|
Delaware
(State or other jurisdiction of
incorporation or organization) |
| |
531110
(Primary Standard Industrial
Classification Code Number) |
| |
82-3334945
(I.R.S. Employer
Identification Number) |
|
|
Copies to:
|
| |||
|
David Alan Miller, Esq.
Brian L. Ross, Esq. Graubard Miller The Chrysler Building 405 Lexington Avenue New York, New York 10174 Telephone: (212) 818-8800 Facsimile: (212) 818-8881 |
| |
Mitchell S. Nussbaum, Esq.
Angela M. Dowd, Esq. Loeb & Loeb LLP 345 Park Avenue New York, New York 10154 Phone: (212)407-4000 |
|
|
Large accelerated filer ☐
Non-accelerated filer ☒ |
| |
Accelerated filer ☐
Smaller reporting company ☒ Emerging growth company ☒ |
|
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| | |
Year Ended December 31,
|
| |
Three Months Ended March 31,
(unaudited) |
| ||||||||||||||||||
|
2021
|
| |
2020
|
| |
2022
|
| |
2021
|
| ||||||||||||||
Rental Revenue
|
| | | $ | 32,223,365 | | | | | $ | 13,540,488 | | | | | $ | 11,762,899 | | | | | $ | 4,960,187 | | |
Refunds and Allowances (“Refunds”)
|
| | | $ | 10,843,452 | | | | | $ | 5,266,629 | | | | | $ | 2,663,474 | | | | | $ | 1,654,158 | | |
Net Rental Revenue
|
| | | $ | 21,379,913 | | | | | $ | 8,273,859 | | | | | $ | 9,099,425 | | | | | $ | 3,306,029 | | |
Cost of Revenue
|
| | | $ | 19,269,153 | | | | | $ | 11,232,643 | | | | | $ | 6,586,162 | | | | | $ | 3,885,293 | | |
Gross profit (loss)
|
| | | $ | 2,110,760 | | | | | $ | (2,958,784) | | | | | $ | 2,513,263 | | | | | $ | (579,264) | | |
Total operating costs
|
| | | $ | 2,844,637 | | | | | $ | 1,107,240 | | | | | $ | 979,606 | | | | | $ | 610,432 | | |
Income / (loss) from operations
|
| | | $ | (733,877) | | | | | $ | (4,066,024) | | | | | $ | 1,533,657 | | | | | $ | (1,189,696) | | |
Total other (expense)
|
| | | $ | (1,499,507) | | | | | $ | (549,701) | | | | | $ | (114,224) | | | | | $ | (117,210) | | |
Net Income (Loss)
|
| | | $ | (2,233,384) | | | | | $ | (4,615,725) | | | | | $ | 1,419,433 | | | | | $ | (1,306,906) | | |
Other Financial Data: | | ||||||||||||||||||||||||
Net Income (Loss)
|
| | | $ | (2,233,384) | | | | | $ | (4,615,725) | | | | | $ | 1,419,433 | | | | | $ | (1,306,906) | | |
Interest and financing costs
|
| | | | 1,626,565 | | | | | | 577,769 | | | | | | 564,137 | | | | | | 117,243 | | |
EBITDA(1) | | | | $ | (606,819) | | | | | $ | (4,037,956) | | | | | $ | 1,983,570 | | | | | $ | (1,189,663) | | |
| | |
As of December 31,
|
| |
As of March 31,
(unaudited) |
| |||||||||||||||
|
2021
|
| |
2020
|
| |
2022
|
| | |||||||||||||
Current Assets
|
| | | $ | 2,656,436 | | | | | $ | 493,013 | | | | | $ | 3,009,539 | | | | ||
Total Assets
|
| | | $ | 3,767,936 | | | | | $ | 493,013 | | | | | $ | 39,895,390 | | | | ||
Current Liabilities
|
| | | $ | 9,521,185 | | | | | $ | 5,916,630 | | | | | $ | 16,932,754 | | | | ||
Long-Term Liabilities
|
| | | $ | 5,460,801 | | | | | $ | 2,372,05 | | | | | $ | 33,171,626 | | | | ||
Total Liabilities
|
| | | $ | 14,981,986 | | | | | $ | 8,288,682 | | | | | $ | 50,104,380 | | | | ||
Stockholders’ Deficit
|
| | | $ | (11,214,050) | | | | | $ | (7,795,669) | | | | | $ | (10,208,990) | | | | ||
Liabilities and Stockholders’ Deficit
|
| | | $ | 3,767,936 | | | | | $ | 493,013 | | | | | $ | 39,895,390 | | | |
| | |
As of March 31, 2022
|
| |||||||||||||||||||||
| | |
Actual
|
| |
Pro Forma
Bridges (unaudited) |
| |
Pro Forma
Debt to Equity Conversion (unaudited) |
| |
As Adjusted
Pro Forma Offering (unaudited)(1) |
| ||||||||||||
Cash
|
| | | $ | 62,189 | | | | | $ | 5,860,189 | | | | | $ | 5,860,189 | | | | | $ | 19,311,689 | | |
Total liabilities
|
| | | | 50,104,380 | | | | | | 56,382,380 | | | | | | 53,439,039 | | | | | | 50,599,039 | | |
Stockholder’s equity: | | | | | | | | | | | | | | | | | | | | | | | | | |
Preferred stock; par value $0.00001
per share, 10,000,000 shares authorized |
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Common stock, par value $0.00001
per share; 90,000,000 shares authorized; 21,675,001; 21,675,001; 23,018,288; 26,351,621 issued and outstanding, respectively |
| | | | 216 | | | | | | 216 | | | | | | 230 | | | | | | 275 | | |
Additional paid-in capital
|
| | | | — | | | | | | — | | | | | | 2,943,328 | | | | | | 20,573,283 | | |
Retained earnings
|
| | | | (10,209,206) | | | | | | (10,209,206) | | | | | | (10,209,206) | | | | | | (10,685,206) | | |
Total stockholders’ equity
|
| | | | (10,208,990) | | | | | | (10,208,990) | | | | | | (7,265,649) | | | | | | 9,888,351 | | |
Total liabilities and stockholders’
equity |
| | | $ | 39,895,390 | | | | | $ | 46,173,390 | | | | | $ | 46,173,390 | | | | | $ | 60,487,390 | | |
|
Assumed public offering price
|
| | | | | | | | | $ | 4.50 | | |
|
Historical actual net tangible book value before this offering
|
| | | $ | (0.47) | | | | | | | | |
|
Increase attributable to pro forma adjustment
|
| | | $ | 0.13 | | | | | | | | |
|
Pro forma net tangible book value before this offering
|
| | | $ | (0.34) | | | | | | | | |
|
Increase attributable to new investors
|
| | | $ | 0.70 | | | | | | | | |
|
Pro forma as adjusted net tangible book value after this offering
|
| | | | | | | | | $ | 0.36 | | |
|
Dilution to new investors
|
| | | | | | | | | $ | 4.14 | | |
| | |
Shares Purchased
|
| |
Total Consideration
|
| |
Weighted
Average Price per Share |
| |||||||||||||||||||||
| | |
Number
|
| |
Percent
|
| |
Amount
|
| |
Percent
|
| ||||||||||||||||||
Existing stockholders
|
| | | | 23,018,288 | | | | | | 84% | | | | | $ | 3,677,479 | | | | | | 15% | | | | | $ | 0.13 | | |
New investors
|
| | | | 4,500,000 | | | | | | 16% | | | | | $ | 20,250,000 | | | | | | 85% | | | | | $ | 0.74 | | |
Total
|
| | | | 27,518,288 | | | | | | 100% | | | | | $ | 23,927,479 | | | | | | 100% | | | | | $ | 0.87 | | |
|
•
Hassel-free experience
|
| | - | | | Easy, orderly, pleasant interactions | |
|
•
Expectations exceeded
|
| | - | | | Delighted people and exceptional experiences | |
|
•
Rave reviews posted
|
| | - | | | Public recognition of our Heroic service | |
|
•
Our brands remembered
|
| | - | | | Favorable recognition of our brands | |
|
•
Information shared
|
| | - | | | Social media and word-of-mouth marketing | |
|
•
Committed to return
|
| | - | | | Relationships established for repeat visits | |
Year
|
| |
OCC
|
| |
REVPAR
|
| | ||||||||
2018 | | | | | 86% | | | | | | 160 | | | | | |
2019 | | | | | 84% | | | | | | 157 | | | | | |
2020 | | | | | 61% | | | | | | 103 | | | | | |
2021 | | | | | 72% | | | | | | 122 | | | | ||
2022 | | | | | 82% | | | | | | 132 | | | | | |
| | |
Annual % of Expenses By City
|
| ||||||
| | |
2021
|
| |
2020
|
| |
2019
|
|
Boston
|
| |
10%
|
| |
8%
|
| |
—
|
|
DC
|
| |
6%
|
| |
15%
|
| |
14%
|
|
Denver
|
| |
3%
|
| |
3%
|
| |
10%
|
|
Fort Lauderdale
|
| |
2%
|
| |
—
|
| |
—
|
|
LA
|
| |
17%
|
| |
10%
|
| |
—
|
|
Miami
|
| |
7%
|
| |
15%
|
| |
14%
|
|
Miami Beach
|
| |
29%
|
| |
13%
|
| |
25%
|
|
New York
|
| |
21%
|
| |
34%
|
| |
15%
|
|
Seattle
|
| |
4%
|
| |
3%
|
| |
14%
|
|
Nashville
|
| |
—
|
| |
—
|
| |
8%
|
|
Total
|
| |
100%
|
| |
100%
|
| |
100%
|
|
| | |
Year Ended December 31,
|
| |
Three Months Ended March 31,
(unaudited) |
| ||||||||||||||||||||||||||||||
|
2021
|
| |
2020
|
| |
%
change |
| |
2022
|
| |
2021
|
| |
%
change |
| ||||||||||||||||||||
Gross Rental Revenue
|
| | | $ | 32,223,365 | | | | | $ | 13,540,488 | | | | | | 138% | | | | | $ | 11,762,899 | | | | | $ | 4,960,187 | | | | | | 137% | | |
Refunds
|
| | | $ | 10,843,452 | | | | | $ | 5,266,629 | | | | | | 106% | | | | | $ | 2,663,474 | | | | | $ | 1,654,158 | | | | | | 61% | | |
Net Rental Revenue
|
| | | $ | 21,379,913 | | | | | $ | 8,273,859 | | | | | | 158% | | | | | $ | 9,099,425 | | | | | $ | 3,306,029 | | | | | | 175% | | |
Cost of Revenue
|
| | | $ | 19,269,153 | | | | | $ | 11,232,643 | | | | | | 72% | | | | | $ | 6,586,162 | | | | | $ | 3,885,293 | | | | | | 75% | | |
Gross profit (loss)
|
| | | $ | 2,110,760 | | | | | $ | (2,958,784) | | | | | | (171)% | | | | | $ | 2,513,263 | | | | | $ | (579,264) | | | | | | 494% | | |
Total operating costs
|
| | | $ | 2,844,637 | | | | | $ | 1,107,240 | | | | | | 157% | | | | | $ | 979,606 | | | | | $ | 610,432 | | | | | | 23% | | |
Income / (loss) from operations
|
| | | $ | (733,877) | | | | | $ | (4,066,024) | | | | | | (82)% | | | | | $ | 1,533,657 | | | | | $ | (1,189,696) | | | | | | 229% | | |
Total other (expense)
|
| | | $ | (1,499,507) | | | | | $ | (549,701) | | | | | | 173% | | | | | $ | (114,227) | | | | | $ | (117,210) | | | | | | (3)% | | |
Net income / (loss)
|
| | | $ | (2,233,384) | | | | | $ | (4,615,725) | | | | | | (52)% | | | | | $ | 1,419,433 | | | | | $ | (1,306,906) | | | | | | 209% | | |
| | | |
As of March 31, 2022
|
| |
As of December 31, 2021
|
| ||||||
|
Cash
|
| | | $ | 62,189 | | | | | $ | 6,998 | | |
|
Other Current Assets
|
| | | $ | 2,947,350 | | | | | $ | 1,272,428 | | |
|
Total Current Assets
|
| | | $ | 3,009,539 | | | | | $ | 1,279,426 | | |
|
Total Current Liabilities
|
| | | $ | 16,932,754 | | | | | $ | 9,519,725 | | |
|
Working Capital (Deficit)
|
| | | $ | (13,923,215) | | | | | $ | (8,240,299) | | |
| | |
As of 3/31/22
|
| |
2021
|
| |
2020
|
| |||||||||
Total Refunds
|
| | | | 22.6% | | | | | | 33.7% | | | | | | 38.9% | | |
| | |
Payments Due by Period
|
| |||||||||||||||||||||||||||
|
Total
|
| |
1 Year
|
| |
2 – 3 Years
|
| |
4 – 5 Years
|
| |
More than
5 Years |
| |||||||||||||||||
Loans payable
|
| | | $ | 8,285 | | | | | $ | 4,010 | | | | | $ | 3,414 | | | | | $ | 32 | | | | | $ | 829 | | |
Operating Lease Obligations(1)
|
| | | | 56,537 | | | | | | 9,455 | | | | | | 11,647 | | | | | | 9,821 | | | | | | 25,614 | | |
Total
|
| | | $ | 64,822 | | | | | $ | 13,465 | | | | | $ | 15,061 | | | | | $ | 9,853 | | | | | $ | 26,443 | | |
Property
|
| |
# of Units
|
| |
Property Type
|
| |
Lease Type
|
| |
Lease Terms
|
| |
Star
Quality Rating |
| |
Maintenance
Obligations |
|
1200 Ocean Dr Miami Beach, FL 33139
|
| |
24
|
| |
Commercially-zoned apartment building that is licensed for Short Term Rentals
|
| | Triple Net(1) | | |
10-year lease with 3% rent escalation annually
|
| | 3-Star Property | | |
CorpHousing Is responsible for maintenance for non-commercial portion of building
|
|
1700 Alton Rd
Miami Beach, FL 33139 |
| |
68
|
| | Licensed hotel | | | Triple Net(1) | | |
6-year lease
with 3% rent escalations annually |
| |
3-Star Property
|
| |
CorpHousing Is responsible for maintenance for non-commercial portion of building
|
|
1228 Collins Ave,
Miami Beach, FL 33139 |
| |
48
|
| | Licensed hotel | | | Triple Net(1) | | |
5-year lease
with 3% rent escalations annually |
| |
3.5-Star Property
|
| |
CorpHousing Is responsible for maintenance for non-commercial portion of building
|
|
136 W 55th St,
New York, NY 10105 |
| |
118
|
| | Licensed hotel | | | Triple Net(1) | | |
15-year lease
with 3% rent escalation annually |
| | 4-Star Property | | |
CorpHousing Is responsible for maintenance for non-commercial portion of building
|
|
956 Washington Ave, Miami Beach, FL 33139
|
| |
42
|
| | Licensed hotel | | | Triple Net | | |
5-year lease with 4% escalation beginning in year three
|
| | 3.5-Star Property | | |
CorpHousing is responsible for maintenance for non-commercial portion of building
|
|
960 Sixth Ave, New York, NY 10001
|
| |
167
|
| | Licensed hotel | | | Triple Net | | |
15-year lease with 3% escalation beginning year seven
|
| |
3-Star Property
|
| |
CorpHousing is responsible for maintenance for non-commercial portion of building
|
|
765 8th Ave,
New York, NY 10036 |
| |
44
|
| | Licensed hotel | | | Triple Net | | |
10-year lease with 3.5% escalation beginning year three
|
| |
3-Star Property
|
| |
CorpHousing is responsible for maintenance for non-commercial portion of building
|
|
1000 29th Street NW, Washington, DC 20007
|
| |
80
|
| | Licensed hotel | | | Triple Net | | | 10-year lease | | | 3-Star Property | | |
CorpHousing is responsible for maintenance for non-commercial portion of building
|
|
|
•
Hassel-free experience
|
| | - | | | Easy, orderly, pleasant interactions | |
|
•
Expectations exceeded
|
| | - | | | Delighted people and exception experiences | |
|
•
Rave reviews posted
|
| | - | | | Public recognition of our Heroic service | |
|
•
Our brands remembered
|
| | - | | | Favorable recognition of our brands | |
|
•
Information shared
|
| | - | | | Social media and word-of-mouth marketing | |
|
•
Committed to return
|
| | - | | | Relationships established or repeat visits | |
Name
|
| |
Age
|
| |
Position
|
|
Brian Ferdinand | | |
45
|
| | Chief Executive Officer and Chairman of the Board | |
David Gurfein | | |
56
|
| | President and Chief Operating Officer | |
Shanoop Kothari | | |
49
|
| | Chief Financial Officer (Principal Financial Officer) | |
Karl Rothman | | |
55
|
| | Chief Accounting Officer (Principal Accounting Officer) | |
Kevin J. Mikolashek | | |
51
|
| | Chief Compliance Officer | |
Jimmie Chatmon | | |
28
|
| | Executive Vice President and Director | |
Leonard Toboroff | | |
89
|
| | Director* | |
David Berg | | |
36
|
| | Director Nominee | |
Donald Engel | | |
87
|
| | Director Nominee* | |
Aimee J. Nelson | | |
44
|
| | Director Nominee* | |
Jeffrey Webb | | |
72
|
| | Director Nominee* | |
Name and Principal Position
|
| |
Salary ($)
|
| |
Bonus ($)
|
| |
Option
Awards ($) |
| |
Non-Equity
Incentive Compensation ($) |
| |
All Other
Compensation ($) |
| |
Total ($)
|
| ||||||||||||||||||
Brian Ferdinand(1)
2020 |
| | | $ | 358,593 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 358,593 | | |
2021
|
| | | $ | 721,506 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 721,506 | | |
David Gurfein(2)
2020 |
| | | $ | 53,250 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 53,250 | | |
2021
|
| | | $ | 7,560 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | 7,560 | | |
Karl Rothman(3) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2020
|
| | | | 28,500 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 28,500 | | |
2021
|
| | | | 98,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 98,000 | | |
Name
|
| |
Shares of
Common Stock Owned Pre-Offering(1) |
| |
Percentage
Ownership Prior to Offering |
| |
Shares of
Common Stock Owned Post-Offering |
| |
Percentage
Ownership Following Offering |
| ||||||||||||
Brian Ferdinand, Chairman and Chief Executive Officer(2)
|
| | | | 15,929,943 | | | | | | 73.5% | | | | | | 16,805,128 | | | | | | 59.7% | | |
Jimmie Chatmon, Executive Vice President and Director(3)
|
| | | | 2,000,000 | | | | | | 9.2% | | | | | | 2,000,000 | | | | | | 7.1% | | |
David Gurfein, President and Chief Operating Officer(4)
|
| | | | 1,119,199 | | | | | | 5.2% | | | | | | 1,119,199 | | | | | | 4.0% | | |
Shanoop Kothari, Chief Financial Officer(5)
|
| | | | 225,000 | | | | | | 1.0% | | | | | | 354,630 | | | | | | 1.3% | | |
Karl Rothman, Chief Accounting Officer(6)
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Kevin J. Mikolashek, Chief Compliance Officer(7)
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Leonard Toboroff, Director(8)
|
| | | | 362,500 | | | | | | 1.7% | | | | | | 388,426 | | | | | | 1.4% | | |
Aimee J. Nelson, Director Nominee
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Jeffrey Webb, Director Nominee
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
David Berg, Director Nominee
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Donald Engel, Director Nominee
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Name
|
| |
Shares of
Common Stock Owned Pre-Offering(1) |
| |
Percentage
Ownership Prior to Offering |
| |
Shares of
Common Stock Owned Post-Offering |
| |
Percentage
Ownership Following Offering |
| ||||||||||||
EBOL Holdings LLC(9)
|
| | | | 1,510,306 | | | | | | 7.0% | | | | | | 1,621,417 | | | | | | 5.8% | | |
All executive officers and directors (and nominees) as a group(10)
|
| | | | 21,146,948 | | | | | | 97.6% | | | | | | 22,288,800 | | | | | | 79.1% | | |
Underwriter
|
| |
Number of
shares |
| |||
Maxim Group LLC
|
| | | | [•] | | |
Joseph Gunnar & Co. LLC
|
| | | | [•] | | |
Total
|
| | | | [•] | | |
| | |
Per share
|
| |
Total without
Over-allotment Option |
| |
Total with
Over-allotment Option |
| |||||||||
Public offering price
|
| | | $ | [•] | | | | | $ | [•] | | | | | $ | [•] | | |
Underwriting discount (7.0%)
|
| | | $ | [•] | | | | | $ | [•] | | | | | $ | [•] | | |
Proceeds, before expenses, to us
|
| | | $ | [•] | | | | | $ | [•] | | | | | $ | [•] | | |
| | |
Page
|
| |||
| | | | F-2 | | | |
Consolidated Financial Statements | | | | | | | |
| | | | F-3 | | | |
| | | | F-4 | | | |
| | | | F-5 | | | |
| | | | F-6 | | | |
| | | | F-7 | | |
| Consolidated Financial Statements | | | | | | | |
| | | | | F-16 | | | |
| | | | | F-17 | | | |
| | | | | F-18 | | | |
| | | | | F-19 | | | |
| | | | | F-20 | | |
| | |
December 31,
|
| |||||||||
| | |
2021
|
| |
2020
|
| ||||||
ASSETS | | | | | | | | | | | | | |
Current Assets
|
| | | | | | | | | | | | |
Cash
|
| | |
$
|
6,998
|
| | | | $ | 512 | | |
Processor retained funds
|
| | |
|
56,864
|
| | | | | 58,514 | | |
Prepaid expenses
|
| | |
|
166,667
|
| | | | | — | | |
Deferred offering costs
|
| | |
|
771,954
|
| | | | | — | | |
Security deposits
|
| | |
|
276,943
|
| | | | | — | | |
Total Current Assets
|
| | |
$
|
1,279,426
|
| | | | $ | 59,026 | | |
Other Assets
|
| | | | | | | | | | | | |
Furniture and equipment
|
| | |
|
11,500
|
| | | | | — | | |
Restricted cash
|
| | |
|
1,100,000
|
| | | | | — | | |
Security deposits
|
| | |
|
1,377,010
|
| | | | | 433,987 | | |
Total Other Assets
|
| | |
|
2,488,510
|
| | | | | 433,987 | | |
| | | |
$
|
3,767,936
|
| | | | $ | 493,013 | | |
LIABILITIES AND MEMBERS’ DEFICIT | | | | | | | | | | | | | |
Current Liabilities
|
| | | | | | | | | | | | |
Accounts payable and accrued expenses
|
| | |
$
|
4,209,366
|
| | | | $ | 3,772,919 | | |
Rents received in advance
|
| | |
|
1,819,943
|
| | | | | 858,538 | | |
Merchant cash advances – net of unamortized costs of $57,768
|
| | |
|
1,386,008
|
| | | | | 320,079 | | |
Loans payable – current portion
|
| | |
|
1,267,004
|
| | | | | 355,182 | | |
Loans payable – SBA – PPP Loan – current portion
|
| | |
|
815,183
|
| | | | | 534,950 | | |
Loans payable – related parties – current portion
|
| | |
|
22,221
|
| | | | | 74,962 | | |
Total Current Liabilities
|
| | |
|
9,519,725
|
| | | | | 5,916,630 | | |
Long-term Liabilities
|
| | | | | | | | | | | | |
Loans payable
|
| | |
|
925,114
|
| | | | | 617,271 | | |
Loans payable – SBA – PPP Loan
|
| | |
|
—
|
| | | | | 280,233 | | |
Loans payable – SBA – EIDL Loan
|
| | |
|
800,000
|
| | | | | 800,000 | | |
Loans payable – related parties
|
| | |
|
496,500
|
| | | | | — | | |
Convertible loans payable – related parties
|
| | |
|
2,608,860
|
| | | | | 367,850 | | |
Line of credit
|
| | |
|
94,975
|
| | | | | 94,975 | | |
Deferred rent
|
| | |
|
536,812
|
| | | | | 211,698 | | |
Total Long-term Liabilities
|
| | |
|
5,462,261
|
| | | | | 2,372,052 | | |
Total Liabilities
|
| | |
|
14,981,986
|
| | | | | 8,288,682 | | |
Commitments and Contingencies | | | | | | | | | | | | | |
Members’ Deficit
|
| | |
|
(11,214,050)
|
| | | | | (7,795,669) | | |
| | | |
$
|
3,767,936
|
| | | | $ | 493,013 | | |
| | |
For the Years Ended
December 31, |
| |||||||||
| | |
2021
|
| |
2020
|
| ||||||
Rental Revenue
|
| | |
$
|
32,223,365
|
| | | | $ | 13,540,488 | | |
Refunds and Allowances
|
| | |
|
10,843,452
|
| | | | | 5,266,629 | | |
Net Rental Revenue
|
| | |
|
21,379,913
|
| | | | | 8,273,859 | | |
Cost of Revenue
|
| | |
|
19,269,153
|
| | | | | 11,232,643 | | |
Gross Profit (Loss) Profit
|
| | |
|
2,110,760
|
| | | | | (2,958,784) | | |
General and Administrative Expenses | | | | | | | | | | | | | |
Administrative and other
|
| | |
|
2,680,005
|
| | | | | 1,045,728 | | |
Professional fees
|
| | |
|
164,632
|
| | | | | 61,512 | | |
Total General and Administrative Expenses
|
| | |
|
2,844,637
|
| | | | | 1,107,240 | | |
Loss from Operations
|
| | |
|
(733,877)
|
| | | | | (4,066,024) | | |
Other Income (Expense) | | | | | | | | | | | | | |
Other income
|
| | |
|
127,058
|
| | | | | 28,068 | | |
Interest and financing costs
|
| | |
|
(1,626,565)
|
| | | | | (577,769) | | |
Total Other Expense
|
| | |
|
(1,499,507)
|
| | | | | (549,701) | | |
Net Loss
|
| | |
$
|
(2,233,384)
|
| | | | $ | (4,615,725) | | |
| | |
For the Years Ended
December 31, 2021 and 2020 |
| | | | |||
Balance – January 1, 2020
|
| | | $ | (2,106,933) | | | | ||
Net loss
|
| | | | (4,615,725) | | | | ||
Contributions
|
| | | | 500,884 | | | | ||
Distributions
|
| | | | (1,573,895) | | | | ||
Balance – December 31, 2020
|
| | | | (7,795,669) | | | | ||
Net loss
|
| | | | (2,233,384) | | | | ||
Contributions
|
| | | | 72,082 | | | | ||
Distributions
|
| | | | (1,257,079) | | | | ||
Balance – December 31, 2021
|
| | | $ | (11,214,050) | | | |
| | |
For the Years Ended
December 31, |
| |||||||||
| | |
2021
|
| |
2020
|
| ||||||
Cash Flows from Operating Activities | | | | | | | | | | | | | |
Net loss
|
| | |
$
|
(2,233,384)
|
| | | | $ | (4,615,725) | | |
Adjustments to reconcile net loss to net cash used in operating activities:
|
| | | | | | | | | | | | |
Changes in operating assets and liabilities:
|
| | | | | | | | | | | | |
(Increase) Decrease in:
|
| | | | | | | | | | | | |
Processor retained funds
|
| | |
|
1,650
|
| | | | | (40,526) | | |
Prepaid expenses and other assets
|
| | |
|
(938,621)
|
| | | | | — | | |
Security deposits
|
| | |
|
(1,219,966)
|
| | | | | (120,337) | | |
Increase in:
|
| | | | | | | | | | | | |
Accounts payable and accrued expenses
|
| | |
|
436,447
|
| | | | | 3,275,838 | | |
Deferred rent
|
| | |
|
325,114
|
| | | | | 23,948 | | |
Rents received in advance
|
| | |
|
961,405
|
| | | | | 240,508 | | |
Net cash used in operating activities
|
| | |
|
(2,667,355)
|
| | | | | (1,236,294) | | |
Cash Flows from Investing Activities | | | | | | | | | | | | | |
Purchase of furniture and equipment
|
| | |
|
(11,500)
|
| | | | | — | | |
Net cash used in investing activities
|
| | |
|
(11,500)
|
| | | | | — | | |
Cash Flows from Financing Activities | | | | | | | | | | | | | |
Proceeds from loans payable – net
|
| | |
|
1,219,665
|
| | | | | 651,423 | | |
Proceeds from loans payable – SBA – PPP loan
|
| | |
|
—
|
| | | | | 815,183 | | |
Proceeds from loans payable – SBA – EIDL loan
|
| | |
|
—
|
| | | | | 800,000 | | |
Proceeds from (repayments of) related party loans payable and convertible note
|
| | |
|
2,684,744
|
| | | | | (1,720) | | |
Proceeds from merchant cash advances – net
|
| | |
|
1,065,929
|
| | | | | 29,891 | | |
Contributions from members
|
| | |
|
72,082
|
| | | | | 500,884 | | |
Distributions to members
|
| | |
|
(1,257,079)
|
| | | | | (1,573,895) | | |
Net cash provided by financing activities
|
| | |
|
3,785,341
|
| | | | | 1,221,766 | | |
Net Increase (Decrease) in Cash and Restricted Cash
|
| | |
|
1,106,486
|
| | | | | (14,528) | | |
Cash, and Restricted Cash – beginning
|
| | |
|
512
|
| | | | | 15,040 | | |
Cash, and Restricted Cash – end
|
| | |
$
|
1,106,998
|
| | | | $ | 512 | | |
Cash
|
| | |
$
|
6,998
|
| | | | $ | 512 | | |
Restricted Cash
|
| | |
|
1,100,000
|
| | | | | — | | |
Total Cash and Restricted Cash
|
| | |
$
|
1,106,998
|
| | | | $ | 512 | | |
Supplemental Disclosures of Cash Flow Information | | | | | | | | | | | | | |
Cash paid for:
|
| | | | | | | | | | | | |
Interest
|
| | |
$
|
1,333,677
|
| | | | $ | 434,587 | | |
Noncash financing activities:
|
| | | | | | | | | | | | |
Imputed interest on related party loans with below market interest rates reported as contributions from members
|
| | |
$
|
—
|
| | | | $ | 25,140 | | |
| | |
2021
|
| |
2020
|
| ||||||
Cash
|
| | | | 6,998 | | | | | | 512 | | |
Restricted Cash
|
| | | | 1,100,000 | | | | | | — | | |
Cash and restricted cash
|
| | | | 1,106,998 | | | | | | 512 | | |
For the Fiscal Years Ending
|
| | | | | | |
2022 | | | |
$
|
1,460
|
| |
2023 | | | |
|
14,062
|
| |
2024 | | | |
|
14,826
|
| |
2025 | | | |
|
15,391
|
| |
2026 | | | |
|
15,979
|
| |
Thereafter | | | |
|
738,282
|
| |
| | | |
$
|
800,000
|
| |
| | |
December 31,
|
| |||||||||
| | |
2021
|
| |
2020
|
| ||||||
Original borrowings of $100,000, bears interest at 1%, requires no payments until maturity in March 2024
|
| | |
$
|
20,500
|
| | | | $ | 20,500 | | |
Original borrowings of $250,000, bears interest at 1%, requires no payments until maturity in January 2024
|
| | |
|
210,500
|
| | | | | 210,500 | | |
Original borrowings of $20,000, bears interest at 1%, and is payable on demand
|
| | |
|
—
|
| | | | | 20,000 | | |
Original borrowings of $121,000, requires weekly payments of $5,822 until total payments of $139,728 have been made. The loan is personally guaranteed by the managing member and originally matured in March of 2020. Maturity date was extended to 2021 when loan was satisfied
|
| | |
|
—
|
| | | | | 17,182 | | |
Original amounts due of $151,096, related to refunds remitted to customers by processor, increased by additional refunds, requires monthly payments of $1,500 until loan is paid in full. This loan fully matures after 2026
|
| | |
|
242,053
|
| | | | | 151,096 | | |
Original amounts due of $195,000, related to services provided by a vendor, requires monthly payments of $10,000 through May 2022, then monthly payments of $25,000 through August 2022 at which time any remaining balance is due
|
| | |
|
145,000
|
| | | |
|
—
|
| |
Original amounts due of $553,175, related to refunds remitted to customers by processor, requires payments of $504,004 in 2022 and balance of loan in 2023
|
| | |
|
553,175
|
| | | | | 553,175 | | |
Related to refunds remitted to customers by processor, increased by additional refunds, requires monthly payments of $50,000 through August 31, 2023 at which time any remaining balance is due
|
| | |
|
1,020,890
|
| | | |
|
—
|
| |
| | | |
|
2,192,118
|
| | | | | 972,453 | | |
Less: Current maturities
|
| | |
|
1,267,004
|
| | | | | 355,182 | | |
| | | | $ | 925,114 | | | | |
$
|
617,271
|
| |
For the Fiscal Years Ending
|
| | | | | | |
2022 | | | |
$
|
1,267,004
|
| |
2023 | | | |
|
488,061
|
| |
2024 | | | |
|
249,000
|
| |
2025 | | | |
|
18,000
|
| |
2026 | | | |
|
18,000
|
| |
Thereafter
|
| | |
|
152,053
|
| |
| | | |
$
|
2,192,118
|
| |
| | |
December 31,
|
| |||||||||
| | |
2021
|
| |
2020
|
| ||||||
Original borrowings of $87,000, bears interest at 1%, requires no payments until maturity in December 2021. Lender is controlled by the managing member
|
| | |
$
|
—
|
| | | | $ | 46,150 | | |
Original borrowings of $4,975, no stated repayment terms — lender is owned and controlled by the managing member
|
| | |
|
—
|
| | | | | 4,975 | | |
Original borrowings of $275,000, bears interest at various rates based on the lenders
borrowing rates, requires various payments in accordance with the loan agreement until maturity in January 2020 when all unpaid principal and interest is due — maturity date was extended into 2021 and balance was satisfied in 2021. Lender is a member of the Company |
| | |
|
—
|
| | | | | 23,837 | | |
Original borrowings of $496,500, bears interest at 6%, requires no payments until maturity in May 2023. Lender is a member of the Company
|
| | |
|
496,500
|
| | | |
|
—
|
| |
Original borrowings of $150,000, bears interest at various rates based on the lenders
borrowing rates. No stated repayment terms. Lender is controlled by the managing member of the Company and owned by his spouse |
| | |
|
22,221
|
| | | |
|
—
|
| |
| | | |
|
518,721
|
| | | | | 74,962 | | |
Less: Current maturities
|
| | |
|
22,221
|
| | | | |
74,962
|
| |
| | | |
$
|
496,500
|
| | | | $ | — | | |
For the Fiscal Years Ending
|
| | | | | | |
2022 | | | |
$
|
22,221
|
| |
2023 | | | |
|
496,500
|
| |
| | | |
$
|
518,721
|
| |
| | |
December 31,
|
| |||||||||
| | |
2021
|
| |
2022
|
| ||||||
Convertible revolving credit line of $650,000, bears interest at 1%, requires no payments until maturity in March 2024. Contingently convertible upon certain triggering events, at the holder’s option, but no earlier than maturity, at a conversion ratio equal to 1% of enterprise value measured at conversion. Lender is related to the managing member
|
| | |
|
642,841
|
| | | |
|
367,875
|
| |
Original borrowings of $1,966,019, bears interest at 6%, requires no payments until maturity in April 2023. Lender is related to the managing member. Contingently convertible upon certain triggering events, at the holder’s option upon an initial public offering
|
| | |
|
1,966,019
|
| | | |
|
—
|
| |
| | | |
$
|
2,608,860
|
| | | | | 367,857 | | |
Less: Current maturities
|
| | |
|
—
|
| | | | | — | | |
| | | |
$
|
2,608,860
|
| | | | $ | 367,857 | | |
For the Fiscal Years Ending
|
| | | | | | |
2022 | | | |
$
|
—
|
| |
2023 | | | |
|
1,966,019
|
| |
2024 | | | |
|
642,841
|
| |
| | | |
$
|
2,608,860
|
| |
| | |
March 31,
2022 |
| |
December 31,
2021 |
| ||||||
ASSETS | | | | | | | | | | | | | |
Current Assets
|
| | | | | | | | | | | | |
Cash
|
| | |
$
|
62,189
|
| | | | $ | 6,998 | | |
Processor retained funds
|
| | |
|
1,646,981
|
| | | | | 56,864 | | |
Prepaid expenses and other current assets
|
| | |
|
204,380
|
| | | | | 166,667 | | |
Deferred offering costs
|
| | |
|
815,733
|
| | | | | 771,954 | | |
Security deposits – current
|
| | |
|
280,256
|
| | | | | 276,943 | | |
Total Current Assets
|
| | | $ | 3,009,539 | | | | | $ | 1,279,426 | | |
Other Assets
|
| | | | | | | | | | | | |
Furniture and equipment, net
|
| | |
|
11,500
|
| | | | | 11,500 | | |
Restricted cash
|
| | |
|
1,100,000
|
| | | | | 1,100,000 | | |
Security deposits – noncurrent
|
| | |
|
1,573,697
|
| | | | | 1,377,010 | | |
Operating lease right-of-use asset, net
|
| | |
|
34,200,654
|
| | | | | — | | |
Total Other Assets
|
| | | | 36,885,851 | | | | | | 2,488,510 | | |
Total Assets
|
| | | $ | 39,895,390 | | | | | $ | 3,767,936 | | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT | | | | | | | | | | | | | |
Current Liabilities
|
| | | | | | | | | | | | |
Accounts payable and accrued expenses
|
| | | $ | 4,194,965 | | | | | $ | 4,209,366 | | |
Rents received in advance
|
| | |
|
2,430,274
|
| | | |
|
1,819,943
|
| |
Merchant cash advances – net of unamortized costs of $44,935 and $57,768, respectively
|
| | |
|
1,756,183
|
| | | |
|
1,386,008
|
| |
Loans payable – current portion
|
| | |
|
1,220,054
|
| | | |
|
1,267,004
|
| |
Loans payable – SBA – PPP Loan – current portion
|
| | |
|
815,183
|
| | | |
|
815,183
|
| |
Loans payable – related parties – current portion
|
| | |
|
170,225
|
| | | |
|
22,221
|
| |
Operating lease liability – current
|
| | |
|
6,345,870
|
| | | |
|
—
|
| |
Total Current Liabilities
|
| | | | 16,932,754 | | | | | | 9,519,725 | | |
Long-Term Liabilities
|
| | | | | | | | | | | | |
Loans payable
|
| | |
|
545,789
|
| | | |
|
925,114
|
| |
Loans payable – SBA – EIDL Loan
|
| | |
|
800,000
|
| | | |
|
800,000
|
| |
Loans payable – related parties
|
| | |
|
486,000
|
| | | |
|
496,500
|
| |
Convertible loans payable – related parties
|
| | |
|
2,351,171
|
| | | |
|
2,608,860
|
| |
Line of credit
|
| | |
|
94,975
|
| | | |
|
94,975
|
| |
Deferred rent
|
| | |
|
—
|
| | | |
|
536,812
|
| |
Operating lease liability
|
| | |
|
28,893,691
|
| | | | | — | | |
Total Long-term Liabilities
|
| | | | 33,171,626 | | | | | | 5,462,261 | | |
Total Liabilities
|
| | | | 50,104,380 | | | | | | 14,981,986 | | |
Commitments and Contingencies
|
| | | | | | | | | | | | |
Stockholders’ Deficit
|
| | | | | | | | | | | | |
Members’ Deficit
|
| | |
|
—
|
| | | |
|
(11,214,050)
|
| |
Common stock (shares authorized, issued and outstanding – 90,000,000; 21,675,001; 21,675,001; respectively)
|
| | |
|
216
|
| | | | | — | | |
Additional paid in capital
|
| | |
|
—
|
| | | | | — | | |
Retained earnings
|
| | |
|
(10,209,206)
|
| | | | | — | | |
Total Stockholders’ Deficit
|
| | |
|
(10,208,990)
|
| | | |
|
(11,214,050)
|
| |
Total Liabilities and Stockholders’ Deficit
|
| | | $ | 39,895,390 | | | | | $ | 3,767,936 | | |
| | |
Three Months Ended
|
| |||||||||
| | |
March 31, 2022
|
| |
March 31, 2021
|
| ||||||
Rental Revenue
|
| | |
$
|
11,762,899
|
| | | | $ | 4,960,187 | | |
Refunds and Allowances
|
| | |
|
2,663,474
|
| | | | | 1,654,158 | | |
Net Rental Revenue
|
| | |
|
9,099,425
|
| | | |
|
3,306,029
|
| |
Cost of Revenue
|
| | |
|
6,586,162
|
| | | | | 3,885,293 | | |
Gross Profit (Loss)
|
| | |
|
2,513,263
|
| | | |
|
(579,264)
|
| |
General and Administrative Expenses | | | | | | | | | | | | | |
Administrative and other
|
| | |
|
750,621
|
| | | | | 557,418 | | |
Professional fees
|
| | |
|
228,985
|
| | | | | 53,014 | | |
Total General and Administrative Expenses
|
| | | | 979,606 | | | | | | 610,432 | | |
Net Income (Loss) Before Other Income (Expense)
|
| | |
|
1,533,657
|
| | | |
|
(1,189,696)
|
| |
Other Income (Expense) | | | | | | | | | | | | | |
Other income
|
| | |
|
449,913
|
| | | | | 33 | | |
Interest and financing costs
|
| | |
|
(564,137)
|
| | | |
|
(117,243)
|
| |
Total Other Expenses
|
| | | | (114,224) | | | | | | (117,210) | | |
Net Income (Loss)
|
| | | $ | 1,419,433 | | | | | $ | (1,306,906) | | |
Basic and diluted earnings (loss) per common share
|
| | | $ | 0.07 | | | | | $ | — | | |
Basic and diluted weighted average number of common stock outstanding
|
| | | | 21,675,001 | | | | | | — | | |
| | |
Common Stock
|
| |
Members’
Deficit |
| |
Additional
Paid-In Capital |
| |
Retained
Earnings |
| |
Stockholders’
Deficit |
| |||||||||||||||||||||
Balance – December 31, 2020 partnership equity
|
| | | | — | | | | | | — | | | | | $ | (7,795,669) | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
Net Loss
|
| | | | | | | | | | | | | | | | (1,306,906) | | | | | | | | | | | | | | | | | | | | |
Contributions
|
| | | | | | | | | | | | | | | | 33,821 | | | | | | | | | | | | | | | | | | | | |
Distributions
|
| | | | | | | | | | | | | | | | (568,485) | | | | | | | | | | | | | | | | | | | | |
Balance – March 31, 2021 partnership equity
|
| | | | | | | | | | | | | | | $ | (9,637,239) | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance – December 31, 2021 partnership equity, previously reported
|
| | | | — | | | | | | — | | | | | $ | (11,214,050) | | | | | $ | — | | | | | $ | — | | | | | $ | (11,214,050) | | |
Cumulative effect of
changes in accounting principle |
| | | | — | | | | | | — | | | | | | (414,373) | | | | | | — | | | | | | — | | | | | | (414,373) | | |
Conversion to C Corp
|
| | | | 216,000 | | | | | | 216 | | | | | | 11,628,423 | | | | | | — | | | | | | (11,628,639) | | | | | | — | | |
Net Income
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 1,419,433 | | | | | | 1,419,433 | | |
Balance – March 31, 2022
|
| | | | 216,000 | | | | | $ | 216 | | | | | $ | — | | | | | $ | — | | | | | $ | (10,209,206) | | | | | $ | (10,208,990) | | |
| | |
Three Months Ended
|
| |||||||||
| | |
March 31, 2022
|
| |
March 31, 2021
|
| ||||||
Cash Flows from Operating Activities | | | | | | | | | | | | | |
Net Income (Loss)
|
| | | $ | 1,419,433 | | | | | $ | (931,929) | | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
| | | | | | | | | | | | |
Changes in operating assets and liabilities:
|
| | | | | | | | | | | | |
(Increase) in:
|
| | | | | | | | | | | | |
Processor retained funds
|
| | |
|
(1,590,117)
|
| | | |
|
(24,289)
|
| |
Prepaid expenses and other assets
|
| | |
|
(37,713)
|
| | | |
|
—
|
| |
Security deposits
|
| | |
|
(200,000)
|
| | | |
|
(18,310)
|
| |
Operating lease right-of-use asset
|
| | |
|
(34,200,654)
|
| | | |
|
—
|
| |
Increase (Decrease) in:
|
| | | | | | | | | | | | |
Accounts payable and accrued expenses
|
| | |
|
(14,401)
|
| | | |
|
(207,675)
|
| |
Deferred rent
|
| | |
|
(951,185)
|
| | | |
|
163,279
|
| |
Operating lease liability
|
| | |
|
35,239,561
|
| | | |
|
—
|
| |
Rents received in advance
|
| | |
|
610,331
|
| | | |
|
1,719,484
|
| |
Net cash provided from operating activities
|
| | |
|
275,255
|
| | | |
|
325,583
|
| |
Cash Flows from Financing Activities | | | | | | | | | | | | | |
Deferred offering costs – net
|
| | |
|
(43,779)
|
| | | |
|
—
|
| |
Proceeds from (repayments of) loans payable – net
|
| | |
|
(426,275)
|
| | | |
|
(22,416)
|
| |
Proceeds from (repayments of) loans payable – related parties – net
|
| | |
|
(120,185)
|
| | | |
|
47,014
|
| |
Proceeds from (repayments of) merchant cash advances – net
|
| | |
|
370,175
|
| | | |
|
184,064
|
| |
Contributions from members
|
| | |
|
—
|
| | | |
|
33,821
|
| |
Distributions to members
|
| | |
|
—
|
| | | |
|
(568,485)
|
| |
Net cash used in financing activities
|
| | |
|
(220,064)
|
| | | |
|
(326,002)
|
| |
Net Increase in Cash and Restricted Cash
|
| | |
|
55,191
|
| | | |
|
(419)
|
| |
Cash and Restricted Cash – beginning
|
| | |
|
1,106,998
|
| | | |
|
512
|
| |
Total Cash and Restricted Cash – end
|
| | |
|
1,162,189
|
| | | |
|
93
|
| |
Cash
|
| | |
|
62,189
|
| | | |
|
93
|
| |
Restricted Cash
|
| | |
|
1,100,000
|
| | | |
|
—
|
| |
Total Cash and Restricted Cash
