party may terminate the Lease at the end of any month by giving a thirty (30) day written notice to the other party. 2. BASE RENT: Beginning on October 1, 2018 Tenant shall pay monthly rental in the amount of $3,000.00. Rent shall be payable in advance on the first (1st) day of each calendar month during the entire Initial Term of this Lease and the Option Terms, if exercised. If Tenant exercises its rights to renew Lease, Base Rent for the First Option Term of this lease shall be $3,180.00 per month, and Base Rent for the Second Option Term shall be at then Market Rate, to be agreed upon by Landlord and Tenant. Rent shall be payable to Landlord at 3926 Magazine Street, New Orleans, LA 70115. Landlord may from time to time designate other places for the payment of the rent by written notice to Tenant. 3. LATE CHARGES: If any portion of the rent is not paid by the fifth (5th) day of each month, Tenant shall be liable for a late charge equal to five percent (5%) of the unpaid rent. DocuSign Envelope ID: CF34738C-2DF5-4E6D-861A-E373C468AB8F |
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Initials: _______ _________ Landlord Tenant Page 2 of 11 4. USE OF LEASED PREMISES: The Leased Premises shall consist of the entirety of the space located at 3932 Magazine Street, approximately 1,015 square feet, to be used as a retail clothing shop, or any other use approved by Landlord in writing. Landlord agrees that it shall not operate or engage in any business which derives more than 10% of its income from the sale of men’s clothing or dress shirts in the 3900 block of Magazine Street. Likewise, Landlord will not lease to another tenant to operate a business which derives more than 10% of its income from the sale of men’s clothing or dress shirts in the 3900 block of Magazine Street. This prohibition extends only to properties owned or controlled by Landlord. Additionally, Tenant will have the non exclusive use of the courtyard on the side of the Leased Premises, which it will share with the Landlord and its guests. Tenant may place outdoor furniture and seating in the courtyard, provided that it complies with all municipal ordinances and regulations. Tenant shall also have the use of two reserved parking spaces, No. 1 and No. 2. Tenant shall maintain current, at Tenant’s expense, all occupancy licenses and permits which are required to operate a retail establishment. Tenant shall not use any portion of the Leased Premises for any purpose that is unlawful or in violation of any zoning ordinances or any other laws nor for any purpose that tends to injure or depreciate the property or create a nuisance or interfere with, annoy or disturb any other persons. Nothing shall be placed or done on the premises by Tenant which shall cause forfeiture of any insurance. Any violation of this section shall permit the Landlord at its option to immediately cancel this Lease upon written notice to Tenant. 5. ALTERATIONS: Landlord shall: improve exterior courtyard in its sole discretion; install French style double doors with glass (or similar) to replace solid double doors currently installed on courtyard side of Leased Premises and reinstall door or window (that is currently boarded up) on courtyard side of Leased Premises. Tenant shall improve the bathroom and kitchen area of the leased premises, at Tenant’s expense and subject to Landlord’s written approval. In lieu of a Tenant Improvement Allowance, Landlord shall provide Tenant with a three month abatement of rent only. Taxes and Insurance shall not be abated. Tenant shall make no other alterations or improvements to the Leased Premises without advance written permission of Landlord. Tenant shall provide Landlord with a detailed description of any such alterations or improvements and Tenant shall not commence work until Landlord has approved the work in writing. Should any addition or alteration made by Tenant cause any increase in the insurance rate on the premises, Tenant shall pay such increase in addition to the agreed monthly rental amount. Any such additions or changes made to the premises by Tenant shall become the property of Landlord, at the termination of this Lease, without any right of reimbursement therefor. Tenant shall promptly remove any items belonging to Tenant and repair or replace in a like condition the Leased Premises on or before the expiration of this Lease, or any extension or renewal thereof. Any alterations or additions made by Tenant to the Leased Premises shall be performed in a good and workmanlike manner, in compliance with all governmental requirements and permits. Tenant shall secure sufficient builders risk, liability and workers compensation insurance, naming Landlord as an additional insured and provide proper evidence of such insurance coverage to DocuSign Envelope ID: CF34738C-2DF5-4E6D-861A-E373C468AB8F |
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Initials: _______ _________ Landlord Tenant Page 3 of 11 Landlord prior to commencement of any work. Tenant shall indemnify and hold Landlord harmless from all claims, liabilities, obligations and expenses, including attorney fees, arising from or in any way connected with such work. Tenant shall only use a licensed contractor for any such work; Tenant warrants that the contractor and all subcontractors, laborers and suppliers shall be paid in a timely manner; and Tenant hereby indemnifies Landlord (including attorney fees) against liens for any work performed, material furnished, or obligations incurred by or on behalf of Tenant, Tenant shall keep the premises free from any such liens, and Tenant shall discharge or bond any lien filed within ten (10) days after the filing thereof. 6. SECURITY DEPOSIT: Upon execution of this Lease, Tenant shall pay to Landlord a security deposit in the amount of $3,000.00 to be held for the performance by Tenant of Tenant's covenants and obligations under this Lease, it being expressly understood that the deposit shall not be considered at any time an advance payment of rental, last month's rent, a measure of Landlord's damage in case of default by Tenant or breach by Tenant of Tenant's covenants under this Lease. Upon the occurrence of any event of default by Tenant, Landlord at its option may use such deposit to the extent necessary to apply toward any arrears of rent, or to apply toward any other damage, injury or expense caused to Landlord by such event of default. Landlord shall have the right to retain and expend such deposit toward the cost of cleaning and repairing the premises if Tenant shall fail to deliver up such premises at the termination of this Lease in the condition delivered, less ordinary wear and tear. Tenant shall make actual delivery of the keys to Landlord. Failure to make delivery shall result in a re-key charge of all locks located on the Leased Premises. 7. RIGHT OF ENTRY: Landlord, its employees, agents, successors or assigns shall have the right to enter the premises at all reasonable times for the purpose of inspection, or in order to make any repairs which may be necessary for the preservation of the property. If locks are changed at any time during the term of this Lease, Landlord or its agent shall be supplied with current keys and/or alarm codes by Tenant. Landlord reserves the right to post "For Lease" signs and show the Leased Premises to prospective tenants one hundred twenty (120) days preceding the expiration of the Lease. Landlord also reserves the right to post "For Sale" signs and show the Leased Premises to prospective purchasers at any time during the Lease. 8. DELIVERY OF PREMISES: Tenant assuming possession of the Leased Premises constitutes an admission that premises have been examined and found to be in good and safe condition and that Tenant accepts the premises in "AS IS" condition; assumes responsibility for the condition of the Leased Premises in accordance with the provisions of LA-R.S. 9:3221; agrees to keep the premises in good condition during the term of this Lease, and any extension or renewal thereof, at Tenant's expense; agrees to keep the premises broom clean and free from dirt, trash and debris during the entire term of this Lease, or any extensions or renewals thereof; and agrees to return the premises to Landlord in the same good and clean condition at the termination of this Lease, normal wear and tear excepted. Tenant shall make actual delivery of the keys to Landlord. DocuSign Envelope ID: CF34738C-2DF5-4E6D-861A-E373C468AB8F |
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Initials: _______ _________ Landlord Tenant Page 4 of 11 9. CONDITION AND UPKEEP OF PREMISES: Tenant agrees not to store merchandise or leave trash outside the Leased Premises. All trash shall be kept in containers. Should Tenant be in default of the requirements of this provision, Landlord may, after written notice to Tenant, remedy such default at Tenant's expense, and such expense shall be treated as additional rental due under this Lease by Tenant. 10. MAINTENANCE, REPAIRS AND REPLACEMENTS: Landlord shall only be responsible for maintaining the slab, foundation and roof of the Leased Premises. Landlord has no other obligations whatsoever for maintenance or repairs of the Leased Premises of any nature whatsoever, either ordinary or extraordinary, during the term of this Lease except that landlord will be responsible for any HVAC repair/replacement above $500 per calendar year. Tenant assumes full and complete responsibility for all other repairs, replacements and maintenance of the Leased Premises, including but not limited to painting, wall covering, floor covering and all non-structural elements of the Leased Premises and any appurtenances, structures or improvements thereon. If Tenant refuses or neglects to perform maintenance or make repairs or replacements, or if Landlord is required to make repairs by reason of Tenant's negligent acts or omissions, Landlord shall have the right, but not be obligated, to perform maintenance or make such repairs or replacements on behalf of and for the account of Tenant; in such event, such work shall be paid for by Tenant as additional rent promptly upon receipt of a bill. All maintenance, repairs and replacements for which Tenant is obligated hereunder shall be approved by Landlord prior to their commencement and shall be performed in a good and workmanlike manner, in compliance with all governmental requirements and permits. Tenant shall secure sufficient builders risk, liability and workers compensation insurance, naming Landlord as an additional insured and provide proper evidence of such insurance coverage to Landlord prior to commencement of any work. Tenant shall indemnify and hold Landlord harmless from all claims, liabilities, obligations and expenses, including attorney fees, arising from or in any way connected with such work. Tenant shall only use a licensed contractor for any such work; Tenant warrants that the contractor and all subcontractors, laborers and suppliers shall be paid in a timely manner; and Tenant hereby indemnifies Landlord (including attorney fees) against liens for any work performed, material furnished, or obligations incurred by or on behalf of Tenant, Tenant shall keep the premises and the Building free from any such liens, and Tenant shall discharge or bond any lien filed within ten (10) days after the filing thereof. 11. SERVITUDES: Landlord shall have the right to grant servitudes and easements in areas of the Leased Premises for the installation of utilities, provided that the use of such servitude and easement for such purposes do not interfere substantially with the operation of Tenant's business. The Tenant shall not be entitled to any compensation or abatement of rent if the use of such servitude or easement does not interfere substantially with the operation of the Tenant's business. 12. FIRE AND CASUALTY: Should the premises be wholly destroyed, or materially damaged so as to render it wholly unfit for occupancy, by fire or other unforeseen event not due to any fault or neglect of Tenant or its agents, employees, contractors, patrons or visitors, then this Lease shall DocuSign Envelope ID: CF34738C-2DF5-4E6D-861A-E373C468AB8F |
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Initials: _______ _________ Landlord Tenant Page 5 of 11 terminate and end, and both Tenant and Landlord shall be relieved of any further responsibility hereunder for the remaining unexpired term of this Lease. In that event, any advance rent shall be pro rated and returned to Tenant. Should the premises, through no fault or neglect of Tenant or its agents, employees, contractors, patrons or visitors, only be partially destroyed or partially damaged by fire or other casualty so as to render the premises untenantable, the rent herein shall abate thereafter until such time as the premises are made tenantable by Landlord or Landlord may elect at its sole option to terminate the Lease. If only a portion of the premises is untenantable, a pro rata abatement of the rent shall be made. 13. INDEMNITY: Tenant agrees to indemnify and save and hold forever harmless the Landlord against all suits, claims, damages and actions (including attorney's fees and costs and expenses of litigation), including but not limited to personal injury, bodily injury, property damage, contamination by hazardous substances, environmental damage or otherwise, occasioned, arising out of, or in any manner related to the occupancy of the Leased Premises, or any business or operation conducted thereupon by Tenant, or any of Tenant's agents, servants or employees or otherwise related in any way to Tenant's use or occupancy of the Leased Premises. This obligation of indemnity and defense shall extend to and encompass any and all suits, claims, demands, actions and causes of action of whatever kind or character whatsoever, including, but not limited to, claims or suits alleging the fault, negligence or liability of Landlord, either solely, or in conjunction with others. The Tenant's obligations under this paragraph shall be included with the insurance required to be carried by Tenant under the "Tenant’s Insurance" paragraph herein. 14. EXPENSES: Tenant shall pay all expenses pertaining to the Leased Premises, including but not limited to, utilities, telephone, internet, security monitoring, water, ground maintenance, sewer user fees, trash and garbage pickup, janitorial services and other fees, charges and costs arising out of Tenant's use of the Leased Premises or incurred by or on behalf of Tenant. 15. DEFAULT BY TENANT: Should Tenant at any time violate any of the conditions or covenants of this Lease, or discontinue the use of the premises for the purpose for which they are rented, or fail to pay the rent punctually, as stipulated herein; or upon the adjudication of Tenant in bankruptcy, the appointment of a receiver for Tenant, or the filing of bankruptcy, receivership or respite petition by or for Tenant; or upon Tenant's suspension, failure or insolvency; or should Tenant abandon the premises; and should any such violation continue for a period of fifteen (15) days after written notice has been given Tenant, then, at the option of Landlord, the rent for the whole unexpired term of this Lease shall at once mature and become immediately due and payable; and Landlord shall have the further option to at once demand the entire rent for the whole term, or to immediately cancel this Lease, or to proceed for past due installments only, reserving Landlord's rights to later proceed for the remaining installments, all without putting Tenant in default, Tenant to remain responsible for all damages or losses suffered by Landlord, Tenant hereby assenting thereto and expressly waiving any legal notices to vacate the premises. Landlord shall have the right to evict Tenant in accordance with the provisions of Louisiana Code DocuSign Envelope ID: CF34738C-2DF5-4E6D-861A-E373C468AB8F |
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Initials: _______ _________ Landlord Tenant Page 6 of 11 of Civil Procedure, Articles 4701-4735, without forfeiting any of Landlord's rights under this paragraph or under the other terms of this Lease and Landlord may at the same time or subsequently sue for any money due or to enforce any other rights which Landlord may have. All rights and remedies of Landlord under this Lease shall be cumulative and none shall exclude any other rights or remedies allowed by law. 16. WAIVER OF NOTICE: Tenant specifically waives the five (5) day notice to vacate as set forth in the Revised Civil Code of the State of Louisiana and under the Louisiana Code of Civil Procedure, including C.C.P. Article 4701, as they may be amended. 17. LANDLORD’S TAXES AND INSURANCE: Tenant shall be responsible for: (i) all real property taxes assessed against the land and building comprising the Leased Premises, and (ii) all insurance premiums charged for the property insurance and fire and extended coverage insurance policy carried by Landlord covering the building and other improvements forming a part of the Leased Premises, which amounts shall be due and payable on a monthly basis as additional rent. The taxing authority and the insurance companies shall be paid directly by Landlord when due and Landlord shall send a bill to Tenant for the property taxes and insurance premiums paid on Tenant’s behalf. The current taxes and insurance, as of the time of the creation of this lease, are $1,088.00 per month, but that amount will vary. Property taxes and insurance for the year 2018 shall be prorated. If the termination date of this Lease occurs prior to December 31st of any year, Landlord shall refund to Tenant prorated property taxes for the year the Lease is terminated. 18. ATTORNEY'S FEES AND EXPENSES: In the event of litigation or other proceeding to enforce performance of any terms of this Lease or any payment obligations under this Lease, the prevailing party shall be entitled to recover all attorney fees and costs that may be reasonably incurred as a result of such litigation or other proceeding from the losing party. 19. LANDLORD NOT LIABLE: Landlord shall not be liable or responsible to Tenant, its employees, invitees, licensees, permittees or other for any loss of any kind, damage or inconvenience to any property or person occasioned by theft, fire, act of God, public enemy, fuel, insurrection, vandalism, sabotage, war, court order, requisition, or order of Government body or authority unless attributable to Landlord's negligence or fault; or for any loss, damage or inconvenience which may arise through repair or alteration of any part of the Leased Premises, failure to make any such repairs, malfunction or failure of any equipment or component, or interruption of services to the Leased Premises, provided that Landlord is acting in a prompt and diligent manner to remedy all such deficiencies. 20. CONDEMNATION: Landlord and Tenant mutually covenant and agree that if the whole or any part of the Premises shall be taken by Federal, State, Parish, City, or other authority for public use, or under any statute or by right of eminent domain or expropriation, Tenant shall not be entitled to any part of any award that may be made for such taking, nor for any damages, except that portion of any award or damages paid, which is directly attributable to leasehold improvements installed and paid for by Tenant. In the event of partial taking, rent shall be DocuSign Envelope ID: CF34738C-2DF5-4E6D-861A-E373C468AB8F |
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Initials: _______ _________ Landlord Tenant Page 7 of 11 reduced as of the date of such taking by a percentage equal to the percentage obtained by reletting the space taken to the total space leased hereby, and if such taking renders the remainder of the Premises untenantable for Tenant's purposes, Tenant shall have the option, to be exercised by notice in writing to Landlord within sixty (60) days after said taking, of terminating this Lease. Such termination shall take place not later than thirty (30) days after receipt of such notice by Landlord. Landlord shall notify Tenant in writing within ten (10) days of the receipt of official notice of commencement of condemnation proceedings. 21. LIMIT ON LIABILITY OF LANDLORD: Under no circumstances whatsoever shall Landlord ever be liable hereunder for consequential or special damages; and all liability of Landlord to Tenant for any default by Landlord under the terms of this Lease shall be limited to the proceeds of sale on execution of the interest of Landlord in the Leased Premises; it being stipulated and agreed that Landlord shall not be personally liable for any deficiency. This clause shall not be deemed to limit or deny any remedies which Tenant may have, in the event of default by Landlord hereunder, which do not involve the personal liability of Landlord. 22. SIGNS: Tenant must obtain Landlord’s prior written approval of any signs posted or placed on the Leased Premises, which approval will not be unreasonably withheld. All signage shall be installed at Tenant’s expense, and shall comply with all local and city ordinances and regulations. Upon termination of this Lease, Tenant shall remove any sign, advertisement or notice painted on or affixed to the Leased Premises and restore the place it occupied to the condition in which it existed as of the commencement date of this Lease. Upon Tenant's failure to do so, Landlord may do so at Tenant's expense. 23. ASSIGNMENT AND SUBLEASE: Tenant shall not assign this Lease or sublet the Premises or any part thereof without the prior written consent of Landlord, which consent shall not be unreasonably withheld (based upon financial, business and other reasonable considerations). In no event shall any such Assignment or Sublease ever release Tenant or any Guarantor from any obligation hereunder unless Landlord consents in writing to such release. In the event of any such Assignment or Sublease, the assignee’s or subtenant’s business shall be in accordance with the use set forth in Section 4 of the Lease and the assignee or subtenant shall assume all obligations under this Lease. 24. TENANT’S INSURANCE: It is agreed that the Landlord shall be under no obligation to maintain insurance of any kind or amount on the movable property of Tenant or for any property of or personal injury liability for Tenant. For the mutual protection of Landlord and Tenant, Tenant at its sole expense agrees to carry and maintain general public liability insurance covering the Leased Premises and Tenant’s use thereof and to furnish Landlord a certificate of insurance issued by an admitted company authorized to do business in the State of Louisiana in the minimum coverage amounts of $1,000,000.00 each person, $2,000,000.00 each occurrence and $1,000,000.00 property damage insuring against liability on the then prevailing Louisiana Standard Owner's Landlords and Tenants policy forms against liability occurring in, on or around the premises with a deductible no greater than $5,000.00 and with appropriate additional insured clauses in favor of Landlord as its interests may appear. All policies of insurance shall contain a provision that the insurer will give Landlord at least ten (10) days notice in writing in advance of DocuSign Envelope ID: CF34738C-2DF5-4E6D-861A-E373C468AB8F |
