DEBT
EXCHANGE AGREEMENT
THIS
DEBT EXCHANGE AGREEMENT (this “Agreement”) made as of
the date set forth on the signature page hereto (the
“Agreement Date”) between
TRACK GROUP, INC.
, a Delaware
corporation (the “Company”), and the
CONRENT INVEST S.A.
, a public limited
liability company (
société anonyme
),
incorporated under the laws of the Grand Duchy of Luxembourg
(“Luxembourg”), having its registered office at 2-4,
avenue Marie-Thérèse, L-2132 Luxembourg, Grand Duchy of
Luxembourg and registered with the Luxembourg trade and companies
register (
registre de commerce et
des sociétés
, Luxembourg) under number B170360,
being subject as an unregulated undertaking to the Luxembourg act
dated 22 March 2004 on securitization, as amended (the
“Securitisation Act 2004”) and acting in respect of its
compartment “Safety
2”
(the “Lender”).
RECITALS
WHEREAS, a facility
agreement dated 30 December 2013 (the “Original Debt
Agreement”), Tetra House Pte. Ltd (the “Original
Lender”) made a term loan available to the Company for an
aggregate amount of $25,000,000;
WHEREAS, by a
transfer certificate dated 10 January 2014, the Original Lender
transferred by novation all of its rights and obligations under the
Original Debt Agreement to the Lender;
WHEREAS, by letter
dated 10 June 2015, the Company requested that the Lender increase
the amount of the loan initially granted from $25,000,000 to
$30,400,000 and extend its maturity through 31 July
2018;
WHEREAS, the
Company and the Lender entered into an Amended and Restated
Facility Agreement dated 30 June 2015, and the Lender increased the
loan to $30,400,000 (the “Facility
Agreement”);
WHEREAS, the
current outstanding principal amount of the indebtedness under the
Facility Agreement is $30,400,000;
WHEREAS, the Lender
has issued debt securities under compartment Safety 2 (the
“Notes”) to investors (the “Noteholders” or
the “Noteholders”) to finance the loans provided under
the Facility Agreement;
WHEREAS, the
Company has requested that the Lender exchange, at the Closing Date
(as defined in this Agreement), the entire unpaid principal amount
of the Facility Agreement and all accrued and unpaid interest on
the Facility Agreement, in the total amount of $34,716,800.00 (as
such amount may be adjusted pursuant to Section 1.1.2 and Section
1.1.4 below, the “Indebtedness”), for shares of newly
created non-voting Convertible Preferred Stock of the Company
(“Preferred Stock”), as described below (the
“Exchange”);
WHEREAS, the Lender
is willing to consummate the Exchange upon the terms and subject to
the conditions set forth below; and
WHEREAS, all
references in this Agreement to “U.S.” shall mean the
United States and all references to “dollars” or
“$” shall mean United States dollars.
NOW,
THEREFORE, in consideration of the premises and the mutual
representations and covenants hereinafter set forth, the parties
hereto do hereby agree as follows:
1. TERMS AND CONDITIONS OF EXCHANGE
1.1
Exchange of
Indebtedness
.
1.1.1
Subject
to the terms and conditions hereinafter set forth, the Lender
hereby agrees to consummate the Exchange, pursuant to which the
entire Indebtedness shall be exchanged for that number of shares of
Preferred Stock (the “Shares”) equal to the total
Indebtedness divided by Thirty-Five United States Dollars ($35.00),
which amount represents the liquidation preference of each Share of
Preferred Stock (“Liquidation Preference”). Beginning
540 days after the Closing Date, each Share shall be convertible
into ten (10) shares of Common Stock (“Conversion
Shares”), which conversion ratio reflects the Liquidation
Preference per Share divided by $3.50, provided that such
conversion ratio shall be adjusted in accordance with the terms of
the Certificate of Designation for the Preferred Stock. In such
connection, subject to the terms and conditions contained herein,
the Lender hereby subscribes for, and agrees to accept from the
Company, the Shares, in lieu of repayment of all amounts due under
the terms of the Facility Agreement, and the Company agrees to
issue the Shares to the Lender. Against delivery of the Shares
issued in the name of the Lender in accordance with the Settlement
Instructions, the Lender shall deliver to the Company the
Satisfaction and Release, substantially in the form attached hereto
as
Exhibit
A.
1.1.2
Subject
to the terms and conditions of this Agreement, the consummation of
the Exchange shall take place at a closing (the
“Closing”) to be held on October 31, 2017, or such
later date as agreed to by the parties in writing (the
“Closing Date”). In the event the Closing occurs after
October 31, 2017, the total Indebtedness shall be increased by an
amount equal to $6,755.56 per calendar day following October 31,
2017 up to and including the Closing Date.
1.1.3
The
Company shall be obligated to pay to the Lender certain costs
incurred or to be incurred by the Lender in connection with the
Exchange, as follows: (i) up to €125,000 shall be paid by the
Company to the Lender for legal fees and expenses related to the
Exchange as incurred by the Lender, promptly upon receipt by the
Company of an invoice specifically setting forth such legal fees
and expenses incurred by the Lender; (ii) up to €55,000 shall
be paid by the Company for any paying, settlement or proxy agents
retained by the Lender in connection with the Exchange, as incurred
by the Lender, promptly upon receipt by the Company of an invoice
specifically setting forth such expenses incurred by the Lender;
provided, however
, that
such additional expenses shall only be paid upon issuance to the
Noteholders of the Exchange Notice, as such term is defined in
Section 1.2.3 below; and (iii)
€127,000
shall be paid by the Company to the Lender for costs and expenses
related to the winding down, shut down or termination of the
Lender, promptly upon the receipt of the Noteholder Consent (as
such term is defined in Section 4.1.6 below) (the costs set forth
in clauses (i), (ii) and (iii) above, where applicable as invoiced
to the Company by the Lender, the “Transaction Costs”).
The payment of Transaction Costs shall be made in U.S. Dollars
based on the Euro/U.S. Dollar exchange rate in effect at the time
of payment of such Transaction Costs, as reported by the Wall
Street Journal (New York Edition).
1.1.4
The
Lender and the Company agree that, should the Noteholders consent
to the Exchange, the Noteholders shall bear 50% of the Transaction
Costs paid by the Company, or required to be paid by the Company to
Lender under the terms of Section 1.1.3 of this Agreement.
Accordingly, the total Indebtedness for purposes of the calculation
of the number of shares of Preferred Stock to be issued in
connection with the consummation of the Exchange shall be reduced
by 50% of the amount of such Transaction Costs (computed in U.S.
Dollars) invoiced by the Lender and required to be paid by the
Company under the terms of Section 1.1.3 of this Agreement. Should
the Noteholders not consent to the
Exchange, the
Company shall only be responsible for those Transaction Costs
required to be paid under clause (i) and (ii) of Section 1.1.3 of
this Agreement.
1.2
Deliveries by the
Lender
. At the Closing, the Lender shall:
1.2.1
Date,
complete and execute the Satisfaction and Release;
1.2.2
Deliver
to the Company copies of the confirmations issued by each
Noteholder consenting to the Exchange to the Lender (the
“Noteholder Agreement”), which Noteholder Agreement
shall contain the representations and warranties set forth on
Exhibit B
attached
hereto;
1.2.3
Deliver
to the Company a certificate of the executive director of the
Lender certifying that the notice in substantially the form set
forth as
Exhibit C
attached hereto (“Exchange Notice”) has been sent to
each Noteholder not consenting to the Exchange that has been
identified by the Lender (“Exchange
Certification”);
1.2.4
Deliver
to the Company settlement instructions (“Settlement
Instructions”), which Settlement Instructions shall set forth
(i) the Lender’s election to receive the Shares in the form
of book- entry notations in the records of the Company’s
transfer agent; and (ii) the election of the Lender to direct the
transfer agent to reissue all or a portion of such Shares to
Noteholders; and
1.2.5
Deliver
the executed Satisfaction and Release, Noteholder Agreement,
Exchange Certification and Settlement Instructions (together with
this Agreement, the “Transaction Documents”)
to:
Track
Group, Inc.
1215 W.
Lakeshore Drive
Romeoville, IL
60446
Attn:
Peter Poli, CFO
Telephone:
877-260-2010 ext.
4016
;
Email:
peter.poli@trackgrp.com
With a
copy to:
Disclosure Law
Group, a Professional Corporation
600
West Broadway, Suite 700
San
Diego, CA 92101
Telephone:
619-272-7062
Attention: Daniel
W. Rumsey
Email:
drumsey@disclosurelawgroup.com
1.3
Deliveries by the
Company
. At the Closing, the Company shall:
1.3.1
Date, complete and
execute the Staisfaction and Release;
1.3.2
Deliver the
executed Satisfaction and Release to: Conrent Invest
S.A.
2-4,
avenue Marie-Thérèse
L-2132
Luxembourg
Grand
Duchy of Luxembourg
Telephone : +352
621179815
Attention : Bernd
Schmitz
Email:
bernd.schmitz@simplex.lu
1.3.3
Within
three (3) business days following the Closing, provide for book-
entry notations in the records of the Company’s transfer
agent, in either case, according the Settlement Instructions, which
Settlement Instructions shall be delivered to the Company’s
transfer agent at the Closing, together with irrevocable
instructions to the transfer agent directing the transfer agent to
issue duly authorized, validly issued, fully paid and
non-assessable Shares to the Lender or the Noteholders, as
applicable.
1.3.4
To
the extent not previously delivered, evidence of the payment to the
Lender of the Transaction Costs.
2. REPRESENTATIONS AND WARRANTIES OF THE LENDER
The
Lender hereby represents and warrants to the Company as
follows:
2.1
Investment Risk
. The Lender
recognizes that the investment in the Shares in connection with the
Exchange involves a high degree of risk. Such risks include, but
are not limited to, the risks associated with the business of the
Company, as more particularly set forth in the Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q and other filings
(“Company SEC Filings”) with the U.S. Securities and
Exchange Commission (“SEC”) which have been made
available to the Lender.
2.2
Regulation S
. The Lender is not
a “U.S. Person” as that term is defined in Rule 902(k)
of Regulation S under the Securities Act of 1933, as amended (the
“Securities Act”). The address of the Lender furnished
by the Lender under 1.3.2 above is the Lender’s principal
business address.
2.3
Investigation
. The Lender has
been afforded the opportunity to ask questions of and receive
answers from the Company regarding the terms and conditions of this
Agreement and about the Company;
provided, however,
that no
investigation performed by or on behalf of the Lender regarding the
terms and conditions of this Agreement or the Company shall limit
or otherwise affect its right to rely on the representations and
warranties of the Company contained herein.