|
| | | $ | 1,162,189 | | | | | $ | 93 | | |
Supplemental Disclosures of Cash Flow Information | | | | | | | | | | | | | |
Cash paid for:
|
| | | | | | | | | | | | |
Interest
|
| | | $ | 421,275 | | | | | $ | — | | |
|
Operating lease right of use asset
|
| | | $ | 34,200,654 | | |
|
Operating lease liability, current portion
|
| | | $ | 6,345,870 | | |
|
Operating lease liability, net of current portion
|
| | | $ | 28,893,691 | | |
| | |
March 31,
2022 |
|
Weighted average discount rate
|
| |
10%
|
|
Weighted average remaining lease term (years)
|
| |
9.3 years
|
|
| | | | ||||
Operating lease cost
|
| | | $ | 3,509,345 | | |
Total lease cost
|
| | | $ | 3,509,345 | | |
For the Twelve Months Ending March 31,
|
| ||||||
2023
|
| | | $ | 815,183 | | |
| | |
March 31,
2022 |
| |
December 31,
2021 |
| ||||||
Original borrowings of $100,000, bears interest at 1%, requires no payments until maturity in March 2024
|
| | |
$
|
20,500
|
| | | | $ | 20,500 | | |
Original borrowings of $250,000, bears interest at 1%, requires no payments until maturity in January 2024
|
| | |
|
210,500
|
| | | | | 210,500 | | |
Original payable of $151,096 with additional net borrowings of $89,154, requires monthly payments of $1,500 until total payments of $240,250 have been made
|
| | |
|
1,051
|
| | | | | 242,053 | | |
Original payable of $553,175 with additional net borrowings of $125,412, requires monthly payments of $25,000 until total payments of $678,587 have been made
|
| | |
|
553,175
|
| | | | | 553,175 | | |
Original payable of $492,180, requires monthly payments of $25,000 until total payments of $492,180 have been made
|
| | |
|
865,618
|
| | | | | 1,020,890 | | |
Original amounts due of $195,000, related to services provided by a vendor, requires monthly payments of $10,000 through May 2022, then monthly payments of $25,000 through August 2022 at which time any remaining balance is due
|
| | |
|
115,000
|
| | | | | 145,000 | | |
| | | |
|
1,765,844
|
| | | | | 2,192,118 | | |
Less: Current maturities
|
| | |
|
1,220,054
|
| | | | | 1,267,004 | | |
| | | |
$
|
545,789
|
| | | | $ | 925,114 | | |
For the Twelve Months Ending March 31,
|
| | | | | | |
2023
|
| | | $ | 1,534,844 | | |
2024
|
| | | | 231,000 | | |
| | | | $ | 1,765,844 | | |
| | |
March 31,
2022 |
| |
December 31,
2021 |
| ||||||
Original borrowings of $496,500, bears interest at 6%, requires no payments until
maturity in May 2023. Lender is a stockholder of the Company |
| | |
$
|
486,000
|
| | | | $ | 496,500 | | |
Original borrowings of $150,000, bears interest at various rates based on the
lenders borrowing rates. No stated repayment terms. Lender is controlled by the managing stockholder and owned by his spouse |
| | |
|
170,225
|
| | | | | 22,221 | | |
| | | |
|
656,225
|
| | | | | 518,721 | | |
Less: Current maturities
|
| | |
|
170,225
|
| | | | | 22,221 | | |
| | | |
$
|
486,000
|
| | | | $ | 496.500 | | |
For the Twelve Months Ending March 31,
|
| ||||||
2023
|
| | | $ | 170,225 | | |
2024
|
| | | | 486,000 | | |
| | | | $ | 656,225 | | |
| | |
March 31,
2022 |
| |
December 31,
2021 |
| ||||||
Original borrowings of $1,966,019, bears interest at 6%, requires no payments
until maturity in April 2023. Lender is related to the managing stockholder. Contingently convertible upon certain triggering events, at the holder’s option upon an initial public offering |
| | |
$
|
1,684,404
|
| | | | $ | 1,966,019 | | |
Convertible revolving credit line of $650,000, bears interest at 1%, requires no payments until maturity in March 2024. Contingently convertible upon certain triggering events, at the holder’s option, nut no earlier than maturity, at a conversion ratio equal to 1% of enterprise value measured at conversion. Lender is related to the managing stockholder
|
| | |
|
666,767
|
| | | | | 642,841 | | |
| | | |
$
|
2,351,171
|
| | | | $ | 2,608,860 | | |
Less: Current maturities
|
| | |
|
—
|
| | | | | — | | |
| | | |
$
|
2,351,171
|
| | | | $ | 2,608,860 | | |
For the Twelve Months Ending March 31,
|
| ||||||
2023
|
| | | $ | — | | |
2024
|
| | | | 1,684,404 | | |
2025
|
| | | | 666,767 | | |
| | | | $ | 2,351,171 | | |
|
SEC registration fee
|
| | | | | | $ | 1,700 | | |
|
FINRA filing fee
|
| | | | | | | 7,300 | | |
|
NYSE American listing fee
|
| | | | | | | 150,000 | | |
|
Transfer agent and registrar fees
|
| | | | | | | 8,000 | | |
|
Accounting fees and expenses
|
| | | | | | | 200,000 | | |
|
Legal fees and expenses
|
| | | | | | | 600,000 | | |
|
Printing and engraving expenses
|
| | | | | | | 50,000 | | |
|
Miscellaneous
|
| | | | | | | 1,000 | | |
|
Total
|
| | | | | | | 1,018,000 | | |
Exhibit No.
|
| |
Description
|
|
1.1 | | | | |
3.1 | | | | |
3.1.1 | | | | |
3.2 | | | | |
3.3 | | | Certificate of Conversion from LLC to “C” corporation(*) | |
4.1 | | | | |
4.2 | | | | |
4.2.1 | | | | |
4.3 | | | | |
4.3.1 | | | | |
4.4 | | | | |
4.5 | | | Form of May/June 2022 Warrant(1) | |
5.1 | | | | |
10.1 | | | | |
10.2 | | | | |
10.3 | | | | |
10.4 | | | | |
10.5 | | | | |
10.6 | | | | |
10.7 | | | | |
10.8 | | | | |
10.8.1 | | | | |
10.8.2 | | | | |
10.9 | | | | |
10.9.1 | | | | |
10.10 | | | | |
10.11 | | | | |
10.12 | | | | |
10.13 | | | | |
10.14 | | | | |
10.15 | | | Securities Purchase Agreement, dated June 30, 2022(1) | |
10.16 | | | | |
10.17 | | | | |
10.18 | | | | |
23.1 | | | | |
23.2 | | | | |
99.1 | | | | |
99.2 | | | Consent of Jeffrey Webb(*) | |
99.3 | | | | |
99.4 | | | |
Exhibit No.
|
| |
Description
|
|
99.5 | | | | |
99.6 | | | | |
99.7 | | | | |
107 | | | |
| | | | CORPHOUSING LLC | | ||||||
| | | | By: | | |
/s/ Brian L. Ferdinand
|
| |||
| | | | | | | Name: | | | Brian L. Ferdinand | |
| | | | | | | Title: | | | Chief Executive Officer | |
|
Name
|
| |
Position
|
| |
Date
|
|
|
By:
/s/ Brian L. Ferdinand
|
| |
Brian L. Ferdinand
Chairman and Chief Executive Officer (Principal Executive Officer) |
| | July 11, 2022 | |
|
By:
/s/ David Gurfein
|
| |
David Gurfein
President and Chief Operating Officer |
| | July 11, 2022 | |
|
By:
/s/ Shanoop Kothari
|
| |
Shanoop Kothari
Chief Financial Officer (Principal Financial Officer) |
| | July 11, 2022 | |
|
By:
/s/ Karl Rothman
|
| |
Karl Rothman
Chief Accounting Officer (Principal Accounting Officer) |
| | July 11, 2022 | |
|
By:
/s/ Jimmie Chatmon
|
| |
Jimmie Chatmon
Director |
| | July 11, 2022 | |
|
By:
/s/ Leonard Toboroff
|
| |
Leonard Toboroff
Director |
| | July 11, 2022 | |
Exhibit 4.5
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
CorpHousing Group Inc.
Initial Exercise Date: [____ __], 2022 |
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, [__________], or its assigns (the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to 5:00 p.m., New York City Time, on [_____], 2027 [five years from date of issuance] (the “Termination Date”) but not thereafter, to subscribe for and purchase from CorpHousing Group Inc., a Delaware corporation (the “Company”), up to a number of shares (as subject to adjustment hereunder, the “Warrant Shares”) of Common Stock equal to the quotient of (i) [$_______ -- the original principal amount of the Note issued to the Holder] divided by (ii) the Exercise Price (as defined in Section 1(b)). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price.
This Warrant is being issued pursuant to that certain Securities Purchase Agreement dated as of June 30, 2022 between the Holder and the Company (the “Securities Purchase Agreement”) and the other purchasers of the Notes. In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Securities Purchase Agreement.
1. Exercise.
(a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy (or e-mail attachment) of the Notice of Exercise in the form annexed hereto and within five (5) Trading Days of the date said Notice of Exercise is delivered to the Company, the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank or, if available, pursuant to the cashless exercise procedure specified in Section 1(c) below. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within five (5) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within three (3) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
(b) Exercise Price. The exercise price per share of the Common Stock under this Warrant shall initially be (i) if the IPO is completed prior to the first anniversary of the Initial Exercise Date of this Warrant, an amount equal to the price per share at which Common Stock (or units of Common Stock and warrant(s) if such units are sold in the IPO) is sold in the IPO, or (ii) if the IPO is not completed prior to the first anniversary of the Initial Exercise Date of this Warrant, an amount equal to the value of a share of Common Stock on such first anniversary date determined as the quotient of an assumed $75 million valuation of the Company divided by the number of outstanding shares of Common Stock on a fully-diluted basis on such date assuming the conversion or exercise of all securities that are convertible into, or exercisable to purchase, shares of Common Stock, subject to adjustment hereunder (the “Exercise Price”).
(c) Cashless Exercise. If at any time after the six-month anniversary of the Initial Exercise Date, there is no effective Registration Statement registering, or no current prospectus available for, the resale of the Warrant Shares by the Holder, then this Warrant may only be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
A = | the VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the applicable Notice of Exercise; |
B = | the Exercise Price of this Warrant, as adjusted hereunder; and |
X = | the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise. |
If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the characteristics of the Warrants being exercised, and the holding period of the Warrants being exercised may be tacked on to the holding period of the Warrant Shares. The Company agrees not to take any position contrary to this Section 2(c).
Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 1(c).
2
(d) Mechanics of Exercise.
i. Delivery of Warrant Shares Upon Exercise. Warrant Shares purchased hereunder shall be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (B) the Warrant Shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is three (3) Trading Days after the delivery to the Company of the Notice of Exercise in compliance with the requirements of this Warrant (such date, the “Warrant Share Delivery Date”). The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised, with payment to the Company of the Exercise Price (or by cashless exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 1(d)(vi) prior to the issuance of such shares, having been paid.
ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
iii. Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 1(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
iv. Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to an exercise, including the payment in full of the Exercise Price, pursuant to the terms of this Warrant, on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares that the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
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v. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
vi. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
vii. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
(e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 1(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 1(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 1(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 1(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.
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2. Certain Adjustments.
(a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 2(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.
(b) Subsequent Equity Sales. If, at any time while this Warrant is outstanding, the Company sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the then Exercise Price (such lower price, the “Base Exercise Price” and such issuances, collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the then Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance), then the Exercise Price shall be reduced to equal the Base Exercise Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no adjustment will be made under this Section 2(b) in respect of an Exempt Issuance. The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 2(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, exercise price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 2(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of Warrant Shares based upon the Base Exercise Price on or after the date of such Dilutive Issuance, regardless of whether the Holder accurately refers to the Base Exercise Price in the Notice of Exercise.
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(c) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 2(a) and 2(b) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
(d) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, upon the exercise of this Warrant, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
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(e) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 1(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 1(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 2(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.
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(f) Calculations. All calculations under this Section 2 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 2, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
(g) Notice to Holder.
i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 2, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 10 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that, following the closing of the IPO, any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
(h) Notwithstanding the provisions of Section 2(a) through 2(g) above, whenever any event requiring an adjustment to the Exercise Price or the number of shares issuable upon exercise of this Warrant shall occur prior to the date on which the Exercise Price or the number of shares issuable upon exercise of this Warrant shall be determined pursuant to the terms of this Warrant, such adjustment shall be effected upon the determination of the Exercise Price or number of shares, as the case may be, and any notice thereof to the Holder required by Section 2(g) shall thereafter be promptly provided to the Holder pursuant to Section 2(g).
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3. Transfer of Warrant.
(a) Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Section 3(d) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
(b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 3(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the original Issue Date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
(c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
(d) Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, make usual and customary representations as to investment intent to the Company.
(e) Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.
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4. Miscellaneous.
(a) No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 1(d)(i), except as expressly set forth in Section 2.
(b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
(c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.
(d) Authorized Shares.
i. The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
ii. Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
iii. Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
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(e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the laws of the State of Delaware as they are applied to contracts executed, delivered and to be wholly performed within the State of Delaware.
(f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered and if the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
(g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
(h) Notices. Any notice, request or other document required or permitted to be given or delivered to the either party to the other shall be delivered in by recognized overnight courier, facsimile or email as follows:
If to the Holder:
[_________]
___________________
___________________
Attn: ________
Email: _____________
If to the Company:
CorpHousing Group Inc.
2125 Biscayne Blvd., Suite 253
Miami, Florida 33137
Attn: Kevin Mikolashek, Chief Compliance Officer
Email: kevin@corphousinggroup.com
(i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
(j) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
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(k) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
(l) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
(m) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
********************
[Signature Page to Follow.]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
CorpHousing Group Inc. | |||
By: | |||
Name: | Brian Ferdinand | ||
Title: | Chief Executive Officer |
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EXHIBIT A
NOTICE OF EXERCISE
TO: CorpHousing Group Inc.
(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
☐ in lawful money of the United States; or
☐ if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in Section 1(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in Section 1(c).
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
The Warrant Shares shall be delivered to the following DWAC Account Number:
(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.
[SIGNATURE OF HOLDER] | |
Name of Investing Entity: | |
Signature of Authorized Signatory of Investing Entity: | |
Name of Authorized Signatory | |
Title of Authorized Signatory | |
Date |
EXHIBIT B
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
Name: | ||
(Please Print) | ||
Address: | ||
(Please Print) | ||
Dated: _______________ __, ______ |
Holder’s Signature: |
|||
Holder’s Address: |
Exhibit 5.1
GRAUBARD MILLER
THE CHRYSLER BUILDING
405 LEXINGTON AVENUE
NEW YORK, NEW YORK 10174
July 11, 2022
CorpHousing Group Inc.
2125 Biscayne Blvd
Suite 253
Miami, Florida 33137
Dear Sirs:
Reference is made to the Registration Statement on Form S-1 (“Registration Statement”)(No. 333-262114) filed by CorpHousing Group Inc. (“Company”), a Delaware corporation, under the Securities Act of 1933, as amended (“Securities Act”), covering up to 5,175,000 shares of Common Stock of the Company, including the 675,000 shares subject to the underwriters’ over-allotment option of the Company (“Public Shares”). The Registration Statement also includes registration of the up to 180,000 shares (“Warrant Shares”) of Common Stock issuable upon exercise of warrants issued to the underwriter in connection with the offering (“Underwriter Warrants”).
We have examined such documents and considered such legal matters as we have deemed necessary and relevant as the basis for the opinion set forth below. With respect to such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as reproduced or certified copies, and the authenticity of the originals of those latter documents. As to questions of fact material to this opinion, we have, to the extent deemed appropriate, relied upon certain representations of certain officers and employees of the Company.
Based upon the foregoing, we are of the opinion that:
1. Public Shares. When the Registration Statement becomes effective under the Securities Act and the Public Shares are issued, delivered and paid for as part of the Public Units, as contemplated by the Registration Statement, the Public Shares will be validly issued, fully paid and non-assessable.
2. Underwriter Warrants and Warrant Shares. When the Registration Statement becomes effective under the Securities Act, and the Underwriter Warrants are issued and delivered, the Underwriter Warrants shall be duly and validly issues and binding obligations of the company and the Warrant Shares issuable upon exercise of such Underwriter Warrants, when issued and sold in accordance with and in the manner described in the Registration Statement and Underwriter Warrants, will be duly authorized, validly issued, fully paid and non-assessable.
We are opining solely on all applicable statutory provisions of Delaware corporate law, including the rules and regulations underlying those provisions, all applicable provisions of the Delaware Constitution, all applicable judicial and regulatory determinations in connection therewith and, as to the Public Shares, Underwriters Warrants and the Warrant Shares constituting legally binding obligations of the Company, with respect to the laws of the State of New York. Our opinion is based on these laws as in effect on the date hereof and as of the effective date of the Registration Statement, and we assume no obligation to revise or supplement this opinion after the effective date of the Registration Statement should the law be changed by legislative action, judicial decision, or otherwise. We express no opinion as to whether the laws of any other jurisdiction are applicable to the subject matter hereof. We are not rendering any opinion as to compliance with any other federal or state law, rule or regulation relating to securities, or to the sale or issuance thereof.
We hereby consent to the use of this opinion as an exhibit to the Registration Statement, to the use of our name as your counsel and to all references made to us in the Registration Statement and in the Prospectus forming a part thereof. In giving this consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act, or the rules and regulations promulgated thereunder.
Very truly yours, | |
/s/ Graubard Miller |
Exhibit 10.13
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this “Agreement”) is dated as of May 27, 2022, between CorpHousing Group Inc., a Delaware corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively, the “Purchasers”).
WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Notes (as defined herein), and (b) the following terms have the meanings set forth in this Section 1.1:
“Acquiring Person” shall have the meaning ascribed to such term in Section 4.7.
“Action” shall have the meaning ascribed to such term in Section 3.1(j).
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“Board of Directors” means the board of directors of the Company.
“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
“Closing Date” means, with respect to each Closing, the Business Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto in connection with such Closing, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Securities as to such Closing, in each case, have been satisfied or waived.
“Closing” means each closing of the purchase and sale of the Securities pursuant to Section 2.1.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock” means the common stock, par value $0.00001 per share, of the Company and any other class of securities into which such securities may hereafter be reclassified or changed.
“Common Stock Equivalents” means any securities of the Company or the Subsidiaries that would entitle the holder thereof to acquire at any time shares of Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, shares of Common Stock.
“Company Counsel” means Graubard Miller, with offices located at 405 Lexington Avenue, New York, New York 10174.
“Conversion Price” shall have the meaning ascribed to such term in the Notes.
“Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of the Notes.
“Disclosure Schedules” shall have the meaning ascribed to such term in Section 3.1.
“Evaluation Date” shall have the meaning ascribed to such term in Section 3.1(r).
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers, directors or consultants of the Company pursuant to the Company’s existing stock option and/or restricted stock plans or stock option and/or restricted stock plans which come into effect following the date hereof, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock, issued and outstanding on the date of this Agreement, or pursuant to other agreements of the Company existing prior to the date hereof and listed on Schedule 3.1(g), provided that such securities and/or agreements have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities, (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities, and (d) the issuance of securities in the IPO.
“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.
“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).
“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).
“IPO” means the consummation of the first underwritten public offering of Common Stock under the Securities Act.
“Legend Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).
“Liens” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
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“Lock-up Period” shall mean the 90-day period commencing on the closing date of the IPO.
“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).
“Material Permits” shall have the meaning ascribed to such term in Section 3.1(m).
“Maximum Rate” shall have the meaning ascribed to such term in Section 5.17.
“Notes” shall mean all of the Notes issued or issuable pursuant to this Agreement, substantially in the form of Exhibit A hereto.
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.
“Public Information Failure” shall have the meaning ascribed to such term in Section 4.3(b).
“Public Information Failure Payments” shall have the meaning ascribed to such term in Section 4.3(b).
“Purchaser Party” shall have the meaning ascribed to such term in Section 4.10.
“Registration Rights Agreement” means the Registration Rights Agreement dated the date hereof between the Company and the Purchasers, substantially in the form of Exhibit C hereto.
“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).
“Required Minimum” means, as of any date, 300% of the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the Transaction Documents, including any Conversion Shares issuable upon conversion in full of all of the Notes and any Warrant Shares issuable upon exercise in full of all of the Warrants, ignoring any conversion limits set forth therein.
“Revenue Share” shall have the meaning ascribed to such term in Section 5.1.
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
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“Securities” means the Notes, the Conversion Shares, the Warrants and the Warrant Shares.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Security Agreement” means the Guaranty and Security Agreement dated the date hereof among the Company and its subsidiaries and Evergreen Capital Management LLC, as secured party, substantially in the form of Exhibit E hereto.
“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock).
“Subscription Amount” shall mean, as to each Purchaser, the aggregate amount to be paid for the Notes and Warrants purchased hereunder as specified below such Purchaser’s name under the heading “Subscription Amount,” on the signature page hereto executed by such Purchaser, which amount in United States dollars and in immediately available funds.
“Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a) and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.
“Trading Day” means a day on which the principal Trading Market is open for trading.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, the OTC Bulletin Board or the OTC Markets (or any successors to any of the foregoing).
“Transaction Documents” means this Agreement, the Notes, the Warrants, the Registration Rights Agreement, the Security Agreement, the Transfer Agent Instruction Letter, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.
“Transfer Agent” means Continental Stock Transfer & Trust Company, the current transfer agent of the Company, with a mailing address of 1 State Street, 30th Floor, New York, New York 10004-1561, and any successor transfer agent of the Company.
“Transfer Agent Instruction Letter” means the letter from the Company to the Transfer Agent which instructs the Transfer Agent to issue shares of Common Stock upon conversion of the Notes and the exercise of the Warrants, substantially in the form of Exhibit D attached hereto.
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“VWAP” means, for or as of any date, the dollar volume-weighted average price for such security on the Trading Market (or, if the Trading Market is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded) during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set to weighted average) or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, recapitalization or other similar transaction during such period.
“Warrant Amount” means, with respect to any Closing, an amount equal to one hundred percent (100%) of the aggregate principal amount of Notes purchased by the Purchasers at such Closing divided by the initial Conversion Price of such Notes.
“Warrants” shall mean all of the Warrants issued or issuable pursuant to this Agreement, substantially in the form of Exhibit B hereto.
“Warrant Shares” means, collectively, the shares of Common Stock issuable upon exercise of the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. At the Closing, each Purchaser shall purchase its Subscription Amount of the Notes (as set forth on the signature page hereto executed by such Purchaser), a Warrant and its right to receive its pro rata portion of the Revenue Share (based upon the amount of its Subscription Amount relative to the aggregate Subscription Amount of all of the Purchasers) and shall deliver to the Company, via wire transfer or a certified check, immediately available funds equal to such Purchaser’s Subscription Amount, and the Company shall deliver to each Purchaser its respective Notes and Warrants (as set forth on the signature page hereto executed by such Purchaser) and agree to pay to each Purchaser its respective pro rata portion of the Revenue Share, and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing. The Closing shall occur concurrently with the execution and delivery of this Agreement at the offices of the Purchaser’s counsel or such other location as the parties shall mutually agree; provided, however, that the Closing may be held virtually through the exchange of pdf signature pages to the Transaction Documents and the delivery of the other documents required by Section 2.2.
2.2 Deliveries.
(a) At the Closing, the Company shall deliver or cause to be delivered to each Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) the Transfer Agent Instruction Letter, duly executed by the Company and the Transfer Agent;
(iii) the Registration Rights Agreement, duly executed by the Company;
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(iv) an executed Note in the principal amount equal to the principal amount of Notes to be purchased by such Purchaser at the Closing as set forth on the signature page hereto executed by such Purchaser;
(v) an executed Warrant to purchase the number of shares of Common Stock to be purchased by such Purchaser at the Closing as set forth on the signature page hereto executed by such Purchaser;
(vi) the Security Agreement duly executed by the Company and each of its Subsidiaries;
(vii) the Disclosure Schedules of the Company; and
(viii) at each Closing, an officers’ certificate executed by the Chief Executive Officer and the Chief Financial Officer of the Company certifying that the representations and warranties of the Company set forth herein are true and correct as of the Closing Date and that the Company has complied with all obligations, covenants and agreements of the Company set forth herein on or prior to the Closing Date.
(b) At the Closing, each Purchaser shall deliver or cause to be delivered to the Company, as applicable, the following:
(i) this Agreement duly executed by such Purchaser;
(ii) the Security Agreement duly executed by Evergreen Capital Management LLC, as secured party;
(iii) the Registration Rights Agreement, duly executed by such Purchaser; and
(iv) such Purchaser’s Subscription Amount for the Closing as set forth on the signature page hereto executed by such Purchaser, by wire transfer to the account specified in writing by the Company.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth in the disclosure schedules of the Company delivered to the Purchasers at the Closing (the “Disclosure Schedules”), which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser:
(a) Subsidiaries. All of the direct and indirect subsidiaries of the Company are set forth in Amendment No. 4 to the Company’s Registration Statement on Form S-1 (Registration No. 333-262114) (as so amended, the “Registration Statement”), including under the heading therein entitled “Certain Corporate Information and Definitions.” The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. If the Company has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.
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(b) Organization and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification. Notwithstanding the foregoing, for purposes of this Agreement, “Material Adverse Effect” shall not include any event, occurrence, fact, condition or change, directly or indirectly, arising out of or attributable to: (A) general economic or political conditions; (B) conditions generally affecting the industries in which the Company operates; (C) any changes in financial, banking or securities markets in general, including any disruption thereof and any decline in the price of any security or any market index or any change in prevailing interest rates; (D) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof; (E) any action required or permitted by this Agreement or any action taken (or omitted to be taken) with the written consent of or at the written request of the Purchasers; (F) any changes in applicable laws or accounting rules (including GAAP (as defined below)) or the enforcement, implementation or interpretation thereof; (G) the announcement, pendency or completion of the transactions contemplated by this Agreement; (H) any natural or man-made disaster or acts of God; or (I) any failure by any Company to meet any internal or published projections, forecasts or revenue or earnings predictions (provided that the underlying causes of such failures (subject to the other provisions of this definition) shall not be excluded).
(c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except: (i) as limited by general equitable principles and 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) insofar as indemnification and contribution provisions may be limited by applicable law.
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(d) No Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not: (i) except as set forth on Schedule 3.1(d) hereto, conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filings required pursuant to Section 4.6 of this Agreement, and (ii) the filing of a Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively, the “Required Approvals”).
(f) Issuance of the Securities. The Conversion Shares and the Warrant Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents. The Company has reserved from its duly authorized capital stock 3,450,000 shares of Common Stock for issuance of the Conversion Shares and the Warrant Shares, which number of shares shall be promptly adjusted upon consummation of the IPO or any other event affecting the applicable conversion or exercise prices of the Notes or the Warrants.
(g) Capitalization. The capitalization of the Company is as set forth in the Registration Statement, including under the heading therein entitled “Prospectus Summary – The Offering” and the footnotes thereto, with the number of shares of Common Stock owned beneficially, and of record, by Affiliates of the Company as of the date hereof described in the Registration Statement under the heading therein entitled “Principal Stockholders.” No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as described in the Registration Statement and except as a result of the purchase and sale of the Securities, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents. The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.
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(h) Financial Statements. The Company is not and since its incorporation never has been a “shell” company as defined in Section 405 of the Securities Act and is not required to file reports with the SEC under the Exchange Act. The financial statements of the Company (the “Financial Statements”) included in Registration Statement have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.