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Initials: _______ _________ Landlord Tenant Page 8 of 11 any material change, cancellation, termination, lapse, or any reduction of any insurance coverage. Tenant shall furnish the certificate of insurance to Landlord upon execution of this Lease and each renewal period thereafter. Tenant shall further be responsible for securing its own contents insurance coverage and Landlord shall have no liability whatsoever for any damage to Tenant's contents ("Contents" shall include any and all Tenant property including without limitation, furniture, fixtures, equipment and inventory). Tenant shall put nothing in the Leased Premises nor do anything which would forfeit the Landlord's insurance or increase the rate charged for such insurance. Should any action be taken by Tenant which results in an increase in the rate of the premiums charged, then Tenant shall pay the additional premiums caused by the increase rate. If the Tenant's occupancy or business prevents Landlord from securing proper insurance, then Tenant hereby grants to Landlord the option of either: a) requiring the immediate termination of such use; or b) considering such use a default entitling Landlord to all rights set forth previously. In addition, Tenant shall at Tenant's expense, maintain a worker's compensation policy in the minimum coverage necessary to meet the requirements of the Louisiana Worker's Compensation Act. 25. SUBORDINATION: This Lease is subject and subordinate to any mortgages or other encumbrance which now or hereafter encumber or affect the Leased Premises, and to all renewals, modifications, consolidations, replacements and extensions thereof. This clause shall be self-operative and no further instrument of subordination need be required by a mortgagee or Landlord. In confirmation of such subordination, however, Tenant shall, at Landlord's request, promptly execute any appropriate certificate or instrument that Landlord may request. Tenant hereby constitutes and appoints Landlord as Tenant's attorney-in-fact to execute any such certificate or instrument for and on behalf of Tenant. In the event of the enforcement by the holder of any such instrument of the remedies provided for by law or by such mortgage or other encumbrance, Tenant will, upon request of any other person or party succeeding to the interest of Landlord as a result of such enforcement, automatically become the Tenant of such successor in interest without change in the terms or other provisions of this Lease. Upon request by such successor in interest, Tenant shall execute and deliver an instrument or instruments confirming the attornment herein provided for. 26. ESTOPPEL CERTIFICATES: Tenant agrees, at any time and from time to time, upon not less than five (5) days' prior written notice by Landlord to execute, acknowledge and deliver to Landlord or to such person(s) as may be designated by Landlord, a statement in writing (i) certifying that Tenant is in possession of the Premises, has unconditionally accepted the same and is currently paying rents reserved hereunder, (ii) certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that this Lease is in full force and effect as modified and stating the modifications), (iii) stating the dates to which the rent and other changes hereunder have been paid by Tenant and (iv) stating whether or not to the best knowledge of Tenant, Landlord is in default in the performance of any covenant, agreement or condition contained in this Lease, and, if so, specifying each such default of which notices to Landlord should be sent. Any such statement delivered pursuant hereto may be relied upon by any owner, prospective owner, prospective purchaser, mortgagee or prospective mortgagee of the Building(s) or of Landlord's interest therein, or any prospective assignee of any such mortgagee. DocuSign Envelope ID: CF34738C-2DF5-4E6D-861A-E373C468AB8F |
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Initials: _______ _________ Landlord Tenant Page 9 of 11 27. RECORDATION: This Lease shall not be placed of record. However, at the request of either party, the other shall enter into a "Notice of Lease" for purposes of recordation, which notice shall fairly reflect the nature and term of this Lease and the property affected, but without designating the rent payments. 28. ASSIGNMENT BY LANDLORD: Landlord shall have the right to transfer and assign, in whole or in part, all of Landlord's rights and obligations hereunder, as well as the Leased Premises and the building and property referred to herein, and in such event the Landlord shall have no further liability or obligation hereunder. 29. PERSONAL PROPERTY: Tenant may place furniture and other personal property in the courtyard areas of the Leased Premises at the time of the execution of this Lease, but without any warranty as to fitness or condition. All personal property owned by Tenant remaining in the Premises upon termination of this lease shall be considered to have been abandoned by Tenant and Landlord may dispose of it in any manner Landlord wishes. 30. COMPLIANCE WITH LAWS: Tenant shall, at Tenant's sole expense, comply with all laws, rules, regulations, requirements and recommendations of all parish, municipal, state, federal and other applicable governmental authorities now or hereafter in force, including, without limitation, the Americans with Disabilities Act of 1990 ("ADA"), as they relate to the Premises and the conduct of Tenant's business therein. To the extent required by the ADA, Tenant at its sole expense, shall place appropriate signage (with respect to the Premises) on the interior of the Premises, and with Landlord's prior written consent, on the exterior of the Premises. Tenant agrees to indemnify Landlord for all damages, losses, fines and expenses, including reasonable attorney's fees, incurred by Landlord as a result of Tenant's failure to comply with any provision of this paragraph. 31. ENVIRONMENTAL COMPLIANCE: Tenant shall not cause or permit the presence, use disposal, storage, or release of any hazardous or environmentally unsafe substances on or in the Leased Premises. Tenant shall not do, or allow anyone else to do, anything affecting the Leased Premises in violation of any state or federal Environmental laws and regulations. Tenant warrants that the Leased Premises shall remain environmentally safe and free from contamination of hazardous substances during and subsequent to the term of this Lease, arising from or in any way related to Tenant's operation and use of the Leased Premises, including but not limited to Tenant's production, use and handling of auto paints, solvents and related products. Tenant agrees to indemnify and hold Landlord harmless against all claims and liabilities arising from Tenant's breach of this covenant, including attorney's fees and other legal costs that may be incurred by Landlord. 32. NUISANCE: Tenant agrees to conduct its business and control its agents, employees, invitees and visitors in such manner as not to create any nuisance. DocuSign Envelope ID: CF34738C-2DF5-4E6D-861A-E373C468AB8F |
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Initials: _______ _________ Landlord Tenant Page 10 of 11 33. CONFLICTS: If there is any conflict between the printed portions and the typewritten or handwritten portions, the typewritten or handwritten portion shall prevail. 34. PARTIAL INVALIDITY: If any provision of this Lease or application thereof to any person or circumstance shall, to any extent, be invalid, the remainder of this Lease or the application of such provision to persons or circumstances other than those to which it is held invalid shall not be effected thereby and each provision of this Lease shall be valid and enforced to the fullest extent permitted by law. 35. BINDING EFFECT: This Lease, and each and every term and provision hereof, shall be for the benefit of and be binding upon the parties hereto, and each of them, and their respective heirs, successors, executors, administrators and assigns. 36. INTERPRETATION: Any ambiguity in the provisions of this Lease shall be interpreted without regard to which party prepared this Lease. 37. ADDITIONAL PROVISIONS OF LEASE: All terms and conditions of this Lease are included herein and no verbal agreements are to be considered as a part of this transaction. This Lease may not be altered, changed or amended, except by an instrument in writing signed by both parties hereto. 38. GOVERNING LAW: This Lease is to take effect in Louisiana, and is to be governed and controlled by the laws of Louisiana. 39. SOLIDARY OBLIGATION OF GUARANTOR AND TENANT: Drew Thomas Jones (“Guarantor”) personally guarantees all of Tenant’s obligations and covenants under this Lease during the Initial Term and the Option Terms, if exercised. Guarantor shall be bound “in solido” with Tenant for the full and faithful performance of all obligations and covenants of Tenant under this Lease. 40. SURVIVAL OF RENT: The covenant to pay any rent or additional rent shall survive that termination of this Lease. 41. SOLIDARY OBLIGATION: In the event that there be more than one person named as Tenant herein, each Tenant binds himself, jointly, severally and in solido, with all the others for the payment of the rent, and the performance of all of the covenants, agreements, stipulations and conditions herein contained, in accordance with the terms hereof. 42. NOTICES: Any notice required or permitted to be given hereunder shall be in writing and may be served via U.S. certified mail return receipt, hand delivery or overnight courier addressed to Landlord and Tenant, respectively, at the addresses set forth below, as well as notice to the Tenant at the address of the Premises (if different from the address stated below). Such notices shall be deemed served when received or three days after placing in the United States mail, postage prepaid, by certified mail return receipt requested. The addresses of the parties are: DocuSign Envelope ID: CF34738C-2DF5-4E6D-861A-E373C468AB8F |
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Initials: _______ _________ Landlord Tenant Page 11 of 11 TO LANDLORD: Mr. Alex Beard 3926 Magazine Street Properties, LLC 3926 Magazine Street New Orleans LA 70115 TO TENANT: Harper & Jones LLC AND GUARANTOR 3932 Magazine Street New Orleans LA 70115 And Mr. Drew Thomas Jones 2260 5th Avenue Fort Worth TX 76110 43. BROKERAGE COMMISSION. Landlord agrees to pay a commission to Beau Box Commercial Real Estate as per a separate commission agreement. THUS DONE AND PASSED by Tenant, Guarantor and Landlord, in duplicate originals, in the presence of the undersigned competent witnesses. WITNESSES: TENANT: __________________________ HARPER & JONES, LLC ___________________________ BY: ___________________________ ___________ Drew Thomas Jones, Manager date WITNESSES: GUARANTOR: __________________________ ______________________________ _________ DREW THOMAS JONES date _________________________ WITNESSES LANDLORD: __________________________ 3926 MAGAZINE STREET PROPERTIES, LLC _________________________ BY: ____________________________ _________ Alexander Beard, Manager date DocuSign Envelope ID: CF34738C-2DF5-4E6D-861A-E373C468AB8F |
Exhibit 10.20
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Exhibit 10.21
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Exhibit 10.22
J. Elmer Turner, REALTORS, Inc
NORTH TEXAS COMMERCIAL ASSOCIATION OF REALTORS®
COMMERCIAL LEASE AGREEMENT
between
Pasha & Sina, Inc.
(Landlord)
and
Harper & Jones, LLC
(Tenant)
|
TABLE OF CONTENTS
Article
1. | Defined Terms | 2 |
2. | Lease and Term | 8 |
3. | Rent and Security Deposit | 9 |
4. | Taxes | 10 |
5. | Insurance and Indemnity | 10 |
6. | Use of Premises | 12 |
7. | Property Condition, Maintenance, Repairs and Alterations | 13 |
8. | Damage or Destruction | 16 |
9. | Condemnation | 16 |
10. | Assignment and Subletting | 17 |
11. | Default and Remedies | 17 |
12. | Landlord’s Contractual Lien | 20 |
13. | Protection of Lenders | 21 |
14. | Environmental Representations and Indemnity | 22 |
15. | Professional Service Fees | 23 |
16. | Miscellaneous and Additional Provisions | 25 |
J. Elmer Turner REALTORS, Inc. 2626 Cole Avenue Dallas TX 75204 | Phone: (214) 954-1221 | Fax: | 2736 Routh St. |
Logan Turner
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COMMERCIAL LEASE AGREEMENT
[Throughout this Lease, complete all blanks and check all boxes that apply. Blanks not completed and boxes not checked do not apply.]
For good and valuable consideration, the parties to this Commercial Lease Agreement (the “Lease”) agree as follows:
ARTICLE ONE
DEFINED TERMS
As used in this Lease, the terms set forth in this Article One have the following meanings:
1.01 | Effective Date: The last date beneath the signatures of Landlord and Tenant on this Lease. |
1.02 | Landlord: | Pasha & Sina, Inc. |
Address: | 15175 Quorum Dr |
Addison, Texas 75001 |
Telephone: | (214)598-2191 | Fax: |
Email: | pashaheidari@sbcglobal.net |
1.03 | Tenant: | Harper & Jones, LLC |
Address: | 2736 Routh St |
Dallas, TX 75204 |
Telephone: | (972)564-8336 | Fax: |
Email: |
1.04 | Premises [include Suite or Unit No., if applicable]: | 2736 Routh Street |
A. Building Name: | 2736 Routh Street |
B. Street address: | 2736 Routh St |
Dallas, TX 75201-1970 |
in | Dallas | County, Texas. |
C. Legal description: The property on which the Premises are situated is described as; BEING a building on Part of Lot 7, Block 3/955 in the Ahab Bowen Homestead Addition to the City of Dallas, save and except the small office addition attached to the rear of the main building.
and may be more particularly described on the attached Exhibit “A”, Survey or Legal Description (the “Property”). The term “Property” includes the land described on Exhibit “A”, and any improvements on the land (including the Premises).
D. Floor Plan or Site Plan: Being a floor area of approximately 2,860 square feet, or a land area of approximately n/a square feet or approximately n/a acres, and being more particularly shown in outline form on the attached Exhibit “B”, Floor Plan or Site Plan.
COMMERCIAL LEASE AGREEMENT - Page 2
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E. Tenant’s Pro Rata Share: 94.000 %.
1.05 | Term: 3 years and four months beginning on See Additional Provisions , (the “Commencement Date”) and ending on June 30 , 2022 (the “Expiration Date”). Unless the context requires otherwise, references in this Lease to the “Term” include any renewal or extension of this Lease. [See Addendum “A”, Renewal Options, if applicable]. |
1.06 | Base Rent: Base Rent is due and payable in monthly installments during the Term of this Lease as set forth in this Section. Base Rent and all other sums due or payable by Tenant to Landlord under this Lease are collectively referred to in this Lease as the “Rent” |
Base Rent Payment Schedule
On or before the first day of each month during the Term of this Lease, Tenant shall pay monthly installments of Base Rent as follows:
Dates | Monthly Base Rent | |||||||
From | Month Zero (0) | to | Month Three (3) | $ | ; | |||
From | Month Four (4) | to | Month Twelve (12) | $ | 6,500.00 | ; | ||
From | Month Thirteen (13) | to | Month Thirteen (13) | $ | ; | |||
From | Month Fourteen (14) | to | Month Twenty-Four (24) | $ | 6,825.00 | ; | ||
From | Month Twenty-Five (25) | to | Month Forty(40) | $ | 7,166.00 | ; | ||
From | to | $ | ; |
[Rent for any Renewal Term is determined pursuant to a separate Addendum, if applicable, and should not be set forth here.]
1.07 |
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1.08 | Security Deposit: $ 6,500.00 (due upon execution of this Lease). [See Section 3.04] |
1.09 | Expense Reimbursements: |
A. Tenant shall pay Landlord as additional Rent (or pay the charges directly to the service provider, if applicable) the following expenses (or a portion of the expenses, if applicable) (each an “Expense Reimbursement” and collectively the “Expense Reimbursements”) that are incurred by or assessed against the Premises (as each of these terms is defined in this Lease) [check all boxes that apply]:
¨ Real Estate Taxes;
¨ Insurance Premiums;
¨ Common Area Maintenance (CAM) Expenses;
¨ Operating Expenses;
¨ Roof and Structural Maintenance Expenses;
x Electricity;
x Cable;
x Gas;
x Internet Access;
COMMERCIAL LEASE AGREEMENT - Page 3
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x Water;
x Sewer;
x Telephone;
x Trash Removal; and
x All other Utilities.
B. | Expense Definitions. |
1. Real
Estate Taxes. “Real Estate Taxes” means all general real-estate taxes, ad valorem taxes, general
and special assessments, parking surcharges, rent taxes, and other similar government charges levied against or applicable
to the Property for each calender year.
2. Insurance
Premiums. “Insurance Premiums” means all Landloard’s insurance premiums attributable to
the Property, including but not limited to insurance for fire, casualty, general liability, property damage, medical expenses, extended
severage, and less of rents coverage for up to 12 months’ Rent.
3. Common
Area Maintenance Expenses. “Common Area Maintenance Expenses” or “CAM Expenses” means all costs
of maintenance, inspection and repairs of the Common Areas of the Property, including, but not limited to, those costs for security, lighting,
painting, cleaning, decorations and fixtures. Utilities, ice and snow removal, trash disposal, project signs, reef repairs, pest
control, project promotional expenses, property owners’ association dues, wages and salary costs of maintenance personnel,
and other expenses benefiting all the Property that may be incurred by Landlord, in its discretion, including sales taxes and a reasonable
service charge for the administration thereof. The term “Common Areas” is defined as that part of the Property
intended for the collective use of all tenants including, but not limited to, the parking areas, driveways, loading areas, landscaping,
gutters and downspouts, plumbing, electrical systems, HVAC systems roof, exterior walls, sidewalks, malls, promenades
(enclosed or otherwise), meeting rooms, doors, otherwise), meeting rooms, doors, windows, corridors and public rest rooms. CAM
Expenses do not include the cost of capital Improvements, the cost of management office equipment and furnishings, depreciation on Landlord’s
original investment, the cost of tenant improvements, real estate brokers’ fees, advertising of space for lease, or interest or
depreciation on capital investments.
4. Operating
Expenses. “Operating Expenses” means all costs of ownership, building management, maintenance,
repairs and operation of the Property, including but not limited to roof and structural maintenance, Real Estate Taxes, Insurance
Premiums, CAM Expenses, reasonable management fees, wages and salary costs of building management personnel, overhead and operation costs
of a management office, janiterial, Utilities, and professional services such as accounting and legal fees. Operating Expenses do not
include the cost of capital improvements, the cost of management office equipment and furnishings, depreciation on Landlord’s original
investment, the cost of tenant improvements, reel estate brokers’ fees, advertising of space for lease, or interest of depreciation
on capital investments.
5. Roof
and Structural Maintenance Expenses. “Roof and Structural Maintenance Expenses” means all costs
of maintenance, repair and replacement of the roof, roof desk, flashings, skylights, foundation, floor slabs, structural compenents and
the structural soundness of the building in general.
6. Utilities. “Utilities” means charges for electricity, cable, gas, Internel access, water, sewer, telephone, trash removal, and any other services that are commonly understood to be utilities, including connection charges.
7. Other Terms. Other terms that are not expressly defined are intended to have the meanings given those terms in common usage.
COMMERCIAL LEASE AGREEMENT - Page 4
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C. | Expense Reimbursement Limitations. The amount of Tenant’s Expense Reimbursement will be determined by one of the following methods as described and defined below [check only one]: |
¨ Base Year Adjustment;
¨ Expense Stop Adjustment;
¨ Pro Rata Adjustment;
x Fixed Amounts; or
¨ Net Lease.
D. | Expense Reimbursement Limitation Definitions. |
1. |
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4. | Fixed Amounts. If “Fixed Amounts” has been checked above, Tenant shall pay to Landlord as additional Rent the following monthly amounts (regardless of whether they have been checked in Section 1.09.A, above) as Tenant’s Expense Reimbursements to Landlord for the following expenses that are incurred by or assessed against the Property: |
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Electricity | $ | per month. | |
Cable | $ | per month. | |
Gas | $ | per month. | |
Internet Access | $ | per month. | |
Water | $ | per month. | |
Sewer | $ | per month. | |
Telephone | $ | per month. | |
Trash Removal | $ | per month. | |
All Other Utilities | $ | per month. |
5. |
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COMMERCIAL LEASE AGREEMENT - Page 5
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E. | First Payment. The sum of the Monthly Base Rent for the first month of the Term for which Base Rent is due (which may be later than the first month of the Term, if there is a free rent period), and the initial estimated monthly Expense Reimbursement payments (before adjustments) is set forth below. Upon the execution of this Lease, in addition to the Security Deposit, Tenant shall pay the first monthly payment in the sum of the amounts set forth below. |
[Complete the amount of the first Base Rent payment to be due, as well as estimated amounts of any other monthly payments that start at the beginning of the Term of this Lease. Put N/A or strike through the rest. Any estimated amounts are subject to adjustment pursuant to other provisions of this Lease. If any expense payments are not due at the beginning of the Term, they may begin later in the Term pursuant to other provisions of this Lease.]