2.4
Professional Counsel
. To the
extent necessary, the Lender has obtained, to the extent necessary,
professional advice regarding the investment, tax and legal merits
and consequences of the Exchange and an investment in the Shares
and the Conversion Shares issuable upon conversion of the Shares
(together with the Shares, the “Exchange
Securities”).
2.5
Absence of Directed Selling
Efforts
. During the negotiation of the Exchange and at the
time of execution of this Agreement, the Lender was located outside
the United States within the meaning of Regulation S under the
Securities Act (“Regulation S”) and did not learn of
the Exchange through any “Directed Selling Efforts” as
that term is defined in Regulation S.
2.6
Securities Act Exemption
. The
Lender hereby acknowledges that the Exchange has not been reviewed
or approved by the SEC or any United States state regulatory
authority and the Exchange will be consummated pursuant to the
exemption from the registration requirements of the Securities Act
under Regulation S. The Lender understands that the Exchange
Securities have not been and will not be registered under the
Securities Act or under the securities laws of any state or
political sub-division of the United States and the Lender
acknowledges and agrees that the Exchange Securities may not be
sold, pledged, assigned or otherwise transferred or disposed of
other than in an “
Offshore
Transaction
” (as such
term is
defined under Regulation S) to or for the account or benefit of any
person who is not a “
U.S.
person
” (as defined in Attachment I hereto) or in a
transaction that is exempt from, or not subject to, the
registration requirements of the Securities Act. Accordingly, the
Lender hereby agrees that it will only reoffer, sell, assign,
transfer, pledge, encumber or otherwise dispose or distribute the
Exchange Securities to Noteholders who have either (i) executed a
Noteholder Agreement, or (ii) to which the Exchange Notice has been
sent.
2.8
Transfer Restrictions
. The
Lender acknowledges and agrees that the Exchange Securities shall
bear the following legend:
“THE
EXCHANGE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT
BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES
LAWS OF ANY STATE OR POLITICAL SUB-DIVISION OF THE UNITED STATES.
NEITHER SUCH SECURITIES NOR ANY INTEREST OR PARTICIPATION THEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED
OR OTHERWISE DISPOSED OF OTHER THAN IN AN “OFFSHORE
TRANSACTION” (AS SUCH TERM IS DEFINED UNDER REGULATION S) TO
OR FOR THE ACCOUNT OR BENEFIT OF ANY PERSON WHO IS NOT A
“U.S. PERSON” (AS DEFINED IN ATTACHMENT I HERETO) OR IN
A TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT.”
The
Lender is aware that the Company will make a notation in its
appropriate records with respect to the restrictions on the
transferability of such Exchange Securities or instruct its
transfer agent regarding such restrictions on
transferability.
2.9
Authority, Enforceability
.
Subject to the receipt of the Noteholder Consent in accordance with
article 94-3 of the Luxembourg act dated 10 August 1915 on
commercial companies, as amended (the “Luxembourg Companies
Act”), the Lender represents that the Lender has full power
and authority (corporate, statutory and otherwise) to execute and
deliver this Agreement and to consummate the Exchange. Subject to
the foregoing and once executed and delivered by all parties
hereto, this Agreement will constitute the legal, valid and binding
obligation of the Lender, enforceable against the Lender in
accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy. If
the Lender is a corporation, partnership, limited liability
company, trust, employee benefit plan, individual retirement
account, Keogh Plan, or other tax-exempt entity, it is authorized
and qualified to invest in the Company and the person signing this
Agreement on behalf of such entity has been duly authorized by such
entity to do so.
2.10
Non-Consenting Noteholders
.
With respect to Noteholders not consenting to the
Exchange:
2.10.1
To
the knowledge of the Lender, no non-consenting Noteholder is a
“U.S. Person” as that term is defined in Rule 902(k) of
Regulation S under the Securities Act, and is not acquiring the
Shares for a U.S. Person.
2.10.2
To
the knowledge of the Lender, at the time of execution of this
Agreement, no non-consenting Noteholder was located in the United
States within the meaning of Regulation S under the Securities Act
and did not learn of the Exchange through any “Directed
Selling Efforts” as that term is defined in Regulation
S.
2.10.3
As
of the Closing Date, the Lender shall have sent the Exchange Notice
to each non-consenting Noteholder identified by the
Lender.
3. REPRESENTATIONS BY AND WARRANTIES OF THE COMPANY
The
Company hereby represents and warrants to the Lender
that:
3.1
Enforceability
. The Company is
a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has full corporate
power and authority to own and use its properties and its assets
and conduct its business as currently conducted. The Company is not
in violation of any of the provisions of its certificate of
incorporation, by-laws or other organizational or charter
documents, including, but not limited to the Certificate of
Incorporation and the Bylaws (each as defined below). The Company
is duly qualified to conduct business and is in good standing as a
foreign corporation 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, would not result in a direct and/or
indirect (i) material adverse effect on the legality, validity or
enforceability of the Exchange and/or this Agreement, (ii) material
adverse effect on the results of operations, assets, business,
condition (financial and other) or prospects of the Company, or
(iii) material adverse effect on the Company’s ability to
perform on a timely basis its obligations under this Agreement (any
of (i), (ii) or (iii), a “Material Adverse
Effect”).
3.2
Exchange Securities
. The Shares
are, and upon conversion of the Exchange Securities, when issued,
will be, duly authorized, validly issued, fully paid and
non-assessable, and the Lender will receive good title to such
Exchange Securities, free and clear of all pledges, security
interests, liens or encumbrances. The issuance of the Exchange
Securities will not give rise to any preemptive rights or rights of
first refusal, or result in a right of any holder of Company
securities to adjust the exercise, exchange or reset price under
such securities. The Company has made available to the Lender true
and correct copies of the Company’s Certificate of
Incorporation, as in effect on the date hereof (the
“Certificate of Incorporation”), and the
Company’s By-laws, as in effect on the date hereof (the
“By-laws”).
3.3
Authority
. The Company has all
corporate right, power and authority to enter into, execute and
deliver this Agreement and each other agreement, document,
instrument and certificate to be executed by the Company in
connection with the consummation of the transactions contemplated
hereby, and to perform fully its obligations hereunder and
thereunder. All corporate action on the part of the Company, its
directors and stockholders necessary for the (a) authorization
execution, delivery and performance of this Agreement by the
Company; and (b) authorization, sale, issuance and delivery of the
Shares contemplated hereby and the performance of the
Company’s obligations under this Agreement has been taken.
This Agreement has been duly executed and delivered by the Company
and constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its
terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public
policy.
3.4
Absence of
Conflicts
.
3.4.1
The
execution and delivery by the Company of this Agreement, the
issuance and sale of the Exchange Securities and the consummation
of the other transactions contemplated hereby or thereby do not and
will not (i) result in the violation of any law, statute, rule,
regulation, order, writ, injunction, judgment or decree of any
federal, state, local or foreign government, court, or
administrative or regulatory authority (“Governmental
Authority”) to or by which the Company is bound including
without
limitation all
foreign, federal, state and local laws applicable to its business
and all such laws that affect the environment, except in each case
as could not have or reasonably be expected to result in a Material
Adverse Effect, (ii) conflict with or violate any provision of the
Certificate of Incorporation or the Bylaws, or (iii) conflict with,
or result in a material breach or violation of, any of the terms or
provisions of, or constitute (with or without due notice or lapse
of time or both) a default or give to others any rights of
termination, amendment, acceleration or cancellation (with or
without due notice, lapse of time or both) under any agreement,
credit facility, lease, loan agreement, mortgage, security
agreement, trust indenture or other agreement or instrument to
which the Company is a party or by which any of them is bound or to
which any of their respective properties or assets is subject, nor
result in the creation or imposition of any Liens upon any of the
properties or assets of the Company.
3.4.2
No
approval by the holders of any securities of the Company is
required to be obtained by the Company in connection with the
authorization, execution, delivery and performance of this
Agreement or in connection with the authorization, issue and sale
of the Exchange Securities or the consummation of the Exchange
except as has been previously obtained.
3.4.3
Other
than the filing of the Certificate of Designation for the Preferred
Stock with the Secretary of State of the State of Delaware, no
consent, approval, authorization or other order of, or other action
by or in respect of, or registration, declaration or filing with,
any Governmental Authority or any other person is required to be
obtained by the Company in connection with the authorization,
execution, delivery and performance of this Agreement and the
Exchange or in connection with the authorization, issuance and sale
of the Exchange Securities.
3.5
The Company
possesses all certificates, authorizations and permits issued by
the appropriate Governmental Authority 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.
3.6
All disclosure
furnished by or on behalf of the Company to the Lender in this
Agreement regarding the Company, its business and the transactions
contemplated hereby is true and correct 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.
4. CONDITIONS TO OBLIGATIONS OF THE LENDER
4.1
The Lender’s
obligation to consummate the Exchange is subject to the fulfillment
of the following conditions at the Closing:
4.1.1
The
representations and warranties made by the Company in Article 3
hereof shall be true and correct as of date of the Closing. All
covenants, agreements and conditions contained in this Agreement to
be performed by the Company on or prior to the date hereof shall
have been performed or complied with in all material
respects.
4.1.2
There
shall not be in effect any law, rule or regulation or any legal or
other order prohibiting, enjoining or restraining the Exchange or
other transactions contemplated by this Agreement.
4.1.3
The
Company shall have obtained any and all consents, permits,
approvals, registrations and waivers necessary or appropriate for
consummation of the Exchange and the consummation of the other
transactions contemplated by this Agreement.
4.1.4
A
copy of the Certificate of Designation for the Preferred Stock, as
filed with, and certified as of a recent date by, the Secretary of
State of the State of Delaware, shall have been delivered to the
Lender.
4.1.5
The
Company shall have delivered to the Lender such other documents,
certificates or other information as the Lender or its counsel may
reasonably request.
4.1.6
The
Lender shall have obtained the consent from the Noteholders for the
Exchange in accordance with article 94-3 of the Luxembourg
Companies Act (the “Noteholder Consent”).
4.1.7
The
Company shall have paid to the Lender the Transaction Costs in
accordance with Section 6.6 of this Agreement.
4.1.8
The
Parties shall have agreed on the total Indebtedness due and payable
Lender in accordance with Section 1.1 of this
Agreement.