(i) Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest balance sheet included in the Financial Statements, except as specifically disclosed in the Registration Statement, including under the heading therein entitled “Prospectus Summary – Recent Developments’ or Schedule 3(i) hereto: (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables, letters of credit relating to accommodation unit properties, and accrued expenses incurred in the ordinary course of business consistent with past practice, and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option and restricted stock plans. Except for the transactions prescribed by this Agreement and the other agreements and documents being delivered in connection herewith, no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, properties, operations, assets or financial condition, that would be required to be disclosed by an issuer subject to the reporting obligations of the Exchange Act at the time this representation is made or deemed made that has not been included in Registration Statement, the Disclosure Schedules or the Financial Statements.
(j) Litigation. There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Except as disclosed in the Registration Statement, neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.
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(k) Labor Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which could reasonably be expected to result in a Material Adverse Effect. Except as described in the Registration Statement, including under the heading therein entitled “Business – Human Capital,” none of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(l) Compliance. Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority, or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.
(m) Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.
(n) Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries, and (ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP and, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.
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(o) Intellectual Property. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights as necessary or required for use in connection with their respective businesses and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from the date of this Agreement. Neither the Company nor any Subsidiary has received a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as could not have or reasonably be expected to not have a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(p) Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including, without limitation, directors and officers insurance coverage at least equal to the initial Subscription Amount. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.
(q) Transactions With Affiliates and Employees. Except as disclosed in the Registration Statement, including under the heading therein entitled “Certain Relationships and Related Party Transactions,” or as set forth on Schedule 3.1(i), none of the officers or directors of the Company or any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, providing for the borrowing of money from or lending of money to or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case in excess of $120,000 other than for: (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company, and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company.
(r) [Reserved.]
(s) Certain Fees. Except for fees payable by the Company to Maxim Group LLC, no brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiary to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.
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(t) Private Placement. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated hereby.
(u) No “Bad Actor” Disqualification. The Company has exercised reasonable care to determine whether any Company Covered Person (as defined below) is subject to any of the “bad actor” disqualifications described in Rule 506(d)(1)(i) through (viii), as modified by Rules 506(d)(2) and (d)(3), under the Securities Act (“Disqualification Events”). To the Company’s knowledge, no Company Covered Person is subject to a Disqualification Event. The Company has complied, to the extent required, with any disclosure obligations under Rule 506(e) under the Securities Act. For purposes of this Agreement, “Company Covered Persons” are those persons specified in Rule 506(d)(1) under the Securities Act; provided, however, that Company Covered Persons do not include (a) any Purchaser, or (b) any person or entity that is deemed to be an affiliated issuer of the Company solely as a result of the relationship between the Company and any Purchaser.
(v) Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.
(w) Registration Rights. Except as disclosed in the Registration Statement, no Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company or any Subsidiary.
(x) Disclosure. All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.
(y) No Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the Securities Act, or (ii) any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.
(z) Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and each of its Subsidiaries (i) has made or filed all United States federal, state and local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject as and when due subject to any applicable extensions, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, whether or not shown or determined to be due on such returns, reports and declarations, and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary know of no basis for any such claim.
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(aa) No General Solicitation. Neither the Company nor any Person acting on behalf of the Company has offered or sold any of the Securities by any form of general solicitation or general advertising. The Company has offered the Securities for sale only to the Purchasers and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.
(bb) Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor any agent or other Person acting on behalf of the Company or any Subsidiary, has: (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any Person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of FCPA.
(cc) Accountants. To the knowledge and belief of the Company, the Company’s accounting firm, Grassi & Co., CPAs, P.C.: (i) is a registered public accounting firm as required by the Exchange Act and (ii) shall express its opinion with respect to the financial statements to be included in the Company’s registration statement to be filed for the IPO.
(dd) No Disagreements with Accountants and Lawyers. There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and the Company is current with respect to any fees owed to its accountants and lawyers which could affect the Company’s ability to perform any of its obligations under any of the Transaction Documents.
(ee) Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities. The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.
(ff) Acknowledgment Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding (except for Section 4.14 hereof), it is understood and acknowledged by the Company that: (i) none of the Purchasers has been asked by the Company to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities for any specified term, (ii) past or future open market or other transactions by any Purchaser, specifically including, without limitation, Short Sales or “derivative” transactions, before or after a closing of this or future private placement transactions, may negatively impact the market price of the Company’s publicly-traded securities, (iii) any Purchaser, and counter-parties in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, may presently have a “short” position in the Common Stock, and (iv) each Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction. The Company further understands and acknowledges that (y) one or more Purchasers may engage in hedging activities at various times during the period that the Securities are outstanding, including, without limitation, during the periods that the value of the Conversion Shares deliverable with respect to Securities are being determined, and (z) such hedging activities (if any) could reduce the value of the existing stockholders’ equity interests in the Company at and after the time that the hedging activities are being conducted. The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.
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(gg) Stock Option Plans. Except as set forth in the Registration Statement, the Company does not currently have or maintain any stock option or other equity incentive plan for its directors, employees or consultants.
(hh) Office of Foreign Assets Control. Neither the Company nor any Subsidiary nor any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).
(ii) U.S. Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Purchaser’s request.
(kk) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”), and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.
(ll) Money Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance in all material respects with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Company or any Subsidiary, threatened.
3.2 Representations and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein):
(a) Organization; Authority. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and 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) insofar as indemnification and contribution provisions may be limited by applicable law.
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(b) Own Account. Such Purchaser understands that the Securities are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting such Purchaser’s right to sell the Securities in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.
(c) Purchaser Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on which it converts any Notes or exercises any Warrants, it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.
(d) Experience of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.
(e) General Solicitation. Such Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.
(f) No “Bad Actor” Disqualification. Neither (A) such Purchaser nor (B) any entity that controls such Purchaser or is under the control of, or under common control with, such Person, is subject to any Disqualification Event. Such Purchaser has exercised reasonable care to determine the accuracy of the representation made by such Purchaser in this paragraph, and agrees to notify the Company if such Purchaser becomes aware of any fact that makes the representation given by such Purchaser hereunder inaccurate.
(g) Disclosure of Information. Purchaser acknowledges that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the sale of the Securities and the business, properties, prospects and financial condition of the Company and its Subsidiaries. Any questions raised by Purchaser concerning the Company and its subsidiaries or the Securities have been answered to the satisfaction of Purchaser. Purchaser’s decision to purchase the Securities is based solely on the information obtained during the course of Purchaser’s due diligence review and on the response to such questions as Purchaser has raised concerning the Securities or the Company and its Subsidiaries.
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(h) Unlawful Activities. (i) No part of the funds used by Purchaser to acquire any Securities under this Agreement has been, or shall be, directly or indirectly derived from, or related to, any activity that may contravene United States federal or state or non-United States laws or regulations, including, without limitation, laws and regulations relating to anti-money laundering, terrorist financing and other illegal activities; (ii) no capital commitment, contribution or payment to the Company by Purchaser and no distribution to Purchaser shall cause the Company to be in violation of any applicable anti-money laundering laws or regulations, including, without limitation, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001 and the United States Department of the Treasury Office of Foreign Assets Control (“OFAC”) regulations (the “Sanction Regulations”); and (iii) none of the funds of Purchaser have been derived from any unlawful activity. Without limiting the foregoing: (1) Purchaser is in compliance with Executive Order 13224 (September 23, 2001), the rules and regulations of OFAC and any enabling legislation or other executive orders in respect thereof; (2) at all times, (I) none of the funds or other assets of Purchaser constitutes property of, or are beneficially owned, directly or indirectly, by any Person, entity or government subject to trade restrictions under U.S. law (including, without limitation, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any executive orders or regulations promulgated thereunder) (any such Person, an “Embargoed Person”); (II) no Embargoed Person has any interest of any nature whatsoever in Investor; and (III) if applicable to Investor, Investor has implemented a corporate anti-money laundering plan that is reasonably designed to ensure compliance with applicable foreign and U.S. anti-money laundering law; and (4) none of the investors, officers, directors, managers, members or partners of Investor appear on any lists published by OFAC with respect to Persons that have been designated by executive order or by the Sanction Regulations as Persons with whom U.S. Persons may not transact business or must limit their interactions to types approved by OFAC or otherwise. Investor shall promptly notify the Company if any of these representations in this paragraph ceases to be true and accurate regarding Investor.
The Company acknowledges and agrees that the representations contained in this Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transaction contemplated hereby.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights and obligations of a Purchaser under this Agreement.
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(b) The Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in the following form or a substantially similar form as may be required by the Company’s Transfer Agent:
[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE] [NOR THE SECURITIES FOR WHICH THIS SECURITY MAY BE EXERCISED] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [CONVERSION/EXERCISE] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of the Transaction Agreements and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities, including, if the Securities are registered under a registration statement, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of selling stockholders thereunder.
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(c) The Conversion Shares and the Warrant Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) while a registration statement covering the resale of such security is effective under the Securities Act, (ii) following any sale of such Conversion Shares or Warrant Shares pursuant to Rule 144, (iii) if such Conversion Shares or Warrant Shares are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Conversion Shares or Warrant Shares and without volume or manner-of-sale restrictions, or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). Upon request of the Purchaser, the Company shall cause its counsel to issue a legal opinion to the Transfer Agent promptly after the events described in clauses (i)-(iv) in the immediately preceding sentence if required by the Transfer Agent to effect the removal of the legend hereunder; provided that the opinion of counsel delivered in connection with clause (i) may contain provisions that such opinion may be withdrawn at any time by counsel upon any applicable registration statement no longer being effective and may be issued in reliance upon the Company undertaking in writing to such counsel to immediately place stop transfer orders on such securities if the applicable registration statement is no longer effective and foregoing clauses (iii) or (iv) are not then applicable. If all or any Notes are converted or Warrants exercised at a time when there is an effective registration statement to cover the resale of the Conversion Shares or Warrant Shares, or if such Conversion Shares or Warrant Shares may be sold under Rule 144 and the Company is then in compliance with the current public information required under Rule 144, or if the Conversion Shares or Warrant Shares may be sold under Rule 144 without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Conversion Shares or Warrant Shares and without volume or manner-of-sale restrictions or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission) then such Conversion Shares or Warrant Shares shall be issued free of all legends. The Company agrees that following such time as such legend is no longer required under this Section 4.1(c), it will, no later than three Trading Days following the delivery by a Purchaser to the Company or the Transfer Agent of the Conversion Shares or Warrant Shares, as applicable, issued with a restrictive legend (such third Trading Day, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser Conversion Shares or Warrant Shares, as applicable, that are free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4. Conversion Shares or Warrant Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System as directed by such Purchaser.
(d) So long as providing the certificate without the legend is allowed under applicable securities laws, in addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, for each $1,000 of Conversion Shares or Warrant Shares (based on the VWAP of the Common Stock on the date such Securities are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day five (5) Trading Days after such damages have begun to accrue) for each Trading Day after the fifth (5th) Trading Day immediately following the Legend Removal Date until such certificate is delivered without a legend. Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Company’s failure to deliver certificates representing any Securities as required by the Transaction Documents, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.
4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Conversion Shares and the Warrant Shares pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company.
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4.3 Furnishing of Information; Public Information. From and after the date on which the Company completes the IPO until the date that no Purchasers own any Securities, the Company agrees to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act.
4.4 Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.
4.5 Conversion and Exercise Procedures. The form of Notice of Conversion included in the Notes (or in the alternative, the delivery of an Offering Notice Response, as defined in the Notes) and the form of Notice of Exercise included in the Warrants set forth the totality of the procedures required of the Purchasers in order to convert the Notes or exercise the Warrants (except, in the case of the Warrants, for the making of any required payments by the holder thereof to the Company). Without limiting the preceding sentences, no ink-original Offering Notice Response, Notice of Conversion or Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Offering Notice Response, Notice of Conversion form or Notice of Exercise form be required in order to convert the Notes or exercise the Warrants. No additional legal opinion, other information or instructions shall be required of the Purchasers to convert their Notes or exercise their Warrants. The Company shall honor conversions of the Notes and exercises of the Warrants and shall deliver Conversion Shares or Warrant Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.
4.6 Securities Laws Disclosure; Publicity. The Company and each Purchaser shall consult with each other in issuing any press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding anything to the contrary contained herein, the Company shall be permitted to make disclosures of the transactions contemplated hereby in any filing with the Commission as required by the rules and regulations thereof and as otherwise required by law, including any amendment to the Registration Statement and with the NYSE in connection with the Company’s application to have its Common Stock and certain warrants listed thereon in connection with the IPO; provided, however, that the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser, in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except: (a) as required by federal securities law in connection with the filing of final Transaction Documents with the Commission and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under this clause (b).
4.7 Shareholder Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company and the Purchasers.
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4.8 Non-Public Information. Following the IPO, the Company shall not, and shall cause each of its Subsidiaries and each of their respective officers, directors, employees, affiliates and agents, not to, provide any Purchaser with any material, nonpublic information regarding the Company or any of its Subsidiaries from and after the date hereof without the express prior written consent of such Purchaser. If following the IPO a Purchaser has, or believes it has, received any such material, nonpublic information regarding the Company or any of its Subsidiaries from the Company, any of its Subsidiaries or any of their respective officers, directors, employees, affiliates or agents, it may provide the Company with written notice thereof. The Company shall, within one (1) Trading Day of receipt of such notice, make public disclosure of such material, nonpublic information. In the event of a breach of the foregoing covenant by the Company, any of its Subsidiaries, or any of its or their respective officers, directors, employees, affiliates and agents, in addition to any other remedy provided herein or in the Transaction Documents, a Purchaser shall have the right to make a public disclosure, in the form of a press release, public advertisement or otherwise, of such material, nonpublic information without the prior approval by the Company, its Subsidiaries, or any of its or their respective officers, directors, employees, affiliates or agents. No Purchaser shall have any liability to the Company, its Subsidiaries, or any of its or their respective officers, directors, employees, affiliates, stockholders or agents for any such disclosure. To the extent that, following the IPO, the Company delivers any material, nonpublic information to a Purchaser without such Purchaser’s consent, the Company hereby covenants and agrees that such Purchaser shall not have any duty of confidentiality to the Company, any of its Subsidiaries or any of their respective officers, directors, employees, affiliates or agent with respect to, or a duty to the Company, any of its Subsidiaries or any of their respective officers, directors, employees, affiliates or agent not to trade on the basis of, such material, nonpublic information.
4.9 Use of Proceeds. The Company shall use the proceeds from this offering as cash collateral for letters of credit delivered as a security deposit in connection with the lease of the former Marriott Herald Square Hotel located at 967 Sixth Avenue in New York City and for general corporate and working capital purposes.
4.10 Indemnification of Purchasers. Subject to the provisions of this Section 4.10, the Company will indemnify and hold each Purchaser and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against the Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such Purchaser Party’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence, willful misconduct or malfeasance). If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent, that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification required by this Section 4.10 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.
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4.11 Reservation and Listing of Securities.
(a) The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as equals the Required Minimum.
(b) If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than (i) the Required Minimum on such date, minus (ii) the number of shares of Common Stock previously issued pursuant to the Transaction Documents, then the Board of Directors shall use commercially reasonable efforts to amend the Company’s certificate or articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the Required Minimum at such time (minus the number of shares of Common Stock previously issued pursuant to the Transaction Documents), as soon as possible and in any event not later than the 90th day after such date, provided that the Company will not be required at any time to authorize a number of shares of Common Stock greater than the maximum remaining number of shares of Common Stock that could possibly be issued after such time pursuant to the Transaction Documents.
4.12 Sale or Transfer of Assets. So long as the Notes remain outstanding, neither the Company, nor any Subsidiary of the Company, shall, without each Purchaser’s written consent, sell, lease or otherwise dispose of or transfer any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition. In addition, so long as the Notes remain outstanding, neither the Company nor any Subsidiary shall sell or transfer or otherwise dispose of any assets to any Subsidiary that is not a guarantor under, and a party to, the Security Agreement.
4.13 Equal Treatment of Purchasers. No consideration (including any modification of any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration is also offered to all of the parties to this Agreement. For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.
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4.14 Certain Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it, nor any Affiliate acting on its behalf or pursuant to any understanding with it, will from the date of the IPO until the date that the Notes are no longer outstanding, execute any Short Sales of the Common Stock (provided that this provision shall not prohibit any sales made where a corresponding Notice of Conversion or Notice of Exercise is tendered to the Company and the shares received upon such conversion or exercise are used to close out such sale) (a “Prohibited Short Sale”). Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company in the IPO, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and the information included in the Transaction Documents and the Disclosure Schedules. Notwithstanding the foregoing, and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced by the Company is a press release or in the registration statement for the IPO, (ii) except for a Prohibited Short Sale, following the IPO, no Purchaser shall be restricted or prohibited from effecting any transactions in any securities of the Company in accordance with applicable securities laws, and (iii) no Purchaser shall have any duty of confidentiality to the Company or its Subsidiaries after the IPO. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.
4.15 Form D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof, promptly upon request of any Purchaser. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions promptly upon request of any Purchaser.
4.16 Piggy-Back Registrations. If at any time while any of the Notes or the Warrants remain outstanding there is not an effective registration statement under the Securities Act covering all of the Conversion Shares and the Warrant Shares (the “Registrable Securities”) and the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, then the Company shall send to each Purchaser then holding Notes or Warrants written notice of such determination and, if within fifteen calendar days after receipt of such notice, any such Purchaser shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such Purchaser requests to be registered, subject to customary underwriter cutbacks applicable to all holders of registration rights and subject to the applicable terms of such registration rights. The rights provided in this Section shall not apply with respect to any registration statement filed in connection with any follow-on primary offering by the Company so long as no equity securities will be offered under such registration statement for the account of others. Notwithstanding the foregoing, a security shall cease to be a Registrable Security for purposes of this Agreement from and after such time as the Purchasers may resell such security without volume restrictions under Rule 144, as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company’s transfer agent and the affected Purchaser.
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4.17 Liens. So long as any of the Notes remain outstanding, the Company shall not, without the prior written consent of each Purchaser, incur, create, assume or suffer to exist any Lien on any of its property or assets, whether now owned or hereinafter acquired, except for (a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings; (b) non-consensual Liens arising by operation of law, arising in the ordinary course of business, and for amounts which are not overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings; (c) Liens on property securing indebtedness incurred by the Company or any of its Subsidiaries to provide funds for all or a portion of the cost of acquiring, leasing, constructing, altering, expanding, improving or repairing such property; (d) Liens securing purchase money Indebtedness incurred in connection with the acquisition of capital assets by the Company or any Subsidiary in the ordinary course of business; or (e) Liens listed on Schedule 4.17 of the Disclosure Schedules.
4.18 Other Indebtedness. Except as set forth on Schedule 4.18, so long as any of the Notes remain outstanding, the Company shall not (directly or indirectly through any Subsidiary or affiliate) incur or suffer to exist or guarantee any Indebtedness that is senior to or pari passu with (in priority of payment and performance) the Company's obligations hereunder or under the Notes, or that matures prior to the maturity date of the Notes. As used herein, the term "Indebtedness" means (a) all indebtedness of the Company for borrowed money or for the deferred purchase price of property or services, including any type of letters of credit, but not including deferred purchase price obligations in place as of the Closing Date or obligations to trade creditors incurred in the ordinary course of business, (b) all obligations of the Borrower evidenced by notes, bonds, debentures or other similar instruments, (c) purchase money indebtedness hereafter incurred by the Company to finance the purchase of fixed or capital assets, including all capital lease obligations of the Company which do not exceed the purchase price of the assets funded, (d) all guarantee obligations of the Company in respect of obligations of the kind referred to in clauses (a) through (c) above that the Company would not be permitted to incur or enter into, and (e) all obligations of the kind referred to in clauses (a) through (d) above that the Company is not permitted to incur or enter into that are secured and/or unsecured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured and/or unsecured by) any Lien on property (including accounts and contract rights) owned by the Company, whether or not the Company has assumed or become liable for the payment of such obligation. Notwithstanding anything to the contrary contained in this Agreement, the Company shall be entitled to sell to one or more purchasers up to $1.5 million aggregate principal amount of promissory notes; provided that such promissory notes are on terms no more favorable to such purchasers as those afforded to the Purchasers in the Notes and that such promissory notes shall be subordinate in right of repayment to the Notes.
4.19 Distributions on Capital Stock. So long as any of the Notes remain outstanding, the Company shall not without each Purchaser’s written consent, (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any Subsidiary make any other payment or distribution in respect of its capital stock.
4.20 Restriction on Stock Repurchases and Debt Repayments. So long as any of the Notes remain outstanding, the Company shall not, without each Purchaser’s prior written consent, (a) redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Company or any warrants, rights or options to purchase or acquire any such shares, or (b) repay any pari passu or subordinated indebtedness of the Company or repay any indebtedness to the Company’s officers, directors or other Affiliates, except for the repayment of indebtedness disclosed under the heading “Use of Proceeds” in the Registration Statement. Notwithstanding the foregoing, the Company shall be permitted to effect the following without the consent of the Purchasers: (i) dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock and (ii) repurchases of stock from former employees, officers, directors, consultants or other persons who performed services for the Company or any subsidiary in connection with the cessation of such employment or service at no greater than the original purchase price thereof.
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4.21 Advances and Loans; Affiliate Transactions. So long as any of the Notes remain outstanding, the Company shall not, without each Purchaser’s written consent, lend money, give credit, or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Company, except loans, credits or advances (a) in existence or committed on the Closing Date and which the Company has informed each Purchaser in writing prior to the Closing Date, (b) in regard to transactions with unaffiliated third parties, made in the ordinary course of business, or (c) in regard to transactions with unaffiliated third parties, not in excess of $50,000. So long as any of the Notes remain outstanding, the Company shall not, without each Purchaser’s written consent, enter into any transaction with Affiliates, except transactions with affiliates made in the ordinary course of business; provided, however, that nothing in this Section 4.21 shall prohibit the Company from entering into any transaction with an Affiliate for the purpose of the Affiliate making a loan or advance to the Company.
4.22 Proceeds of IPO. The Company agrees, upon the written request of any Purchaser delivered to the Company no later than seven (7) Business Days following the consummation of the IPO, to repay at least fifty percent (50%) of the principal amount of the Notes held by such Purchaser at a repayment price equal to one hundred fifteen percent (115%) of the principal amount to be repaid, together with all accrued and unpaid interest on such principal amount, within three (3) Business Days of the delivery to the Company of such written request, from the net proceeds of the IPO, prior to applying the net proceeds of the IPO for any other purposes (other than those specifically described under the heading “Use of Proceeds” in the Registration Statement. The Purchasers hereby waive any notice of such prepayment as would otherwise be required by Section 2(e) of the Notes.
4.23 Additional Securities Issuances. So long as any of the Notes remain outstanding, without the prior written consent of the Purchaser, the Company shall not issue any indebtedness for money borrowed that has a variable conversion rate or enter into any transaction for merchant cash advances.
4.24 Participation in Future Financing.
(a) From the date hereof until the date that is the earlier of (i) the date on which no Notes or shares of Common Stock issued to the applicable Purchaser upon the conversion of Notes are outstanding and (ii) the second anniversary of the Closing Date, upon any issuance by the Company or any of its Subsidiaries of Common Stock, Common Stock Equivalents for cash consideration, indebtedness or a combination of units thereof (a “Subsequent Financing”), each Purchaser shall have the right to participate in such Subsequent Financing in an amount up to the greater of (y) an amount equal to such Purchaser’s Subscription Amount, or if the amount of the Subsequent Financing is less than the aggregate Subscription Amounts of all of the Purchasers, such Purchaser’s Pro Rata Portion and (ii) twenty percent (20%) of the aggregate purchase price of the securities sold in such Subsequent Financing (such greater amount, the “Participation Maximum”), on the same terms, conditions and price provided for in the Subsequent Financing.
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(b) At least three (3) Trading Days prior to the closing of the Subsequent Financing, the Company shall deliver to each Purchaser a written notice of its intention to effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such Purchaser if it wants to review the details of such financing (such additional notice, a “Subsequent Financing Notice”). Upon the request of a Purchaser, and only upon a request by such Purchaser, for a Subsequent Financing Notice, the Company shall promptly, but no later than one (1) Trading Day after such request, deliver a Subsequent Financing Notice to such Purchaser. The Subsequent Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing, the amount of proceeds intended to be raised thereunder and the Person or Persons through or with whom such Subsequent Financing is proposed to be effected and shall include a term sheet or similar document relating thereto as an attachment.
(c) Any Purchaser desiring to participate in such Subsequent Financing must provide written notice to the Company by not later than 5:30 p.m. (New York City time) on the second (2nd) Trading Day after all of the Purchasers have received the Pre-Notice that such Purchaser is willing to participate in the Subsequent Financing, the amount of such Purchaser’s participation, and representing and warranting that such Purchaser has such funds ready, willing, and available for investment on the terms set forth in the Subsequent Financing Notice. If the Company receives no such notice from a Purchaser as of such second (2nd) Trading Day, such Purchaser shall be deemed to have notified the Company that it does not elect to participate.
(d) If by 5:30 p.m. (New York City time) on the second (2nd) Trading Day after all of the Purchasers have received the Pre-Notice, notifications by the Purchasers of their willingness to participate in the Subsequent Financing (or to cause their designees to participate) is, in the aggregate, less than the total amount of the Subsequent Financing, then the Company may consummate the remaining portion of such Subsequent Financing on the terms and with the Persons set forth in the Subsequent Financing Notice.
(e) If by 5:30 p.m. (New York City time) on the second (2nd) Trading Day after all of the Purchasers have received the Pre-Notice, the Company receives responses to a Subsequent Financing Notice from Purchasers seeking to purchase more than the aggregate amount of the Participation Maximum, each such Purchaser shall have the right to purchase its Pro Rata Portion (as defined below) of the Participation Maximum. “Pro Rata Portion” means the ratio of (x) the Subscription Amount of Securities purchased by a Purchaser participating under this Section 4.24 and (y) the sum of the aggregate Subscription Amounts of Securities purchased by all Purchasers participating under this Section 4.24.
(f) The Company must provide the Purchasers with a second Subsequent Financing Notice, and the Purchasers will again have the right of participation set forth above in this Section 4.24, if the Subsequent Financing subject to the initial Subsequent Financing Notice is not consummated for any reason on the terms set forth in such Subsequent Financing Notice within thirty (30) Trading Days after the date of the initial Subsequent Financing Notice.
(g) The Company and each Purchaser agree that if any Purchaser elects to participate in the Subsequent Financing, the transaction documents related to the Subsequent Financing shall not include any term or provision whereby such Purchaser shall be required to agree to any restrictions on trading as to any of the Securities purchased hereunder or be required to consent to any amendment to or termination of, or grant any waiver, release or the like under or in connection with, this Agreement, without the prior written consent of such Purchaser.
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(h) Notwithstanding anything to the contrary in this Section 4.24 and unless otherwise agreed to by such Purchaser, the Company shall either confirm in writing to such Purchaser that the transaction with respect to the Subsequent Financing has been abandoned or shall publicly disclose its intention to issue the securities in the Subsequent Financing, in either case in such a manner such that such Purchaser will not be in possession of any material, non-public information, by the tenth (10th) Business Day following delivery of the Subsequent Financing Notice. If by such tenth (10th) Business Day, no public disclosure regarding a transaction with respect to the Subsequent Financing has been made, and no notice regarding the abandonment of such transaction has been received by such Purchaser, such transaction shall be deemed to have been abandoned and such Purchaser shall not be deemed to be in possession of any material, non-public information with respect to the Company or any of its Subsidiaries.
(i) Notwithstanding the foregoing, this Section 4.24 shall not apply in respect of an Exempt Issuance.
4.25 Lock-Up. In connection with the IPO, if requested by the Company and the representative of the underwriters, each Purchaser shall enter into a supplemental agreement to not transfer any shares of Common Stock (or other securities) of the Company held by such Purchaser (other than those included in the registration) during the ninety (90) day period (or such lesser period as may be determined by the underwriter) following the effective date of the registration statement of the Company filed under the Securities Act relating to the IPO; provided that all directors, officers and holders of the Company’s outstanding securities issued prior to the IPO enter into agreements providing for similar restrictions on sales and that any waiver or termination of the prohibitions set forth in this Section 4.25 by the Company or any underwriter shall apply to each Purchaser. The obligations described in this Section 4.25 shall not apply to a registration relating solely to employee benefit plans on Form S-3 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a transaction pursuant to Rule 145 under the Securities Act on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions with respect to each Purchaser’s shares of Common Stock (or other securities) subject to the foregoing restriction until the end of such ninety (90) day or lesser period.
4.26 Post Lock-Up Period Adjustment. Within two Business Days following the last day of the Lock-Up Period, the Company shall prepare and deliver to each Purchaser an officer’s certificate (the “Pricing Certificate”) certified by the Chief Financial Officer of the Company that sets forth the average VWAP of the Common Stock for the last three Trading Days of the Lock-Up Period (the “Closing Lock-up Price”), which certificate shall set forth the basis for the Company’s calculation of the Closing Lock-up Price. If the Closing Lock-up Price is less than an amount equal to the price at which the Common Stock (or units of Common Stock and warrants if such units are sold in the IPO) is sold in the IPO, each Purchaser shall have the right, exercisable within five (5) Business Days of date of its receipt of the Pricing Certificate, to request that the Company prepay pursuant to Section 2(d) of the Notes, and the Company shall thereafter prepay pursuant to such Section 2(d) of the Notes, an amount equal to up to fifty percent (50%) of the original principal amount of the Notes held by such Purchaser, and all accrued and unpaid interest thereon, in six (6) equal monthly installments commencing on the tenth (10th) Business Day following the last day of the Lock-Up Period and on each monthly anniversary of such date.
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ARTICLE V.
REVENUE SHARE
5.1 Payment of Revenue Share. With respect to the six (6)-year period commencing on July 1, 2022 and terminating on June 30, 2028 (the “Revenue Share Period”), the Company shall pay to each Purchaser such Purchaser’s pro rata percentage (as set forth on the signature page hereto executed by such Purchaser) of the Applicable Percentage (as defined below) of the Quarterly Net Rental Revenues (as defined below) received by the Company or any Affiliate thereof during each calendar quarter during the Revenue Share Period. Within ten (10) days of the last Business Day of each calendar quarter during the Revenue Share Period prior to the consummation of the IPO, or within ten (10) days of the date of the filing by the Company of its Quarterly Report on Form 10-Q for each calendar quarter during the Revenue Share Period after consummation of the IPO, the Company shall deliver to each Purchaser an officer’s certificate (a “Revenue Share Certificate”) certified by the Chief Financial Officer of the Company that sets forth (i) the Quarterly Net Rental Revenues received by the Company and each Affiliate of the Company during the immediately preceding calendar quarter, (ii) the amount that is equal to the Applicable Percentage of the Quarterly Net Rental Revenues (such amount, the “Revenue Share”) for such immediately preceding calendar quarter, and (iii) such Purchaser’s pro rata percentage of such Revenue Share (the “Payment Amount”), which certificate shall set forth the basis for the Company’s calculation of such Quarterly Net Rental Revenues, such Revenue Share and the Payment Amount. The Company shall pay to each Purchaser such Purchaser’s Payment Amount by wire transfer of immediately available funds within two (2) Business Days of the date of delivery of the applicable Revenue Share Certificate to such account as such Purchaser shall have directed in writing. For purposes of this Section 5.1, the term “Applicable Percentage” shall mean, for each of the first four (4) calendar quarters during the Revenue Share Period, five percent (5%), and for each other calendar quarter during the Revenue Share Period, one percent (1%), and the term “Quarterly Net Rental Revenues” shall mean, with respect to each calendar quarter during the Revenue Share Period, the gross rental revenues received by the Company and its Affiliates during such calendar quarter from the lease of accommodation units at the property located at 967 Sixth Avenue in New York City, as determined in accordance with GAAP, net of any lease refunds during such calendar quarter as so determined.
ARTICLE VI.
MISCELLANEOUS
6.1 [RESERVED]
6.2 Fees and Expenses. Except as expressly set forth in the Transaction Documents or any other writing to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement; provided that at the Closing the Company shall pay the Purchasers an amount equal to $45,000 for their legal fees (net of any expenses paid in advance). In addition, upon the request of any Purchaser, the Company shall pay each Purchaser’s reasonable legal fees and expenses incident to the negotiation, preparation, execution, delivery and performance of any document or agreement to be delivered by the Company and such Purchaser in respect of the Securities or the Transaction Documents following the Closing. The Company shall pay all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company and any conversion notice delivered by a Purchaser), stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers.
6.3 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
6.4 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or via email at the email address set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or via email at the email address set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.
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6.5 Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchasers holding at least 67% in interest of the Securities then outstanding or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.
6.6 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
6.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”
6.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.10 and this Section 6.8.
6.9 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in New Castle County, State of Delaware. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in New Castle County, State of Delaware for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action, suit or proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under Section 4.10, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
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6.10 Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Securities for a period of twenty-four (24) months thereafter.
6.11 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.
6.12 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
6.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however, that in the case of a rescission of a conversion of the Notes or exercise of the Warrants, the applicable Purchaser shall be required to return any shares of Common Stock subject to any such rescinded conversion notice or exercise notice concurrently with the restoration of such Purchaser’s right to acquire such shares pursuant to such Purchaser’s Notes or Warrants.
6.14 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.
6.15 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.
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6.16 Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.
6.17 Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any claim, action or proceeding that may be brought by any Purchaser in order to enforce any right or remedy under any Transaction Document. Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Purchaser with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by such Purchaser to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at such Purchaser’s election.
6.18 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser has been represented by its own separate legal counsel in its review and negotiation of the Transaction Documents. The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers.
6.19 Liquidated Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.
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6.20 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.
6.21 Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.
6.22 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
(Signature Pages Follow)
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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
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Exhibit 10.14
AMENDMENT NO. 1
TO
SECURITIES PURCHASE AGREEMENT
This AMENDMENT No. 1 to Securities Purchase Agreement (this “Amendment”), dated as of June 30, 2022 (the “Amendment Effective Date”) is entered into by and between CorpHousing Group Inc., a Delaware corporation (the “Company”) and Greenle Partners LLC Series Alpha P.S. (the “Purchaser”) to amend the Securities Purchase Agreement originally entered into between the Company and Evergreen Capital Partners LLC (“Evergreen”) on May 27, 2022 (the “Agreement”). All capitalized terms herein shall have the definitions assigned to such terms in the Agreement.
WHEREAS, by a Purchase and Assignment Agreement entered into by Evergreen and the Purchaser on June 10, 2022, Evergreen has assigned to the Purchaser all of its rights, title and interest in and to the Agreement and to the securities of the Company issued pursuant to the Agreement; and
WHEREAS, the Purchaser and the Company desire to amend certain of the covenants and agreements of the parties under the Agreement and to amend the form of the Notes issued pursuant to the Agreement on the terms and conditions set forth in this Amendment, and simultaneously with such amendments to exchange the outstanding Note for a new Note in the same principal amount in the form and having the terms set forth in Exhibit A to this Amendment.
NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows.
1. Amendment to Section 4.18. The last sentence of Section 4.18 of the Agreement shall be amended and restated in its entirety as follows:
“Notwithstanding anything to the contrary contained in this Agreement, in addition to the Notes, the convertible notes issued or to be issued under the Securities Purchase Agreement dated as of June 30, 2022 between the Company and the Purchasers and the Indebtedness disclosed in the Registration Statement, the Company shall be entitled to have outstanding at any time up to $1.5 million aggregate principal amount of other promissory notes; provided that such promissory notes are on terms no more favorable to the holders thereof as those afforded to the Purchasers in the Notes and that such promissory notes shall be subordinate in right of repayment to the Notes.”
2. Amendment to Section 5.1. Section 5.1 of the Agreement shall be amended and restated in its entirety as follows:
“5.1 Payment of Hotel Revenue Share.
(a) With respect to the six (6)-year period commencing on July 1, 2022 and terminating on June 30, 2028 (the “Revenue Share Period”), the Company shall pay to each Purchaser such Purchaser’s pro rata percentage (as set forth on the signature page hereto executed by such Purchaser) of the Applicable Percentage (as defined below) of the Quarterly Net Rental Revenues (as defined below) received by the Company or any Affiliate thereof during each calendar quarter during the Revenue Share Period. Within ten (10) days of the last Business Day of each calendar quarter during the Revenue Share Period prior to the consummation of the IPO, or within ten (10) days of the date of the filing by the Company of its Quarterly Report on Form 10-Q for each calendar quarter during the Revenue Share Period after consummation of the IPO, the Company shall deliver to each Purchaser an officer’s certificate (a “Revenue Share Certificate”) certified by the Chief Financial Officer of the Company that sets forth (i) the Quarterly Net Rental Revenues received by the Company and each Affiliate of the Company during the immediately preceding calendar quarter, (ii) the amount that is equal to the Applicable Percentage of the Quarterly Net Rental Revenues (such amount, the “Revenue Share”) for such immediately preceding calendar quarter, and (iii) such Purchaser’s pro rata percentage of such Revenue Share (the “Payment Amount”), which certificate shall set forth the basis for the Company’s calculation of such Quarterly Net Rental Revenues, such Revenue Share and the Payment Amount. The Company shall pay to each Purchaser such Purchaser’s Payment Amount by wire transfer of immediately available funds within two (2) Business Days of the date of delivery of the applicable Revenue Share Certificate to such account as such Purchaser shall have directed in writing. If the Company fails to pay any Payment Amount within five (5) Business Days of the date due hereunder, such Payment Amount shall be increased to an amount equal to 130% of such Payment Amount and such increased Payment Amount shall accrue interest daily from the date due until the date paid at a rate equal to 2.0% per month (24% per annum) calculated on the basis of a 360-day year consisting of twelve 30-day periods. For purposes of this Section 5.1, the term “Applicable Percentage” shall mean, for each of the first four (4) calendar quarters during the Revenue Share Period, five percent (5%), and for each other calendar quarter during the Revenue Share Period, one percent (1%), and the term “Quarterly Net Rental Revenues” shall mean, with respect to each calendar quarter during the Revenue Share Period, the gross rental revenues received by the Company and its Affiliates during such calendar quarter from the lease of accommodation units at the property located at 967 Sixth Avenue in New York City (the “Property”), as determined in accordance with GAAP, net of any lease refunds during such calendar quarter as so determined.