F. | Expense Reimbursement Payments. Tenant agrees to pay any end-of-year lump sum Expense Reimbursement within 30 days after receiving an invoice from Landlord. Any time during the Term, Landlord may direct Tenant to pay monthly an estimated portion of the projected future Expense Reimbursement amount. Any such payment directed by Landlord will be due and payable monthly on the same day that the Base Rent is due. Landlord may, at Landlord’s option and to the extent allowed by applicable law, impose a Late Charge on any Expense Reimbursement payments that are not actually received by Landlord on or before the due date, in the amount and manner set forth in Section 3.03 of this Lease. Any Expense Reimbursements relating to partial calendar years will be prorated accordingly. If Tenant’s Pro Rata Share is not expressed in Section 1.04.E of this Lease, then Tenant’s Pro Rata Share of such Expense Reimbursements will be based on the square footage of useable area contained in the Premises in proportion to the square footage of useable building area of the Property. Tenant may audit or examine those items of expense in Landlord’s records that relate to Tenant’s obligations under this Lease. Landlord shall promptly refund to Tenant any overpayment that is established by an audit or examination. If the audit or examination reveals an error of more than 5% over the figures billed to Tenant, Landlord shall pay the reasonable cost of the audit or examination. |
G. |
¨ |
COMMERCIAL LEASE AGREEMENT - Page 6
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1.10 | Permitted Use: | General Office |
[See Section 6.01] |
1.11 |
Party to whom Tenant is to deliver payments under this Lease is the Landlord, |
1.12 |
Principal Broker:
J. Elmer Turner, Realtors Inc.
, is acting as the agent for Landlord exclusively, |
Principal Broker’s Address: | 2626 Cole Avenue, Suite 606 | |
Dallas, Texas75204 |
Telephone: | (214)954-1221 | Fax: | (214)954-6410 |
Email: | turner1898@gmail.com |
1.13 |
Cooperating Broker: Esrp
Advisory Dallas, LLC
is acting as the agent for Tenant exclusively, |
Cooperating Broker’s Address: |
One Cowboys Way Suite 350 |
|
Frisco, TX 75034 |
Telephone: | (972)977-7200 | Fax: |
Email: | jake.pavelka@esrp.com |
1.14 | The Professional Service Fee (the “Fee”): |
A. |
The percentages applicable in Section 15.01 and
Section 15.02 to leases will be 4.500 % of the Base Rent to Principal
Broker and
,% of the Base Rent to Cooperating Broker, |
B. | The percentages applicable in Section 15.03 in the event of a sale will be % to Principal Broker and % to Cooperating Broker. |
1.15 | Disclosure of Dual Capacity as Broker and Principal. [Complete if applicable] |
A. n/a is a licensed Texas real estate broker and is acting in a dual capacity as broker for Landlord and as a principal in this transaction, as he or she may be Landlord (or one of the owners of Landlord).
B. n/a is a licensed Texas real estate broker and is acting in a dual capacity as broker for Tenant and as a principal in this transaction, as he or she may be Tenant (or one of the owners of Tenant).
1.16 | Exhibits and Addenda. Any exhibit or addendum attached to this Lease (as Indicated by the boxes checked below) is incorporated as a part of this Lease. Any term not specifically defined in an Addendum will have the same meaning given to it in the body of this Lease. |
COMMERCIAL LEASE AGREEMENT - Page 7
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¨ | Exhibit “A” | Survey and/or Legal Description of the Property | |||
¨ | Exhibit “B” | Floor plan and/or Site Plan | |||
x | Exhibit “C” | Information About Brokerage Services | |||
¨ | Exhibit “D” | Other |
x | Addendum “A” | Renewal Options | |||
¨ | Addendum “B” | Construction of Improvements by Landlord | |||
¨ | Addendum “C” | Construction of Improvements by Tenant | |||
¨ | Addendum “D” | Percentage Rental and Gross Sales Reports | |||
¨ | Addendum “E” | Right of First Refusal for Additional Space | |||
¨ | Addendum “F” | Guaranty | |||
x | Addendum “G” | Rules and Regulations | |||
¨ | Addendum “H” | Rooftop Lease | |||
¨ | Addendum “I” | Parking | |||
x | Addendum “J” | Additional Provisions Addendum | |||
¨ | Addendum “K” | Other |
ARTICLE TWO
LEASE AND TERM
2.01 Lease of Premises for Term. Landlord leases the Premises to Tenant and Tenant leases the Premises from Landlord for the Term stated in Section 1.05. The Commencement Date is the date specified in Section 1.05, unless advanced or delayed under any provision of this Lease.
2.02 Delays in Commencement. Landlord will not be liable to Tenant if Landlord does not deliver possession of the Premises to Tenant on the Commencement Date specified in Section 1.05 above. Landlord’s non-delivery of possession of the Premises to Tenant on the Commencement Date will hot affect this Lease or the obligations of Tenant under this Lease. However, the Commencement Date will be delayed until possession of the Premises is delivered to Tenant. The Term will be extended for a period equal to the delay in delivery of possession of the Premises to Tenant, plus the number of days necessary for the Term to expire on the last day of a month. If Landlord does not deliver possession of the Premises to Tenant within 60 days after the Commencement Date specified in Section 1.05. Tenant may cancel this Lease by giving a written notice to Landlord at any time after the 60-day period ends, but before Landlord actually delivers possession of the Premises to Tenant. If Tenant gives such notice, this Lease will be canceled effective as of the date of its execution, any prepaid amounts will be reimbursed to Tenant, and no party will have any rights or obligations under this Lease. If Tenant does not give such notice within the time specified, Tenant will have no right to cancel this Lease, and the Term will commence upon the delivery of possession of the Premises to Tenant. If delivery of possession of the Premises to Tenant is delayed, Landlord and Tenant shall, upon such delivery, execute an amendment to this Lease setting forth the revised Commencement Date and Expiration Date of the Term.
2.03 Early Occupancy. If Tenant occupies the Premises before the Commencement Date, Tenant’s occupancy of the Premises will be subject to all of the provisions of this Lease. Early occupancy of the Premises will not advance the Expiration Date. Unless otherwise provided in this Lease, Tenant shall pay Base Rent and all other charges specified in this Lease for the period of occupancy.
2.04 Holding Over. Tenant shall vacate the Premises immediately upon the expiration of the Term or earlier termination of this Lease. Tenant shall reimburse Landlord for and indemnify Landlord against all damages incurred by Landlord as a result of any delay by Tenant in vacating the Premises. If Tenant does not vacate the Premises upon the expiration of the Term or earlier termination of this Lease, Tenant’s occupancy of the Premises will be a day-to-day tenancy, subject to all of the terms of this Lease, except that the Base Rent during the holdover period will be increased to an amount that is one-and-one-half (1½) times the Base Rent in effect on the expiration or termination of this Lease, computed on a daily basis for each day of the holdover period, plus all additional sums due under this Lease. This Section will not be construed as Landlord’s consent for Tenant to hold over or to extend this Lease.
COMMERCIAL LEASE AGREEMENT - Page 8
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ARTICLE THREE
RENT AND SECURITY DEPOSIT
3.01 Manner of Payment. Tenant shall pay the Rent to Landlord at the address set forth in Section 1.02, unless another person is designated in Section 1.11, or to any other party or address Landlord may designate in any written notice delivered to Tenant Landlord may designate, in a written notice delivered to Tenant, the party authorized to receive Rent and act on behalf of Landlord to enforce this Lease. Any such authorization will remain in effect until it is revoked by Landlord in a subsequent written notice delivered to Tenant. Any payments made to a third party designated by Landlord will be deemed made to Landlord when received by the designated third party. All sums payable by Tenant under this Lease, whether or not expressly denominated as Rent, will constitute rent for the purposes of Section 502(b)(6) of the Bankruptcy Code and for all other purposes.
3.02 Time of Payment. Upon execution of this Lease, Tenant shall pay the installment of Base Rent for the first month of the Term for which Base Rent Is due (which may be later than the first month of the Term, if there is a free rent period). On or before the first day of the next month and each month thereafter, the installment of Base Rent and other sums due under this Lease will be due and payable, in advance, without off-set deduction or prior demand. Tenant shall cause payments to be properly mailed or otherwise delivered so as to be actually received (and not merely deposited in the mail) by Landlord (or the party identified in Section 1.11, or any other third party designated by Landlord) on or before the due date. If the Term commences or ends on a day other than the first or last day of a calendar month, the rent for any partial calendar month following the Commencement Date or preceding the end of the Term will be prorated. Tenant shall pay any such prorated portion for a partial calendar month at the beginning of the Term on the Commencement Date. Tenant shall pay any such prorated portion for a partial calendar month at the end of the Term on the first day of that calendar month.
3.03 Late Charges. Tenant’s failure to promptly pay sums due under this Lease may cause Landlord to incur unanticipated costs. The exact amount of those costs is impractical or extremely difficult to ascertain. The costs may include, but are not limited to, processing and accounting charges and late charges that may be imposed on Landlord by any ground lease or deed of trust encumbering the Premises. Payments due to Landlord under this Lease are not an extension of credit. Therefore, if any payment under this Lease is not actually received on or before the due date (and not merely deposited in the mail), Landlord may, at Landlord’s option and to the extent allowed by applicable law, impose a Late Charge on any late payments in an amount equal to 10% of the amount of the past due payment (the “Late Charge”) after the payment is more than five days past due. A Late Charge may be Imposed only once on each past due payment. Any Late Charge will be in addition to Landlord’s other remedies for nonpayment of Rent. If any check tendered by Tenant under this Lease is dishonored for any reason, Tenant shall pay to Landlord a dishonored check foe of $30.00, plus (at Landlord’s option) a Late Charge as provided above until Good Funds (defined below) are received by Landlord. The parties agree that any Late Charge and dishonored check fee represent a fair and reasonable estimate of the costs Landlord will incur by reason of the late payment or dishonored check. If there are any Late Charges, dishonored check fees, installments of Base Rent, arid any other unpaid charges or reimbursements due to Landlord, then Landlord may apply any payments received from Tenant to any amounts due in any order Landlord may choose. Notwithstanding the foregoing, Landlord will not impose a Late Charge as to the first late payment in any calendar year, unless Tenant fails to pay the late payment to Landlord within three business days after the delivery of a written notice from Landlord to Tenant demanding the late payment be paid. However, Landlord may impose a Late Charge without advance notice to Tenant on any subsequent late payment in the same calendar year.
3.04. Security Deposit. Upon execution of this Lease, in addition to the installment of Base Rent due under Section 3.02, and in addition to any other amounts that are due from Tenant upon the execution of this Lease, Tenant shall deliver to Landlord a Security Deposit in the amount stated in Section 1.08. Landlord may apply all or part of the Security Deposit to any unpaid Rent, and damages and charges for which Tenant is legally liable under this Lease, and damages and charges that result from a breach of this Lease, including but not limited to, the cost to cure Tenant’s failure to comply with Section 7.05 and any other provision that requires Tenant to leave the Premises in a certain condition upon the expiration or termination of this Lease. If Landlord uses any part of the Security Deposit, Tenant shall restore the Security Deposit to its full amount within 10 days after Landlord’s written demand. Tenant’s failure to restore the full amount of the Security Deposit within the time specified will be a default under this Lease. No interest will be paid on the Security Deposit Landlord will not be required to keep the Security Deposit separate from its other accounts, and no trust relationship is created with respect to the Security Deposit. After the expiration of this Lease, Landlord shall refund the unused portion of the Security Deposit, if any, to Tenant within 60 days after the date Tenant surrenders possession of the Premises and provides a written notice to Landlord of Tenant’s forwarding address for the purpose of refunding the Security Deposit. The provisions of this Section will survive the expiration or termination of this Lease.
COMMERCIAL LEASE AGREEMENT - Page 9
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3.05 Good Funds Payments. If any two or more payments by check from Tenant to Landlord for Rent are dishonored and returned unpaid, thereafter Landlord may, at Landlord’s option, by the delivery of a written notice to Tenant, require that all future payments of Rent for the remaining Term of this Lease must be made by cash, certified check, cashier’s check, official bank check, money order, wire transfer or automatic electronic funds transfer (“Good Funds”), and that the delivery of Tenant’s personal or corporate check will no longer constitute payment of Rent under this Lease. Any acceptance by Landlord of a payment for Rent by Tenant’s personal or corporate check thereafter will not be construed as a waiver of Landlord’s right to insist upon payment by Good Funds as set forth in this Section.
ARTICLE FOUR
TAXES
4.01 Payment by Landlord. Landlord shall pay the real estate taxes on the Premises during the Term, subject to reimbursement by Tenant pursuant to any other provision in this Lease.
4.02 Improvements by Tenant. If the real estate taxes levied against the Premises for the year in which the Term commences are increased as a result of any additions or improvements made by Tenant, or by Landlord at Tenant’s request, Tenant shall pay to Landlord upon demand the amount of the increase and continue to pay the increase during the Term. Landlord shall use reasonable efforts to obtain from the tax assessor a written statement of the amount of the increase due to such additions or improvements.
4.03 Joint Assessment. If the real estate taxes are assessed against the Premises jointly with other property that is not part of the Premises, the real estate taxes applicable to the Premises will be equal to the amount bearing the same proportion to the aggregate assessment that the total square feet of building area in the Premises bears to the total square feet of building area included in the joint assessment. If there are no improvements on the Property or the other property, then land area will be used instead of building area for the calculation of the proportional assessment. If there are improvements on one of the jointly assessed properties but not on the other property, then the calculation of the proportional assessment must be done in a reasonable manner.
4.04 Personal Property Taxes. Tenant shall pay all taxes assessed against trade fixtures, furnishings, equipment, inventory, products, or any other personal property belonging to Tenant. Tenant shall use reasonable efforts to have Tenant’s property taxed separately from the Premises. If any of Tenant’s property is taxed with the Premises, Tenant shall pay the taxes for Tenant’s property to Landlord within 15 days after Tenant receives a written statement from Landlord for the property taxes.
4.05 Waiver of Right to Protest Taxes. Unless otherwise provided in this Lease: (i) Landlord retains the right to protest the tax assessment of the Property, and Tenant waives the right to protest; and (ii) Tenant waives Landlord’s obligation to provide Tenant with a notice of the tax valuation of the Property.
ARTICLE FIVE
INSURANCE AND INDEMNITY
5.01 Property Insurance. During the Term, Landlord shall maintain insurance policies covering damage to the Premises in an amount or percentage of replacement value as Landlord deems reasonable in relation to the age, location, type of construction and physical condition of the Premises and the availability of insurance at reasonable rates. The policies will provide protection against risks and causes of loss that landlord reasonably deems necessary. Landlord may, at Landlord’s option, obtain Insurance coverage for Tenant’s fixtures, equipment and Improvements in or on the Premises. Promptly after the receipt of a written request from Tenant, Landlord shall provide a certificate of insurance showing the insurance coverage then in effect Tenant shall, at Tenant’s expense, obtain and maintain insurance on Tenant’s fixtures, equipment and improvements in or on the Premises as Tenant reasonably deems necessary to protect Tenant’s interest, Any property insurance carried by Landlord or Tenant will be for the sole benefit of the party carrying the insurance and under its sole control.
COMMERCIAL LEASE AGREEMENT - Page 10
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5.02 Increases in Premiums. Tenant shall not conduct or permit any operation or activity, or store or use any materials, in or around the Premises that would cause suspension or cancellation of any insurance policy carried by Landlord. If Tenant’s use or occupancy of the Premises causes Landlord’s insurance premiums to increase, then Tenant shall pay to Landlord, as additional Rent, the amount of the increase within 10 days after Landlord delivers written evidence of the increase to Tenant.
5.03 Liability Insurance. During the Term, Tenant shall maintain a commercial general liability insurance policy, at Tenant’s expense, insuring Tenant against liability arising out of the use or occupancy of the Premises, and naming Landlord as an additional insured. The initial amounts of the insurance must be at least $1,000,000 or, If the following blank is completed $ for Each Occurrence, $2,000,000 or, if the following blank is completed $ General Aggregate per policy year, and $10,000 for Medical Expense. If Tenant’s liability Insurance coverage is less than $5,000,000, and if this box ¨ is checked, then Tenant must also maintain a commercial liability umbrella policy in amount to provide a combination of liability insurance coverage to equal a $5,000,000 total limit. The coverage amounts will be subject to periodic increases as Landlord may reasonably determine from time to time. The amounts of the insurance will not limit Tenant’s liability or relieve Tenant of any obligation under this Lease. The policies must contain cross-liability endorsements and must insure Tenant’s performance of the indemnity provisions of Section 5.04. The policies must contain a provision that prohibits cancellation or modification of the policy except upon 30 days’ prior written notice to Landlord. Tenant shall deliver a copy of the policy or certificate of insurance to Landlord before the Commencement Date and before the expiration of the policy during the Term. If Tenant fails to maintain the policy, Landlord may elect to maintain the insurance at Tenant’s expense.
5.04 Indemnity. Landlord will not be liable to Tenant or to Tenant’s employees, agents, invitees or visitors, or to any other person, for any injury to persons or damage to property on or about the Premises or any adjacent area owned by Landlord caused by the negligence or misconduct of Tenant. Tenant’s employees, subtenants, agents, licensees or concessionaires or any other person entering the Premises under express or implied invitation of Tenant, or arising out of the use of the Premises by Tenant and the conduct of Tenant’s business, or arising out of any breach or default by Tenant in the performance of Tenant’s obligations under this Lease. Tenant hereby agrees to defend, indemnify and hold Landlord harmless from any loss, expense or claims arising out of such damage or injury. Tenant will not be liable for any injury or damage caused by the negligence or misconduct of Landlord, or Landlord’s employees or agents, and Landlord agrees to indemnify and hold Tenant harmless from any loss, expense or damage arising out of such damage or injury.
5.05 Waiver of Subrogation. Each party to this Lease waives any and every claim that arises or may arise in its favor against the other party during the Term of this Lease for any and all loss of, or damage to, any of its property located within or upon, or constituting a part of, the Premises, to the extent the loss or damage is covered by and recoverable under valid and collectible insurance policies. These mutual waivers are in addition to, and not in limitation or derogation of, any other waiver or release contained in this Lease with respect to any loss of, or damage to, property of the parties. Inasmuch as these mutual waivers will preclude the assignment of any such claim by way of subrogation to an insurance company (or any other person), each party agrees to immediately give to each insurance company that has issued an insurance policy to such party written notice of the terms of such mutual waivers, and to cause the policies to be endorsed to prevent the invalidation of the insurance coverage by reason of these waivers.
COMMERCIAL LEASE AGREEMENT - Page 11
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ARTICLE SIX
USE OF PREMISES
6.01 Permitted Use. Tenant may use the Premises only for the Permitted Use stated in Section 1.10. Tenant acknowledges that: (i) the current use of the Premises or the improvements located on the Premises, or both, may not conform to city ordinances or restrictive covenants with respect to the permitted use, zoning, height limitations, setback requirements, minimum parking requirements, coverage ratio of improvements to land area, and other matters that may have a significant impact upon the Tenant’s intended use of the Premises; (ii) Tenant has independently investigated and verified to Tenant’s satisfaction the extent of any limitations or non-conforming uses of the Premises; and (iii) Tenant is not relying upon any representations of Landlord or the Brokers with respect to any such matters.
6.02 Compliance with Laws. Tenant shall comply with all governmental laws, ordinances and regulations applicable to the use of the Premises, and will promptly comply with all governmental orders and directives for the correction, prevention and abatement of nuisances and other activities in or upon, or connected with the Premises, all at Tenant’s sole expense, including any expense or cost resulting from the construction or installation of fixtures and improvements or other accommodations for handicapped or disabled persons required for compliance with governmental laws and regulations, including but not limited to the Texas Architectural Barriers Act (the “TABA”) and the Americans with Disabilities Act (the “ADA”). To the extent any alterations to the Premises are required by the TABA, the ADA or other applicable laws or regulations, Tenant shall bear the expense of the alterations. To the extent any alterations to areas of the Property outside the Premises are required by the TABA, the ADA or other applicable laws or regulations (for “path of travel” requirements or otherwise), Landlord shall bear the expense of the alterations.