5. CONDITIONS TO OBLIGATIONS OF THE COMPANY
5.1.1
The
representations and warranties made by the Lender in Article 2
hereof shall be true and correct as of date of the Closing. All
covenants, agreements and conditions contained in this Agreement to
be performed by the Lender on or prior to the date hereof shall
have been performed or complied with in all material
respects.
5.1.2
There
shall not be in effect any law, rule or regulation or any legal or
other order prohibiting, enjoining or restraining the Exchange or
other transactions contemplated by this Agreement.
5.1.3
The
Company shall have obtained any and all consents, permits,
approvals, registrations and waivers necessary or appropriate for
consummation of the Exchange and the consummation of the other
transactions contemplated by this Agreement.
5.1.4
In
addition to the other Transaction Documents required to be
delivered as a condition to Closing, the Company shall have
received from the Lender the Noteholder Agreements duly executed by
each Noteholder consenting to the Exchange, and the Exchange
Certification with respect to Noteholders not consenting to the
Exchange.
6. COVENANTS OF THE COMPANY
6.1
Registration Rights
. The
Company hereby agrees to register for resale under the Securities
Act all of the Conversion Shares issuable upon conversion of the
Shares issued to the Lender under this Agreement (the
“Registrable Securities”), at the same time as the
Company registers shares of its Common Stock for the account of
other holders of such shares of Common Stock.
6.2
No Alternate Consideration
. No
consideration (including any modification of any Transaction
Document) shall be offered or paid to the Lender or to any other
Noteholder electing to exchange Indebtedness for Shares unless the
same consideration is also offered to all Noteholders.
6.3.1
The
Company agrees to indemnify and hold harmless the Lender, its
affiliates and their respective officers, directors, employees,
agents and controlling persons (collectively, the
“Lender
Indemnified
Parties”) from and against, any and all Loss suffered or
incurred by any Lender Indemnified Party by reason of any
misrepresentation or breach of warranty by the Company or, after
any applicable notice and/or cure periods, nonfulfillment of any
covenant or agreement to be performed or complied with by the
Company under this Agreement; and will promptly reimburse the
Lender Indemnified Parties for all expenses (including reasonable
fees and expenses of legal counsel) as incurred in connection with
the investigation of, preparation for or defense of any pending or
threatened claim related to or arising in any manner out of any of
the foregoing, or any action or proceeding arising therefrom
(collectively, “Proceedings”).
6.3.2
If
for any reason (other than a final non-appealable judgment finding
any Lender Indemnified Party liable for losses, claims, damages,
liabilities or expenses for its gross negligence or willful
misconduct) the foregoing indemnity is unavailable to an Lender
Indemnified Party or insufficient to hold a Lender Indemnified
Party harmless, then the Company shall contribute to the amount
paid or payable by a Lender Indemnified Party as a result of such
loss, claim, damage, liability or expense in such proportion as is
appropriate to reflect not only the relative benefits received by
the Company on the one hand and the advisor on the other, but also
the relative fault by the Company and the Lender Indemnified Party,
as well as any relevant equitable considerations.
6.4
Absence of Non-Public
Information
. The Company covenants and agrees that neither
it, nor any other person acting on its behalf, will provide the
Lender or its agents or counsel with any information that the
Company believes constitutes material non-public information
without first so identifying such information.
6.5
Removal of Restrictive Legend
.
The Company covenants to cause the removal of any restrictive
legend with respect to the transfer of the Exchange Securities from
any relevant certificate or to instruct the Company’s
transfer agent as to the removal of any restructions on transfer,
in the case of non- certificated Exchange Securities, and the
Company shall issue or cause the issuance of a certificate
representing such Exchange Securities without such legend or the
issuance of non-certificated Exchange Securities without such
restrictions to the holder thereof if (i) such securities are
registered under the Securities Act, (ii) if such securities are
sold pursuant to Rule 144 under the Securities Act, (iii) if such
securities are eligible for transfer under Rule 144 under the
Securities Act, or (iv) upon the expiration of six months after the
date of the Exchange. The Company covenants to refuse to effect the
transfer of Exchange Securities not made in compliance with the
provisions of Regulation S.
6.6
Transaction Costs
. The Company
covenants and agrees that, as a condition of the Lender’s
willingness to enter into the Exchange, the Company shall pay the
Transaction Costs, as more particularly set forth in Section 1.1.3
of this Agreement.
7. COVENANTS OF THE LENDER
7.1
Noteholder Consents
. The Lender
shall use its reasonable best efforts to obtain the Noteholder
Consent;
provided, however,
that such reasonable best efforts shall not require the Lender to
recommend the Exchange to the Noteholders or to amend the terms of,
or modify, any Transaction Document.
7.2
Absence of Alternative
Consideration
. No consideration (including any modification
of any Transaction Document) shall be offered or paid to to any
Noteholder electing to exchange Indebtedness for Shares unless the
same consideration is also offered to all Noteholders.
7.3
Hedging
Transactions
. The Lender shall not engage in any hedging
transaction with respect
to the Exchange
Securities before the distribution compliance period expires unless
in compliance with the Securities Act.
7.4
Lender
Indemnity
.
7.4.1
The
Lender agrees to indemnify and hold harmless the Company, its
affiliates and their respective officers, directors, employees,
agents and controlling persons (collectively, the “Company
Indemnified Parties”) from and against, any and all Loss
suffered or incurred by any Company Indemnified Party by reason of
any misrepresentation or breach of warranty by the Lender or, after
any applicable notice and/or cure periods, nonfulfillment of any
covenant or agreement to be performed or complied with by the
Lender under this Agreement; and will promptly reimburse the
Company Indemnified Parties for all expenses (including reasonable
fees and expenses of legal counsel) as incurred in connection with
any Proceedings.
7.4.2
If
for any reason (other than a final non-appealable judgment finding
any Indemnified Party liable for losses, claims, damages,
liabilities or expenses for its gross negligence or willful
misconduct) the foregoing indemnity is unavailable to an
Indemnified Party or insufficient to hold an Indemnified Party
harmless, then the Company shall contribute to the amount paid or
payable by an Indemnified Party as a result of such loss, claim,
damage, liability or expense in such proportion as is appropriate
to reflect not only the relative benefits received by the Company
on the one hand and the Advisor on the other, but also the relative
fault by the Company and the Indemnified Party, as well as any
relevant equitable considerations.
8. MISCELLANEOUS
8.1
Except as otherwise
provided herein, this Agreement shall not be changed, modified or
amended except by a writing signed by the parties, and this
Agreement may not be discharged except by performance in accordance
with its terms or by a writing signed by the party to be charged.
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.
8.2
This Agreement
shall be binding upon and inure to the benefit of the parties
hereto and to their respective heirs, legal representatives,
successors and assigns. The Company may not assign this Agreement
or any rights or obligations hereunder without the prior written
consent of the Lender. The Lender may assign any or all of its
rights under this Agreement to any person to whom the Lender
assigns or transfers any Shares, provided that such transferee
agrees in writing to be bound, with respect to the transferred
Shares, by the provisions of this Agreement.
8.3
This Agreement,
together with the exhibits and schedules thereto, contain the
entire understanding of the parties with respect to the subject
matter hereof 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.
8.4
All questions
concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of
Delaware, United States, 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
this Agreement (whether brought against a party hereto
or
its
respective affiliates, directors, officers, shareholders, employees
or agents) shall be commenced exclusively in the state and federal
courts sitting in Cook County, Illinois. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in Cook County, Illinois 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 this
Agreement), 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.
8.5
The holding of any
provision of this Agreement to be invalid or unenforceable by a
court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and
effect. If any provision of this Agreement shall be declared by a
court of competent jurisdiction to be invalid, illegal or incapable
of being enforced in whole or in part, such provision shall be
interpreted so as to remain enforceable to the maximum extent
permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof shall nevertheless
remain in full force and effect and enforceable to the extent they
are valid, legal and enforceable, and no provisions shall be deemed
dependent upon any other covenant or provision unless so expressed
herein.
8.6
It is agreed that a
waiver by either party of a breach of any provision of this
Agreement shall not operate, or be construed, as a waiver of any
subsequent breach by that same party.
8.7
The Lender and
Company agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action
as may be necessary or appropriate to carry out the purposes and
intent of this Agreement.
8.8
This Agreement may
be executed in two or more counterparts each of which shall be
deemed an original, but all of which shall together constitute one
and the same instrument. 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.
8.9
Nothing in this
Agreement shall create or be deemed to create any rights in any
person or entity not a party to this Agreement.
8.10
In
addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, the Lender and
the Company will be entitled to specific performance under this
Agreement. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach
of obligations described in the foregoing sentence and hereby
agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be
adequate.
8.11
If
any provision of this Agreement is invalid or unenforceable under
any applicable statute or rule of law, then such provision will be
deemed modified in order to conform with such statute or rule of
law. Any provision hereof that may prove invalid or unenforceable
under any law will not affect the validity or enforceability of any
other provision hereof.
8.12
The
Company acknowledges and accepts that the Lender (i) is subject to
the Securitisation Act 2004 and (ii) has created the compartment
Safety 2 in respect of the Notes to which all assets, rights,
claims and agreements relating to the Notes have been and will be
allocated. The Company also
acknowledges and
accepts that is has only recourse to the assets of the compartment
Safety 2 and not to the assets allocated to any other compartments
created by the Lender or any other assets of the Lender. The
Company further acknowledges and accepts that once all the assets
allocated to the compartment Safety 2 have been realised, it is not
entitled to take any further steps against the Lender to recover
any further sums due and the right to receive any such sum shall be
extinguished. The Company accepts not to attach or otherwise seize
the assets of the Lender allocated to the compartment Safety 2 or
to other compartments of the Lender or other assets of the Lender.
In particular, the Company shall not be entitled to petition or
take any other step for the winding-up, the liquidation or the
bankruptcy of the Lender or any similar insolvency related
proceedings. In the case of discrepancy between this Clause 8.12
and any other provision of this Agreement, this Clause 8.12 shall
prevail.
*****************************
Signature page follows
IN WITNESS WHEREOF
,
the Lender and the Company have
caused this Debt Conversion Agreement to be duly executed as of the
date first written above.
COMPANY:
TRACK
GROUP, INC.