(b) If the lease or sublease of the Company or any Affiliate of the Company with respect to the Property (or any Replacement Property), or the Property (or any Replacement Property) is permanently closed for business, during the first twelve (12) Revenue Share Periods for the Property, the Company shall designate another hotel property of similar size and location that is reasonably acceptable to the Purchasers to be designated as the Property for purposes of this Agreement (each, a “Replacement Property”).
(c) The obligations of the Company to pay the Payment Amounts and interest, if any, thereon pursuant to Section 5.1(a) shall be secured by the Security Agreement as set forth therein.
(d) The Company shall use its best efforts to cause all leases or subleases with respect to the Property or any Replacement Property to be in the name of CorpHousing RSL LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (“Leaseco”), and shall cause all revenues received with respect to the Property or any Replacement Property to be deposited in a deposit account maintained in the name of Leaseco; provided, however, that if the Company is unable to obtain landlord consent to the assignment of the lease or sublease of the Property to Leaseco, the Company shall assign or cause to be assigned to Leaseco the lease or sublease for another hotel property of similar size and location as the Property that is reasonably acceptable to the Purchasers and to cause all revenues received with respect to the property that is the subject of such lease or sublease to be deposited in a deposit account maintained in the name of Leaseco. The Company shall cause Leaseco to maintain ownership of each lease or sublease of the Property or any Replacement Property (and any lease or sublease assigned to Leaseco pursuant to the proviso of the immediately preceding sentence) and shall take all required action to ensure that Leaseco does not sell, assign or otherwise transfer any such lease or sublease without the prior written consent of each Purchaser. Leaseco shall have no commercial operations other than to hold and operate the leases and related operations for the Property or any Replacement Property or any other property in which the Purchaser or its assignee has an interest and to receive rental payments and other revenues relating to the Property or any Replacement Property or any other property in which the Purchaser or its assignee has an interest.”
2 |
3. Exhibit A. The form of Note annexed as Exhibit A to the Agreement is hereby amended and restated and replaced in its entirety by Exhibit A to this Amendment.
4. Exchange of Note. Concurrrently with the execution and delivery of this Amendment, the Company and the Purchaser shall exchange the outstanding Note issued pursuant to the Agreement for a Note in the same principal amount in the form, and having the terms, set forth in Exhibt A to this Amendment. In connection with such exchange, the Company and the Purchaser acknowledge and agree that such exchange will be exempt from registration under applicable United States securities laws as a result of the exchange being undertaken pursuant to Section 3(a)(9) of the Securities Act. The Company covenants and represents to the Purchaser that neither the Company nor any of its Subsidiaries has received, anticipates receiving, has any agreement to receive or has been given any promise to receive any consideration from the Purchaser or any other Person in connection with the transactions contemplated by this Section 3. The Company hereby acknowledges that the holding period of the Note issued in such exchange (and Shares issuable upon conversion of such Note) shall tack back to the date the Notes were originally issued by the Company to the Purchaser (or its assignor) under the Agreement and it covenants not to take any position to the contrary.
5. Limited Effect. Except as expressly amended hereby, all of the terms and provisions of the Agreement shall remain in full force and effect.
6. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of Delaware.
7. Counterparts. This Amendment may be executed in any number of counterparts, all of which shall constitute one and the same agreement, and any party hereto may execute this Amendment by signing and delivering one or more counterparts.
IN WITNESS WHEREOF, the parties hereto by their duly authorized representatives have executed this Amendment to be effective as of the Amendment Effective Date.
CORPHOUSING GROUP INC. |
GREENLE PARTNERS LLC SERIES ALPHA P.S. |
By: | By: | |||||
Name: | Mendi Baron | Name: | Alan Uryniak | |||
Title: | Chief Executive Officer | Title: | Manager | |||
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EXHIBIT A
THIS NOTE HAS BEEN ISSUED WITH “ORIGINAL ISSUE DISCOUNT” FOR U.S. FEDERAL INCOME TAX PURPOSES. THE ISSUER OF THIS NOTE WILL MAKE AVAILABLE TO ANY HOLDER OF THIS NOTE: (1) THE ISSUE PRICE AND ISSUE DATE OF THE NOTE, (2) THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THE NOTE, (3) THE YIELD TO MATURITY OF THE NOTE, AND (4) ANY OTHER INFORMATION REQUIRED TO BE MADE AVAILABLE BY U.S. TREASURY REGULATIONS UPON RECEIVING A WRITTEN REQUEST FOR SUCH INFORMATION AT THE FOLLOWING ADDRESS: 2125 BISCAYNE BLVD., SUITE 253, MIAMI, FLORIDA 33137.
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
Dated as of: | May 27, 2022 | Purchase Price: | $1,500,000 | ||
Maturity Date: | May 27, 2023 | Original Issue Discount: | $225,000 | ||
Interest Rate: | 5% | Original Principal Amount: | $1,725,000 |
15% OID SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
DUE MAY 27, 2023
THIS 15% OID SENIOR CONVERTIBLE PROMISSORY NOTE is one of a series of duly authorized and validly issued 15% OID Senior Secured Convertible Promissory Notes of CorpHousing Group Inc., a Delaware corporation (the “Company”), having its principal place of business at 2125 Biscayne Boulevard, Suite 253, Miami, Florida 33137, designated as its 15% OID Senior Convertible Promissory Notes (this Note, the “Note” and, collectively with the other Notes of such series, the “Notes”).
FOR VALUE RECEIVED, the Company hereby promises to pay to the order of Greenle Partners LLC Series Alpha P.S. or its registered assigns or successors-in-interest (the “Holder”), or shall have paid pursuant to the terms hereunder, an amount equal to 115% of the principal amount set forth above on May 27, 2023 (the “Maturity Date”) or such earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof.
This Note is being issued pursuant to that Securities Purchase Agreement dated as of May 27, 2022 and amended as of June 30, 2022 (the “Purchase Agreement”) between the Company and the Holder (defined below) and the other purchasers, if any, of the Notes.
Ex A-1 |
This Note is subject to the following additional provisions:
1. Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Note, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:
“Alternate Consideration” shall have the meaning set forth in Section 5(e).
“Bankruptcy Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
“Base Conversion Price” shall have the meaning set forth in Section 5(b).
“Beneficial Ownership Limitation” shall have the meaning set forth in Section 4(d).
“Change of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 49% of the voting securities of the Company (other than by means of conversion or exercise of the Notes and the Securities issued together with the Notes), (b) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the Company or the successor entity of such transaction, (c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a three-year period of more than one-half of the members of the Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the Original Issue Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.
“Conversion” shall have the meaning ascribed to such term in Section 4.
“Conversion Date” shall have the meaning set forth in Section 4(a).
Ex A-2 |
“Conversion Price” shall have the meaning set forth in Section 4(b).
“Conversion Schedule” means the Conversion Schedule in the form of Schedule 1 attached hereto.
“Conversion Shares” means, collectively, the shares of Common Stock (or if units consisting of Common Stock and warrants are sold in the IPO, the securities comprising such units) issuable upon conversion of this Note in accordance with the terms hereof.
“Delaware Courts” shall have the meaning set forth in Section 7(d).
“Dilutive Issuance” shall have the meaning set forth in Section 5(b).
“Dilutive Issuance Notice” shall have the meaning set forth in Section 5(b).
“Event of Default” shall have the meaning set forth in Section 6(a).
“Fundamental Transaction” shall have the meaning set forth in Section 5(e).
“IPO” means the consummation of the first underwritten public offering of Common Stock under the Securities Act.
“June Purchase Agreement” means the Securities Purchase Agreement dated as of June __, 2022 between the Company and Greenle Partners LLC Series Alpha P.S. and the other purchasers, if any, of the Other Notes.
“Late Fees” shall have the meaning set forth in Section 2(c).
“Mandatory Default Amount” means the payment of 130% of the outstanding principal amount of this Note and accrued and unpaid interest hereon, in addition to the payment of all other amounts, costs, expenses and liquidated damages due in respect of this Note.
“Note Register” shall have the meaning set forth in Section 2(b).
“Notice of Conversion” shall have the meaning set forth in Section 4(a).
“Original Issue Date” means the date of the first issuance of the Notes, regardless of any transfers of any Note and regardless of the number of instruments which may be issued to evidence such Notes.
“Other Notes” means the Series B 15% OID Senior Secured Convertible Promissory Notes of the Company issued pursuant to the June Purchase Agreement and any notes issued upon registration of transfer thereof or in exchange therefor.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Share Delivery Date” shall have the meaning set forth in Section 4(c)(ii).
“Successor Entity” shall have the meaning set forth in Section 5(e).
“Trading Market” means any of the following markets or exchanges on which the Common Stock (or any other common stock of any other Person that references the Trading Market for its common stock) is listed or quoted for trading on the date in question: The NASDAQ Global Market, The NASDAQ Global Select Market, The NASDAQ Capital Market, the New York Stock Exchange, NYSE Arca, the NYSE American, the OTCQX Marketplace, the OTCQB Marketplace, the OTC Pink Marketplace or any other tier operated by OTC Markets Group Inc. (or any successor to any of the foregoing).
Ex A-3 |
2. Interest and Prepayments.
(a) Payment of Interest in Cash. The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note at the rate of five percent (5%) per annum. All interest payments hereunder will be payable in cash. Accrued and unpaid interest shall be due on payable on the Maturity Date, or as otherwise set forth herein.
(b) Interest Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made. Interest hereunder will be paid to the Person in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note (the “Note Register”).
(c) Late Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law (the “Late Fees”) which shall accrue daily from the date such interest is due hereunder through and including the date of actual payment in full.
(d) Prepayment. This Note may be prepaid by the Company in whole or in part at any time or from time to time, upon at least five (5) Business Days prior written notice to the Holder, during which period Holder shall have the opportunity to convert this Note pursuant to Section 4 hereof and which notice period may be waived by the Holder. If the Company exercises its right to prepay this Note at any time, the Company shall make payment to the Holder within three (3) Business Days after such five (5) Business Day period of an amount in cash equal to the sum of the then outstanding principal amount of this Note and accrued interest thereon, plus a prepayment premium equal to (i) 30% of the principal amount of this Note to be prepaid if such prepayment is prior to the IPO or (ii) 15% of the principal amount of this Note to be prepaid if such prepayment is following the IPO.
(e) Prepayment Upon Qualified Financing. If the Company completes a Qualified Financing (as defined below), the Company shall, at the request of the Holder made in writing to the Company no later than seven (7) Business Days following consummation of the Qualified Financing, repay up to fifty percent (50%) of the then-outstanding principal amount of this Note and any accrued but unpaid interest, plus an amount equal to the applicable prepayment premium on the date of such repayment; provided, however, that the Company shall not be obligated to repay an aggregate principal amount of Notes or Other Notes out of the proceeds of a Qualified Financing that is more than the greater of (i) $2,500,000, or (ii) an amount equal to fifty percent (50%) of the aggregate Subscription Amount paid by all Holders of Notes and holders of Other Notes under this Agreement and the June Purchase Agreement (the “Maximum Repayment Amount”). If, with respect to a Qualified Offering, the Company receives requests for the repayment of an aggregate principal amount of Notes and Other Notes that is greater than the Maximum Repayment Amount, the Company shall be required to pay to each holder of Notes or Other Notes that has requested repayment, including the Holder, such holder’s pro rata portion of the Maximum Repayment Amount based upon the principal amount of Notes and Other Notes held by each such holder relative to the aggregate principal amount of Notes and Other Notes held by all such holders. Such repayment shall be due within three (3) Business Days of the Company’s receipt of such written request. The Company shall give written notice to Holder (i) of a proposed Qualified Offering as soon as practicable, but in no event less than seven (7) Business Days before the anticipated closing date of such Qualified Financing, and (ii) of the closing of a Qualified Offering within one (1) Business Day of the consummation of a Qualified Offering, during which periods Holder shall have the opportunity to convert this Note pursuant to Section 4 hereof. The term “Qualified Financing” shall mean that the Company issues and sells shares of its equity or debt securities to investors on or before the Maturity Date in a financing with total gross proceeds to the Company of not less than $10,000,000 (excluding the conversion of the notes or other convertible securities issued for capital raising purposes).
Ex A-4 |
3. Registration of Transfers and Exchanges.
(a) Different Denominations. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.
(b) Investment Representations. This Note has been issued subject to certain investment representations of the original Holder set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations.
(c) Reliance on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.
4. Conversion.
(a) Voluntary Conversion. This Note shall be convertible, in whole or in part, into shares of Common Stock, or if units of Common Stock and warrants are sold by the Company in the IPO, into identical units of Common Stock and warrants, at the option of the Holder, at any time and from time to time following the closing of the IPO (subject to the conversion limitations set forth in Section 4(d) hereof); provided, however, that if the Company elects to prepay this Note in whole or in part at any time prior to the closing of the IPO, the Holder of this Note may elect to convert the amount to be paid by the Company in respect of such prepayment into shares of Common Stock at any time prior to the payment of such prepayment amount. The Holder shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”), specifying therein the principal amount of this Note to be converted, accrued and unpaid interest outstanding under this Note to be converted, and the date on which such conversion shall be effected (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder. No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required. To effect conversions hereunder, the Holder shall not be required to physically surrender this Note to the Company unless the entire principal amount of this Note, plus all accrued and unpaid interest thereon, has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Note in an amount equal to the applicable conversion. The Holder and the Company shall maintain a Conversion Schedule showing the principal amount(s) converted, the corresponding paydown of interest and the date of such conversion(s). The Company may deliver an objection to any Notice of Conversion within three (3) Business Days of delivery of such Notice of Conversion. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The Holder, and any assignee by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note may be less than the amount stated on the face hereof.
Ex A-5 |
(b) Conversion Price. The conversion price in effect on any Conversion Date shall initially be equal to (i) if such Conversion Date is following the closing of the IPO, an amount equal to seventy-five percent of the price per share or price per unit at which Common Stock or units of Common Stock and warrants is sold in the IPO, or (ii) if such Conversion Date is prior to the closing of the IPO, an amount equal to the value of a share of Common Stock on such Conversion Date determined as the quotient of an assumed $75 million valuation of the Company divided by the number of outstanding shares of Common Stock on a fully-diluted basis on such date assuming the conversion or exercise of all securities that are convertible into, or exercisable to purchase, shares of Common Stock (the “Conversion Price”).
(c) Mechanics of Conversion.
i. Conversion Shares Issuable Upon Conversion of Principal Amount, Interest and Mandatory Default Amount. The number of Conversion Shares issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note to be converted and any accrued and unpaid interest to be converted, which amount may include the Mandatory Default Amount, by (y) the Conversion Price.
ii. Delivery of Certificate Upon Conversion. Not later than three (3) Trading Days after each Conversion Date (the “Share Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder (A) a certificate or certificates representing the Conversion Shares which, on or after the date on which such Conversion Shares are eligible to be sold under Rule 144 without the need for current public information and the Company has received an opinion of counsel to such effect reasonably acceptable to the Company, shall be free of restrictive legends and trading restrictions (other than those which may then be required by the Purchase Agreement) representing the number of Conversion Shares being acquired upon the conversion of this Note, and (B) a bank check in the amount of accrued and unpaid interest (if the Company has elected or is required to pay accrued interest in cash). All certificate or certificates required to be delivered by the Company under this Section 4(c) shall be delivered electronically through the Depository Trust Company or another established clearing corporation performing similar functions, if available, or physical certificates if not available. If the Conversion Date is prior to the date on which such Conversion Shares are eligible to be sold under Rule 144 without the need for current public information the Conversion Shares shall bear a restrictive legend in the following form, as appropriate:
“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
Ex A-6 |
iii. Failure to Deliver Certificates. If, in the case of any Notice of Conversion, such certificate or certificates are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Company at any time on or before its receipt of such certificate or certificates, to rescind such Conversion, in which event the Company shall promptly return to the Holder any original Note delivered to the Company and the Holder shall promptly return to the Company the Common Stock certificates issued to such Holder pursuant to the rescinded Conversion Notice. Notwithstanding the obligations of the Company contained in Section 4(c) to deliver share certificates, any requirement to deliver share certificates shall be remedied by recording share issuances in favor of the Holder in book entry form and delivery to the Holder of written evidence of such share issuances.
iv. Obligation Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares upon conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 6 hereof for the Company’s failure to deliver Conversion Shares within the period specified herein and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.
vi. Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock a number of shares of Common Stock at least equal to the Required Minimum (as defined in the Purchase Agreement) for the sole purpose of issuance upon conversion of this Note and payment of interest on this Note, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Notes), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion of the then outstanding principal amount of this Note and payment of interest hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.
vii. Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Note. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.
viii. Transfer Taxes and Expenses. The issuance of certificates for shares of the Common Stock on conversion of this Note shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that, the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Note so converted and the Company shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Conversion.
Ex A-7 |
(d) Holder’s Conversion Limitations. The Company shall not effect any conversion of principal and/or interest of this Note, and a Holder shall not have the right to convert any principal and/or interest of this Note, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any Persons acting as a group together with the Holder or any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted principal amount of this Note beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other Notes or the Warrants) beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 4(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 4(d) applies, the determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which principal amount of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination of whether this Note may be converted (in relation to other securities owned by the Holder together with any Affiliates) and which principal amount of this Note is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 4(d), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note held by the Holder. The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 4(d), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Note held by the Holder and the Beneficial Ownership Limitation provisions of this Section 4(d) shall continue to apply. Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company. The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Note.
Ex A-8 |
5. Certain Adjustments.
(a) Stock Dividends and Stock Splits. If the Company, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of, or payment of interest on, the Notes), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
(b) Subsequent Equity Sales. If, at any time while this Note is outstanding, the Company or any Subsidiary, as applicable, sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced to equal the Base Conversion Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no adjustment will be made under this Section 5(b) in respect of an Exempt Issuance. The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 5(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion.
(c) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 5 above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
Ex A-9 |
(d) Pro Rata Distributions. During such time as this Note is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Note, then, in each such case, upon conversion of this Note, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
(e) Fundamental Transaction. If, at any time while this Note is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent conversion of this Note, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 4(d) on the conversion of this Note), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Note is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 4(d) on the conversion of this Note). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Note following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Note and the other Transaction Documents (as defined in the Purchase Agreement) in accordance with the provisions of this Section 5(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Note, deliver to the Holder in exchange for this Note a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Note which is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Note (without regard to any limitations on the conversion of this Note) prior to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Note immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.
Ex A-10 |
(f) Calculations. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.
(g) Notice to the Holder.
i. Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Note Register, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to convert this Note during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
Ex A-11 |
(h) Adjustment for More Favorable Terms Contained in Future Financings. So long as this Note is outstanding, upon any issuance by the Company or any of its subsidiaries of any security or debt instrument, including any convertible debt security (whether such debt begins with a convertible feature or such feature is added at a later date) or other Common Stock Equivalents, with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Holder in this Note, then the Company shall notify the Holder of such additional or more favorable term and such term, at the Holder’s option, shall become a part of this Note and its supporting documentation. The types of terms contained in the other security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, conversion look back periods, interest rates, original issue discount percentages and warrant coverage.
6. Events of Default.
(a) “Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
i. any default in the payment of (A) the principal amount of any Note or (B) interest, liquidated damages and other amounts owing to a Holder on any Note, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within five (5) Trading Days;
ii. the Company shall materially fail to observe or perform any other covenant or agreement contained in the Notes (other than a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed in clause (ix) below) which failure is not cured, if possible to cure, within the earlier to occur of (A) seven (7) Trading Days after notice of such failure sent by the Holder or by any other Holder to the Company and (B) ten (10) Trading Days after the Company has become or should have reasonably become aware of such failure;
Ex A-12 |
iii. the Company shall materially fail to observe or perform any other covenant or agreement contained in, or a default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument) shall occur under the specific terms of, any of the other Transaction Documents which failure is not cured, if possible to cure, within the earlier to occur of (A) five (5) Trading Days after notice of such failure sent by the Holder or by any other Holder to the Company and (B) ten (10) Trading Days after the Company has become or should have become aware of such failure;
iv. any representation or warranty made in this Note, any other Transaction Documents, any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to the Holder shall be untrue or incorrect in any material respect as of the date when made or deemed made;
v. the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy Event;
vii. following the IPO, the Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible to resume listing or quotation for trading thereon within twenty-one Trading Days or the transfer of shares of Common Stock through the Depository Trust Company System is no longer available for twenty-one Trading Days;
viii. the Company shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose of all or in excess of 33% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change of Control Transaction);
ix. the Company shall fail for any reason to deliver certificates to a Holder prior to the third Trading Day after a Conversion Date pursuant to Section 4(c) or the Company shall provide at any time notice to the Holder, including by way of public announcement, of the Company’s intention to not honor requests for conversions of any Notes in accordance with the terms hereof;
x. following the IPO, the Company fails to file with the Commission, subject to any extension permitted by Commission regulations, including Rule 12b-25 under the Exchange Act, any required reports under Section 13 or 15(d) of the Exchange Act such that it is not in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable);
xi. if the Company or any Significant Subsidiary shall: (i) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator of it or any of its properties, (ii) make a general assignment for the benefit of creditors, (iii) be adjudicated a bankrupt or insolvent or be the subject of an order for relief under Title 11 of the United States Code or any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute of any other jurisdiction or foreign country, or (iv) file a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or an arrangement with creditors or to take advantage or any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law, or (v) take or permit to be taken any action in furtherance of or for the purpose of effecting any of the foregoing;
Ex A-13 |
xii. if any order, judgment or decree shall be entered, without the application, approval or consent of the Company or any Significant Subsidiary, by any court of competent jurisdiction, approving a petition seeking liquidation or reorganization of the Company or any Subsidiary, or appointing a receiver, trustee, custodian or liquidator of the Company or any Subsidiary, or of all or any substantial part of its assets, and such order, judgment or decree shall continue unstayed and in effect for any period of sixty (60) days;
xiii. the occurrence of any levy upon or seizure or attachment of, or any uninsured loss of or damage to, any property of the Company or any Subsidiary having an aggregate fair value or repair cost (as the case may be) in excess of $100,000 individually or in the aggregate, and any such levy, seizure or attachment shall not be set aside, bonded or discharged within thirty (30) days after the date thereof;
xiv. the Company or any subsidiary shall default on any of its obligations under any mortgage(s), credit agreement(s) or other facility, indenture agreement(s), factoring agreement(s) or other instrument(s) under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involve(s) obligations greater than $100,000 in the aggregate, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;
xv. any monetary judgement, writ or similar final process shall be entered or filed after the date hereof against the Company, any subsidiary or any of their respective property or assets for more than $100,000, and such judgement, writ or similar process shall remain unvacated, unbonded or unstayed for a period of 45 calendar days; or
xvi. the Company shall fail to maintain sufficient reserved shares pursuant to Section 4.11 of the Purchase Agreement, subject to a cure period of ten (10) Trading Days.
(b) Remedies Upon Event of Default. Subject to the Beneficial Ownership Limitation as set forth in Section 4(d), if any Event of Default occurs, then the outstanding principal amount of this Note, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount. After the occurrence of any Event of Default that results in the eventual acceleration of this Note, the interest rate on this Note shall accrue at an additional interest rate equal to the lesser of 1.5% per month (18% per annum) or the maximum rate permitted under applicable law. Upon the payment in full of the Note, the Holder shall promptly surrender this Note to or as directed by the Company. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 6(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.
7. Security. This Note is secured by the Security Agreement (as defined in the Purchase Agreement), executed by the Company and its subsidiaries in favor of the Holders encumbering the collateral set forth therein, as more specifically set forth in the Security Agreement, all the terms and conditions of which are hereby incorporated into and made a part of this Note.
Ex A-14 |
8. Miscellaneous.
(a) Notices. Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, by email, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other facsimile number, email or other address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 7(a). Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, by email or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number, email or other address of the Holder appearing on the books of the Company, or if no such facsimile number, email or other address appears on the books of the Company, at the principal place of business of such Holder, as set forth in the Purchase Agreement, with a copy to counsel of the Holder as set forth in the Purchase Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile or via email prior to 12:00 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile or via email on a day that is not a Trading Day or later than 12:00 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.
(b) Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Company.
(c) Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.
(d) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the federal courts sitting in the State of Delaware (the “Delaware Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Delaware Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such Delaware Courts, or such Delaware Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorney’s fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
Ex A-15 |
(e) Waiver. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion. Any waiver by the Company or the Holder must be in writing.
(f) Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.
(g) Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Note.
(h) Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.
Ex A-16 |
(i) Headings. The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.
*********************
(Signature Pages Follow)
Ex A-17 |
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.
CorpHousing Group Inc. | |||
By: | |||
Name: | Brian Ferdinand | ||
Title: | Chief Executive Officer |
Email address for delivery of Notices: brian@corphousinggroup.com
Ex A-18 |
ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal and interest under the 15% OID Senior Secured Convertible Promissory Notes due May 27, 2023 of CorpHousing Group Inc. (the “Company”), into shares of its common stock (the “Common Stock”), according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.
By the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not exceed the amounts specified under Section 4 of this Note, as determined in accordance with Section 13(d) of the Exchange Act.
The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.
Conversion calculations:
Date to Effect Conversion:______________________________________
Principal Amount of Note to be Converted:________________________
Payment of Interest in Common Stock __ yes __ no
If yes, $_____ of Interest Accrued on Account of Conversion at Issue.
Number of shares of Common Stock to be issued:___________________
Signature |
Name |
Delivery Instructions: | |
Ex A-19 |
Schedule 1
CONVERSION SCHEDULE
This 15% OID Senior Secured Convertible Promissory Notes due May 27, 2023 in the original principal amount of $1,725,000 is issued by CorpHousing Group Inc. (the “Company”). This Conversion Schedule reflects conversions made under Section 4 of the above referenced Note.
Dated:
Date of Conversion |
Amount of Conversion | Aggregate Principal Amount Remaining Subsequent to Conversion (or original Principal Amount) |
Company Attest |
Ex A-20 |
Exhibit 10.15
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this “Agreement”) is dated as of June 30, 2022, between CorpHousing Group Inc., a Delaware corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively, the “Purchasers”).
WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Notes (as defined herein), and (b) the following terms have the meanings set forth in this Section 1.1:
“Acquiring Person” shall have the meaning ascribed to such term in Section 4.7.
“Action” shall have the meaning ascribed to such term in Section 3.1(j).
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“Amendment to Existing SPA” means Amendment No. 1 to the Securities Purchase Agreement dated the date hereof between the Company and the Purchasers, substantially in the form of Exhibit F hereto.
“Amendment to Registration Rights Agreement” means Amendment No. 1 to Registration Rights Agreement dated the date hereof between the Company and the Purchasers, substantially in the form of Exhibit C hereto.
“Amendment to Security Agreement” means Amendment No. 1 to Guaranty and Security Agreement dated the date hereof among the Company and its subsidiaries and Greenle Partners LLC, as secured party, substantially in the form of Exhibit E hereto.
“Behome Property” means the real property that is leased or subleased to the Company or an Affiliate of the Company known as The Behome located at 765 8th Avenue, New York, New York.
“Board of Directors” means the board of directors of the Company.
“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
“Certificate of Designation” means a Certificate of Designations, Preferences and Rights of a series of convertible preferred stock of the Company, substantially in the form of Exhibit F hereto.
“Closing Date” means, with respect to each Closing, the Business Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto in connection with such Closing, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Securities as to such Closing, in each case, have been satisfied or waived.
“Closing” means each closing of the purchase and sale of the Securities pursuant to Section 2.1.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock” means the common stock, par value $0.00001 per share, of the Company and any other class of securities into which such securities may hereafter be reclassified or changed.
“Common Stock Equivalents” means any securities of the Company or the Subsidiaries that would entitle the holder thereof to acquire at any time shares of Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, shares of Common Stock.
“Company Counsel” means Graubard Miller, with offices located at 405 Lexington Avenue, New York, New York 10174.
“Conversion Price” shall have the meaning ascribed to such term in the Notes.
“Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of the Notes or any Preferred Shares.
“DC Property” means the real property that is leased or subleased to the Company or an Affiliate of the Company known as Georgetown Suites Harbour located at 1000 29th St NW Washington DC.
“Disclosure Schedules” shall have the meaning ascribed to such term in Section 3.1.
“Evaluation Date” shall have the meaning ascribed to such term in Section 3.1(r).
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers, directors or consultants of the Company pursuant to the Company’s existing stock option and/or restricted stock plans or stock option and/or restricted stock plans which come into effect following the date hereof, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock, issued and outstanding on the date of this Agreement, or pursuant to other agreements of the Company existing prior to the date hereof and listed on Schedule 3.1(g), provided that such securities and/or agreements have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities, (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities, and (d) the issuance of securities in the IPO.
2
“Existing Notes” means the 15% OID Senior Secured Convertible Promissory Note due May 27, 2023 in the original principal amount of $1,725,000 issued by the Company to Evergreen Capital Management LLC on May 27, 2022, and any promissory notes issued upon registration of transfer thereof or in exchange therefor.
“Existing SPA” means the Securities Purchase Agreement dated as of May 27, 2022 between the Company and the original purchaser of the Existing Notes, as amended or supplemented from time to time.
“Existing Warrants” means the Warrants dated May 27, 2022 issued pursuant to the Existing SPA to the original purchaser of the Existing Notes, and any warrants issued upon registration of transfer thereof.
“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.
“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).
“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).
“IPO” means the consummation of the first underwritten public offering of Common Stock under the Securities Act.
“Legend Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).
“Liens” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“Lock-up Period” shall mean the 90-day period commencing on the closing date of the IPO.
“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).
“Material Permits” shall have the meaning ascribed to such term in Section 3.1(m).
“Maximum Rate” shall have the meaning ascribed to such term in Section 5.17.
“Notes” shall mean all of the Notes issued or issuable pursuant to this Agreement, substantially in the form of Exhibit A hereto.
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
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“Preferred Shares” means the shares of preferred stock, par value $0.00001 per share, of the Company issued pursuant to the Certificate of Designation in connection with an exchange effected pursuant to Section 4.28, and any other class of securities into which such securities may hereafter be reclassified or changed.
“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.
“Property” means the Behome Property, the DC Property (so long as the Purchasers do not exercise their option to replace the DC Property with the Tillary Property pursuant to Section 5.1(d)), the Tillary Property (if the Closing of the Third Tranche is effected or the Purchasers exercise their option to replace the DC Property with the Tillary Property pursuant to Section 5.1(d)), and each other hotel property that is a replacement property as provided in Section 5.1 or that the Company and the Purchasers shall agree in writing is a “Property” for purposes of Section 5.1, including the provisions of Section 5.1(f).
“Public Information Failure” shall have the meaning ascribed to such term in Section 4.3(b).
“Public Information Failure Payments” shall have the meaning ascribed to such term in Section 4.3(b).
“Purchaser Party” shall have the meaning ascribed to such term in Section 4.10.
“Registration Rights Agreement” means the Registration Rights Agreement dated as of May 27, 2022 between the Company and the holder of the Existing Notes, as amended on the date hereof by the Amendment to Registration Rights Agreement and as further amended or supplemented from time to time.
“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).
“Required Minimum” means, as of any date, 300% of the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the Transaction Documents, including any Conversion Shares issuable upon conversion in full of all of the Notes and any Warrant Shares issuable upon exercise in full of all of the Warrants, ignoring any conversion limits set forth therein.
“Revenue Share” shall have the meaning ascribed to such term in Section 5.1.
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Securities” means the Notes, the Preferred Shares, if issued, the Conversion Shares, the Warrants and the Warrant Shares.
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“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Security Agreement” means the Guaranty and Security Agreement dated as of May 27, 2022 between the Company and the holder of the Existing Notes, as amended on the date hereof by the Amendment to Security Agreement and as further amended or supplemented from time to time.
“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock).
“Subscription Amount” shall mean, as to each Purchaser, the aggregate amount to be paid for the Notes and Warrants purchased hereunder as specified below such Purchaser’s name under the heading “Subscription Amount,” on the signature page hereto executed by such Purchaser, which amount in United States dollars and in immediately available funds.
“Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a) and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.
“Tillary Property” means the real property that is leased or subleased to the Company or an Affiliate of the Company known as The Tillary located at 85 Flatbush Avenue Extension, Brooklyn, New York 11201.
“Trading Day” means a day on which the principal Trading Market is open for trading.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, the OTC Bulletin Board or the OTC Markets (or any successors to any of the foregoing).
“Transaction Documents” means this Agreement, the Notes, the Warrants, the Registration Rights Agreement, the Security Agreement, the Transfer Agent Instruction Letter, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.
“Transfer Agent” means Continental Stock Transfer & Trust Company, the current transfer agent of the Company, with a mailing address of 1 State Street, 30th Floor, New York, New York 10004-1561, and any successor transfer agent of the Company.
“Transfer Agent Instruction Letter” means the letter from the Company to the Transfer Agent which instructs the Transfer Agent to issue shares of Common Stock upon conversion of the Notes and the exercise of the Warrants, substantially in the form of Exhibit D attached hereto.
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“VWAP” means, for or as of any date, the dollar volume-weighted average price for such security on the Trading Market (or, if the Trading Market is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded) during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set to weighted average) or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, recapitalization or other similar transaction during such period.
“Warrant Amount” means, with respect to any Closing, an amount equal to one hundred percent (100%) of the aggregate principal amount of Notes purchased by the Purchasers at such Closing divided by the initial Conversion Price of such Notes.
“Warrants” shall mean all of the Warrants issued or issuable pursuant to this Agreement, substantially in the form of Exhibit B hereto.
“Warrant Shares” means, collectively, the shares of Common Stock issuable upon exercise of the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. The Purchasers may, subject to the terms and conditions hereof, purchase an aggregate of up to $5,000,000 in aggregate Subscription Amount of Notes and Warrants (to purchase an aggregate of $5,750,000 principal amount of Notes and Warrants to purchase shares of Common Stock, in one or more tranches (each a “Tranche”), with the first Tranche of $700,000 in Subscription Amount of Notes (to purchase an aggregate of $805,000 in principal amount of Notes) and Warrants to purchase an aggregate of number of shares of Common Stock equal to the Warrant Amount for such Closing, being closed within three (3) Business Days of the date on which the Company delivers to the Purchasers evidence that the conditions to Section 2.2(vii) can be satisfied. The Closing for the second Tranche of $1,000,000 in Subscription Amount of Notes (to purchase an aggregate of $1,150,000 in principal amount of Notes) and Warrants to purchase an aggregate of number of shares of Common Stock equal to the Warrant Amount for such Closing, shall occur within three (3) Business Days of the date on which the Company delivers to the Purchasers evidence that the conditions to Section 2.2(viii) can be satisfied. The Closing for the third Tranche of $700,000 in Subscription Amount of Notes (to purchase an aggregate of $805,000 in principal amount of Notes) and Warrants to purchase an aggregate of number of shares of Common Stock equal to the Warrant Amount for such Closing, shall occur, at the election of the Purchasers, within three (3) Business Days of the date on which the Company delivers to the Purchasers evidence that the conditions to Section 2.2(ix) can be satisfied. The Closing for each additional Tranche, if any, will occur, at the mutual election of the Company and the Purchasers, at such time or times as the Company and the Purchasers shall agree. Notwithstanding the election of the Purchasers to proceed with the Closing of the third Tranche or the mutual election of the Company and the Purchasers to proceed to any additional Closing, the Purchasers shall not be required to fund any additional Tranche if the Company is then in default under the terms of this Agreement or the Notes or if the conditions to such Closing in Section 2.3(b) are not then satisfied. At each Closing, each Purchaser shall purchase its Subscription Amount of the Notes for such Closing (as set forth on the signature page hereto executed by such Purchaser, as such signature page may be supplemented or amended) and shall deliver to the Company, via wire transfer or a certified check, immediately available funds equal to such Purchaser’s Subscription Amount for such Closing, and the Company shall deliver to each Purchaser its respective Notes and Warrants for such Closing (as set forth on the signature page hereto executed by such Purchaser, as such signature page may be supplemented or amended), and the Company and each Purchaser shall deliver the other items set forth in Section 2.3 deliverable at such Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.3 and 2.4 for the applicable Closing, the Closing shall occur at the offices of the Purchaser’s counsel or such other location as the parties shall mutually agree.