6.03 Certificate of Occupancy. If required, Tenant shall apply for Certificate of Occupancy from the municipality in which the Property is located before the Commencement Date, and obtain a Certificate of Occupancy before Tenant occupies the Premises. If Tenant is unable to obtain a Certificate of Occupancy after making an application and diligently pursuing it, then Tenant may terminate this Lease by delivering a written notice to Landlord, unless either Landlord or Tenant is willing and able to cure the defects that prevented the issuance of the Certificate of Occupancy, Either Landlord or Tenant may cure any such defects, at their own expense, including any repairs, replacements, or installations of any items that are not presently existing on the Premises, but neither of them have any obligation to do so (unless another provision of this Lease states otherwise). If Tenant delivers a written termination notice to Landlord under this Section, and then any defects are cured and a Certificate of Occupancy is issued within 15 days after Tenant delivered the notice, then this Lease will remain in force. If this Lease is terminated because Landlord and Tenant cannot get a Certificate of Occupancy, then Landlord will return to Tenant any prepaid rent and any Security Deposit, and the parties will have no further obligations under this Lease. References in this Lease to a “Certificate of Occupancy” mean a Certificate of Occupancy sufficient to allow the Tenant to occupy the Premises for the Permitted Use.
6.04 Signs. Without the prior written consent of Landlord, Tenant may not place any signs, ornaments or other objects on the Premises or the Property, including but not limited to the roof or exterior of the building or other improvements on the Property, or paint or otherwise decorate or deface the exterior of the building or other improvements on the Property. Any signs installed by Tenant must conform to applicable laws, deed restrictions, and other applicable requirements. Tenant must remove all signs, decorations and ornaments at the expiration or termination of this Lease, and must repair any damage and close any holes caused by installation or removal.
6.05 Utility Services. Unless otherwise provided in this Lease, Tenant shall pay the cost of all Utilities used for the Premises, and the cost of replacing light bulbs and tubes. Unless otherwise required by law, Landlord is the party entitled to designate utility and telecommunication service providers to the Property and the Premises. Landlord may, at Landlord’s option, allow Tenant to select the provider. If Tenant selects the provider, any access or alterations to the Property or the Premises necessary for the Utilities may be made only with Landlord’s prior consent, which Landlord will not unreasonably withhold or delay. If Landlord incurs any utility or connection charges that Tenant is responsible to pay and Landlord pays the charges, Tenant shall reimburse Landlord Immediately upon receipt of a written notice from Landlord stating the amount of the charges.
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6.06 Landlord’s Access. Landlord and Landlord’s agents will have the right to, upon reasonable advance notice, and without unreasonably interfering with Tenant’s business, enter the Premises: (a) to inspect the general condition and state of repair of the Premises, (b) to make repairs required or permitted under this Lease, (c) to show the Premises or the Property to any prospective tenant or purchaser, and (d) for any other reasonable purpose. If Tenant changes the locks on the Premises, Tenant must provide Landlord with a copy of each separate key upon Landlord’s request. During the last 150 days of the Term, Landlord and Landlord’s agents may erect signs on or about the Premises advertising the Premises for lease or for sale.
6.07 Possession. If Tenant pays the Rent, properly maintains the Premises, and complies with all other terms of this Lease, Tenant may occupy and enjoy the Premises for the full Term, subject to the provisions of this Lease.
6.08 Exemptions from Liability. Landlord will not be liable for any damage to the business (including any loss of income), goods, inventory, furnishings, fixtures, equipment, merchandise or other property of Tenant, Tenant’s employees, invitees or customers, or for any injury to Tenant or Tenant’s employees, invitees, customers or any other person in or about the Premises, whether the damage or injury is caused by or results from: (a) fire, steam, electricity, Water, gas or wind; (b) the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures or any other cause; (c) conditions arising on or about the Premises or other portions of the Property, or from other sources or places; or (d) any act or omission of any other occupant of the Property. The provisions of this Section will not, however, exempt Landlord from liability for Landlord’s gross negligence or willful misconduct.
ARTICLE SEVEN
PROPERTY CONDITION, MAINTENANCE, REPAIRS AND ALTERATIONS
7.01 Property Condition. Except as disclosed in writing by Landlord to Tenant before the execution of this Lease, to the best of Landlord’s actual knowledge: (i) the Premises have no known latent structural or construction defects of a material nature; and (ii) none of the improvements to the Premises have been constructed with materials known to be a potential health hazard to occupants of the Premises. Unless otherwise expressly set forth in this Lease, Landlord represents that on the Commencement Date (and for a period of 30 days thereafter): (a) the fixtures and equipment serving the Premises are in good operating condition, including the plumbing, electrical and lighting systems, any fire protection sprinkler system, the HVAC (defined below) systems and equipment, the roof, skylights, doors, overhead doors, windows, dock levelers and elevators; and (b) the interior of the Premises is in good condition. Tenant will have a period of 30 days after the Commencement Date to inspect the Premises and notify Landlord in writing of any defects and maintenance, repairs or replacements required to the above named fixtures, equipment and interior. Within a reasonable period of time after the timely receipt of any such written notice from Tenant, Landlord shall, at Landlord’s expense, correct the defects and perform the maintenance, repairs and replacements.
7.02 Acceptance of Premises. Tenant has inspected, or has had an opportunity to inspect, the Premises, before the execution of this Lease, Tenant has determined that the Premises may be used for the Permitted Use. Subject to the provisions in Section 7.01, and any other express obligations of Landlord in this Lease to construct any improvements, make repairs, or correct defects, Tenant agrees to accept the Premises in “AS IS” condition and with all faults (other than latent defects). To the extent permitted by applicable law, Tenant waives any implied warranties of Landlord as to the quality or condition of the Premises or the Property, or as to the fitness or suitability of the Premises or the Property for any particular use.
7.03 Maintenance and Repairs. Landlord will not be required to perform any maintenance or repairs, or management services, in the Premises, except as otherwise provided in this Lease. Tenant will be fully responsible, at Tenant’s expense, for all maintenance and repairs, and management services, other than those that are expressly set forth in this Lease as Landlord’s responsibility.
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A. Landlord’s Obligations.
(1) Subject to the provisions of Article Eight (Damage or Destruction) and Article Nine (Condemnation) and except for damage caused by any act or omission of Tenant, Landlord shall keep the roof, skylights, foundation, structural components and the structural portions of exterior walls of the Premises in good order, condition and repair. Landlord will not be obligated to maintain or repair windows, doors, overhead doors, plate glass or the surfaces of walls. In addition, Landlord will not be obligated to make any repairs under this Section until a reasonable time after receipt of written notice from Tenant of the need for repairs. If any repairs are required to be made by Landlord, Tenant shall, at Tenant’s sole cost and expense, promptly remove Tenant’s furnishings, fixtures, inventory, equipment and other property, to the extent required to enable Landlord to make repairs. Landlord’s liability under this Section will be limited to the cost of those repairs or corrections. Tenant waives the benefit of any present or future law that might give Tenant the right to repair the Premises at Landlord’s expense or to terminate this Lease because of the condition.
(2) All repairs, maintenance, management and other services to be performed by Landlord or Landlord’s agents involve the exercise of professional judgment by service providers, and Tenant expressly waives any claims against Landlord for breach of warranty arising from the performance of those services.
B. Tenant’s Obligations. Subject to the provisions of Section 7.01, Section 7.03A, Article Eight (Damage or Destruction) and Article Nine (Condemnation), Tenant shall, at all times, keep all other portions of the Premises in good order, condition and repair (except for normal wear and tear), including, but not limited to, maintenance, repairs and all necessary replacements of the windows, plate glass, doors, overhead doors, HVAC equipment, electrical and lighting systems, fire protection sprinkler system, dock levelers, elevators, interior and exterior plumbing, the interior and exterior of the Premises in general, pest control and extermination, down spouts, gutters, paving, railroad siding, care of landscaping and regular mowing of grass. In addition, Tenant shall, at Tenant’s expense, repair any damage to any portion of the Property, including the roof, skylights, foundation, or structural components and exterior walls of the Premises, caused by Tenant’s acts or omissions. If Tenant fails to maintain and repair the Property as required by this Section, Landlord may, on 10 days’ prior written notice, enter the Premises and perform the maintenance or repair on behalf of Tenant, except that no notice is required in case of emergency, and Tenant shall reimburse Landlord immediately upon demand for all costs incurred in performing the maintenance or repair, plus a reasonable service charge.
C. HVAC Service. This Section pertains to the heating, ventilation and air-conditioning (“HVAC”) systems and equipment that service the Premises, [Check one box only.]
¨ | (1) Landlord is obligated to provide the HVAC services to the Premises only during the operating hours of the Property (as described below). |
¨ | (2) Landlord will provide the HVAC services to the Premises during the operating hours of the Property (as described below) for no additional charge and will, at Tenant’s request, provide HVAC services to the Premises during other hours for an additional charge of $ per hour. Tenant will pay Landlord the charges under this paragraph promptly after receipt of Landlord’s invoice. Hourly charges are charged on a half-hour basis. Any partial hour will be rounded up to the next half hour. Tenant will comply with Landlord’s procedures to make a request to provide the additional HVAC services in advance. |
x | (3) Tenant will pay for the HVAC services under this Lease. For any HVAC system that services only the Premises, Tenant shall, at Tenant’s own cost and expense, enter into a regularly scheduled preventative maintenance and service contract for all such HVAC systems and equipment during the Term. If Tenant fails to enter into such a service contract acceptable to Landlord, Landlord may do so on Tenant’s behalf and Tenant agrees to pay Landlord the cost and expense thereof, plus a reasonable service charge, periodically upon demand. |
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@NTCAR 2014 - Form No. 2 (3/2014)
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D. Operating Hours of the Property. The operating hours of the Property are the times reasonably determined by Landlord unless they are specified here, [specify the operating hours of the Property including the days of the week, and whether Saturdays, Sundays and holidays are included]:
no restrictions on operating hours |
E.
Cleaning. Tenant must keep the Premises clean and sanitary and promptly dispose of all trash in appropriate receptacles. Tenant will
provide, at Tenant’s expense, janitorial services to the Premises, unless this box ¨
is checked, in which case Landlord will provide janitorial services to the Premises
that are customary for the property type. Tenant will maintain, at Tenant’s expense, any grease trap on the Property that Tenant
uses, including but not limited to periodic emplying and cleaning, as well as making any modification to the grease trap that may be necessary
to comply with any applicable law.
7.04 Alterations, Additions and improvements. Tenant may not create any openings in the roof or exterior walls without the prior written consent of Landlord. Tenant may not make any alterations, additions or improvements to the Premises (“Alterations”) without the prior written consent of Landlord. However, Tenant is not required to obtain the Landlord’s prior written consent for non-structural Alterations that do not cost more than $5,000 and that do not modify or affect the roof, plumbing, HVAC systems or electrical systems. Consent for non-structural Alterations in excess of $5,000 or that modify or affect plumbing, HVAC systems or electrical systems will not be unreasonably withheld, conditioned or delayed by Landlord. Tenant may erect or install trade fixtures, shelves, bins, machinery, HVAC systems, and refrigeration equipment, provided that Tenant complies with all applicable governmental laws, ordinances, codes, and regulations. At the expiration or termination of this Lease, Tenant may, subject to the restrictions of Section 7.05, remove items installed by Tenant, provided Tenant is not in default at the time of the removal and Tenant repairs, in a good and workmanlike manner, any damage caused by the installation or removal Tenant shall pay for all costs incurred or arising out of Alterations and will not permit any mechanic’s or materialman’s lien to be filed against the Premises or the Property. Upon request by Landlord, Tenant shall deliver to Landlord proof of payment, reasonably satisfactory to Landlord, of all costs incurred in connection with any Alterations.
7.05 Condition upon Termination. Upon the expiration or termination of this Lease, Tenant shall surrender the Premises to Landlord broom clean and in the same condition as received, except for normal wear and tear and any damage caused by a casualty that Tenant is not otherwise obligated to repair under any provision of this Lease. Tenant will not be obligated to repair any damage that Landlord is required to repair under Article Seven (Property Condition) or Article Eight (Damage or Destruction). In addition, Landlord may require Tenant to remove any Alterations before the expiration or termination of this Lease and to restore the Premises to their prior condition, all at Tenant’s expense. However, Tenant will not be required to remove any Alterations that were made with Landlord’s consent or that were otherwise permitted under the terms of this Lease, All Alterations that Tenant does not remove will become Landlord’s property upon the expiration or termination of this Lease. In no event may Tenant remove any of the following items without Landlord’s prior written consent: (i) electrical wiring or power panels; (ii) lighting or lighting fixtures; (iii) wall coverings, drapes, blinds or other window coverings; (iv) carpets or other floor coverings; (v) HVAC equipment; (vi) plumbing equipment; (vii) fencing or gates; or (viii) any fixtures, equipment or other items that, if removed, would affect the operation or the appearance of the Property. However, Tenant may remove Tenant’s trade fixtures, equipment used in Tenant’s business, and personal property. The provisions of this Section will survive the expiration or termination of this Lease.
COMMERCIAL LEASE AGREEMENT - Pace 15
@NTCAR 2014 - Form No. 2 (3/2014)
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ARTICLE EIGHT
DAMAGE OR DESTRUCTION
8.01 Notice. If any buildings or other improvements situated on the Property are damaged or destroyed by fire, flood, windstorm, tornado or other casualty, Tenant shall immediately give written notice of the damage or destruction to Landlord.
8.02 Partial Damage. If the Premises are damaged by fire, tornado or other casualty, and rebuilding and repairs can be completed within 120 days after the date Landlord receives written notification from Tenant of the occurrence of the damage, then this Lease will not terminate, but Landlord shall proceed with reasonable diligence to rebuild and repair the Premises (other than leasehold improvements made by Tenant or any assignee, subtenant or other occupant of the Premises) to substantially the condition they were in before the damage. To the extent the Premises cannot be occupied (in whole or in part) after the casualty, the Rent payable under this Lease during the period the Premises cannot be fully occupied will be adjusted equitably.
If the casualty occurs during the last 18 months of the Term, Landlord will not be required to rebuild or repair the damage unless Tenant exercises Tenants renewal option (if any) within 15 days after the date Landlord receives written notification of the occurrence of the damage. If the casualty occurs during the last 18 months of the Term and Tenant does not so exercise Tenant’s renewal option, or if there is ho renewal option in this Lease, Landlord may, at Landlord’s option, terminate this Lease by delivering a written termination notice to Tenant, in which case the Rent will be abated for the unexpired portion of the Term, effective on the date Landlord received written notification of the damage.
8.03 Substantial or Total Destruction. If the Premises are substantially or totally destroyed by fire, tornado, or other casualty, or so damaged that rebuilding and repairs cannot reasonably be completed within 120 days after the date Landlord receives written notification from Tenant of the occurrence of the damage, either Landlord or Tenant may terminate this Lease by promptly delivering a written termination notice to the other party, in which event the monthly installments of Rent will be abated for the unexpired portion of the Term, effective on the date of the damage or destruction. If neither party promptly terminates this Lease, Landlord shall proceed with reasonable diligence to rebuild and repair the Premises (except that Tenant shall rebuild and repair Tenant’s fixtures and improvements in the Premises). To the extent the Premises cannot be occupied (in whole or in part) after the casualty, the Rent payable under this Lease during the period the Premises cannot be fully occupied will be adjusted equitably.
ARTICLE NINE
CONDEMNATION
If, during the Term, all or a substantial part of the Premises are taken for any public or quasi-public use under any governmental law, ordinance or regulation or by right of eminent domain, or are conveyed to the condemning authority under threat of condemnation, this Lease will terminate and the monthly installments of Rent will be abated during the unexpired portion of the Term, effective on the date of the taking. If less than a substantial part of the Premises is taken for public or quasi-public use under any governmental law, ordinance or regulation, or by right of eminent domain, or is conveyed to the condemning authority under threat of condemnation, Landlord shall promptly, at Landlord’s expense, restore and reconstruct the Premises (other than leasehold improvements made by Tenant or any assignee, subtenant or other occupant of the Premises) in order to make the Premises reasonably suitable for the Permitted Use. The Rent payable under this Lease during the unexpired portion of the Term will be adjusted equitably. If there is a taking of the Property that has a material, adverse effect on the operation of Tenant’s business in the Premises, then the Rent will be adjusted equitably. Landlord and Tenant will each be entitled to receive and retain such separate awards and portions of lump sum awards as may be allocated to their respective interests in any condemnation proceeding. The termination of this Lease will not affect the rights of the parties to those awards.
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ARTICLE TEN
ASSIGNMENT AND SUBLETTING
Tenant may not assign this Lease or sublet the Premises or any portion thereof, without the prior written consent of Landlord, which consent will not be unreasonably withheld or delayed. Any assignment or subletting will be expressly subject to all terms and provisions of this Lease, including the provisions of Section 6.01 pertaining to the use of the Premises. In the event of any assignment or subletting, Tenant will remain fully liable for the full performance of all of Tenant’s obligations under this Lease. Tenant may not assign Tenant’s rights under this Lease or sublet the Premises without first obtaining a written agreement from the assignee or sublessee whereby the assignee or sublessee agrees to assume the obligations of Tenant under this Lease and to be bound by the terms of this Lease. If a Default occurs while the Premises is assigned or sublet, Landlord may, at Landlord’s option, in addition to any other remedies provided in this Lease or by law, collect directly from the assignee or subtenant all rents becoming due under the terms of the assignment or subletting and apply the rents against any sums due to Landlord under this Lease. No direct collection by Landlord from any assignee or subtenant will release Tenant from Tenant’s obligations under this Lease.
ARTICLE ELEVEN
DEFAULT AND REMEDIES
11.01 Default. Each of the following events is a default under this Lease (a “Default”):
A. | Failure of Tenant to pay any installment of the Rent or other sum payable to Landlord under this Lease on the date that it is due, and the continuance of that failure for a period of five days after Landlord delivers written notice of the failure to Tenant. This clause will not be Construed to permit or allow a delay in paying Rent beyond the due date and will not affect Landlord’s right to impose a Late Charge as permitted in Section 3.03; |
B. | Failure of Tenant to comply with any term, condition or covenant of this Lease, other than the payment of Rent or other sum of money, and the continuance of that failure for a period of 30 days after Landlord delivers written notice of the failure to Tenant; |
C. | Failure of Tenant or any guarantor of Tenant’s obligations under this Lease to pay its debts as they become due or an admission in writing of inability to pay its debts, or the making of a general assignment for the benefit of creditors; |
D. | The commencement by Tenant or any guarantor of Tenant’s obligations under this Lease of any case, proceeding or other action seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its property; |
E. | The commencement of any case, proceeding or other action against Tenant or any guarantor of Tenant’s obligations under this Lease seeking to have an order for relief entered against it as debtor, or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its property, and Tenant or any guarantor: (i) falls to obtain a dismissal of such case, proceeding, or other action within 60 days of its commencement; or (ii) converts the case from one chapter of the Federal Bankruptcy Code to another chapter; or (iii) is the subject of an order of relief that is not fully stayed within seven business days after the entry thereof; and |
F. | Vacancy or abandonment by Tenant of any substantial portion of the Premises or cessation of the use of the Premises for the purpose leased, and the continuance of that vacancy, abandonment or cessation for a period of 30 days after Landlord delivers a written notice to Tenant. |
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11.02 Remedies. Upon the occurrence of any Default listed in Section 11.01, Landlord may pursue any one or more of the following remedies without any prior notice or demand.