By:
______________________
Name:
Peter K. Poli
Title:
Chief Financial Officer
LENDER:
CONRENT
INVEST, S.A. ACTING IN RESPECT OF ITS COMPARTMENT SAFETY
2
By:
____________________
Name:
H.B. Schmitz Title: Sole Director
EXHIBIT
A
SATISFACTION AND
RELEASE
The
SATISFACTION AND RELEASE ("Agreement") is made and entered into
this _______ day of October 2017, between Track Group, Inc., a
Delaware corporation (the “
Company
”), and the Conrent Invest
S.A., a public limited liability company (
société anonyme
),
incorporated under the laws of the Grand Duchy of Luxembourg
(“
Luxembourg
”),
having its registered office at 2-4, avenue
Marie-Thérèse, L-2132 Luxembourg, Grand Duchy of
Luxembourg and registered with the Luxembourg trade and companies
register (
registre de commerce et
des sociétés
, Luxembourg) under number B170360,
being subject as an unregulated undertaking to the Luxembourg act
dated 22 March 2004 on securitization, as amended (the
“
Securitisation Act
2004
”) and acting in respect of its compartment
“Safety 2” (the “
Lender
”).
RECITALS
WHEREAS
, Lender and the Company are
parties to a Debt Exchange Agreement, dated as of [
l
] (“
Exchange Agreement
”), pursuant to
which the Lender has agreed to exchange the entire unpaid principal
amount of, and all accrued and unpaid interest due under, the
Amended and Restated Facility Agreement, dated June 30, 2015 (the
“
Facility
Agreement
” and such amounts, the “
Outstanding Facility Debt
”), for
Shares, as more particularly set forth in the Exchange
Agreement;
WHEREAS
, the Lender desires to accept
the Shares in full and complete satisfaction of the Outstanding
Facility Debt, and to fully release and discharge the Company for
all matters and liabilities, including from any and all further
liability for repayment of the Outstanding Facility Debt under the
terms of the Facility Agreement;
WHEREAS
, the Exchange Agreement provides
that, at the Closing, the Lender execute and deliver this Agreement
to the Company;
WHEREAS
, this Agreement is the
Satisfaction and Release that is referred to in, and is attached as
Exhibit A
to, the
Exchange Agreement; and
WHEREAS
, capitalized terms not otherwise
defined herein shall have the meanings ascribed to such terms set
forth in the Exchange Agreement.
NOW, THEREFORE
, in consideration of the
premises and the mutual representations and covenants hereinafter
set forth, the parties hereto do hereby agree as
follows:
AGREEMENT
1.
Confirmation of Outstanding Facility
Debt
. The principal amount of the Outstanding Facility Debt,
including accrued and unpaid interest under the Facility Agreement
as of [
Closing Date
],
is
$[
amount calculated in accordance with interest
provision in Exchange Agreement
]. The amount of the
Indebtedness, as adjusted in accordance with the terms of the
Exchange Agreement, is $[
l
].
2.
Delivery of Preferred Stock in
Satisfaction of Outstanding Facility Debt
. Subject to the
terms and conditions set forth in the Exchange Agreement, the
Company agrees to deliver [
l
] Shares, as calculated in
accordance with the terms of the Exchange Agreement (the
“
Settlement
Shares
”) in accordance with the Settlement
Instructions delivered by the Lender to the Company on the Closing
Date.
3.
Satisfaction of Outstanding Facility
Debt
. Upon delivery of the Settlement Shares by the Company
in accordance with the Settlement Instructions, (a) the Lender
hereby agrees that the Outstanding Facility Debt will have been
fully and completely satisfied; and (b) the Lender hereby
compromises, settles, resolves, discharges, and releases the
Company, and its successors and assigns, from the payment of any
and
all amounts due and
payable to the Lender or accrued on or prior to the Effective Date,
in each case under the Facility Agreement.
4.
Lender Release
. Effective upon
delivery of the Settlement Shares by the Company in accordance with
the Settlement Instructions, the Lender, for itself and for any and
all of its past or present shareholders, members, predecessors,
successors, parents and subsidiaries, partners, officers,
directors, managers, employees, agents, servants, attorneys,
assigns, transferees, beneficiaries, subrogees, insurers,
underwriters, and any others claiming by, through, under, or in
concert with it, and each of them (collectively, the
“
Lender
Releasors
”), does hereby release and forever discharge
the Company, and to the extent they are acting by, through, under,
or in concert with the Company, each of the Company’s past or
present shareholders, members, predecessors, successors, parents
and subsidiaries, partners, officers, directors, managers,
employees, agents, servants, attorneys, assigns, transferees,
beneficiaries, subrogees, insurers, underwriters, and any others
claiming by, through, under, or in concert with it, and each of
them (collectively, the “
Company Releasees
”), of and from
any and all claims, obligations, damages, losses, injuries, debts,
rights, rights to payment, rights to equitable remedies, rights to
legal or equitable relief, demands, allegations, counterclaims,
cross-claims, contracts, covenants, agreements, promises,
trespasses, torts, tortious conduct, dues, accounts, bonds, bills,
notices, costs, expenses, attorneys’ fees, judgments,
executions, liens, encumbrances, contribution rights, indemnity
rights, actions, causes of action, choses in action, suits,
controversies, disputes, vicarious liability, challenges, and
liabilities of any kind or nature whatsoever in law, equity, or
otherwise, whether known or unknown, suspected or unsuspected,
asserted or unasserted, fixed or contingent, matured or unmatured,
accrued or inchoate, which have existed or may have existed or that
may yet exist or do exist, that any of the Lender Releasors at any
time had, owned, or held from the beginning of the world through
the Effective Date against any of the Company Releasees arising
under or relating to any matter or thing done, omitted, or suffered
to be done by the Company Releasees arising from, out of, or in any
way connected with: (a) the Original Debt Agreement, the Facility
Agreement, or any other document evidencing the Outstanding
Facility Debt (the “
Indebtedness Documents
”); and (b)
any act, omission, event, or condition that might arguably create
or constitute a breach or default under the Indebtedness Documents
(collectively, the “
Lender
Released Claims
”);
provided, however,
that, for the
avoidance of doubt, the Company Released Claims shall not include
any claims arising under the Exchange Agreement, including the
obligation to pay the Reimbursable Expenses.
5.
Covenants Not to Sue
. Effective
upon the delivery of the Settlement Shares by the Company in
accordance with the Settlement Instructions, the Lender agrees that
it shall not file suit or initiate legal proceedings against any
person for events occurring prior to the date of this Agreement for
the collection of the Outstanding Facility Debt or any claim for
relief arising under the Indebtedness Documents or the obligation
evidenced thereby.
6.
Company Release
. Effective upon
delivery of the Settlement Shares by the Company in accordance with
the Settlement Instructions, the Company, on behalf of itself and
its successors and assigns, hereby forever waives, releases and
discharges, and hereby covenants not to assert or prosecute, any
and all claims (including, without limitation, cross-claims,
counterclaims, rights of setoff and recoupment), causes of action,
demands, suits, costs, expenses and damages arising out of actions
taken under the Indebtedness Documents or any failure to act under
the Indebtedness Documents that it now has or hereafter may have,
of whatsoever nature and kind, whether known or unknown, whether
now existing or hereafter arising, whether arising at law or in
equity (the “
Company
Released Claims
”, and collectively with the Lender
Released Claims, the “
Released Claims
”), against the
Lender (in its capacity as a Lender or in any other capacity) and
any its subsidiaries and affiliates, and each its successors,
assigns, officers, directors, employees, agents, attorneys and
other representatives (collectively, the “
Lender Releasees
”, and
collectively with the Company Releasees, the “
Releasees
”), based in whole or in
part on facts, whether or not known, existing on or prior to the
Effective Date.
7.
Releases to be Construed Broadly; All
Derivative Claims Released
. The parties hereto intend and
agree that the releases provided hereunder shall be construed to
the broadest extent permitted by law and, to the extent permitted
by law, that the scope of the releases shall be expanded for the
benefit of the parties and the identified Releasees to the extent
that, at any time after the Effective Date, the law is clarified or
changed to permit such a broader construction. To the extent this
Agreement and the releases hereunder become effective, (a) neither
the Lender nor any person claiming by, through, or under the Lender
may pursue any Company Released Claims against the Company
Releasees, and (b) neither the Company nor any person claiming by,
through, or under the Company may pursue any released claims
against the Lender Releasees. Among other things, no party, equity
holder, or other party in privity with Lender or the Company,
respectively, may assert any claims against the Company Releasees
or the Lender Releasees, as applicable: (x) that might be
characterized as “derivative” of the rights or claims
of Lender or the Company, as applicable; or (y) that arise from or
relate to the Indebtedness Documents.
8.
Unknown or Undiscovered Claims
.
The parties acknowledge that: (a) they may subsequently discover
facts in addition to, or different from, those that they now know
or believe to be true with respect to the Released Claims; and (b)
they may have sustained or may yet sustain damages, costs, or
expenses that are presently unknown and that relate to those
claims. The parties acknowledge, however, that they have
negotiated, agreed upon, and entered into this Agreement with full
knowledge of these possibilities and agree that, notwithstanding
the provisions of California Civil Code Section 1542, or by any law
of any state or territory of the United States or other
jurisdiction, or principle of common law, which is similar,
comparable or equivalent to Section 1542 of the California Civil
Code (“
Comparable
Laws
”), this Agreement shall not be affected in any
manner whatsoever if any of these possibilities comes to pass, and
it is intended to release all claims, including those that are
unknown or unsuspected. In entering into this Agreement, each party
expressly waives any rights or benefits under Section 1542 of the
California Civil Code or Comparable Laws with respect to the
Released Claims, which provides as follows:
A
general release does not extend to claims that the Company does not
know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor.
9.
Termination
. This Agreement
shall automatically be terminated if the Effective Date of the
Exchange does not occur on or before December 31,
2017.
10.
Costs
. Except as otherwise
expressly set forth in the Exchange Agreement, each party shall pay
his or its own costs and expenses incurred or to be incurred by
each in negotiating and preparing this Agreement and in closing and
carrying out the transactions contemplated by this
Agreement.
11.
Notices
. Any notice, demand,
request, or other communication permitted or required under this
Agreement shall be in writing and shall be deemed to have been
given as of the date so delivered, if personally delivered; as of
the date so sent, if transmitted by facsimile and receipt is
confirmed by the facsimile operator of the recipient; as of the
date so sent, if sent by electronic mail and receipt is
acknowledged by the recipient; and one day after the date so sent,
if delivered by overnight courier service, addressed as
follows:
If to
the Company:
Track
Group, Inc.