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2.2 Deliveries.
(a) On or prior to each Closing Date (or as otherwise indicated below), the Company shall deliver or cause to be delivered to each Purchaser the following:
(i) at the Closing of the first Tranche, this Agreement duly executed by the Company;
(ii) at the Closing of the first Tranche, the Transfer Agent Instruction Letter with respect to (a) the Conversion Shares and Warrant Shares issuable in respect to the Notes and Warrants to be issued at such Closing and (b) the shares of Common Stock underlying the Existing Notes and the Existing Warrants, duly executed by the Company and the Transfer Agent, and at each subsequent Closing, evidence satisfactory to the Purchasers that the number of shares of Common Stock reserved for issuance under the Transfer Agent Instruction Letter has been sufficiently increased to give effect to the Notes and Warrants to be issued by the Company at such Closing;
(iii) at the Closing of the first Tranche, the Amendment to the Existing SPA, the Amendment to Registration Rights Agreement and the Amendment to Security Agreement, each duly executed by the Company and the Subsidiaries of the Company, as applicable;
(iv) at each Closing, an executed Note in the principal amount equal to the principal amount of Notes to be purchased by such Purchaser at such Closing as set forth on the signature page hereto executed by such Purchaser;
(v) at each Closing, an executed Warrant to purchase the number of shares of Common Stock to be purchased by such Purchaser at such Closing as set forth on the signature page hereto executed by such Purchaser;
(vi) at the Closing of the first Tranche, the Disclosure Schedules of the Company;
(vii) at the Closing of the first Tranche, an executed copy of the Company’s lease for the Behome Property;
(viii) at the Closing of the second Tranche, an executed copy of the Company’s lease for the DC Property;
(ix) at the Closing of the third Tranche, (x) an executed copy of the Company’s lease for the Tillary Property and (y) evidence satisfactory to the Purchasers of court approval of such lease; and
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(x) at each Closing, an officers’ certificate executed by the Chief Executive Officer and the Chief Financial Officer of the Company certifying that the representations and warranties of the Company set forth herein are true and correct as of such Closing Date and that the Company has complied with all obligations, covenants and agreements of the Company set forth herein on or prior to such Closing Date, or a bring down letter of such officers relating to the same in a form reasonably acceptable to the Purchasers.
(b) On or prior to each Closing Date, each Purchaser shall deliver or cause to be delivered to the Company, as applicable, the following:
(i) at the Closing of the first Tranche, this Agreement duly executed by such Purchaser;
(ii) at the Closing of the first Tranche, the Amendment to the Existing SPA, the Amendment to Registration Rights Agreement and the Amendment to Security Agreement, each duly executed by such Purchaser and the Greenle Partners LLC, as collateral agent;
(iii) such Purchaser’s Subscription Amount for such Closing as set forth on the signature page hereto executed by such Purchaser, by wire transfer to the account specified in writing by the Company; and
(iv) if such Purchaser is not currently a party to this Agreement, a joinder agreement to this Agreement duly executed by such Purchaser pursuant to which such Purchaser shall become a party to this Agreement.
2.3 Closing Conditions.
(a) The obligations of the Company hereunder in connection with each Closing are subject to the following conditions being met:
(i) the accuracy in all material respects on the applicable Closing Date of the representations and warranties of the Purchasers contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);
(ii) all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the applicable Closing Date shall have been performed; and
(iii) the delivery by each Purchaser of the required items set forth in Section 2.2(b) of this Agreement.
(b) The respective obligations of the Purchasers hereunder in connection with each Closing are subject to the following conditions being met:
(i) the accuracy in all material respects when made and on the applicable Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date therein);
(ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the applicable Closing Date shall have been performed;
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(iii) the delivery by the Company of the required items set forth in Section 2.2(a) of this Agreement; and
(iv) there shall have been no Material Adverse Effect with respect to the Company since the date hereof; and
(v) from the date hereof to the applicable Closing Date, at any time prior to the applicable Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Securities at such Closing.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth in the disclosure schedules of the Company delivered to the Purchasers at the Closing (the “Disclosure Schedules”), which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser:
(a) Subsidiaries. All of the direct and indirect subsidiaries of the Company are set forth in Amendment No. 4 to the Company’s Registration Statement on Form S-1 (Registration No. 333-262114) (as so amended, the “Registration Statement”), including under the heading therein entitled “Certain Corporate Information and Definitions” and on Exhibit 21 to the Registration Statement. The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, other than the Liens securing the Existing Notes, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. If the Company has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.
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(b) Organization and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification. Notwithstanding the foregoing, for purposes of this Agreement, “Material Adverse Effect” shall not include any event, occurrence, fact, condition or change, directly or indirectly, arising out of or attributable to: (A) general economic or political conditions; (B) conditions generally affecting the industries in which the Company operates; (C) any changes in financial, banking or securities markets in general, including any disruption thereof and any decline in the price of any security or any market index or any change in prevailing interest rates; (D) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof; (E) any action required or permitted by this Agreement or any action taken (or omitted to be taken) with the written consent of or at the written request of the Purchasers; (F) any changes in applicable laws or accounting rules (including GAAP (as defined below)) or the enforcement, implementation or interpretation thereof; (G) the announcement, pendency or completion of the transactions contemplated by this Agreement; (H) any natural or man-made disaster or acts of God; or (I) any failure by any Company to meet any internal or published projections, forecasts or revenue or earnings predictions (provided that the underlying causes of such failures (subject to the other provisions of this definition) shall not be excluded).
(c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except: (i) as limited by general equitable principles and 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) insofar as indemnification and contribution provisions may be limited by applicable law.
(d) No Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not: (i) except as set forth on Schedule 3.1(d) hereto, conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.
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(e) Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filings required pursuant to Section 4.6 of this Agreement, and (ii) the filing of a Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively, the “Required Approvals”).
(f) Issuance of the Securities. The Conversion Shares and the Warrant Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents. The Company has reserved from its duly authorized capital stock 3,910,000 shares of Common Stock for issuance of the Conversion Shares and the Warrant Shares relating to the conversion or exercise of the Notes and Warrants issued in connection with the closings of the first two Tranches hereunder, which number of shares shall be promptly adjusted upon consummation of the closing or each additional Tranche hereunder, if any, or the IPO or any other event affecting the applicable conversion or exercise prices of the Notes or the Warrants.
(g) Capitalization. Except for the Existing Notes and the Existing Warrants, the capitalization of the Company is as set forth in the Registration Statement, including under the heading therein entitled “Prospectus Summary – The Offering” and the footnotes thereto, with the number of shares of Common Stock owned beneficially, and of record, by Affiliates of the Company as of the date hereof described in the Registration Statement under the heading therein entitled “Principal Stockholders.” Except as set forth in the Existing SPA, no Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as described in the Registration Statement and except as a result of the purchase and sale of the Existing Notes, the Existing Warrants and the Securities, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents. The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.
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(h) Financial Statements. The Company is not and since its incorporation never has been a “shell” company as defined in Section 405 of the Securities Act and is not required to file reports with the SEC under the Exchange Act. The financial statements of the Company (the “Financial Statements”) included in Registration Statement have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.
(i) Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest balance sheet included in the Financial Statements, except as specifically disclosed in the Registration Statement, including under the heading therein entitled “Prospectus Summary – Recent Developments’ or Schedule 3(i) hereto: (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables, letters of credit relating to accommodation unit properties, and accrued expenses incurred in the ordinary course of business consistent with past practice, (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP and (C) the Existing Notes, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option and restricted stock plans. Except for the transactions prescribed by this Agreement and the other agreements and documents being delivered in connection herewith and the transactions prescribed by the Existing SPA and the other agreements and documents delivered in connection therewith , no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, properties, operations, assets or financial condition, that would be required to be disclosed by an issuer subject to the reporting obligations of the Exchange Act at the time this representation is made or deemed made that has not been included in Registration Statement, the Disclosure Schedules or the Financial Statements.
(j) Litigation. There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Except as disclosed in the Registration Statement, neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.
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(k) Labor Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which could reasonably be expected to result in a Material Adverse Effect. Except as described in the Registration Statement, including under the heading therein entitled “Business – Human Capital,” none of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(l) Compliance. Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority, or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as could not have or reasonably be expected to result in a Material Adverse Effect.
(m) Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.
(n) Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries, (ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP and, the payment of which is neither delinquent nor subject to penalties and (iii) Liens securing the Existing Notes. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.
(o) Intellectual Property. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights as necessary or required for use in connection with their respective businesses and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from the date of this Agreement. Neither the Company nor any Subsidiary has received a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as could not have or reasonably be expected to not have a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
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(p) Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including, without limitation, directors and officers insurance coverage at least equal to the initial Subscription Amount. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.
(q) Transactions With Affiliates and Employees. Except as disclosed in the Registration Statement, including under the heading therein entitled “Certain Relationships and Related Party Transactions,” or as set forth on Schedule 3.1(i), none of the officers or directors of the Company or any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, providing for the borrowing of money from or lending of money to or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case in excess of $120,000 other than for: (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company, and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company.
(r) [Reserved.]
(s) Certain Fees. Except for fees payable by the Company to Maxim Group LLC, no brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiary to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.
(t) Private Placement. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated hereby.
(u) No “Bad Actor” Disqualification. The Company has exercised reasonable care to determine whether any Company Covered Person (as defined below) is subject to any of the “bad actor” disqualifications described in Rule 506(d)(1)(i) through (viii), as modified by Rules 506(d)(2) and (d)(3), under the Securities Act (“Disqualification Events”). To the Company’s knowledge, no Company Covered Person is subject to a Disqualification Event. The Company has complied, to the extent required, with any disclosure obligations under Rule 506(e) under the Securities Act. For purposes of this Agreement, “Company Covered Persons” are those persons specified in Rule 506(d)(1) under the Securities Act; provided, however, that Company Covered Persons do not include (a) any Purchaser, or (b) any person or entity that is deemed to be an affiliated issuer of the Company solely as a result of the relationship between the Company and any Purchaser.
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(v) Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.
(w) Registration Rights. Except as disclosed in the Registration Statement, no Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company or any Subsidiary.
(x) Disclosure. All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.
(y) No Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the Securities Act, or (ii) any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.
(z) Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and each of its Subsidiaries (i) has made or filed all United States federal, state and local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject as and when due subject to any applicable extensions, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, whether or not shown or determined to be due on such returns, reports and declarations, and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary know of no basis for any such claim.
(aa) No General Solicitation. Neither the Company nor any Person acting on behalf of the Company has offered or sold any of the Securities by any form of general solicitation or general advertising. The Company has offered the Securities for sale only to the Purchasers and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.
(bb) Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor any agent or other Person acting on behalf of the Company or any Subsidiary, has: (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any Person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of FCPA.
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(cc) Accountants. To the knowledge and belief of the Company, the Company’s accounting firm, Grassi & Co., CPAs, P.C.: (i) is a registered public accounting firm as required by the Exchange Act and (ii) shall express its opinion with respect to the financial statements to be included in the Company’s registration statement to be filed for the IPO.
(dd) No Disagreements with Accountants and Lawyers. There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and the Company is current with respect to any fees owed to its accountants and lawyers which could affect the Company’s ability to perform any of its obligations under any of the Transaction Documents.
(ee) Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities. The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.
(ff) Acknowledgment Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding (except for Section 4.14 hereof), it is understood and acknowledged by the Company that: (i) none of the Purchasers has been asked by the Company to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities for any specified term, (ii) past or future open market or other transactions by any Purchaser, specifically including, without limitation, Short Sales or “derivative” transactions, before or after a closing of this or future private placement transactions, may negatively impact the market price of the Company’s publicly-traded securities, (iii) any Purchaser, and counter-parties in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, may presently have a “short” position in the Common Stock, and (iv) each Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction. The Company further understands and acknowledges that (y) one or more Purchasers may engage in hedging activities at various times during the period that the Securities are outstanding, including, without limitation, during the periods that the value of the Conversion Shares deliverable with respect to Securities are being determined, and (z) such hedging activities (if any) could reduce the value of the existing stockholders’ equity interests in the Company at and after the time that the hedging activities are being conducted. The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.
(gg) Stock Option Plans. Except as set forth in the Registration Statement, the Company does not currently have or maintain any stock option or other equity incentive plan for its directors, employees or consultants.
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(hh) Office of Foreign Assets Control. Neither the Company nor any Subsidiary nor any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).
(ii) U.S. Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Purchaser’s request.
(kk) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”), and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.
(ll) Money Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance in all material respects with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Company or any Subsidiary, threatened.
3.2 Representations and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the date hereof and as of each Closing Date to the Company as follows (unless as of a specific date therein):
(a) Organization; Authority. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and 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) insofar as indemnification and contribution provisions may be limited by applicable law.
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(b) Own Account. Such Purchaser understands that the Securities are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting such Purchaser’s right to sell the Securities in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.
(c) Purchaser Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on which it converts any Notes or exercises any Warrants, it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.
(d) Experience of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.
(e) General Solicitation. Such Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.
(f) No “Bad Actor” Disqualification. Neither (A) such Purchaser nor (B) any entity that controls such Purchaser or is under the control of, or under common control with, such Person, is subject to any Disqualification Event. Such Purchaser has exercised reasonable care to determine the accuracy of the representation made by such Purchaser in this paragraph, and agrees to notify the Company if such Purchaser becomes aware of any fact that makes the representation given by such Purchaser hereunder inaccurate.
(g) Disclosure of Information. Purchaser acknowledges that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the sale of the Securities and the business, properties, prospects and financial condition of the Company and its Subsidiaries. Any questions raised by Purchaser concerning the Company and its subsidiaries or the Securities have been answered to the satisfaction of Purchaser. Purchaser’s decision to purchase the Securities is based solely on the information obtained during the course of Purchaser’s due diligence review and on the response to such questions as Purchaser has raised concerning the Securities or the Company and its Subsidiaries.
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(h) Unlawful Activities. (i) No part of the funds used by Purchaser to acquire any Securities under this Agreement has been, or shall be, directly or indirectly derived from, or related to, any activity that may contravene United States federal or state or non-United States laws or regulations, including, without limitation, laws and regulations relating to anti-money laundering, terrorist financing and other illegal activities; (ii) no capital commitment, contribution or payment to the Company by Purchaser and no distribution to Purchaser shall cause the Company to be in violation of any applicable anti-money laundering laws or regulations, including, without limitation, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001 and the United States Department of the Treasury Office of Foreign Assets Control (“OFAC”) regulations (the “Sanction Regulations”); and (iii) none of the funds of Purchaser have been derived from any unlawful activity. Without limiting the foregoing: (1) Purchaser is in compliance with Executive Order 13224 (September 23, 2001), the rules and regulations of OFAC and any enabling legislation or other executive orders in respect thereof; (2) at all times, (I) none of the funds or other assets of Purchaser constitutes property of, or are beneficially owned, directly or indirectly, by any Person, entity or government subject to trade restrictions under U.S. law (including, without limitation, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any executive orders or regulations promulgated thereunder) (any such Person, an “Embargoed Person”); (II) no Embargoed Person has any interest of any nature whatsoever in Investor; and (III) if applicable to Investor, Investor has implemented a corporate anti-money laundering plan that is reasonably designed to ensure compliance with applicable foreign and U.S. anti-money laundering law; and (4) none of the investors, officers, directors, managers, members or partners of Investor appear on any lists published by OFAC with respect to Persons that have been designated by executive order or by the Sanction Regulations as Persons with whom U.S. Persons may not transact business or must limit their interactions to types approved by OFAC or otherwise. Investor shall promptly notify the Company if any of these representations in this paragraph ceases to be true and accurate regarding Investor.
The Company acknowledges and agrees that the representations contained in this Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transaction contemplated hereby.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights and obligations of a Purchaser under this Agreement.
(b) The Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in the following form or a substantially similar form as may be required by the Company’s Transfer Agent:
[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE] [NOR THE SECURITIES FOR WHICH THIS SECURITY MAY BE EXERCISED] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [CONVERSION/EXERCISE] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
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The Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of the Transaction Agreements and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities, including, if the Securities are registered under a registration statement, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of selling stockholders thereunder.
(c) The Conversion Shares and the Warrant Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) while a registration statement covering the resale of such security is effective under the Securities Act, (ii) following any sale of such Conversion Shares or Warrant Shares pursuant to Rule 144, (iii) if such Conversion Shares or Warrant Shares are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Conversion Shares or Warrant Shares and without volume or manner-of-sale restrictions, or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). Upon request of the Purchaser, the Company shall cause its counsel to issue a legal opinion to the Transfer Agent promptly after the events described in clauses (i)-(iv) in the immediately preceding sentence if required by the Transfer Agent to effect the removal of the legend hereunder; provided that the opinion of counsel delivered in connection with clause (i) may contain provisions that such opinion may be withdrawn at any time by counsel upon any applicable registration statement no longer being effective and may be issued in reliance upon the Company undertaking in writing to such counsel to immediately place stop transfer orders on such securities if the applicable registration statement is no longer effective and foregoing clauses (iii) or (iv) are not then applicable. If all or any Notes (or Preferred Shares) are converted or Warrants exercised at a time when there is an effective registration statement to cover the resale of the Conversion Shares or Warrant Shares, or if such Conversion Shares or Warrant Shares may be sold under Rule 144 and the Company is then in compliance with the current public information required under Rule 144, or if the Conversion Shares or Warrant Shares may be sold under Rule 144 without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Conversion Shares or Warrant Shares and without volume or manner-of-sale restrictions or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission), then such Conversion Shares or Warrant Shares shall be issued free of all legends. The Company agrees that following such time as such legend is no longer required under this Section 4.1(c), it will, no later than three Trading Days following the delivery by a Purchaser to the Company or the Transfer Agent of the Conversion Shares or Warrant Shares, as applicable, issued with a restrictive legend (such third Trading Day, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser Conversion Shares or Warrant Shares, as applicable, that are free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4. Conversion Shares or Warrant Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System as directed by such Purchaser.
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(d) So long as providing the certificate without the legend is allowed under applicable securities laws, in addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, for each $1,000 of Conversion Shares or Warrant Shares (based on the VWAP of the Common Stock on the date such Securities are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day five (5) Trading Days after such damages have begun to accrue) for each Trading Day after the fifth (5th) Trading Day immediately following the Legend Removal Date until such certificate is delivered without a legend. Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Company’s failure to deliver certificates representing any Securities as required by the Transaction Documents, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.
4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Conversion Shares and the Warrant Shares pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company.
4.3 Furnishing of Information; Public Information. From and after the date on which the Company completes the IPO until the date that no Purchasers own any Securities, the Company agrees to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act.
4.4 Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.
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4.5 Conversion and Exercise Procedures. The form of Notice of Conversion included in the Notes (or in the alternative, the delivery of a notice of conversion with respect to any Preferred Shares) and the form of Notice of Exercise included in the Warrants set forth the totality of the procedures required of the Purchasers in order to convert the Notes (or Preferred Shares) or exercise the Warrants (except, in the case of the Warrants, for the making of any required payments by the holder thereof to the Company). Without limiting the preceding sentences, no ink-original Offering Notice Response, Notice of Conversion or Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form or Notice of Exercise form be required in order to convert the Notes (or any Preferred Shares) or exercise the Warrants. No additional legal opinion, other information or instructions shall be required of the Purchasers to convert their Notes (or Preferred Shares) or exercise their Warrants. The Company shall honor conversions of the Notes (or Preferred Shares) and exercises of the Warrants and shall deliver Conversion Shares or Warrant Shares, as applicable, in accordance with the terms, conditions and time periods set forth in the Transaction Documents.
4.6 Securities Laws Disclosure; Publicity. The Company and each Purchaser shall consult with each other in issuing any press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding anything to the contrary contained herein, the Company shall be permitted to make disclosures of the transactions contemplated hereby in any filing with the Commission as required by the rules and regulations thereof and as otherwise required by law, including any amendment to the Registration Statement and with the NYSE in connection with the Company’s application to have its Common Stock and certain warrants listed thereon in connection with the IPO; provided, however, that the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser, in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except: (a) as required by federal securities law in connection with the filing of final Transaction Documents with the Commission and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under this clause (b).
4.7 Shareholder Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any other agreement between the Company and the Purchasers.
4.8 Non-Public Information. Following the IPO, the Company shall not, and shall cause each of its Subsidiaries and each of their respective officers, directors, employees, affiliates and agents, not to, provide any Purchaser with any material, nonpublic information regarding the Company or any of its Subsidiaries from and after the date hereof without the express prior written consent of such Purchaser. If following the IPO a Purchaser has, or believes it has, received any such material, nonpublic information regarding the Company or any of its Subsidiaries from the Company, any of its Subsidiaries or any of their respective officers, directors, employees, affiliates or agents, it may provide the Company with written notice thereof. The Company shall, within one (1) Trading Day of receipt of such notice, make public disclosure of such material, nonpublic information. In the event of a breach of the foregoing covenant by the Company, any of its Subsidiaries, or any of its or their respective officers, directors, employees, affiliates and agents, in addition to any other remedy provided herein or in the Transaction Documents, a Purchaser shall have the right to make a public disclosure, in the form of a press release, public advertisement or otherwise, of such material, nonpublic information without the prior approval by the Company, its Subsidiaries, or any of its or their respective officers, directors, employees, affiliates or agents. No Purchaser shall have any liability to the Company, its Subsidiaries, or any of its or their respective officers, directors, employees, affiliates, stockholders or agents for any such disclosure. To the extent that, following the IPO, the Company delivers any material, nonpublic information to a Purchaser without such Purchaser’s consent, the Company hereby covenants and agrees that such Purchaser shall not have any duty of confidentiality to the Company, any of its Subsidiaries or any of their respective officers, directors, employees, affiliates or agent with respect to, or a duty to the Company, any of its Subsidiaries or any of their respective officers, directors, employees, affiliates or agent not to trade on the basis of, such material, nonpublic information.
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4.9 Use of Proceeds. The Company shall use the proceeds from this offering as cash collateral for letters of credit delivered as security deposits in connection with the leases of the Behome Property and the Tillary Property and for general corporate and working capital purposes.
4.10 Indemnification of Purchasers. Subject to the provisions of this Section 4.10, the Company will indemnify and hold each Purchaser and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against the Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such Purchaser Party’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence, willful misconduct or malfeasance). If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent, that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification required by this Section 4.10 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.
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4.11 Reservation and Listing of Securities.
(a) The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as equals the Required Minimum.
(b) If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than (i) the Required Minimum on such date, minus (ii) the number of shares of Common Stock previously issued pursuant to the Transaction Documents, then the Board of Directors shall use commercially reasonable efforts to amend the Company’s certificate or articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the Required Minimum at such time (minus the number of shares of Common Stock previously issued pursuant to the Transaction Documents), as soon as possible and in any event not later than the 90th day after such date, provided that the Company will not be required at any time to authorize a number of shares of Common Stock greater than the maximum remaining number of shares of Common Stock that could possibly be issued after such time pursuant to the Transaction Documents.
4.12 Sale or Transfer of Assets. So long as the Notes or any Preferred Shares remain outstanding, neither the Company, nor any Subsidiary of the Company, shall, without each Purchaser’s written consent, sell, lease or otherwise dispose of or transfer any significant portion of its assets outside the ordinary course of business; provided, however, that for purposes of clarity, it is understood that the Company enters, trades, modifies and terminates early real property leases from time to time as part of its operations in the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition. In addition, so long as the Notes or any Preferred Shares remain outstanding, neither the Company nor any Subsidiary shall sell or transfer or otherwise dispose of any assets to any Subsidiary that is not a guarantor under, and a party to, the Security Agreement.
4.13 Equal Treatment of Purchasers. No consideration (including any modification of any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration is also offered to all of the parties to this Agreement. For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.
4.14 Certain Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it, nor any Affiliate acting on its behalf or pursuant to any understanding with it, will from the date of the IPO until the date that the Notes or any Preferred Shares are no longer outstanding, execute any Short Sales of the Common Stock (provided that this provision shall not prohibit any sales made where a corresponding Notice of Conversion or Notice of Exercise is tendered to the Company and the shares received upon such conversion or exercise are used to close out such sale) (a “Prohibited Short Sale”). Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company in the IPO, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and the information included in the Transaction Documents and the Disclosure Schedules. Notwithstanding the foregoing, and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced by the Company is a press release or in the registration statement for the IPO, (ii) except for a Prohibited Short Sale, following the IPO, no Purchaser shall be restricted or prohibited from effecting any transactions in any securities of the Company in accordance with applicable securities laws, and (iii) no Purchaser shall have any duty of confidentiality to the Company or its Subsidiaries after the IPO. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.
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4.15 Form D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof, promptly upon request of any Purchaser. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions promptly upon request of any Purchaser.
4.16 Piggy-Back Registrations. If at any time while any of the Notes or the Warrants or any Preferred Shares remain outstanding there is not an effective registration statement under the Securities Act covering all of the Conversion Shares and the Warrant Shares (the “Registrable Securities”) and the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, then the Company shall send to each Purchaser then holding Notes, Preferred Shares or Warrants written notice of such determination and, if within fifteen calendar days after receipt of such notice, any such Purchaser shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such Purchaser requests to be registered, subject to customary underwriter cutbacks applicable to all holders of registration rights and subject to the applicable terms of such registration rights. The rights provided in this Section shall not apply with respect to any registration statement filed in connection with any follow-on primary offering by the Company so long as no equity securities will be offered under such registration statement for the account of others. Notwithstanding the foregoing, a security shall cease to be a Registrable Security for purposes of this Agreement from and after such time as the Purchasers may resell such security without volume restrictions under Rule 144, as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company’s transfer agent and the affected Purchaser.
4.17 Liens. So long as any of the Notes remain outstanding, the Company shall not, without the prior written consent of each Purchaser, incur, create, assume or suffer to exist any Lien on any of its property or assets, whether now owned or hereinafter acquired, except for (a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings; (b) non-consensual Liens arising by operation of law, arising in the ordinary course of business, and for amounts which are not overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings; (c) Liens on property securing indebtedness incurred by the Company or any of its Subsidiaries to provide funds for all or a portion of the cost of acquiring, leasing, constructing, altering, expanding, improving or repairing such property; (d) Liens securing purchase money Indebtedness incurred in connection with the acquisition of capital assets by the Company or any Subsidiary in the ordinary course of business; (e) Liens securing the Existing Notes; or (f) Liens listed on Schedule 4.17 of the Disclosure Schedules.
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4.18 Other Indebtedness. Except with respect to the Existing Notes or as set forth on Schedule 4.18, so long as any of the Notes remain outstanding, the Company shall not (directly or indirectly through any Subsidiary or affiliate) incur or suffer to exist or guarantee any Indebtedness that is senior to or pari passu with (in priority of payment and performance) the Company's obligations hereunder or under the Notes, or that matures prior to the maturity date of the Notes. As used herein, the term "Indebtedness" means (a) all indebtedness of the Company for borrowed money or for the deferred purchase price of property or services, including any type of letters of credit, but not including deferred purchase price obligations in place as of the Closing Date or obligations to trade creditors incurred in the ordinary course of business, (b) all obligations of the Borrower evidenced by notes, bonds, debentures or other similar instruments, (c) purchase money indebtedness hereafter incurred by the Company to finance the purchase of fixed or capital assets, including all capital lease obligations of the Company which do not exceed the purchase price of the assets funded, (d) all guarantee obligations of the Company in respect of obligations of the kind referred to in clauses (a) through (c) above that the Company would not be permitted to incur or enter into, and (e) all obligations of the kind referred to in clauses (a) through (d) above that the Company is not permitted to incur or enter into that are secured and/or unsecured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured and/or unsecured by) any Lien on property (including accounts and contract rights) owned by the Company, whether or not the Company has assumed or become liable for the payment of such obligation. Notwithstanding anything to the contrary contained in this Agreement, the Company shall be entitled to have outstanding at any time up to $1.5 million aggregate principal amount of other promissory notes; provided that such promissory notes are on terms no more favorable to the holders thereof as those afforded to the Purchasers in the Notes and that such promissory notes shall be subordinate in right of repayment to the Notes.
4.19 Distributions on Capital Stock. So long as any of the Notes or Preferred Shares remain outstanding, the Company shall not without each Purchaser’s written consent, (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any Subsidiary make any other payment or distribution in respect of its capital stock.
4.20 Restriction on Stock Repurchases and Debt Repayments. So long as any of the Notes or any Preferred Shares remain outstanding, the Company shall not, without each Purchaser’s prior written consent, (a) redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Company (other than the Preferred Shares) or any warrants, rights or options to purchase or acquire any such shares, or (b) repay any pari passu or subordinated indebtedness of the Company or repay any indebtedness to the Company’s officers, directors or other Affiliates, except for the repayment of the Existing Notes and the indebtedness disclosed under the heading “Use of Proceeds” in the Registration Statement. Notwithstanding the foregoing, the Company shall be permitted to effect the following without the consent of the Purchasers: (i) dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock and (ii) repurchases of stock from former employees, officers, directors, consultants or other persons who performed services for the Company or any subsidiary in connection with the cessation of such employment or service at no greater than the original purchase price thereof.
4.21 Advances and Loans; Affiliate Transactions. So long as any of the Notes or any Preferred Shares remain outstanding, the Company shall not, without each Purchaser’s written consent, lend money, give credit, or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Company, except loans, credits or advances (a) in existence or committed on the Closing Date and which the Company has informed each Purchaser in writing prior to the Closing Date, (b) in regard to transactions with unaffiliated third parties, made in the ordinary course of business, or (c) in regard to transactions with unaffiliated third parties, not in excess of $50,000. So long as any of the Notes or any Preferred Shares remain outstanding, the Company shall not, without each Purchaser’s written consent, enter into any transaction with Affiliates, except transactions with affiliates made in the ordinary course of business; provided, however, that nothing in this Section 4.21 shall prohibit the Company from entering into any transaction with an Affiliate for the purpose of the Affiliate making a loan or advance to the Company.
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4.22 Proceeds of IPO, Other Equity or Debt Issuances or Asset Sales.
(a) The Company agrees, upon the written request of one or more Purchasers delivered to the Company no later than seven (7) Business Days following the consummation of the IPO, to repay the Notes and Existing Notes held by such Purchasers; provided, however, that the Company shall not be required to repay an aggregate principal amount of Notes or Existing Notes pursuant to this Section 4.22(a) that is more than the greater of (i) $2,500,000, or (ii) an amount equal to fifty percent (50%) of the aggregate Subscription Amount paid by such Purchasers under this Agreement and the Existing SPA. Any such repayment shall be made on a pro rata basis if Purchasers have requested the repayment of a greater aggregate principal amount of Notes and Existing Notes. Any such repayment shall be at a repayment price equal to one hundred fifteen percent (115%) of the principal amount to be repaid, together with all accrued and unpaid interest on such principal amount, and shall be made within three (3) Business Days of the date of delivery to the Company of such written request, from the net proceeds of the IPO, prior to applying the net proceeds of the IPO for any other purposes (other than those specifically described under the heading “Use of Proceeds” in the Registration Statement).
(b) The Company agrees to provide to the Purchasers at least three (3) Business Days’ prior written notice of any proposed (i) sales of debt or equity securities other than the IPO, and (ii) sales of assets outside the ordinary course of business (each, a “Funding Transaction”) and, upon the written request of one or more Purchasers delivered to the Company no later than three (3) Business Days following receipt of any such notice, to repay the principal amount of the Notes held by such Purchaser(s), on a pro rata basis if Purchasers have requested the repayment of an aggregate principal amount of Notes that is more than the net proceeds of such Funding Transaction, at a repayment price equal to one hundred fifteen percent (115%) of the principal amount to be repaid, together with all accrued and unpaid interest on such principal amount, within three (3) Business Days of the closing of such Funding Transaction, from the net proceeds of the Funding Transaction, prior to applying the net proceeds of the Funding Transaction for any other purposes.
(c) The Purchasers hereby waive any notice of such prepayment pursuant to this Section 4.22 as would otherwise be required by Section 2(e) of the Notes or the Existing Notes. Notwithstanding anything to the contrary contained herein in this Section 4.22, nothing in this Section 4.22 shall limit the ability of the Company to prepay the Notes or Existing Notes at any time in accordance with the terms thereof.
4.23 Additional Securities Issuances. So long as any of the Notes or Preferred Shares remain outstanding, without the prior written consent of the Purchasers, the Company shall not issue any indebtedness for money borrowed that has a variable conversion rate or enter into any transaction for merchant cash advances.
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4.24 Participation in Future Financing.
(a) From the date hereof until the date that is the later of (i) the date on which no Notes or Preferred Shares are outstanding and (ii) the 18-month anniversary of the Closing Date, upon any issuance by the Company or any of its Subsidiaries of Common Stock, Common Stock Equivalents for cash consideration, indebtedness or a combination of units thereof (a “Subsequent Financing”), each Purchaser shall have the right to participate in such Subsequent Financing in an amount up to an amount equal to such Purchaser’s Subscription Amount, or if the amount of the Subsequent Financing is less than the aggregate Subscription Amounts of all of the Purchasers, such Purchaser’s Pro Rata Portion (such amount, the “Participation Maximum”), on the same terms, conditions and price provided for in the Subsequent Financing.
(b) At least three (3) Trading Days prior to the closing of the Subsequent Financing, the Company shall deliver to each Purchaser a written notice of its intention to effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such Purchaser if it wants to review the details of such financing (such additional notice, a “Subsequent Financing Notice”). Upon the request of a Purchaser, and only upon a request by such Purchaser, for a Subsequent Financing Notice, the Company shall promptly, but no later than one (1) Trading Day after such request, deliver a Subsequent Financing Notice to such Purchaser. The Subsequent Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing, the amount of proceeds intended to be raised thereunder and the Person or Persons through or with whom such Subsequent Financing is proposed to be effected and shall include a term sheet or similar document relating thereto as an attachment.
(c) Any Purchaser desiring to participate in such Subsequent Financing must provide written notice to the Company by not later than 5:30 p.m. (New York City time) on the second (2nd) Trading Day after all of the Purchasers have received the Pre-Notice that such Purchaser is willing to participate in the Subsequent Financing, the amount of such Purchaser’s participation, and representing and warranting that such Purchaser has such funds ready, willing, and available for investment on the terms set forth in the Subsequent Financing Notice. If the Company receives no such notice from a Purchaser as of such second (2nd) Trading Day, such Purchaser shall be deemed to have notified the Company that it does not elect to participate.
(d) If by 5:30 p.m. (New York City time) on the second (2nd) Trading Day after all of the Purchasers have received the Pre-Notice, notifications by the Purchasers of their willingness to participate in the Subsequent Financing (or to cause their designees to participate) is, in the aggregate, less than the total amount of the Subsequent Financing, then the Company may consummate the remaining portion of such Subsequent Financing on the terms and with the Persons set forth in the Subsequent Financing Notice.
(e) If by 5:30 p.m. (New York City time) on the second (2nd) Trading Day after all of the Purchasers have received the Pre-Notice, the Company receives responses to a Subsequent Financing Notice from Purchasers seeking to purchase more than the aggregate amount of the Participation Maximum, each such Purchaser shall have the right to purchase its Pro Rata Portion (as defined below) of the Participation Maximum. “Pro Rata Portion” means the ratio of (x) the Subscription Amount of Securities purchased by a Purchaser participating under this Section 4.24 and (y) the sum of the aggregate Subscription Amounts of Securities purchased by all Purchasers participating under this Section 4.24.
(f) The Company must provide the Purchasers with a second Subsequent Financing Notice, and the Purchasers will again have the right of participation set forth above in this Section 4.24, if the Subsequent Financing subject to the initial Subsequent Financing Notice is not consummated for any reason on the terms set forth in such Subsequent Financing Notice within thirty (30) Trading Days after the date of the initial Subsequent Financing Notice.
(g) The Company and each Purchaser agree that if any Purchaser elects to participate in the Subsequent Financing, the transaction documents related to the Subsequent Financing shall not include any term or provision whereby such Purchaser shall be required to agree to any restrictions on trading as to any of the Securities purchased hereunder or be required to consent to any amendment to or termination of, or grant any waiver, release or the like under or in connection with, this Agreement, without the prior written consent of such Purchaser.
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(h) Notwithstanding anything to the contrary in this Section 4.24 and unless otherwise agreed to by such Purchaser, the Company shall either confirm in writing to such Purchaser that the transaction with respect to the Subsequent Financing has been abandoned or shall publicly disclose its intention to issue the securities in the Subsequent Financing, in either case in such a manner such that such Purchaser will not be in possession of any material, non-public information, by the tenth (10th) Business Day following delivery of the Subsequent Financing Notice. If by such tenth (10th) Business Day, no public disclosure regarding a transaction with respect to the Subsequent Financing has been made, and no notice regarding the abandonment of such transaction has been received by such Purchaser, such transaction shall be deemed to have been abandoned and such Purchaser shall not be deemed to be in possession of any material, non-public information with respect to the Company or any of its Subsidiaries.