A. | Landlord may terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord. If Tenant fails to surrender the Premises, Landlord may, without prejudice to any other remedy that Landlord may have for possession of the Premises or Rent in arrears, enter upon and take possession of the Premises and expel Tenant and any other person who may be occupying the Premises or any part thereof, without being liable for any claim for damages due to the termination of this Lease or termination of possession. Tenant shall pay to Landlord on demand the amount of all Rent and loss and damage Landlord may suffer by reason of the termination or inability to relet the Premises up to the date of termination, in addition to any other liabilities that survive the termination of this Lease. |
B. | Landlord may enter upon and take possession of the Premises, without terminating this Lease and without being liable for any claim for damages due to termination of possession, and expel Tenant and any other person who may be occupying the Premises or any part thereof. Landlord may relet the Premises and receive rent from the new occupant. Tenant agrees to pay to Landlord monthly, or on demand from time to time, any deficiency that may arise by reason of any such reletting. In determining the amount of the deficiency, professional service fees, reasonable attorneys’ fees, court costs, remodeling expenses and other costs of reletting will be subtracted from the amount of rent received from the new occupant. |
C. | Landlord may enter upon the Premises, without terminating this Lease and without being liable for any claim for damages due to such entry, and do whatever Tenant is obligated to do under the terms of this Lease. Tenant agrees to pay Landlord on demand for expenses that Landlord incurs in performing Tenant’s obligations under this Lease, together with interest thereon at the rate of 12% per annum from the date spent until paid. |
D. | Landlord may sue Tenant for damages for breach of this Lease after Tenant’s Default and abandonment of the Premises, or after Landlord terminates Tenant’s possession and Tenant vacates the Premises, in which case the measure of damages is the sum of: (i) the unpaid Rent up to the date of the abandonment or vacancy, plus (ii) the difference between the Rent for the remainder of the Term after abandonment or vacancy, and the fair market rental value of this Lease for the remainder of the Term after abandonment or vacancy, such difference to be discounted to present value at a rate equal to the rate of interest that is allowed by law in the State of Texas when the parties to a contract have not agreed on any particular rate of interest (or, in the absence of such law, at the rate of 6% per annum). Neither the enforcement or collection by Landlord of those amounts nor the payment by Tenant of those amounts will constitute a waiver by Landlord of any breach, existing or in the future, of any of the terms or provisions of this Lease by Tenant or a waiver of any rights or remedies that the Landlord may have with respect to any breach. |
E. | In addition to the foregoing remedies, Landlord may change or modify the locks on the Premises if Tenant fails to pay the Rent when due, Landlord will not be obligated to provide another key to Tenant or allow Tenant to regain entry to the Premises unless and until Tenant pays Landlord all Rent that is delinquent. Tenant agrees that Landlord will not be liable for any damages resulting to the Tenant from the lockout. When Landlord changes or modifies the locks, Landlord or Landlord’s agent shall post a written notice in accordance with Section 93,002of the Texas Property Code, or its successor statute. Tenant may be subject to legal liability if Tenant or Tenants representative tampers with any lock after the locks have been changed or modified. |
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©NTCAR 2014 - Form No. 2 (3/2014)
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F. | No re-entry or taking possession of the Premises by Landlord will be construed as an election to terminate this Lease, unless a written notice of that intention is given to Tenant Notwithstanding any re-entry, taking possession or reletting. Landlord may, at any time thereafter, elect to terminate this Lease for a previous Default, Pursuit of any of the foregoing remedies will not preclude pursuit of any other remedies provided by law, nor will pursuit of any remedy provided in this Lease constitute a forfeiture or waiver of any Rent due to Landlord under this Lease or of any damages accruing to Landlord by reason of the violation of any of the provisions in this Lease. Failure of Landlord to declare any Default immediately upon its occurrence, or failure to enforce one or more of Landlord’s remedies, or forbearance by Landlord to enforce one or more of Landlord’s remedies upon a Default, will not be deemed to constitute a waiver of any of Landlord’s remedies for any Default. Pursuit of any one of the remedies will not preclude pursuit by Landlord of any of the other remedies provided in this Lease. The loss or damage that Landlord may suffer by reason of a Default by Tenant under this Lease, or the deficiency from any reletting, will include the expense of taking possession and any repairs performed by Landlord after a Default by Tenant. If Landlord terminates this Lease at any time for any Default in addition to other Landlord’s remedies, Landlord may recover from Tenant all damages Landlord may incur by reason of the Default, including the cost of recovering the Premises and the Rent then remaining unpaid. |
G. | Nothing in this Lease will be construed as imposing any duty upon Landlord to relet the Premises. Landlord will have no duty to mitigate Landlord’s damages except as required by applicable law. Any duty imposed by law on Landlord to mitigate damages after a Default by Tenant will be satisfied if Landlord undertakes to lease the Premises to another tenant (a “Substitute Tenant”) in accordance with the following criteria: |
(1) Landlord will have no obligation to solicit or entertain negotiations with any other prospective tenant for the Premises until Landlord obtains full possession of the Premises including, without limitation, the final and unappealable legal right to relet the Premises free of any claim of Tenant;
(2) Landlord will not be obligated to lease or show the Premises on a priority basis, or offer the Premises to a prospective tenant when other space in the Property suitable for the prospective tenant’s use is (or soon will be) available;
(3) Landlord will not be obligated to lease the Premises to a Substitute Tenant for an amount less than the current fair market rent then prevailing for similar uses in comparable buildings in the same market area as the Property, nor will Landlord be obligated to enter into a new lease under other terms arid conditions that are unacceptable to Landlord under Landlord’s then current leasing policies for comparable space in the Property;
(4) Landlord will not be obligated to enter into a lease with a Substitute Tenant whose use would:
(i) violate any restriction, covenant, or requirement contained in the lease of another tenant of the Property;
(ii) adversely affect the reputation of the Property; or
(iii) be incompatible with other uses of the Property.
(5) Landlord will not be obligated to enter into a lease with a Substitute Tenant that does not have, in Landlord’s reasonable opinion, sufficient financial resources to pay the Rent under the new lease and operate the Premises In a first class manner; and
(6) Landlord will not be required to spend any amount of money to alter, remodel, or otherwise make the Premises suitable for use by a proposed Substitute Tenant unless;
(i) Tenant pays any such sum to Landlord in advance of Landlord’s execution of a lease with the Substitute Tenant (which payment will not be In lieu of any damages or other sums to which Landlord may be entitled as a result of Tenants Default under this Lease); or
COMMERCIAL LEASE AGREEMENT - Page 19
©NTCAR 2014 - Form No. 2 (3/2014)
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(ii) Landlord, in Landlord’s reasonable discretion, determines that any such expenditure is financially justified in connection with entering into a lease with the Substitute Tenant.
H. | No right or remedy of Landlord is intended to be exclusive of any other right or remedy, and each and every right and remedy will be cumulative and in addition to any other right or remedy now or hereafter existing under this Lease, at law, in equity or by statute. Landlord will not be liable for any damages resulting to Tenant from any right or remedy exercised by Landlord, regardless of the cause, even If it is caused by the sole, joint or concurrent negligence of Landlord. |
11.03 Notice of Default. Tenant shall give written notice of any failure by Landlord to perform any of Landlord’s obligations under this Lease to Landlord and to any ground lessor, mortgagee or beneficiary under any deed of trust encumbering the Premises whose name and address have been furnished to Tenant in writing. Landlord will not be in default under this Lease unless Landlord (or the ground lessor, mortgagee or beneficiary) fails to cure the nonperformance within 30 days after receipt of Tenant’s notice. However, if the nonperformance reasonably requires more than 30 days to cure, Landlord will not be in default if the cure is commenced within the 30-day period and is thereafter diligently pursued to completion.
11.04 Limitation of Landlord’s Liability. As used in this Lease, the term “Landlord” means only the current owner or owners of the fee title to the Premises, or the leasehold estate under a ground lease of the Premises, at the time in question. Each Landlord is obligated to perform the obligations of Landlord under this Lease only during the time such Landlord owns such title or estate. Any Landlord who transfers its title, estate or other interest is relieved of all liability with respect to the obligations of Landlord under this Lease accruing on or after the date of the transfer, and Tenant agrees to recognize the transferee as Landlord under this Lease. However, each Landlord shall deliver to its transferee the Security Deposit held by Landlord, to the extent the Security Deposit has not then been applied under the terms of this Lease.
ARTICLE TWELVE
LANDLORD’S CONTRACTUAL LIEN
In addition to the statutory Landlord’s lien, Tenant hereby grants to Landlord a security interest to secure payment of all Rent and other sums of money becoming due under this Lease from Tenant, upon all inventory, goods, wares, equipment, fixtures, furniture and all other personal property of Tenant situated in or on the Premises, together with the proceeds from the sale thereof. Tenant may not remove such property without the consent of Landlord until all Rent in arrears and other sums then due to Landlord under this Lease have been paid. Upon the occurrence of a Default, Landlord may, in addition to any other remedies provided in this Lease or by law, enter upon the Premises and take possession of any and all goods, wares, equipment, fixtures, furniture and other personal property of Tenant situated in or on the Premises without liability for trespass or conversion, and sell the property at public or private sales, with or without having the property at the sale, after giving Tenant reasonable notice of the time and place of any such sale. Unless otherwise required by law, notice to Tenant of the sale will be deemed sufficient if given in the manner prescribed in this Lease at least 10 days before the time of the sale. Any public sale made under this Article will be deemed to have been conducted in a commercially reasonable manner if held on the Premises or where the property is located, after the time, place and method of sale and a general description of the types of property to be sold have been advertised in a daily newspaper published in the county where the Premises is located for five consecutive days before the date of the sale. Landlord or its assigns may purchase at a public sale and, unless prohibited by law, at a private sale. The proceeds from any disposition pursuant to this Article, less any and all expenses connected with the taking of possession, holding and selling of the property (including reasonable attorneys’ fees and expenses), will be applied as a credit against the indebtedness secured by the security interest granted in this Article. Any surplus will be paid to Tenant or as otherwise required by law, and Tenant shall promptly pay any deficiencies. Landlord is authorized to file a financing statement to perfect the security interest of Landlord in the aforementioned property and proceeds thereof under the provisions of the Texas Business and Commerce Code in effect in the State of Texas. Provided Tenant is not in default under any of the terms of this Lease, upon written request by Tenant, Landlord shall deliver a written subordination of Landlord’s statutory and contractual liens to any liens and security interests securing any institutional third party financing of Tenant Landlord shall not unreasonably withhold or delay the delivery of Landlord’s written subordination.
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©NTCAR 2014 - Form No. 2 (3/2014)
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ARTICLE THIRTEEN
PROTECTION OF LENDERS
13.01 Subordination and Attornment. Landlord may subordinate this Lease to any future ground Lease, deed of trust or mortgage encumbering the Premises, and advances made on the security thereof and any renewals, modifications, consolidations, replacements or extensions thereof, whenever made or recorded. Landlord’s right to subordinate is subject to Landlord providing Tenant with a written Subordination, Non-disturbance and Attornment Agreement from the ground lessor, beneficiary or mortgagee wherein Tenant’s right to peaceable possession of the Premises during the Term will not be disturbed if Tenant pays the Rent and performs all of Tenant’s obligations under this Lease and is not otherwise in default, in which case Tenant shall attorn to the transferee of or successor to Landlord’s interest in the Premises and recognize the transferee or successor as Landlord under this Lease. Tenant’s rights under this Lease are subordinate to any existing ground lease, deed of trust or mortgage encumbering the Premises. However, if any ground lessor, beneficiary or mortgagee elects to have this Lease be superior to its ground lease, deed of trust or mortgage and gives Tenant written notice thereof, then this Lease will be deemed superior to the ground lease, deed of trust or mortgage whether this Lease is dated prior or subsequent to the date of the ground lease, deed of trust or mortgage or the date of recording thereof.
13.02 Signing of Documents. Tenant shall sign and deliver any document that may be requested to evidence any attornment or subordination, or any agreement to attorn or subordinate, as long as the document is consistent with the provisions of Section 13.01. If Tenant fails to do so within 10 days after a written request, Tenant hereby irrevocably appoints Landlord as Tenant’s attorney-in-fact to execute and deliver the attornment or subordination document.
13.03 Estoppel Certificates.
A. | Upon Landlord’s written request, Tenant shall execute and deliver to Landlord a written statement (an “Estoppel Certificate”) certifying: |
(1) whether Tenant is an assignee or subtenant;
(2) the Expiration Date of this Lease;
(3) the number of renewal options under this Lease, if any, and the total period of time covered by the renewal options,
(4) that none of the terms or provisions of this Lease have been changed since the original execution of this Lease, except as shown on any attached amendments or modifications;
(5) that no default exists under the terms of this Lease by either Landlord or Tenant;
(6) that Tenant has no claim against Landlord under this Lease and has no defense or right of offset against collection of Rent or other charges accruing under this Lease;
(7) the amount and payment date of the last payment of Rent, the period of time covered by that payment, and the amount of any rental payments made in advance;
(8) the amount of any Security Deposit and other deposits, if any; and
(9) the Identity and address of any guarantor of this Lease.
Tenant shall deliver the statement to Landlord within 10 days after Landlord’s request. Landlord may forward any such statement to any prospective purchaser or lender of the Premises. The purchaser or lender may rely conclusively upon the statement as true and correct.
B. | If Tenant does not deliver the Estoppel Certificate to Landlord within the 10-day period, Landlord, and any prospective purchaser or lender, may conclusively presume and rely upon the following facts: (1) that the terms and provisions of this Lease have hot been changed except as otherwise represented by Landlord; (2) that this Lease has not been terminated except as otherwise represented by Landlord; (3) that not more than one monthly installment of Base Rent and other charges have been paid in advance; (4) there are no claims against Landlord nor any defenses or rights of offset against collection of Rent; and (5) that Landlord is not in default under this Lease. In such event, Tenant will be estopped from denying the truth of the presumed facts. |
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©NTCAR 2014 - Form No. 2 (3/2014)
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C. | Also, if Tenant does not deliver the Estoppel Certificate to Landlord within the 10-day period, Landlord may deliver a written notice to Tenant stating that Tenant must deliver an Estoppel Certificate under this Section within five days after Tenant receives the notice. If Tenant does not deliver an Estoppel Certificate to Landlord within five days after Tenant receives the notice, then Tenant’s failure to deliver an Estoppel Certificate will constitute a Default under this Lease, notwithstanding any longer period of time under Section 11.01 that Tenant would otherwise be allowed to cure a failure before the failure would become a Default. |
13.04 Tenant’s Financial Condition. Within 10 days after a written request from Landlord, but not more than two times in any calendar year, Tenant shall deliver to Landlord financial statements as are reasonably required by Landlord to verify the net worth of Tenant, or any assignee, subtenant, or guarantor of Tenant. In addition, Tenant shall deliver to any lender designated by Landlord any financial statements required by the lender to facilitate the financing or refinancing of the Premises. Tenant represents to Landlord that each financial statement is a true, complete, and accurate statement as of the date of the statement. All financial statements will be confidential and will be used only for the purposes set forth in this Lease.
ARTICLE FOURTEEN
ENVIRONMENTAL REPRESENTATIONS AND INDEMNITY
14.01 Tenant’s Compliance with Environmental Laws. Tenant, at Tenant’s expense, shall comply with all laws, rules, orders, ordinances, directions, regulations and requirements of Federal, State, county and municipal authorities pertaining to Tenant’s use of the Property and with the recorded covenants, conditions and restrictions, regardless of when they become effective, including, without limitation, all applicable Federal, State and local laws, regulations or ordinances pertaining to air and water quality, Hazardous Materials (as defined in Section 14.05). waste disposal, air emissions and other environmental matters, all zoning arid other land use matters, and with any direction of any public officer or officers, pursuant to law, which impose any duty upon Landlord or Tenant with respect to the use or occupancy of the Property.
14.02 Tenant’s Indemnification. Tenant shall not cause or permit any Hazardous Materials to be brought upon, kept or used in or about the Property by Tenant, or Tenant’s agents, employees, contractors or invitees without the prior written consent of Landlord. If the presence of Hazardous Materials on the Property caused or permitted by Tenant results in contamination of the Property or any other property, or if contamination of the Property or any other property by Hazardous Materials otherwise occurs for which Tenant is legally liable to Landlord for damage resulting therefrom, then Tenant shall indemnify, defend and hold Landlord harmless from any and all claims, judgments, damages, penalties, fines, costs, liabilities or losses (including, without limitation, diminution in value of the Property, damages for the loss or restriction on use of rentable or unusable space or of any amenity or appurtenance of the Property, damages arising from any adverse impact on marketing of building space or land area, sums paid in settlement of claims, reasonable attorneys’ fees, court costs, consultant fees and expert fees) that arise during or after the Term as a result of the contamination. This indemnification of Landlord by Tenant includes, without limitation, costs incurred in connection with any investigation of site conditions or any clean-up, remedial work, removal or restoration work required by any Federal, State or local government agency because of Hazardous Materials present in the soil or ground water on or under the Property. Without limiting the foregoing, if the presence of any Hazardous Materials on the Property (or any other property) caused or permitted by Tenant results in any contamination of the Property, Tenant shall promptly take all actions at Tenant’s sole expense as are necessary to return the Property to the condition existing prior to the introduction of any such Hazardous Materials, provided that Landlord’s approval of such actions is first obtained.
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14.03 Landlord’s Representations. Landlord represents, to the best of Landlord’s actual knowledge, that: (i) any handling, transportation, storage, treatment or usage of Hazardous Materials that has occurred on the Property to date has been in compliance with all applicable Federal, State, and local laws, regulations and ordinances; and (ii) no leak, spill, release, discharge, emission or disposal of Hazardous Materials has occurred on the Property to date and that the soil or groundwater on or under the Property is free of Hazardous Materials as of the Commencement Date, unless expressly disclosed by Landlord to Tenant in writing.
14.04 Landlord’s Indemnification. Landlord hereby indemnifies, defends and holds Tenant harmless from any claims, judgments, damages, penalties, fines, costs, liabilities, (including sums paid in settlements of claims) or loss, Including, without limitation, reasonable attorneys’ fees, court costs, consultant fees, and expert fees, which arise during or after the Term of this Lease from or in connection with the presence or suspected presence of Hazardous Materials in the soil or groundwater on or under the Property, unless the Hazardous Material is released by Tenant or is present as a result of the negligence or willful conduct of Tenant. Without limiting the generality of the foregoing, the indemnification provided by this Section will specifically cover costs incurred in connection with any Investigation of site conditions or any clean-up, remedial work, removal or restoration work required by any Federal, State or local governmental authority.
14.05 Definition. For purposes of this Lease, the term “Hazardous Materials” means any one or more pollutant, toxic substance, hazardous waste, hazardous material, hazardous substance, solvent or oil as defined in or pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, as amended, the Clean Water Act, as amended, the Water Pollution Control Act, as amended, the Solid Waste Disposal Act, as amended, or any other Federal, State or local environmental law, regulation, ordinance, or rule, whether existing as of the date of this Lease or subsequently enacted.
14.06 Survival. The representations and indemnities contained in this Article Fourteen will survive the expiration or termination of this Lease.
ARTICLE FIFTEEN
PROFESSIONAL SERVICE FEES
15.01 Amount and Manner of Payment. Professional service Fees due to the Principal Broker and Cooperating Broker (together, the “Brokers”) will be calculated and paid as follows:
A. | Lump Sum. Unless the box for Section 15.01B is checked in Section 1.14A, then Landlord agrees to pay to each of the Brokers a lump sum professional service Fee for negotiating this Lease, plus any applicable sales taxes, equal to: (i) the percentages stated in Section 1.14A of the total Base Rent to become due to Landlord during the Term, if the blanks for percentages are completed; or (ii) the amounts per square foot in the Premises stated in Section 1.14A. if the blanks for amounts per square foot are completed. The Fees will be paid to the Brokers (i) one-half on the date of final execution of this Lease, and (ii) the balance on the Commencement Date of this Lease. |
B. |
|
15.02 Payments on Renewal, Expansion or New Lease. Subject to the termination date stated in this Section below, if Tenant or Tenant’s successors or assigns: (a) exercises any right or option to renew or extend the Term (whether contained in this Lease or in any amendment to this Lease) or enters into a new lease covering the Premises, a portion of the Premises, or the Premises and additional space; or (b) enters into any new lease, expansion or other rental agreement as to any premises located on or constituting all or part of any real property owned by Landlord adjacent to the Property, then Landlord shall pay to each of the Brokers an additional Fee covering the full period of the renewal, extension, new lease, expansion or other rental agreement. The additional Fees will be due on the date of exercise of a renewal option, or the date of execution in the case of a new lease, expansion or other agreement The additional Fees will be computed and paid under Section 15.01A or Section 15.01B above (whichever has been made applicable under Section 1.14), as if a new lease had been made for such period of time. The Brokers’ right to receive these additional Fees will terminate on the date that is 10 years after the expiration of the Term of this Lease, as amended or extended.