1215 W.
Lakeshore Drive
Romeoville, IL
60446
Attn:
Peter Poli, CFO
Telephone:
877-260-2010 ext. 4016;
Email:
peter.poli@trackgrp.com
With a
copy to:
Disclosure Law
Group, a Professional Corporation
600
West Broadway, Suite 700
San
Diego, CA 92101
Telephone:
619-272-7062
Attention: Daniel
W. Rumsey
Email:
drumsey@disclosurelawgroup.com
If to
the Lender:
Conrent
Invest S.A.
2-4,
avenue Marie-Thérèse
L-2132
Luxembourg
Grand
Duchy of Luxembourg
Telephone : +352
621179815
Attention : Bernd
Schmitz
Email:
bernd.schmitz@simplex.lu
Notwithstanding the
foregoing, service of legal process or other similar communications
shall not be given by electronic mail and will not be deemed duly
given under this Agreement if delivered by such means. Each party,
by notice duly given in accordance herewith, may specify a
different address for the giving of any notice
hereunder.
12.
Entire Agreement
. This
Agreement, the Exchange Agreement, together with the documents to
be delivered pursuant hereto and thereto, represent the entire
agreement between the parties relating to the subject matter
hereof. There are no other courses of dealing, understanding,
agreements, representations, or warranties, written or oral, except
as set forth herein.
13.
Amendment or Waiver
. Every
right and remedy provided herein shall be cumulative with every
other right and remedy, whether conferred herein, at law, or in
equity and may be enforced concurrently herewith, and no waiver by
any party of the performance of any obligation by the other shall
be construed as a waiver of the same or any other default then,
theretofore, or thereafter occurring or existing. At any time prior
to the Effective Date, this Agreement may be amended by a writing
signed by all parties hereto, respecting any of the terms contained
herein, and any term or condition of this Agreement may be waived
or the time for performance thereof may be extended by a writing
signed by the party or parties for whose benefit the provision is
intended.
14.
Form of Execution;
Counterparts
. A valid and binding signature hereto or on any
notice or demand hereunder may be in the form of a manual execution
or a true copy made by photographic, xerographic, conversion to
portable document format (pdf), or other electronic process that
provides similar copy accuracy of a document that has been
executed, and such electronic signature or record shall be of the
same legal effect, validity, or enforceability as a manually
executed signature. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of
which taken together shall be but a single instrument.
15.
Governing Law
. This Agreement
shall be governed by, and construed under and in accordance with,
the laws of the state of Delaware without giving effect to any
choice or conflict of law provision or rule (whether the state of
Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the state of
Delaware.
16.
Interpretation
. Section
headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this
Agreement. Except when the context clearly requires to the
contrary: (a) the word “or” shall not be applied in its
exclusive sense, unless the context otherwise requires; (b)
instances of gender or entity-specific usage (e.g.,
“his,” “her,” “its” or
“individual”) shall not be interpreted to preclude the
application of any provision of this Agreement to any individual or
entity; and (c) “including” shall mean that the items
listed are illustrative, without any implication that all or even
most of the components are mentioned.
17.
Securitisation Act 2004
. The
Company acknowledges and accepts that the Lender (i) is subject to
the Securitisation Act 2004 and (ii) has created the compartment
Safety 2 in respect of the Notes (as defined in the Exchange
Agreement) to which all assets, rights, claims and agreements
relating to the Notes have been and will be allocated. The Company
also acknowledges and accepts that is has only recourse to the
assets of the compartment Safety 2 and not to the assets allocated
to any other compartments created by the Lender or any other assets
of the Lender. The Company further acknowledges and accepts that
once all the assets allocated to the compartment Safety 2 have been
realised, it is not entitled to take any further steps against the
Lender to recover any further sums due and the right to receive any
such sum shall be extinguished. The Company accepts not to attach
or otherwise seize the assets of the Lender allocated to the
compartment Safety 2 or to other compartments of the Lender or
other assets of the Lender. In particular, the Company shall not be
entitled to petition or take any other step for the winding-up, the
liquidation or the bankruptcy of the Lender or any similar
insolvency related proceedings. In the case of discrepancy between
this Clause 17 and any other provision of this Agreement, this
Clause 17 shall prevail.
[
The Remainder of Page Intentionally Left
Blank
]
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
COMPANY:
TRACK
GROUP, INC.
By:
______________________ Name: Guy Dubois
Title:
Chief Executive Officer Chairman of the Board
LENDER:
CONRENT
INVEST, S.A. ACTING IN RESPECT OF ITS COMPARTMENT SAFETY
2
By:
____________________ Name: H.B. Schmitz
Title:
Sole Director
EXHIBIT B
REPRESENTATIONS TO
BE INCLUDED IN NOTEHOLDER AGREEMENTS
1.
The Noteholder
hereby represents and warrants to the Lender as
follows:
a.
The Noteholder
recognizes that an investment in the Shares in connection with the
Exchange involves a high degree of risk. Such risks include, but
are not limited to, the risks associated with the the business of
the Company, as more particularly set forth in the Company’s
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and
other filings with the Securities and Exchange Commission (the
“Company SEC Filings”) which have been made available
to the Noteholder.
b.
The Noteholder is
not a “U.S. Person” as such term is defined in Rule
902(k) of Regulation S under the Securities Act of 1933, as amended
(the “Securities Act”), and is not acquiring the Shares
for a U.S. person.
c.
The Noteholder
hereby acknowledges and represents that: (a) the Noteholder is a
highly sophisticated investor with extensive knowledge and
experience in business and financial matters, prior investment
experience, including investment in securities that are non-listed,
unregistered and/or not traded on a national securities exchange,
(b) the Noteholder is capable of evaluating independently, and has
evaluated independently the merits, risks and suitability of the
potential purchase of the Securities and is able to bear the
economic risk inherent in an investment in the Exchange Securities,
and (c) the investment in the Shares by the Noteholder are for such
Noteholder’s own account and not with a present view towards
the public sale or distribution thereof, except pursuant to sales
registered or exempted from registration under the Securities
Act.
d.
The Noteholder has
carefully reviewed the Company’s SEC Filings and all exhibits
thereto and has had access to such financial and other information
concerning the Company and the Exchange Securities as it has deemed
necessary in connection with its decision to purchase the Exchange
Securities, including an opportunity to ask questions of and
receive answers from duly authorized officers or other
representatives of the Company regarding the terms and conditions
of this [Noteholder Agreement] and about the Company.
e.
To the extent
necessary, the Noteholder has obtained professional advice
regarding the investment, tax and legal merits and consequences of
its decision to purchase the Exchange Securities.
f.
At the time of
execution of this [Noteholder Agreement], the Noteholder was
located outside of the United States within the meaning of
Regulation S under the Securities Act (“Regulation S”)
and did not learn of the Exchange through any “Directed
Selling Efforts” as such term is defined in Regulation
S.
g.
The Noteholder
hereby acknowledges that the Exchange has not been reviewed or
approved by the SEC or any United States state regulatory authority
and the Exchange will be consummated pursuant to the exemption from
the registration requirements of the Securities Act under
Regulation S. The Noteholder understands that neither the Exchange
Securities have not been and will not be registered under the
Securities Act or or under the securities
laws of
any state or political sub-division of the United States and
understands that the Exchange Securities may not be sold, pledged,
assigned or otherwise transferred or disposed of other than in an
“Offshore Transaction” (as such term is defined under
Regulation S) to or for the account or benefit of any person who is
not a “
U.S.
person
” (as defined in Attachment I hereto) or in a
transaction that is exempt from, or not subject to, the
registration requirements of the Securities Act.
h.
The Noteholder
hereby acknowledges and agrees that (i) during the six month period
commencing on the date of the consummation of the Exchange it will
only resell the Exchange Securities in transactions that are exempt
from, or not subject to, the registration requirements of the
Securities Act or any applicable state securities laws, and (ii)
that it will not engage in any hedging transaction with respect to
the Exchange Securities.
i.
The Noteholder
acknowledges and agrees that the Exchange Securities shall bear the
following legend:
“THE
EXCHANGE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT
BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES
LAWS OF ANY STATE OR POLITICAL SUB-DIVISION OF THE UNITED STATES.
NEITHER SUCH SECURITIES NOR ANY INTEREST OR PARTICIPATION THEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED
OR OTHERWISE DISPOSED OF OTHER THAN IN AN “OFFSHORE
TRANSACTION” (AS SUCH TERM IS DEFINED UNDER REGULATION S) TO
OR FOR THE ACCOUNT OR BENEFIT OF ANY PERSON WHO IS NOT A
“U.S. PERSON” (AS DEFINED IN ATTACHMENT I HERETO) OR IN
A TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT.”
The
Noteholder is aware that the Company will make a notation in its
appropriate records with respect to the restrictions on the
transferability of such Exchange Securities or instruct its
transfer agent to that effect.
j.
Any transfer of
Exchange Securities in violation of the restrictions set forth in
clause (i) above will be void
ab
initio
and of no legal effect whatsoever. Accordingly, any
purported transferee of any legal or beneficial ownership interest
in any Exchange Securities in such a transaction will not be
entitled to any rights as a legal or beneficial owner of such
interest in such Exchange Securities. The Issuer shall have the
right at any time after becoming aware that any legal or beneficial
ownership interest in any Exchange Securities is held by a U.S.
person to require such U.S. person to sell such interest to (i) an
affiliate of the Issuer (to the extent permitted by applicable
law); or (ii) a person who is a non-U.S. person.
k.
The Noteholder
represents that the Noteholder has full power and authority
(corporate, statutory and otherwise) to execute and deliver this
[Noteholder Agreement] and to consummate the Exchange. Once
executed and delivered by all parties hereto, this [Noteholder
Agreement] will constitute the legal, valid and binding obligation
of the Noteholder, enforceable against the Noteholder in accordance
with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other
equitable remedies, and to
limitations of
public policy.
l.
If the Noteholder
is a corporation, partnership, limited liability company, trust,
employee benefit plan, individual retirement account, Keogh Plan,
or other tax-exempt entity, it is authorized and qualified to
invest in the Company and the person signing this [Agreement] on
behalf of such entity has been duly authorized by such entity to do
so.