(i) Notwithstanding the foregoing, this Section 4.24 shall not apply in respect of an Exempt Issuance.
4.25 Lock-Up. In connection with the IPO, if requested by the Company and the representative of the underwriters, each Purchaser shall enter into a supplemental agreement to not transfer any shares of Common Stock (or other securities) of the Company held by such Purchaser (other than those included in the registration) during the ninety (90) day period (or such lesser period as may be determined by the underwriter) following the effective date of the registration statement of the Company filed under the Securities Act relating to the IPO; provided that all directors, officers and holders of the Company’s outstanding securities issued prior to the IPO enter into agreements providing for similar restrictions on sales and that any waiver or termination of the prohibitions set forth in this Section 4.25 by the Company or any underwriter shall apply to each Purchaser. The obligations described in this Section 4.25 shall not apply to a registration relating solely to employee benefit plans on Form S-3 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a transaction pursuant to Rule 145 under the Securities Act on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions with respect to each Purchaser’s shares of Common Stock (or other securities) subject to the foregoing restriction until the end of such ninety (90) day or lesser period.
4.26 Post Lock-Up Period Adjustment. Within two Business Days following the last day of the Lock-Up Period, the Company shall prepare and deliver to each Purchaser an officer’s certificate (the “Pricing Certificate”) certified by the Chief Financial Officer of the Company that sets forth the average VWAP of the Common Stock for the last three Trading Days of the Lock-Up Period (the “Closing Lock-up Price”), which certificate shall set forth the basis for the Company’s calculation of the Closing Lock-up Price. If the Closing Lock-up Price is less than an amount equal to the price at which the Common Stock (or units of Common Stock and warrants if such units are sold in the IPO) is sold in the IPO, each Purchaser shall have the right, exercisable within five (5) Business Days of date of its receipt of the Pricing Certificate, to request that the Company prepay pursuant to Section 2(d) of the Notes, and the Company shall thereafter prepay pursuant to such Section 2(d) of the Notes, an amount equal to up to fifty percent (50%) of the original principal amount of the Notes held by such Purchaser, and all accrued and unpaid interest thereon, in six (6) equal monthly installments commencing on the tenth (10th) Business Day following the last day of the Lock-Up Period and on each monthly anniversary of such date.
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4.27 Right of First Refusal. If from the date hereof until the date that is the later of (i) the date on which no Notes or Preferred Shares are outstanding and (ii) the 18-month anniversary of the Closing Date, the Company or any Subsidiary has a bona fide offer of capital or financing from any third party that the Company or Subsidiary intends to act upon, then the Company must first offer such opportunity to the Purchasers to provide such capital or financing to the Company or Subsidiary on the same terms as each respective third party’s terms. Should the Purchasers be unwilling or unable to provide such capital or financing to the Company within ten (10) Trading Days from the Purchasers’ receipt of written notice of the offer (the “Offer Notice”) from the Company, then the Company or Subsidiary may, subject to Section 4.24, obtain such capital or financing from that respective third party upon the exact same terms and conditions offered by the Company to the Purchaser, which transaction must be completed within sixty (60) days after the date of the Offer Notice. If the Company does not receive the capital or financing from the respective 3rd party within sixty (60) days after the date of the respective Offer Notice, then the Company must again offer the capital or financing opportunity to the Purchasers as described above, and the process detailed above shall be repeated.
4.28 Mandatory Exchange of Notes. Following the consummation of the IPO and the listing of the Common Stock on any of the Nasdaq or New York stock exchanges, each Purchaser shall, upon the written request of the Company, exchange such Purchaser’s Notes (other than any Notes that are to be paid pursuant to Section 4.22(a) or converted to Common Stock) for a class of the Company’s convertible preferred stock having terms as set forth in a Certificate of Designation pursuant to the terms of an exchange agreement that has representations and warranties substantially identical to the representations and warranties of the Company set forth in Section 3.1 and agreements of the Company and the Purchasers applicable to the shares of preferred stock and such parties as are set forth in this Article IV. Any such exchange shall be effected pursuant to Section 3(a)(9) of the Securities Act and in connection with such exchange the Company shall acknowledge that the holding period of the shares of preferred stock (and the shares of Common Stock issuable upon conversion of such shares) shall tack back to the date the Notes were originally issued by the Company to the Purchasers (or their assignor) and shall covenants not to take any position to the contrary.
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ARTICLE V.
REVENUE SHARE
5.1 Payment of Hotel Revenue Share.
(a) With respect each calendar quarter during the Original Lease Term (as defined below) of a Property (each, a “Revenue Share Period”), commencing with the first full calendar quarter following the date on which the Company or an Affiliate of the Company originally enters into a lease or sublease for such Property (a copy of which shall be provided to the Purchasers within ten (10) days of the date of execution thereof by the Company), the Company shall, with respect to each Property leased or subleased by the Company or an Affiliate of the Company during such Revenue Share Period, pay to each Purchaser such Purchaser’s pro rata percentage (as set forth on the signature page hereto executed by such Purchaser) of the Applicable Percentage (as defined below) of the Quarterly Net Rental Revenues (as defined below) received by the Company or any Affiliate thereof with respect to such Property during such Revenue Share Period. Within ten (10) days of the last Business Day of each Revenue Share Period that ends prior to the consummation of the IPO, or within ten (10) days of the date of the filing by the Company of its Quarterly Report on Form 10-Q for each Revenue Share Period that ends after consummation of the IPO, the Company shall deliver to each Purchaser an officer’s certificate certified by the Chief Financial Officer of the Company (a “Revenue Share Certificate”) that sets forth with respect to each Property (i) the Quarterly Net Rental Revenues received by the Company and each Affiliate of the Company in respect of such Property during the immediately preceding Revenue Share Period, (ii) the amount that is equal to the Applicable Percentage of the Quarterly Net Rental Revenues in respect of such Property (such amount, the “Revenue Share”) for such immediately preceding Revenue Share Period, and (iii) such Purchaser’s pro rata percentage of such Revenue Share (the “Payment Amount”), which certificate shall set forth, with respect to each Property in respect of which the Company or an Affiliate of the Company received revenues, the basis for the Company’s calculation of such Quarterly Net Rental Revenues, such Revenue Share and the Payment Amount and which certificate shall have annexed thereto copies of the bank statements covering such immediately preceding Revenue Share Period for each account of the Company or an Affiliate of the Company into which any revenues generated by a Property during such Revenue Share Period were deposited during such Revenue Share Period. The Company shall pay to each Purchaser such Purchaser’s Payment Amount for a Revenue Share Period for each Property within two (2) Business Days of the date of delivery to such Purchaser of the applicable Revenue Share Certificate for such Revenue Share Period by wire transfer of immediately available funds to such account as such Purchaser shall have directed in writing. If the Company fails to pay any Payment Amount within five (5) Business Days of the date due hereunder, such Payment Amount shall be increased to an amount equal to 130% of such Payment Amount and such increased Payment Amount shall accrue interest daily from the date due until the date paid at a rate equal to 2.0% per month (24% per annum) calculated on the basis of a 360-day year consisting of twelve 30-day periods. For purposes of this Section 5.1, the term “Applicable Percentage” shall mean, (i) with respect to the Tillary Property, for each of the first twenty (20) Revenue Share Periods for such Property, ten percent (10%), and for each other Revenue Share Period, one percent (1%), and (ii) with respect to each other Property, for each of the first twenty (20) Revenue Share Periods for such Property, seven and one-half percent (7.5%), and for each other Revenue Share Period, one percent (1%), the term “Original Lease Term” shall mean, with respect to a Property, the term of the original lease of the Company or an Affiliate of the Company relating to such Property, including all extensions thereof, and the term “Quarterly Net Rental Revenues” shall mean, with respect to a Property and a Revenue Share Period, the gross rental revenues received by the Company and its Affiliates during such Revenue Share Period from the lease of accommodation units at such Property, as determined in accordance with GAAP, net of any lease refunds during such Revenue Share Period as so determined.
(b) If the lease or sublease of the Company or any Affiliate of the Company with respect to any Property is terminated prior to the end of the Original Lease Term of such Property, or any Property is permanently closed for business prior to the end of the Original Lease Term of such Property, the Company shall, within thirty (30) days of such termination or closure, designate another hotel property of similar size and location that is reasonably acceptable to the Purchasers to be designated as a Property for purposes of this Agreement (each, a “Replacement Property”), and the provisions of Section 5.1(a) above and 5.1(c) below shall apply to such Replacement Property until the end of the Original Lease Term of the Property being replaced.
(c) The obligations of the Company to pay the Payment Amounts and interest, if any, thereon pursuant to Section 5.1(a) shall be secured by the Security Agreement as set forth therein.
(d) If the Closing for the second Tranche is effected pursuant to Section 2.1 and the Company or an Affiliate of the Company enters into a lease or sublease for the Tillary Property without the Purchasers electing to proceed with the Closing for the Third Tranche, the Purchasers shall have the right, exercisable within 180 days of the date on which the Company delivers to the Purchasers a copy of the Tillary lease or sublease, by written notice to the Company, to substitute the Tillary Property for the DC Property for the remainder of the Original Lease Term of the DC Property, in which event the Tillary Property shall become a Property for purposes of this Section 5.1 in lieu of the DC Property, commencing on the first day of the next Revenue Share Period for the DC Property.
(e) The Company shall cause all leases or subleases with respect to a Property or Replacement Property to be in the name of CorpHousing RSL LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (“Leaseco”), and shall cause all revenues received with respect to each Property or Replacement Property to be deposited in a deposit account maintained in the name of Leaseco. The Company shall cause Leaseco to maintain ownership of each lease or sublease of a Property or Replacement Property and shall take all required action to ensure that Leaseco does not sell, assign or otherwise transfer any such lease or sublease without the prior written consent of each Purchaser. Leaseco shall have no commercial operations other than to hold and operate the leases and related operations for each Property or Replacement Property and to receive rental payments and other revenues relating to each Property and Replacement Property.
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(f) In addition to the Notes and Warrants that are issuable to the Purchasers pursuant to Section 2.1 in connection with the Closing of the first Tranche, effective at the Closing of the first Tranche, the Purchasers shall be deemed to have been issued a credit in the aggregate amount of $500,000 (the “Credit”), which can be applied by the Purchasers to obtain from the Company a Revenue Share with respect to any one of the next five hotel properties that are leased or subleased by the Company or an Affiliate of the Company after the date hereof (other than the Behome Property, the DC Property or the Tillary Property) in an amount equal to the Credit Percentage (as defined below) of the Applicable Percentage that would be payable to the Purchasers pursuant to Section 5.1(a) if such hotel property was a Property that had been financed by the Purchasers pursuant to this Agreement. The Company shall forward to the Purchasers a complete copy of the lease or sublease entered into by the Company or an Affiliate of the Company within five (5) Business Days of the date such lease or sublease is executed and delivered by the parties thereto. The Purchasers may elect to apply the Credit with respect to any such hotel property by written notice to the Company within ten (10) Business Days of the date on which the Purchasers are furnished a copy of the lease or sublease for any such hotel property. If the Purchasers elect to apply the Credit with respect to any such hotel property, such hotel property shall be deemed to be a Property for all purposes of this Agreement. For purposes of this Section 5.1, the term “Credit Percentage” means, with respect to any such hotel property, a fraction, the numerator of which is $500,000 and the denominator is the amount of the letter of credit that was posted by the Company or an Affiliate of the Company as a security deposit for the rental payments under the applicable lease or sublease of such hotel property.
ARTICLE VI.
MISCELLANEOUS
6.1 [RESERVED]
6.2 Fees and Expenses. Except as expressly set forth in the Transaction Documents or any other writing to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement; provided that at the Closing the Company shall pay the Purchasers an amount equal to $50,000 for their legal fees (net of any expenses paid in advance). In addition, upon the request of any Purchaser, the Company shall pay each Purchaser’s reasonable legal fees and expenses incident to the negotiation, preparation, execution, delivery and performance of any document or agreement to be delivered by the Company and such Purchaser in respect of the Securities or the Transaction Documents following the Closing. The Company shall pay all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company and any conversion notice delivered by a Purchaser), stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers.
6.3 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
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6.4 Notices. Any and all notices or other communications or deliveries to be provided by a party hereunder shall be in writing and delivered personally, by email (with a copy by a nationally recognized overnight courier, signature required), or sent by a nationally recognized overnight courier service, signature required, addressed to the receiving party at the email or physical address set forth on the Signature Page hereto. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via email at the email address set forth on the signature pages to the Exchange Agreement prior to 12:00 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via email at the email address set forth on the signature pages to the Exchange Agreement on a day that is not a Trading Day or later than 12:00 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, signature required or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.
6.5 Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchasers holding at least 67% in interest of the Securities then outstanding or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.
6.6 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
6.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”
6.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.10 and this Section 6.8.
6.9 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in New Castle County, State of Delaware. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in New Castle County, State of Delaware for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action, suit or proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under Section 4.10, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
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6.10 Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Securities for a period of twenty-four (24) months thereafter.
6.11 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.
6.12 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
6.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however, that in the case of a rescission of a conversion of the Notes or exercise of the Warrants, the applicable Purchaser shall be required to return any shares of Common Stock subject to any such rescinded conversion notice or exercise notice concurrently with the restoration of such Purchaser’s right to acquire such shares pursuant to such Purchaser’s Notes or Warrants.
6.14 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.
6.15 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.
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6.16 Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.
6.17 Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any claim, action or proceeding that may be brought by any Purchaser in order to enforce any right or remedy under any Transaction Document. Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Purchaser with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by such Purchaser to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at such Purchaser’s election.
6.18 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser has been represented by its own separate legal counsel in its review and negotiation of the Transaction Documents. The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers.
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6.19 Liquidated Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.
6.20 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.
6.21 Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.
6.22 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
(Signature Pages Follow)
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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
CorpHousing Group Inc. | Address for Notice: | ||
2125 Biscayne Blvd., Suite 253 | |||
Miami, Florida 33137 | |||
By: | E-Mail: brian@corphousinggroup.com | ||
Name: Brian Ferdinand | |||
Title: Chief Executive Officer | |||
With a copy to (which shall not constitute notice): | Graubard Miller | ||
425 Lexington Avenue | |||
New York, New York 10174 | |||
Attention: Brian Ross | |||
E-Mail: BRoss@graubard.com |
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
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[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
Name of Purchaser: | Greenle Partners LLC Series Alpha P.S. | |
Signature of Authorized Signatory of Purchaser: | ||
Name of Authorized Signatory: | Alan Uryniak | |
Title of Authorized Signatory: | Manager | |
Email Address of Authorized Signatory: | auryniak@gmail.com | |
Email Addresses for Offering Notices: | jpazdro@egcmllc.com | |
auryniak@gmail.com | ||
ehellige@pryorcashman.com | ||
Address for Notice to Purchaser: | 156 W Saddle River Road | |
Saddle River, New Jersey 07458 |
Address for Delivery of Securities to Purchaser (if not same as address for notice):
Aggregate Subscription Amount: $5,000,000
$5,750,000 aggregate principal amount of Notes (15% OID)
Warrants for a number of shares of Common Stock set forth in the form of Warrant attached hereto as Exhibit B at an exercise price set forth in such form of Warrant.
Pro Rata Percentage of Revenue Share: 100%
First Closing: Subscription Amount: $700,000
$805,000 aggregate principal amount of Notes
Warrants for a number of shares of Common Stock set forth in the form of Warrant attached hereto as Exhibit B at an exercise price set forth in such form of Warrant.
Pro Rata Percentage of Revenue Share: 100%
Second Closing: Subscription Amount: $1,000,000
$1,150,000 aggregate principal amount of Notes
Warrants for a number of shares of Common Stock set forth in the form of Warrant attached hereto as Exhibit B at an exercise price set forth in such form of Warrant.
Pro Rata Percentage of Revenue Share: 100%
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Third Closing: Subscription Amount: $700,000
$805,000 aggregate principal amount of Notes
Warrants for a number of shares of Common Stock set forth in the form of Warrant attached hereto as Exhibit B at an exercise price set forth in such form of Warrant.
Pro Rata Percentage of Revenue Share: 100%
EIN Number: |
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COMPANY DISCLOSURE SCHEDULES
Schedule 3.1(d)
Under the terms of the leases for the Company’s accommodation units, assignment of such leases, including by operation of law (including specially any mortgaging, placing of liens, etc.) are prohibited without the consent of the landlords party thereto. Accordingly, the granting of security interests as prescribed by this Purchase Agreement and the other agreements contemplated hereby would violate such provisions.
Schedule 3.1(i)
SuperLuxMia LLC, an entity owned and controlled by Brian Ferdinand, purchased notes and warrants from the Company for gross proceeds of approximately $600,000 as additional issuances of 2022 Insider Bridge Financing as defined in the Registration Statement.
Exhibit 10.16
THIS NOTE HAS BEEN ISSUED WITH “ORIGINAL ISSUE DISCOUNT” FOR U.S. FEDERAL INCOME TAX PURPOSES. THE ISSUER OF THIS NOTE WILL MAKE AVAILABLE TO ANY HOLDER OF THIS NOTE: (1) THE ISSUE PRICE AND ISSUE DATE OF THE NOTE, (2) THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THE NOTE, (3) THE YIELD TO MATURITY OF THE NOTE, AND (4) ANY OTHER INFORMATION REQUIRED TO BE MADE AVAILABLE BY U.S. TREASURY REGULATIONS UPON RECEIVING A WRITTEN REQUEST FOR SUCH INFORMATION AT THE FOLLOWING ADDRESS: 2125 BISCAYNE BLVD., SUITE 253, MIAMI, FLORIDA 33137.
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
Dated as of: | May 27, 2022 | Purchase Price: | $ | |||
Maturity Date: | May 27, 2023 | Original Issue Discount: | $ | |||
Interest Rate: | 5% | Original Principal Amount: | $ |
15% OID SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
DUE MAY 27, 2023
THIS 15% OID SENIOR CONVERTIBLE PROMISSORY NOTE is one of a series of duly authorized and validly issued 15% OID Senior Secured Convertible Promissory Notes of CorpHousing Group Inc., a Delaware corporation (the “Company”), having its principal place of business at 2125 Biscayne Boulevard, Suite 253, Miami, Florida 33137, designated as its 15% OID Senior Convertible Promissory Notes (this Note, the “Note” and, collectively with the other Notes of such series, the “Notes”).
FOR VALUE RECEIVED, the Company hereby promises to pay to the order of Greenle Partners LLC Series Alpha P.S. or its registered assigns or successors-in-interest (the “Holder”), or shall have paid pursuant to the terms hereunder, an amount equal to 115% of the principal amount set forth above on May 27, 2023 (the “Maturity Date”) or such earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof.
This Note is being issued pursuant to that Securities Purchase Agreement dated as of May 27, 2022 and amended as of June 30, 2022 (the “Purchase Agreement”) between the Company and the Holder (defined below) and the other purchasers, if any, of the Notes.
This Note is subject to the following additional provisions:
1. Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Note, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:
“Alternate Consideration” shall have the meaning set forth in Section 5(e).
“Bankruptcy Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
“Base Conversion Price” shall have the meaning set forth in Section 5(b).
“Beneficial Ownership Limitation” shall have the meaning set forth in Section 4(d).
“Change of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 49% of the voting securities of the Company (other than by means of conversion or exercise of the Notes and the Securities issued together with the Notes), (b) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the Company or the successor entity of such transaction, (c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a three-year period of more than one-half of the members of the Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the Original Issue Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.
“Conversion” shall have the meaning ascribed to such term in Section 4.
“Conversion Date” shall have the meaning set forth in Section 4(a).
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“Conversion Price” shall have the meaning set forth in Section 4(b).
“Conversion Schedule” means the Conversion Schedule in the form of Schedule 1 attached hereto.
“Conversion Shares” means, collectively, the shares of Common Stock (or if units consisting of Common Stock and warrants are sold in the IPO, the securities comprising such units) issuable upon conversion of this Note in accordance with the terms hereof.
“Delaware Courts” shall have the meaning set forth in Section 7(d).
“Dilutive Issuance” shall have the meaning set forth in Section 5(b).
“Dilutive Issuance Notice” shall have the meaning set forth in Section 5(b).
“Event of Default” shall have the meaning set forth in Section 6(a).
“Fundamental Transaction” shall have the meaning set forth in Section 5(e).
“IPO” means the consummation of the first underwritten public offering of Common Stock under the Securities Act.
“June Purchase Agreement” means the Securities Purchase Agreement dated as of June __, 2022 between the Company and Greenle Partners LLC Series Alpha P.S. and the other purchasers, if any, of the Other Notes.
“Late Fees” shall have the meaning set forth in Section 2(c).
“Mandatory Default Amount” means the payment of 130% of the outstanding principal amount of this Note and accrued and unpaid interest hereon, in addition to the payment of all other amounts, costs, expenses and liquidated damages due in respect of this Note.
“Note Register” shall have the meaning set forth in Section 2(b).
“Notice of Conversion” shall have the meaning set forth in Section 4(a).
“Original Issue Date” means the date of the first issuance of the Notes, regardless of any transfers of any Note and regardless of the number of instruments which may be issued to evidence such Notes.
“Other Notes” means the Series B 15% OID Senior Secured Convertible Promissory Notes of the Company issued pursuant to the June Purchase Agreement and any notes issued upon registration of transfer thereof or in exchange therefor.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Share Delivery Date” shall have the meaning set forth in Section 4(c)(ii).
“Successor Entity” shall have the meaning set forth in Section 5(e).
“Trading Market” means any of the following markets or exchanges on which the Common Stock (or any other common stock of any other Person that references the Trading Market for its common stock) is listed or quoted for trading on the date in question: The NASDAQ Global Market, The NASDAQ Global Select Market, The NASDAQ Capital Market, the New York Stock Exchange, NYSE Arca, the NYSE American, the OTCQX Marketplace, the OTCQB Marketplace, the OTC Pink Marketplace or any other tier operated by OTC Markets Group Inc. (or any successor to any of the foregoing).
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2. Interest and Prepayments.
(a) Payment of Interest in Cash. The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note at the rate of five percent (5%) per annum. All interest payments hereunder will be payable in cash. Accrued and unpaid interest shall be due on payable on the Maturity Date, or as otherwise set forth herein.
(b) Interest Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made. Interest hereunder will be paid to the Person in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note (the “Note Register”).
(c) Late Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law (the “Late Fees”) which shall accrue daily from the date such interest is due hereunder through and including the date of actual payment in full.
(d) Prepayment. This Note may be prepaid by the Company in whole or in part at any time or from time to time, upon at least five (5) Business Days prior written notice to the Holder, during which period Holder shall have the opportunity to convert this Note pursuant to Section 4 hereof and which notice period may be waived by the Holder. If the Company exercises its right to prepay this Note at any time, the Company shall make payment to the Holder within three (3) Business Days after such five (5) Business Day period of an amount in cash equal to the sum of the then outstanding principal amount of this Note and accrued interest thereon, plus a prepayment premium equal to (i) 30% of the principal amount of this Note to be prepaid if such prepayment is prior to the IPO or (ii) 15% of the principal amount of this Note to be prepaid if such prepayment is following the IPO.
(e) Prepayment Upon Qualified Financing. If the Company completes a Qualified Financing (as defined below), the Company shall, at the request of the Holder made in writing to the Company no later than seven (7) Business Days following consummation of the Qualified Financing, repay up to fifty percent (50%) of the then-outstanding principal amount of this Note and any accrued but unpaid interest, plus an amount equal to the applicable prepayment premium on the date of such repayment; provided, however, that the Company shall not be obligated to repay an aggregate principal amount of Notes or Other Notes out of the proceeds of a Qualified Financing that is more than the greater of (i) $2,500,000, or (ii) an amount equal to fifty percent (50%) of the aggregate Subscription Amount paid by all Holders of Notes and holders of Other Notes under this Agreement and the June Purchase Agreement (the “Maximum Repayment Amount”). If, with respect to a Qualified Offering, the Company receives requests for the repayment of an aggregate principal amount of Notes and Other Notes that is greater than the Maximum Repayment Amount, the Company shall be required to pay to each holder of Notes or Other Notes that has requested repayment, including the Holder, such holder’s pro rata portion of the Maximum Repayment Amount based upon the principal amount of Notes and Other Notes held by each such holder relative to the aggregate principal amount of Notes and Other Notes held by all such holders. Such repayment shall be due within three (3) Business Days of the Company’s receipt of such written request. The Company shall give written notice to Holder (i) of a proposed Qualified Offering as soon as practicable, but in no event less than seven (7) Business Days before the anticipated closing date of such Qualified Financing, and (ii) of the closing of a Qualified Offering within one (1) Business Day of the consummation of a Qualified Offering, during which periods Holder shall have the opportunity to convert this Note pursuant to Section 4 hereof. The term “Qualified Financing” shall mean that the Company issues and sells shares of its equity or debt securities to investors on or before the Maturity Date in a financing with total gross proceeds to the Company of not less than $10,000,000 (excluding the conversion of the notes or other convertible securities issued for capital raising purposes).
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3. Registration of Transfers and Exchanges.
(a) Different Denominations. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.
(b) Investment Representations. This Note has been issued subject to certain investment representations of the original Holder set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations.
(c) Reliance on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.
4. Conversion.
(a) Voluntary Conversion. This Note shall be convertible, in whole or in part, into shares of Common Stock, or if units of Common Stock and warrants are sold by the Company in the IPO, into identical units of Common Stock and warrants, at the option of the Holder, at any time and from time to time following the closing of the IPO (subject to the conversion limitations set forth in Section 4(d) hereof); provided, however, that if the Company elects to prepay this Note in whole or in part at any time prior to the closing of the IPO, the Holder of this Note may elect to convert the amount to be paid by the Company in respect of such prepayment into shares of Common Stock at any time prior to the payment of such prepayment amount. The Holder shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”), specifying therein the principal amount of this Note to be converted, accrued and unpaid interest outstanding under this Note to be converted, and the date on which such conversion shall be effected (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder. No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required. To effect conversions hereunder, the Holder shall not be required to physically surrender this Note to the Company unless the entire principal amount of this Note, plus all accrued and unpaid interest thereon, has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Note in an amount equal to the applicable conversion. The Holder and the Company shall maintain a Conversion Schedule showing the principal amount(s) converted, the corresponding paydown of interest and the date of such conversion(s). The Company may deliver an objection to any Notice of Conversion within three (3) Business Days of delivery of such Notice of Conversion. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The Holder, and any assignee by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note may be less than the amount stated on the face hereof.
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(b) Conversion Price. The conversion price in effect on any Conversion Date shall initially be equal to (i) if such Conversion Date is following the closing of the IPO, an amount equal to seventy-five percent of the price per share or price per unit at which Common Stock or units of Common Stock and warrants is sold in the IPO, or (ii) if such Conversion Date is prior to the closing of the IPO, an amount equal to the value of a share of Common Stock on such Conversion Date determined as the quotient of an assumed $75 million valuation of the Company divided by the number of outstanding shares of Common Stock on a fully-diluted basis on such date assuming the conversion or exercise of all securities that are convertible into, or exercisable to purchase, shares of Common Stock (the “Conversion Price”).
(c) Mechanics of Conversion.
i. Conversion Shares Issuable Upon Conversion of Principal Amount, Interest and Mandatory Default Amount. The number of Conversion Shares issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note to be converted and any accrued and unpaid interest to be converted, which amount may include the Mandatory Default Amount, by (y) the Conversion Price.
ii. Delivery of Certificate Upon Conversion. Not later than three (3) Trading Days after each Conversion Date (the “Share Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder (A) a certificate or certificates representing the Conversion Shares which, on or after the date on which such Conversion Shares are eligible to be sold under Rule 144 without the need for current public information and the Company has received an opinion of counsel to such effect reasonably acceptable to the Company, shall be free of restrictive legends and trading restrictions (other than those which may then be required by the Purchase Agreement) representing the number of Conversion Shares being acquired upon the conversion of this Note, and (B) a bank check in the amount of accrued and unpaid interest (if the Company has elected or is required to pay accrued interest in cash). All certificate or certificates required to be delivered by the Company under this Section 4(c) shall be delivered electronically through the Depository Trust Company or another established clearing corporation performing similar functions, if available, or physical certificates if not available. If the Conversion Date is prior to the date on which such Conversion Shares are eligible to be sold under Rule 144 without the need for current public information the Conversion Shares shall bear a restrictive legend in the following form, as appropriate:
“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
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iii. Failure to Deliver Certificates. If, in the case of any Notice of Conversion, such certificate or certificates are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Company at any time on or before its receipt of such certificate or certificates, to rescind such Conversion, in which event the Company shall promptly return to the Holder any original Note delivered to the Company and the Holder shall promptly return to the Company the Common Stock certificates issued to such Holder pursuant to the rescinded Conversion Notice. Notwithstanding the obligations of the Company contained in Section 4(c) to deliver share certificates, any requirement to deliver share certificates shall be remedied by recording share issuances in favor of the Holder in book entry form and delivery to the Holder of written evidence of such share issuances.
iv. Obligation Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares upon conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 6 hereof for the Company’s failure to deliver Conversion Shares within the period specified herein and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.
vi. Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock a number of shares of Common Stock at least equal to the Required Minimum (as defined in the Purchase Agreement) for the sole purpose of issuance upon conversion of this Note and payment of interest on this Note, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Notes), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion of the then outstanding principal amount of this Note and payment of interest hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.
vii. Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Note. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Company shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.
viii. Transfer Taxes and Expenses. The issuance of certificates for shares of the Common Stock on conversion of this Note shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that, the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Note so converted and the Company shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Conversion.
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(d) Holder’s Conversion Limitations. The Company shall not effect any conversion of principal and/or interest of this Note, and a Holder shall not have the right to convert any principal and/or interest of this Note, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any Persons acting as a group together with the Holder or any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted principal amount of this Note beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other Notes or the Warrants) beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 4(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 4(d) applies, the determination of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which principal amount of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination of whether this Note may be converted (in relation to other securities owned by the Holder together with any Affiliates) and which principal amount of this Note is convertible, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 4(d), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Note held by the Holder. The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 4(d), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Note held by the Holder and the Beneficial Ownership Limitation provisions of this Section 4(d) shall continue to apply. Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company. The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Note.
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5. Certain Adjustments.
(a) Stock Dividends and Stock Splits. If the Company, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of, or payment of interest on, the Notes), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
(b) Subsequent Equity Sales. If, at any time while this Note is outstanding, the Company or any Subsidiary, as applicable, sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced to equal the Base Conversion Price. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no adjustment will be made under this Section 5(b) in respect of an Exempt Issuance. The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 5(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion.
(c) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 5 above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
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(d) Pro Rata Distributions. During such time as this Note is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Note, then, in each such case, upon conversion of this Note, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
(e) Fundamental Transaction. If, at any time while this Note is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent conversion of this Note, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 4(d) on the conversion of this Note), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Note is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 4(d) on the conversion of this Note). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Note following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Note and the other Transaction Documents (as defined in the Purchase Agreement) in accordance with the provisions of this Section 5(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Note, deliver to the Holder in exchange for this Note a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Note which is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Note (without regard to any limitations on the conversion of this Note) prior to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Note immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.
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(f) Calculations. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.
(g) Notice to the Holder.
i. Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Note Register, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to convert this Note during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
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(h) Adjustment for More Favorable Terms Contained in Future Financings. So long as this Note is outstanding, upon any issuance by the Company or any of its subsidiaries of any security or debt instrument, including any convertible debt security (whether such debt begins with a convertible feature or such feature is added at a later date) or other Common Stock Equivalents, with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Holder in this Note, then the Company shall notify the Holder of such additional or more favorable term and such term, at the Holder’s option, shall become a part of this Note and its supporting documentation. The types of terms contained in the other security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, conversion look back periods, interest rates, original issue discount percentages and warrant coverage.
6. Events of Default.
(a) “Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
i. any default in the payment of (A) the principal amount of any Note or (B) interest, liquidated damages and other amounts owing to a Holder on any Note, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within five (5) Trading Days;
ii. the Company shall materially fail to observe or perform any other covenant or agreement contained in the Notes (other than a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed in clause (ix) below) which failure is not cured, if possible to cure, within the earlier to occur of (A) seven (7) Trading Days after notice of such failure sent by the Holder or by any other Holder to the Company and (B) ten (10) Trading Days after the Company has become or should have reasonably become aware of such failure;
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iii. the Company shall materially fail to observe or perform any other covenant or agreement contained in, or a default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument) shall occur under the specific terms of, any of the other Transaction Documents which failure is not cured, if possible to cure, within the earlier to occur of (A) five (5) Trading Days after notice of such failure sent by the Holder or by any other Holder to the Company and (B) ten (10) Trading Days after the Company has become or should have become aware of such failure;
iv. any representation or warranty made in this Note, any other Transaction Documents, any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to the Holder shall be untrue or incorrect in any material respect as of the date when made or deemed made;
v. the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy Event;
vii. following the IPO, the Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible to resume listing or quotation for trading thereon within twenty-one Trading Days or the transfer of shares of Common Stock through the Depository Trust Company System is no longer available for twenty-one Trading Days;
viii. the Company shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose of all or in excess of 33% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change of Control Transaction);
ix. the Company shall fail for any reason to deliver certificates to a Holder prior to the third Trading Day after a Conversion Date pursuant to Section 4(c) or the Company shall provide at any time notice to the Holder, including by way of public announcement, of the Company’s intention to not honor requests for conversions of any Notes in accordance with the terms hereof;
x. following the IPO, the Company fails to file with the Commission, subject to any extension permitted by Commission regulations, including Rule 12b-25 under the Exchange Act, any required reports under Section 13 or 15(d) of the Exchange Act such that it is not in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable);
xi. if the Company or any Significant Subsidiary shall: (i) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator of it or any of its properties, (ii) make a general assignment for the benefit of creditors, (iii) be adjudicated a bankrupt or insolvent or be the subject of an order for relief under Title 11 of the United States Code or any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute of any other jurisdiction or foreign country, or (iv) file a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or an arrangement with creditors or to take advantage or any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law, or (v) take or permit to be taken any action in furtherance of or for the purpose of effecting any of the foregoing;
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xii. if any order, judgment or decree shall be entered, without the application, approval or consent of the Company or any Significant Subsidiary, by any court of competent jurisdiction, approving a petition seeking liquidation or reorganization of the Company or any Subsidiary, or appointing a receiver, trustee, custodian or liquidator of the Company or any Subsidiary, or of all or any substantial part of its assets, and such order, judgment or decree shall continue unstayed and in effect for any period of sixty (60) days;
xiii. the occurrence of any levy upon or seizure or attachment of, or any uninsured loss of or damage to, any property of the Company or any Subsidiary having an aggregate fair value or repair cost (as the case may be) in excess of $100,000 individually or in the aggregate, and any such levy, seizure or attachment shall not be set aside, bonded or discharged within thirty (30) days after the date thereof;
xiv. the Company or any subsidiary shall default on any of its obligations under any mortgage(s), credit agreement(s) or other facility, indenture agreement(s), factoring agreement(s) or other instrument(s) under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involve(s) obligations greater than $100,000 in the aggregate, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;
xv. any monetary judgement, writ or similar final process shall be entered or filed after the date hereof against the Company, any subsidiary or any of their respective property or assets for more than $100,000, and such judgement, writ or similar process shall remain unvacated, unbonded or unstayed for a period of 45 calendar days; or
xvi. the Company shall fail to maintain sufficient reserved shares pursuant to Section 4.11 of the Purchase Agreement, subject to a cure period of ten (10) Trading Days.
(b) Remedies Upon Event of Default. Subject to the Beneficial Ownership Limitation as set forth in Section 4(d), if any Event of Default occurs, then the outstanding principal amount of this Note, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount. After the occurrence of any Event of Default that results in the eventual acceleration of this Note, the interest rate on this Note shall accrue at an additional interest rate equal to the lesser of 1.5% per month (18% per annum) or the maximum rate permitted under applicable law. Upon the payment in full of the Note, the Holder shall promptly surrender this Note to or as directed by the Company. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 6(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.
7. Security. This Note is secured by the Security Agreement (as defined in the Purchase Agreement), executed by the Company and its subsidiaries in favor of the Holders encumbering the collateral set forth therein, as more specifically set forth in the Security Agreement, all the terms and conditions of which are hereby incorporated into and made a part of this Note.
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8. Miscellaneous.
(a) Notices. Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, by email, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other facsimile number, email or other address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 7(a). Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, by email or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number, email or other address of the Holder appearing on the books of the Company, or if no such facsimile number, email or other address appears on the books of the Company, at the principal place of business of such Holder, as set forth in the Purchase Agreement, with a copy to counsel of the Holder as set forth in the Purchase Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile or via email prior to 12:00 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile or via email on a day that is not a Trading Day or later than 12:00 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.
(b) Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Company.
(c) Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.
(d) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the federal courts sitting in the State of Delaware (the “Delaware Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Delaware Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such Delaware Courts, or such Delaware Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorney’s fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
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(e) Waiver. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion. Any waiver by the Company or the Holder must be in writing.