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15.03 Payments on Sale. Subject to the termination date stated in this Section below, if Tenant or Tenant’s successors or assigns, purchases the Premises pursuant to a purchase option contained in this Lease (or in any amendment to this Lease or any other agreement) or otherwise purchases the Premises, the Property or any portion of either the Premises or the Property, then Landlord shall pay to each of the Brokers a Fee equal to the percentages stated in Section 1.14B of the purchase price, payable in Good Funds at the closing. Upon the closing of a sale to Tenant, any monthly lease Fees will terminate upon payment of the Fee on the sale. The Brokers’ right to receive the Fees set forth in this Section 15.03 will terminate on the date that is 10 years after the expiration of the Term of this Lease, as amended or extended.
15.04 Other Brokers. Both Landlord and Tenant represent to the other party that they have had no dealings with any person, firm or agent in the negotiation of this Lease other than the Brokers) named in this Lease, and no other broker, agent, person, firm or entity other than Broker(s) is entitled to any commission or fee in connection with this Lease.
15.05 Landlord’s Liability. Landlord will be liable for payment of all Fees solely to the Brokers, and Landlord will not be obligated to pay any claims by any undisclosed broker. The Principal Broker may pay a portion of the Fee to any Cooperating Broker pursuant to a separate agreement between the Brokers.
15.06 Joint Liability of Tenant. If Tenant enters into any new lease, extension, renewal, expansion, or other agreement to rent, occupy, or purchase any property described in Section 15.02 or Section 15.03 within the time specified in those Sections, the negotiations must be communicated through the Principal Broker (which may be done through the Cooperating Broker), otherwise Tenant will be jointly and severally liable with Landlord for any payments due or to become due to the Principal Broker.
15.07 Assumption on Sale. In the event of a sale or other transfer of the Premises by Landlord, Landlord shall assign this Lease to the purchaser or other transferee, and obtain from the purchaser or other transferee an Assumption Agreement in recordable form whereby the purchaser or other transferee agrees to pay the Brokers all Fees payable under this Lease. Landlord shall deliver a fully executed original counterpart of the Assumption Agreement to each of the Brokers upon the closing of the sale or other transfer of the Premises. Landlord will be released from personal liability for subsequent payments of Fees payable under this Lease only upon the delivery of the Assumption Agreement to the Brokers.
15.08 Termination. Landlord and Tenant agree that the Brokers are third party beneficiaries of this Lease with respect to the Fees, and that no change may be made by Landlord or Tenant as to the time of payment, amount of payment or the conditions for payment of the Fees without the written consent of the Brokers. The termination of this Lease by the mutual agreement of Landlord and Tenant will not affect the right of the Brokers to continue to receive the Fees agreed to be paid under this Lease, just as if Tenant had continued to occupy the Premises and had paid the Rent during the entire Term. Amendment or termination of this Lease under Article Eight (Damage or Destruction) and Article Nine (Condemnation) will not amend or terminate the Brokers’ right to collect the Fees.
15.09 Intermediary Relationship.
A. | If either of the Brokers has indicated in Section 1.12 or Section 1.13 or otherwise that they are acting as an intermediary, then Landlord and Tenant consent to the intermediary relationship, authorize such Broker or Brokers to act as an intermediary between Landlord and Tenant in connection with this Lease, and acknowledge that the source of any expected compensation to the Brokers will be Landlord, and the Brokers may also be paid a fee by Tenant. A broker, and any broker or salesperson appointed to communicate with and carry out instructions of one party, who acts as an intermediary is required to act fairly and impartially, and may not: |
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(1) disclose to Tenant that Landlord will accept a rent less than the asking rent, unless otherwise instructed in a separate writing by Landlord;
(2) disclose to Landlord that Tenant will pay a rent greater than the rental submitted in a written offer to Landlord, unless otherwise instructed in a separate writing by Tenant;
(3) disclose any confidential information, or any information a party specifically Instructs the real estate broker or salesperson in writing not to disclose, unless:
(a) the broker or salesperson is otherwise instructed in a separate writing by the respective party;
(b) the broker or salesperson is required to disclose the information by the Texas Real Estate License Act or a court order ; or
(c) the information materially relates to the condition of the property;
(4) treat a party to the transaction dishonestly; or
(5) violate the Texas Real Estate License Act.
B. | Appointments. Each Broker is authorized to appoint, by providing written notice to the parties, one or more license holders associated with the Broker to communicate with and carry out instructions of one party, and one or more other license holders associated with the Broker to communicate with and cany out instructions of the other party. An appointed license holder may provide opinions and advice during negotiations to the party to whom the license holder is appointed. |
ARTICLE SIXTEEN
MISCELLANEOUS AND ADDITIONAL PROVISIONS
16.01 Disclosure. Landlord and Tenant understand that a real estate broker is not an expert in matters of law, tax, financing, surveying, hazardous materials, engineering, construction, safety, zoning, land planning, architecture, the TABA, or the ADA. The Brokers hereby advise Tenant to seek expert assistance on such matters. Brokers do not investigate a property’s compliance with building codes, governmental ordinances, statutes and laws that relate to the use or condition of a property and its construction, or that relate to its acquisition. If the Brokers provide names of consultants or sources for advice or assistance, Tenant acknowledges that the Brokers do not warrant the services of the advisors or their products and cannot warrant the suitability of property to be acquired or leased. Furthermore, the Brokers do not warrant that the Landlord will disclose any or all property defects, although the Brokers Will disclose to Tenant any actual knowledge possessed by Brokers regarding defects of the Premises and the Property. In this regard, Tenant agrees to make all necessary and appropriate inquiries and to use diligence in investigating the Premises and the Property before signing this Lease. Tenant acknowledges and agrees that neither the Principal Broker nor any Cooperating Broker has made any representation to Tenant with respect to the condition of the Premises, and that Tenant is relying exclusively upon Tenant’s own investigations and the representations of Landlord, if any, with respect to the condition of the Premises. Landlord and Tenant agree to hold the Brokers harmless from any and all damages, claims, costs arid expenses resulting from or related to Landlord’s furnishing to the Brokers any inaccurate information with respect to the Premises, or Landlord’s concealing any material information with respect to the Premises. Landlord arid Tenant hereby agree to indemnify and defend the Brokers against any and all liabilities, claims, debts, damages, costs, or expenses, including but not limited to reasonable attorneys’ fees and court costs, related to or arising out of or in any way connected to (a) representations concerning matters properly the subject of advice by experts; or (b) any dispute directly between Landlord and Tenant regarding this Lease. In addition, to the extent permitted by applicable law, the Brokers’ liability for errors, omissions, or negligence is limited to the return of the Fee, if any, paid to the Brokers pursuant to this Lease.
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16.02 Force Majeure. If performance by Landlord of any term, condition or covenant in this Lease is delayed or prevented by any Act of God, strike, lockout, shortage of material or labor, restriction by any governmental authority, civil riot, flood, or any other cause not within the control of Landlord, the period for performance of the term, condition or covenant will be extended for a period equal to the period Landlord is so delayed or prevented.
16.03 Interpretation. The captions of the Articles or Sections of this Lease are to assist the parties in reading this Lease and are not part of the terms or provisions of this Lease. Whenever required by the context of this Lease, the singular will include the plural and the plural will include the singular, and the masculine, feminine and neuter genders will each include the other.
16.04 Waivers. Any waivers of any provisions of this Lease must be in writing and signed by the waiving party. Landlord’s delay or failure to enforce any provisions of this Lease or Landlord’s acceptance of late installment of Rent will not be a waiver and will not prevent Landlord from enforcing that provision or any other provision of this Lease in the future. No statement on a check from Tenant or in a letter accompanying a check will be binding on Landlord. Landlord may, with or without notice to Tenant, negotiate, cash, or endorse the check without being bound to the conditions of any such statement.
16.05 Severability. A determination by a court of competent jurisdiction that any provision of this Lease is invalid or unenforceable will not invalidate the remainder of that provision or any other provision of this Lease, which will remain in full force arid effect.
16.06 Joint and Several Liability. All parties signing this Lease as Tenant will be jointly and severally liable for all obligations of Tenant. Tenant will be responsible for the conduct, acts and omissions of Tenant’s agents, employees, customers, contractors, invitees, agents, successors or others using the Premises with Tenant’s express or implied permission.
16.07 Amendments or Modifications. This Lease is the only agreement between the parties pertaining to the lease of the Premises and no other agreements are effective unless made a part of this Lease. All amendments to this Lease must be in writing and signed by all parties.
16.08 Notices. All notices and other communications required or permitted under this Lease must be in writing and will be deemed delivered, whether actually received or not, on the earlier of: (i) actual receipt if delivered in person or by messenger with evidence of delivery; or (ii) receipt of an electronic facsimile transmission (“Fax”) with confirmation of delivery; or (iii) upon deposit in the United States Mail as required below. Notices may be transmitted by Fax to the Fax telephone numbers specified in Article One of this Lease, if any. Notices delivered by mail must be deposited in the U.S. Postal Service, certified mail, return receipt requested, postage prepaid, and properly addressed to the intended recipient as set forth in Article One. Notices sent by any other means will be deemed delivered when actually received, with proof of delivery. After possession of the Premises by Tenant, Tenant’s address for notice purposes will be the address of the Premises unless Tenant notifies Landlord in writing of a different address to be used for that purpose. Any party may change its address for notice by delivering written notice of its new address to all other parties in the manner set forth above. Copies of all notices should also be delivered to the Brokers, but failure to notify the Brokers will not cause an otherwise properly delivered notice to be ineffective. Also, copies of all notices must also be delivered to the following persons [if the blanks have been completed]:
Copies of notices to Landlord are to be delivered to:
Address: | |||
Telephone: | Fax: | ||
Email: |
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Copies of notices to Tenant are to be delivered to:
Drew Jones
Address: | 2260 5th Avenue | ||
Fort Worth TX 76110 | |||
Telephone: | 2142260133 | Fax | |
Email: | drew@harperandjones.com | ||
x Landlord also consents to receive any notices by e-mail. [Check the box, if applicable.]
x Tenant also consents to receive any notices by e-mail. [Check the box, if applicable ]
16.09 Attorneys’ Fees. If, on account of any breach or default by any party to this Lease in its obligations to any other party to this Lease (including, but not limited to, the Brokers), it becomes necessary for a party to employ an attorney to enforce or defend any of its rights or remedies under this Lease, the non-prevailing party agrees to pay the prevailing party its reasonable attorneys’ fees and court costs, if any, whether or not suit is instituted in connection with the enforcement or defense.
16.10 Venue. All obligations under this Lease, including, but not limited to, the payment of Fees to the Brokers, will be performed and payable in the county in which the Property is located. The laws of the State of Texas will govern this Lease.
16.11 Survival. All obligations of any party to this Lease that are not fulfilled at the expiration or the termination of this Lease will survive such expiration or termination as continuing obligations of the party,
16.12 Binding Effect. This Lease will inure to the benefit of, and be binding upon, each of the parties to this Lease and their respective heirs, representatives, successors and assigns. However, Landlord will not have any obligation to Tenant’s successors or assigns unless the rights or interests of the successors or assigns are acquired in accordance with the terms of this Lease.
16.13 Right to Claim a Lien. If a commission agreement or other agreement to pay Fees to the Brokers is not included in this Lease, then be advised that pursuant to Chapter 62 of the Texas Property Code, each Broker hereby discloses the Broker’s right to claim a lien based on a separate written commission agreement or other agreement to pay Fees to the Broker, and this disclosure is incorporated in the commission agreement or other agreement to pay Fees.
16.14 Patriot Act Representation. Landlord and Tenant each represent to the other that: (1) its property interests are not blocked by Executive Order No. 13224, 66 Fed. Reg. 49079; (2) it is not a person listed on the Specially Designated Nationals and Blocked Persons list of the Office of Foreign Assets Control of the United States Department of the Treasury; and (3) it is not acting for or on behalf of any person on that list.
16.15 Counterparts. This Lease may be executed in a number of identical counterparts, and all counterparts will be construed together as one agreement.
16.16 Offer. The execution of this Lease by the first party to do so constitutes an offer to lease the Premises. Unless this Lease is signed by the other party and a fully executed copy is delivered to the first party by the earlier of this date March 1st, 2019 or the date that is 10 days after the date of execution by the first party, such offer to lease will be deemed automatically withdrawn. Any acceptance of an offer that has been withdrawn will only be effective if the party that withdrew the offer subsequently agrees to the acceptance either in writing or by course of conduct.
COMMERCIAL LEASE AGREEMENT - Page 27
©NTCAR 2014 - Form No. 2 (3/2014)
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16.17 Additional Provisions. Landlord and Tenant agree to any provisions set forth on the attached Addenda (if any) and the following additional provisions (if any):
See Additional Provisions attached hereto as Addendum J and made part of thereof for all purposes.
COMMERCIAL LEASE AGREEMENT - Page 28
©NTCAR 2014 - Form No. 2 (3/2014)
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16.18 Consult an Attorney. This Lease is an enforceable, legally binding agreement. Read it carefully. The Brokers involved in the negotiation of this Lease cannot give you legal advice. Landlord and Tenant acknowledge that they have been advised by the Brokers to have this Lease reviewed by competent legal counsel of their choice before signing this Lease. By executing this Lease, Landlord and Tenant each agree to the provisions contained in this Lease.
This Lease has been executed as of the Effective Date (as defined in Section 1.01).
PERMISSION TO USE: This form is provided for the use of members of the North Texas Commercial Association of REALTORS®, Inc. (“NTCAR”), members of the North Texas Commercial Association of Real Estate Professionals, Inc, and other licensed users of an NTCAR electronic forms system, Permission is given to make limited copies of the current version of this form for use in a particular Texas real estate transaction. Please contact the NTCAR office to confirm that you are using the current version of this form, Mass production, or reproduction for resale, is not allowed without express permission. Any changes to this form must be made in a manner that is obvious. If any words are deleted, they must be left in the form with a line drawn through them. If changes are made that are not obvious, the person who made the change could be subject to a claim of fraud or misrepresentation for passing off an altered form as if it were the genuine NTCAR form.
COMMERCIAL LEASE AGREEMENT - Page 29
©NTCAR 2014 - Form No. 2 (3/2014)
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J. Elmer Turner, REALTORS, Inc
Information About Brokerage Services
Texas law requires all real estate licensees
to give the following information about
|
11/2/2015 |
TYPES OF REAL ESTATE LICENSE HOLDERS:
# | A BROKER is responsible for all brokerage activities, including acts performed by sales agents sponsored by the broker. |
# | A SALES AGENT must be sponsored by a broker and works with clients on behalf of the broker. |
A BROKER’S MINIMUM DUTIES REQUIRED BY LAW (A client is the person or party that the broker represents):
# | Put the interests of the client above all others, including the broker’s own interests; |
# | Inform the client of any material information about the property or transaction received by the broker; |
# | Answer the client's questions and present any offer to or counter-offer from the client; and |
# | Treat all parties to a real estate transaction honestly and fairly. |
A LICENSE HOLDER CAN REPRESENT A PARTY IN A REAL ESTATE TRANSACTION:
AS AGENT FOR OWNER (SELLER/LANDLORD): The broker becomes the property owner’s agent through an agreement with the owner, usually in a written listing to sell or property management agreement. An owner's agent must perform the broker’s minimum duties above and must inform the owner of any material information about the property or transaction known by the agent, including information disclosed to the agent or subagent by the buyer or buyer’s agent.
AS AGENT FOR BUYER/TENANT: The broker becomes the buyer/tenant’s agent by agreeing to represent the buyer, usually through a written representation agreement. A buyer’s agent must perform the broker’s minimum duties above and must inform the buyer of any material information about the property or transaction known by the agent, including information disclosed to the agent by the seller or seller’s agent.
AS AGENT FOR BOTH - INTERMEDIARY: To act as an intermediary between the parties foe broker must first obtain the written agreement of each party to the transaction. The written agreement must state who will pay the broker and, in conspicuous bold or underlined print, set forth the broker’s obligations as an intermediary. A broker who acts as an intermediary:
# | Must treat all parties to the transaction impartially and fairly; |
# | May, with the parties’ written consent, appoint a different license holder associated with the broker to each party (owner and buyer) to communicate with, provide opinions and advice to, and carry out the instructions of each party to the transaction. |
# | Must not, unless specifically authorized in writing to do so by the party, disclose; |
o | that the owner will accept a price less than the written asking price; |
o | that the buyer/tenant will pay a price greater than the price submitted in a written offer; and |
o | any coincidental information or any other information that a party specifically instructs the broker in writing not to disclose, unless required to do so by law. |
AS SUBAGENT: A license holder acts as a subagent when aiding a buyer in a transaction without an agreement to represent the buyer. A subagent can assist the buyer but does not represent the buyer and must place the interests of the owner first.
TO AVOID DISPUTES, ALL AGREEMENTS BETWEEN YOU AND A BROKER SHOULD BE IN WRITING AND CLEARLY ESTABLISH:
· | The broker’s duties and responsibilities to you, and your obligations under the representation agreement. |
· | Who will pay the broker for services provided to you, when payment will be made and how the payment will be calculated. |
LICENSE HOLDER CONTACT INFORMATION: This notice is being provided for information purposes. It does not create an obligation for you to use the broker’s services. Please acknowledge receipt of this notice below and retain a copy for your records.
J. Elmer Turner, Realtors Inc. | 381055 | mike@jelmerturner.com | (214)954-1221 | |||
Licensed Broker /Broker Firm Name or | License No. | Phone | ||||
Primary Assumed Business Name | ||||||
Michael C. Turner | 0277978 | mike@jelmerturner.com | (214)954-1221 | |||
Designated Broker of Firm | License No. | Phone | ||||
Licensed Supervisor of Sales Agent/ | License No. | Phone | ||||
Associate | ||||||
Logan F. Turner | 681322 | logan@jelmerturner.com | (214)250-4578 | |||
Sales Agent/Associate’s Name | License No. | Phone |
[ILLEGIBLE] | ||||
Buyer/Tenant/Seller/Landlord Intials | Date | |||
Regulated by the Texas Real Estate Commission | Information avaliable at www.trec.texas.gov |
IABS 1-0
Produced with zipForm® by zipLogix 18070 Fifteen Mile Road, Fraser, Michigan 48026 www.ziplogix.com 2736 Routh St. |
J. Elmer Turner, REALTORS, Inc
NORTH TEXAS COMMERCIAL ASSOCIATION OF REALTORS®
ADDENDUM “A” TO LEASE
RENEWAL OPTIONS
Address of the Premises: | 2736 Routh St, Dallas, TX 76201-1970 |
1. Option to Extend the Term. Landlord grants to Tenant Two (2) option(s) (each an “Option”) to extend the Term for an additional term of Thirty-six (36) months each (the “Extension”), on the same terms, conditions and covenants set forth in this Lease, except as provided below. Each Option may be exercised only by written note delivered to the Landlord no earlier than Two Hundred Seventy ( 270 ) days before, and no later than ( 180 )days before, the expiration of the Term or the preceding Extension of the Term, whichever is applicable. If Tenant fails to deliver to Landlord a written notice of the exercise of an Option within the prescribed time period, such Option and any succeeding Options will lapse, and there will be no further right to extend the Term. Each Option may only be exercised by Tenant on the express condition that, at the time of the exercise, Tenant is not in default under any of the provisions of this Lease. The Options are personal to Tenant and may not be exercised by an assignee or subtenant without Landlord’s written consent.