EXHIBIT C
FORM OF EXCHANGE NOTICE
Conrent
Invest S.A.
acting
in respect of its compartment Safety 2 2-4, avenue
Marie-Thérèse
L-2132
Luxembourg
Grand
Duchy of Luxembourg Attn: Bernd Schmitz
Re:
[INSERT DESCRIPTION
OF NOTES] (the “
Notes
”)
You (a
“
Noteholder
”
and together with the other holders of Notes, the
“
Noteholders
”)
are hereby given notice, in connection with the Notes issued by
Conrent Invest S.A., a public limited
liability company (
société
anonyme
), incorporated under
the laws of the Grand Duchy of Luxembourg, having its registered
office at 2-4, avenue Marie-Thérèse, L-2132 Luxembourg,
Grand Duchy of Luxembourg and registered with the Luxembourg trade
and companies register (
registre de commerce et des
sociétés
,
Luxembourg) under number B170360, being subject as an unregulated
undertaking to the Luxembourg act dated 22 March 2004 on
securitization, as amended (the “
Securitisation Act
2004
”) and acting in
respect of its compartment “Safety 2” (the
“
Notes
Issuer
”)
, that,
in accordance with article 94-3
of
the
Luxembourg act dated 10 August 1915 on commercial
companies, as amended, the holders of the Notes, have approved at a
meeting of the Noteholders held on, 201, (i) the exchange of the
Notes for shares of Series A Convertible Preferred Stock of Track
Group, Inc. (the “
Issuer
”) (the “
Track Preferred Stock
”),
effective as of
, 2017 (the “
Exchange
Date
”) (the “
Exchange
”) and (ii) the amendment
and restatement of the terms and conditions of the Notes (the
“
Amended and Restated
Conditions
”).
As a
result of the Exchange, each Note, including principal and accrued
interest thereon through the Exchange Date held by a Consenting
Noteholder that has communicated its account details to the Notes
Issuer in connection with the Exchange shall, subject to certain
conditions, be exchanged for the appropriate number of shares of
Track Preferred Stock.
Noteholders that
have not provided their account details to the Notes Issuer in
connection with the Exchange will be able to obtain the Track
Preferred Stock by exercising a relevant option under the Amended
and Restated Conditions as provided therein.
In
connection with the Exchange, you are hereby notified as
follows:
a.
An investment in
the Track Preferred Stock in connection with the Exchange involves
a high degree of risk. Such risks include, but are not limited to,
the risks associated with the business of the Issuer, as more
particularly set forth in the Issuer’s Annual Report on Form
10-K, Quarterly Reports on Form 10-Q, and other filings
(“
Issuer SEC
Filings
”) with the
U.S. Securities and
Exchange Commission (the “
SEC
”), which Issuer SEC Filings
are available for inspection by each Noteholder at:
https://
www.sec.gov/cgi-bin/browse-edgar?company=track+group&owner=exclude&action=getcompany
b.
The Track Preferred Stock has not been
and will not be registered under the United States Securities Act
of 1933, as amended (the “
Securities Act
”), or under the
securities laws of any state or political sub-division of the
United States. The Track Preferred Stock is being offered and sold
in reliance on an exemption from the registration requirements of
the Securities Act pursuant to Regulation S. Accordingly, the Track
Preferred Stock nor any interest or participation therein may be
reoffered, sold, assigned, transferred, pledged, encumbered or
otherwise disposed of except in an “
Offshore Transaction
” (as such
term is defined under Regulation S) to or for the account or
benefit of any person who is not a “
U.S. person
” (as defined in
Attachment I hereto) or in a transaction that is exempt from, or
not subject to, the registration requirements of the Securities
Act;
c. Any
transfer of Track Preferred Stock in violation of the restrictions
set forth in clause
b.
above will be void
ab initio
and of no legal
effect whatsoever. Accordingly, any purported transferee of any
legal or beneficial ownership interest in any Track Preferred Stock
in such a transaction will not be entitled to any rights as a legal
or beneficial owner of such interest in such Track Preferred Stock.
The Issuer shall have the right at any time after becoming aware
that any legal or beneficial ownership interest in any Track
Preferred Stock is held by a U.S. person to require such U.S.
person to sell such interest to (i) an affiliate of the Issuer (to
the extent permitted by applicable law); or (ii) a person who is a
non-U.S. person; and
d.
The Track Preferred Stock has not been
approved or disapproved by the SEC or any other regulatory agency
in the United States, nor has the SEC or any other regulatory
agency in the United States passed upon the accuracy or adequacy of
this document or the merits of the Track Preferred
Stock.
Pursuant to article
[
l
] of the
Amended and Restated Conditions, please contact Bernd Schmitz in
order to receive your Track Preferred Stock.
Dated
, 2017.
Conrent
Invest S.A.
Name:
Title:
ATTACHMENT
1
to
Form of
Exchange Notice
Set
forth below is the text of Rule 902(k)(1) of Regulation S, which
defines "U.S. person" as used in this Form of Exchange
Notice.
(i)
Any natural person
resident in the United States;
(ii)
Any partnership or
corporation organized or incorporated under the laws of the United
States;
(iii)
Any estate of which
any executor or administrator is a U.S. person;
(iv)
Any trust of which
any trustee is a U.S. person;
(v)
Any agency or
branch of a foreign entity located in the United
States;
(vi)
Any
nondiscretionary account or similar account (other than an estate
or trust) held by a dealer or other fiduciary for the benefit or
account of a U.S. person;
(vii)
Any discretionary
account or similar account (other than an estate or trust) held by
a dealer or other fiduciary organized, incorporated, or (if an
individual) resident in the United States; and
(viii)
Any partnership or
corporation if: (A) organized or incorporated under the laws of any
foreign jurisdiction; and (B) formed by a U.S. person principally
for the purpose of investing in securities not registered under the
1933 Act, unless it is organized or incorporated, and owned, by
accredited investors (as defined in Rule 501(a)) who are not
natural persons, estates or trusts.
CERTIFICATE OF DESIGNATION OF THE RELATIVE RIGHTS
AND
PREFERENCES OF THE
SERIES A CONVERTIBLE PREFERRED STOCK OF
TRACK GROUP, INC.
The undersigned,
the Chief Executive Officer of Track Group, Inc., a Delaware
corporation (the “
Company
”), does hereby certify
that, pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation of the Company, the
following resolution creating a series of Series A Convertible
Preferred Stock, was duly adopted on October 4,
2017.
RESOLVED
, that pursuant to the
authority expressly granted to and vested in the Board of Directors
of the Company by provisions of the Certificate of Incorporation of
the Company (the "
Certificate of
Incorporation
"), there hereby is created out of the shares
of preferred stock, par value $0.0001 per share, of the Company
authorized in Article IV of the Certificate of Incorporation (the
"
Preferred Stock
"), a
series of Preferred Stock of the Company, to be named "Series A
Convertible Preferred Stock,” consisting of One Million, Two
Hundred Thousand (1,200,000) shares, which series shall have the
following designations, powers, preferences and relative and other
special rights and the following qualifications, limitations and
restrictions:
1
.
Designation
and Rank. The designation of such series of the Preferred Stock
shall be the Series A Convertible Preferred Stock, par value
$0.0001 per share (the "
Series A
Preferred
"). The maximum number of shares of Series A
Preferred shall be One Million, Two Hundred Thousand (1,200,000)
shares. With respect to payment of dividends and distribution of
assets upon liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the Series A Preferred shall rank
senior to the common stock, par value $0.0001 per share (the
"
Common Stock
"), and shall
rank senior to all other classes and series of equity securities of
the Company that by their terms do not rank senior to the Series A
Preferred ("
Junior
Stock
").
2
.
Dividends.
Whenever the Board of Directors declares a dividend on the Common
Stock, each holder of record of a share of Series A Preferred, or
any fraction of a share of Series A Preferred, on the date set by
the Board of Directors to determine the owners of the Common Stock
of record entitled to receive such dividend (the "
Record Date
") shall be entitled to
receive out of any assets at the time legally available therefore,
an amount equal to such dividend declared on one share of Common
Stock multiplied by the number of shares of Common Stock into which
such share, or such fraction of a share, of Series A Preferred
could be converted on the Record Date.
3
.
Voting
Rights
.
(a
)
Class
Voting Rights. The Series A Preferred shall have the following
class voting rights. So long as any shares of Series A Preferred
remain outstanding, the Company shall not, without the affirmative
vote or consent of the holders of at least sixty-seven percent
(67%) of the shares of Series A Preferred outstanding at the time,
given in person or by proxy, either in writing or at a meeting, in
which the holders of shares of Series A Preferred vote separately
as a class: (i) amend, alter or repeal the provisions of this
Certificate of Designation or the Certificate of Incorporation of
the Company in any manner that would affect any right, preference,
privilege or power of the Series A Preferred; (ii) increase the
authorized number of shares of Series A Preferred; or (iii) effect
any distribution with respect to Junior Stock, except that the
Company may effect a distribution on the Common Stock if the
Company makes a like kind distribution on each share, or fraction
of a share, of Series A Preferred in an amount equal to the
distribution on one share of Common Stock multiplied by the number
of shares of Common Stock into which such one share, or such
fraction of a share, of Series A Preferred can be converted at the
time of such distribution.
(b
)
General Voting
Rights. Except with respect to transactions upon which the Series A
Preferred shall be entitled to vote separately as a class pursuant
to Section 3(a) above, the Series A Preferred shall have no voting
rights.
4
.
Liquidation
Preference.
(a
)
In the
event of the liquidation, dissolution or winding up of the affairs
of the Company (“
Liquidation
”), whether voluntary
or involuntary, the holders of outstanding shares of Series A
Preferred then outstanding shall be entitled to receive, out of the
assets of the Company available for distribution to its
stockholders, an amount equal to $35.00 per share of Series A
Preferred (the “
Liquidation
Preference Amount
”) before any payment shall be made
or any assets distributed to the holders of shares of Common Stock
or any other Junior Stock. If the assets of the Company are not
sufficient to pay in full the Liquidation Preference Amount payable
to the holders of outstanding shares of Series A Preferred and any
series of preferred stock or any other class of stock on a parity,
as to rights on liquidation, dissolution or winding up, with the
Series A Preferred, then all of said assets will be distributed
among the holders of shares of Series A Preferred and the other
classes of stock on a parity with the Series A Preferred, if any,
ratably in accordance with the respective amounts that would be
payable on such shares if all amounts payable thereon were paid in
full. The liquidation payment with respect to each outstanding
fractional share of Series A Preferred shall be equal to a ratably
proportionate amount of the liquidation payment with respect to
each outstanding share of Series A Preferred. All payments for
which this Section 4(a) provides shall be in cash, property (valued
at its fair market value as determined reasonably and in good faith
by the Board of Directors of the Company) or a combination thereof;
provided
,
however
, that no cash shall be paid to
holders of Junior Stock unless each holder of the outstanding
shares of Series A Preferred has been paid in cash the full
Liquidation Preference Amount to which such holder is entitled as
provided herein. After payment of the full Liquidation Preference
Amount to which each holder is entitled, such holders of shares of
Series A Preferred will not be entitled to any further
participation as such in any distribution of the assets of the
Company.