(f) Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.
(g) Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Note.
(h) Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.
(i) Headings. The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.
*********************
(Signature Pages Follow)
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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.
CorpHousing Group Inc. | ||
By: | ||
Name: Brian Ferdinand | ||
Title: Chief Executive Officer |
Email address for delivery of Notices: brian@corphousinggroup.com
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ANNEX A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal and interest under the 15% OID Senior Secured Convertible Promissory Notes due May 27, 2023 of CorpHousing Group Inc. (the “Company”), into shares of its common stock (the “Common Stock”), according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.
By the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not exceed the amounts specified under Section 4 of this Note, as determined in accordance with Section 13(d) of the Exchange Act.
The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.
Conversion calculations:
Date to Effect Conversion:______________________________________
Principal Amount of Note to be Converted:________________________
Payment of Interest in Common Stock __ yes __ no
If yes, $_____ of Interest Accrued on Account of Conversion at Issue.
Number of shares of Common Stock to be issued:___________________
__________________________
Signature
__________________________
Name
Delivery Instructions:
__________________________
__________________________
__________________________
__________________________
__________________________
Schedule 1
CONVERSION SCHEDULE
This 15% OID Senior Secured Convertible Promissory Notes due May 27, 2023 in the original principal amount of $________ is issued by CorpHousing Group Inc. (the “Company”). This Conversion Schedule reflects conversions made under Section 4 of the above referenced Note.
Dated:
Date of Conversion (or for first entry, Original Issue Date) |
Amount of Conversion |
Aggregate Principal |
Company Attest |
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Exhibit 10.17
AMENDED AND RESTATED
GUARANTY AND SECURITY AGREEMENT
This AMENDED AND RESTATED GUARANTY AND SECURITY AGREEMENT (this “Security Agreement”) is made as of June 30, 2022, by and among CorpHousing Group Inc., a Delaware corporation (the “Company”), the subsidiaries of the Company named on the signature pages hereto (the “Guarantors” and individually a “Guarantor”), and Greenle Partners LLC Series Alpha P.S. (the “Lender”). The Company and the Guarantors are collectively referred to in this Security Agreement as the “Grantors” and the Grantors and the Lender are collectively referred to in this Security Agreement as the “Parties.”
WHEREAS, the Lender has previously acquired from Evergreen Capital Management LLC (“Evergreen Capital”) a promissory note of the Company dated May 27, 2022 in the original principal amount of $1,750,000 (the “May Note”) issued pursuant to a Securities Purchase Agreement, dated as of May 27, 2022 (the “May Purchase Agreement”), between the Company and Evergreen Capital, that was secured pursuant to the terms of a Guaranty and Security Agreement dated as of May 27, 2022 (the “Original Security Agreement”) among the Company, the Guarantors and Evergreen Capital, which has been assigned by Evergreen Capital to the Lender;
WHEREAS, the Lender has agreed to lend to the Company in one or more tranches up to $5,000,000 (each, a “Loan” and collectively the “Loans”) pursuant to a Securities Purchase Agreement, dated as of even date herewith (the “June Purchase Agreement”), between the Company and the Lender, which Loans shall initially be evidenced by one or more promissory notes issued pursuant to the June Purchase Agreement (the “June Notes” and, together with the May Note and any additional promissory notes that may be issued under the June Purchase Agreement, the “Notes”). Capitalized terms used herein and not otherwise defined herein having the meanings set forth in the June Notes or, if not defined therein, in the June Purchase Agreement;
WHEREAS, as a condition precedent to the Loans and as security for repayment of the Loans upon the terms set forth in the June Notes and the guarantees of the Guarantors hereunder, the Guarantors also agree to guaranty all obligations of the Company under the June Notes and the other obligations of the Company under the Transaction Documents (as defined in the June Purchase Agreement), and the Grantors agree to execute and deliver this Security Agreement to the Lender and hereby to pledge and grant to the Lender a lien on and security interest in all of Grantors’ rights and interest the Pledged Collateral (as defined below), whether now owned or hereafter acquired;
WHEREAS, as an additional condition to the Loans, the Company and the Guarantors agree to amend and restate in its entirety the Original Security Agreement on the terms set forth in this Security Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce the Lender to make the Loans and accept the June Notes, the Parties hereby agree as follows:
SECTION 1. Pledge. Each Grantor hereby pledges and delivers to the Lender and reaffirms its prior pledge and delivery to the Lender, and hereby grants to the Lender and reaffirms it prior grant to the Lender, of a lien on and security interest in all of each Grantor’s right, title, and interest in and with respect to each of the following, whether now owned or hereafter acquired (collectively, the “Pledged Collateral”):
(a) the properties, assets, and rights of the Grantor described in Attachment 1 hereto, wherever located, whether such Grantor now has or hereafter acquires an ownership or other interest or power to transfer; and
(b) to the extent not covered by subsection (a) above, all general intangibles (including causes of action) relating to, and all proceeds of, any or all of the foregoing Pledged Collateral;
provided, however, that if a Document or Instrument (each as defined in Attachment 1 hereto) or other agreement or lease of a Grantor may not be pledged by such Grantor hereunder without the consent or approval of a counterparty thereto, such Document, Instrument, agreement or lease shall not be deemed pledged to the Lender, and the Lender shall not be deemed to have a lien on or a security interest therein, until such consent or approval of such counterparty is obtained, and the Grantors shall use commercially reasonable best efforts to obtain such consent or approval as soon as practicable following the first date on which such Document, Instrument, agreement or lease would otherwise be pledged to the Lender as Pledged Collateral hereunder.
For purposes of this Agreement, “proceeds” includes whatever is receivable or received when Pledged Collateral or proceeds are sold, exchanged, collected, or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes proceeds of any indemnity or guaranty payable to Grantor or the Company from time to time with respect to any of the Pledged Collateral.
SECTION 2. Security for Obligations. This Security Agreement secures the prompt and complete (a) payment of all obligations of the Grantors to the Lender now or hereafter existing under this Security Agreement, the Notes and any and all Transaction Documents (as such term is defined in each of the May Purchase Agreement and the June Purchase Agreement), including, without limitation, the payment of the Revenue Share (as such term is defined in Section 5.1 of each of the May Purchase Agreement and the June Purchase Agreement); and (b) performance and observance by the Grantors of all of their respective covenants and conditions contained in the Transaction Documents (as such term is defined in each of the May Purchase Agreement and the June Purchase Agreement). All such obligations, covenants and conditions described in the immediately preceding clauses (a) and (b), whether for principal, interest, fees, expenses, or otherwise, are hereinafter collectively referred to as the “Obligations.” Upon repayment in full of all of the Obligations other than the Obligations relating to the Revenue Share under the May Purchase Agreement and the June Purchase Agreement (such Obligations, the “Revenue Share Obligations”)), or conversion of 100% of the outstanding Notes into common stock of the Company (as provided in the Notes) or exchange of 100% of the outstanding Notes for shares of preferred stock of the Company as contemplated by the June Purchase Agreement, the Company shall provide the Lender with such amendments or modifications to the UCC Financing Statements filed with respect to the any and all of the Pledged Collateral necessary to amend or modify such UCC Financing Statements to remove from the Pledged Collateral all Pledged Collateral other than (i) the equity interests of the Grantors in CH Revenue Share Lease HoldCo LLC, a Delaware limited liability company (“Lease Holdco”) and (ii) the properties, assets, and rights of Lease Holdco described in Attachment 1 hereto, wherever located, whether Lease Holdco now has or hereafter acquires an ownership or other interest or power to transfer thereof, and all general intangibles (including causes of action) relating to, and all proceeds of, any or all of the foregoing Pledged Collateral (the Pledged Collateral referred to in (i) and (ii), collectively, the “Revenue Share Collateral”), and Lender shall promptly execute and return same to the Company (and in no event less than five business days following receipt of such UCC amendments); provided, that if such UCC amendments are not executed by the Lender and delivered to the Company within such five-day period, the Company shall be entitled to prepare, execute and file same. Upon repayment in full of all of the Obligations including the Revenue Share Obligations, the Company shall provide the Lender with UCC termination statements and other documentation necessary to terminate (the “UCC Terminations”) any UCC Financing Statements filed with respect to any and all Pledged Collateral and Lender shall promptly execute and return same to the Company (and in no event less than five business days following receipt of such UCC Terminations); provided, that if such UCC Terminations are not executed by the Lender and delivered to the Company within such five-day period, the Company shall be entitled to prepare, execute and file same.
AMENDED & RESTATED GUARANTY AND SECURITY AGREEMENT – PAGE 2
For purposes of clarity, in circumstances where all amounts payable under the Notes, including principal thereunder and interest thereon, have been paid by the Company (or converted into common stock or preferred stock of the Company), (a) the pledge and grant by the Grantors to the Lender of a security interest in the Pledged Collateral, other than the Revenue Share Collateral, shall be terminated, and (b) the Company shall be entitled to amend or modify the UCC Financing Statements filed with respect to the Pledged Collateral to remove all Pledged Collateral other than the Revenue Share Collateral, and (c) the Revenue Share Collateral shall thereafter be the only collateral pledged by the Grantors to secure the payment obligations of the Grantors with respect to the Revenue Share Obligations and the obligations of the Grantors under this Security Agreement and the other Transactions Documents.
SECTION 3. UCC Financing Statements on Pledged Collateral. Grantors agree that at any time and from time to time each Grantor will promptly execute and deliver all further instruments, UCC financing statements, and documents, and take all further action that may be reasonably desirable, or that the Lender may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Lender to exercise and enforce its rights and remedies hereunder with respect to any of the Pledged Collateral. Each Grantor shall deliver to Lender within three (3) Business Days of the date of execution of this Security Agreement a form of UCC financing statement(s) prepared by Lender and in form reasonably satisfactory to the Grantor and consistent with this Agreement with respect to the Pledged Collateral, to be filed and recorded by the Lender at its own discretion. Lender may, at any time and from time to time, upon the occurrence and during the continuance of an Event of Default, subject to grace and cure periods under the Notes and a cure period hereunder of fourteen (14) days for the Company or any Guarantor to correct any Default, in order to facilitate the Lender’s exercise of its rights and remedies hereunder, in its discretion and without notice to any Grantor, to transfer to or to register in the name of the Lender or any of its nominees, part or all of the Pledged Collateral.
SECTION 4. Further Assurances; Information; Legending the Certificates. Each Grantor shall cooperate in the completion of, and execute and deliver, any and all notices, forms, schedules or other documents which may be filed by the Lender on its own behalf or on behalf of such Grantor, including any and all required notices or statements, and do or cause to be done all such other acts and things, necessary or, in the opinion of the Lender, advisable, for the disposition of any part of the Pledged Collateral pursuant to applicable law.
SECTION 5. Representations and Warranties. Each Grantor represents and warrants to the Lender that:
(a) No currently effective UCC financing statement covering any of the Pledged Collateral is on file in any public office other than financing statements, if any, related to Permitted Liens (for purposes of this Agreement, “Permitted Liens” means (A) statutory liens of landlords and liens of carriers, warehousemen, bailees, mechanics, materialmen and other like liens imposed by law, created in the ordinary course of business and securing amounts not yet due (or which are being contested in good faith, by appropriate proceedings or other appropriate actions which are sufficient to prevent imminent foreclosure of such liens), and with respect to which adequate reserves or other appropriate provisions are being maintained by a Grantor, (B) deposits made (and the liens thereon) in the ordinary course of business of a Grantor (including, without limitation, security deposits for leases, indemnity bonds, surety bonds and appeal bonds) in connection with workers’ compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, contracts (other than for the repayment or guarantee of borrowed money or purchase money obligations), statutory obligations and other similar obligations arising as a result of progress payments under government contracts, (C) liens for taxes not yet due and payable or which are being contested in good faith and with respect to which adequate reserves are being maintained by a Grantor, (D) purchase money liens relating to the acquisition of equipment, machinery or other goods of a Grantor and (E) liens created by the Original Security Agreement, which liens are reaffirmed pursuant to this Security Agreement (provided, that in the event of any discrepancy between the Original Security Agreement and this Security Agreement, this Security Agreement shall prevail);
AMENDED & RESTATED GUARANTY AND SECURITY AGREEMENT – PAGE 3
(b) Such Grantor is and will remain the legal and beneficial owner of the Pledged Collateral, free of all liens and claims whatsoever, other than Permitted Liens, and with full power and authority to execute this Security Agreement and perform its obligations hereunder, and to subject the Pledged Collateral to the security interest hereunder, except for sales, transfers, dispositions, modifications and amendments, as contemplated by the May Purchase Agreement or the June Purchase Agreement, including dispositions of assets (including leases and lease rights) in the ordinary course of business, and the use of revenue proceeds generated through or from the Pledged Assets in the ordinary course of business;
(c) All information with respect to the Pledged Collateral set forth in any schedule, certificate or other writing at any time hereafter furnished by Grantors to the Lender, and all other written information hereafter furnished by Grantors to the Lender, is and will be true and correct in all material respects as of the date furnished;
(d) The execution and delivery of this Security Agreement and the performance by each Grantor of its obligations hereunder do not and will not contravene or conflict with any provision of presently effective law or of any agreement binding upon such Grantor, and this Security Agreement is a legal, valid and binding obligation of each Grantor, enforceable in accordance with its terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency or similar laws and by general principles of equity; and
(e) For the purposes of notices under this Agreement, the Company and each of the Grantors shall accept notice at the address for notices set forth with the Company’s signature hereto.
(f) The Grantors hereby represent and warrant that (a) set forth on Schedule I hereto is (i) the legal name of each Grantor, (ii) the jurisdiction of incorporation or organization of each Grantor, (iii) the identity or type of organization or corporate structure of each Grantor (iv) the Federal Taxpayer Identification Number and organizational number of each Grantor and (v) the true and correct location of the chief executive office of each Grantor and principal place of business and any office in which each Grantor maintains books of records relating to Collateral owned by it.
SECTION 6. Covenants. During the term of this Security Agreement, each Grantor covenants and agrees with the Lender as follows:
(a) Such Grantor shall give the Lender written notice of any change to the address referenced in Section 5(e);
(b) Such Grantor shall duly fulfill in all material respects all obligations on its part to be fulfilled under or in connection with the Pledged Collateral and shall do nothing to impair in any material respect the rights of the Lender therein;
(c) Following the occurrence and during the continuance of an Event of Default, any proceeds of Pledged Collateral that is not subject to a prior lien, when first received by or on behalf of such Grantor, if so requested by the Lender, shall be deposited by or on behalf of Grantor in the form so received in such account as the Lender shall specify, and until so deposited shall be held in trust for and as the Lender’s property and shall not be commingled with such Grantor’s or any other Person’s other funds or properties;
AMENDED & RESTATED GUARANTY AND SECURITY AGREEMENT – PAGE 4
(d) Such Grantor shall (i) comply in all material respects with all applicable laws with respect to the Pledged Collateral or any part thereof, (ii) pay promptly when due all taxes, assessments and governmental charges or levies imposed upon the Pledged Collateral or in respect of its income or profits therefrom and all claims of any kind which, if unpaid, might by law become a lien upon the Pledged Collateral or in respect of its income or profits therefrom, except that such Grantor shall not be required to pay or discharge any such tax, assessment, charge, or claim which is being contested in good faith and by proper proceedings, and (iii) advise the Lender promptly, in reasonable detail, of any lien or claim made or asserted against any of the Pledged Collateral other than Permitted Liens;
(e) If the validity or priority of this Security Agreement or of any right, title, security interest, or other interest created or evidenced hereby shall be attacked, endangered, or questioned or if any legal proceedings are instituted against such Grantor with respect thereto, such Grantor will give prompt written notice thereof to the Lender and will diligently endeavor to cure any defect that may be developed or claimed, and will take all necessary and proper steps for the defense of such legal proceedings, and the Lender (whether or not named as a party to legal proceedings with respect thereto) is hereby authorized and empowered to take such additional steps as in its judgment and discretion may be necessary or proper for the defense of any such legal proceedings or the protection of the validity or priority of this Security Agreement and the right, title, security interest, and other interests created or evidenced hereby, and all expenses so incurred of every kind and character shall be a demand obligation owing by such Grantor, and the Person incurring such expenses shall be subrogated to all rights of the Person receiving such payment;
(f) Such Grantor will, on request of the Lender, (i) promptly correct any defect, error or omission which may be discovered in the contents of this Security Agreement or in any other instrument executed in connection herewith or in the execution or acknowledgment thereof; (ii) execute, acknowledge, deliver and record or file such further instruments (including further security agreements, financing statements and continuation statements) and do such further acts as may be necessary, desirable or proper to carry out more effectively the purposes of this Security Agreement and such other instruments and to subject to the security interests hereof and thereof any property intended by the terms hereof and thereof to be covered hereby and thereby, including any renewals, additions, substitutions, replacements or appurtenances to the Pledged Collateral; and (iii) execute, acknowledge, deliver, procure and record or file any document or instrument (including any financing statement) deemed advisable by the Lender to protect the security interest hereunder against the rights or interests of third persons;
(g) Such Grantor shall account fully and faithfully for and, if the Lender so elects following the occurrence and during the continuance of an Event of Default, shall promptly pay or turn over to the Lender the proceeds in whatever form received from disposition in any manner of any of the Pledged Collateral. Such Grantor shall keep accurate and complete records of the Pledged Collateral and its proceeds;
(h) From time to time, upon demand of the Lender, such Grantor will keep and stamp or otherwise mark any and all instruments, documents and chattel paper and its individual books and records relating to any of the Pledged Collateral in such a manner as the Lender may reasonably require; and
(i) Such Grantor shall furnish the Lender all such information as the Lender may reasonably request with respect to the Pledged Collateral.
AMENDED & RESTATED GUARANTY AND SECURITY AGREEMENT – PAGE 5
SECTION 7. Voting Rights; Dividends; Etc.
(a) So long as no Event of Default shall have occurred and be continuing:
(i) Each Grantor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Security Agreement or any other Transaction Document; provided, however, that each Grantor shall give the Lender at least five (5) days’ written notice of the manner in which he intends to exercise, or the reasons for refraining from exercising, any voting or other consensual rights pertaining to the Pledged Collateral or any part thereof which may have a material adverse effect on the value of the Pledged Collateral or any part thereof.
(ii) Any and all of the following shall be delivered in the ordinary course and pursuant to the Company’s charter and by-laws:
(A) dividends or interest paid or payable other than in cash in respect of, and instruments and other property received, receivable, or otherwise distributed in respect of, or in exchange for, any Pledged Collateral; and
(B) dividends and other distributions hereafter paid or payable in cash in respect of any Pledged Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus.
(b) Upon the occurrence and during the continuance of an Event of Default:
(i) All rights of each Grantor to exercise the voting and other consensual rights which he would otherwise be entitled to exercise pursuant to Section 7(a)(i) shall cease, and all such rights shall thereupon become vested in the Lender, which shall thereupon have the sole right to exercise such voting and other consensual rights.
(ii) Each Grantor shall execute and deliver (or cause to be executed and delivered to the Lender) all such proxies and other instruments as the Lender may reasonably request for the purpose of enabling the Lender to exercise the voting and other rights which it is entitled to exercise pursuant to Section 7(b)(i) and to receive the dividends or interest payments which it is entitled to receive and retain pursuant to this Section 7.
(iii) Dividends or any other cash distributions received by any Grantor in respect of the Pledged Collateral with the exception of cash distributions received from the Company to satisfy Grantor’s tax obligations due to Company profits and to fulfill Grantor’s covenant of Section 6(d) hereof prior to payment in full of all amounts due and owing under or in connection with the Obligations (including principal, premium, if any, interest, fees and expenses on or in connection with the Obligations) shall be received and held in trust for the Lender, and will be promptly paid over to the Lender in the form received for application to the payment of such obligations until all such Obligations have been paid in full in such manner and order and at such time as the Lender shall select.
SECTION 8. No Transfers and Other Liens. Except as set forth in the May Purchase Agreement, the June Purchase Agreement or this Security Agreement, no Grantor shall sell, exchange or otherwise dispose of, or grant any option, warrant, or other right with respect to or any interest in, any of the Pledged Collateral or create or permit to exist any lien upon or with respect to any of the Pledged Collateral (other than (A) the lien created hereby, (B) Permitted Liens, (C) the transfer of goods, inventory and Collateral in the ordinary course of a Grantor’s business, and (D) transfers to the Company or other subsidiaries of the Company or a Grantor that have pledged their assets as collateral to secure payment of the Secured Obligations.
AMENDED & RESTATED GUARANTY AND SECURITY AGREEMENT – PAGE 6
SECTION 9. The Lender Appointed Attorney-in-Fact. Each Grantor hereby irrevocably appoints the Lender to be Grantor’s attorney-in-fact, with full authority in the place and stead of Grantor and in the name of Grantor, from time to time in the Lender’s discretion, to take any action and to execute any instrument which the Lender may deem necessary or advisable to accomplish the purposes of this Security Agreement, including:
(a) to ask, demand, collect, sue for, recover, compound, receive, and give acquittance and receipts for moneys due and to become due under or in respect of any of the Pledged Collateral;
(b) to receive, endorse and collect any drafts or other instruments, documents, and chattel paper in connection with Section 9(a); and
(c) to file any claims or take any action or institute any proceedings which the Lender may deem necessary or desirable for the collection of any of the Pledged Collateral or otherwise to enforce the rights of the Lender with respect to any of the Pledged Collateral.
SECTION 10. The Lender May Perform. If any Grantor fails to perform any covenant or agreement herein, the Lender may itself perform, or cause performance of, such covenant or agreement, and the expenses of the Lender incurred in connection therewith shall be payable by Grantor.
SECTION 11. Reasonable Care. The Lender shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if the Pledged Collateral is accorded treatment substantially equal to that which the Lender accords its own property, it being understood that the Lender shall not have any responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders, or other matters relative to any Pledged Collateral, whether or not the Lender has or is deemed to have knowledge of such matters, or (b) taking any necessary steps to preserve rights against any Persons with respect to any Pledged Collateral.
SECTION 12. Remedies upon an Event of Default; Recourse Nature of Grantor’s Obligations. If any Event of Default shall have occurred:
(a) The Lender may exercise in respect of the Pledged Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a Lender on default under the UCC, or under the laws of any other applicable jurisdiction, at that time, and the Lender may also, without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker’s board or at any of the Lender’s offices or elsewhere, for cash, on credit, or for future delivery, and upon such other terms as the Lender may deem commercially reasonable. Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days’ notice to Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Lender shall not be obligated to make any sale of Pledged Collateral, regardless of whether notice of sale has been given. The Lender may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. The Lender is authorized to conduct any private sale of the Pledged Collateral or any part thereof in a manner that will not require the Pledged Collateral or any part thereof to be registered under the Securities Act or any other applicable securities laws. In this regard, each Grantor acknowledges and agrees that the Lender may, in its discretion, approach a restricted number of potential purchasers and that a sale under those circumstances may yield a lower price for the Pledged Collateral or any part thereof then would otherwise be obtainable if the sale of the Pledged Collateral or any part thereof were registered under the Securities Act and applicable state securities laws. Each Grantor agrees that (i) if the Lender shall so sell the Pledged Collateral or any part thereof at such a private sale or sales, the Lender shall have the right to rely upon the advice or opinion of any federally registered securities broker or dealer as to the best price reasonably obtainable upon such a private sale and (ii) such reliance shall be conclusive evidence that the Lender handled such matter in a commercially reasonable manner.
AMENDED & RESTATED GUARANTY AND SECURITY AGREEMENT – PAGE 7
(b) In addition to the rights of the Lender under Section 7, any cash held by the Lender as Pledged Collateral and all cash proceeds received by the Lender in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral may, in the discretion of the Lender, be held by the Lender as collateral for, and then or at any time thereafter applied in whole or in part by the Lender against, the Obligations in such order as the Lender shall select. Any surplus of such cash or cash proceeds and interest accrued thereon, if any, held by the Lender and remaining after payment in full of all the Obligations shall be paid over to Grantors, or to whomsoever may be lawfully entitled to receive such surplus, within a reasonable period of time; provided, that the Lender shall have no obligation to invest or otherwise pay interest on any amounts held by it in connection with or pursuant to this Security Agreement.
(c) Without limiting in any manner any of any Grantor’s obligations or any of the Lender's rights under any of the other terms and provisions of this Security Agreement or under any of the terms of the Notes, each Grantor’s liability, and the Lender's recourse to any assets of Grantor other than the Pledged Collateral, upon the occurrence of any Event of Default shall be per the Guaranty between the Lender and Grantors set forth herein.
SECTION 13. Security Interest Absolute. All rights of the Lender hereunder and all obligations of Grantors hereunder, and the security interest created hereunder shall, to the extent permitted by applicable law, be absolute and unconditional, irrespective of:
(a) any lack of validity or enforceability of any of the Transaction Documents;
(b) any change in the time, manner, or place of payment of, or in any other term of, all or any of the Obligations or any other amendment or waiver of or any consent to any departure from any of the Transaction Documents;
(c) any exchange, release, or non-perfection of any collateral standing as security for the Obligations or any liabilities incurred directly or indirectly hereunder or any set-off against any of such liabilities, or any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Obligations; or
(d) any other circumstance which might otherwise constitute a defense available to, or a discharge of, Grantor, or any other Person that is obligated in respect of any of the Obligations.
SECTION 14. Continuing Security Interest; Assignment. This Security Agreement shall create a continuing security interest in the Pledged Collateral and shall (a) be binding upon each Grantor and its executors, trustees, receivers, successors and permitted assigns; and (b) inure to the benefit of and be enforceable by the Lender, and its trustees, receivers, successors and assigns. No Grantor may assign any of its rights or obligations under this Security Agreement without the Lender's prior written consent; and any such purported assignment without such consent shall be void and ineffective.
SECTION 15. Waiver of Marshalling. All rights of marshalling of assets of each Grantor, including any such right with respect to the Pledged Collateral, are hereby waived by Grantors.
AMENDED & RESTATED GUARANTY AND SECURITY AGREEMENT – PAGE 8
SECTION 16. Additional Guarantors. The Company agrees that any Subsidiary (defined below) of the Company that is not already a party to this Agreement shall, within five (5) business days of becoming a Subsidiary, become a Subsidiary Grantor, with the same force and effect as if originally named as Subsidiary Grantor herein, for all purposes of this Agreement by executing and delivering to the Collateral Agent a written supplement substantially in the form of Annex A hereto. The execution and delivery of any instrument adding an additional Subsidiary Grantor as a party to this Agreement shall not require the consent of any other Grantor hereunder. The rights and obligations of each Subsidiary Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Subsidiary Grantor as a party to this Agreement. For purposes of this Section 16, “Subsidiary” means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by the Company.
SECTION 17. No Waiver; Remedies. No failure on the part of the Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.
SECTION 18. GOVERNING LAW. THIS SECURITY AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS SHALL BE DEEMED TO BE CONTRACTS AND AGREEMENTS EXECUTED BY THE PARTIES HERETO UNDER THE LAWS OF THE STATE OF DELAWARE, AND SHALL BE GOVERNED BY, ENFORCED UNDER, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE AND APPLICABLE FEDERAL LAW.
SECTION 19. Notices: Notices, reports, and other communications hereunder shall be in writing, shall be given by personal or courier service or by mail, and shall be deemed to be given and received (i) upon the addressee's receipt if delivered in person or by courier or (ii) upon the earlier of the addressee's receipt and three Business Days following the date such notices, reports, and payments are placed in the United States mail, if properly posted with postage prepaid, by certified mail in an envelope properly addressed, to the addresses denoted under the signatures of the Grantors and the Lender hereto or to such other address as any Party may specify in a written notice to the other Parties in accordance with this Section 19.
SECTION 20. Headings; Certain Terms. The headings in this Security Agreement are for convenience only and are in no way intended to describe, interpret, define, or limit the scope, extent, or intent of this Security Agreement or any provision hereof. In this Security Agreement, (a) “include” and “including” do not signify or imply any limitation, (b) “Section” refers to a Section of this Security Agreement, unless otherwise stated, (c) “hereunder,” “hereof,” “hereto,” and similar terms are references to this Security Agreement as a whole, and not to any particular provision of this Security Agreement, and (d) “UCC” refers to the Uniform Commercial Code in effect in the State of Delaware.
SECTION 21. FINAL AGREEMENT OF THE PARTIES: THIS SECURITY AGREEMENT, TOGETHER WITH THE OTHER TRANSACTION DOCUMENTS (AS SUCH TERM IS DEFINED IN EACH OF THE MAY PURCHASE AGREEMENT AND THE JUNE PURCHASE AGREEMENT, CONSTITUTES THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.
AMENDED & RESTATED GUARANTY AND SECURITY AGREEMENT – PAGE 9
SECTION 22. Guaranty. The Guarantors hereby, jointly and severally, absolutely, irrevocably and unconditionally guarantee the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of the Obligations and the performance of all agreements of the Company now or hereafter existing under the Notes and the other Transaction Documents (as such term is defined in each of the May Purchase Agreement and the June Purchase Agreement), whether for principal, interest, fees, expenses or otherwise. In the event of any failure of the Company to pay or perform when due the Obligations under the Notes and the other Transaction Documents (as such term is defined in each of the May Purchase Agreement and the June Purchase Agreement), the Guarantors will, jointly and severally, immediately pay and perform the same at the time and place, and in the funds and manner, provided for in the applicable Transaction Documents (as such term is defined in each of the May Purchase Agreement and the June Purchase Agreement), without set-off, counterclaim or deduction of any kind.
[Signature Page Follows]
AMENDED & RESTATED GUARANTY AND SECURITY AGREEMENT – PAGE 10
IN WITNESS WHEREOF, the Parties have caused this Security Agreement to be duly executed and delivered as of the date first above written.
LENDER: | |||
Greenle Partners LLC Series Alpha P.S. | |||
By: | |||
Alan Uryniak | |||
Managing Member | |||
156 West Saddle River Road | |||
Saddle River, NJ 07458 |
THE COMPANY: | ||||
CorpHousing Group Inc., | ||||
a Delaware corporation | ||||
By: | ||||
Brian Ferdinand | ||||
Chief Executive Officer | ||||
2125 Biscayne Blvd., Suite 253 | ||||
Miami, Florida 33137 | ||||
GUARANTORS: | ||||
SoBeNY Partners Inc., | ||||
a Delaware corporation | ||||
By: | ||||
Name: | Brian Ferdinand | |||
Title: | Chief Executive Officer of CorpHousing Group Inc., Manager | |||
2125 Biscayne Blvd., Suite 253 | ||||
Miami, Florida 33137 | ||||
LuxUrban RE Holdings LLC, | ||||
a Delaware limited liability company | ||||
By: | ||||
Name: | Brian Ferdinand | |||
Title: | Chief Executive Officer of CorpHousing Group Inc., Manager | |||
2125 Biscayne Blvd., Suite 253 | ||||
Miami, Florida 33137 |
AMENDED & RESTATED GUARANTY AND SECURITY AGREEMENT – PAGE 11
LuxUrban LLC, | ||||
a Delaware limited liability company | ||||
By: | ||||
Name: | Brian Ferdinand | |||
Title: | Chief Executive Officer of CorpHousing Group Inc., Manager | |||
2125 Biscayne Blvd., Suite 253 | ||||
Miami, Florida 33137 | ||||
S-Be Rentals, LLC, | ||||
a Florida limited liability company | ||||
By: | ||||
Name: | Brian Ferdinand | |||
Title: | Chief Executive Officer of CorpHousing Group Inc., Manager | |||
2125 Biscayne Blvd., Suite 253 | ||||
Miami, Florida 33137 | ||||
Corphousing UK Limited, | ||||
a UK private limited company | ||||
By: | ||||
Name: | Brian Ferdinand | |||
Title: | Chief Executive Officer of CorpHousing Group Inc., Manager | |||
2125 Biscayne Blvd., Suite 253 | ||||
Miami, Florida 33137 | ||||
CorpHousing RSL LLC, | ||||
a Delaware limited liability company | ||||
By: | ||||
Name: | Brian Ferdinand | |||
Title: | Chief Executive Officer of CorpHousing Group Inc., Manager | |||
2125 Biscayne Blvd., Suite 253 | ||||
Miami, Florida 33137 |
AMENDED & RESTATED GUARANTY AND SECURITY AGREEMENT – PAGE 12
ATTACHMENT 1
All right, title, interest, claims and demands of each Grantor in and to the following property now held by or hereafter acquired by such Grantor:
1. | All Accounts; |
2. | All Chattel Paper; |
3. | All Deposit Accounts and cash; |
4. | All Documents; |
5. | All General Intangibles; |
6. | All Goods; |
7. | All Instruments; |
8. | All Intellectual Property; |
9. | All Inventory; |
10. | All Investment Property; |
11. | All Unencumbered Equipment; |
12. | All Pledged Equity; and |
13. | All Letter-of-Credit Rights. |
To the extent not otherwise included, all Proceeds and products of any and all of the foregoing, and all accessions to, substitutions and replacements for, and rents and profits of each of the foregoing.
The term “Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.
The term “Intellectual Property” means, with respect to each Grantor, all intellectual and similar property of every kind and nature now owned or hereafter acquired by such Grantor, including inventions, designs, patents (whether registered or unregistered), copyrights (whether registered or unregistered), trademarks (whether registered or unregistered), trade secrets, domain names, confidential or proprietary technical and business information, know-how, methods, processes, drawings, specifications or other data or information and all memoranda, notes and records with respect to any research and development, software and databases and all embodiments or fixations thereof whether in tangible or intangible form or contained on magnetic media readable by machine together with all such magnetic media and related documentation, registrations and franchises, and all additions, improvements and accessions to, and books and records describing or used in connection with, any of the foregoing.
AMENDED & RESTATED GUARANTY AND SECURITY AGREEMENT – PAGE 13
The term “Person” means an individual, corporation, partnership, joint venture, trust, unincorporated organization or other entity of whatever nature.
The term “Pledged Equity” means, with respect to each Grantor, 100% of the issued and outstanding Equity Interests of each Subsidiary that is directly owned by such Grantor, including, without limitation, the Equity Interests of the Subsidiary Grantors, in each case together with the certificates (or other agreements or instruments), if any, representing such shares, and all options and other rights, contractual or otherwise, with respect thereto, including, but not limited to, the following: (a) all Equity Interests representing a dividend thereon, or representing a distribution or return of capital upon or in respect thereof, or resulting from a stock split, revision, reclassification or other exchange therefor, and any subscriptions, warrants, rights or options issued to the holder thereof, or otherwise in respect thereof; and (b) in the event of any consolidation or merger involving the issuer thereof and in which such issuer is not the surviving Person, all shares of each class of the Equity Interests of the successor Person formed by or resulting from such consolidation or merger, to the extent that such successor Person is a direct Subsidiary of such Grantor.
The term “Subsidiary” means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by a Grantor.
All capitalized terms used in this Attachment 1 and not otherwise defined herein, shall have the respective meanings given to such terms in the Uniform Commercial Code of the State of Delaware as in effect from time to time.
AMENDED & RESTATED GUARANTY AND SECURITY AGREEMENT – PAGE 14
SCHEDULE I
TO THE
GUARANTY AND SECURITY AGREEMENT
Legal Name and Address | Jurisdiction
of Incorporation or Organization | Type
of Organization or Corporate Structure | Federal Taxpayer Identification Number and Organizational Identification Number | |||
CorpHousing Group Inc. | Delaware | Corporation | ||||
SoBeNY Partners Inc. | Delaware | Corporation | ||||
LuxUrban RE Holdings LLC | Delaware | Limited Liability Company | ||||
LuxUrban LLC | Delaware | Limited Liability Company | ||||
S-Be Rentals, LLC | Delaware | Limited Liability Company | ||||
Corphousing UK Limited | United Kingdom | Private Limited Company | ||||
CorpHousing RSL LLC | Delaware | Limited Liability Company |
ANNEX A
SUPPLEMENT TO THE AMENDED AND RESTATED
GUARANTY AND SECURITY AGREEMENT
SUPPLEMENT NO. [ ] dated as of [ ], to the Amended and Restated Guaranty and Security Agreement dated as of June 30, 2022 (the “Security Agreement”) by and among CorpHousing Group Inc., a Delaware corporation (the “Company”), each of the subsidiaries of the Company listed on the signature pages thereto or that becomes a party thereto pursuant to Section 16 of the Security Agreement (each such entity being a “Subsidiary Grantor” and collectively, the “Subsidiary Grantors”; the Company and the Subsidiary Grantors are referred to collectively as the “Grantors”), and Greenle Partners LLC Series Alpha P.S. (the “Lender”).
A. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Security Agreement.
B. The Grantors have entered into the Security Agreement in order to induce the Lender to make the Loans to the Company.
C. Section 16 of the Security Agreement provides that each Subsidiary of the Company that is required to become a party to the Security Agreement shall become a Subsidiary Grantor, with the same force and effect as if originally named as a Subsidiary Grantor therein, for all purposes of the Security Agreement upon execution and delivery by such Subsidiary of an instrument in the form of this Supplement. Each undersigned subsidiary (each a “New Grantor”) is executing this Supplement in accordance with the requirements of the Security Agreement to become a Subsidiary Grantor under the Security Agreement in order to induce the Lender to make the Loans.
Accordingly, the Lender and the New Grantors agree as follows:
SECTION 1. In accordance with Section 16 of the Security Agreement, each New Grantor by its signature below becomes a Subsidiary Grantor under the Security Agreement with the same force and effect as if originally named therein as a Subsidiary Grantor and each New Grantor hereby (a) agrees to all the terms and provisions of the Security Agreement applicable to it as a Subsidiary Grantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Subsidiary Grantor thereunder are true and correct on and as of the date hereof. In furtherance of the foregoing, each New Grantor, as security for the payment and performance in full of the Obligations, does hereby bargain, sell, convey, assign, set over, mortgage, pledge, hypothecate and transfer to the Collateral Agent for the benefit of the Lender, and hereby grants to the Lender, a Security Interest in all of the Collateral of such New Grantor, in each case whether now or hereafter existing or in which it now has or hereafter acquires an interest. Each reference to a “Subsidiary Grantor” in the Security Agreement shall be deemed to include each New Grantor. The Security Agreement is hereby incorporated herein by reference.
SECTION 2. Each New Grantor represents and warrants to the Lender that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to the effects of bankruptcy, insolvency or similar laws affecting creditors’ rights generally and general equitable principles.
SECTION 3. This Supplement may be executed by one or more of the parties to this Supplement on any number of separate counterparts (including by facsimile or other electronic transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Supplement signed by all the parties shall be lodged with the Lender and the Company. This Supplement shall become effective as to each New Grantor when the Lender shall have received counterparts of this Supplement that, when taken together, bear the signatures of such New Grantor and the Lender.
A-1
SECTION 4. Such New Grantor hereby represents and warrants that (a) set forth on Schedule I hereto is (i) the legal name of such New Grantor, (ii) the jurisdiction of incorporation or organization of such New Grantor, (iii) the identity or type of organization or corporate structure of such New Grantor (iv) the Federal Taxpayer Identification Number and organizational number of such New Grantor and (v) the true and correct location of the chief executive office and principal place of business and any office in which it maintains books of records relating to Collateral owned by it.
SECTION 5. Except as expressly supplemented hereby, the Security Agreement shall remain in full force and effect.
SECTION 6. This supplement and the rights and obligations of the parties hereunder shall be governed by, and construed and interpreted in accordance with, the laws of the state of Delaware.
SECTION 7. Any provision of this Supplement that 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 hereof and in the Security Agreement, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. The parties hereto shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.
SECTION 8. All notices, requests and demands pursuant hereto shall be made in accordance with the Security Agreement. All communications and notices hereunder to each New Grantor shall be given to it in care of the Company at the Company’s address set forth in the Security Agreement.
IN WITNESS WHEREOF, each New Grantor and the Lender have duly executed this Supplement to the Security Agreement as of the day and year first above written.
[NAME OF NEW GRANTOR] | |||
By: | |||
Name: | |||
Title: | |||
GREENLE PARTNERS LLC SERIES ALPHA P.S. | |||
By: | |||
Name: | |||
Title: |
A-2
SCHEDULE I
TO SUPPLEMENT NO. TO THE AMENDED AND RESTATED
GUARANTY AND SECURITY AGREEMENT
Legal Name and Address | Jurisdiction of Incorporation or Organization | Type of Organization or Corporate Structure | Federal Taxpayer Identification Number and Organizational Identification Number | |||
Exhibit 10.18
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
This Amended and Restated Registration Rights Agreement (this “Agreement”) is made and entered into as of June 30, 2022, between CorpHousing Group Inc., a Delaware corporation (the “Company”), and each of the several purchasers signatory hereto (each such purchaser, a “Purchaser” and, collectively, the “Purchasers”).
This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date hereof, between the Company and each Purchaser (the “June Purchase Agreement”) and amends and restates in its entirety the Registration Rights Agreement dated as of May 27, 2022 between the Company and Evergreen Capital Management LLC (“Evergreen Capital”), the original purchaser of the May Notes (as defined below) that was issued pursuant to the Securities Purchaser Agreement dated as of May 27, 2022 (the “May Purchase Agreement”) between the Company and Evergreen Capital. The May 2022 Note and the rights and obligations of Evergreen Capital under the May Purchase Agreement have been transferred and assigned by Evergreen Capital to Greenle Partners LLC, the original Purchaser that is a signatory hereto.
The Company and each Purchaser hereby agrees as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein that are defined in the June Purchase Agreement shall have the meanings given such terms in the June Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:
“Advice” shall have the meaning set forth in Section 6(c).
“Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of the Notes or the Preferred Shares.
“Effectiveness Date” means, with respect to the Initial Registration Statement required to be filed hereunder, the 60th calendar day following the Filing Date on which the Initial Registration Statement is required to be filed hereunder (or, in the event of a “full review” by the Commission, the 90th calendar day following the Filing Date on which the Initial Registration Statement is required to be filed hereunder) and with respect to any additional Registration Statements which may be required pursuant to Section 2(c) or Section 3(c), the 90th calendar day following the date on which an additional Registration Statement is required to be filed hereunder (or, in the event of a “full review” by the Commission, the 120th calendar day following the date such additional Registration Statement is required to be filed hereunder); provided, however, that in the event the Company is notified by the Commission that one or more of the above Registration Statements will not be reviewed or is no longer subject to further review and comments, the Effectiveness Date as to such Registration Statement shall be the fifth Trading Day following the date on which the Company is so notified if such date precedes the dates otherwise required above, provided, further, if such Effectiveness Date falls on a day that is not a Trading Day, then the Effectiveness Date shall be the next succeeding Trading Day.
“Effectiveness Period” shall have the meaning set forth in Section 2(a).
“Event” shall have the meaning set forth in Section 2(d).
“Event Date” shall have the meaning set forth in Section 2(d).
“Filing Date” means, with respect to the Initial Registration Statement required hereunder, the 30th calendar day following the closing date of the first Qualified Offering consummated by the Company after the date hereof (unless such first Qualified Offering is the IPO and the financial statements included in the final prospectus for the IPO must be updated during such 30-day period in order to file the Initial Registration Statement with the Commission pursuant to the rules and regulations of the Commission, in which case the 10th calendar day following the date the Company files of such updated financial statements with the Commission pursuant to the Exchange Act) and, with respect to any additional Registration Statements which may be required pursuant to Section 2(c) or Section 3(c), the earliest practical date on which the Company is permitted by SEC Guidance to file such additional Registration Statement related to the Registrable Securities.
“Holder” or “Holders” means the holder or holders, as the case may be, from time to time of Registrable Securities.
“Indemnified Party” shall have the meaning set forth in Section 5(c).
“Indemnifying Party” shall have the meaning set forth in Section 5(c).
“Initial Registration Statement” means the initial Registration Statement filed pursuant to this Agreement.
“June Notes” means the senior secured convertible promissory notes of the Company issued pursuant to the June Purchase Agreement, and any such notes issued upon registration of transfer thereof or pursuant thereto or in exchange therefor.
“June Warrants” means the Common Stock purchase warrants of the Company issued pursuant to the June Purchase Agreement, and any such warrants issued upon registration of transfer thereof or pursuant thereto or in exchange therefor.
“Losses” shall have the meaning set forth in Section 5(a).
“May Notes” means the senior secured convertible promissory notes of the Company issued pursuant to the May Purchase Agreement, and any such notes issued upon registration of transfer thereof or pursuant thereto or in exchange therefor.
“May Warrants” means the Common Stock purchase warrants of the Company issued pursuant to the May Purchase Agreement, and any such warrants issued upon registration of transfer thereof or pursuant thereto or in exchange therefor.
“Notes” means, collectively, the May Notes and the June Notes and “Note” means any May Note or June Note.
“Plan of Distribution” shall have the meaning set forth in Section 2(a).
“Prospectus” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated by the Commission pursuant to the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.
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“Qualified Offering” means an offering by the Company in which the Company issues and sells shares of its equity securities or debt to investors on or before the maturity date of the Notes in a financing with total gross proceeds to the Company of not less than $10,000,000 (excluding the conversion of the notes or other convertible securities issued for capital raising purposes).
“Registrable Securities” means, as of any date of determination, (a) all Conversion Shares (assuming on such date the Conversion Shares are converted in full without regard to any conversion limitations in the Notes), (b) all Warrant Shares then issued and issuable upon exercise of the Warrants (assuming on such date the Warrants are exercised in full without regard to any exercise limitations therein), (c) all shares of Common Stock and shares of Common Stock issuable upon the exercise of warrants, if any, issued to the Purchasers upon conversion of the Notes pursuant to Section 4(a) of the Notes, and (d) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing; provided, however, that any such Registrable Securities shall cease to be Registrable Securities (and the Company shall not be required to maintain the effectiveness of any, or file another, Registration Statement hereunder with respect thereto) for so long as (a) a Registration Statement with respect to the sale of such Registrable Securities is declared effective by the Commission under the Securities Act and such Registrable Securities have been disposed of by the Holder in accordance with such effective Registration Statement, (b) such Registrable Securities have been previously sold in accordance with Rule 144, or (c) such securities become eligible for resale without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 as set forth in a written opinion letter to such effect, addressed, delivered and acceptable to the Transfer Agent and the affected Holders (assuming that such securities and any securities issuable upon exercise, conversion or exchange of which, or as a dividend upon which, such securities were issued or are issuable, were at no time held by any Affiliate of the Company, and all Warrants are exercised by “cashless exercise” as provided in Section 2(c) of each of the Warrants), as reasonably determined by the Company, upon the advice of counsel to the Company.
“Registration Statement” means any registration statement required to be filed hereunder pursuant to Section 2(a) and any additional registration statements contemplated by Section 2(c) or Section 3(c), including (in each case) the Prospectus, amendments and supplements to any such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in any such registration statement.
“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Selling Stockholder Questionnaire” shall have the meaning set forth in Section 3(a).
“SEC Guidance” means (i) any publicly-available written or oral guidance of the Commission staff, or any comments, requirements or requests of the Commission staff and (ii) the Securities Act.
“Subscription Amount” means, as to each Holder, the aggregate amount paid for the Notes and Warrants held by such Holder under the May Purchase Agreement or the June Purchase Agreement, as applicable, by the original purchaser(s) of such Notes or Warrants, as set forth on the signature pages of the May Purchase Agreement or the June Purchase Agreement, as applicable.
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“Warrants” means, collectively, the May Warrants and the June Warrants and “Warrant” means any May Warrant or June Warrant.
“Warrant Shares” means, collectively, the shares of Common Stock issuable upon exercise of the Warrants.
2. Shelf Registration.
(a) On or prior to each Filing Date, the Company shall prepare and file with the Commission a Registration Statement covering the resale of all of the Registrable Securities that are not then registered on an effective Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415. Each Registration Statement filed hereunder shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith, subject to the provisions of Section 2(e)) and shall contain (unless otherwise directed by at least 85% in interest of the Holders) substantially the “Plan of Distribution” attached hereto as Annex A and substantially the “Selling Stockholder” section attached hereto as Annex B; provided, however, that no Holder shall be required to be named as an “underwriter” without such Holder’s express prior written consent. Subject to the terms of this Agreement, the Company shall use its commercially reasonable efforts to cause a Registration Statement filed under this Agreement (including, without limitation, under Section 3(c)) to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event no later than the applicable Effectiveness Date, and shall use its commercially reasonable efforts to keep such Registration Statement continuously effective under the Securities Act until the date that is the earlier of (A) the date on which all Registrable Securities covered by such Registration Statement (i) have been sold, thereunder or pursuant to Rule 144, or (ii) may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144, as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the affected Holders, and (B) the third anniversary of the closing date of the first Qualified Offering consummated by the Company after the date hereof (the “Effectiveness Period”). The Company shall telephonically request effectiveness of a Registration Statement as of 5:00 p.m. (New York City time) on a Trading Day. The Company shall immediately notify the Holders via facsimile or by e-mail of the effectiveness of a Registration Statement on the same Trading Day that the Company telephonically confirms effectiveness with the Commission, which shall be the date requested for effectiveness of such Registration Statement. The Company shall, by 9:30 a.m. (New York City time) on the Trading Day after the effective date of such Registration Statement, file a final Prospectus with the Commission as required by Rule 424.
(b) Notwithstanding the registration obligations set forth in Section 2(a), if the Commission informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly inform each of the Holders thereof and use its commercially reasonable efforts to file amendments to the Initial Registration Statement as required by the Commission, covering the maximum number of Registrable Securities permitted to be registered by the Commission, on Form S-3 or such other form available to register for resale the Registrable Securities as a secondary offering, subject to the provisions of Section 2(e); with respect to filing on Form S-3 or other appropriate form, and subject to the provisions of Section 2(d) with respect to the payment of liquidated damages; provided, however, that prior to filing such amendment, the Company shall be obligated to use reasonably diligent efforts to advocate with the Commission for the registration of all of the Registrable Securities in accordance with the SEC Guidance, including without limitation, Compliance and Disclosure Interpretation 612.09.
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(c) Notwithstanding any other provision of this Agreement and subject to the payment of liquidated damages pursuant to Section 2(d), if the Commission or any SEC Guidance sets forth a limitation on the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering (and notwithstanding that the Company used reasonably diligent efforts to advocate with the Commission for the registration of all or a greater portion of Registrable Securities), unless otherwise directed in writing by a Holder as to its Registrable Securities, the number of Registrable Securities to be registered on such Registration Statement will be reduced as follows:
(i) | First, the Company shall reduce or eliminate any securities to be included other than Registrable Securities; |
(ii) | Second, the Company shall reduce Registrable Securities represented by Warrant Shares (applied, in the case that some Warrant Shares may be registered, to the Holders on a pro rata basis based on the total number of unregistered Warrant Shares held by such Holders); and |
(iii) | Third, the Company shall reduce Registrable Securities represented by Conversion Shares (applied, in the case that some Conversion Shares may be registered, to the Holders on a pro rata basis based on the total number of unregistered Conversion Shares held by such Holders). |
In the event of a cutback hereunder, the Company shall give the Holder at least five (5) Trading Days prior written notice along with the calculations as to such Holder’s allotment. In the event the Company amends the Initial Registration Statement in accordance with the foregoing, the Company will use its commercially reasonable efforts to file with the Commission, as promptly as allowed by Commission or SEC Guidance provided to the Company or to registrants of securities in general, one or more registration statements on Form S-3 or such other form available to register for resale those Registrable Securities that were not registered for resale on the Initial Registration Statement, as amended.
(d) If: (i) the Initial Registration Statement is not filed on or prior to its Filing Date or if the Company files the Initial Registration Statement without affording the Holders the opportunity to review and comment on the same as required by Section 3(a) herein, or (ii) the Company fails to file with the Commission a request for acceleration of a Registration Statement in accordance with Rule 461 promulgated by the Commission pursuant to the Securities Act, within five Trading Days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that such Registration Statement will not be “reviewed” or will not be subject to further review, or (iii) prior to the effective date of a Registration Statement, the Company fails to file a pre-effective amendment and otherwise respond in writing to comments made by the Commission in respect of such Registration Statement within ten (10) calendar days after the receipt of comments by or notice from the Commission that such amendment is required in order for such Registration Statement to be declared effective, or (iv) a Registration Statement registering for resale all of the Registrable Securities is not declared effective by the Commission by the Effectiveness Date of the Initial Registration Statement, or (v) after the effective date of a Registration Statement, such Registration Statement ceases for any reason to remain continuously effective as to all Registrable Securities included in such Registration Statement, or the Holders are otherwise not permitted to utilize the Prospectus therein to resell such Registrable Securities, for more than ten (10) consecutive calendar days or more than an aggregate of fifteen (15) calendar days (which need not be consecutive calendar days) during any 12-month period (any such failure or breach being referred to as an “Event”, and for purposes of clauses (i) and (iv), the date on which such Event occurs, and for purpose of clause (ii) the date on which such five (5) Trading Day period is exceeded, and for purpose of clause (iii) the date which such ten (10) calendar day period is exceeded, and for purpose of clause (v) the date on which such ten (10) or fifteen (15) calendar day period, as applicable, is exceeded being referred to as “Event Date”), then, in addition to any other rights the Holders may have hereunder or under applicable law, on each such Event Date and on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the applicable Event is cured, the Company shall pay to each Holder an amount in cash, as partial liquidated damages and not as a penalty, equal to the product of 2.0% multiplied by the aggregate Subscription Amount paid by such Holder pursuant to the Purchase Agreements, up to an aggregate of 18% of the aggregate Subscription Amount paid by such Holder pursuant to the Purchase Agreements for all such liquidated damages. If the Company fails to pay any partial liquidated damages pursuant to this Section in full within seven days after the date payable (or notify the Holder its election to accrete such amounts to principal), the Company will pay interest thereon at a rate of 18% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full. The partial liquidated damages pursuant to the terms hereof shall apply on a daily pro rata basis for any portion of a month prior to the cure of an Event.
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(e) If Form S-3 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable Securities on another appropriate form and (ii) undertake to register the Registrable Securities on Form S-3 as soon as such form is available so long as there remain Registrable Securities covered by the original registration statement, provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as a Registration Statement on Form S-3 covering the Registrable Securities has been declared effective by the Commission.
(f) Notwithstanding anything to the contrary contained herein, in no event shall the Company be permitted to name any Holder or affiliate of a Holder as any Underwriter without the prior written consent of such Holder.
3. Registration Procedures. In connection with the Company’s registration obligations hereunder, the Company shall:
(a) Not less than three (3) Trading Days prior to the filing of each Registration Statement and not less than one (1) Trading Day prior to the filing of any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated or deemed to be incorporated therein by reference), the Company shall (i) furnish to each Holder copies of all such documents proposed to be filed, which documents (other than those incorporated or deemed to be incorporated by reference) will be subject to the review of such Holders, and (ii) cause its officers and directors, counsel and independent registered public accountants to respond to such inquiries as shall be reasonably necessary, in the reasonable opinion of respective counsel to each Holder, to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall not file a Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holders of a majority of the Registrable Securities shall reasonably object in good faith, provided that, the Company is notified of such objection in writing no later than three (3) Trading Days after the Holders have been so furnished copies of a Registration Statement or one (1) Trading Day after the Holders have been so furnished copies of any related Prospectus or amendments or supplements thereto. Each Holder agrees to furnish to the Company a completed questionnaire in the form attached to this Agreement as Annex B (a “Selling Stockholder Questionnaire”) on a date that is not less than three (3) Trading Days prior to the Filing Date or by the end of the second (2nd) Trading Day following the date on which such Holder receives draft materials in accordance with this Section.
(b) (i) Prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities, (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424, (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amendment thereto and provide as promptly as reasonably possible to the Holders true and complete copies of all correspondence from and to the Commission relating to a Registration Statement (provided that, the Company shall excise any information contained therein which would constitute material non-public information regarding the Company or any of its Subsidiaries), and (iv) comply in all material respects with the applicable provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by a Registration Statement during the applicable period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holders thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented.
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(c) If during the Effectiveness Period, the number of Registrable Securities at any time exceeds 100% of the number of shares of Common Stock then registered in a Registration Statement, then the Company shall file as soon as reasonably practicable, but in any case prior to the applicable Filing Date, an additional Registration Statement covering the resale by the Holders of not less than the number of such Registrable Securities.
(d) Notify the Holders of Registrable Securities to be sold (which notice shall, pursuant to clauses (iii) through (vi) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible (and, in the case of (i)(A) below, not less than one (1) Trading Day prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one (1) Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement is proposed to be filed, (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement, and (C) with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information, (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose, (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (vi) of the occurrence or existence of any pending corporate development with respect to the Company that the Company believes may be material and that, in the determination of the Company, makes it not in the best interest of the Company to allow continued availability of a Registration Statement or Prospectus; provided, however, that in no event shall any such notice contain any information which would constitute material, non-public information regarding the Company or any of its Subsidiaries.
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(e) Use its commercially reasonable efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order stopping or suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.
(f) Furnish to each Holder, without charge, at least one conformed copy of each such Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference to the extent requested by such Person, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission, provided that any such item which is available on the EDGAR system (or successor thereto) need not be furnished in physical form.
(g) Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the giving of any notice pursuant to Section 3(d).
(h) Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the Registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement, provided that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.
(i) If requested by a Holder, cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by the Purchase Agreement, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holder may request.
(j) Upon the occurrence of any event contemplated by Section 3(d), as promptly as reasonably possible under the circumstances taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event, prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither a Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Holders in accordance with clauses (iii) through (vi) of Section 3(d) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus. The Company will use its commercially reasonable efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company shall be entitled to exercise its right under this Section 3(j) to suspend the availability of a Registration Statement and Prospectus, subject to the payment of partial liquidated damages otherwise required pursuant to Section 2(d), for a period not to exceed 60 calendar days (which need not be consecutive days) in any 12-month period.
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(k) Otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the Commission under the Securities Act and the Exchange Act, including, without limitation, Rule 172 under the Securities Act, file any final Prospectus, including any supplement or amendment thereof, with the Commission pursuant to Rule 424 under the Securities Act, promptly inform the Holders in writing if, at any time during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule 172 and, as a result thereof, the Holders are required to deliver a Prospectus in connection with any disposition of Registrable Securities and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder.
(l) The Company shall use its commercially reasonable efforts to maintain eligibility for use of Form S-3 (or any successor form thereto) for the registration of the resale of Registrable Securities.
(m) The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned by such Holder and, if required by the Commission, the natural persons thereof that have voting and dispositive control over the shares. During any periods that the Company is unable to meet its obligations hereunder with respect to the registration of the Registrable Securities solely because any Holder fails to furnish such information within three Trading Days of the Company’s request, any liquidated damages that are accruing at such time as to such Holder only shall be tolled and any Event that may otherwise occur solely because of such delay shall be suspended as to such Holder only, until such information is delivered to the Company.
4. Registration Expenses. All fees and expenses incident to the performance of or compliance with, this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of the Company’s counsel and independent registered public accountants) (A) with respect to filings made with the Commission, (B) with respect to filings required to be made with any Trading Market on which the Common Stock is then listed for trading, and (C) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Company be responsible for any broker or similar commissions of any Holder or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holders.
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5. Indemnification.
(a) Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, members, partners, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, stockholders, partners, agents and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (2) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement, such Prospectus or in any amendment or supplement thereto (it being understood that the Holder has approved Annex A hereto for this purpose) or (ii) in the case of an occurrence of an event of the type specified in Section 3(d)(iii)-(vi), the use by such Holder of an outdated, defective or otherwise unavailable Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated, defective or otherwise unavailable for use by such Holder and prior to the receipt by such Holder of the Advice contemplated in Section 6(c). The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified person and shall survive the transfer of any Registrable Securities by any of the Holders in accordance with Section 6(f).
(b) Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company expressly for inclusion in such Registration Statement or such Prospectus or (ii) to the extent, but only to the extent, that such information relates to such Holder’s information provided in the Selling Stockholder Questionnaire or the proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement (it being understood that the Holder has approved Annex A hereto for this purpose), such Prospectus or in any amendment or supplement thereto. In no event shall the liability of a selling Holder be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such Holder in connection with any claim relating to this Section 5 and the amount of any damages such Holder has otherwise been required to pay by reason of such untrue statement or omission) received by such Holder upon the sale of the Registrable Securities included in the Registration Statement giving rise to such indemnification obligation.
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(c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof, provided that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have materially and adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses, (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding, or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall reasonably believe that a material conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one separate counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement only consists of monetary remuneration and includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.
Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten Trading Days of written notice thereof to the Indemnifying Party, provided that the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) not to be entitled to indemnification hereunder.
(d) Contribution. If the indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms.
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The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. In no event shall the contribution obligation of a Holder of Registrable Securities be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such Holder in connection with any claim relating to this Section 5 and the amount of any damages such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission) received by it upon the sale of the Registrable Securities giving rise to such contribution obligation.
The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.
6. Miscellaneous.
(a) Remedies. In the event of a breach by the Company or by a Holder of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. Each of the Company and each Holder agrees that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate.
(b) No Piggyback on Registrations; Prohibition on Filing Other Registration Statements. Neither the Company nor any of its security holders may include securities of the Company in any Registration Statements other than the Registrable Securities. The Company shall not file any other registration statements until all Registrable Securities are registered pursuant to a Registration Statement that is declared effective by the Commission, provided that this Section 6(b) shall not prohibit the Company from filing amendments to registration statements filed prior to the date of this Agreement so long as no new securities are registered on any such existing registration statements or from filing a registration statement relating to an offering for its own account under the Securities Act of any of its equity or equity linked securities or securities to be registered on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity or equity linked securities to be issued solely in connection with any acquisition of any entity or business or equity or equity linked securities issuable in connection with stock option or other employee benefit plans.
(c) Discontinued Disposition. By its acquisition of Registrable Securities, each Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(d)(iii) through (vi), such Holder will forthwith discontinue disposition of such Registrable Securities under a Registration Statement until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus (as it may have been supplemented or amended) may be resumed. The Company will use its commercially reasonable efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company agrees and acknowledges that any periods during which the Holder is required to discontinue the disposition of the Registrable Securities hereunder shall be subject to the provisions of Section 2(d).
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(d) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of 67% or more of the then outstanding Registrable Securities (for purposes of clarification, this includes any Registrable Securities issuable upon exercise or conversion of any Security), provided that, if any amendment, modification or waiver disproportionately and adversely impacts a Holder (or group of Holders), the consent of such disproportionately impacted Holder (or group of Holders) shall be required. If a Registration Statement does not register all of the Registrable Securities pursuant to a waiver or amendment done in compliance with the previous sentence, then the number of Registrable Securities to be registered for each Holder shall be reduced pro rata among all Holders and each Holder shall have the right to designate which of its Registrable Securities shall be omitted from such Registration Statement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of a Holder or some Holders and that does not directly or indirectly affect the rights of other Holders may be given only by such Holder or Holders of all of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the first sentence of this Section 6(d). No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration also is offered to all of the parties to this Agreement.
(e) Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the June Purchase Agreement.
(f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign (except by merger) its rights or obligations hereunder without the prior written consent of all of the Holders of the then outstanding Registrable Securities. Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under Section 5.7 of the June Purchase Agreement.
(g) No Inconsistent Agreements. Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Except as set forth on Schedule 6(i), neither the Company nor any of its Subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person that have not been satisfied in full.
(h) Execution and Counterparts. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.
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(i) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be determined in accordance with the provisions of the June Purchase Agreement.
(j) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.
(k) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
(l) Headings. The headings in this Agreement are for convenience only, do not constitute a part of the Agreement and shall not be deemed to limit or affect any of the provisions hereof.
(m) Independent Nature of Holders’ Obligations and Rights. The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Holders are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by this Agreement or any other matters, and the Company acknowledges that the Holders are not acting in concert or as a group, and the Company shall not assert any such claim, with respect to such obligations or transactions. Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose. The use of a single agreement with respect to the obligations of the Company contained was solely in the control of the Company, not the action or decision of any Holder, and was done solely for the convenience of the Company and not because it was required or requested to do so by any Holder. It is expressly understood and agreed that each provision contained in this Agreement is between the Company and a Holder, solely, and not between the Company and the Holders collectively and not between and among Holders.
********************
(Signature Pages Follow)
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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.
CORPHOUSING GROUP INC. | |||
By: | |||
Name: | Brian Ferdinand | ||
Title: | Chief Executive Officer |
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
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[SIGNATURE PAGE OF HOLDERS TO CORPHOUSING RRA]
Name of Holder: Greenle Partners LLC Series Alpha P.S.
_____________________________
Signature of Authorized Signatory of Holder: __________________________
Name of Authorized Signatory: _____________________
Title of Authorized Signatory: ______________________________________
[SIGNATURE PAGES CONTINUE]
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Annex A
Plan of Distribution
Each Selling Stockholder (the “Selling Stockholders”) of the securities and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities covered hereby on the principal Trading Market or any other stock exchange, market or trading facility on which the securities are traded or in private transactions. These sales may be at fixed or negotiated prices. A Selling Stockholder may use any one or more of the following methods when selling securities:
• | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
• | block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
• | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
• | an exchange distribution in accordance with the rules of the applicable exchange; |
• | privately negotiated transactions; |
• | settlement of short sales; |
• | in transactions through broker-dealers that agree with the Selling Stockholders to sell a specified number of such securities at a stipulated price per security; |
• | through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
• | a combination of any such methods of sale; or |
• | any other method permitted pursuant to applicable law. |
The Selling Stockholders may also sell securities under Rule 144 or any other exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), if available, rather than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2121; and in the case of a principal transaction a markup or markdown in compliance with FINRA Rule 2121.
In connection with the sale of the securities or interests therein, the Selling Stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The Selling Stockholders may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The Selling Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
A-1
The Selling Stockholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each Selling Stockholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities.
The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the securities. The Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.
We agreed to keep this prospectus effective until the earlier of (i) the date on which the securities may be resold by the Selling Stockholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for the Company to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the common stock by the Selling Stockholders or any other person. We will make copies of this prospectus available to the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).
A-2
SELLING SHAREHOLDERS
The common stock being offered by the selling shareholders are those previously issued to the selling shareholders, and those issuable to the selling shareholders, upon exercise of the warrants. For additional information regarding the issuances of those shares of common stock and warrants, see “Private Placement of 15% OID Senior Secured Convertible Promissory Notes and Warrants” above. We are registering the shares of common stock in order to permit the selling shareholders to offer the shares for resale from time to time. Except for the ownership of the shares of common stock and the warrants, the selling shareholders have not had any material relationship with us within the past three years.
The table below lists the selling shareholders and other information regarding the beneficial ownership of the shares of common stock by each of the selling shareholders. The second column lists the number of shares of common stock beneficially owned by each selling shareholder, based on its ownership of 15% OID Senior Secured Convertible Promissory Notes and warrants, as of _______, 2022, assuming the conversion of such promissory notes and the exercise of the warrants held by the selling shareholders on that date, without regard to any limitations on exercises.
The third column lists the shares of common stock being offered by this prospectus by the selling shareholders.
In accordance with the terms of a registration rights agreement with the selling shareholders, this prospectus generally covers the resale of the sum of (i) the number of shares of common stock issuable to the selling shareholders upon the conversion or exercise of 15% OID Senior Secured Convertible Promissory Notes and warrants issued as described in the “Private Placement of 15% OID Senior Secured Convertible Promissory Notes and Warrants” described above and (ii) the maximum number of shares of common stock issuable upon exercise of the related warrants, determined as if the outstanding warrants were exercised in full as of the trading day immediately preceding the date this registration statement was initially filed with the SEC, each as of the trading day immediately preceding the applicable date of determination and all subject to adjustment as provided in the registration right agreement, without regard to any limitations on the exercise of the warrants. The fourth column assumes the sale of all of the shares offered by the selling shareholders pursuant to this prospectus.
[Under the terms of the 15% OID Senior Secured Convertible Promissory Notes and the warrants, a selling shareholder may not convert such 15% OID Senior Secured Convertible Promissory Notes or exercise the warrants to the extent such conversion or exercise would cause such selling shareholder, together with its affiliates and attribution parties, to beneficially own a number of shares of common stock which would exceed 4.99% of our then outstanding common stock following such exercise, excluding for purposes of such determination shares of common stock issuable upon conversion of such 15% OID Senior Secured Convertible Promissory Notes or exercise of the warrants which have not been exercised. The number of shares in the second column does not reflect this limitation. The selling shareholders may sell all, some or none of their shares in this offering. See "Plan of Distribution."]
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Name of Selling Shareholder | Number of shares of Common Stock Owned Prior to Offering | Maximum Number of shares of Common Stock to be Sold Pursuant to this Prospectus | Number of shares of Common Stock Owned After Offering | |||
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Annex C
CORPHOUSING GROUP INC.
Selling Stockholder Notice and Questionnaire
The undersigned beneficial owner of common stock (the “Registrable Securities”) of CorpHousing Group Inc., a Delaware corporation (the “Company”), understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “Commission”) a registration statement (the “Registration Statement”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities, in accordance with the terms of the Registration Rights Agreement (the “Registration Rights Agreement”) to which this document is annexed. A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.
Certain legal consequences arise from being named as a selling stockholder in the Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling stockholder in the Registration Statement and the related prospectus.
NOTICE
The undersigned beneficial owner (the “Selling Stockholder”) of Registrable Securities hereby elects to include the Registrable Securities owned by it in the Registration Statement.
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The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate:
QUESTIONNAIRE
1. | Name. |
(a) | Full Legal Name of Selling Stockholder |
(b) | Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities are held: |
(c) | Full Legal Name of Natural Control Person (which means a natural person who directly or indirectly alone or with others has power to vote or dispose of the securities covered by this Questionnaire): |
2. | Address for Notices to Selling Stockholder: |
Telephone: |
Fax: |
Contact Person: |
3. | Broker-Dealer Status: |
(a) | Are you a broker-dealer? |
Yes ¨ No ¨
(b) | If “yes” to Section 3(a), did you receive your Registrable Securities as compensation for investment banking services to the Company? |
Yes ¨ No ¨
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Note: | If “no” to Section 3(b), the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement. |
(c) | Are you an affiliate of a broker-dealer? |
Yes ¨ No ¨
(d) | If you are an affiliate of a broker-dealer, do you certify that you purchased the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities? |
Yes ¨ No ¨
Note: | If “no” to Section 3(d), the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement. |
4. | Beneficial Ownership of Securities of the Company Owned by the Selling Stockholder. |
Except as set forth below in this Item 4, the undersigned is not the beneficial or registered owner of any securities of the Company other than the securities issuable pursuant to the Purchase Agreements.
(a) | Type and Amount of other securities beneficially owned by the Selling Stockholder: |
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5. | Relationships with the Company: |
Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.
State any exceptions here:
The undersigned agrees to promptly notify the Company of any material inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the Registration Statement remains effective; provided, that the undersigned shall not be required to notify the Company of any changes to the number of securities held or owned by the undersigned or its affiliates.
By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items 1 through 5 and the inclusion of such information in the Registration Statement and the related prospectus and any amendments or supplements thereto. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related prospectus and any amendments or supplements thereto.
IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.
Date: | Beneficial Owner: |
By: | |||
Name: | |||
Title: |
PLEASE FAX A COPY (OR EMAIL A .PDF COPY) OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE TO:
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Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We hereby consent to the inclusion in this Offering Statement on Form S-1 of our report dated April 14, 2022, which includes an explanatory paragraph as to the Company’s ability to continue as a going concern, relating to the consolidated financial statements of Corphousing LLC and Affiliate as of and for the years ended December 31, 2021 and 2020. We also consent to the reference to our firm under the heading "Experts" appearing therein.
Grassi & Co., CPAs, P.C.
Jericho, New York
July 11, 2022
Exhibit 107
Calculation of Filing Fees Tables
Form S-1
(Form Type)
CorpHousing Group Inc.
(Exact Name of Registration as Specified in its Charter)
Table 1: Newly Registered Securities
Security Type | Security Class Title | Fee Calculation or Carry Forward Rule | Amount Registered | Proposed Maximum Offering Price Per Security | Maximum Aggregate Offering Price | Fee Rate | Amount of Registration Fee | |||||||||||||||||||||
Fees to be Paid | ||||||||||||||||||||||||||||
Fees Previously Paid | Equity | Common Stock(2)(3) | 457(o) | $ | 17,250,000 | (1) | -- | $ | 17,250,000 | 0.0000927 | $ | 1,599.07 | ||||||||||||||||
Fees Previously Paid | Other | Underwriter’s Warrants(4) | 457(g) | -- | -- | -- | -- | -- | ||||||||||||||||||||
Fees Previously Paid | Equity | Common Stock issuable upon exercise of the Underwriter’s Warrants(5) | 457(o) | $ | 759,000 | -- | $ | 759,000 | 0.0000927 | $ | 70.36 | |||||||||||||||||
Total Offering Amount | $ | 18,009,000 | $ | 1,669.43 | ||||||||||||||||||||||||
Total Fee Offsets | $ | 0 | ||||||||||||||||||||||||||
Total Fees Previously Paid | $ | 4,509 | ||||||||||||||||||||||||||
Net Fee Due | $ | 0.00 |
(1) Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) under the Securities Act. Includes the offering price of additional shares that the underwriters have the option to purchase to cover over-allotments, if any.
(2) Pursuant to Rule 416 under the Securities Act, the shares registered hereby also include an indeterminate number of additional shares as may from time to time become issuable by reason of stock splits, distributions, recapitalizations, or other similar transactions.
(3) No separate fee is required pursuant to Rule 457(i) under the Securities Act.
(4) In accordance with Rule 457(g) under the Securities Act, because the shares of the registrant’s Common Stock underlying the Underwriter’s warrants are registered hereby, no separate registration fee is required with respect to the warrants registered hereby.
(5) The fee is based on the estimated exercise price of the Underwriter’s warrants, which are exercisable at a per share exercise price equal to 110% of the price per Share sold in this Offering.