2. Calculation of Rent. The Base Rent during the Extension(s) will be determined by one of the following methods [check one]:
¨ | A. Fair Market Rental. The Base Rent during the Extension will be the Fair Market Rental determined as follows: |
a. The “Fair Market Rental” of the Premises means the price that a ready and willing tenant Would pay as of the commencement of the Extension as monthly rent to a ready and willing landlord of Premises comparable to the Premises if the property were exposed for lease on the open market for a reasonable period of time, and taking into account the term of the Extension, the amount of improvements made by Tenant at its expense, the creditworthiness of the Tenant, and all of the purposes for which the property may be used and not just the use proposed to be made of Ws Premises by Tenant Upon proper written notice by Tenant to Landlord of Tenant’s intention to elect to exercise the renewal Option, Landlord shall, within days thereafter, notify Tenant in writing of Landlord’s proposed Fair Market Rental amount, and Tenant shall thereupon notify Landlord of Tenant’s acceptance or rejection of Landlord’s proposed amount. Failure of Tenant to reject Landlord’s Fair Market Rental amount within days after receipt of Landlord’s notice will be deemed Tenant’s acceptance of Landlord’s proposed Fair Market Rental amount.
b. If Landlord and Tenant have not been able to agree on the Fair Market Rental amount within 40 days following the exercise of the Option, the Fair Market Rental for the Extension will be determined by the following appraisal process. Landlord and Tenant shall endeavor in good faith to select a single Appraiser. The term “Appraiser” means a State Certified Real Estate Appraiser licensed by the State of Texas to value commercial property. If Landlord and Tenant are able to agree upon and select a single Appraiser, that Appraiser will determine the Fair Market Rental for the Extension.
If Landlord and Tenant are unable to agree upon a single Appraiser within days after the end of the 40-day period, each will then appoint one Appraiser by written notice to the other, given within days after the end of the 40-day period. Within five business days after the two Appraisers are appointed, the two Appraisers will appoint a third Appraiser. If either Landlord or Tenant fails to appoint its Appraiser within the prescribed time period, the single Appraiser appointed will determine the Fair Market Rental amount of the Premises. Each party will bear the cost of the appraiser appointed by it and the parties will share equally the cost of the third appraiser. The Fair Market Rental of the Premises will be the average of two of the three appraisals that are closest in amount, and the third appraisal will be disregarded.
ADDENDUM “A” TO LEASE - Page 1
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c. In no event will the Base Rent be reduced for any Extension, regardless of the Fair Market Rental determined by any appraisal. If the Fair Market Rental is not determined before the commencement of the extension, then Tenant shall continue to pay to Landlord the Base Rent applicable to the Premises immediately before the Extension until the Fair Market Rental amount is determined, and when it is determined, Tenant shall pay to Landlord the difference between the Base Rent actually paid by Tenant to Landlord and the new Base Rent
¨ B. Consumer Price Index Adjustment. The monthly Base Rent during the Extension will be determined by multiplying the monthly installment of Base Rent during the last month of the Term by a fraction determined as follows:
a. | The numerator will be the Latest Index that means either [check one]: |
¨ | (1) the Index published for the nearest calendar month preceding the first day of the Extension, or |
¨ | (2) the Index for the month of Extension. preceding the first day of the |
b. | The denominator will be the Initial Index that means either [check one]: |
¨ | (1) the Index published for the nearest calendar month preceding the Commencement Date,or |
¨ | (2) the Index for the month of preceding the Commencement Date. |
[If no blanks are filled in above, the choice (1) including the phrase “the nearest calendar month preceding” will apply. If the Index Is not yet published for the nearest calendar month preceding the applicable date, then “the nearest calendar month” means the first month preceding the applicable date for which the Index is published].
c. The Index means the Consumer Price Index (CPI) for All Urban Consumers (All Items) U.S. City Average (unless this box is checked ¨ in which case the CPI for the Dallas/Fort Worth Consolidated Metropolitan Statistical Area will be used) published by the U. S. Department of Labor, Bureau of Labor Statistics (Base Index of 1982-84 =100). If the Index is discontinued or revised, the new index or computation that replaces the Index will be used in order to obtain substantially the same result as would have been obtained if it had not been discontinued or revised. If such computation would reduce the Rent for the particular Extension, it will be disregarded, and the Rent during the immediately preceding period will apply instead.
x | C. Fixed Rental Adjustments. The monthly installments of Base Rent during the Extension(s) will be increased beginning on the following dates to these amounts: |
Date: | See Additional Provisions | Amount:$ | ||
Date: | Amount:$ | |||
Date: | Amount:$ | |||
Date: | Amount:$ |
ADDENDUM “A” TO LEASE - Page 2
©NTCAR 2014 - Form No. 2(3/2014)
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J. Elmer Turner, REALTORS, Inc
North Texas Commercial association of Realtors®
ADDENDUM “G” TO LEASE
RULES AND REGULATIONS
Address of the Premises: | 2736 Routh St. Dallas, TX 75201-1970 |
1. Application. Tenant, and Tenant’s employees and Invitees, shall abide by the following standards for the mutual safety, cleanliness, care, protection, comfort and convenience of all tenants and occupants of the Property. These Rules and Regulations apply to all of the Property as defined in this Lease including, but not limited to, the Premises, the building(s), the parking garages, if any, the common areas, driveways, and parking lots.
2. Consent Required. Any exception to these Rules and Regulations must first be approved in writing by Landlord. For purposes of these Rules and Regulations, the term “Landlord” includes the building manager, the building manager’s employees, and any other agent or designee authorized by Landlord to manage or operate the Property.
3. | Rules and Regulations: |
a. Tenant may not conduct any auction, “flea market1’ or “garage sale” on the Premises nor store any goods or merchandise on the Property except for Tenant’s own business use. Food may not be prepared in the Premises except in small amounts for consumption by Tenant and Tenant’s officers and employees. Vending machines or dispensing machines may not be placed in the Premises without Landlord’s written approval. The Premises may not be used or occupied as sleeping quarters or for lodging purposes. Animals may not be kept in or about the Property.
b. Tenant shall not obstruct sidewalks, driveways, loading areas, parking areas, corridors, hallways, vestibules, stairs and Other similar areas designated for the collective use of tenants, or use such areas for Tenant’s storage, temporary or otherwise, or for any purpose other than going to and from the Premises. Tenant shall comply with parking rules and guidelines as may be posted on the Property from time to time.
c. Tenant shall not make any loud noises, unusual vibrations, unpleasant odors, objectionable or illegal activities on the Property. Tenant shall not permit the operation of any equipment in the Premises that annoys other occupants of the Property. Tenant shall not interfere with the possession of other tenants of the property.
d. Tenant may not bring any flammable, explosive, toxic, noxious, dangerous or hazardous materials onto the Property, except in small quantities as needed in Tenant’s business and used, stored, and disposed of in accordance with applicable laws.
e. Installation of security systems, telephone, television and other communication cables, fixtures and equipment must comply with Section 7.04 of the Lease, except that routine installation and construction of normal communication devices that do not require any holes in the roof or exterior walls of the Property do not require the written approval of Landlord.
f. Movement into or out of the building through public entrances, lobbies or corridors that requires use of a hand truck, dolly or pallet jack to carry freight, furniture, office equipment, supplies and other large or heavy material, must be limited to the service entrances and freight elevators only and must’be done at times and in a manner so as not to unduly inconvenience other occupants of the Property. All wheels for such use must have rubber tires and edge guards to prevent damage to the building. Tenant shall be responsible for and shall pay all costs to repair damages to the building caused by the movement of materials by Tenant.
ADDENDUM “G” TO LEASE - Page 1
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g. Requests by Tenant for building services, maintenance and repair must be made in writing to the office of the building manager designated by Landlord and must be dated. Tenant shall give prompt written notice to Landlord of any significant damage to or defects in the Premises or the Property, including plumbing, electrical and mechanical systems, heating, ventilating and air conditioning systems, roofs, windows, doors, foundation and structural components, regardless of whose responsibility it is to repair such damage or defects.
h. Tenant shall not change locks or install additional locks on doors without the prior written consent of Landlord. If Tenant changes locks or installs additional locks on the Property, Tenant shall provide Landlord with a copy of each separate key to each lock upon Landlord’s request. Upon termination of Tenant’s occupancy of the Premises, Tenant must surrender all keys to the Premises and the Property to Landlord.
i. Harmful liquids, toxic wastes, bulky objects, insoluble substances and other materials that may cause clogging, stains or damage to plumbing fixtures or systems must not be placed in the lavatories, water closets, sinks, or drains. Tenant must pay the costs to repair and replace drains, plumbing fixtures and piping that is required because of damage caused by Tenant
j. Tenant shall cooperate with Landlord and other occupants of the Property in keeping the Property and the Premises neat and clean. Nothing may be swept, thrown or left in the corridors, stairways, elevator shafts, lobbies, loading areas, parking lots or any other common areas on the Property. All trash and debris must be properly placed in receptacles provided therefor.
k. Landlord may regulate the weight and position of heavy furnishings and equipment on the floor of foe Premises, including safes, groups of filing cabinets, machines, and any other item that may overload the floor Tenant shall notify Landlord when heavy items are to be taken into or out of the building, and the placement and transportation of heavy items may be done only with the priorwritten approval of Landlord.
l. No window screens, blinds, draperies, awnings, solar screen films, window ventilators or other materials visible from the exterior of the Premises may be placed in the Premises without Landlord’s approval. Landlord is entitled to control all lighting that may be visible from the exterior of the building.
m. No advertisement, sign, notice, handbill, poster or banner may be exhibited, distributed, painted or affixed on foe Property. No directory of tenants is allowed on the Property other than that provided by Landlord.
n. Tenant agrees to cooperate with and assist Landlord in the prevention of peddling, canvassing and soliciting on the Property.
o. Tenant accepts any and all liability for damages and injuries to persons and property resulting from the serving or sales of alcoholic beverages by or on behalf of Tenant on or from the Property.
p. Any person entering and leaving foe building before and after normal working hours, or building hours if posted by Landlord, whichever applies, may be required to identify himself to security personnel by signing a list and giving the time of day and destination or location of the applicable Premises. Normal building business hours are established by Landlord from time to time.
4. Revisions. Landlord reserves the right to revise or rescind any of these Rules and Regulations and to make additional rules that Landlord may determine are necessary from time to time for the safety, protection, comfort and convenience of the tenants and visitors of the Property and for the care, protection and cleanliness of foe Property. Revisions and additions will be binding upon the Tenant as if they had been originally prescribed herein when furnished in writing by Landlord to Tenant, provided the additions and revisions apply equally to all tenants occupying the Property and do not impose any substantial cost to Tenant.
5. Enforcement. Any failure or delay by Landlord in enforcing these Rules and Regulations will not prevent Landlord from enforcing these Rules and Regulations in the future. If any of these Rules and Regulations is determined to be unenforceable, it will be severed from this Lease without affecting the remainder of these Rules and Regulations.
ADDENDUM “G” TO LEASE - Page 2
©NTCAR 2014 - Form No. 2 (3/2014)
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ADDENDUM J
TO
COMMERCIAL LEASE AGREEMENT
FOR THE PROPERTY
AT 2736 ROUTH STREET, DALLAS
The terms and conditions contained in this Addendum J shall take precedence over any term or condition contained in the attached Commercial Lease Agreement.
16.18.A. Commencement Date. The Commencement Date shall be the later of (i) ninety (90) days from March 1, 2019 or (ii) the date in which landlord delivers space to tenant with all Landlord work complete. The utilities shall be reimbursed by Tenant during any period that the base rent is abated.
16.18.B. Signage. Tenant shall be permitted to install exterior signage as the city permits, and subject to Article 6.04. above. Tenant shall provide the Landlord with mockups of exterior signage and obtain the prior written approval from Landlord before installing any signage.
16.18.C. Tenant Improvements. Tenant shall paint the exterior of the structure during the first year of occupancy with a color mutually agreed upon between Tenant and Landlord. Tenant shall obtain the prior written approval from Landlord before completing any work on the exterior or interior of the building.
16.18.D. Landlord Improvements. Landlord shall refinish and stain the wood floors back to their original color, or a color mutually agreed upon between Tenant and Landlord prior to lease commencement.
16.18.E. Tenant Responsibilities. Tenant shall at all times maintain the landscaping in a first-class manner.
16.18.F. Monetary Default Notice. Notwithstanding anything to the contrary contained in the Commercial Lease Agreement, Landlord shall not be obligated to give more than two (2) written notices of default in any twelve (12) month period.
16.18.G. Early Termination. Landlord shall have the option to terminate this lease during the second renewal option period if the subject property and adjacent property are to be a part of a redevelopment. Landlord shall give Tenant one hundred eighty (180) days written notice of any such lease termination. Upon written notice from Landlord, Tenant has the option to terminate the lease at any time with thirty (30) days written notice to Landlord.
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16.18.H. HVAC Maintenance, Repair or Replacement. Notwithstanding anything contained in the Commercial Lease Agreement to the contrary, Tenant’s liability for any service call to repair or replace the HVAC equipment shall be limited to $500.00 per service call. Tenant shall not be responsible for more than $1,000.00 worth of HVAC repairs or replacement costs during occupancy. Tenant shall cause to be performed routine filter changes and routine seasonal maintenance at its cost and such routine maintenance expenses are to be outside the $1,000.00 limit on repair or replacement costs to the HVAC.
16.18.I. Landlord Suit Provision. Tenant shall provide to Landlord three (3) suits of Landlord’s choosing.
16.18. J. Renewal Option. So long as Tenant is not in monetary default, beyond any applicable cure periods, Tenant shall have the option(s) to renew per the attached addendum A. The gross rental rates for the renewal option(s) are as follows:
Option 1 - July 1, 2022 | |||
Year 1 | $7,524.00 + Utilities | ||
Year 2 | $7,643.00 +Utilities | ||
Year 3 | $7,763.00 + Utilities | ||
Option 2 - July 1, 2025 | |||
Year 1 | $8,151.00 +Utilities | ||
Year 2 | $8,270.00 + Utilities | ||
Year 3 | $8,389.00 +Utilities |
Initialed: | Initialed: | |||
Landlord | Tenant |
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Exhibit 10.23
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Exhibit 10.24
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Exhibit 10.25
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Exhibit 10.26
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Exhibit 10.27
BOARD OF DIRECTORS AGREEMENT
THIS AGREEMENT is made and entered into effective as of , 2021 (the “Effective Date”), by and between Digital Brands Group, Inc., a Delaware corporation (the “Company”) with its principal place of business located at , and Jameeka Green Aaron, an individual (“Director”) with her principal residence at 121 Excursion, Irvine CA 92618 .
1. | Term |
This Agreement shall continue for a period of one (1) year from the Effective Date and shall continue thereafter for as long as Director is elected as a member of the Board of Directors by the shareholders of the Company. It may be renewed for a successive one year term upon termination.
2. | Position and Responsibilities |
(a) Position. The Board of Directors hereby appoints the Director to serve as a Board Member until the next annual meeting of the Company’s shareholders or until her earlier resignation, removal or death. The Director shall perform such duties and responsibilities as are customarily related to such position in accordance with Company’s bylaws and applicable law, including, but not limited to, those services described on Exhibit A attached hereto (the “Services”). Director hereby agrees to use her best efforts to provide the Services. Director shall not allow any other person or entity to perform any of the Services for or instead of Director. Director shall comply with the statutes, rules, regulations and orders of any governmental or quasi-governmental authority, which are applicable to the Company and the performance of the Services, and Company’s rules, regulations, and practices as they may from time-to-time be adopted or modified.
(b) Other Activities. Director may be employed by another company, may serve on other Boards of Directors or Advisory Boards, and may engage in any other business activity (whether or not pursued for pecuniary advantage), as long as such outside activities do not violate Director’s obligations under this Agreement or Director’s fiduciary obligations to the Company’s shareholders. The ownership of less than a 5% interest in an entity, by itself, shall not constitute a violation of this duty. Director represents that Director has no outstanding agreement or obligation that is in conflict with any of the provisions of this Agreement, and Director agrees to use her best efforts to avoid or minimize any such conflict and agrees not to enter into any agreement or obligation that could create such a conflict without the approval of a majority of the Board of Directors. If, at any time, Director is required to make any disclosure or take any action that may conflict with any of the provisions of this Agreement, Director will promptly notify the Board of such obligation, prior to making such disclosure or taking such action.
(c) No Conflict. Director will not engage in any activity that creates an actual or perceived conflict of interest with Company, regardless of whether such activity is prohibited by Company’s conflict of interest guidelines or this Agreement, and Director agrees to notify the Board of Directors before engaging in any activity that could reasonably be assumed to create a potential conflict of interest with Company. Notwithstanding the provisions of Section 2(b) hereof, Director shall not engage in any activity that is in direct competition with the Company or serve in any capacity (including, but not limited to, as an employee, consultant, advisor or director) in any company or entity that competes directly or indirectly with the Company, as reasonably determined by a majority of Company’s disinterested board members, without the approval of the Board of Directors.
3. | Compensation and Benefits |
(a) Stock and Stock Options. Subject to vesting, as set forth on Exhibit B, the Company will issue to Director options as set forth and described on Exhibit B. Company shall issue said options within sixty (60) days from the execution of this Agreement by both parties. In addition, Company the provisions of Exhibit B “Initial Option Award”, are incorporated in and made a part of this agreement., subject to the vesting, and other provisions of the Company’s 2020 Stock Incentive Plan.
b) Expenses. The Company shall reimburse Director for all reasonable business expenses incurred in the performance of the Services in accordance with Company’s expense reimbursement guidelines.
(c) Indemnification. Company will indemnify and defend Director against any liability incurred in the performance of the Services to the fullest extent authorized in Company’s Certificate of Incorporation, as amended, bylaws, as amended and applicable law. Concurrently with the effective date of its initial public offering, the Company will purchase Director’s and Officer’s liability insurance and Director shall be entitled to the protection of any insurance policies the Company maintains for the benefit of its Directors and Officers against all costs, charges and expenses in connection with any action, suit or proceeding to which he may be made a party by reason of her affiliation with Company, its subsidiaries, or affiliates.
(d) Records. So long as the Director shall serve as a member of the Company’s Board of Directors the Director shall have full access to books and records of Company and access to management of the Company.
4. | Termination |
(a) Right to Terminate. At any time, Director may be removed as Board Member as provided in Company’s Certificate of Incorporation, as amended, bylaws, as amended, and applicable law. Director may resign as Board Member or Director as provided in Company’s Certificate of Incorporation, as amended, bylaws, as amended, and applicable law. Notwithstanding anything to the contrary contained in or arising from this Agreement or any statements, policies, or practices of Company, neither Director nor Company shall be required to provide any advance notice or any reason or cause for termination of Director’s status as Board Member, except as provided in Company’s Certificate of Incorporation, as amended, Company’s bylaws, as amended, and applicable law.
(b) Effect of Termination as Director. Upon Director’s termination this Agreement will terminate; Company shall pay to Director all compensation and expenses to which Director is entitled up through the date of termination; and Director shall be entitled to her rights under any other applicable law. Thereafter, all of Company’s obligations under this Agreement shall cease.
5. | Termination Obligations |
(a) Director agrees that all property, including, without limitation, all equipment, tangible proprietary information, documents, records, notes, contracts, and computer-generated materials provided to or prepared by Director incident to the Services and her membership on the Company’s Board of Directors or any committee therefore the sole and exclusive property of the Company and shall be promptly returned to the Company at such time as the Director is no longer a member of the Company’s Board of Directors.
(b) Upon termination of this Agreement, Director shall be deemed to have resigned from all offices then held with Company by virtue of her position as Board Member. Director agrees that following any termination of this Agreement, he shall cooperate with Company in the winding up or transferring to other directors of any pending work and shall also cooperate with Company (to the extent allowed by law, and at Company’s expense) in the defense of any action brought by any third party against Company that relates to the Services.
6. | Nondisclosure Obligations |
Director shall maintain in confidence and shall not, directly or indirectly, disclose or use, either during or after the term of this Agreement, any Proprietary Information (as defined below), confidential information, or trade secrets belonging to Company, whether or not it is in written or permanent form, except to the extent necessary to perform the Services, as required by a lawful government order or subpoena, or as authorized in writing by Company. These nondisclosure obligations also apply to Proprietary Information belonging to customers and suppliers of Company, and other third parties, learned by Director as a result of performing the Services. “Proprietary Information” means all information pertaining in any manner to the business of Company, unless (i) the information is or becomes publicly known through lawful means; (ii) the information was part of Director’s general knowledge prior to her relationship with Company; or (iii) the information is disclosed to Director without restriction by a third party who rightfully possesses the information and did not learn of it from Company.
7. | Dispute Resolution |
(a) Jurisdiction and Venue. The parties agree that any suit, action, or proceeding between Director and Company (and its affiliates, shareholders, directors, officers, employees, members, agents, successors, attorneys, and assigns) relating to this Agreement shall be brought in either the United States District Court for the State of Texas or in a Texas state court and that the parties shall submit to the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to the laying of venue for any such suit, action or proceeding brought in such court. If any one or more provisions of this Section shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable.
(b) Attorneys’ Fees. Should any litigation, arbitration or other proceeding be commenced between the parties concerning the rights or obligations of the parties under this Agreement, the party prevailing in such proceeding shall be entitled, in addition to such other relief as may be granted, to a reasonable sum as and for its attorneys’ fees in such proceeding. This amount shall be determined by the court in such proceeding or in a separate action brought for that purpose. In addition to any amount received as attorneys’ fees, the prevailing party also shall be entitled to receive from the party held to be liable, an amount equal to the attorneys’ fees and costs incurred in enforcing any judgment against such party. This Section is severable from the other provisions of this Agreement and survives any judgment and is not deemed merged into any judgment.
8. | Entire Agreement |
This Agreement constitutes the entire understanding between the parties hereto superseding all prior and contemporaneous agreements or understandings among the parties hereto concerning the Agreement.
9. | Amendments; Waivers |
This Agreement may be amended, modified, superseded or canceled, and any of the terms, covenants, representations, warranties or conditions hereof may be waived, only by a written instrument executed by the parties or, in the case of a waiver, by the party to be charged. Any amendment or waiver by the Company must be approved by the Company’s Board of Directors and executed on behalf of the Company by its Chief Executive Officer. If the Director shall also serve as Chief Executive Officer, such amendment or waiver must be executed on behalf of the Company by an officer designed by the Company’s Board of Directors.
10. | Assignment |
This Agreement shall not be assignable by either party.
11. | Severability |
If any provision of this Agreement shall be held by a court to be invalid, unenforceable, or void, such provision shall be enforced to fullest extent permitted by law, and the remainder of this Agreement shall remain in full force and effect. In the event that the time period or scope of any provision is declared by a court of competent jurisdiction to exceed the maximum time period or scope that such court deems enforceable, then such court shall reduce the time period or scope to the maximum time period or scope permitted by law.
12. | Governing Law |
This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.
13. | Counterparts |
This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
The parties have duly executed this Agreement as of the date first written above.
DIGITAL BRANDS GROUP, INC.
a Delaware Corporation
Name | John Davis III | Name | ||
Title | President |
EXHIBIT A
DESCRIPTION OF SERVICES
Responsibilities as Director. Director shall have all responsibilities of a Director of the Company imposed by Delaware or applicable law, the Certificate of Incorporation, as amended, and Bylaws, as amended, of Company. These responsibilities shall include, but shall not be limited to, the following:
1. Attendance. Use best efforts to attend scheduled meetings of Company’s Board of Directors;
2. Act as a Fiduciary. Represent the shareholders and the interests of Company as a fiduciary; and
3. Participation. Participate as a full voting member of Company’s Board of Directors in setting overall objectives, approving plans and programs of operation, formulating general policies, offering advice and counsel, serving on Board Committees, and reviewing management performance.
EXHIBIT B
STOCK OPTIONS AND VESTING
Options. Subject to the Vesting Requirements of the Company’s 2020 Stock Incentive Plan and this Agreement, Company will grant Director Options to purchase up to shares of Company’s common stock at an exercise price of $ per share in a form as described below.
1. The Options will be vested in Director at a rate of 25% per quarter, starting on the date hereof and quarterly thereafter.
2. Options will expire 5 years from the date of issue.
3. Company agrees to register the Company’s shares subject to the Option Grant on Form S-8 or such other registration form as may be available, and the Company shall provide a cashless exercise procedure.
4. Director agrees to execute a lock-up agreement if any financing for the Company so requires and the terms of such financing are acceptable to the Director, and upon the same terms as other affiliates.
Exhibit 10.28
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325822880.1 SECURED PROMISSORY NOTE $4,500,000 February 11, 2020 (the “Issuance Date”) The undersigned, Denim.LA, Inc., a Delaware corporation (the “Company”), promises to pay to the order of Norwest Venture Partners XI, LP and Norwest Venture Partners XII, LP (each a “Holder” and together the “Holders”) in the respective portions set out in Schedule I hereto, the principal sum of Four Million Five Hundred Thousand Dollars ($4,500,000), together with simple interest accrued on the unpaid principal amount at the rate of twelve percent (12.0%) per annum. Interest shall be due and payable to the Holders ratably in cash on the Maturity Date. Interest shall begin to accrue on the date hereof and shall continue to accrue on the outstanding principal until the entire Balance is paid, and shall be computed based on the actual number of days elapsed and on a year of 365 days. This Secured Promissory Note (this “Note”) has been executed and delivered pursuant to and in accordance with the terms and conditions of the Agreement and Plan of Merger, by and between the Company and Denim.LA Acquisition Corp., on the one hand, and Bailey 44, LLC, a Delaware limited liability company (“Bailey”), and the Holders, on the other hand, dated as of February 7, 2020 (the “Merger Agreement”) and is subject to the terms and conditions of the Merger Agreement. This Note is issued to Holders as partial consideration in connection with the Merger whereby a subsidiary of the Company will merge with and into Bailey with Bailey as the Surviving Company of the Merger. The principal balance hereunder shall be available to the Company as a source of funds to satisfy Holders’ indemnification obligations under Article VIII of the Merger Agreement, subject to the limitations and other provisions expressly set forth therein. All payments hereunder shall be paid in lawful money of the United States of America, shall be payable at the place or places hereafter designated by the Holders and shall be made ratably to the Holders based on the outstanding principal amount owed to such Holders immediately prior to giving effect to such payment. Capitalized terms used but not defined in this Note shall have the meanings ascribed to such terms in the Merger Agreement. 1. Definitions. The following definitions shall apply for all purposes of this Note: “Balance” means, at the applicable time, all then outstanding principal of this Note, all then accrued but unpaid interest and all other amounts then accrued but unpaid hereunder. “Business Day” means a weekday on which banks are open for general banking business in Los Angeles, CA. “CIT Debt” means the Debt incurred by Bailey from time to time pursuant to that certain Factoring Agreement, dated March 4, 2004, by and between CIT Group/Commercial Services, Inc. and Bailey 44, LLC. “Debt” means for any Person (a) all indebtedness for borrowed money, (b) all obligations represented by bonds, debentures, notes, securities or other evidences of indebtedness, (c) all DocuSign Envelope ID: 3527CCE6-E463-46D4-9FE8-6C08CC5D4D02 |
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325822880.1 indebtedness representing deferred payment of the purchase price of property or assets, (d) capitalized lease obligations, (e) all indebtedness under guaranties, endorsements, assumptions or other contingent obligations, in respect of, or to purchase or otherwise acquire, indebtedness of others, (f) all indebtedness secured by a Lien existing on property owned by such Person, whether or not the indebtedness secured thereby shall have been assumed by the owner thereof, (g) all indebtedness of any partnership of which such Person is a general partner, except to the extent that applicable law and the terms of such indebtedness expressly provide that such Person is not liable therefor, (h) all obligations of such Person in respect of letters of credit, bankers acceptances, surety bonds or similar instruments issued or accepted by banks or other financial institutions for the account of such Person, (i) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (j) all obligations of such Person, whether or not contingent, to purchase, redeem, retire, defease or otherwise acquire for value or make any cash payments in respect of Disqualified Stock, valued at, in the case of redeemable preferred stock, the greater of the voluntary liquidation preference and the involuntary liquidation preference of such Equity Interests plus accrued and unpaid dividends and (k) all guarantees of the foregoing by such Person. “Disqualified Stock” means any Equity Interest which, by its terms (or by the terms of any security or other Equity Interest into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition, (a) matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is one hundred eighty (180) days following the Maturity Date (excluding any provisions requiring redemption upon a “change of control” or similar event; provided that such “change of control” or similar event would result in the prior payment in full in cash of the Obligations (other than contingent indemnification obligations to the extent no claim giving rise thereto has been asserted), (b) is convertible into or exchangeable for (i) indebtedness or (ii) any Equity Interest referred to in (a) above, in each case, at any time on or prior to the date that is one hundred eighty (180) days following the Maturity Date, or (c) is entitled to receive scheduled dividends or distributions in cash (except for distributions for taxes attributable to the operations of the business) prior to the time that the Obligations (other than contingent indemnification obligations to the extent no claim giving rise thereto has been asserted) are paid in full in cash. “Highest Lawful Rate” means the maximum non-usurious rate of interest, as in effect from time to time, which may be charged, contracted for, reserved, received or collected by Holder in connection with this Note under applicable law. 2. Maturity Date; Payment; Interest Limitation. 2.1 Maturity Date and Payment. The Balance shall be due and payable in full to the Holders ratably on the earliest to occur of (i) one (1) day following the closing date of the IPO, (ii) one (1) day following the closing date of a Denim Sale or (iii) December 31, 2020 (such earliest date, the “Maturity Date”). This Note may be prepaid at any time, in whole or in part, at the option of the Company, without penalty or premium. DocuSign Envelope ID: 3527CCE6-E463-46D4-9FE8-6C08CC5D4D02 |
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325822880.1 2.2 Mandatory Prepayment. If the Company or any of its subsidiaries shall receive proceeds from any financing transaction (other than an IPO) after the Issuance Date, then for each whole increment of $10,000,000 in gross proceeds received by the Company or any of its subsidiaries in aggregate after the Issuance Date (on a cumulative basis), the Company shall make a principal payment to the Holders ratably in an aggregate amount of $1,500,000. 2.3 Interest. Notwithstanding anything herein to the contrary, if during any period for which interest is computed hereunder, the amount of interest computed on the basis provided for in this Note, together with all fees, charges and other payments which are treated as interest under applicable law, as provided for herein or in any other document executed in connection herewith, would exceed the amount of such interest computed on the basis of the Highest Lawful Rate, then the Company shall not be obligated to pay, and Holder shall not be entitled to charge, collect, receive, reserve or take, interest in excess of the Highest Lawful Rate, and during any such period the interest payable hereunder shall be computed on the basis of the Highest Lawful Rate. 3. Right of Setoff. The Company shall have the right to withhold and setoff against the Balance any amount to which a Denim Indemnified Party is entitled to indemnification pursuant to Article VIII of the Merger Agreement, subject to the limitations and other provisions set forth therein. 4. Events of Default. The following events shall be considered Events of Default (each an “Event of Default”) with respect to this Note: (a) The Company shall default in the payment of any part of the principal or unpaid accrued interest on the Note or the Pledge Agreement for more than five (5) Business Days after the same shall become due and payable, whether at maturity or at a date fixed for prepayment or by acceleration or otherwise; (b) The Company shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts as they become due, or shall file a voluntary petition for bankruptcy, or shall file any petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, dissolution or similar relief under any present or future statute, law or regulation, or shall file any answer admitting the material allegations of a petition filed against the Company in any such proceeding, or shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of the Company, or of all or any substantial part of the properties of the Company, or the Company or its respective directors or majority stockholders shall take any action effecting the dissolution or liquidation of the Company; (c) Upon the commencement of any proceeding against the Company seeking any bankruptcy, reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, or after the appointment without the consent or acquiescence of the Company of any trustee, receiver or DocuSign Envelope ID: 3527CCE6-E463-46D4-9FE8-6C08CC5D4D02 |
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325822880.1 liquidator of the Company or of all or any substantial part of the properties of the Company, and such appointment shall not have been vacated; or (d) The Company shall fail to observe or perform in any material respect any covenant, obligation, condition or agreement contained in the Merger Agreement, this Note or the Pledge Agreement and (i) such failure shall continue for fifteen (15) Business Days after notice thereof, or (ii) if such failure is not curable within such fifteen (15) Business Day period, but is reasonably capable of cure within thirty (30) Business Days and an additional period for cure would not be materially prejudicial or adverse to Holders, either (A) such failure shall continue for thirty (30) Business Days or (B) the Company shall not have commenced a cure in a manner reasonably satisfactory to Holders within the thirty (30) Business Day period. 5. Remedies. Subject to the provisions of the Merger Agreement, upon the occurrence of an Event of Default at the option and upon the declaration of Holders (or automatically upon the occurrence of an Event of Default described in clause (b) or (c) above), the Balance shall, without presentment, demand, protest, or notice of any kind, all of which are hereby expressly waived, be forthwith due and payable, and any Holder may, immediately and without expiration of any period of grace, enforce payment of all amounts due and owing under this Note and exercise any and all other remedies granted to it at law, in equity or otherwise, including the exercise of rights and remedies of a secured creditor under the UCC. If any obligations or other amounts payable under this Note are not paid as and when due, Company hereby authorizes each Holder to proceed, without prior notice, by right of set-off, banker’s lien or counterclaim, against any moneys or other assets of Company to the full extent of all obligations owed to Holders. Company hereby appoints each Holder and its representatives as Company’s true and lawful attorney-in-fact with full power and authority in the place and stead of Company and in the name of Company, for the purpose of carrying out the terms of this Note, to take the appropriate actions and to execute and deliver (and perform under on Company’s behalf) any agreement, document or instrument that may be necessary to accomplish the purposes set forth in this Note, in each case upon and after the occurrence and during the continuance of an Event of Default. 6. General Provisions. 6.1 Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Note shall inure to the benefit of and be binding upon the respective successors and assigns of the parties; provided, however that the Company may not assign its obligations under this Note without the written consent of Holders of a majority-in-interest of the aggregate principal amount of the Note then outstanding (the “Requisite Note Holders”). Nothing in this Note, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Note, except as expressly provided in this Note. 6.2 Governing Law. This Note shall be governed by and construed under the laws of the State of Delaware as applied to agreements among Delaware residents, made and to be performed entirely within the State of Delaware. DocuSign Envelope ID: 3527CCE6-E463-46D4-9FE8-6C08CC5D4D02 |
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325822880.1 6.3 Notices. Any notice required or permitted to be given hereunder shall be given in accordance with Section 9.02 of the Merger Agreement. 6.4 Severability. If one or more provisions of this Note are held to be unenforceable under applicable law, such provision shall be excluded from this Note and the balance of the Note shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 6.5 Amendments and Waivers. Any term of the Note may be amended and the observance of any term may be waived (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and Requisite Note Holders. 6.6 Officers and Directors not Liable. In no event shall any officer or director of the Company be liable for any amounts due and payable pursuant to this Note. 6.7 Cost of Collection. The Company promises to pay reasonable and documented attorneys’ fees and court and other costs if this Note is placed in the hands of an attorney to collect or enforce this Note. In addition, if action is instituted to collect this Note, the Company promises to pay all costs and expenses, including, without limitation, reasonable attorneys’ fees and costs, incurred in connection with such action. 7. Security. All obligations owing under this Note from time to time, including, without limitation, principal amounts, interest, premium (if any), fees, and other amounts, shall be secured pursuant to the terms of the Pledge Agreement, dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the “Pledge Agreement”), among the Company, as pledgor, and the Holders, as the secured parties. The parties hereto acknowledge and agree that the execution and delivery of the Pledge Agreement as of the date hereof is a condition precedent to the delivery of this Note and intended to induce the Holders to grant credit to the Company in connection herewith. 8. Debt Covenant. The Company will not permit Bailey or any of its subsidiaries to create, incur or permit any Debt, except (i) the CIT Debt in an aggregate amount not to exceed $2,000,000 at any time outstanding and (ii) Debt incurred in the ordinary course of business consistent with past practice in an aggregate amount not to exceed $25,000 in aggregate at any time outstanding. [Remainder of this page intentionally left blank] DocuSign Envelope ID: 3527CCE6-E463-46D4-9FE8-6C08CC5D4D02 |
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325822880.1 DENIM.LA, INC. By: Name: Title: DocuSign Envelope ID: 3527CCE6-E463-46D4-9FE8-6C08CC5D4D02 Hil Davis CEO |
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325822880.1 Schedule I Holder Principal Amount Norwest Venture Partners XI, LP $2,250,000 Norwest Venture Partners XII, LP $2,250,000 Total $4,500,000 DocuSign Envelope ID: 3527CCE6-E463-46D4-9FE8-6C08CC5D4D02 |
EXHIBIT 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the use, in this Registration Statement on Form S-1, of our report dated April 12, 2021 related to the consolidated financial statements of Digital Brands Group, Inc (the “Company”) as of December 31, 2020 and 2019, and for the years then ended, which includes an explanatory paragraph regarding the substantial doubt about the Company’s ability to continue as a going concern. We also consent to the reference to us under the heading “Experts” in such Registration Statement.
/s/ dbbmckennon | |
Newport Beach, California | |
April 12, 2021 |
Exhibit 23.2
Consent of Independent Auditor
We consent to the use, in this Registration Statement on Form S-1, of our report dated April 9, 2021 related to the financial statements of Harper & Jones, LLC (the “Company”) as of December 31, 2020 and 2019, and for the years then ended, which includes an explanatory paragraph regarding the substantial doubt about the Company’s ability to continue as a going concern.
/s/ dbbmckennon
Newport Beach, California
April 12, 2021
Exhibit 23.3
Consent of Independent Auditor
We consent to the use, in this Registration Statement on Form S-1, of our report dated December 29, 2020, except as described in Note 2 under Restatement, for which the date is February 16, 2021, related to the financial statements of Bailey 44, LLC (the “Company”) as of December 31, 2019, and for the year then ended, which includes an explanatory paragraph regarding the substantial doubt about the Company’s ability to continue as a going concern.
/s/ dbbmckennon
Newport Beach, California
April 12, 2021
Exhibit 99.1(a)
Consent of Director Nominee
Digital Brands Group, Inc. is filing a Registration Statement on Form S-1 with the Securities and Exchange Commission under the Securities Act of 1933, as amended, or the Securities Act, in connection with the initial public offering of common stock of Digital Brands Group, Inc. In connection therewith, I hereby consent, pursuant to Rule 438 of the Securities Act, to being named as a nominee to the board of directors of Digital Brands Group, Inc. in the Registration Statement, as may be amended from time to time. I also consent to the filing of the consent as an exhibit to such Registration Statement and any amendments thereto.
/s/ Jameeka Aaron | |
Jameeka Aaron |
April 12, 2021
Exhibit 99.1(b)
Consent of Director Nominee
Digital Brands Group, Inc. is filing a Registration Statement on Form S-1 with the Securities and Exchange Commission under the Securities Act of 1933, as amended, or the Securities Act, in connection with the initial public offering of common stock of Digital Brands Group, Inc. In connection therewith, I hereby consent, pursuant to Rule 438 of the Securities Act, to being named as a nominee to the board of directors of Digital Brands Group, Inc. in the Registration Statement, as may be amended from time to time. I also consent to the filing of the consent as an exhibit to such Registration Statement and any amendments thereto.
/s/ Moise Emquies | |
Moise Emquies |
April 12, 2021