(b
)
A
consolidation or merger of the Company with or into any other
corporation or corporations, or a sale of all or substantially all
of the assets of the Company, or other acquisition type transaction
shall be, at the election of a majority of the holders of shares of
Series A Preferred, deemed to be a Liquidation within the meaning
of this Section 4. In the event of the merger or consolidation of
the Company with or into another corporation that is not treated as
a Liquidation pursuant to this Section 4(b), the Series A Preferred
shall maintain its relative powers, designations and preferences
provided for herein and no merger shall result inconsistent
therewith.
(c
)
Written notice of
any voluntary or involuntary Liquidation, stating a payment date
and the place where the distributable amounts shall be payable,
shall be given by mail, postage prepaid, no less than forty-five
(45) days prior to the payment date stated therein, to the holders
of record of shares of Series A Preferred at their respective
addresses as the same shall appear on the books of the
Company.
5
.
Conversion.
The holder of any outstanding shares of Series A Preferred shall
have the following conversion rights (the "
Conversion
Rights
"):
(a
)
Right
to Convert. At any time beginning five hundred and forty (540) days
after the date of issuance of the relevant shares of Series A
Preferred (the “
Issuance
Date
”), the holder of any such shares of Series A
Preferred may, at such holder's option, subject to the limitations
set forth in Section 7 herein, elect to convert (a "
Voluntary Conversion
") all or any
portion of the shares of Series A Preferred held by such person
into a number of fully paid and nonassessable shares of Common
Stock at a conversion rate of ten (10) shares of Common Stock for
each share of Series A Preferred (subject to adjustments set forth
in Section 5(c) herein, the "
Conversion Rate
").
The Company shall keep written
records of the conversion of the shares of Series A Preferred
converted by each holder. A holder shall be required to deliver the
original certificates representing the shares of Series A Preferred
upon any conversion of shares of Series A Preferred as provided in
Section 5(b) below.
(b
)
Mechanics of
Voluntary Conversion. The Voluntary Conversion of shares of Series
A Preferred shall be conducted in the following
manner:
(i
)
Holder's Delivery
Requirements. To convert the shares of Series A Preferred into
shares of Common Stock on any date (each such relevant date, the
"
Voluntary Conversion
Date
"), the holder thereof shall (A) transmit by electronic
mail, facsimile, or otherwise deliver, for receipt on or prior to
5:00 p.m., New York time on such date, a copy of a fully executed
notice of conversion in the form attached hereto as Exhibit A (the
"
Conversion Notice
"), to
the Company, and (B) surrender to a common carrier for delivery to
the Company as soon as practicable following such Voluntary
Conversion Date, but in no event later than five (5) business days
after such date, the original certificates representing the shares
of Series A Preferred being converted (or an indemnification
undertaking with respect to such shares in the case of their loss,
theft or destruction) (the "
Preferred Stock
Certificates
").
(ii
)
Company's
Response. Upon receipt by the Company of a copy of a Conversion
Notice, the Company shall immediately send, via electronic mail or
facsimile, a confirmation of receipt of such Conversion Notice to
such holder and the Company or its designated transfer agent (the
"
Transfer Agent
"), as
applicable, shall, as promptly as practicable but in any event
within five (5) business days following the date of receipt by the
Company of the certificate representing the shares of Series A
Preferred being converted, (x) issue and deliver to the holder the
number of shares of Common Stock to which the holder shall be
entitled pursuant to the Conversion Rate then in effect, and (y) if
the certificate so surrendered represents more shares of Series A
Preferred than those being converted, issue and deliver to the
holder a new certificate for such number of shares of Series A
Preferred represented by the surrendered certificate which were not
converted. All shares of capital stock issued hereunder by the
Company shall be duly and validly issued, fully paid and
nonassessable, free and clear of all liens, charges and
encumbrances with respect to the issuance
thereof.
(iii
)
Record
Holder. The person or persons entitled to receive the shares of
Common Stock issuable upon a conversion of the shares of Series A
Preferred shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on the Voluntary Conversion
Date. Each relevant conversion of shares of Series A Preferred
shall be deemed to have been effected on the applicable Voluntary
Conversion Date.
(iv
)
Company's Failure
to Timely Convert. If, five (5) business days following the date of
receipt by the Company of the certificate representing the shares
of Series A
Preferred being
converted (the "
Share Delivery
Period
"), the Company shall have failed to issue and deliver
to a holder the number of shares of Common Stock to which such
holder is entitled upon such holder's conversion of shares of
Series A Preferred, in addition to all other available remedies
that such holder may pursue hereunder, the Company shall pay
additional damages to such holder, for each business day after such
fifth (5th) business day of the Share Delivery Period until such
time as the applicable shares of Common Stock have been delivered,
in an amount equal to 0.5% of the product of (A) the aggregate
number of shares of Common Stock not issued to the holder on a
timely basis pursuant to Section 5(b)(ii), and (B) the closing bid
price of the Common Stock on the fifth day of such Share Delivery
Period. If the Company fails to pay the additional damages set
forth in this Section 5(b)(iv) within five (5) business days of the
date incurred, then such payment shall bear interest at the rate of
2% per month (prorated for partial months) until such payments are
made.
(c) Adjustments of
Conversion Rate.
(i
)
Adjustments for
Stock Splits and Combinations. If the Company shall at any time or
from time to time after the Issuance Date, effect a stock split of
the outstanding Common Stock, the Conversion Rate shall be
proportionately increased. If the Company shall at any time or from
time to time after the Issuance Date, combine the outstanding
shares of Common Stock, the Conversion Rate shall be
proportionately decreased. Any adjustments under this Section
5(c)(i) shall be effective at the close of business on the date the
stock split or combination occurs.
(ii
)
Adjustments for
Certain Dividends and Distributions. If the Company shall at any
time or from time to time after the Issuance Date, make or issue,
or set a record date for the determination of holders of shares of
Common Stock entitled to receive, a dividend or other distribution
payable in shares of Common Stock, then, and in each event, the
Conversion Rate shall be increased as of the time of such issuance
or, in the event such record date shall have been fixed, as of the
close of business on such record date, by multiplying, as
applicable, the Conversion Rate then in effect by a
fraction:
(1
)
the
numerator of which shall be the total number of shares of Common
Stock issued and outstanding immediately after such issuance on the
close of business on such record date; and
(2
)
the
denominator of which shall be the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such
issuance on the close of business on such record
date.
(iii
)
Adjustment for
Other Dividends and Distributions. If the Company shall, at any
time or from time to time after the Issuance Date, make or issue,
or set a record date for the determination of holders of, shares of
Common Stock entitled to receive, a dividend or other distribution
payable in securities of the Company other than shares of Common
Stock, then, and in each event, an appropriate revision to the
applicable Conversion Rate shall be made and provision shall be
made (by adjustments of the Conversion Rate or otherwise) so that
the holders of shares of Series A Preferred shall receive upon
conversions thereof, in addition to the number of shares of Common
Stock receivable thereon, the number of securities of the Company
which they would have received had their shares of Series A
Preferred been converted into shares of Common Stock on the date of
such event and had thereafter, during the period from the date of
such event to and including the Voluntary Conversion Date, retained
such securities (together with any distributions payable thereon
during such period), giving application to all adjustments called
for during such period under this Section 5(c)(iii) with respect to
the rights of the holders of shares of Series A
Preferred.
(iv
)
Adjustments for
Reclassification, Exchange or Substitution. If the Common Stock
issuable upon conversion of the shares of Series A Preferred at any
time or from time to time after the Issuance Date shall be changed
to the same or different number of shares of any class or classes
of stock, whether by reclassification, exchange, substitution or
otherwise (other than by way of a stock split or combination of
shares or stock dividends provided for in Sections 5(c)(i), (ii)
and (iii), or a reorganization, merger, consolidation, or sale of
assets provided for in Section 5(c)(v)), then, and in each event,
an appropriate revision to the Conversion Rate shall be made and
provisions shall be made so that the holder of each share of Series
A Preferred shall have the right thereafter to convert such share
of Series A Preferred into the kind and amount of shares of stock
and other securities receivable upon reclassification, exchange,
substitution or other change, by holders of the number of shares of
Common Stock into which such share of Series A Preferred might have
been converted immediately prior to such reclassification,
exchange, substitution or other change, all subject to further
adjustment as provided herein.
(v
)
Adjustments for
Reorganization, Merger, Consolidation or Sales of Assets. If at any
time or from time to time after the Issuance Date there shall be a
capital reorganization of the Company (other than by way of a stock
split or combination of shares or stock dividends or distributions
provided for in Section 5(c)(i), (ii) and (iii), or a
reclassification, exchange or substitution of shares provided for
in Section 5(c)(iv)), or a merger or consolidation of the Company
with or into another corporation, or the sale of all or
substantially all of the Company's properties or assets to any
other person (an "
Organic
Change
"), then as a part of such Organic Change an
appropriate revision to the Conversion Rate shall be made and
provision shall be made so that the holder of each share of Series
A Preferred shall have the right thereafter to convert such share
of Series A Preferred into the kind and amount of shares of stock
and other securities or property of the Company or any successor
corporation resulting from the Organic Change which the holder of
such share of Series A Preferred would have received if such share
of Series A Preferred had been converted prior to such Organic
Change.
(vi
)
Record
Date. In case the Company shall take record of the holders of
shares of Common Stock or any other Preferred Stock for the purpose
of entitling them to subscribe for or purchase shares of Common
Stock or Convertible Securities, then the date of the issue or sale
of the shares of Common Stock shall be deemed to be such record
date.
(d
)
No
Impairment. The Company shall not, by amendment of 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 to be observed or performed
hereunder by the Company, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 5
and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the
holders of shares of Series A Preferred against impairment. In the
event a holder shall elect to convert any shares of Series A
Preferred as provided herein, the Company cannot refuse conversion
based on any claim that such holder or anyone associated or
affiliated with such holder has been engaged in any violation of
law, unless an injunction from a court, on notice, restraining
and/or adjoining conversion of all or of such shares of Series A
Preferred shall have been issued.
(e
)
Certificates as to
Adjustments. Upon occurrence of each adjustment or readjustment of
the Conversion Rate or number of shares of Common Stock issuable
upon conversion of shares of Series A Preferred pursuant to this
Section 5, the Company at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and
furnish to each holder of such shares of Series A Preferred a
certificate setting forth such adjustment and readjustment, showing
in detail the facts upon which such adjustment or readjustment is
based. The Company shall, upon written request of the holder of
such affected shares of Series A Preferred, at any time, furnish or
cause to be furnished to such holder a like certificate setting
forth any and all adjustments and readjustments, the Conversion
Rate in effect at the time, and the number of shares of Common
Stock and the amount, if any, of other securities or property which
at the time would be received upon the conversion of a share of
such Series A Preferred.
(f
)
Issue
Taxes. The Company shall pay any and all issue and other taxes,
excluding federal, state or local income taxes, that may be payable
in respect of any issue or delivery of shares of Common Stock on
conversion of shares of Series A Preferred pursuant hereto;
provided, however
, that
the Company shall not be obligated to pay any transfer taxes
resulting from any transfer involved in the issue and delivery of
shares of Common Stock in a name other than that in which the
shares of Series A Preferred so converted were
registered.
(g
)
Notices. All
notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, by facsimile,
electronic mail or three (3) business days following (A) being
mailed by certified or registered mail, postage prepaid,
return-receipt requested, or (B) delivered to an express mail
delivery service such as Federal Express, with written receipt by
the addressee required, in either case addressed to the holder of
record at its address appearing on the books of the Company. The
Company will give written notice to each holder of shares of Series
A Preferred at least twenty (20) days prior to the date on which
the Company closes its books or takes a record (z) with respect to
any dividend or distribution upon shares of Common Stock, (y) with
respect to any pro rata subscription offer to holders of shares of
Common Stock or (x) for determining rights to vote with respect to
any Organic Change, dissolution, liquidation or winding-up and in
no event shall such notice be provided to such holder prior to such
information being made known to the public. The Company will also
give written notice to each holder of shares of Series A Preferred
at least twenty (20) days prior to the date on which any Organic
Change, dissolution, liquidation or winding-up will take place and
in no event shall such notice be provided to such holder prior to
such information being made known to the
public.
(h
)
Fractional Shares.
No fractional shares of Common Stock shall be issued upon
conversion of shares of Series A Preferred. In lieu of any
fractional shares to which the holder would otherwise be entitled,
the Company, at its option, shall (A) pay cash equal to the product
of such fraction multiplied by the average of the closing bid
prices of the Common Stock for the five (5) consecutive trading
immediately preceding the Voluntary Conversion Date, or (B) issue
one whole share of Common Stock to the holder.
(i
)
Reservation of
Common Stock. The Company shall, so long as any shares of Series
the A Preferred are outstanding, reserve and keep available out of
its authorized and unissued shares of Common Stock, solely for the
purpose of effecting the conversion of shares of Series A
Preferred, such number of shares of Common Stock as shall from time
to time be sufficient to effect the conversion of all shares of
Series A Preferred then outstanding (without giving effect to the
limitations set forth in Section 4 hereof).
(j
)
Retirement of
Series A Preferred. The Company shall keep written records of the
conversion of the shares of Series A Preferred converted by each
holder.
(k
)
Regulatory
Compliance. If any shares of Common Stock to be reserved for the
purpose of conversion of shares of Series A Preferred require
registration or listing with or approval of any governmental
authority, stock exchange or other regulatory body under any
federal or state law or regulation or otherwise before such shares
may be validly issued or delivered upon conversion, the Company
shall, at its sole cost and expense, in good faith and as
expeditiously as possible, endeavor to secure such registration,
listing or approval, as the case may be.
6
.
No
Preemptive or Redemption Rights. Unless otherwise specified in this
Certificate of Designation, no holder of shares of Series A
Preferred shall be entitled to rights to subscribe for, purchase or
receive any part of any new or additional shares of any class,
whether now or hereafter authorized, or of bonds or debentures, or
other evidences of indebtedness convertible into or exchangeable
for shares of any class, but, unless otherwise so specified in this
Certificate of Designation, all such new or additional shares of
any class, or any bond, debentures or other evidences of
indebtedness convertible into or exchangeable for shares, may be
issued and disposed of by the Board of Directors on such terms and
for such consideration (to the extent permitted by law), and to
such person or persons as the Board of Directors in their absolute
discretion may deem advisable.
7
.
Conversion
Restriction. Notwithstanding anything to the contrary set forth in
Section 5 of this Certificate of Designation, in the event the
Common Stock is listed on the NASDAQ Stock Market, at no time may a
holder of shares of Series A Preferred convert shares of Series A
Preferred if the number of shares of Common Stock to be issued
pursuant to such conversion would exceed, when aggregated with all
other shares of Common Stock owned by such holder at such time, the
number of shares of Common Stock that would result in such holder
beneficially owning (as determined in accordance with Section 13(d)
of the Securities Exchange Act of 1934, as amended, and the rules
thereunder) more than 19.99% of all of the shares of Common Stock
outstanding at such time (a “
Beneficial Ownership Change
”);
provided, however
, the
foregoing shall not apply in the event the Company’s
stockholders approve the Beneficial Ownership Change, as required
by Rule 5635 of the NASDAQ Stock Market.
8
.
Inability
to Fully Convert.
(a)
Holder's Option if
Company Cannot Fully Convert. If, upon the Company's receipt of a
Conversion Notice, the Company cannot issue shares of Common Stock
for any reason, including, without limitation, because the Company
(x) does not have a sufficient number of shares of Common Stock
authorized and available or (y) is otherwise prohibited by
applicable law or by the rules or regulations of any stock
exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Company or its securities,
from issuing all of the shares of Common Stock which is to be
issued to a holder of shares of Series A Preferred pursuant to a
Conversion Notice, then the Company shall issue as many shares of
Common Stock as it is able to issue in accordance with such
holder's Conversion Notice and with respect to the unconverted
shares of Series A Preferred (the "
Unconverted Preferred Stock
") the
holder, solely at such holder's option, can elect, at any time
after receipt of notice from the Company that there is Unconverted
Preferred Stock, to void the holder's Conversion Notice as to the
number of shares of Common Stock the Company is unable to issue and
retain or have returned, as the case may be, the certificates for
the shares of Unconverted Preferred Stock.
In the event a
holder shall elect to convert any shares of Series A Preferred as
provided herein, the Company cannot refuse conversion based on any
claim that such Holder or anyone associated or affiliated with such
holder has been engaged in any violation of law, violation of an
agreement to which such holder is a party or for any reason
whatsoever, unless an injunction from a court, on notice,
restraining and or enjoining conversion of all or any of such
shares of Series A Preferred shall have issued.
(b
)
Mechanics of
Fulfilling; Holder's Election. The Company shall immediately send
via facsimile to a holder of shares of Series A Preferred, upon
receipt of a facsimile copy of a Conversion Notice from such holder
which cannot be fully satisfied as described in Section 8(a) above,
a notice of the Company's inability to fully satisfy such holder's
Conversion Notice (the "
Inability
to Fully Convert Notice
"). Such Inability to Fully Convert
Notice shall indicate (i) the reason why the Company is unable to
fully satisfy such holder's Conversion Notice and (ii) the number
of shares of Series A Preferred which cannot be
converted.
9
.
Lost
or Stolen Certificates. Upon receipt by the Company of evidence
satisfactory to the Company of the loss, theft, destruction or
mutilation of any Preferred Stock Certificates representing the
shares of Series A Preferred, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the holder to
the Company and, in the case of mutilation, upon surrender and
cancellation of the Preferred Stock Certificate(s), the Company
shall execute and deliver new preferred stock certificate(s) of
like tenor and date.
10.
Remedies,
Characterizations, Other Obligations, Breaches and Injunctive
Relief. The remedies provided in this Certificate of Designation
shall be cumulative and in addition to all other remedies available
under this Certificate of Designation, at law or in equity
(including a decree of specific performance and/or other injunctive
relief), no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and
nothing herein shall limit a holder's right to pursue actual
damages for any failure by the Company to comply with the terms of
this Certificate of Designation. Amounts set forth or provided for
herein with respect to conversion and the like (and the computation
thereof) shall be the amounts to be received by the holder thereof
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 holders of shares of
Series A Preferred 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 holders of shares of
Series A Preferred shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach,
without the necessity of showing economic loss and without any bond
or other security being required.
11
.
Specific
Shall Not Limit General; Construction. No specific provision
contained in this Certificate of Designation shall limit or modify
any more general provision contained herein.
12
.
Failure
or Indulgence Not Waiver. No failure or delay on the part of a
holder of shares of Series A Preferred in the exercise of any
power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such
power, right or privilege preclude other or further exercise
thereof or of any other right, power or
privilege.
|
|
IN WITNESS WHEREOF,
this Certificate of
Designation is executed on Company this 12th day of October,
2017.
TRACK GROUP,
INC.
By:
/s/ Peter
Poli
Name: Peter
Poli
Title: Chief
Financial Officer
|
EXHIBIT
A
TRACK GROUP, INC.
CONVERSION NOTICE
Reference is made
to the Certificate of Designation of the Relative Rights and
Preferences of the Series A Convertible Preferred Stock of Track
Group, Inc. (the "
Certificate of
Designation
"). In accordance with and pursuant to the
Certificate of Designation, the undersigned hereby elects to
convert the number of shares of Series A Preferred, par value
$.0001 per share (the "
Preferred
Shares
"), of Track Group, Inc., a Delaware corporation (the
"
Company
"), indicated
below into shares of Common Stock, par value $.0001 per share (the
"
Common Stock
"), of the
Company, by tendering the stock certificate(s) representing the
share(s) of Preferred Shares specified below as of the date
specified below.
Date of
Conversion:
Number of
Preferred Shares to be converted:
Stock certificate
no(s).:
Number of
Preferred Shares to be converted: Common Stock has been sold:
YES NO
Please confirm the
following information:
Conversion
Rate:
Number of shares
of Common Stock to be issued:
Number of shares
of Common Stock beneficially owned or deemed beneficially owned by
the Holder on the Date of Conversion determined in accordance with
Section 16 of the Securities Exchange Act of 1934, as
amended:
Please issue the
Common Stock into which the Preferred Shares to be converted are
being converted and, if applicable, any check drawn on an account
of the Company in the following name and to the following
address:
Issue
to:
Facsimile
Number:
Authorization:
By:
Title:
Dated: